01-Kotler-Frontiers of The Marketing Paradigm in The Third Millennium - Achrol and Kotler 2012

J. of the Acad. Mark. Sci. (2012) 40:3552 DOI 10.
1007/s11747-011-0255-4
CONCEPTUAL/THEORETICAL PAPER
Frontiers of the marketing paradigm in the third millennium

Ravi S. Achrol & Philip Kotler
Received: 11 March 2011 / Accepted: 13 April 2011 / Published online: 11 May 2011 # Academy of Marketing Science 2011
Abstract The domain and theories of marketing have been expanding since the origins of the discipline. Since the 1970s marketing science has been organized around the exchange paradigm. Marketing concepts apply to all forms of exchange, whether it is goods, services, personages, places or ideas, and whether it is between individuals, forprofit and nonprofit firms, governments and NGOs. Marketing theories evolved from a firm oriented view to encompass the exchanging dyad. More recently the paradigm expanded to a network level of explanation, and relational theories have come to the fore. But even as the field struggles to grasp its new fields of explanation, there is a Kuhnian shift happening at its boundaries. The shift significantly bends the marketing worldview as well as the theoretical tools and methodologies we use to study it. In this paper we develop a three-tiered explanation of the emerging field of marketingits subphenomena (consumer experiences and sensory systems), its phenomena (marketing networks), and its superphenomena (sustainability and development). Keywords Marketing paradigm . Marketing future . Marketing theory . Consumption experience . Consumer sensory processes . Consumer neurophysiology . Nanotechnology . Marketing networks . Consumer networks . Sustainable marketing . Marketing and poverty alleviation
Introduction A number of prominent scholars have analyzed the evolution of the marketing paradigm (for example Bartels 1962; Hunt 2002; Sheth et al. 1988). The evolutionary path can be traced from the functionalist paradigm to the marketing management paradigm to the exchange paradigm. The functionalist paradigm described the institutions of marketing and their functions. The marketing management paradigm is rooted in a firm view of marketing processes (the archetype firm being the classic manufacturing company). Under it, marketings role and responsibilities expanded from sales and advertising to product development and a firm-wide responsibility for customer care. The impetus behind this major expansion was provided by the generic and exchange paradigms (Bagozzi 1975; Kotler 1972; Kotler and Levy 1969). Marketing theories and research were generalized beyond the exchange of goods, services and money to include any valuable resource like time, energy, feelings, places, ideas, symbols or information. They were extended to exchange with customers, employees, suppliers, the public, and even competitors, and applied to all types of organizationsfor profit, nonprofit, social service agencies, government, NGOs and nation states. The exchange paradigm, with its focus on inter-firm relationships (Achrol et al. 1983; Dwyer et al. 1987), brought the concept and theories of the marketing channel to the fore, and from there it was almost a natural step to where we stand todayat the threshold of the network paradigm (Achrol and Kotler 1999; Iacobucci 1996). Relational theories of exchange are highlighted in an exchange network (Achrol 1997; Anderson et al. 1994; Gummesson 1998; Morgan and Hunt 1994; Sheth and Parvatiyar 1995). These changes in the marketing paradigm are significant in themselves, but they are occurring at a time of even greater change at the boundary and foundations of the discipline. The plurality of domains and theoretical riches is difficult to address systematically without an organizing framework.
R. S. Achrol (*) Professor of Marketing Science, School of Business, The George Washington University, Washington, DC, USA e-mail: achrol@gwu.edu P. Kotler S. C. Johnson & Son Distinguished Professor of International Marketing, Kellogg School of Management, Northwestern University, Evanston, IL, USA
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J. of the Acad. Mark. Sci. (2012) 40:3552
As marketing expanded over the years, scholars sought to synthesize its fundamental premises into general theories. Prominent among early contributions are the theories of Robert Bartels and Wroe Alderson (see discussions in Sheth et al. 1988). Of more recent origin are the resource-based theory of competition (Hunt 2002) and the service dominant logic (Vargo and Lusch 2004). Bartels and Aldersons general theories addressed aggregate levels of marketing phenomena. The service dominant logic builds its arguments on a reductionist foundation. The resource-based theory is an intermediate level of generalization. The debate over the superiority of reductionist versus phenomenal theories will surely rage for a long time. Perhaps the complexity of marketing phenomenology and the infancy of its theories are such that it behooves the discipline to pursue a multi-tiered paradigmatic structure to its science. In this paper we pursue a somewhat unusual line of inquiry. This paper is not about a general theory. Neither is it synthetically constructed from the theories and research about the phenomenon of marketing as we know it. Rather we construct a three-tiered framework based on emerging shifts in the phenomenology of marketing. The three fields
are (1) consumption experiences, (2) marketing networks, and (3) sustainable development. The fields span a reductionist to holistic construal of marketing phenomena.
A paradigm for the third millennium It is frequently useful for marketing to organize the growing inventory of empirical and theoretical data in a codex that consolidates that which is important in what we know and points to that which is important in what we do not know. We decided not to look in the rear view mirror. However, for the purpose of providing some reference points and summarizing at a glance what is proposed in the shift discussed in the rest of this forward-looking article, Table 1 contrasts key assumptions defining marketings current paradigm with how these are transformed under the emerging paradigm. The received paradigm is a collection of a number of streams of literature, some enduring and some of more recent vintage. A few of the theories span current and future possibilities. For example, some aspects of the service dominant logic (co-creation and co-production) and network and relational theories can only
Table 1 Key assumptions of the received vs. emergent marketing paradigms Received paradigm Consumer satisfaction Cognitive psychology of behavior Products as delivered services Massive-scale manufacturing by contract manufacturers (phase one networks); early phase two innovation networks Emergent paradigm Consumer sensations and sense-making Neurophysiology of consumer behavior and sensory experiences Products and services as sensory experiences Small-scale distributed production-consumption networks. Products built atom-by-atom. Customer co-creation and co-production (phase three networks) Dominant technologies: biotechnology, nanotechnology Management as customer care and network developmentinterorganizational coordination of finance, innovation and production. Core competency: Focal firmmarketing; Networkrelational solidarity, synergy and mutuality Management priorities: sustainable marketing (including demarketing, counter-marketing), growth from lower middle and base-of-the-pyramid markets Multi-level networks as units of analysis; bottom-up networks; relational management of the economic and ecological commons; social engagement (proactive) Proactive corporate strategies in ecology and development Public policy: regulated capitalism (embedded regulation, self regulation); conscientious capitalism, conscious capitalism, social capitalism
Dominant technologies: digitization and computer controlled systems Management as internal coordination of finance, marketing, production, R&D and personnel in the firm Core competency: idiosyncratic resources, usually technology
Management priorities: growth, customer life-time value, targeting middle and upper class high value markets
Dyad as unit of analysis; theories of hierarchical control, power and dependence; early relationship marketing, social norms of behavior Corporate social responsibility (reactive, adaptive) Public policy: laissez-faire capitalism
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be partially realized at present but are likely to achieve their full potential under the emergent paradigm. Looking ahead, how does one extract the critical features of a turbulent field that pervades the entire fabric of society and condense them into a forward-looking framework for marketing? We propose the way to make this complexity tractable is to conceptualize it in three dimensions marketings substructure, its structure and its superstructure. In this way we can span: (1) the theoretically more tractable domain of the marketing microcosm, its subphenomena; (2) its phenomenal realm (including the managerial realm) with its mid-range theories that have predictive power even if their putative mechanisms are less than rigorously explicated; and (3) the superphenomenal realm of marketing and society, a largely descriptive field of analysis. In the subphenomenal field we focus on the consumption experience as the fundamental domain of relevant theory and human sensory processes as the fundamental bases of explanation. Major advances in the science of the mind are imminent due to a covergence in the understanding of its psychology and its physiology. This promises to shift the theoretical tools of consumer behavior analysis from cognitve concepts such as attitudes, information storage and retrieval theories to the mechanisms of sensory depiction of reality and its experience. The field of phenomenal marketing is complex and is shifting. Hierarchies have given way to marketing networks. The theories of exchange that served marketing well for 40 years are giving way to relational concepts. Networks are inverting many aspects of traditional marketing processes. In the post-information economy, vertical integration is receding. Marketing functions and value-added are moving forward in the network and closer to the consumer. This process may take a giant leap in the future by bringing production and consumption close together. The third dimension is marketings superphenomena. This is an area of marketing where our science, including its theories and empirical findings, is likely to be more descriptive than causative. Nevertheless, as marketings footprint and societal consequences loom ever larger, the superphenomena of marketing are going to represent a critical agenda in its paradigm. There are too many issues to address in a single article. We picked the two we believe are the most significantsustainability and poverty. Sustainability has been creeping up on Eric Fromms homo consumens for a long time (Kotler 2011). Marketing has well-known negative impacts. It encourages rapid consumption of limited natural resources, it does not restrain the wants it encourages, and it over-fulfills materialistic wants and under-serves nonmaterial wants.
