Kotler- The Frontiers of the Marketing Paradigm in the Third Millenium 2012

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 beenexpanding since the origins of the discipline. Since the1970s marketing science has been organized around theexchange paradigm. Marketing concepts apply to all formsof exchange, whether it is goods, services, personages,places or ideas, and whether it is between individuals, for-profit and nonprofit firms, governments and NGOs.Marketingtheories evolved from a firm oriented view to encompass theexchanging dyad. More recently the paradigm expanded to anetwork level of explanation, and relational theories havecome to the fore. But even as the field struggles to grasp itsnew fields of explanation, there is a Kuhnian shift happening atits boundaries. The shift significantly bends the marketingworldview as well as the theoretical tools and methodologieswe use to study it. In this paper we develop a three-tieredexplanation of the emerging field of marketing—its subphe-nomena (consumer experiences and sensory systems), itsphenomena (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 . Consumernetworks . Sustainable marketing .

Marketing and poverty alleviation

Introduction

A number of prominent scholars have analyzed the evolutionof the marketing paradigm (for example Bartels 1962; Hunt2002; Sheth et al. 1988). The evolutionary path can be tracedfrom the functionalist paradigm to the marketing manage-ment paradigm to the exchange paradigm. The functionalistparadigm described the institutions of marketing and theirfunctions. The marketing management paradigm is rooted in afirm view of marketing processes (the archetype firm being theclassic manufacturing company). Under it, marketing’s role andresponsibilities expanded from sales and advertising to productdevelopment and a firm-wide responsibility for customer care.

The impetus behind this major expansion was providedby the generic and exchange paradigms (Bagozzi 1975;Kotler 1972; Kotler and Levy 1969). Marketing theoriesand research were generalized beyond the exchange ofgoods, services and money to include any valuable resourcelike time, energy, feelings, places, ideas, symbols orinformation. They were extended to exchange with customers,employees, suppliers, the public, and even competitors, andapplied to all types of organizations—for profit, nonprofit,social service agencies, government, NGOs and nation states.

The exchange paradigm, with its focus on inter-firmrelationships (Achrol et al. 1983; Dwyer et al. 1987), broughtthe concept and theories of the marketing channel to the fore,and from there it was almost a natural step to where we standtoday—at the threshold of the network paradigm (Achrol andKotler 1999; Iacobucci 1996). Relational theories ofexchange are highlighted in an exchange network (Achrol1997; Anderson et al. 1994; Gummesson 1998; Morgan andHunt 1994; Sheth and Parvatiyar 1995). These changes inthe marketing paradigm are significant in themselves, butthey are occurring at a time of even greater change at theboundary and foundations of the discipline.

The plurality of domains and theoretical riches is difficultto address systematically without an organizing framework.

R. S. Achrol (*)Professor of Marketing Science, School of Business,The George Washington University,Washington, DC, USAe-mail: [email protected]

P. KotlerS. C. Johnson & Son Distinguished Professor of InternationalMarketing, Kellogg School of Management,Northwestern University,Evanston, IL, USA

J. of the Acad. Mark. Sci. (2012) 40:35–52DOI 10.1007/s11747-011-0255-4

As marketing expanded over the years, scholars sought tosynthesize its fundamental premises into “general theories.”Prominent among early contributions are the theories ofRobert Bartels andWroe Alderson (see discussions in Sheth etal. 1988). Of more recent origin are the resource-basedtheory of competition (Hunt 2002) and the service dominantlogic (Vargo and Lusch 2004). Bartels and Alderson’sgeneral theories addressed aggregate levels of marketingphenomena. The service dominant logic builds its argumentson a reductionist foundation. The resource-based theory is anintermediate level of generalization. The debate over thesuperiority of reductionist versus phenomenal theories willsurely rage for a long time. Perhaps the complexity ofmarketing phenomenology and the infancy of its theories aresuch that it behooves the discipline to pursue a multi-tieredparadigmatic structure to its science.

In this paper we pursue a somewhat unusual line ofinquiry. This paper is not about a general theory. Neither isit synthetically constructed from the theories and researchabout the phenomenon of marketing as we know it. Ratherwe construct a three-tiered framework based on emergingshifts in the phenomenology of marketing. The three fields

are (1) consumption experiences, (2) marketing networks, and(3) sustainable development. The fields span a reductionist toholistic construal of marketing phenomena.

A paradigm for the third millennium

It is frequently useful for marketing to organize the growinginventory of empirical and theoretical data in a codex thatconsolidates that which is important in what we know andpoints to that which is important in what we do not know. Wedecided not to look in the rear view mirror. However, for thepurpose of providing some reference points and summarizing ata glance what is proposed in the “shift” discussed in the rest ofthis forward-looking article, Table 1 contrasts key assumptionsdefining marketing’s current paradigm with how these aretransformed under the emerging paradigm. The receivedparadigm is a collection of a number of streams of literature,some enduring and some of more recent vintage. A few of thetheories span current and future possibilities. For example,some aspects of the service dominant logic (co-creation andco-production) and network and relational theories can only

Table 1 Key assumptions of the received vs. emergent marketing paradigms

Received paradigm Emergent paradigm

Consumer satisfaction Consumer sensations and sense-making

Cognitive psychology of behavior Neurophysiology of consumer behavior and sensory experiences

Products as “delivered services” Products and services as sensory experiences

Massive-scale manufacturing by contract manufacturers(phase one networks); early phase two innovation networks

Small-scale distributed production-consumption networks.Products built atom-by-atom. Customer co-creationand co-production (phase three networks)

Dominant technologies: digitization and computer controlledsystems

Dominant technologies: biotechnology, nanotechnology

Management as internal coordination of finance, marketing,production, R&D and personnel in the firm

Management as customer care and network development–interorganizationalcoordination of finance, innovation and production.

