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SCOPE AND CONTENT OF A COURSE IN MARKETING 1
Marketing, as I should define the term briefly, is a study of
the principles that govern the policies of business management
in the distribution of commodities from producers to consumers.
This includes the activities of retail and wholesale merchants,
manufacturers' sales organizations, the various agencies engaged
in the distribution of raw materials, and all other means of facili-
tating and promoting the sale of merchandise.
Take a shoe manufacturer, for example, who has just organized
a new business. The first marketing problem for him is the deter-
mination of the agencies through which his product is to be sold.
He has a choice between selling entirely to wholesalers, entirely
to retailers, or to both. He has a choice, furthermore, between
the various types of retailers — unit stores, department stores,
chain stores, and mail-order houses. He probably will find it
inadvisable to plan to sell to all these indiscriminately. Some
degree of selection will be essential. There is also the possibility
that he may elect to operate a chain of manufacturers' retail
Following this selection of agencies, and interwoven with that
problem, questions relating to the manufacturer's sales organiza-
tion arise. How large a sales force shall he maintain? What
plan for management of the sales force is to be developed? Is
a stock department to be operated? Then come the problems
of brands. Is this manufacturer to sell his product unbranded,
entirely under his own brand, or under wholesalers' and retailers'
private brands ? What is to be his advertising policy ? How are
his shoes to be priced? These are roughly the marketing prob-
lems that the shoe manufacturer must consider.
Take another case. I recently had an inquiry from a young
man who is just about to engage in a new business venture. He
1 A paper read before the meeting of the Association of Collegiate Schools of
Business at Chicago, May, 1920.
376 MELVIN T. COPELAND
had had experience in wood-working and was opening up a plant
for the manufacture of garden trellises and similar articles. His
capital resources were limited, and he expected to sell his entire
product within a radius of a few hundred miles of the point at
which his plant was located. He proposed to sell his product
by direct solicitation from house to house. He estimated that
this would require from ten to fifteen solicitors, and he expected
to pay them 20 per cent commission on their sales. The success
of this business venture depended mainly upon the results of this
sales plan. An analysis was made which indicated that each
solicitor must sell from six to eight articles every day, in good
weather or bad. The market obviously would be restricted to
families who owned their own houses and who were sufficiently
well to do to afford this expenditure. The number of such families
per thousand population would be small.
It could be anticipated, furthermore, that the percentage of
sales to the number of calls made would be low. For these and
other reasons the plan as at first drawn up appeared to need modi-
fication. Tests were made which bore out the conclusion reached
by the analysis of the problem. It was necessary, therefore, for
this manufacturer to change substantially his sales plans in order
to secure the necessary volume of business at an expense that was
These are typical marketing problems which are of everyday
The plan of a course in marketing and the methods of instruction
must obviously be adjusted to the conditions under which the course
is given — the preliminary training of the students, their stage of
development, and the relation of the marketing course to other
courses in the curriculum. I do not presume to lay down rules
of procedure that are universally applicable. It is my purpose
rather to indicate how we have met our problems in teaching
this subject in the Harvard Graduate School of Business Adminis-
tration, leaving it to other speakers not only to give us the benefit
of their criticism but also to suggest how the plans should be
modified to meet the conditions in other schools where the circum-
stances are different.
A COURSE IN MARKETING 377
GENERAL PLAN OF COURSE
As at present arranged, the courses in the field of marketing
in the Harvard Business School include the introductory market-
ing course, sales management, advertising, retail-store manage-
ment, and purchasing. Our students are also taking courses in
accounting and ordinarily factory management, commercial law,
business statistics, and in their second year business policy, as
well as other professional business courses. Sales management,
advertising, retail-store management, and purchasing are advanced,
specialized courses built upon the foundation laid in the introduc-
tory marketing course. These specialized courses I shall not at-
tempt to discuss on this occasion. In this paper I shall take up
the work of the introductory course in marketing, which in our
case covers an entire year with three meetings a week.
The method of instruction employed in this course is the prob-
lem or case method; that is, we seek to develop the principles
inductively by a discussion of concrete problems each of which
illustrates a specific point or points. In my opinion this is by
far the most satisfactory method of instruction. It trains the
students in analysis and thus helps to prepare them most effectively
for grappling with the problems with which later they will have
to deal. It stimulates independent thinking. The method of
approach outlined in Shaw's Approach to Business Problems affords
useful suggestions in developing this method of instruction.
So much for general conditions and for the method of instruc-
tion that we are using. I will turn now to the substance of the
elementary course in marketing. This course has two major
divisions: the first is marketing methods and the second is sales
The methods of marketing merchandise fall into two main
groups: (1) methods used in marketing goods for retail distribu-
tion, and (2) methods used in marketing goods for wholesale
consumption. The marketing processes are essentially different
for these two groups of products. For some goods that are to
be sold at retail a process of assembling the products of numerous
manufacturers or producers is necessary, as in the case of foods
sold by wholesale grocers. For others, as in the agricultural
378 MELVIN T. COPELAND
implement trade, the products of one manufacturer can be dis-
tributed to the retailers frequently without any intermediary pro-
cess of assembling. The predominant characteristic of the trade
in goods sold through retail stores, however, is the distribution of
merchandise so that it can be parceled out in small units, retailed to
individual consumers who purchase for personal use or gratification.