Poverty, on the other hand, is a novel subject for marketing. The poor do not consitute a marketable segment. They are the subject of government agencies, NGOs, charitable trusts, religious orders, altruists, sociologists and economists. But there is a growing realization that the world of business and the world of development are on convergent paths. Leading scholars in business schools are proposing models for development that offer alternatives to conventional approaches originating in economics, sociology and anthropology.
The subphenomena of marketing The fundamental process in marketing is consumption, and the elemental concepts in consumption are satisfaction, value and utility. If there is a new concept in the digital age of information, knowledge products and the service economy, it is that of consumer experiences. Yet as Holbrook (2006) points out, the idea that the consumption experience is at the bottom of consumer value goes back some 25 years, and even further back to the economist Lawrence Abbott: The thesis may be stated quite simply. What people really desire are not products but satisfying experiences People want products because they want the experience bringing services which they hope the products will render (Abbott 1955, p. 40) At the nucleus of consumption is a need and its satisfaction. As consumers, we go about need satisfaction via a complex of experiences filtered through our senses. The senses record and filter all that we feel and know about the world around us and its pleasures and pains. These include the visual (perceptual), auditory and olfactory senses, the sense of taste and the so called other sensesthe sense of touch and feel (tactile and haptic sense), the sense of limb position and motion (proprioception and kinesthesis) and the sense of whole-body orientation and motion (vestibular sense). The senses are the vehicles by which we experience the world, but the question remains, what does it mean to say that we experience something, and that the experience was a satisfying one or not? That is the primary subject domain of consumer behavior theory and research. The bulk of it is informed by cognitive psychology (including theories of attitudes, emotions and information processing), which has constituted the dominant behavioral paradigm in marketing and psychology for many decades now. But there is an important shift in the behavioral sciences from cognitive psychology to neurological psychology. The disciplinary divide between mind (cognitions) and the brain (the physiology of the mind) is rapidly disappearing.
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Marketing and the human senses Beyond the obligatory treatment in consumer behavior texts, little research attention has been directed to consumer sensation and sense-making (Jacoby et al. 1998). There may be a good reason for the long hiatus in academic studies. We draw much of our inspiration in consumer behavior from psychology, and the psychology of the senses has been moribund for a while. In the preface to his 1953 edition of The Human Senses, Princeton psychologist Frank Geldard notes that not too long ago the greater portion of psychology was about the human senses: Experience was psychologys proper object of study, and experience comes by way of mans senses. He goes on to lament that psychology evolved into the science of behavior and concepts like learning, motive, attitude and interest rose to the fore: These trends in psychological fashion, partially account for the current rarity of books on sensation (Geldard 1972). This leaves a void in how behavior and the reality we live in are connected to the building blocks of matter and to the theories of mind and body. The void appears to be narrowing. The convergence of physiological and behavioral theory in the shape of neurophysiology has led to a revival of scientific interest in sensory processes (e.g., Zaltman 2003). On the one hand are phenomenological reasons. In his A History of the Senses: From Antiquity to Cyberspace, Jutte (2005, p. 16) observes: The rediscovery of the senses, which is in some ways a mere few decades old, certainly has a lot to do with commercialization, but it is also a response to the growing needs of a post-industrial leisure society, in which the senses are befuddled by artificial worlds and overstrained by incessant stimulation. On the other hand are a growing field in cognitive neuroscience linking cognition and molecular genetics (e.g., the Journal of Cognitive Neuroscience) and an emerging field in neuroeconomics (e.g., Sren et al. 2008). Interest in sensory research in marketing appears to be increasing (Bloch 1995; Groeppel-Klein 2005; Gulas and Bloch 1995; Li 2008; Mitchell et al. 1995; Morrin and Ratneshwar 2003; Peck and Childers 2003; Raghubir and Krishna 1999; Spangenberg et al. 1996). The attention is focused on visual and auditory processes, which is to be expected in a media and communications driven managerial paradigm. Sight and sound are often considered the superior senses. The classical hierarchy of the senses dates back to Aristotle who ordered them thusvisus (sight), auditus (hearing), odoratus (smell), gustus (taste), and tactus (touch). Jutte (2005) observes that the hierarchy of the senses is both a cultural construction and a product of the phylogenetic development of the human species. There may be a cultural evolution happening in what stimuli we respond and relate better to. Some believe we are now entering a haptic age (John Naisbitts high touch
society). The German weekly Die Zeit published a Manifesto for the Emancipation of the Sense of Touch (April 11, 1997). The popularity of leather seats, massages, touching zoos, hugging and the like are witness to a more touchy-feely culture. Marketing practitioners are quick to pick up on stimulating consumers olfactory and haptic sensations. The popular press is abuzz with article titles like Dollars and Scents (Hoppough 2006) and Bringing Senses into Play (Musgrove 2007). Predictably, the buzz follows the old sales-orientationi.e., how can I get customers to turn on the buying impulse?1 Early efforts by the movie industry (dating as far back as the 1940s) to incorporate scents into the movie experience were largely failures (LA Times 2006), probably due to rather crude technology. Today there is a whole new technology of artificial aromas, including the possibility of transmitting them electronically to TVs fitted with artificial-scent boxes. There is a push to design haptic experiences into virtual products. New game systems by Sony and Philips incorporate sense effects via vibrations, breezes, thunder and lightening, 3-D, and so on. A company called Immersion claims to have designed a computer mouse that can obtain tactile impressions of the textures of solid and liquid surfaces (e.g., the softness of a mattress) provided suppliers program their websites to facilitate it (Jutte 2005, p. 251). Seeing, hearing, tasting, smelling, and touching are, thus, well on the way to becoming digitalized, computertransmitted processes that will progressively complement or even replace impressions traditionally supplied by the five natural organs of sense (Jutte 2005, p. 330). Cyberspace and virtual reality have the potential to separate our minds and bodies, to allow us to experience the bodys needs by a virtual projection of the mind into cyberspace. There exist well-known virtual worlds on the Web such as Second Life, where one can create an avatar to move around, shop, meet other avatars, and in effect, lead a second life at that site. Soon avatars will be able to move freely about the Internet, connecting virtual worlds and stand alone sites. 3-D avatars created to ones measurements can meet other avatars anywhere on the Web, hold a conversation, socialize, go shopping with friends, try on a pair of jeans for fit and so on (McConnon 2007). Those of us who grew up in the physical world cannot begin to imagine life as it will be for those who grow up in a digital world. The digital world will offer nearly endless
In the early 1990s a study by the Chicago based Smell and Taste Treatment Research Foundation in a Las Vegas casino purported to show that the right kind of scent induced customers to spend 45 percent more on the slot machines (Lee 2004). Now Sony stores are being spritzed with a custom vanilla-and-mandarin scent created for it by Scent-Air of Charlotte, NC. Other Scent-Air customers reportedly include Doubletree Hotels, Westin Hotels & Resorts, Hard Rock Hotel in Orlando, and Procter & Gamble (Hoppough 2006). Some advocates see a brand having a unique scent image of its own.