Core competency: idiosyncratic resources, usually technology Core competency: Focal firm—marketing; Network—relational solidarity,synergy and mutuality

Management priorities: growth, customer life-time value,targeting middle and upper class high value markets

Management priorities: sustainable marketing (including demarketing,counter-marketing), growth from lower middle andbase-of-the-pyramid markets

Dyad as unit of analysis; theories of hierarchical control,power and dependence; early relationship marketing,social norms of behavior

Multi-level networks as units of analysis; bottom-up networks;relational management of the economic and ecological“commons”; social engagement (proactive)

Corporate social responsibility (reactive, adaptive) Proactive corporate strategies in ecology and development

Public policy: laissez-faire capitalism Public policy: regulated capitalism (embedded regulation, self regulation);conscientious capitalism, conscious capitalism, social capitalism

36 J. of the Acad. Mark. Sci. (2012) 40:35–52

be partially realized at present but are likely to achieve theirfull potential under the emergent paradigm.

Looking ahead, how does one extract the critical featuresof a turbulent field that pervades the entire fabric of societyand condense them into a forward-looking framework formarketing? We propose the way to make this complexitytractable is to conceptualize it in three dimensions—marketing’s substructure, its structure and its superstructure.In this way we can span:

(1) the theoretically more tractable domain of the marketingmicrocosm, its subphenomena;

(2) its phenomenal realm (including the managerial realm)with its mid-range theories that have predictive powereven if their putative mechanisms are less thanrigorously explicated; and

(3) the superphenomenal realm of marketing and society,a largely descriptive field of analysis.

In the subphenomenal field we focus on the consumptionexperience as the fundamental domain of relevant theoryand human sensory processes as the fundamental bases ofexplanation. Major advances in the science of the mind areimminent due to a covergence in the understanding of itspsychology and its physiology. This promises to shift thetheoretical tools of consumer behavior analysis fromcognitve concepts such as attitudes, information storageand retrieval theories to the mechanisms of sensorydepiction of “reality” and its experience.

The field of phenomenal marketing is complex and isshifting. Hierarchies have given way to marketing net-works. The theories of exchange that served marketing wellfor 40 years are giving way to relational concepts. Networksare inverting many aspects of traditional marketing processes.In the post-information economy, vertical integration isreceding. Marketing functions and value-added are movingforward in the network and closer to the consumer. Thisprocess may take a giant leap in the future by bringingproduction and consumption close together.

The third dimension is marketing’s superphenomena.This is an area of marketing where our science, includingits theories and empirical findings, is likely to be moredescriptive than causative. Nevertheless, as marketing’sfootprint and societal consequences loom ever larger, thesuperphenomena of marketing are going to represent acritical agenda in its paradigm. There are too many issues toaddress in a single article. We picked the two we believe arethe most significant—sustainability and poverty.

Sustainability has been creeping up on Eric Fromm’shomo consumens for a long time (Kotler 2011). Marketinghas well-known negative impacts. It encourages rapidconsumption of limited natural resources, it does notrestrain the wants it encourages, and it over-fulfillsmaterialistic 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 arethe subject of government agencies, NGOs, charitabletrusts, religious orders, altruists, sociologists and econo-mists. But there is a growing realization that the world ofbusiness and the world of development are on convergentpaths. Leading scholars in business schools are proposingmodels for development that offer alternatives to conven-tional approaches originating in economics, sociology andanthropology.

The subphenomena of marketing

The fundamental process in marketing is consumption, andthe elemental concepts in consumption are satisfaction,value and utility. If there is a “new” concept in the digitalage of information, knowledge products and the serviceeconomy, it is that of consumer experiences. Yet asHolbrook (2006) points out, the idea that the consumptionexperience is at the bottom of consumer value goes backsome 25 years, and even further back to the economistLawrence Abbott:

The thesis … may be stated quite simply. Whatpeople really desire are not products but satisfyingexperiences … People want products because theywant the experience bringing services which theyhope the products will render (Abbott 1955, p. 40)

At the nucleus of consumption is a need and itssatisfaction. As consumers, we go about need satisfactionvia a complex of experiences filtered through our senses.The senses record and filter all that we feel and know aboutthe world around us and its pleasures and pains. Theseinclude the visual (perceptual), auditory and olfactory senses,the sense of taste and the so called “other” senses—thesense of touch and feel (tactile and haptic sense), the senseof 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 theworld, but the question remains, what does it mean to saythat “we experience” something, and that the experiencewas a satisfying one or not? That is the primary subjectdomain of consumer behavior theory and research. Thebulk of it is informed by cognitive psychology (includingtheories of attitudes, emotions and information processing),which has constituted the dominant behavioral paradigm inmarketing and psychology for many decades now. But thereis an important shift in the behavioral sciences fromcognitive psychology to neurological psychology. Thedisciplinary divide between mind (cognitions) and the brain(the physiology of the mind) is rapidly disappearing.

J. of the Acad. Mark. Sci. (2012) 40:35–52 37

Marketing and the human senses

Beyond the obligatory treatment in consumer behaviortexts, little research attention has been directed to consumersensation and sense-making (Jacoby et al. 1998). Theremay be a good reason for the long hiatus in academic studies.We draw much of our inspiration in consumer behavior frompsychology, and the psychology of the senses has beenmoribund for a while. In the preface to his 1953 edition of TheHuman Senses, Princeton psychologist Frank Geldard notesthat not too long ago the greater portion of psychology wasabout the human senses: “Experience was psychology’sproper object of study, and experience comes by way ofman’s senses.” He goes on to lament that psychologyevolved into the science of behavior and concepts likelearning, motive, attitude and interest rose to the fore: “Thesetrends in psychological fashion, partially account for thecurrent rarity of books on sensation” (Geldard 1972).

This leaves a void in how behavior and the reality we livein are connected to the building blocks of matter and to thetheories of mind and body. The void appears to be narrowing.The convergence of physiological and behavioral theory in theshape of neurophysiology has led to a revival of scientificinterest in sensory processes (e.g., Zaltman 2003). On the onehand are phenomenological reasons. In his A History of theSenses: From Antiquity to Cyberspace, Jutte (2005, p. 16)observes: The “rediscovery of the senses, which is in someways a mere few decades old, certainly has a lot to do withcommercialization, but it is also a response to the growingneeds of a post-industrial leisure society, in which the sensesare befuddled by artificial worlds and overstrained byincessant stimulation.”

