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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. 



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 
not prohibitive. 

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. 



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 


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 


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 


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 


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- 


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 
be distributed. 


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. 


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 


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 


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 
fifteen years. 

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 


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 


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 


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 


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 


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. 


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 


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 ; 


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. 


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 


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. 


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- 


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 


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 
are discussed. 

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. 


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 


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 

Harvard University