Take a manufacturer of cotton cloth, for example. In the
United States alone, to say nothing of foreign countries, there
are over 100,000,000 possible consumers of his product. Each
consumer ordinarily will purchase only a few yards of cloth at
one time. The problem of this manufacturer is to find means
of securing a distribution of his product whereby as many of these
customers as possible may effectively be given an opportunity to
buy these goods in the form and quantity that they desire.
The goods that are sold for wholesale consumption include
raw materials; semi-manufactured products, such as crude iron
and steel and leather; equipment; and machinery supplies. The
raw materials must be assembled in large lots and usually it is
essential that they be carefully graded. These materials are
used in large quantities by individual purchasers. The semi-
manufactured materials similarly are sold in large lots according
to well-defined specifications or grades. Equipment also is gener-
ally a bulk sale, although in some instances this shades down to
small individual purchases.
The market for goods sold for wholesale consumption ordinarily
is clearly defined and of narrow scope in comparison with the
market for goods sold at retail. The purchase of goods for whole-
sale consumption, furthermore, is determined not by the personal
needs or personal desires for gratification of the purchaser but ac-
cording to purely business considerations of quality, utility, and
price. These considerations are governed by the product into
which the materials are to enter or by the production require-
ments of the plant in which the materials or machines are to be
Take the market for raw cotton, for instance. There are only
from one to two thousand manufacturers in the United States
who purchase raw cotton. The number of purchasers of any
A COURSE IN MARKETING 379
specific grade of raw cotton is even less. This market, therefore,
is one that is clearly defined. It is a market, furthermore, in
which the individual sales are large. The problems of this mar-
ket are quite different from the problems of a cotton manufacturer
seeking to sell his product to 100,000,000 individual consumers.
Let us consider now the subdivisions of the methods of market-
ing each of these groups of products. The methods of marketing
goods for retail distribution are divided into three sections: (1)
conditions determining demand; (2) retail trade; (3) wholesale
CONDITIONS AFFECTING DEMAND
Some of the questions for consideration with regard to condi-
tions affecting demand are the following : Who will use the product ?
What are the consumers' buying motives and habits? In what
form do they prefer to buy the product ?
The potential market for a manufacturer of workmen's overalls
is definitely limited to men who are engaged in occupations where
the use of overalls is necessary. The first task of such a manu-
facturer is to determine those occupations and the geographical
location of the market. His problem is simple compared with
the problems of numerous other manufacturers. While there are
some products of almost universal demand, such as certain articles
of food, nevertheless, in most instances an investigation will show
that the purchasers of any product come mainly from particular
classes of consumers. It is important that an analysis should be
made, to ascertain the definite classes of consumers to be aimed
at, as the first step in determining the marketing methods.
Some of the considerations to be taken into account in this
analysis are whether the product is for individual or family use,
the age and sex of the users, rural or urban demand, the occupations
of the users, racial influences, living conditions such as home
ownership, the influence of climatic conditions, provincialisms in
demand, such as the demand for left-hand plows in some districts
or the "yokel" trade in clothing, and the influence of custom.
A manufacturer of a breakfast food, for example, would find
difficulty in selling his product on the continent of Europe, because
380 MELVIN T. COPELAND
of the long-established custom which restricts the continental
European breakfast to rolls and coffee.
Buying motives and habits are equally worthy of consideration
in the elementary analysis of the market. Groceries, for instance,
are products that ordinarily are purchased where it is most con-
venient for the housewife to place her daily order. Articles of
women's wearing apparel, on the other hand, are usually bought
by the shopping process. In purchasing a coat or a gown, the
housewife wishes to compare style, quality, and price in several
shops before making her purchase.
The selection of marketing methods, furthermore, will depend
upon whether the buying motive is to secure economy in labor
or economy in price, to secure durability or satisfy a desire for
a novelty, whether the purchase is made as a necessity or as a
Is the article one for which there will be a repeat demand
from users? A breakfast-food manufacturer, for example, can
count upon repeat demand for his product, provided it is satis-
factory to consumers. The manufacturer of a vacuum cleaner,
on the other hand, can expect repeat orders from consumers only
at infrequent intervals. His task is rather continually to dig up
new purchasers. The manufacturer of a safety razor cannot
expect a substantial repeat demand for the razor itself, but he can
count upon a repeat demand for the blades used in the razor.
Obviously, the type of sales organization to be developed must
be shaped in part according to whether or not a repeat demand is
These illustrate a few of the buying habits and motives that
must be taken into account; applied to specific cases they form
the basis for interesting and valuable classroom discussions.
Influences are at work constantly to change buying habits.