On the other hand are a growing field in cognitiveneuroscience linking cognition and molecular genetics (e.g.,the Journal of Cognitive Neuroscience) and an emergingfield in neuroeconomics (e.g., Sören et al. 2008). Interest insensory 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 visualand auditory processes, which is to be expected in a mediaand communications driven managerial paradigm. Sight andsound are often considered the superior senses. The classicalhierarchy of the senses dates back to Aristotle who orderedthem thus—visus (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 humanspecies.”

There may be a cultural evolution happening in whatstimuli we respond and relate better to. Some believe weare now entering a haptic age (John Naisbitt’s 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 moretouchy-feely culture. Marketing practitioners are quick topick up on stimulating consumers’ olfactory and hapticsensations. The popular press is abuzz with article titles like“Dollars and Scents” (Hoppough 2006) and “BringingSenses into Play” (Musgrove 2007). Predictably, the buzzfollows the old sales-orientation—i.e., how can I getcustomers to turn on the buying impulse?1

Early efforts by the movie industry (dating as far back asthe 1940s) to incorporate scents into the movie experiencewere largely failures (LA Times 2006), probably due torather crude technology. Today there is a whole newtechnology of artificial aromas, including the possibilityof transmitting them electronically to TVs fitted withartificial-scent boxes. There is a push to design hapticexperiences into virtual products. New game systems bySony and Philips incorporate sense effects via vibrations,breezes, thunder and lightening, 3-D, and so on. A companycalled Immersion claims to have designed a computer mousethat can obtain tactile impressions of the textures of solid andliquid surfaces (e.g., the softness of a mattress) providedsuppliers 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, computer-transmitted processes that will progressively complement oreven replace impressions traditionally supplied by the five‘natural’ organs of sense” (Jutte 2005, p. 330).

Cyberspace and virtual reality have the potential toseparate our minds and bodies, to allow us to experiencethe body’s needs by a virtual projection of the mind intocyberspace. There exist well-known virtual worlds on theWeb such as Second Life, where one can create an avatar tomove around, shop, meet other avatars, and in effect, lead asecond life at that site. Soon avatars will be able to movefreely about the Internet, connecting virtual worlds andstand alone sites. 3-D avatars created to one’s measure-ments can meet other avatars anywhere on the Web, hold aconversation, socialize, go shopping with friends, try on apair of jeans for fit and so on (McConnon 2007).

Those of us who grew up in the physical world cannotbegin to imagine life as it will be for those who grow up ina digital world. The digital world will offer nearly endless

1 In the early 1990s a study by the Chicago based Smell and TasteTreatment Research Foundation in a Las Vegas casino purported toshow that the right kind of scent induced customers to spend 45percent more on the slot machines (Lee 2004). Now Sony stores arebeing spritzed with a custom vanilla-and-mandarin scent created for itby Scent-Air of Charlotte, NC. Other Scent-Air customers reportedlyinclude Doubletree Hotels, Westin Hotels & Resorts, Hard Rock Hotelin Orlando, and Procter & Gamble (Hoppough 2006). Some advocatessee a brand having a unique scent image of its own.


possibilities of shaping life and experiences so that thephysical world will pale in significance and may wellbecome a secondary world in which our bodies live wiredto a digital reality. Like so much of science fiction, themovie Avatar may be prophetic. It triggered a rush to 3-Dtelevision. We stand at the threshold of a virtual world ofexperiences and an incredible expansion of the science bywhich experiences are experienced.

Neurophysiology and marketing

The relationship between the brain and “mind” has puzzledscientists and philosophers for centuries (the classicalmodel is often traced to Rene Descartes). The modernscience of sensation and perception takes a neurophysio-logical approach to the subject based on cellular biology.The core concept is that of cellular mapping networkslocated in specific areas of the brain. For example, amonkey’s visual system (the human system is believed tobe similar) consists of some 34 different maps whichanalyze different attributes (color, shape, orientation,speed, depth) of what is recorded by the retina. Specificcells in the map are linked to specific areas of the retina,and adjacent areas in the retina are linked to adjacentcells in the brain. The maps are organized in ahierarchical manner into “what” pathways and “where”pathways that connect the primary visual area in the backof the brain to the temporal lobes in the lower middle ofthe brain and parietal lobes in the upper middle,respectively (Posner and Raichle 1994). The importantpoint here is that neuroscientists believe human sensoryand motor systems are analyzed and controlled byprecisely located networks of cells in the brain. That isone part of the unfolding mind-brain puzzle. The second ismonitoring 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 anucleus, dendrites, axons, etc. Signals are transmitted andprocessed by the nervous system as electrical energy andare subject to the concepts of electricity such as chargedparticles (ions), resistance and potential difference. Thesignals can be transmitted to distances up to a few meters.One methodology of analyzing the functioning of the brainis measuring its electrical activity (EEG); this has been usedin clinical practice for over sixty years. But the EEG is notvery effective in isolating the multiple cell assemblieslocated in different parts of the brain. It was not until thedevelopment of PET and MRI methodologies, especiallyfMRI in the 1990s, that the cognitive neurophysiology ofthe brain really took off. Both technologies involve highlysophisticated measurement systems (working at the level ofatoms 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 glucoseand decrease their use of oxygen, resulting in a local increaseof blood flow to the precise region of neural activity.

The reason for this brief discussion is to highlight the forcesbehind the growth of a physiologically driven cognitive andbehavioral science. The methodologies driving this momen-tum are only going to become more and more sophisticated.The future science of consumer behavior and consumptionexperiences is inextricably linked to this future. The newscience shows some interesting throwbacks to marketingquandaries of the past: (1) how large a role do Skinnerianstimulus-response processes play in consumption behavior,and (2) is there a subliminal learning process after all (due tothe so called “priming” effect)?

For those who believe all this is too premature for anapplied behavioral science, or that this is just anothergalvanic skin response fad, here is the reality. The field of“neuroeconomics” has been quickly established, led byeconomists like Colin Cramer at Caltech. The UK’s Journalof Consumer Behavior devoted a special issue in 2008 to“neuromarketing.” And long before it is clear that there is averifiable body of knowledge here, marketing consultantsare charging into the practice of neuromarketing (notablyUK-based Neursense and Bright-House NeurostrategiesGroup of Atlanta). For example, a company called Mind-Sign Neuromarketing says:

We look at the subject brain response to your ad,game, speech, or film. We look at how well and howoften it engages the areas for attention/emotion/memory/and personal meaning. We also look at howwell it activates the brain as a whole. From this datawe can tell what your audience was thinking whileusing your software or watching your content,moment by moment, regardless of what that contentis. Were they scared or sleepy, happy or sad? Werethey even paying attention? We can show you howyour product is affecting the consumer brain evenbefore the consumer is able to say anything about it.