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possibilities of shaping life and experiences so that the physical world will pale in significance and may well become a secondary world in which our bodies live wired to a digital reality. Like so much of science fiction, the movie Avatar may be prophetic. It triggered a rush to 3-D television. We stand at the threshold of a virtual world of experiences and an incredible expansion of the science by which experiences are experienced. Neurophysiology and marketing The relationship between the brain and mind has puzzled scientists and philosophers for centuries (the classical model is often traced to Rene Descartes). The modern science of sensation and perception takes a neurophysiological approach to the subject based on cellular biology. The core concept is that of cellular mapping networks located in specific areas of the brain. For example, a monkeys visual system (the human system is believed to be similar) consists of some 34 different maps which analyze different attributes (color, shape, orientation, speed, depth) of what is recorded by the retina. Specific cells in the map are linked to specific areas of the retina, and adjacent areas in the retina are linked to adjacent cells in the brain. The maps are organized in a hierarchical manner into what pathways and where pathways that connect the primary visual area in the back of the brain to the temporal lobes in the lower middle of the brain and parietal lobes in the upper middle, respectively (Posner and Raichle 1994). The important point here is that neuroscientists believe human sensory and motor systems are analyzed and controlled by precisely located networks of cells in the brain. That is one part of the unfolding mind-brain puzzle. The second is monitoring the activity and functioning of the networks. Two functional processes are noteworthy. There are about 100 billion cells or neurons in the brain. Neurons come in many configurations and consist of a nucleus, dendrites, axons, etc. Signals are transmitted and processed by the nervous system as electrical energy and are subject to the concepts of electricity such as charged particles (ions), resistance and potential difference. The signals can be transmitted to distances up to a few meters. One methodology of analyzing the functioning of the brain is measuring its electrical activity (EEG); this has been used in clinical practice for over sixty years. But the EEG is not very effective in isolating the multiple cell assemblies located in different parts of the brain. It was not until the development of PET and MRI methodologies, especially fMRI in the 1990s, that the cognitive neurophysiology of the brain really took off. Both technologies involve highly sophisticated measurement systems (working at the level of atoms and positrons) that measure changes in the blood flow
in response to neural activity (Posner and Raichle 1994). Neural cells increase consumption of energy from glucose and decrease their use of oxygen, resulting in a local increase of blood flow to the precise region of neural activity. The reason for this brief discussion is to highlight the forces behind the growth of a physiologically driven cognitive and behavioral science. The methodologies driving this momentum are only going to become more and more sophisticated. The future science of consumer behavior and consumption experiences is inextricably linked to this future. The new science shows some interesting throwbacks to marketing quandaries of the past: (1) how large a role do Skinnerian stimulus-response processes play in consumption behavior, and (2) is there a subliminal learning process after all (due to the so called priming effect)? For those who believe all this is too premature for an applied behavioral science, or that this is just another galvanic skin response fad, here is the reality. The field of neuroeconomics has been quickly established, led by economists like Colin Cramer at Caltech. The UKs Journal of Consumer Behavior devoted a special issue in 2008 to neuromarketing. And long before it is clear that there is a verifiable body of knowledge here, marketing consultants are charging into the practice of neuromarketing (notably UK-based Neursense and Bright-House Neurostrategies Group of Atlanta). For example, a company called MindSign Neuromarketing says: We look at the subject brain response to your ad, game, speech, or film. We look at how well and how often it engages the areas for attention/emotion/ memory/and personal meaning. We also look at how well it activates the brain as a whole. From this data we can tell what your audience was thinking while using your software or watching your content, moment by moment, regardless of what that content is. Were they scared or sleepy, happy or sad? Were they even paying attention? We can show you how your product is affecting the consumer brain even before the consumer is able to say anything about it. Additionally, an fMRI experiment using the Pepsi Challenge by neuroscientist Read Montague (published in Neuron, October 2004), articles in Forbes, Time and the New Yorker, and a book by Martin Lindstrom titled buy.ology (2008), had a lot to do with publicizing the new science. Marketing and nanotechnology Nanotechnology is the creation of materials, devices and systems through manipulation of matter at scales of 1100 nanometers, essentially via manipulating atoms and molecules. A nanometer is a billionth of a meter (the width of a human hair is 200,000 nanometers). In the realm below 50
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nanometers the common laws of physics no longer apply, and the surreal world of quantum physics takes over. Materials take on surprising new properties: something that was red may now be green, metals may become translucent and thus invisible, insoluble substances may dissolve and much more (Montague 2004). The U.S. National Science Foundation has labeled the impending revolution in science as NBICa nanotechnology driven convergence of nanotech, biotech (manipulation of genes), infotech and cognotech (cognitive). Largely unnoticed, the application of nanotech to consumer products is well on its way. Nano particles, nanotubes and carbon nano crystals are being manufactured in ton quantities for commercial use. Scientists have made breakthroughs in the holy grail of nanotechself-assembling systems that can grow and evolve like the human cell (NewScientist.com 2003). The U.S. is investing big in nanotechnology. The National Nanotechnology Institute was created in 2001 and will have disbursed $12 billion for research in the field through 2010. Hundreds of products containing nano particles have already reached the marketmetal surfaces and paints that clean themselves when it rains; subminiature data storage devices (aiming to hold the Library of Congress in a computer the size of a sugar cube); specialty lubricants; long-mileage vehicle tires; nanoreinforced plastics for stronger automobile fenders; lightweight military armor; anti-reflective and scratch-resistant sun glasses; super-slippery ski wax; powerful tennis rackets and long-lasting tennis balls; inkjet photographic paper intended to hold an image for 100 years; efficient drug and vaccine delivery systems; anti-wrinkle cosmetic creams; and so on (Montague 2004). NBIC promises consequences so radical that they are likely to change the very nature of the world and human experiences as we know them. According to Freitas (1999) Nanomedicine, artificial nanodevices can be designed and programmed to proceed directly to our approximately 12,000 taste buds and trigger any combination of desires or taste sensations. Likewise thousands of nanodevices can target our 50 million odd olfactory sensors and provide complete olfactory sensation control. Consider the scary part: nanotech portends the ultimate in targeted marketing, directly (even surreptitiously) targeting an identified individuals senses. It reads like science fiction, but it is very real science: Just like bloodhounds and mosquitoes follow a quarrys scent, airborne nanobots can be designed to identify and home in on the senses of host patients identified by specific characteristics (odortypes). Aerial nanorobots could be released as aerosols (chemtrails) engineered to deliver complete visual and auditory hallucinations to recipients. The odortypes which can be used to target individuals may
include naturally produced scents; behavior related scents (due to exercise, fear reactions, sexual activity, intoxication, and the like); artificial scents (cosmetics); and taggants (messenger molecules). The airborne nanorobots can stationkeep in the vicinity of the host patient, navigate and avoid no-fly zones, and communicate among themselves. They can also be spread from person to person like diseasesby direct physical contact (e.g., handshaking or sexual activity), by indiscriminate broadcast transfers (e.g., sneezing, bleeding, sharing tools or utensils), by serendipitous anonymous contacts (e.g., doorknobs, public toilet seats, library books), or by deliberate airborne nanorobot migrations. (Freitas 1999) The aim of a subphenomenal marketing is to enhance the consumption experience. But, with the lengthening shadow of NBIC, it is equally important that the discipline be in a position to protect the consumer from insidious marketing. Regulation and regulatory norms are seriously lagging. Congress intended to create the American Nanotechnology Preparedness Center (to study nanotechs potential societal and ethical effects) when it created the National Nanotechnology Initiative, but apparently that part of the legislation ran into trouble. Recently a coalition of consumer protection groups led by the International Center for Technology Assessment filed a legal petition with the EPA seeking a ban on consumer products (over 200 of them such as odor resistant socks, baby bottles and clothes washers) which use nanoparticles of silver as a germicide (www.icta.org; www. nanoaction.ord).
The phenomenal structure of marketing The previous section recounted the directions of prospective change in the micro science of marketing. Equally powerful changes are occurring in the way business organization is structured and functions. The post-industrial, vertically integrated, multidivisional firm is evolving into complex global business networks from the production end to the consumption end. Network theory is rapidly becoming the lingua franca of all science, from anthropology to physics (Borgatti and Li 2009). Marketing networks are superior to hierarchies in the production and exchange of knowledge. To function, networks rely on relational governance processes rather than hierarchical authority or power (Achrol 1997). One stream of the literature highlights the vertical disaggregation of functions in the network and the reorganization of individual firms along horizontal synergies rather than vertical ones (Achrol and Kotler 1999). It emphasizes the shift in control and coordination mechanisms from power-based systems to norm-based relational