The increased use of automobiles by farmers, for example, is
lengthening the farmers' radius of interest and tending to make
the farm demand for numerous personal and household articles
more akin to city demand than it has been in the past. The
spread of educational facilities and the introduction of better means
of transportation and communication are constantly affecting buy-
A COURSE IN MARKETING 381
ing habits. Public opinion, finally, may influence buying hab-
its. This public opinion may be expressed in organized form
through a housewives' league, through the label leagues of trade
unions, through such organizations as the consumers' league or it
may manifest itself in unorganized form through the development
of a sentiment in favor of or against a certain product.
Shall the goods be sold in packages or in bulk? The answer
to this question in the final analysis depends upon the preference
of the consumers. Attacks upon the package system are of fre-
quent occurrence. Nevertheless, the quantity of goods sold in
packages is constantly increasing, not through coercion by manu-
facturers, but because many consumers prefer to buy the merchan-
dise in that form. General rules cannot be laid down as to whether
goods should be sold in packages or in bulk. The problem is one
for careful analysis, in each individual case, for determining the
marketing methods that are to be used.
The nature of the product and the buying motives and habits
of consumers are among the chief influences determining the selec-
tion of the type of retail store through which the product is to
A large majority of the retail stores in the United States are
what I prefer to call unit stores. Sometimes they are called "inde-
pendent " stores or " regular " stores. A unit store is a store without
an elaborate departmental organization that is owned and managed
as an independent unit for the sale of goods through personal sales-
manship. Unit stores are used most extensively for the distribution
of merchandise such as groceries, hardware, agricultural imple-
ments, shoes, men's clothing and furnishings, jewelry, cigars and
tobacco, and drugs.
Unit stores furnish the most numerous outlets for many kinds
of merchandise. They provide the only means whereby large
numbers of consumers can be reached regularly. They are adapt-
able to the service requirements of their patrons. Frequently
the proprietor of a unit store has built up a strong personal clientele.
The market for merchandise distributed through unit stores is not
dominated by a few large powerful buyers.
382 MELVIN T. COPELAND
A manufacturer who elects to distribute his product through
unit stores, however, encounters difficulty in inducing a large
number of individual retailers to handle his product effectively.
While there are many notable exceptions, nevertheless a substantial
number of unit stores are not operated efficiently. The selection
of this type of store as the marketing agency, therefore, presents
a series of difficult, complex problems.
For some commodities a manufacturer finds it advantageous
to select unit stores to act as exclusive agents. This policy is
exemplified by several large clothing manufacturers. Other cloth-
ing manufacturers, whose product is probably of equal merit,
follow the opposite policy of not building up a system of exclusive
agencies. This is one of the large problems of sales policy, because
there are substantial reasons for and against this system.
Another type of store that is generally operated on the unit
principle is the company store. This has come into especial promi-
nence during the last few years of rising prices. The American
Woolen Company, for example, has recently established a store
at its plants in Lawrence, Massachusetts, for the sale of merchan-
dise to its employees. Similar stores have been organized by
several other large employers of labor. To the manufacturer or
wholesaler seeking distribution for his product, the company store
presents a problem because of the doubt as to its permanency
and the friction that it causes with many of the unit stores with
which it competes.
The retail-wholesale store is another institution that compli-
cates the sales problem for many a manufacturer. Such a store
is one that carries on a retail business and also operates a wholesale
department. A store of this type ordinarily demands wholesalers'
discounts. It is, therefore, in a position to buy goods for its
retail department at manufacturers' wholesale prices. It often-
times becomes a troublesome competitor of the unit stores, to which
the manufacturer cannot afford to sell at wholesale and which are
forced to buy from wholesalers at prices higher than the wholesale-
retail store purchases its merchandise.
The metropolitan specialty store, especially for articles such
as women's wearing apparel, has become an important factor in
A COURSE IN MARKETING 383
the sale of some kinds of merchandise. This type of store has
operating expenses quite similar to those of the other types of
stores with which it competes. Its main advantages appear to
be those that accrue from specialization.
A department store, according to the customary usage of the
term, is a retail store organized on a departmental system in which
one of the large departments is dry goods. Wherein does the
department store have its chief advantages? Its size frequently
gives it a buying advantage. Oftentimes it is able to obtain
wholesale prices or high discounts because of the large quantities
that it purchases. Its size, however, does not give it any advan-
tage apparently in operating expenses. From such scanty informa-
tion as is now available it appears that the ratio of operating
expenses to sales is as high in department stores as in unit stores.
Frequently the expenses are higher in department stores in pro-
portion to sales. Some of the failures of department stores during
the last ten years have been due, I believe, to a mistaken theory
that a large volume of business necessarily meant economy in
The chief advantage of a department store, it seems to me, is
the facilities that it offers for shopping. A department store is
essentially a shopping institution. It is a strong factor in the
trade in women's wearing apparel, for instance; but as a rule the
department store has not been able to make a success of a grocery
department. It cannot operate a grocery department ordinarily
as cheaply as a unit store is operated. The buying habits of the
consumers, furthermore, lead them to patronize unit stores for the
bulk of their purchases of groceries.
The determination of the buying motives and habits of con-
sumers to whom a given article is to be sold, therefore, plays an
important part in the decision of a manufacturer as to whether
he will seek to have his product sold through unit stores or through
department stores. It is one of the tasks of the teacher of market-
ing to train students to analyze these problems so that the type
of retail store to be used can be determined intelligently.