Additionally, an fMRI experiment using the “PepsiChallenge” by neuroscientist Read Montague (published inNeuron, October 2004), articles in Forbes, Time and the NewYorker, 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 andsystems through manipulation of matter at scales of 1–100nanometers, essentially via manipulating atoms and mole-cules. A nanometer is a billionth of a meter (the width of ahuman hair is 200,000 nanometers). In the realm below 50


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 thatwas red may now be green, metals may become translucentand thus invisible, insoluble substances may dissolve andmuch more (Montague 2004).

The U.S. National Science Foundation has labeled theimpending revolution in science as NBIC—a nanotechnologydriven convergence of nanotech, biotech (manipulation ofgenes), infotech and cognotech (cognitive). Largely unno-ticed, the application of nanotech to consumer products is wellon its way. Nano particles, nanotubes and carbon nano crystalsare being manufactured in ton quantities for commercial use.Scientists have made breakthroughs in the holy grail ofnanotech—self-assembling systems that can grow and evolvelike the human cell (NewScientist.com 2003).

The U.S. is investing big in nanotechnology. TheNational Nanotechnology Institute was created in 2001and will have disbursed $12 billion for research in the fieldthrough 2010. Hundreds of products containing nanoparticles have already reached the market—metal surfacesand paints that clean themselves when it rains; sub-miniature data storage devices (aiming to hold the Libraryof Congress in a computer the size of a sugar cube);specialty lubricants; long-mileage vehicle tires; nano-reinforced plastics for stronger automobile fenders; light-weight military armor; anti-reflective and scratch-resistantsun glasses; super-slippery ski wax; powerful tennis racketsand long-lasting tennis balls; inkjet photographic paperintended to hold an image for 100 years; efficient drug andvaccine delivery systems; anti-wrinkle cosmetic creams;and so on (Montague 2004).

NBIC promises consequences so radical that they arelikely to change the very nature of the world and humanexperiences as we know them. According to Freitas’ (1999)Nanomedicine, artificial nanodevices can be designed andprogrammed to proceed directly to our approximately12,000 taste buds and trigger any combination of desiresor taste sensations. Likewise thousands of nanodevices cantarget our 50 million odd olfactory sensors and providecomplete olfactory sensation control. Consider the scary part:nanotech portends the ultimate in targeted marketing, directly(even surreptitiously) targeting an identified individual’ssenses. It reads like science fiction, but it is very real science:

Just like bloodhounds and mosquitoes follow aquarry’s scent, airborne nanobots can be designed toidentify 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 visualand auditory hallucinations to recipients. The odor-types which can be used to target individuals may

include naturally produced scents; behavior relatedscents (due to exercise, fear reactions, sexual activity,intoxication, and the like); artificial scents (cosmetics);and taggants (messenger molecules). The airbornenanorobots can stationkeep in the vicinity of the hostpatient, navigate and avoid no-fly zones, and commu-nicate among themselves. They can also be spread fromperson to person like diseases–by direct physical contact(e.g., handshaking or sexual activity), by indiscriminatebroadcast transfers (e.g., sneezing, bleeding, sharingtools or utensils), by serendipitous anonymous contacts(e.g., doorknobs, public toilet seats, library books), or bydeliberate airborne nanorobot migrations. (Freitas 1999)

The aim of a subphenomenal marketing is to enhance theconsumption experience. But, with the lengthening shadowof NBIC, it is equally important that the discipline be in aposition to protect the consumer from insidious marketing.Regulation and regulatory norms are seriously lagging.Congress intended to create the American NanotechnologyPreparedness Center (to study nanotech’s potential societaland ethical effects) when it created the National Nanotech-nology Initiative, but apparently that part of the legislationran into trouble. Recently a coalition of consumer protec-tion groups led by the International Center for TechnologyAssessment filed a legal petition with the EPA seeking aban on consumer products (over 200 of them such as odorresistant socks, baby bottles and clothes washers) which usenanoparticles of silver as a germicide (www.icta.org; www.nanoaction.ord).

The phenomenal structure of marketing

The previous section recounted the directions of prospectivechange in the micro science of marketing. Equally powerfulchanges are occurring in the way business organization isstructured and functions. The post-industrial, verticallyintegrated, multidivisional firm is evolving into complexglobal business networks from the production end to theconsumption end.

Network theory is rapidly becoming the lingua francaof all science, from anthropology to physics (Borgattiand Li 2009). Marketing networks are superior tohierarchies in the production and exchange of knowledge.To function, networks rely on relational governanceprocesses rather than hierarchical authority or power(Achrol 1997). One stream of the literature highlights thevertical disaggregation of functions in the network and thereorganization of individual firms along horizontal syner-gies rather than vertical ones (Achrol and Kotler 1999). Itemphasizes the shift in control and coordination mecha-nisms from power-based systems to norm-based relational


http://www.icta.org

http://www.nanoaction.ord

http://www.nanoaction.ord

systems (Anderson et al. 1994; Dwyer et al. 1987; Morganand Hunt 1994) and parallels the development of relation-ship 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 andits backward outsourcing. The focal “firm” specialized inthe innovation and marketing functions. The fortunes of theleading production specialists like Flextronics and Jabilcontinue to soar.

Phase two networks involve the routinization andoutsourcing of innovation. In the last five years smalleraggressive competitors (primarily from Taiwan) havecarved away a large share of the contract manufacturingbusiness in cell phones, PDAs, laptops and digital cameras.This pushed contract manufacturers like Flextronics intotechnology development, product design and engineering.