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systems (Anderson et al. 1994; Dwyer et al. 1987; Morgan and Hunt 1994) and parallels the development of relationship marketing theory in general (Gummesson 1998; Sheth and Parvatiyar 1995). The evolution of production and innovation networks Contemporary business networks evolved in two phases. First came the routinization of the production function and its backward outsourcing. The focal firm specialized in the innovation and marketing functions. The fortunes of the leading production specialists like Flextronics and Jabil continue to soar. Phase two networks involve the routinization and outsourcing of innovation. In the last five years smaller aggressive competitors (primarily from Taiwan) have carved away a large share of the contract manufacturing business in cell phones, PDAs, laptops and digital cameras. This pushed contract manufacturers like Flextronics into technology development, product design and engineering. R&D constitutes a key part of the strategic core of the firm, guarded zealously as its primary source of sustainable competitive advantage. Nevertheless, even technology leaders such as Philips, Motorola, Boeing and Eli Lilly are being forced to turn to faster and cheaper innovators around the globe for significant portions of their technology and design needs. A VP of a Taiwanese innovation company was quoted as saying: Customers used to participate in design two or three years back. But starting last year, many just take our product. Because of price competition, they have to (Engardio and Einhorn 2005). Cost is one factor, but equally important are the complexity of tomorrows technologies and the uncertainty of success. Few firms have the knowledge resources to tackle major innovation on their own. Network organization is not only about utilizing knowledge resources; it is about creating new knowledge. The open innovation model, as this network form has been dubbed (Chesbrough 2003), is more effective in both creating and applying new knowledge. Alongside the outsourcing of these core functions there has been a quiet spinning-off of many support functions, including accounting and human resources. HR hiring through contract suppliers has expanded from clerical and labor to include technical professionals and managerial talent in areas such as marketing. This leaves what used to be the classic manufacturing firm close to becoming a pure marketing company. A recent survey of executives by the Economic Intelligence Unit and Anderson Consulting (Vision 2010: Designing Tomorrows Organization) concluded that: The company of the future will consist of a small team running its affairs from a single office. The team will build and use its knowledge of market demands and
customer requirements, potential suppliers and partners, and bring them together through sophisticated electronic links to respond quickly and painlessly to changes in fashion and economic circumstance. The process of creating value will be set free from all unnecessary activities, and for that reason alone will be significantly more efficient. Evolution is an ongoing process. As firms search out new sources of efficiency, their attention will inevitably focus on the remaining vestige of the industrial era economy, the distribution system. The business environment and technological possibilities are pushing network structures slowly but surely toward phase three. We predict that phase three networks will invert functional disaggregation to forward outsourcing. Production will move as close to consumption as possible. The distribution component accounts for the largest share of the final price of consumer products, and this share has been growing steadily. When the Internet and e-commerce arrived, many expected widespread disintermediation would follow. Conventional resellers survived the threat of obsolescence from e-marketing. Disintermediation didnt happen. Rather, the electronic medium became intermediated by etailers like Amazon and eBay. The growth of the echannel has been slower than anticipated. In 2009 e-commerce accounted for just 3.7 percent (up from 3.3 percent in 2008) of the $3,683 billion in total retail sales (U.S. Census Bureau). Its biggest impact has been in products and services that can be delivered electronically: thus the demise of Tower Records and Hollywood Video, the impending demise of Blockbuster, and the rapid growth of online sales of travel and leisure products. But we predict the story of the 21st century is going to be about products which cannot be delivered electronically; it will be about micro production systems. Distributed production-consumption networks We call phase three networks distributed productionconsumption networks. They represent the ultimate in the just-in-time model. Technology is approaching the point where production can be enjoined to or juxtaposed with consumption. Leading the way is the power industry of the future. Distributed generation (also called on-site, dispersed or embedded generation) produces electricity from small energy sourcessolar, wind, fuel cellsat or close to the consumption site. A large number of commercial buildings already use in-house systems that produce a significant amount of their power needs. Figure 1 pictures the difference between the conventional centralized production system and the distributed generation system. Solar and wind powered units for individual homes are available and growing in efficiency. The consumer market
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Fig. 1 Conventional and distributed power generation systems. Source: Maribu, Karl Magnus (2006), Modeling the Economics and Market Adoption of Distributed Power Generation, Doctoral Thesis,
Norwegian University of Science and Technology, Department of Electrical Power Engineering
in Europe for rooftop wind-powered systems is off to a solid start and is emerging in the U.S. In Marketing Myopia, Ted Levitt (1960) predicted that in the future homes will be powered by a small chemical fuel cell unit sitting in a closet. That is a technical reality today and no doubt will become a commercial reality soon. Recently the media featured the success of California-based Bloom Energys fuel cell that can run on natural gas or biogas and is in operation at Google, eBay, Wal-Mart, FedEx, Coca Cola, and the like. The startup anticipates it will be able to produce refrigerator-sized units for the home for about $3,500 within the decade. Similar distribution of production or assembly capabilities to wholesale and retail levels can be visualized for many kinds of products except the most technologically complex. Xeroxs Book-In-Time system, properly marketed to local retailproducers (e.g., small printing firms, Kinkos), could have seriously eroded the position of the giant publishing houses and retail chains in the book business. Now Amazons Kindle and Apples iPad threaten to do away with printed media altogether. The same technologies that facilitated the emergence of giant production specialists in phase one networks lie behind the opportunity for distributed micro production systems. Small computer controlled automated manufacturing or assembly systems can be designed to operate at the level of local markets. In concept, the distributed facilities are linked to a core firm (a brand marketing firm or, in some cases, a technology specialist) via an information system that provides the technical information and controls the computers that run the distributed plants. The operations will likely be franchised to smaller local firms, retailers or wholesalers in the industry. In some cases, the distributed systems may be decentralized all the way to the ultimate customer and be located on customer premises. Obviously, the economics upon which
such systems are contingent is that the efficiencies of decentralization are greater than its cost. Producing to demand at the point of demand offers efficiencies in inventories and logistics and reduces the uncertainties of innovation. These advantages become bigger and bigger as the share of distribution cost becomes disproportionately large and the marketplace becomes the globe. The previous section discussed how nanotechnology is poised to dramatically alter consumer experiences. The potential of the NBIC revolution to impact manufacturing goes beyond our comprehension today. Today everything, down to the tiniest micro-circuit, is fashioned by hammering, melting, squeezing and sculpting chunks of matter, something like force-herding masses of molecules into a desired form. In contrast, nanotech construction or molecular assembly arranges individual atoms or molecules one at a time (in the ideal scenario they will self-assemble like living cells) into the desired configuration. Instead of cutting trees to make a table, a table will be grown by swarms of nanorobots that can be programmed to fashion any kind of molecule and construct any kind of product (see Bonsor 2007; Drexler 1992; Feynman 1960; Montague 2004). How far removed is this reality? In January 2011 the Department of Defense published a request for proposals to develop micro robotic fabrication machines. STTR Solicitation 2011.a states: Desktop manufacturing is the ability to use a personal computer to drive a miniature fabrication station for the creation of new objects with complex geometry ... This topic focuses on a particular approach of using a coordinated and distributed swarm of microrobots that are capable of handling and manipulating nano- and micron-scale building blocks in the process of synthesizing novel materials and structures. What a transformation from Henry Fords famed integrated factory on 2,000 acres along the Rouge River,
