For The Greater Good
by John Quelch
& Katherine E. Jocz
Marketing is one of the singular American success stories. No country on earth is better at building brands and creating new consumers than the United States. The latest Interbrand listing of the most valuable global brands reveals eight American brands in the top ten and 52 in the top 100, more than twice the expected numbers based on the United States’ command of roughly a quarter of the world economy. Coca-Cola, Nike, and Starbucks command more loyalty among many consumers than any political party or trade union, more than many religions. Starbucks founder Howard Schultz sought to make his coffee shops the “third place” in our lives, after home and work.
But many commentators have long been skeptical of the merit and virtue of marketing. Thorstein Veblen in his Theory of the Leisure Class
(1899), Vance Packard in The Hidden Persuaders
(1957), and many others before and since them have dismissed marketing as manipulative, deceptive, and intrusive. Marketing, they argue, focuses too much of our attention on material consumption.
This criticism of marketing is with us still. Benjamin Barber, in his 2007 book, Consumed
, claims that marketing is “sucking up the air from every other domain to sustain the sector devoted to consumption.” As long as businesses market goods, there will be critics wishing they would rein it in or cease altogether.
To set these critiques in their proper perspective, we must first understand how and why the United States achieved its extraordinary marketing dominance. The democratization of consumer access to products and services that emerged from American marketing muscle is a story of vision and innovation. Marketing has helped in the creation of a modern miracle: satisfying consumer needs at every income level. And it has done this in largely beneficial ways, by building trust, communicating and educating consumers, lowering costs, creating choices, and stimulating growth. In this way, marketing is one of the more striking economic—indeed, human—triumphs of our time.
The Emergence of Modern Marketing
Marketing by producers to consumers is as old as the bazaar, but modern marketing is more than just selling. It involves the design of products and services in response to consumer needs, latent or explicit. It requires branding these products and services, communicating their benefits to intermediaries and end consumers, and distributing them. All of these activities involve value creation. In return, producers extract value through the prices they set in the marketplace.
In 19th-century America, manufacturing and distribution were fragmented. There were almost no national marketers. By the 1880s, laissez-faire economic policies and America’s size and growing population gave rise to the emergence of large, vertically integrated corporations that, thanks to scale economies, could produce standard products at relatively low cost. A flood of innovations needed to be commercialized and communicated to consumers across a vast land.
The result was the emergence of national brands such as Kodak, Johnson & Johnson, and Coca-Cola. A brand is a promise, an assurance of consistent quality from one purchase to the next. Brands make decision-making easier for consumers; instead of inspecting a myriad of unbranded options at market stalls every time they shop for an item, consumers can buy conveniently the same trusted brand on each purchase occasion. They may pay a little more for the branded item, but the time saved and the peace of mind make the trade-off worthwhile.
By the 1920s, the emergence of national retail chains helped ensure the distribution component of the value chain would not be overwhelmed by the power of manufacturer brands. These chains lowered their operating costs by buying in bulk and developed their own reputations as store brands. The self-service supermarket was born in 1930 and thus operating costs—and retail prices—were lowered by shifting tasks to the end consumer. Rural consumers were reached by national mail order houses, including Sears, Roebuck and Montgomery Ward.