R&D constitutes a key part of the strategic core of thefirm, guarded zealously as its primary source of sustainablecompetitive advantage. Nevertheless, even technologyleaders such as Philips, Motorola, Boeing and Eli Lillyare being forced to turn to faster and cheaper innovatorsaround the globe for significant portions of their technologyand design needs. A VP of a Taiwanese innovationcompany was quoted as saying: “Customers used toparticipate in design two or three years back. But startinglast year, many just take our product. Because of pricecompetition, they have to” (Engardio and Einhorn 2005).

Cost is one factor, but equally important are the complexityof tomorrow’s technologies and the uncertainty of success.Few firms have the knowledge resources to tackle majorinnovation on their own. Network organization is not onlyabout utilizing knowledge resources; it is about creating newknowledge. The open innovation model, as this network formhas been dubbed (Chesbrough 2003), is more effective inboth creating and applying new knowledge.

Alongside the outsourcing of these core functions there hasbeen a quiet spinning-off of many support functions, includingaccounting and human resources. HR hiring through contractsuppliers has expanded from clerical and labor to includetechnical professionals and managerial talent in areas such asmarketing. This leaves what used to be the classic “manufac-turing firm” close to becoming a pure marketing company. Arecent survey of executives by the Economic IntelligenceUnit and Anderson Consulting (Vision 2010: DesigningTomorrow’s Organization) concluded that:

The company of the future will consist of a small teamrunning its affairs from a single office. The team willbuild and use its knowledge of market demands and

customer requirements, potential suppliers and partners,and bring them together through sophisticated electroniclinks to respond quickly and painlessly to changes infashion and economic circumstance. The process ofcreating value will be set free from all unnecessaryactivities, and for that reason alone will be significantlymore efficient.

Evolution is an ongoing process. As firms search outnew sources of efficiency, their attention will inevitablyfocus on the remaining vestige of the industrial eraeconomy, the distribution system. The business environ-ment and technological possibilities are pushing networkstructures slowly but surely toward phase three. We predictthat phase three networks will invert functional disaggre-gation to forward outsourcing. Production will move asclose to consumption as possible.

The distribution component accounts for the largest shareof the final price of consumer products, and this share hasbeen growing steadily. When the Internet and e-commercearrived, many expected widespread disintermediation wouldfollow. Conventional resellers survived the threat of obsoles-cence from e-marketing. Disintermediation didn’t happen.Rather, the electronic medium became intermediated by“etailers” like Amazon and eBay. The growth of the echannelhas been slower than anticipated. In 2009 e-commerceaccounted 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 canbe delivered electronically: thus the demise of Tower Recordsand Hollywood Video, the impending demise of Blockbuster,and the rapid growth of online sales of travel and leisureproducts. But we predict the story of the 21st century is goingto 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 production-consumption networks. They represent the ultimate in thejust-in-time model. Technology is approaching the pointwhere production can be enjoined to or juxtaposed withconsumption. Leading the way is the power industry of thefuture. Distributed generation (also called on-site, dispersedor embedded generation) produces electricity from smallenergy sources—solar, wind, fuel cells—at or close to theconsumption site. A large number of commercial buildingsalready use in-house systems that produce a significantamount of their power needs. Figure 1 pictures thedifference between the conventional centralized productionsystem and the distributed generation system.

Solar and wind powered units for individual homes areavailable and growing in efficiency. The consumer market


in Europe for rooftop wind-powered systems is off to asolid start and is emerging in the U.S. In “MarketingMyopia,” Ted Levitt (1960) predicted that in the futurehomes will be powered by a small chemical fuel cell unitsitting in a closet. That is a technical reality today and nodoubt will become a commercial reality soon. Recently themedia featured the success of California-based BloomEnergy’s fuel cell that can run on natural gas or biogasand is in operation at Google, eBay, Wal-Mart, FedEx,Coca Cola, and the like. The startup anticipates it will beable to produce refrigerator-sized units for the home forabout $3,500 within the decade.

Similar distribution of production or assembly capabilitiesto wholesale and retail levels can be visualized for many kindsof products except the most technologically complex. Xerox’sBook-In-Time system, properly marketed to local retail-producers (e.g., small printing firms, Kinkos), could haveseriously eroded the position of the giant publishing houses andretail chains in the book business. Now Amazon’s Kindle andApple’s iPad threaten to do awaywith printedmedia altogether.

The same technologies that facilitated the emergence ofgiant production specialists in phase one networks lie behindthe opportunity for distributed micro production systems.Small computer controlled automated manufacturing orassembly systems can be designed to operate at the level oflocal markets. In concept, the distributed facilities are linked toa core firm (a brand marketing firm or, in some cases, atechnology specialist) via an information system that providesthe technical information and controls the computers that runthe distributed plants. The operations will likely be franchisedto smaller local firms, retailers or wholesalers in the industry.In some cases, the distributed systems may be decentralizedall the way to the ultimate customer and be located oncustomer premises. Obviously, the economics upon which

such systems are contingent is that the efficiencies ofdecentralization are greater than its cost. Producing to demandat the point of demand offers efficiencies in inventories andlogistics and reduces the uncertainties of innovation. Theseadvantages become bigger and bigger as the share ofdistribution cost becomes disproportionately large and themarketplace becomes the globe.

The previous section discussed how nanotechnology ispoised to dramatically alter consumer experiences. Thepotential of the NBIC revolution to impact manufacturinggoes beyond our comprehension today. Today everything,down to the tiniest micro-circuit, is fashioned by hammering,melting, squeezing and sculpting chunks of matter, somethinglike force-herding masses of molecules into a desired form. Incontrast, nanotech construction or molecular assemblyarranges individual atoms or molecules one at a time (in theideal scenario they will self-assemble like living cells) into thedesired configuration. Instead of cutting trees to make a table, atable will be “grown” by swarms of nanorobots that can beprogrammed to fashion any kind of molecule and constructany kind of product (see Bonsor 2007; Drexler 1992;Feynman 1960; Montague 2004). How far removed is thisreality? In January 2011 the Department of Defense publisheda request for proposals to develop micro robotic fabricationmachines. STTR Solicitation 2011.a states: “Desktop manu-facturing is the ability to use a personal computer to drive aminiature fabrication station for the creation of new objectswith complex geometry ... This topic focuses on a particularapproach of using a coordinated and distributed swarm ofmicrorobots that are capable of handling and manipulatingnano- and micron-scale building blocks in the process ofsynthesizing novel materials and structures.”