A chain-store system is a group of scattered stores with single
ownership and centralized management. Ordinarily a central
384 MELVIN T. COPELAND
warehouse is operated from which merchandise is distributed to
the retail branches. The chain-store system has the advantages
of large-scale buying and wide dispersal of the individual retail
branches. It has facilitated the development of standardization
of equipment and of methods of operation and management.
Chain stores have been most successful in marketing those products
that ordinarily are sold through unit stores. Chain stores are
located at points where it is most convenient for their patrons
to visit them.
While the chain store undoubtedly has definite advantages
such as have been mentioned, it also is at a disadvantage in some
respects in competition with unit stores. The chain-store system
is less flexible. It cannot readily adjust its services, such as
delivery and credit, to meet the needs of the individual patrons.
Moreover, the advantages that the chain-store system gains through
centralized buying and standardization of management methods
are offset, in part at least, by the necessity of operating a central
warehouse and especially by the difficulty in securing managers
who will take a keen personal interest in the conduct of these
stores. Expenses must also be incurred for policing the branches:
a system of frequent, close inspection is necessary in a chain-store
Inasmuch as many of the chain-store systems have cut prices,
they are looked at askance by numerous manufacturers who believe
that their main reliance must be placed upon unit stores. The
friction between chain stores and unit stores has been a matter
of grave concern to many a manufacturer during the last ten or
Occasionally a manufacturer decides that a system of manu-
facturer's retail branches is the logical outlet for at least a part
of his merchandise. The establishment of retail branches by a
manufacturer is not ordinarily, however, for the purpose of econ-
omy in expense of operation. It seems to have been the general
experience of manufacturers who have established retail branches
that they are not able to operate their stores more economically
than the average unit store or department store is operated. Such
branches generally have been established for other reasons. One
A COURSE IN MARKETING 385
of these reasons is to insure a steady, sure outlet for at least a
portion of the manufacturer's product. There are also several
instances in which manufacturers have established a small number
of retail branches for educational and promotional work. The
L. E. Waterman Company, for example, has a store in New York
to provide service to the purchasers of its pens and also to serve
as a laboratory in which to study retail problems. The Dennison
Manufacturing Company has four retail branches that are used
as agencies for promoting the sale of its products but not in com-
petition with the independent retail stores that carry this merchan-
dise. Whenever a manufacturer decides to open up a retail store,
he finds immediately that his action is capitalized by his com-
petitors, who seek to develop a spirit of antagonism among retailers
on the ground that the manufacturer is entering into direct com-
petition with his own customers.
A mail-order house ordinarily is a business that sells at retail
from catalogues and not over the counter. The orders are received
by mail at a central warehouse whence the goods are shipped to
consumers. The chief field for the development of mail-order
sales has been in the rural districts and small towns. The cata-
logue of a mail-order house gives an opportunity for shopping
somewhat akin to the visit to a department store. The large
mail-order houses, to be sure, have utilized their buying power
and their established clientele to sell many products outside the
range of shopping goods. Whether a mail-order house is able to
operate at substantially lower expense than unit stores is a question
that has not yet been definitely settled. At all events, concentra-
tion of buying power and the tendency to cut prices frequently
have caused manufacturers to hesitate to seek distribution of their
products through mail-order houses.
Co-operative stores have not been sufficiently successful in
the United States, up to the present time, to present a substantial
marketing problem. A co-operative store, properly speaking, is
one that is owned and managed by consumers. The typical
co-operative store is organized on the Rochdale plan, whereby
each member of the society purchases one or more shares of stock
at a small amount per share. The number of shares that one
386 MELVIN T. COPELAND
member may hold usually is limited, and ordinarily each member
has one vote irrespective of the number of shares of stock that he
holds. Dividends are commonly paid upon the stock at the
ordinary local rate of interest and the remainder of the earnings,
aside from such as may be set aside for reserves or surplus, are
distributed to the members annually in proportion to their pur-
chases. This system has had a tremendous development in Euro-
pean countries, but in the United States the number of co-operative
stores is small and many of those in existence have led a precarious
life. During the last eighteen months, the co-operative movement
has received a new impetus in this country through the influence
of labor-union men; this may prove to be a new marketing factor
of large significance.
Retail public markets present problems of quite a different
character from those encountered in other types of retail stores.
Municipal markets in which booths are leased to dealers, to be
sure, are not far different from other classes of retail stores. Public
markets in which producers sell to consumers, however, bring in
a new set of problems.
Widespread efforts have been put forth, especially during
recent years, in numerous localities to stimulate the development
of public markets of this type. Their success depends upon the
buying habits of the consumers and their readiness to go to those
markets. Their success also depends upon the readiness of the
farmers to spend the time necessary to haul their produce to
market and to carry on its sale. Frequently farmers find that
this takes too much of their time at a period when their crops
need attention. In the larger cities, moreover, the supply of
produce from nearby sources is so inadequate for the total needs
of the community that large quantities must be shipped in from
more or less distant points. Under such circumstances a well-
organized group of merchants is essential to carry on the produce
business. It may be to the advantage, therefore, not only of the
farmers but of the community at large under some conditions to
have the bulk of the local produce sold through established trade
channels rather than through farmers' public markets.