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Michigan, with its own blast furnace, steel mill, glass factory, and more than 90 miles of railroad track and conveyor belts to run the production lines. The manufacturing machines (nanorobots) of the future may well be so small that thousands of them will fit in the period at the end of this sentence (Bonsor 2007). It is not far fetched to go a step further and imagine a general purpose production machine in every consumers basement that can, with the right software and programming (accessed online), manufacture anything a consumer wants from a jar of commodity atoms and molecules. Everything in the physical world is simply the result of a particular arrangement of atoms. Arrange them one way and you have steel, arrange them another way you have corn. The ultimate outsourcing of production and distribution will have taken place, and a true era of consumer co-production and cocreation will have arrived (Jaworski and Kohli 2006). Consumption networks Today when we speak of consumption networks we think mostly of the consumer communities organized by marketing firms. Firms seeking to develop enduring relationship ties with their consumers do so by creating forums for consumer interaction, by developing extensive databases on the consumers and by targeting customized communications and offers to them. This is the classic relationship marketing model. But firm-driven vertical consumer networks will likely erode in the near future, giving way to a bottom-up marketing phenomenon shaped by horizontal consumer networks. The Internet has created a vast channel of horizontal information flows, word-of-mouth and technical advice from user communities and websites in practically every class of consumption. There is probably no area of consumer interest today that does not have a dedicated chat group, blog, or interactive forum created by an enthusiast or a group. It is frequently said that power is shifting from media institutions to consumer communities and firms are taking note. This explains the rapid growth of online brand monitoring services led by market leaders Nielsen BuzzMetrics and Cymfony. These firms specialize in automatic searching of text-based keywords and data on blogs, chat rooms, message boards, subject groups, social networks, bulletin and message boards. Del Monte allocates between 10 and 15 percent of its research funds on online research (see Kim [2006] for a review). Consumer communities hold the power to usher in a bottom-up market model to rival the top-down manufacturing firmcontrolled information supply (the so-called prescription model) with important effects on concentration and heterogeneity of preferences (Benghozi and Paris 2005; Gensollen 2005; both cited in Curien et al. 2005). The sociology of consumer communities (Smith and Kollock 1999) will be important in understanding consumption in the future. A community is a network of social relations
marked by mutuality and emotional bonds (Bender 1978, p. 7). Brand communities are nurtured by avid enthusiasts and fans of a brand. They perpetuate sentiments of belonging or consciousness of kind (Gusfield 1978). Because this is a spontaneous consciousness and is not motivated by pecuniary interests, it creates a fierce in-group loyalty, causing feelings of betrayal and animosity toward members who defect to other brands (Muniz and OGuinn 2001). Communities vary greatly in motivations and resources. There are experience-sharing, brand rating and user communities that make consumer choice easier for experience goods, epistemic communities (knowledge sharing communities) which disseminate knowledge about complex goods and subjects and file-sharing communities of peer-to-peer networks that exchange cultural goods (Curien et al. 2005). Consumer communities, with the exception of brand communities, are particularly sensitive and inhospitable to individuals who are seen as promoting particular products or companies. Consumer communities are social networks and develop complex organic properties but are inherently lacking in formal structure and mechanisms. The networks are fluid and membership is transient. Communities can form and reform a number of times among leaders who come and go. They are organized by mutuality, tradition, trust, reputation and norms of behavior. Trust is one of the most important variables in the success of a community and often the one most threatened by opportunism. Consumer communities are a public good and are subject to the tragedy of the commons. Individuals under-invest in a public good because its non-excludability and non-rivalry provide incentives to free riders who benefit from the shared resource without contributing to it (Curien et al. 2005; Varian 2004). Curien et al. (2005) call it the curse of under participation, seemingly inherent to the management of shared resources. The 2009 Nobel laureate in economics, Elinor Ostrom (Ostrom 1990; Ostrom et al. 1994) argues that self governing systems are possible for managing common properties and interests. Should consumer networks become embedded with firm networks in a distributed production-consumption system, the clash of values, interests, dependencies and vulnerabilities will spawn a socio-economic environment the likes of which cannot be fully visualized today. An example of the clash of consumer and producer networks occurred in February 2004 when Amazon.com mistakenly disclosed the real identities of some of its book reviewers. A sizable proportion of those reviewers were the books own publishers, authors and even competitors. The network framework will need to evolve to provide a structure for studying exchange as a social system. In that line of thought, there is an even more encompassing dimension to future marketing that reaches beyond economically empowered networks of consumers, marketers and producers. It highlights the social externalities of consumption and the well-being of humankind. We call this the marketing superphenomenon.
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The superphenomena of marketing We paraphrase Heinrich Kluver in his introduction to Hayeks The Sensory Order (Hayek 1952): It has been said that a philosopher is a man who has a bad conscience whenever he hears the word philosophy. Nowadays [marketing] scholars no longer seem to develop feelings of guilt when they hear the word [marketing]. This state of affairs certainly cannot be accounted for by believing that the field of [marketing] has acquired the status of a science. Kluver was talking about psychologists. But is it time for marketing scholars to develop a guilt complex over our preoccupation with the managerial interests of marketing? Marketing ethicist George Brenkert (2008) says it best: marketing does not simply surround us, it envelops us; it is in part how a society defines itself and its treatment of its members. A person might think that such a pervasive activity would be the object of widespread moral agreement or that it is at least subject to well developed norms of social behavior and accountability. Notwithstanding the tireless work of a dedicated cadre of researchers in public policy, non-profit, environment and social marketing fields, marketing has not embraced a worldview commensurate to its vanguard role in the social and economic well-being of nations. Ultimately marketing is about more than individual firms and their consumers; it is about the economic, social and ecological sum of these contributions. The U.S. consumerdriven economy (consumer spending accounts for 70 percent of GDP) has proved superior in creating wealth, raising standards of living and providing opportunity. But the consumer economy has created excesses, waste and harmful side effects. How much marketing-at-any-cost can society tolerate? The current crisis in financial and real estate markets is a product of such excesses on the part of firms and consumers. Just as economists are engaged with stimulating the growth of the economy as much as they are with controlling its malfunctions (inflation, recession, unemployment, poverty), marketing is responsible for the functions and malfunctions of consumption. Marketing science should be about creating a healthy consumption environment as well as about protecting the consumer from overconsumption. There are too many facets to the superphenomena of marketing science to be covered in an article, so we focus on two very large and pressing facets: the concept of a sustainable marketing ideology and the dark side of the middle-class prosperity created by consumption economies, i.e., the dark face of poverty. There are two powerful forces driving our attention on these two areasthe carrying
capacity of the environment and the consumption capacity of developed economies. The sustainable marketing concept The three decades of unprecedented prosperity following the Second World War swept companies along a path of relentless growth to become multi-product, multi-market, multi-divisional firms. Despite concerns voiced by prominent voices like Rachel Carson (Silent Spring, 1962), Ernest F. Schumacher (Small is Beautiful, 1973) and the Club of Rome report (Limits to Growth, 1972), the growth model remained the dominant logic of the corporation. It is not until the late 1980s that we see the first signs of maturing markets and overconsumption beginning to slow corporations and right size them. Sustainable marketing is founded on the key premise that society and marketing are poised at a fundamental transition from an anthropocentric (human centered) paradigm to a biocentric (nature centered) one (Fuller 1999, p. 12). The imperative for sustainable marketing can be characterized by two types of carrying capacitymarket capacity and resource capacity. Market capacity concerns whether the present consumption level in a society is too high to permit the next generation to achieve the same consumption level. More and more economies are operating near their market capacity limits; Europe, the U.S., Japan and the Five Tigers are all bouncing near the limits. Operating at near market capacity is a recipe for marketing excesses. The resulting crises are due to the marketing shadowoverconsumption whether it is oversold currencies, financial instruments, real estate, business opportunities or dreams. On the other side of the consumption capacity problem is the resource capacity problem. In nature populations grow faster than their stabilizing forces (such as predation) when there is a surplus of supporting resources. In the days when food was the limiting factor, Thomas Malthus postulated that the human population was growing at a faster rate than the food supply and this would lead to mass starvation. Now there is even more at stake. The ecological consequences of a mass consumption society range from rapidly depleting scarce resources, environmental degradation due to extractive and manufacturing processes, dangerous pollutants that persist in the environment, emissions and waste due to logistics and distribution, and emissions, waste and waste products due to the consumption and post consumption processes. Together they threaten to make planet Earth uninhabitable to many species, including humankind. Approaching the limit of carrying capacity, small displacements cause large oscillations. To illustrate the argument, the instability in the system as it approaches carrying capacity is depicted in Fig. 2. The carrying capacity K is depicted as an