What a transformation from Henry Ford’s famedintegrated factory on 2,000 acres along the Rouge River,

Fig. 1 Conventional and distributed power generation systems.Source: Maribu, Karl Magnus (2006), Modeling the Economics andMarket Adoption of Distributed Power Generation, Doctoral Thesis,

Norwegian University of Science and Technology, Department ofElectrical Power Engineering


Michigan, with its own blast furnace, steel mill, glass factory,and more than 90 miles of railroad track and conveyor belts torun the production lines. The manufacturing machines (nano-robots) of the future may well be so small that thousands ofthem will fit in the period at the end of this sentence (Bonsor2007). It is not far fetched to go a step further and imagine ageneral purpose production machine in every consumer’sbasement that can, with the right software and programming(accessed online), manufacture anything a consumer wantsfrom a “jar” of commodity atoms and molecules. Everythingin the physical world is simply the result of a particulararrangement of atoms. Arrange them one way and you havesteel, arrange them another way you have corn. The ultimateoutsourcing of production and distribution will have takenplace, and a true era of consumer co-production and co-creation will have arrived (Jaworski and Kohli 2006).

Consumption networks

Today when we speak of consumption networks we thinkmostly of the consumer communities organized by marketingfirms. Firms seeking to develop enduring relationship tieswith their consumers do so by creating forums for consumerinteraction, by developing extensive databases on the con-sumers and by targeting customized communications andoffers to them. This is the classic relationship marketingmodel. But firm-driven vertical consumer networks will likelyerode in the near future, giving way to a bottom-up marketingphenomenon shaped by horizontal consumer networks.

The Internet has created a vast channel of horizontalinformation flows, word-of-mouth and technical advice fromuser communities and websites in practically every class ofconsumption. There is probably no area of consumer interesttoday that does not have a dedicated chat group, blog, orinteractive forum created by an enthusiast or a group. It isfrequently said that power is shifting from media institutionsto consumer communities and firms are taking note. Thisexplains the rapid growth of online brand monitoring servicesled by market leaders Nielsen BuzzMetrics and Cymfony.These firms specialize in automatic searching of text-basedkeywords 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 researchfunds on online research (see Kim [2006] for a review).

Consumer communities hold the power to usher in abottom-up market model to rival the top-down manufactur-ing firm–controlled information supply (the so-called“prescription model”) with important effects on concentra-tion and heterogeneity of preferences (Benghozi and Paris2005; Gensollen 2005; both cited in Curien et al. 2005).The sociology of consumer communities (Smith and Kollock1999) will be important in understanding consumption in thefuture. A community is a “network of social relations

marked by mutuality and emotional bonds” (Bender 1978,p. 7). Brand communities are nurtured by avid enthusiastsand fans of a brand. They perpetuate sentiments of belongingor “consciousness of kind” (Gusfield 1978). Because this is aspontaneous consciousness and is not motivated by pecuni-ary interests, it creates a fierce in-group loyalty, causingfeelings of betrayal and animosity toward members whodefect to other brands (Muniz and O’Guinn 2001).

Communities vary greatly in motivations and resources.There are experience-sharing, brand rating and user commu-nities that make consumer choice easier for experience goods,epistemic communities (knowledge sharing communities)which disseminate knowledge about complex goods andsubjects and file-sharing communities of peer-to-peer networksthat exchange cultural goods (Curien et al. 2005). Consumercommunities, with the exception of brand communities, areparticularly sensitive and inhospitable to individuals who areseen as promoting particular products or companies.

Consumer communities are social networks and developcomplex organic properties but are inherently lacking in formalstructure and mechanisms. The networks are fluid andmembership is transient. Communities can form and reform anumber of times among leaders who come and go. They areorganized by mutuality, tradition, trust, reputation and normsof behavior. Trust is one of the most important variables in thesuccess of a community and often the one most threatened byopportunism. Consumer communities are a public good andare subject to the “tragedy of the commons.” Individualsunder-invest in a public good because its non-excludability andnon-rivalry provide incentives to free riders who benefit fromthe shared resource without contributing to it (Curien et al.2005; Varian 2004). Curien et al. (2005) call it “the curse ofunder participation, seemingly inherent to the management ofshared resources.” The 2009 Nobel laureate in economics,Elinor Ostrom (Ostrom 1990; Ostrom et al. 1994) argues thatself governing systems are possible for managing commonproperties and interests.

Should consumer networks become embedded with firmnetworks in a distributed production-consumption system, theclash of values, interests, dependencies and vulnerabilities willspawn a socio-economic environment the likes of which cannotbe fully visualized today. An example of the clash of consumerand producer networks occurred in February 2004 whenAmazon.com mistakenly disclosed the real identities of someof its book reviewers. A sizable proportion of those reviewerswere the books’ own publishers, authors and even competitors.

The network framework will need to evolve to provide astructure for studying exchange as a social system. In that lineof thought, there is an even more encompassing dimension tofuturemarketing that reaches beyond economically empowerednetworks of consumers, marketers and producers. It highlightsthe social externalities of consumption and the well-being ofhumankind. We call this the marketing superphenomenon.


The superphenomena of marketing

We paraphrase Heinrich Kluver in his introduction toHayek’s The Sensory Order (Hayek 1952):

It has been said that a philosopher is a man who has abad conscience whenever he hears the word philosophy.Nowadays [marketing] scholars no longer seem todevelop feelings of guilt when they hear the word[marketing]. This state of affairs certainly cannot beaccounted for by believing that the field of [marketing]has acquired the status of a science.

Kluver was talking about psychologists. But is it time formarketing scholars to develop a guilt complex over ourpreoccupation with the managerial interests of marketing?Marketing ethicist George Brenkert (2008) says it best:marketing does not simply surround us, it envelops us; it isin part how a society defines itself and its treatment of itsmembers. A person might think that such a pervasiveactivity would be the object of widespread moral agreementor that it is at least subject to well developed norms ofsocial behavior and accountability.

Notwithstanding the tireless work of a dedicated cadre ofresearchers in public policy, non-profit, environment andsocial marketing fields, marketing has not embraced aworldview commensurate to its vanguard role in the socialand economic well-being of nations.

