Do you think when you produce more products, the products will create their own demands? Let’s see what the production concept has to say about this.
What is a Production Concept?
The production concept is the management or marketing philosophy that believes consumers always buy those products that are widely available yet with lower prices. It assumes the product’s price is what customers look for when they are buying.
This is the earliest marketing concept. The basic idea behind this concept is that mass production leads to more sales and ultimately more profits. The production concept’s goal is to increase profits with mass production, wide distribution, and decreased prices.
It was the time of the early 1950s when the popularity of the production concept was high. At that time the goal of factories was to achieve production efficiency with decreased cost. The Industrial Revolution (1770-1820) focused on the specialization of labor and enhanced production technologies and was the backbone of production philosophy. It resulted in higher productivity which decreased the cost of products dramatically. This effort continued till the 1930s.
The underlying beliefs of the production concept are:
- Consumers buy products that are available in the market.
- They buy products that are affordable i.e. consumers prefer to buy low-priced products.
- Consumers always try to know the prices of competing products. Hence, price is always a critical marketing variable.
- Consumers do not give more emphasis on non-price factors of the products like warranty, guarantee, quality, services, etc.
This concept is fit when the resources are readily available with low costs, cheap labor, and low competition, and demand is higher than supply. It might also work well when the business is new and attempts to capture huge markets with higher product availability. But it may fail when competition arises and consumers start preferring quality.
Also Read: The 5 Core Concepts of Marketing
Characteristics of Production Concept
The following are the key features of the production concept of marketing.
Efficiency in Production
Measurement of efficiency in production pinpoints the conditions required to produce goods as affordably as possible. This considers the number of units produced in addition to waste avoidance. This concept aims to achieve higher production efficiency.
Mass Production
The focus of this marketing concept is mass production. It seeks to achieve economies of scale i.e. reduced per-unit costs through mass production and making readily available products to wide areas which create more sales.
Price is a Key Marketing Variable
This marketing concept believes the product’s price is the key marketing variable and attraction point for customers. It states whenever customers seek to buy something their focal point is always the price of the product.
Lower Price
As it believes the price is key additionally it supports the lower price of products as the attraction point of customers. It thinks that buyers are price-conscious. They always buy a product that has a lower price than other companies products.
Related: What is Pricing?
Supply Creates Its Own Demand
The production philosophy of marketing believes that the supply of products creates its own demand. It is strongly in favor of Says Law that “Supply Creates its Own Demand”.
Mass Distribution
It states the produced goods should be easily and widely available. The profit should be through mass distribution and higher selling.
First Marketing Concept
Production is the first marketing concept and after this other concepts appeared such as product, selling, marketing, etc.
4 Principles of Production Concept
The principles of production orientation of marketing state how it works and how it makes profits. If you are considering applying the production concept you should be considering the following four principles.
This picture states how the production concept is made up of and functions.
Factory
The starting point should be your factory. Establish a factory to produce desirable products.
Related: What is Selling Concept?
Mass Production
Your focus should be on mass production. Try to produce more products as far as possible. It also helps you to achieve lower per-unit cost.
Low Price and Mass Distribution
As it assumes people prefer low-priced and widely available products. You should lower the price of your products through economies of scale and distribution and make them as easily available of products in diverse areas as possible.
Profit Through Production Efficiency
According to the production concept, your profit should be through production efficiency. Your production manager should be able to produce the largest possible output from the available resources in your factory.
Advantages and Disadvantages of Production Concept
When you adopt this production marketing philosophy your business might get and provide the following benefits and drawbacks to business and society.
Also Read: Societal Marketing Concept
Advantages:
- Availability of Products – This marketing concept focuses on mass production and mass distribution which makes the availability of products at the highest level. The company as well as customers do not have to worry about the shortage of products.
- Good For Price Conscious Customers – Production marketing philosophy focuses on producing low-priced products which is the right fit for customers having low income and price focused.
- Employment – Since this concept focuses on reducing production costs, the cheap labor force may get the opportunity to work. And it might also support their living standards.
- Higher Sales and Profits – As it explains low prices and easy availability of products induces consumers to buy. It increases the sales and profits of the firm.
Disadvantages:
- Low Quality – One of the cons of the production philosophy of marketing is it does not focus on the quality of products it only focuses on quantity. With such low quality, this concept can not compete in the long run.
- Ignorance of Customer Needs – It argues customers buy those products which the companies want to sell. It puts customers’ needs and wants of products secondary and companies’ interest in goods production first.
- Not Applicable Today – As people now in these modern times are highly conscious about product quality and the market has been dynamic and competitive this marketing philosophy has become outdated.
Examples of Production Concept
A good example of a production concept is India and China. These countries have an abundance of manual labor with cheap labor costs. China has been producing more products adopting this concept. And, India is doing the same to produce IT services. Result of that China is one of the biggest exporters of manufacturing products and India is of IT services.
The Ford Company’s Car Model T is another example of this production philosophy. In 1908, Henry Ford introduced the Model T which was affordable, simple, and durable. With mass production, he was able to sell this model car for between $260 to $850. At that time Ford had sold this car to many customers and earned a profit. And, we can say that this is evidence of how this production concept of marketing was successful back then.
Read Next: What is Marketing Philosophy?