Wagon retailers include those merchants who do not operate
a retail store, except perhaps as an incidental adjunct to their
A COURSE IN MARKETING 387
business, but who retail merchandise from wagons that deliver
the merchandise at the homes of the consumers. The milk trade
is one of the notable examples of business that is carried on by-
wagon retailers. Suggestions, such as have been made from time
to time, that a co-operative system should be used for milk delivery,
run afoul of this fact, that the only place of business for the ordinary
milk dealer is his delivery wagon. If he gives up his independent
delivery system, he practically gives up the independence of his
The ice business is another trade carried on by wagon retailers.
In this trade the heavy loss through shrinkage tends to discourage
duplication of routes and therefore to result in the development of
local monopolies in the ice trade. As in the case of the milk
dealer, the ice merchant must ordinarily maintain a delivery sys-
tem if he is to carry on an independent business. Both milk and
ice are commodities of such general use that these trades present
unusual marketing problems of broad public policy. Many of
these problems have not yet been solved satisfactorily.
The final class of retail merchants includes what I have termed
bulk retailers. Examples of this class are coal merchants and
lumber retailers. In these trades a merchant must necessarily
carry a large stock requiring a heavy investment of capital. The
trade is seasonal and sales are usually made in bulk lots on specifi-
cation. The individual consumer seldom visits the place of busi-
ness of the retailer.
Each of these types of retail merchants presents special prob-
lems in store management and also special problems from the
standpoint of the manufacturer or producer who undertakes to
determine the logical channels for the distribution of his product.
The selection of the retail channels to be used, moreover, influences
the producer's decision as to the method of wholesale distribution
to be utilized.
Wholesale merchants are business men who buy and sell
merchandise on their own account for distribution to retailers
in lots smaller than those in which the wholesaler buys. The
wholesale merchant is a large factor in the distribution of many
388 MELVIN T. COPELAND
products to unit stores. Although there are some manufacturers
who sell their merchandise direct to retail grocers, for example,
nevertheless they constitute but a small minority. Such manu-
facturers, furthermore, find it necessary practically to duplicate
the organization and to assume the functions of the wholesale
grocer, usually incurring at least as much expense as the wholesale
grocer incurs in operating his business.
The function of the wholesaler ordinarily is to assemble the
products of numerous manufacturers and to parcel these out in
such lots as are required by unit stores. The wholesale merchant
also performs the function of making collections and bears the
credit risk. This is not a small item in many wholesale businesses.
The large wholesale merchant oftentimes goes farther than this.
He assumes the responsibility of specifying what product is to be
made and he may also take the responsibility of having the prod-
uct put out under his own brand or trade-mark, thus entering
into competition with the brands of goods carrying manufacturers'
We hear a great deal of loose talk about the "elimination of
the jobber." This is not, however, a question that can be dis-
cussed on the basis of generalizations. Each particular case needs
to be considered by itself on its own merits. Take a shoe manu-
facturer near Boston, for example. He is selling his entire output
of women's shoes to sixty shoe wholesalers. One salesman, with
the occasional assistance of one member of the firm, is able to sell
the entire output of the factory. The customers are all of sound
financial standing. The manufacturer, therefore, incurs slight
credit risk. His shipments are made in large lots. Consequently
he can operate with a minimum shipping force and a minimum
office force. He also receives valuable guidance from his customers
in the selection of styles. In this case, the manufacturer believes
that it is to his advantage to dispose of his product to wholesalers.
He finds that in this way he can compete effectively with other
shoe manufacturers who have followed a policy of selling their
shoes directly to retailers.
One of the largest manufacturers of hosiery in the United
States has followed a policy of concentrating his efforts upon the
A COURSE IN MARKETING 389
problems of production. He sells his entire output to wholesalers.
Many fruit and vegetable canners, whose business is highly sea-
sonal, could not afford to operate if it were not for the outlet and
the financial assistance furnished them by the wholesale grocers.
The specialty wholesaler represents a differentiation from the
ordinary wholesale merchants, such as are referred to above. In
New York, for example, there are a number of wholesalers who
handle only hosiery and knit goods. The tea and coffee whole-
saler is another specialty merchant. These specialty wholesalers
generally cover a wide territory in the sale of their products and
develop a demand through especial care in the selection and
quality of the merchandise that they handle.
There are a few catalogue wholesalers in the United States.
One of the most notable examples of these is Butler Brothers of
Chicago. The catalogue wholesaler does not employ a force of
traveling salesmen but sells on mail orders.
Merchants' co-operative wholesale associations, or buying
exchanges as they are sometimes called, have been developing
more rapidly during the last ten years than prior to that time.
The oldest of them have been in existence for twenty-five years
or more. These co-operative buying associations have had their
greatest development in those trades in which the wholesale mer-
chant is also a large factor. They are direct competitors of the
wholesale merchant, but in the grocery trade at least the co-
operative buying associations deal chiefly in staple merchandise.
