Page 28 - Marketing the Basics 2nd

20 Marketing: the Basics
‘Pile ’em high and sell ’em cheap’ was the mantra of the late Sam Walton, founder of Wal-Mart. Companies that adopt the product concept, like Wal-Mart, focus their efforts on maximizing the economies of scale within their operations, and passing those savings onto customers.
This strategy succeeds if two conditions are met. The first: the manufacturer or distributor can reap cost savings by increasing the scale of their activities. If they cannot, excess demand will persist, creating opportunities for competitors to enter the market. One of the reasons the US auto industry is in so much trouble is that they failed to commercialize innovations they pioneered in fuel-efficient cars. It was GM, after all, which first introduced the electric car, called the EV-1 in the early 1990s. Officially, the EV-1 program was scrapped because GM couldn’t take the product to market profitably. However, had someone at GM succeeded in introducing an electric-powered motor with a gasoline-powered engine, in other words, created a hybrid vehicle, GM would’ve enjoyed a first-mover advantage and reaped a public relations coup for their forward thinking. Who knows, after 15 years of selling hybrids, they might have even been able to bring the cost of producing a fully electric car to a price most people could afford.
The second condition that must be met to implement the production concept successfully is for the firm not to succumb to marketing myopia. Selling a product that no one wants is a one- way ticket to bankruptcy.
THE PRODUCT CONCEPT
Firms adopting the product concept believe customers favour products that offer the most value after considering the quality and performance of the product. A product is evaluated according to its durability, reliability or serviceability or a combination thereof. In the case of brands, consumers also evaluate the product’s ability to satisfy the customer’s psychological needs.