Discuss About The Knowledge Based Approach To Product Concept?
The aim of the assignment is to critically analyse the marketing management concepts and compare between them. The study takes Apple, the multinational manufacturer of iphones, tablets and other computer hardwares as the base of the study. The six marketing concepts compared are production concept, product concept, sales concept, marketing concept, consumer concept and profit concept.
According to Jalonen et al. (2016), the production concept was prevalent in the 1950s when the business organisations were concerned more about production and manufacturing. The production concept stands on Says Law, which says that if a product is manufactured in the market, it will always find consumers to buy it. Compared to the marketing concept, in case of production concept, the producers believed that consumers would choose from the products and services available in the market. These products were made available to the consumers at low cost. The business organisations concentrated on production maximum units of products to earn high amount of profits and obtain economies of scale. The producers considered the tastes and preferences of the consumers secondary to their own needs to produce high number of units of goods and sell them to the consumers to earn high profits. The production concept of marketing was applicable when the goods and services are available in the market have low cost and there are high demands for them(Radke et al. 2014). Thus, analysis shows that the production concept was not appropriate for multinational companies like Apple who make expensive high value products like tablets and mobile smart phones. The company has to incur huge investment in hardware and software technology to manufacture these products and hence require selling them to appropriate customer segments to generate high profits. Thus, it can be inferred that production concept paid very less importance to the needs of the customers and is not appropriate for modern companies.
An analysis of the production concept shows that it laid more emphasis on the needs of the producers to mass produce goods to sell them to the consumers to earn high profits. A deeper analysis of the production concept reveals the following advantages:
Baumers et al.(2016) state that the producers concentrated on attaining economies of scale by mass-producing products and selling them to buyers at lower prices. Hence, the aim of the producers was not customer satisfaction but to earn economies of scale. This ensured a large number of products were available to buyers at low costs. Mirzaei, Moore and Liu (2013) say that contradictory to the cheap goods, which are sold under the production concept, Apple sells expensive mobile phones. The company invests a huge amount of money to manufacture these electronic goods. Thus, it is 1required to target the upper class customers to sell the smart phones at high price to recycle the investment amount back into its account as revenue. Thus, it needs to consider the customer segments and hence, it can construed that production concept is not applicable for Apple.
Mirzaei, Moore and Liu (2013) say that the production concept reveal that the producers concentrated on mass-producing products to earn high price and consumer convenience was considered secondary. This clearly points out to lack of marketing activities to inform the buyers about the products and letting them choose. This trend led to the reduced marketing costs of the producers and the consumers had to choose from the small variety of products available. It can be contradicted from the view of Apple that the reduced marketing is not acceptable to the company, which invests huge capital to make its expensive products(Hoberg and Phillips 2016). Thus, from this angle it can be stated that production concept is not applicable for modern companies like Apple.
Hoberg and Phillips (2016) state that the production concept clearly shows that compared to the product concept, the producers did not pay attention to the needs of the consumers and mass produced goods to earn profits. This left very less scope for product differentiation and the products of the producers eventually lost their unique characteristics. Imai et al. (2015) state that the producers as a results were not able to obtain consumer loyalty, which limited their repeated business profit generation. Thus, this concept is not applicable for multinational IT companies like Apple because they manufacture high-involvement electronic products for the consumers. It is crucial that Apple achieves product differentiation to make its smart phones and tablets stand apart from its competitor’s products in the market. Thus, the lack of product differentiation attribute of production concept is not applicable for Apple.
Imai, Mizuyama and Nonaka(2015) state that the product concept refers to the marketing concept of displaying the best attributes and maximum characteristics of the products. The product concept of marketing is a development on the production concept where the producers target their audience groups before selling their products. Jalonen et al. (2016) support the opinion and states that in comparison to production concept considers that consumers prefer commodities with highest quality, which would create high utility for them. This analysis shows that the product concept compared to the production
The producers advertise the best features of their products to the buyers to sell them. The advantage of this approach is the producers were able to target the appropriate consumer groups who bought the products. This earned them loyal base of consumers and who bought their products thereby generating high profits for them(Cassia et al. 215). This again shows that product concept like production concept is not applicable for use in Apple. This is because the concept does not incorporate advertising of goods and simply selling them based on their features. This process is not capable of earning high profit in the long run and hence is not appropriate for Apple(Mirzaei, Moore and Liu 2013).