The most successful type of co-operative buying association
is organized on plans similar to the Rochdale system of consumers'
co-operative societies whereby each merchant who is a member
has one vote and where the amount of stock that one merchant
can hold is limited. These co-operative buying associations do
not employ traveling salesmen. They sell only for cash or on
very short credit, and usually the customers pay for the delivery
of the goods that they order. There are frequent instances of
associations organized on other principles, and sometimes it is
stated that some of them have been promoted by parties who were
interested in securing the commission on the sale of the stock
rather than in the continued successful operation of the business.
390 MELVIN T. COPELAND
As in other co-operative enterprises the success of the co-operative
buying association depends upon the willingness of the members
of the association to work together harmoniously and to employ
sufficiently expert managers. The most successful co-operative
buying associations are made up of retail merchants who are in
a sufficiently strong financial position to enable them to pay cash
for their purchases.
The fruit-and-produce trade presents a series of particularly
complex marketing problems. These problems, nevertheless, are
of wide public interest and constitute some of the most important
topics covered in a course on marketing. They are concerned
primarily with the large urban markets. The inhabitants of the
large cities and the industrial districts of the United States are
supplied with fresh fruits and vegetables from a wide area. The
local supplies, in most instances, are not adequate to provide
during the entire year for the needs of the people living in these
districts. With the improvement in means of refrigeration and
transportation, furthermore, producers in distant parts of the
country have found that they can cater advantageously to
these markets, even to the extent of engaging in specialized
agricultural production. The marketing machinery for handling
this large volume of trade is still by no means perfect. The trade
is one of especial difficulties because of the fact that a constant,
regular flow of merchandise is essential and also because of the
perishable nature of the merchandise, which involves danger of
loss through spoilage or through glutted markets.
The commission merchant is one of the chief agencies for the
handling of fruit and produce in large cities. Ordinarily the
commission merchant receives shipments on consignments from
farmers or from country dealers. These shipments are sold at
the prices that are current when the shipments arrive. After
deducting his commission fee and any incidental expense that he
may have incurred, the commission merchant remits the balance
to the shipper. This system enables the shipper to ship his mer-
chandise whenever it is ready without awaiting specific orders
from the commission merchant. It also enables the shipper to
obtain the benefit of the prices that are current at the time that
A COURSE IN MARKETING 391
the shipments arrive at the market. Dissatisfaction sometimes
occurs when the shipper does not receive as high a price as he
anticipated. This may be due to poor grading, to poor handling
in transit, or to an unexpected slump in the market. The com-
mission merchant not infrequently is held responsible by the
shipper for the failure to obtain better prices.
Many commission merchants, furthermore, buy and sell on
their own account, thus acting as jobbers. This combination of a
commission merchant and a jobbing business, while it has some
advantages occasionally even to the shipper, has not ordinarily
worked out well in any industry in the long run. The conflicts
of interest tend to create distrust and dissatisfaction.
In the large urban markets there are several other agencies
through which produce may be sold. There are car-lot receivers
who buy outright on their own account. Some of these receivers,
and also some of the other types of middlemen, send out
buyers to purchase produce or to contract for it in the growing
The broker, who handles a portion of the trade in produce,
sells for a brokerage fee shipments consigned to him. Ordinarily
the broker, however, sells only upon confirmation of the price
by the shipper. The broker as a rule deals only in car lots.
The jobber in the fruit-and-produce trade buys from car-lot
receivers, brokers, or commission merchants, and sells to retailers.
He performs the regular wholesale merchant's functions.
The trade in citrus fruits and occasionally in other products
in several large cities is carried on through auctions. These
auctions are ordinarily held daily, and sales are made directly
at the freight terminal to jobbers and large retailers. The auction
system can be used advantageously only where there are large
shipments of carefully graded produce.
The most serious problem in the trade in fruit and perishable
produce in our large cities is the lack of adequate terminal facilities
for handling the trade expeditiously and economically. In New
York, Chicago, and Boston the wholesale fruit-and-produce mar-
kets are practically in the same condition that they were twenty
to thirty years ago. The volume of the trade has greatly increased ;
392 MELVIN T. COPELAND
yet these markets are not well situated with reference to shipping
terminals. The result is expensive teaming through congested
streets; this frequently causes serious deterioration in the produce.
While these existing markets may generally be well situated for
the jobbing trade, nevertheless they are not satisfactorily equipped
for handling car-lot shipments. The provision of adequate rail-
road terminal facilities especially equipped for this trade is one
of the most urgent marketing problems that we face.
A notable development in the field of marketing during recent
years has been the growth of the California Fruit Growers' Ex-
change, probably the most successful example of a co-operative
association of producers. The success of this organization has
undoubtedly been due in part to special circumstances, such as
the specialized, capitalistic nature of the industry, an all-the-
year-round production, and previous experience in co-operative
efforts for other purposes. Not least, among other reasons, is
the distance from the market, which has placed a premium upon
the effective control of shipments, with diversion in transit in
order to have the fruit delivered at the markets paying the best
prices and to avoid gluts.