Ultimately marketing is about more than individual firmsand their consumers; it is about the economic, social andecological sum of these contributions. The U.S. consumer-driven economy (consumer spending accounts for 70percent of GDP) has proved superior in creating wealth,raising standards of living and providing opportunity. Butthe consumer economy has created excesses, waste andharmful side effects. How much marketing-at-any-cost cansociety tolerate? The current crisis in financial and realestate markets is a product of such excesses on the part offirms and consumers.

Just as economists are engaged with stimulating thegrowth of the economy as much as they are with controllingits malfunctions (inflation, recession, unemployment, pov-erty), marketing is responsible for the functions andmalfunctions of consumption. Marketing science shouldbe about creating a healthy consumption environment aswell as about protecting the consumer from overconsump-tion. There are too many facets to the superphenomena ofmarketing science to be covered in an article, so we focuson two very large and pressing facets: the concept of asustainable marketing ideology and the dark side of themiddle-class prosperity created by consumption economies,i.e., the dark face of poverty. There are two powerful forcesdriving our attention on these two areas—the carrying

capacity of the environment and the consumption capacityof developed economies.

The sustainable marketing concept

The three decades of unprecedented prosperity followingthe Second World War swept companies along a path ofrelentless growth to become multi-product, multi-market,multi-divisional firms. Despite concerns voiced by promi-nent voices like Rachel Carson (Silent Spring, 1962), ErnestF. Schumacher (Small is Beautiful, 1973) and the Club ofRome report (Limits to Growth, 1972), the growth modelremained the dominant logic of the corporation. It is notuntil the late 1980s that we see the first signs of maturingmarkets and overconsumption beginning to slow corpora-tions and right size them.

Sustainable marketing is founded on the key premise thatsociety and marketing are poised at a fundamental transitionfrom an anthropocentric (human centered) paradigm to abiocentric (nature centered) one (Fuller 1999, p. 12). Theimperative for sustainable marketing can be characterized bytwo types of carrying capacity—market capacity andresource capacity. Market capacity concerns whether thepresent consumption level in a society is too high to permitthe next generation to achieve the same consumption level.More and more economies are operating near their marketcapacity limits; Europe, the U.S., Japan and the Five Tigersare all bouncing near the limits. Operating at near marketcapacity is a recipe for marketing excesses. The resultingcrises are due to the marketing shadow—overconsumption—whether it is oversold currencies, financial instruments, realestate, business opportunities or dreams.

On the other side of the consumption capacity problem isthe resource capacity problem. In nature populations growfaster than their stabilizing forces (such as predation) whenthere is a surplus of supporting resources. In the days whenfood was the limiting factor, Thomas Malthus postulatedthat the human population was growing at a faster rate thanthe food supply and this would lead to mass starvation.Now there is even more at stake. The ecological con-sequences of a mass consumption society range fromrapidly depleting scarce resources, environmental degrada-tion due to extractive and manufacturing processes,dangerous pollutants that persist in the environment,emissions and waste due to logistics and distribution, andemissions, waste and waste products due to the consump-tion and post consumption processes. Together theythreaten to make planet Earth uninhabitable to manyspecies, including humankind.

Approaching the limit of carrying capacity, small displace-ments cause large oscillations. To illustrate the argument, theinstability in the system as it approaches carrying capacity isdepicted in Fig. 2. The carrying capacity K is depicted as an


increasing function over time to allow for growth in resourcesdue to new discoveries and technology. It may indeed becharacterized by periodic discontinuities or “steps” (forexample, corresponding to revolutions in mechanization andpolymer chemistry in the past, digitalization and biotechnol-ogy in the present, and coming soon, nanotechnology). Evenwhen the function steps up, the speed with which businessesrespond globally to exploit the opportunities is such that re-convergence is a matter of a few years (not decades like itwas with mechanization and the industrial revolution).

The theoretical impact curve is depicted here as the well-known Ehrlich equation I=PAT (where P is population, A percapita affluence, and T the damaging side effects oftechnology per unit of consumption). If overshoot isaccompanied by irreversible damage to carrying capacity,the result could be catastrophic extinction of species (called rselection). K selection, on the other hand, means a stableequilibrium population, but a turbulent equilibrium due tohuman tendencies. Hence the recurring “bubbles.” The impactfunction and its variants have been empirically tested (e.g.,Chertow 2001), and a number of alternative measurements arealso being used like ecological footprint, critical naturalcapital, materials flow and economic throughput analyses.

Marketing scholars are cognizant of the imperative for a newand probably radical reformulation of its fundamental philos-ophy, its operational premises and the heuristics that are used tomake marketing decisions. But what are the conceptualunderpinnings of such a worldview? How can we constructan orderly set of criteria that can reverse or at least slow downthe operational mindset and theorems that have guidedmarketing’s activities for over a half century? Sustainablemarketing starts where marketing starts, at the very beginningof the product development cycle. It ends where marketingends, 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 toface: what it takes, what it makes, and what it wastes.” These

three principles can be laid across marketing’s venerableplanning framework, the product life cycle, to create itsshadow life cycle—see Fig. 3. At the bottom of the figure arelisted the kinds of questions that will need to be answered aspart of marketing decision making. So far marketing has takena passive and reactive position vis-à-vis sustainability—bydeveloping “alternatives” (often perceived as more expensiveand less effective) for the ecology-sensitive consumersamong, for example, the LOHAS segments. In contrast weemphasize a new philosophy for firms to proactively:

(1) communicate the harmful side-effects of wastefulconsumption,

(2) grow the segments of environmentally consciousconsumers, by developing superior products at stan-dard market prices, and

(3) demarket/countermarket certain products, technologies,and marginal consumer segments (e.g., consumers whocannot afford expensive homes).

Currently, in their decision calculus, companies have toworry only about the costs of operations they undertake (andin some cases, the costs of foregone opportunities) relative toprojected returns. Society bears the cost of environmentalimpact, but there is a growing accountability to agencies likethe EPA that can require companies to clean up theirenvironmental messes and a growing movement around the“polluter pays” principle. The BP oil spill tragedy in the Gulfis a stark case in point. In the not too distant future firms willbe required to cost-in their nature costs of operation. It is anopportune time for the discipline to be developing environ-mental cost accounting models that can become an integralpart of its decision calculus.