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increasing function over time to allow for growth in resources due to new discoveries and technology. It may indeed be characterized by periodic discontinuities or steps (for example, corresponding to revolutions in mechanization and polymer chemistry in the past, digitalization and biotechnology in the present, and coming soon, nanotechnology). Even when the function steps up, the speed with which businesses respond globally to exploit the opportunities is such that reconvergence is a matter of a few years (not decades like it was with mechanization and the industrial revolution). The theoretical impact curve is depicted here as the wellknown Ehrlich equation I=PAT (where P is population, A per capita affluence, and T the damaging side effects of technology per unit of consumption). If overshoot is accompanied by irreversible damage to carrying capacity, the result could be catastrophic extinction of species (called r selection). K selection, on the other hand, means a stable equilibrium population, but a turbulent equilibrium due to human tendencies. Hence the recurring bubbles. The impact function and its variants have been empirically tested (e.g., Chertow 2001), and a number of alternative measurements are also being used like ecological footprint, critical natural capital, materials flow and economic throughput analyses. Marketing scholars are cognizant of the imperative for a new and probably radical reformulation of its fundamental philosophy, its operational premises and the heuristics that are used to make marketing decisions. But what are the conceptual underpinnings of such a worldview? How can we construct an orderly set of criteria that can reverse or at least slow down the operational mindset and theorems that have guided marketings activities for over a half century? Sustainable marketing starts where marketing starts, at the very beginning of the product development cycle. It ends where marketing ends, disposal of the side effects and detritus of consumption. In his influential book The Ecology of Commerce, Hawken (1993) phrases it succinctly, Business has three issues to face: what it takes, what it makes, and what it wastes. These
three principles can be laid across marketings venerable planning framework, the product life cycle, to create its shadow life cyclesee Fig. 3. At the bottom of the figure are listed the kinds of questions that will need to be answered as part of marketing decision making. So far marketing has taken a passive and reactive position vis--vis sustainabilityby developing alternatives (often perceived as more expensive and less effective) for the ecology-sensitive consumers among, for example, the LOHAS segments. In contrast we emphasize a new philosophy for firms to proactively: (1) communicate the harmful side-effects of wasteful consumption, (2) grow the segments of environmentally conscious consumers, by developing superior products at standard market prices, and (3) demarket/countermarket certain products, technologies, and marginal consumer segments (e.g., consumers who cannot afford expensive homes). Currently, in their decision calculus, companies have to worry only about the costs of operations they undertake (and in some cases, the costs of foregone opportunities) relative to projected returns. Society bears the cost of environmental impact, but there is a growing accountability to agencies like the EPA that can require companies to clean up their environmental messes and a growing movement around the polluter pays principle. The BP oil spill tragedy in the Gulf is a stark case in point. In the not too distant future firms will be required to cost-in their nature costs of operation. It is an opportune time for the discipline to be developing environmental cost accounting models that can become an integral part of its decision calculus. In Fig. 4, three types of hypothetical nature cost curves have been overlaid on the product life cycle. Curve A may be a company in the petroleum industry, with a bipolar distribution depicting high nature costs during exploration and refining and during the consumption (combustion) of its
Fig. 2 Carrying capacity
46 Fig. 3 Ecology of sustainable product life cycles
Technology Development Search for alternative technologies
Component Product Production Manufacturing Scarce, harmful materials Footprint, emissions, waste
Product Product Waste Distribution Consumption Recycle Excessive consumption scarce material Slowing planned obsolescence Emissions, waste Health side effects of consumption
products. Curve B could be a firm in the transport industry (automobiles, airlines, trucking, shipping) where the products have a long consumption life span. Curve C could be a firm with a product that contains persistent organic or chemical pollutants (like DDT, lead, mercury, nuclear waste) and leaves lasting long-term damage in the ecology at a growing cost of recovery. There is a pressing need for: (1) developing the accounting concepts for measuring such nature cost curves, (2) defining the joint space of environmental and marketing decisions over the product life cycle, and (3) a cap-and-trade framework for consumption related environmental effects. Sustainable marketing almost inevitably implies a slow down in sales growth and product obsolescence cycles, and in some cases, even shrinkage of the market. Assuming then that developed economies are going to grow slowly close to
market saturation and are able to rein in their consumption capacity at some stable level just below carrying capacity, what does that mean for the global economy and the growth opportunities for business? That is where the BOP, the billions of people at the base of the pyramid that the consumer society left behind, enters the equation. Base of the pyramid marketing The economic miracle of the 20th century is far less amazing when it is considered from its underside. Over three billion people, nearly half the worlds population, live on less than U. S. $2.50 (purchasing power parity) a day; using the standard of $10 a day for an affluent country like the U.S., puts maybe about ninety-five percent of humanity in poverty (Ravallion et al. 2008). The share of global income of the poorest forty percent of the world population was a mere five percent in 2005, whereas the wealthiest twenty percent received seventy-five percent of it (Watkins et al. 2005).
Fig. 4 Nature costs and the product life cycle
Sales Revenue/ Nature Costs ($)
Product Development
Introduction
Growth
Maturity
Decline
Time
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It is perplexingwhy one of the oldest problems plaguing humankind persists with few solutions in sight? Some argue that it is due to a lack of determined effort by governments and the community of nations Only a few nations achieve the small UN target for development aid of 0.7 percent of GDP. The Borgen Project, an anti-poverty advocacy organization, estimates the annual cost of eliminating starvation globally at $19 billion a year, a mere drop in the bucket compared to the $1000 billions spent annually on military expenditures (www. wikipedia, 2007). Some believe that the solution calls for a vast transfer of money from the wealthy to the poor nations (Sachs 2005). But directing more and more money to the problem will be only as effective as the development models in use. The theories and development tools used to date have had an impact (Watkins et al. 2005), but it seems insignificant in the face of the size and gravity of the problem. It is possible that there are more effective development models that can be designed based on the theories and methodologies of business management. Around the turn of the century Nobel Laureate in economics Amartya Sen proposed the concept of empowerment, arguing that economic development is fundamentally the expansion of individual freedom of choice (Sen 1999). He inspired a shift toward empowering the poor as the key to a lasting end to poverty. Under Wolfenshon the World Bank adopted empowerment as its primary strategy in attacking poverty (Narayan 2002). But one cannot simply jump to empowerment. Premature empowerment can be destabilizing, as we learned from the Soviet Unions instant transition to a market economy compared with the gradual approach adopted by China. After decades of programs designed around development theories proposed by economists, sociologists and anthropologists, there is a new movement in the fielddevelopment approaches proposed by scholars in business schools. Two events acted as catalysts. One is the late C. K. Prahalads influential book Fortune at the Bottom of the Pyramid (Prahalad 2005). The second is the award of the 2006 Nobel Peace Prize to Muhammad Yunus. Business Week named Yunus (founder of the Grameen Bank and modern microfinance), among the greatest entrepreneurs of all time, joining Bill Gates, Steve Jobs, Henry Ford, Thomas Edison, John Rockefeller and the like. These high visibility influences have drawn the attention of large multinational corporations (MNCs) and venture capitalists to the problems and potential of the BOP. Prahalads model is based on aggregating the demand of the BOP and equipping poor people with the microfinance to start and run businesses. According to Prahalad the purchasing power of the BOP collectively amounts to $8 billion per day, making them a multi-trillion dollar annual market for the worlds products. Prahalad recounts many business success stories such as Hindustan Lever in India