There are also numerous other examples of successful co-
operative marketing associations of producers which deserve careful
consideration in a marketing course. While co-operative methods
are far from being a cure-all for the ills that exist in the marketing
of farm produce, nevertheless they are achieving enough success
to warrant a thoroughgoing study of the problems of their organiza-
tion and management from the business standpoint.
The final section on wholesale trade in our marketing course
deals with manufacturers' wholesale branches.
There are numerous instances of manufacturers who have
established wholesale branches for the distribution of their prod-
ucts directly to retailers. They have thus assumed completely
the functions and the expenses of the wholesale merchant. In
few cases does it appear that there has been a substantial saving
in expense by the adoption of this policy. The objects have
generally been to facilitate more aggressive selling or to meet
some special conditions in the industry.
A COURSE IN MARKETING 303
Frequently a manufacturer feels that his product does not
receive enough individual attention from the wholesalers and their
salesmen. He believes that by coming directly in contact with
retailers, he will be able to push his goods more effectively against
the products of his competitors. He values the good will of the
retail merchants and believes that he can secure it more certainly
by dealing with them directly. In other instances, the manu-
facturer establishes a system of wholesale branches in order to
maintain a more steady production load for his factory. With
a system of wholesale branches the seasonal fluctuations in the
volume of sales may be lessened.
Among the industries in which the operation of manufacturers'
wholesale branches is conspicuous is the meat-packing industry.
Each of the large meat packers has a system of branch houses
from which the products are distributed directly to retailers.
Without entering into the many controversial questions regarding
the activities of the packers, I wish merely to point out that the
system of branch houses and refrigerator cars enables a packing
company to secure a nicer adjustment in the distribution of its
products than could be obtained by any other method that has
yet been devised. The meat packers, like the dealers in fresh
fruit and produce, are selling a highly perishable product. Speed
in marketing is essential; only two weeks' time elapses from the
purchase of the steer in the stockyards to the sale of the fresh meat
in the retail store. The inhabitants of the urban districts, further-
more, require a continuous supply of fresh meat. The failure of
this supply would cause hardship and suffering. An excessive
supply, on the other hand, would result in waste and spoilage.
A continuous flow of fresh meat in such quantities as are demanded
from day to day by the various markets must therefore be provided.
The organizations of the large packing companies appear to fur-
nish a well-adjusted machine for carrying on this trade with a
minimum of economic waste. This is one example of the special
circumstances which in some trades have resulted in the estab-
lishment of manufacturers' wholesale branches.
The discussion of problems that arise in connection with
methods of marketing goods for retail distribution thus touch upon
394 MELVIN T. COPELAND
a wide field of business. They not only serve to acquaint the
student with the facts that must be taken into account in ana-
lyzing such problems but also afford a broad survey of conditions
in numerous industries and trades.
METHODS OF MARKETING GOODS FOR WHOLESALE CONSUMPTION
The plan that is followed in analyzing the problems of marketing
materials, equipment, and supplies for wholesale consumption is
essentially similar to that used for the preceding topics. We take
up first the marketing of raw materials, including problems of
direct sale, such as coal, iron ore, and sugar beets; the problems
of raw-material merchants, as in the cotton and wool trades; organ-
ized speculation, as in the grain and cotton trades; the problems
of financing the trade in raw materials such as in the cattle trade;
and the use of auctions for products such as leaf tobacco and furs.
The methods of marketing semi-manufactured and manufac-
tured materials, such as pig iron, steel, copper, and leather, include
direct sale, selling agents, and merchants. The marketing machin-
ery necessary for handling these trades is much less elaborate
than in most other industries, because the merchandise usually
is produced in large quantities of specified grade which are in
turn sold in large lots by specification to other manufacturers.
In each trade the number of producers is small and the number
of purchasers is also small. With few exceptions the process of
assembling is not necessary, and for much of the trade shipments
can be made directly from the plant of the producer to the plant
of the consumer without any intervening warehousing. The
merchant's function is required only for a small portion of the
business which is carried on under special circumstances.
The marketing of equipment is quite similar to the marketing
of manufactured materials for wholesale consumption in that
the number of producers is small and the number of purchasers
also small. Nevertheless, there is one group of problems in
connection with . the marketing of equipment that is peculiar to
this field. These problems, I believe, have a social significance
that has not yet been fully recognized. With the growth of
large manufacturing industries, there has developed a supple-
A COURSE IN MARKETING 305
mentary set of industries manufacturing plant equipment. Thus,
there is a group of manufacturers of textile machinery, the manu-
facturers of shoe machinery, a group of manufacturers of printing
machinery, and so on.
The production of these highly intricate machines necessitates
an expensive plant and organization for the machinery manu-
facturer. His field of sale is restricted. Once a new factory is
equipped with his product, he cannot expect to sell any substantial
quantity of machinery to that same plant again for a long period
of time, except for occasional repairs and perhaps for plant exten-
sion. He cannot count upon repeat sales in his market such as
the steel manufacturer has in selling his product. In times of
business depression, moreover, the machinery manufacturer is
likely to find his market prostrate.
How are equipment manufacturers to meet this problem?