Baumers et al. (2016) say the producers believed that consumers would buy highly engineered products and spent less on marketing them. They were as a result able to allocate more amounts of resources towards making high quality products rather than spending on marketing them. Axelson and Svensson (2013) contradicts this opinion and opine it can be pointed out that lack of marketing activities would result in weakening of the brand value of Apple and it would lose its customers to its competitors. Hence, this concept of large customer base buying products merely due to engineering attributes does not apply for Apple.
The producers relied on the approach that products sell due to high qualities and neglected advertising. As a result, they were not able to attract a large number of consumers, which limited their profitability(Relich, ?wíc and Gola 2015). There was still lack of product differentiation because the producers did not carry out large-scale marketing to know the needs of the consumers. Axelson et al. (2013) supports this view and opine that this often led to stocking of large amount of finished products because of over production and lack of advertisement of them. Apple cannot afford to have a lot investments in storing finished goods because that would hamper its financial liquidity. Thus the company requires to sell its products to its customers on a continual basis so that it can plough back the amount invested in the products by selling them to the customers.
As per Hoberg and Phillips(2016) the sales concept stands on the assumption that companies sell what they make and promote. The producers which practice the sales approach believe that consumers will buy products which are sold aggressively and promoted in the market. Similar to the product concept, the producers do not emphasise on building relationship with the consumers and assume that consumers forget their disliking for a product and may buy it in the future. Trujillo?Ponce (2013) support this theory and state the sales concept is not capable of earning profit in the long run because it does not try to build customer relationship and hence has limited use in multinational companies like Apple. This because since the customers cannot relate to the producers, they tend to switch from one producer to another which impairs the profitability of companies in the long run.
The advantage of sales concept in comparison to the product concept is that the producers concentrate on marketing the products to sell them to the consumers. This leads to mass selling and earns high profits for the producers. However Radke et al.(2014) points out that mass selling without customer relationship building is applicable for cheap goods. It is not applicable for expensive goods like Apple which requires huge initial investment in technology and human resources. The company requires building strong and long term relationship with its customers to be able generate repeat business. Hence, the sales concept is not applicable for Apple due to its lack of customer relationship attribute.
Axelson and Svensson(2013) say that the biggest disadvantage of the sales concept is that the producers concentrated on promoting their goods to sell them to consumers and not to create relationship with them. The sale of goods left very little scope for after sales services. Hoberg and Phillips(2016) supports Alexson and Svensson and state that this lack of relationship between the consumers led to limited repeat business, which did not allow the producers to acquire loyal consumer base and earn perpetual profits. This lack of customer relationship would lead to loss of customers and consequent loss of market position would lead to erosion of profitability of Apple. Hence, sales concept is also not applicable like product and production concept in case of Apple.
Baumers et al. (2016) state that marketing concept believed that marketing of products in the markets is important for the business organisation sell their products to the right customer segments and earn high profits. A comparison between the product, production, selling and marketing concept shows that the first three concepts were oriented with the profit making needs of the producers. The marketing concept emphasises on the needs of the consumers before offering them products rather than offering them what the producers have to offer them. Axelson and Svensson(2013) support this opinion and state that multinational companies like Apple follow this approach. Apple makes expensive electronic high involvement consumer goods like mobile phones and tablets. They are expensive and require a lot of investment in research and development from Apple to manufacture them. The multinational company advertises its products to attract the upper middle and upper class consumer segments who have enough disposable income to buy its products.
Cassia et al.(2015) state that the marketing concept stresses on advertising products to the consumers to know their needs before offering them products. This leads to the producers selling their products to appropriate customers segments, which earn them huge profits. Imai, Mizuyama and Nonaka(2015) support this view and say that multinational companies like Apple use this approach to target the appropriate consumer groups and sell their products to them to earn high profits.
