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.