These special circumstances probably constitute one of the chief
reasons for the success of the leasing system of the United Shoe
Machinery Company, whereby the machinery manufacturer is in
a position to replace machines at his own option and to encourage
new customers to build factories. In the textile field, in times of
depression before the war, the machinery manufacturers some-
times adopted a policy of taking stock in new mill companies in
exchange for machinery. This was a marketing device to enable
the machinery manufacturers to keep their plants in operation.
Whenever the world approaches the point of saturation in
the supply of the equipment for any industry, the manufacturers
of machinery will face an unusually difficult problem. It is
necessary that their plants be kept in existence in order to take
care of the needs of replacements. But it is questionable whether
replacements will furnish enough business to make the operation
of these equipment plants profitable. At all events this series
of marketing problems is one that is worthy of careful study by
our young men who are to engage in business.
manufacturers' sales policies
The second major division of our introductory course in market-
ing, as I previously pointed out, takes up problems of manufac-
turers' sales policies. The policies that are discussed here are
396 MELVIN T. COPELAND
those that are typical and of frequent occurrence. The object
is to give a broad view of the subject and to pave the way for
the specialized courses that follow.
The first topic under this division is the relation of the sales
department to the other departments of a business. What is
the relation of the sales department to the production department ?
How are the sales policies and the credit policies of a business to
be harmonized ? Specific cases illustrating such questions as these
The next topic is that of the determination of the selling points
of a product. This is a marketing subject worthy of especial
attention, for it involves that recognition of the point of view of
the buyer which is so essential in all effective saleswork.
The determination of brand and trade-mark policies is another
subject of general significance. Shall the manufacturer sell his
product branded or unbranded ? If it is to be sold as a branded
product, shall he sell it under his own brand or under the brands
of wholesalers or retailers ? There is a series of interesting ques-
tions to be taken up in this connection. The selection of a trade-
mark ties in directly with these questions.
How is the market for the product to be analyzed ? A manu-
facturer cannot safely assume that his product will appeal alike
to all classes of consumers. Differences in living conditions, in
occupations, in habits and customs, and many other factors, as
well as general business conditions, determine the class or classes
of consumers from whom he may expect the demand for his prod-
uct to arise. He needs to know where the potential consumers
are located and what volume of sales may be counted upon. The
more definitely he can determine the potential market, the more
readily can he solve many of his other marketing problems.
The management of the sales force brings up another series
of problems. How is the sales force to be selected and trained?
What method of paying the sales force is to be adopted ? How
are the activities of the salesmen to be followed and checked?
A study of the practice of typical manufacturers in dealing with
such problems is obviously essential.
A COURSE IN MARKETING 397
We also cover briefly the subject of advertising in this intro-
ductory course, in order to familiarize our students with some of
the fundamental problems in planning advertising work. We do
not give the students problems in copywriting or in anything of
that nature. Our object rather is to show the use of advertising
as a selling force. In the marketing plans of a manufacturer,
advertising ordinarily should have a definite place. There are
some services in the marketing of a product which commonly
can be performed more effectively by advertising than by the
sales force. The advertising campaign therefore should be planned
properly with reference to the specific work it is desired that
it should perform in relation to the other sales work of the
Suppose that a company is organized to manufacture a new
food product. The company is starting out on a small scale with
the expectation that eventually it will distribute its product to
all parts of the United States. The product is to be sold through
the orthodox wholesale and retail channels. What advertising
should be used to reach wholesalers, retailers, and consumers?
Should the advertising precede or follow the initial work of the
sales force ? How long should it be continued ? What mediums
should be used ? What message is it desired that the advertising
should convey? In what sequence are the selling points to be
presented ? Specific problems illustrating such questions as these
serve to familiarize the students with the factors that must be
taken into account in planning an advertising campaign from the
standpoint of the business as a whole.
Other sales policies, such as the use of the guaranty, methods
of handling cancellations, and returned goods, are discussed.
Finally, questions of price policy are taken up. The factors
that must be considered in determining discounts, in fixing the
prices to be charged to various classes of customers, and in super-
vision of the execution of these price plans are often perplexing
to the executive who must solve them.
This summary indicates the topics that up to the present
time we have felt should be included in our introductory course
398 MELVIN T. COPELAND
in marketing. The subject is still in its early stages of develop-
ment, and of course frequent modifications are inevitable. The
topics that are to be stressed in any such course necessarily depend
upon the primary interests of the particular group of students.
In conclusion, I wish to add a word regarding the significance
of the subject of marketing from the standpoint of public interest.
For many commodities the costs of marketing are equal to or
greater than the total cost of the raw materials plus the cost of
manufacturing. The fact that these costs are high does not imply
that merchants and manufacturers are lax in their marketing
methods. Nevertheless, it seems to me certain that in some
manner the costs of marketing will be substantially reduced dur-
ing the next generation. I conceive one of the chief functions of
the course in marketing to be the study of improvements in mar-
keting methods in order that we may contribute somewhat to the
ultimate reduction in the cost of getting merchandise from the
producer to the consumer, and thus contribute to the welfare of
the public at large.
Melvin T. Copeland