The previous three approaches were not appropriate for high priced products like Apple iphone. The high involvement consumer products require huge investment from the producers towards research and development and technology. Hence, the marketing approach ensures that companies are able to target appropriate customer segments and sell products to them to earn high revenue.
Cassia et al.(2015) state that the marketing concept requires the companies to invest huge amount of resources in marketing of products to reach out to appropriate consumer bases. The marketing cost adds to the cost of production of the producing companies, which cannot be borne by small firms. This leads to low sale in those small firms who cannot promote their products like multinational companies. Axelson and Svensson(2013) support them and opine that this leads to lowering of profits which eventually leads to the eradication of those small firms from the market. However it can be pointed out that though the marketing concepts applies for Apple, it can be pointed out that even for a multinational company like Apple massive promotions have bearing on its capital. Thus, though marketing concept is applicable for Apple, it erodes the capital of the company.
According to Radke et al.(2014) the marketing concept has led to the big companies to spend huge amount of money to promote their products to reach out a huge consumer base. This develops stiff competition among the companies, which often spend huge amount of resources to market their products rather than improving the quality of their products. However, Mizuyama and Nonaka(2015) point out that excessive marketing has made the competition stiff for even leading companies like Apple. Hence, it can be said that marketing concept beyond the limit is not acceptable in any company.
According to the profit concept, firms aim to increase their profit earning capacity at a specific rate in the long run rather than earning short term profit. The organisations aim to increase their efficiency and effectiveness to utilise the resources available to them and the resources acquired from acquired from external identities. Cassia et al. (2015) states that the companies like Apple today conduct open innovation to get access to resources like workforce and knowledge of other business organisations to bring about improvement in their products. This leads them to introduce more technologically advanced products which satisfy needs of more customers and earn higher return for the firms producing them.
According to Mizuyama and Nonaka(2015) the firms are able to acquire higher efficiency and effectiveness, which led them to make more high quality products. This increased their profitability and competitive advantage in the end. Apple uses profitability concept to increase its efficiency and effectiveness to enhance its future profitability. Thus, profitability concept is extremely applicable for Apple.
Conclusion:
It can be concluded from the above discussion that the production concept, the product concept and the sales concept are not appropriate for modern multinational companies like Apple. The marketing concept and the profit concept are apt for multinational companies.
References:
Axelson, J. and Svensson, L., 2013. Ski transportation: A lead user study and product concept development for alpine ski equipment transportation outside a car.
Baumers, M., Dickens, P., Tuck, C. and Hague, R., 2016. The cost of additive manufacturing: machine productivity, economies of scale and technology-push. Technological forecasting and social change, 102, pp.193-201.
c, M., Ristimäki, P., Toiviainen, H., Pulkkis, A. and Lohtander, M., 2016. Between product Lack of after sales services:;Journal of Workplace Learning, 28(1), pp.33-48.
Cassia, F., Ugolini, M.M., Cobelli, N. and Gill, L., 2015. Service-based vs. goods-based positioning of the product concept: effects on customer perceived value. The TQM Journal, 27(2), pp.247-255.
Hoberg, G. and Phillips, G., 2016. Text-based network industries and endogenous product differentiation. Journal of Political Economy, 124(5), pp.1423-1465.
Imai, M., Mizuyama, H. and Nonaka, T., 2015. Product Concept Evaluation Game Combining Preference Market and GA.
Mirzaei, A., Moore, T. and Liu, G., 2013. Does market structure matter on banks’ profitability and stability? Emerging vs. advanced economies. Journal of Banking & Finance, 37(8), pp.2920-2937.
Radke, A.M., Plehn, J., Finke, G. and Hertz, P., 2014. Toward the integrated determination of a strategic production concept, distribution concept, service concept, and tranport concept for manufacturers of physical products.
Relich, M., ?wíc, A. and Gola, A., 2015. A knowledge-based approach to product concept screening. In Distributed Computing and Artificial Intelligence, 12th International Conference (pp. 341-348). Springer, Cham.
Trujillo?Ponce, A., 2013. What determines the profitability of banks? Evidence from Spain. Accounting & Finance, 53(2), pp.561-586.
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