and Casas Bahia in Brazil. An especially arresting example is about cell phones in Africa. A single cell phone in a SubSaharan region can create a business opportunity for a small reseller of calls by the minute. In several African countries cell phone sales are growing 150 percent a year, far in excess of saturated Western markets. Prahalads calculations and assumptions have been questioned by Karnani (2009), but we emphasize that a purely commercial solution ignores how vulnerable the poor consumer is to exploitation (Chakravarti 2006). As narrated in a Business Week feature story (Grow and Epstein 2007), commercial abuse of the poor consumer is rampant even in a sophisticated and regulated society like the U.S. An alternative model has been developed by Kotler and Lee (2009) based on the social marketing model. The model is equally relevant to profit minded commercial firms, nonprofit minded NGOs and charitable trusts and public service minded government agencies. The theories and methodologies of marketing can greatly enrich the quality and effectiveness of ongoing programs. For example, the techniques for market segmentation, consumer analysis, and targeting can immediately improve the quality of program design and delivery. Almost all current approaches use census-style mass market methods of aggregating the poor and broadcasting aid programs to the mass segments. To marketers it is evident that these mass segments can be usefully analyzed based on differences in needs, means, sub cultures, motivations, literacy, life cycles, social class, benefits and so on. Even the poor have distinct existence styles. In this paper we offer the elements of a different marketing model for tackling poverty. It is based on two core ideas. The first is an adaptation of one of marketings oldest theories adopted from sociologyMaslows venerable hierarchy of needs (Maslow 1943). It is a time worn tool in marketing pedagogy and probably largely irrelevant in a developed society. But it is a useful framework to order and align the problems and solutions of subeconomic communities, issues which are leap-frogged by Sens empowerment model and Prahalads MNC business model. The second is the application of the concept of marketing networks and the distributed production-consumption model discussed earlier. The needs-means hierarchy Maslows hierarchy is well known to marketinga persons motivations progress from satisfying physiological needs, to safety needs, to the social needs for love and belonging, to the need to be recognized and esteemed among society, and ultimately to the need to actualize oneself. Once a need level is satisfied it ceases to be a motivating factor, and the person switches to pursuing the next higher order need. The interpretation of each need is likely to be different for people
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raising themselves out of abject poverty. Most important, the need hierarchy of the poor has to be understood in the context of a critical parallel hierarchya hierarchy of means. This is depicted as an inverted pyramid in Fig. 5, implying an expanding horizon of means. One reason for the meager results of global aid programs is that they target multiple levels of the hierarchy simultaneously, maybe even indiscriminately. Many are missing their targets and the motivations of their targets. Instead of creating a harmony of ends and means they are creating a muddle of inefficiency and dependency. Marketing logic teaches us to start by analyzing the unique needs of specific groups of the poor, and then develop products, services, solutions, distribution channels and communication programs reflecting their unique circumstances. Needed are instrumental measures for segmenting the poor, and targeting and positioning needsolutions and means to them. Figure 5 highlights that a comprehensive poverty alleviation campaign needs to integrate two parallel worlds of the poor. On the one hand it should design intervention strategies that match the subjects movement along the need hierarchy. On the other it must create the wherewithal and pathways for the subjects to navigate themselves along an opportunity hierarchy such that their means-motivations match their needs-motivations. Thus the second integral component of our model is applying the concepts of networks and distribution channels to operationalize the needs-means hierarchy in a way that the economic benefits are shared among the poor and become the means by which they can satisfy their needs. The franchising model can be applied to creating distributed production-consumption networks in ways that foster economic opportunities. Many articles have been written about the need to reengineer products and packaging for the poor markets. But the game-changing innovation may be reengineering production itself. Flooding the markets of the poor with products manufactured in modern plants in distant cities
Fig. 5 The needs-means hierarchies of subeconomic communities
and countries is not a self-sustaining solution. Poverty has a local face. More value-added must be located near value consumption. Automated small scale production distributed as close to the consuming populations as possible is the solution. Only then can the needs-means hierarchy become self-generating and self-sustaining. The distributed production-consumption model Distributed production is the opposite of the mass production factories of the 20th century; it is the anti-Flextronics. It would be terribly cost ineffective if it wasnt for the revolution in automated, computerized manufacturing. It is now conceivable to develop village-level automated micro production systems linked to the parent company via the Internet and programmed to assemble modern quality products in small quantities on demand. One does not even need to wait for nanotechnology to make this happen. Such systems would take just-in-time from production all the way to consumption, and eliminate much of the costs of marketing, logistics and distribution, which constitute the largest chunk of the delivered price of many consumer goods. An excellent example that this can be done is offered by the NGO KickStart. This NGOs approach is to develop rudimentary mechanical products that are directly connected to improving the productivity and income of rural populations in impoverished areas of Kenya, Tanzania and Mali, with plans to extend to West Africa, India, Haiti and Kyrgyzstan. It sees its mission in the spirit of the Chinese proverb Give a man a fish and he will eat for a day; teach a man to fish and he will eat for the rest of his life. KickStart developed a leg-powered irrigation pump that allowed poor farmers to move from subsistence farming to growing cash crops like fruits and vegetables. It developed a hand press for processing oil seeds into higher value products like cooking oil and oilseed cake. It developed a technology for making cheap building blocks for constructing homes. It produces
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the products locally and markets them through rural channels, maximizing as much downstream employment and profits as it can. The NGO claims to have created 88,600 enterprises generating $88.7 million in profits and wages annually, and moved 439,000 people out of poverty forever at a cost of $60 per person (www.kickstart.org). The managerial model for distributed networks is the franchising model. The MNC that tries to set up its own distributed production and distribution network will not be localized enough to adapt to the structure and culture of poverty as it exists locally. It will not transfer enough of the wealth creation process to impact the means creation process locally. It will not distribute enough motivational forces among the populations to make the model self-sustaining. Distributed production-consumption networks must be organized around the need and resource structure of poor communities, not around downsized need structures of the wealthy. The evolution of the need structure and its satisfaction should be gradual and not driven by visions of leap-frogging. No doubt there are areas such as communications, entertainment and utilities where leap-frogging is inevitable, but pushing consumption across a broad spectrum can cause market fractures and is likely to be unsustainable. Promoting markets for the shared use of cell phones and TVs, cheap gas and electricity is one thing, marketing video games, refrigerators, skin lightening cosmetics, and athletic shoes is leap-frogging the means hierarchy and may atrophy it. The product-market composition of distributed networks is a function of the natural resources and livelihood characterizing a particular community. Urban poor, for
Fig. 6 Distributed productionconsumption networks
Natural Gas Electric
example, most often provide manual labor or household services to the wealthyservices such as laundry, landscaping, cleaning and cooking. Rural communities continue to be predominantly agricultural and pastoral. If the village community is large enough, it will also support the basic trades like carpentry, masonry and shop keeping. Sustainable production-consumption networks are those that directly engage the predominant indigenous sources of livelihood in a community. Figure 6 depicts typical rural livelihood clusters. At the most basic level is manual labor. This is literally manual labor, with people working with their hands, using rudimentary tools and carrying heavy materials around on their heads or backs. They do not even have the benefit of a wheel barrow. In the semi-skilled building trades, masons still work with a hammer, chisel, trowel and a mixing pan. Powered tools just do not exist. A local production system for assembling modern mechanical tools and simple powered work tools and power generators, supported by a microfinance system and a training system, would have a profound impact on the productivity, income and quality of work-life for the common rural laborer. Indeed, focusing on the needs of the rural middle class has created the anomaly that one can spot a number of farm tractors standing in rural villages, but no power tillers or mechanized hand implements for alleviating the toil of the menial farm worker. Distributed production franchises can be designed to target each employment cluster in Fig. 6. The opportunities inherent in each are self evident. Power failures are chronic in the villages, if they have power to begin with. Cooking
Sanitation
Leather Prep
Bio Fuels Communications Phone, TV
Utility Production Distribution Franchises
