The Production Concept of Marketing Management

Businesses operate on different strategies to survive in the cutthroat marketing environment. Some aim at improving the quality of their product or services, some aim at advertising their product in the best manner possible, some aim at providing maximum consumer satisfaction, some aim at an enhanced public image, and some aim at increasing the production of goods and services. The majority of firms try to inculcate two or more of these strategies to get an edge over their competitors. We have the entire evolution of marketing management based on the five major goals listed above. The five basic concepts of marketing management are −

• Production Concept

• Product Concept

• Selling Concept

• The holistic concept or the societal concept

• Marketing concept

Production Concept

This concept of marketing management aims at increasing the supply of goods and services. The goal is achieved through increasing production or process efficiency. The concept originated during the period of the Industrial Revolution. There were enormous demands in the market because of the ever-increasing population, and the money started flowing because of the liberalization, privatization, and globalization of the economy. The market was ready for a dump of goods and services, and there was a shortage on the supply side; hence, the way to succeed was to increase the production of goods, which would lead to lower prices because of economies of scale.

Every product has two types of costs involved in the production process. The two types of costs are Fixed costs and variable costs. Examples of fixed costs are rent, the fixed salary of employees, and others; examples of variable costs are the cost of running the machine, the cost of raw materials, and others. Since the fixed costs for production and factories remain the same, after a certain level of production, firms are able to recover their fixed costs. Goods that were produced after the break-even point only had variable costs as their cost of production, also known as economies of scale.

The underlying assumptions behind the production concept of marketing management are −

• Consumers will buy products that are readily available on the market. The products that are better displayed on the shelf and have stronger distribution channels will always sell more.

• Consumers are price-sensitive. They will always purchase a product that is more affordable or of lower cost.

• Consumers are not loyal to any brand.

To achieve the goal of more affordable goods, companies should aim at −

• Increased production and process efficiency

• When compared to competitors, we have more distribution channels.

Benefits of the Production Concept of Marketing Management

Let us take a look at the myriad benefits of the production concept of marketing management to individuals, firms, and the community −

• It helps the company achieve economies of scale.

• It improves the standard of living for the nation. Firms are toiling to make their products cheaper than their competitors and affordable to consumers, making sure that they can have a bigger consumption basket.

• Firms have excellent logistics, operations, and supply chain management services.

• Firms can compete internationally with their quality goods and affordable prices. As a result, the larger community benefits.

• It gives the company an edge over its competitors because they are able to sell the products at lower costs. In many price-sensitive countries, the lower cost of the product plays an important role in the purchase decision-making process.

• It helps the company ensure strong distribution channels. Since the firm operates on the modus operandi of availability and shelf display of the products.

Firms that Operate on the Production Concept of Marketing Management

• Ford Motor Company – Ford Model T − In the early 20th century, the production cost of one Ford Model T car was around 800 dollars, but with the production concept of marketing management in place, the firm was able to bring down the cost to around 300 dollars per unit. The car was now affordable to a major section of Americans.

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• Apple − Apple outsources the production of the hardware for its electronic devices to Asian countries. The reason behind this is the availability of a cheap and dedicated labor force. The company can profit while also ensuring that the product is affordable to the general public.

• H&M, GAP, Zara, Peacocks, Primark, New Look, and Austin Reed − All these companies are working on the production concept of marketing management. They understood that producing the quality products that they desired in their home country would be a disaster in terms of cost. If they want to make their product affordable to the mass market and not just one luxurious segment, the production cost needs to come down. All their products are manufactured in Bangladesh because of the availability of cheap labor and poor working conditions.

Disadvantages of the Production Concept of Marketing Management

The production concept of marketing only focuses on the volume of goods and lower prices, but consumers are dynamic, as are their needs and wants. Let us understand the drawbacks of the production concept of marketing and how they can lead to business failures.

• No Consideration for the needs of the Consumers − The production concept works on the assumption that consumers need the product at any cost and that the only thing holding them back from purchasing it is its price and availability. which is not true. Consumers may want products that will be a status symbol or may satisfy the intrinsic and subconscious needs of others. A brand’s focus should always be on consumers and their satisfaction.

• There is no Loyal fan base or Customer Base − Consumers buy the product because it is cheap and readily available, but there will be other brands offering the product at an even lower price. The consumers will switch because they are price sensitive, and the company will lose sales.

• Quality Degradation − Firms can benefit from economies of scale only up to a point; after that, the cost is not going to be any lower. Firms that operate with the primary goal of lowering prices will look for other ways to cut costs, such as lowering product quality, increasing packaging costs, and so on. The company will lose face with sub-quality products and customers as well.

• Not all Customers desire Low-Priced Products − Some customers will desire products that are of high quality and super expensive. The product will act as a status symbol to them, and hence the brand is losing on such customers and the super-normal profit.

The production concept of marketing is still very much applicable in today’s business environment. Big and established brands have found their way out of the negatives of the production concept by ensuring the availability of quality products not at a lower price but at affordable prices for the consumer. A lot more can be done to ensure that along with its consumers, the community and ecology are happy with the business. At the end of the day, the wholesome view is only going to ensure the sustainability of the business.