The history of modern marketing and distribution systems

Marketing & Distribution

The History

of Modern

Marketing

and

Distribution

Marketing & Distribution

Modern marketing and distribution systems are a result of:

rise of living standards new spending

habits

technology advances wide variety of

products

inter-firm competition substitute goods

transportation advances national markets

investing in customer loyalty

developing techniques of mass

marketing

developing wider distribution

networks

Origins

Companies need to shift focus from „optimizing“ to „creating“ markets by:

Marketing & Distribution Three distinct time periods

I. „The Emergence of the Mass Market“ (1880 - 1920)

II. „The Maturing of the Mass Market“ (1920 - 1940)

III. „Reconstruction, Economic Growth and Consumer Boom“ ( after

1940 )

Marketing & Distribution „The Emergence of the Mass Market“ (1880-1920 )

marks the beginnings of modern marketing & distribution

Characteristics:

• large-scale companies & national markets

• high volumes, low margins, large profits

• department stores, mail-order companies

Strategies:

• diversification and expansion of consumption

• change of life habits & consumption patterns

• shift from price & production to product, advertising & branding

Marketing & Distribution

Conditions:

• growth of urban population

• increase in real wages

Marketing:

• focus on quality, product identity and branding to secure customers

loyalty

• advertising in urban areas & through mass newspapers

Distribution:

• long-distance deliveries

• development from fixed shops & multiples to national retailers: Marks

& Spencer, Sainsbury, W.H.Smith

• department stores in cities: Harrod‘s, Selfridge‘s

1880-1920: Great Britain

Marketing & Distribution

Conditions:

• extensive railway system national markets

• increase in urban population

• high living standards

Marketing:

• focus on mass adversiting campaigns: Coca-Cola, Royal Baking Powder,

Sapolio soap

• shift from product-orientation to customer-orientation: values, status,

prestige, desirable lifestyles

Distribution:

• general stores in small towns and rural areas

• chain stores, department stores and mail-order companies in cities

• big manufacturers operated own wholesaling networks: P&G, Colgate,

Gillette, Heinz

1880-1920: U.S.A

Marketing & Distribution

Conditions:

• population more scattered in rural areas

• focus on other industries than consumer goods (Germany, France)

• differences in living standards between regions (Italy)

no national markets & less advanced mass consumption

Marketing:

• few transformations in branding, packaging, advertising

Distribution:

• department stores in cities: Wertheim (Germany), Au Bon Marche, Le

Printemps, Galleries Lafayette (France)

• regional mail-order companies (Italy & Germany)

1880-1920: Continental Europe

Marketing & Distribution

Conditions:

• high level of urbanization

• expanding demand for goods (BUT not like G.B. or U.S.A.)

Marketing:

• first attempts to use advertising and brand identity for traditional

products: rice, soy sauce, sake

Distribution:

• extensive network of general stores, later specialist stores and

department stores in urban areas

1880-1920: Japan

Marketing & Distribution

Characteristics:

• USA – leading world economy

• higher segmentation of markets

Strategies:

• expanding marketing operations

• value-based pricing

• psychological understanding of consumers through marketing

research

• techniques to forge a consumer culture based on choice, lifestyle,

prestige rather than price & basic wants

• emotive, associational advertising

1920-1940: „The Maturing of the Mass Market“

Marketing & Distribution

Conditions:

• USA – leading world economy

• booming consumer demand

• large-scale companies

Marketing:

• marketing becomes a key business function within the company

• advertising focuses on emotional wishes rather than basic wants, uses

radio, TV

• advertising & market research agencies use statistical testing &

demographics to understand consumers

Distribution:

• department stores in cities

• chains like A&P, Woolworth, J.C. Penney expand

1920-1940: U.S.A.

Marketing & Distribution

Conditions:

• far behind the USA in terms of living standards

• consumption patterns change

Marketing:

• focus on statistics to plan output & distribution

• focus on sales efforts and intensive advertising

Distribution:

• concentration of retailing outlets & supermarkets like Tesco,

Sainsbury advantages in bulk purchase, price & image

1920-1940: Great Britain

Marketing & Distribution

Conditions:

• concentration of the population in urban areas

Marketing:

• need for new approach in marketing beginning of the „modern

marketing era“ in Japan

Distribution:

• arrival of station terminal shops that competed with small

retailers for the urban middle class

• producers establish own wholesale & retailing networks

1920-1940: Japan

Marketing & Distribution

Conditions:

• different development pace of countries

• focus remains on technology & production (Germany)

• increase in consumption (France)

Marketing:

• foreign brands enter Germany (Rama, Coca-Cola)

• imitation of marketing techniques from U.S. (Holland, Italy, France)

• advertising intensifies, using slogans & illustrations, psychology of

consumer

• sophisticated advertising campaigns: Pirelli, Ollivetti, Cirio

Distribution:

• department stores start operating on national scale

1920-1940: Continental Europe

Marketing & Distribution

Characteristics:

• USA – international lead in marketing techniques

• huge gap between US and Europe/Japan (war costs, reconstruction)

• post war boom narrows the gap, European & U.S. life standards

become similar

Strategies:

• shift from statistics-based to psychological analysis of human

desires – „motivational research“

• TV becomes an important medium for advertising

• supermarket chains like Auchan, Metro, Edeka become dominant

suppliers (Germany, France)

• new low-cost chains & discount stores threaten traditional

multiples

• shopping mall – center of life outside home (U.S.)

after 1940: „Reconstruction, Growth & Boom“

Marketing & Distribution

Thank you for your attention!

Reference:

Fitzgerald, R.: „Chapter 17 – Marketing and Distribution“, in Zeitlin, J. & Jones, G. (eds.): „The Oxford Handbook of Business History”, Oxford University Press, New York, 2009.