Leather Goods Franchises
Leather Goods Franchises
Franchisor MNCs
Shop Keeping Tailoring Powered Trade -Tools Franchises Repairs Labor Building Trades Carpentry
Fruits & Vegetables Staple Grains Processed Food Franchises
Microfinance Banks
Milk
Meat
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gas supply is sporadic and comes through agencies in larger cities. Bio fuel opportunities abound but are not fully exploited because they tend to be government-sponsored initiatives which favor the middle class and are not entrepreneurially embedded in the BOP. In designing distributed networks it is important not to lose sight of the production-consumption synergy. Training the consumer on how to optimize the use and productivity of the products, adapting the product to his/her needs and providing the means through leasing or microfinance are the keys to a sustainable needs-means virtuous cycle of development. Understanding how the marketing model can be adapted and applied to raising the consumption capacity and quality of life of the worlds 4 billion consumers in the BOP in a sustainable way is vital to the future of globalization and world prosperity. The developed world will benefit from the degree of poverty alleviation in the developing world. As the poor acquire purchasing power, they provide the missing market that the developed world needs to supply full employment to its own citizens. Yet the growth of the poor worlds purchasing power will pose the question once again of limited natural resources and increasing pollution and climate damage. We cannot avoid the need to strike some balance in the distribution of the worlds resources among the competing claimants in different countries and social classes. Not only must the present generation arrive at an acceptable balance in the consumption of the worlds products and resources, but it must also make sure that current consumption levels do not prevent the next and future generations to inherit the same capacities as this generation. The marketing discipline must take a prominent position in fashioning this understanding. Without a body of knowledge that can address the social problems of the world, marketing will surely lack the philosophical direction and stature it needs heading into a future rife with global, economic, social and individual opportunities, but also with conflicts of interest.
nanotech driven NBIC phenomenology, a surreal world of quantum physics and fantasy experiences far exceeding virtual reality. To cope, marketing will need to develop a vastly expanded base of theoretical and methodological tools. The way consumer products and services are created, delivered and consumed is also in radical shift. Gone are the days of vertical integration. The phenomena of marketing are being distributed between consumption networks, marketing networks, innovation networks and production networks. The day is not far when micro production systems that produce to demand and are located close to or in the place of consumption can be developed. Network organization is evolving to a distributed production-consumption model. Finally there is the marketing superphenomenon. Globalization continues on its fitful but inexorable pace. Nations like China and India with expanding consumption bases are racing ahead to economic prosperity. A more prosperous world magnifies the side effects of consumption societies on the ecology and resources of the world. At the same time large sections of the world population languish on the sidelines. Economic theory based models for alleviating poverty have had marginal impacts. It is an opportune time, an imperative time, for marketing to step forward with its model for a sustainable consumer society and base of the pyramid marketing. What does the new marketing horizon portend for key marketing stakeholdersmanagement, scholarship and public policy? For managers we emphasize the following thoughts: (1) Managers need to understand the nature and theory of network organization. What are the various forms of networks and the market and technology conditions which favor one type over others; the economics of network exchanges and the distribution of functions, risks and rewards; the governance structures and the organization of control, coordination and relationships; and looking ahead, what will be the nature of decentralized production-consumption in their industry? (2) There is a new consumption philosophy of customer care. Customer care means acting on behalf of the customer and his/her long-term interests. The focal firms primary function in the network is marketing and branding, and its primary role is to act as the agent of the consumer. This may mean demarketing and countermarketing as often as it means marketing. (3) Growth is not a panacea in the new marketing. For growth firms will increasingly look to lower middle and BOP markets. Micro marketing and distributed production models will be prominent, and the global strategies of firms like Nokia and Lever Brothers will be carefully emulated. (4) The new marketing will demand a new cost accounting featuring nature costing. Firms will need to be active
Conclusion This has been a far ranging discussion of marketings future possibilities. Marketing is confronted with a Kuhnian paradigm shift, a transformation like nothing before. The prominent features of the shift are consumer experiences, networks and a macro domain spanning the global commons. Consumers experience products and services via their senses. Our understanding of sensory experiences is fast becoming a neurophysiological science. The growing impact of digitization and virtual media considerably expand the scope and impact of sensory satisfactions. Approaching is a
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change agents in industry groups and government to develop uniform conventions for measuring nature costs and incorporating them in delivered price to the consumer. (5) The decision calculus will become further complicated by serious intangible considerations. The possibilities for stealth marketing and consumer manipulation posed by the NBIC revolution, demands a commitment to establishing high ethical and moral managerial values. For this too, firms will need to be proactively engaged with industry groups and regulators. What about marketing science? All of the five forces affecting marketing management greatly expand the scope of marketing scholarship. We see an already bursting tool box of theories, areas of application, and complex methodologies, becoming far more exacting in detail and rigor. To be a skilled consumer researcher may mean one has to be half a neurophysiologist with expertise in, for example, fMRI besides the latest in research design and statistical method. Marketing scholars will need educational backgrounds in marketing on top of education in special fields of science such as neurophysiology, nanotechnology and environmental engineering. No doubt there will be an increasingly specialized academy. But marketing scholars may also need a new philosophical orientation, one which is tied to the well-being of the consumer and society over the well-being of marketing management. Last, public policy. The implications of nanotechnology and a threatened ecology greatly elevate the stakes of public policy in marketing. Despite political currents to the contrary, we dare say the old laissez-faire capitalism is approaching its end. Modern markets are highly concentrated and interconnected in networks of global dependencies. They bare little resemblance to Adam Smiths competitive markets. The meltdown of the financial system in the U.S. and the huge amounts of public money required to save private firms from collapse have many scholars talking about the imperative of a new capitalism (variously called conscious capitalism, social capitalism and so on). This is compounded many times over by the potential for invasive consumer technologies around the corner. One can expect a new kind of regulatory environment that struggles to preserve market behavior and incentives amidst more closely monitored social performance and obligations. One can expect a regulatory regime more closely engaged with industry groups to develop selfregulation norms and mechanisms (Achrol and Gundlach 2011) but also demand a clear responsibility for ameliorating damage to consumers and the environment. There is an Aldous Huxley brave new world awaiting humankind in the not too distant future. It will require brave consumers to live in it and brave marketing scholars to understand it. The side effects and fallout of a neuromapped and nanotech invaded world of consumption are
hard to imagine. Are marketing scholars prepared to contribute to the new social consciousness required to guide marketing practices and husband natural resources? In the millennial shift, will marketing develop the scholarship and methodologies to be biological and social scientists and not just management engineers? We end this article with this sentiment: one meaning of millennium is a hoped-for period of joy, serenity, prosperity, and justice.
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Frontiers of the marketing paradigm in the third millennium

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J. of the Acad. Mark. Sci. (2012) 40:3552

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J. of the Acad. Mark. Sci. (2012) 40:3552

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J. of the Acad. Mark. Sci. (2012) 40:3552

Norwegian University of Science and Technology, Department of Electrical Power Engineering

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Fig. 2 Carrying capacity

46 Fig. 3 Ecology of sustainable product life cycles

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Technology Development Search for alternative technologies

Fig. 4 Nature costs and the product life cycle

Sales Revenue/ Nature Costs ($)

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Bio Fuels Communications Phone, TV

Utility Production Distribution Franchises

Leather Goods Franchises

Leather Goods Franchises

Fruits & Vegetables Staple Grains Processed Food Franchises

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J. of the Acad. Mark. Sci. (2012) 40:3552

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