What is the production concept in marketing?
What are the advantages and disadvantages of the production concept?
In this article, we’ll go over the production concept in detail.
- Marketing concepts
- What is the production concept in marketing
- Advantages of the production concept
- Disadvantages of the production concept
- Production concept history
- Examples of production concept
Let’s get started…
In marketing, there are five marketing concepts providing companies and businesses philosophical grounds to make business and marketing decisions to dominate their industry, increase their market share and drive value to their customers.
These five marketing concepts are:
- Product concept
- Production concept
- Selling concept
- Marketing concept
- Societal concept
In this article, we’ll focus on the production concept.
What is the production concept in marketing
The production concept is a subset of marketing concepts whereby you focus on producing goods and services in such a way to make it highly available and affordable to your customers.
On the basis of the this philosophy, your business decisions will drive you to improve your production efficiency and find better distribution channels so you make more of your product and drive prices down.
The idea is the more your customers can readily find your product and benefit from lower prices achieved through your economies of scale.
A company adopting the production concept is of the view that they can increase demand for their product by reducing costs.
The idea is the more your goods are affordable, the more people will want to buy them.
To decrease cost, in most cases, you’ll need to produce on the large-scale.
By mass-producing your product, your company will attempt to reduce the cost per unit and benefit from economies of scale.
The production concept is a concept leading you to think strategically about your production and operations.
Advantages of the production concept
There are some advantages when you consider the production concept in itself.
The production concept forces your company to find ways to produce more for less.
Companies will look at optimizing their operations and logistics in such a way that they can reduce their overall cost per unit and offer their products in a more affordable way to their customers.
Achieving economies of scale is an important advantage of the production concept.
A company that believes they could produce more of equal quality for less can certainly offer value to their customers.
The advantage for your customers is that they can find your products anywhere and in an affordable way.
Your customers will not need to go out of their way to find what you are selling.
Disadvantages of the production concept
Companies that focus too much on the production concept may lose focus on what their customers need or want.
Considering this is fundamentally based on the fact that producing more can help the company reduce costs and lower prices, the constant urge to reduce prices may lead companies to cut corners and degrade the quality of their product.
There is a point in time where the lower prices will no longer drive customers to buy more but actually drive customers to buy less.
If the company cuts quality to drive prices down, eventually their customers will no longer see value in paying for a cheap low-quality product.
The more your customers perceive your products as lacking in quality, the less they will have the inclination and motivation to buy your products.
This results in the reduction of demand for your product, the opposite of what you were trying to achieve.
Another disadvantage of the production concept is that not all customers will make purchasing decisions primarily on the basis of cost and affordability.
Depending on your industry and the products, your customers may have other important considerations, not just price.
If product safety is important for them, they’ll pay more for a safe product than pay less for an unsafe product.
Production concept history
The production concept was the widespread concept at the turn of the twentieth century and at the time of the industrial revolution.
Businesses believed that by improving their production efficiency, they could offer their products in a more affordable way to the market and by doing so they’ll increase the overall demand for their product.
Back then, it worked quite well.
Many businesses offered necessity products and by producing more of them and at a lower cost they were successful in generating demand for their products.
Back then, all the companies needed to was to figure out if they could produce the goods and if they could produce enough of them to fulfill the demand.
There was generally more demand than there was supply making it easier for companies focused on the production concept to be highly profitable.
In today’s economy, the production concept does not have the same level of effectiveness as it did a century ago.
Most businesses have already implemented highly efficient production and distribution logistics, so on this basis alone a company could not beat its main competitors.
The production concept is now a given, without it, you cannot compete in most cases.
Companies need to find alternative ways to generate demand for their product and complement their production concept.
Examples of production concept
An example of the production concept is a company outsourcing its production needs to another specialized company or investing in countries where they can produce in massive quantities at a much lower cost.
Many American companies have their products produced overseas for this reason.
If you look at companies like Apple, their smartphone hardware is produced in Asia where they can produce more for less.
One notorious example of the successful implementation of the production concept is when Ford Motor Company started producing its cars on a large scale.
Ford reckoned that the more he produces his cars, the more people will buy him.
At the beginning of the twentieth century, his assessment was spot on.
The more he produced, the more people bought.
There was so much demand for cars and so little supply that the mere increase in production, more optimized distribution and economies of scale lead the Ford Motor Company to become one of the most successful companies in history.
The production concept is a subset of the marketing concept.
The production concept is a marketing philosophy where your business focuses on producing more goods in such a way to drive prices down.
The idea is that the more your products are available and affordable, the more people will buy your goods.
The production concept has advantages such as leading a company to achieve economies of scale but also disadvantages where a company may compromise its product quality just to continue driving prices down.
Depending on your product and industry, you’ll need to see if the product concept is a philosophy that should primarily guide your business decisions and marketing efforts or not.
We hope you enjoyed this article.
Do you have any feedback to share with us? We would love to hear from you. Drop us a comment!