What is the Production Concept?
The production concept of marketing may be the first and oldest concept that assumes consumers prefer those products that are easily available in the market and which are in-expensive. It assumes price as a critical variable, the customer looks for products price, low the price, more the purchases.
The production concept or philosophy states that the more the company produces products the more sales will be and more the profits. Managers with production-oriented organizations concentrate on achieving high production efficiency (mass production) and wide distribution coverage (mass-selling). Their focus is on the existing products. All business efforts are directed at raising output levels, produce standardized products, and sell at a lower price. The price is assumed to be the critical viable in buying decisions of customers.
The organizations that adopt the production concept focus on building the internal capabilities of the organization in terms of production and selling. Organizations use the lower costs to cut prices and expand market size.
The existence of the production concept appeared in the early mid-1950 at the time companies are concerned about manufacturing, production, and efficiency issues. The companies are concentrating on producing the products, capturing the target market, and making sales.
This marketing concept is applicable where the resources are enough, labor is cheap & easily available, and the competition is low. Similarly, it may be applicable to new businesses when they are trying to make market through huge production and availability. But, it may fail in the long term where the competition is likely to occur.
The common features of the production concept are:
Mass Production. The companies who adopt the production concept are involved in mass production. Through mass production, the company aims to increase production efficiency by reducing per unit cost (economies of scale) and making more sales. It believes customers constantly choose the products that are readily available in the market.
Customer Attraction through Low Price. This production philosophy believes that customers prefer those products that have low prices. It believes customers are price sensitive. High volumes sales with low prices lead to profits.
Wide Distribution. It concentrates on mass production, high coverage distribution, more market coverage, and more selling.
Oldest Marketing Concept. The production concept is one of the oldest marketing concepts from others such as product, selling, marketing, societal, and holistic marketing concepts.
Price-key marketing variable. The production concept believes the price is always a primary variable in marketing. People always look for prices when they see any products. It says people did not focus on products quality, services, rather they always focus on price.
Supply Creates Demand. This marketing concept follows the Says Law, which states that “Supply creates its own Demand”. It believes that produced goods easily create their own demand and the higher the produced goods the higher the demand.
Principles of Production Concept
The marketer who adopts this production marketing philosophy should follow the following principles.
Factory. First of all, start a business by establishing a factory to produce desired products.
Mass Production. Concentrate on producing desired products as much as possible.
Low Price, Mass Distribution. Sale maximization must be accomplished by keeping affordable prices for customers and mass sales.
Profits. The goal of marketers should be maximizing profit through efficiency in production.
Many Japanese companies in the 1960s and 1970s adopted this philosophy in international marketing. Currently, Chinese and Indians companies are adopting this marketing concept. If you see, China is the biggest exporter of manufactured products and India in ICT services across the globe.
But with the increase in the consumption of quality products in developed countries, the product concept significance is slowly decreasing.