This article could have been titled “On the harmfulness of marketing supremacy.” However, it does not deal with the negative impact of marketing on consumer decisions. This issue is well-known, although rarely raised. It is known that marketing activities can sometimes be accused of taking on forms or shapes that raise ethical concerns. We will probably never know, for example, whether the story about marketing specialists inventing a disease called halitosis to increase sales of mouthwash is true or a product of human imagination. However, it is easy to point to similar cases.
The issue addressed in this article concerns the damage caused in the area of logistics as a result of the supremacy of marketing goals (implemented by marketing and sales departments). In business practice, it is easy to find companies dominated by one slogan: invoice, invoice! The harmfulness of this slogan lies in the disregard for logistical problems.
In the literature on the subject, we find many postulates testifying to the need for the integration of functions and management areas in enterprises and enterprise networks. Similar trends can be found in logistics literature. In the book titled Marketing Logistics, there is clear talk about coherent management of sources of competitive advantage:
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innovation and brand
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customer relationships
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effective supply chain.
M. Christopher writes in many publications about the necessity of abandoning practices that create specific walls between functions and management areas. However, some definitions of marketing suggest maximizing sales as the primary goal. The slogan attributed to Philip Kotler: “sell everything to everyone” is actually contrary to the common-sense logistical principle: “we do not sell to everyone” (and especially not to those who require high logistics costs, making it impossible to realize a margin).
Furthermore, the article addresses a seemingly minor problem related to the tendency to plan activities at the beginning or end of periods such as a month, a week, etc. Units of time related to the movement of celestial bodies determine the rhythm of many economic activities. Of fundamental importance are: the time it takes for the Earth to orbit the Sun, the time it takes for the Moon to orbit the Earth, and the time of a single phase of the Moon. Economic management, and thus management in general, based on these astronomical elements can be sensible, necessary, or harmful. For example, preparing budgets and financial reports in 12-month periods ensures that annual calculations take into account the impact of cyclical climatic and astronomical phenomena and social phenomena associated with the latter. It is also necessary to take into account in management holidays related to the position of the Earth relative to the Sun and behaviors associated with the seasons (mainly summer and winter holidays). Focusing on other dates and periods can be harmful.
Demand shaping
It is known that demand volatility makes the work of logisticians very difficult. It is easier to deal with volatility determined by objective factors (for example, the volatility of demand for cooling drinks, dependent on weather conditions). It is much more difficult to ensure good availability of goods where most of the factors shaping demand are irrational (for example, most clothing markets). However, it happens that the company’s own actions increase demand fluctuations. Most often, these are marketing activities.
The realization of marketing goals often reinforces demand fluctuations. Demand fluctuations can be increased primarily by three types of activities:
1) stimulating demand for goods from different market segments, implemented at different times (basic tools – advertising),
2) price manipulation (basic tools – discount systems, rebates, and price promotions),
3) fictitious product differentiation (product differentiation justified only by marketing considerations).
An example of an industry with large demand fluctuations is the FMCG (Fast Moving Consumer Goods) industry. These include, above all: food products, household chemicals, cosmetics, small household appliances, etc. Companies that are suppliers in the FMCG industry are concentrated both in large international corporations (Nestle, Masterfoods, Coca Cola, Procter&Gamble, Philip Morris, Unilever, Grupa Żywiec) and in Polish corporations building their strength and importance over the last twenty years (Grupa Maspex, Grupa Jutrzenka, Polski Koncern Mięsny DUDA). Competing in this industry is difficult due to the multitude of alternative products and substitutes, as well as the importance of the brand and packaging.
Products go through life cycle phases. In the initial phases, they must be intensively promoted – and thus demand for them shows large and rapid fluctuations. However, contrary to appearances, they are not always smaller in the maturity phase. Even then, when the sales structure changes, market shares fall, and consumer preferences or habits change under the influence of competitors’ actions, the first reflex of defensive actions is marketing campaigns. Strong stimuli are directed at customers and consumers to maintain or save falling sales. Such stimuli include price cuts, discounts, multi-format product packaging, or sales on a two in cost of one basis. If such actions are sudden, not planned in advance, or do not result from a long-term marketing strategy, their result may be the creation of the well-known Forrester effect, the so-called bullwhip effect, which causes severe consequences for logistics and production. Using the example of the so-called beer game, this phenomenon was described by P. Senge in the book The Fifth Discipline: The Art and Practice of the Learning Organization. The bullwhip phenomenon can be briefly described as an excessive increase in orders for goods caused by purchasing stimuli acting at the retail level, resulting in an increase in orders directed to wholesale, and then passed on to production. As a result, disharmony arises throughout the distribution channel, and at every level of this channel, backlogs of unfulfilled orders appear. If demand falls, stocks of unsold goods will arise at every level of the supply chain. A temporary purchasing impulse triggered by marketing activities therefore generates additional costs of excessive inventory throughout the supply chain.
The article comes from the magazine “Logistyka” 6/2010.