The Need for an Expanded Conceptual Framework

The marketer must manage three sets of relationships--with customers, with suppliers, and with resellers. In both industrial buyer-seller relationships and in manufacturer-reseller relationships, we are talking about interorganizational relationships. In the microeconomic paradigm, the units of analysis are products, prices, firms, and transactions. In the new world of marketing management, we must also look at people, processes, and organizations.

Marketing scholars face two mandates for the 1990s. The first is to develop an expanded view of the marketing function within the firm, one that specifically addresses the role of marketing in firms that go to market through multiple partnerships and that is sensitive to the multiple levels of strategy within the organization. The second is to develop a base of empirical research that broadens our understanding of the forces leading to the development of long-term customer relationships, strategic partnerships with vendors, alliances for the codevelopment of technologies, and the issues involved in creating, managing, and dissolving these partnerships over time. Whereas the historical marketing management model has depended most heavily on economics, statistics, mathematics, psychology, and social psychology, the broadened view of the marketing function calls for work that spans the disciplines of political economy, organizational psychology, legal analysis, political science (government), and cultural anthropology.

In contrast to the microeconomic paradigm and its emphasis on prices, the political economy paradigm is better suited to understanding these firm-to-firm relationships. This is the argument first presented by Johan Arndt in articles published in 1979, 1981, and 1983. The political economy paradigm looks at marketing organizations as social systems--"dynamic, adapting, and internally differentiated. Important dimensions of marketing behavior are authority and control patterns, distributions of power, conflict and conflict management, and external and internal determinants of institutional change" (Arndt 1983, p. 52). Political economy has obvious potential to help us understand the role of marketing in managing relationships with other organizations and in developing support within the firm for activities necessary to respond to the changing marketplace. The political economy model has recently been applied most aggressively in the study of channel conflict (Dwyer, Schurr, and Oh 1987; Frazier 1983), but it offers solid potential for better understanding of all types of relationships and alliances in marketing (Day and Klein 1987). It is cited here as evidence of the availability of alternative conceptualizations of the functions of marketing to move the field beyond its historically narrow focus on transactions and prices based on the traditional microeconomic paradigm. 

Marketing As An Optimization Problem

Scholars on the leading edge of marketing responded with enthusiasm to the call for greater analytical rigor. At the root of most of the new managerial texts and the evolving research literature of marketing science was the basic microeconomic paradigm, with its emphasis on profit maximization (Anderson 1982). The basic units of analysis were transactions in a competitive market and fully integrated firms controlling virtually all of the factors of production (Arndt 1979; Thorelli 1986). Market transactions connected the firm with its customers and with other firms (Johnston and Lawrence 1988).

Analysis for marketing management focused on demand (revenues), costs, and profitability and the use of traditional economic analysis to find the point at which marginal cost equals marginal revenue and profit is maximized. Behavioral science models were used primarily to structure problem definition, helping the market researcher to define the questions that are worth asking and to identify important variables and the relationships among them (Messy and Webster 1964). Statistical analysis was used to manipulate the data to test the strength of the hypothesized relationships or to look for relationships in the data that had not been hypothesized directly.

The application of formal, rigorous analytical techniques to marketing problems required specialists of various kinds. Marketing departments typically included functional specialists in sales, advertising and promotion, distribution, and marketing research, and perhaps managers of customer service, marketing personnel, and pricing. Early organizational pioneers of professional marketing departments included the consumer packaged goods companies with brand management systems, such as Procter & Gamble, Colgate-Palmolive, General Foods, General Mills, and Gillette. In other companies, the marketing professionals were concentrated at the corporate staff level in departments of market research and operations research or management science. Examples of the latter include General Electric, IBM, and RCA. Large, full-service advertising agencies built strong research departments to support their national advertiser account relationships. Other large firms, such as Anheuser-Busch and General Electric, also entered into research partnerships with university-based consulting organizations.

Such specialized and sophisticated professional marketing expertise fit well into the strategy, structure, and culture of large, divisionalized, hierarchical organizations. 

Marketing as a Social & Economic Process

It is sobering to recall that the study of marketing did not always have a managerial focus. The early roots of marketing as an area of academic study can be found, beginning around 1910, in Midwestern American land grant universities, where a strong involvement with the farm sector created a concern for agricultural markets and the processes by which products were brought to market and prices determined. The analysis was centered around commodities and the institutions involved in moving them from farm, forest, sea, mine, and factory to industrial processors, users, and consumers. Within this tradition, three separate schools evolved that focused on the commodities themselves, on the marketing institutions through which products were brought to market, especially brokers, wholesalers, and retailers in their many forms and variations (Breyer 1934; Duddy and Revzan 1953), and finally on the functions performed by these institutions (McGarry 1950; Weld 1917). All of these approaches tended to be descriptive rather than normative, with the functional being the most analytical and leading to the development of a conceptual framework for the marketing discipline (Barters 1962; Rathmell 1965).

These early approaches to the study of marketing are interesting because of the relative absence of a managerial orientation. Marketing was seen as a set of social and economic processes rather than as a set of managerial activities and responsibilities. The institutional and functional emphasis began to change in 1948, when the American Marketing Association (1948, p. 210) defined marketing as:

The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer or user.

This definition, modified only very slightly in 1960, represented an important shift of emphasis. Though it grew out of the functional view, it defined marketing functions as business activities rather than as social or economic processes. The managerial approach brought relevance and realism to the study of marketing, with an emphasis on problem solving, planning, implementation, and control in a competitive marketplace.