History of Modern Marketing

Over the past 100 years, marketing went from having no department in the business to playing one of the main, if not the most essential role in determining the success or failure of an organization (Fullerton, 1998) (Egan, 2008). Its development can be traced through 4 phases; production, sales, and the marketing concept, which then evolved into the relationship-marketing era (Wilkie and Moore, 2003). This essay will describe the particular context in which modern marketing emerged and thrived and how this context has evolved over time.

Furthermore, the essay will discuss how the marketing discipline has changed and needs to change further in order to adapt to current and future needs of firms, consumers, and society in general. Modern marketing emerged and thrived in North America, specifically the USA, where the traditional marketing discipline benefited from the country’s focus on innovation, neo-liberal freedoms, entrepreneurship, and fierce competition (Witkowski, 2005 cited in Egan, 2008:p6, Eugene, 2002).

During the production era, between the mid nineteenth century and early twentieth century, innovations such as the assembly line and Taylor’s scientific management movement allowed companies to mass-produce their products. This resulted in declining unit costs of production and reduced selling prices, which appealed to large segments of the market (Stoddard, 2007). This production-oriented approach was working for a while, due to the growing middle class at whom moderately priced consumer goods could be targeted (Egan, 2008:p6).

However after World War I, many manufacturers found their merchandise piling up in warehouses and on store shelves, as the supply was much higher than the demand (White, 2010). This was caused by the increased rate of unemployment and the decrease in the amount of disposable income available to consumers (Stoddard, 2007). The problem became more apparent and severe during the Great Depression of the 1930’s when even the consumers who could afford the products did not buy them (Eugene, 2002). Around that time marketing was starting to be recognized as a subject worth academic endeavor (Wilkie and Moore, 2003 cited in Egan, 2008:p6).

“Marketers were proposing that demand consisted of more than just the ability to purchase and that it also required desire on the part of the consumer; and this desire could be increased and manipulated by factors other than the mere existence of supply (Bartels, 1976) and value added beyond that of production” (Wilkie and Moore, 1999 cited in Egan, 2008:p10). This led to the sales era; in which businesses where no longer able to sell everything they produced, and thus focused their efforts on convincing consumers to buy their products (Vargo and Lusch, 2004).

For example, the cigarette companies were selling homogeneous products and thus had to rely on advertisement to differentiate their products (Goldberg, Davis and O’Keef, 2006) Furthermore, there was a great need to formalize marketing to guarantee that it worked every time (Brown, 1996 cited in O’Malley and Patterson, 1998). In the 1950s the marketing concept emerged from the science-led revolution, which reflected a conscious movement in US business thinking (Egan, 2008:p9).

Consequently the marketing era began, where firms oriented their marketing plans towards the consumers and company-wide integration of efforts using the marketing concept (Keith, 1960). In addition, Borden introduced the concept of the marketing mix, which McCarthy then reconstructed from its original 12 variables to the 4Ps (Egan, 2008). Since then there was rapid interest in marketing were many significant concepts developed, such as market segmentation (Smith, 1956) and brand image (Garner and Levy, 1955).

These would then form the basis of ‘modern’ transactional marketing (Kotler, 1992 cited in Egan, 2008:p9). The economic conditions in the 1950s and 1960s were great thus reinforcing the perceived superiority of the marketing mix paradigm (Egan, 2008; p10). High consumer trust, effective mass marketing, growing prosperity, homogeneous demand and dominant manufacturers (O’Driscoll and Murray, 1998) further proved that transactional marketing is working successfully (Egan, 2008:p10).

However, over the next decades, marketers started questioning the effectiveness of the dominating marketing mix paradigm (Gronroos, 1994). It was particularly inadequate for those working in the industrial and service sectors, as it seemed problematic for the transactional marketing to be applied outside its original context (Egan, 2008:12). Some attempts were made to solve these inadequacies, but they only expanded on the same approach instead of rethinking the approach as a whole (O’Malley and Patterson, 1998).

For example, one of the proposed solutions was to add people, physical evidence, and process (Booms and Bitner, 1981) to form the 7Ps (Egan, 2008). However by trying to simplify it and making it fit different contexts, the concept lost its validity and substance (Gummesson, 1994 cited in O’Malley and Patterson, 1998). Moreover, USA’s intra-market competition intensified considerably as the number of firms, both local and foreign, increased. Firms had to compete for a static number of customers within a market that was becoming increasingly saturated with products (Egan, 2008:p13).

This illustrated to marketers that the transactional marketing theory is designed for markets that are growing and it would be unsuitable for highly competitive and mature markets (Gonroos, 1991 cited in Egan, 2008; 13). The marketing discipline diverted from it’s original customer-oriented perspective and company-wide integration efforts, back to short term profits and marketing departments that had full responsibility for the marketing function (Egan, 2008) (Egan, 2008; Webster, 1992 cited in O’Malley and Patterson, 1998).