In Fig. 4, three types of hypothetical nature cost curveshave been overlaid on the product life cycle. Curve A maybe a company in the petroleum industry, with a bipolardistribution depicting high nature costs during exploration andrefining and during the consumption (combustion) of its

Fig. 2 Carrying capacity


products. Curve B could be a firm in the transport industry(automobiles, airlines, trucking, shipping) where the productshave a long consumption life span. Curve C could be a firmwith a product that contains persistent organic or chemicalpollutants (like DDT, lead, mercury, nuclear waste) and leaveslasting long-term damage in the ecology at a growing cost ofrecovery. There is a pressing need for:

(1) developing the accounting concepts for measuringsuch nature cost curves,

(2) defining the joint space of environmental and marketingdecisions over the product life cycle, and

(3) a cap-and-trade framework for consumption relatedenvironmental effects.

Sustainable marketing almost inevitably implies a slowdown in sales growth and product obsolescence cycles, andin some cases, even shrinkage of the market. Assuming thenthat developed economies are going to grow slowly close to

market saturation and are able to rein in their consumptioncapacity at some stable level just below carrying capacity,what does that mean for the global economy and the growthopportunities for business? That is where the BOP, the billionsof people at the base of the pyramid that the consumer societyleft behind, enters the equation.

Base of the pyramid marketing

The economic miracle of the 20th century is far less amazingwhen it is considered from its underside. Over three billionpeople, nearly half the world’s population, live on less than U.S. $2.50 (purchasing power parity) a day; using the standardof $10 a day for an affluent country like the U.S., puts maybeabout ninety-five percent of humanity in poverty (Ravallion etal. 2008). The share of global income of the poorest fortypercent of the world population was a mere five percent in2005, whereas the wealthiest twenty percent receivedseventy-five percent of it (Watkins et al. 2005).

Technology Component Product Product Product WasteDevelopment Production Manufacturing Distribution Consumption RecycleSearch for Scarce, harmful materials Excessive consumption scarce materialalternative Footprint, emissions, waste Slowing “planned obsolescence”technologies Emissions, waste

Health side effects of consumption

Fig. 3 Ecology of sustainableproduct life cycles

Time

Sales Revenue/ Nature Costs ($)

ProductDevelopment

Introduction Growth Maturity Decline

Fig. 4 Nature costs and theproduct life cycle


It is perplexing—why one of the oldest problems plaguinghumankind persists with few solutions in sight? Some arguethat it is due to a lack of determined effort by governments andthe community of nations Only a few nations achieve thesmall 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 avast transfer of money from the wealthy to the poor nations(Sachs 2005). But directing more and more money to theproblem will be only as effective as the development modelsin use. The theories and development tools used to date havehad an impact (Watkins et al. 2005), but it seemsinsignificant in the face of the size and gravity of theproblem. It is possible that there are more effectivedevelopment models that can be designed based on thetheories and methodologies of business management.

Around the turn of the century Nobel Laureate in economicsAmartya Sen proposed the concept of “empowerment,”arguing that economic development is fundamentally “theexpansion of individual freedom of choice” (Sen 1999). Heinspired a shift toward empowering the poor as the key to alasting end to poverty. Under Wolfenshon the World Bankadopted empowerment as its primary strategy in “attackingpoverty” (Narayan 2002). But one cannot simply jump toempowerment. Premature empowerment can be destabilizing,as we learned from the Soviet Union’s instant transition to amarket economy comparedwith the gradual approach adoptedby China.

After decades of programs designed around developmenttheories proposed by economists, sociologists and anthropo-logists, there is a new movement in the field—developmentapproaches proposed by scholars in business schools. Twoevents acted as catalysts. One is the late C. K. Prahalad’sinfluential book Fortune at the Bottom of the Pyramid(Prahalad 2005). The second is the award of the 2006 NobelPeace Prize to Muhammad Yunus. Business Week namedYunus (founder of the Grameen Bank and modern micro-finance), among the greatest entrepreneurs of all time,joining Bill Gates, Steve Jobs, Henry Ford, Thomas Edison,John Rockefeller and the like. These high visibility influen-ces have drawn the attention of large multinational corpo-rations (MNCs) and venture capitalists to the problems andpotential of the BOP.

Prahalad’s model is based on aggregating the demand ofthe BOP and equipping poor people with the microfinanceto start and run businesses. According to Prahalad thepurchasing power of the BOP collectively amounts to $8billion per day, making them a multi-trillion dollar annualmarket for the world’s products. Prahalad recounts manybusiness success stories such as Hindustan Lever in India

and Casas Bahia in Brazil. An especially arresting exampleis about cell phones in Africa. A single cell phone in a Sub-Saharan region can create a business opportunity for a smallreseller of calls by the minute. In several African countriescell phone sales are growing 150 percent a year, far inexcess of saturated Western markets. Prahalad’s calcula-tions and assumptions have been questioned by Karnani(2009), but we emphasize that a purely commercial solutionignores how vulnerable the poor consumer is to exploitation(Chakravarti 2006). As narrated in a Business Week featurestory (Grow and Epstein 2007), commercial abuse of thepoor consumer is rampant even in a sophisticated andregulated society like the U.S.

An alternative model has been developed by Kotler andLee (2009) based on the social marketing model. Themodel is equally relevant to profit minded commercialfirms, nonprofit minded NGOs and charitable trusts andpublic service minded government agencies. The theoriesand methodologies of marketing can greatly enrich thequality and effectiveness of ongoing programs. For exam-ple, the techniques for market segmentation, consumeranalysis, and targeting can immediately improve the qualityof program design and delivery. Almost all currentapproaches use census-style “mass market” methods ofaggregating the poor and broadcasting aid programs to themass segments. To marketers it is evident that these masssegments can be usefully analyzed based on differences inneeds, means, sub cultures, motivations, literacy, lifecycles, social class, benefits and so on. Even the poor havedistinct “existence styles.”

In this paper we offer the elements of a different marketingmodel for tackling poverty. It is based on two core ideas. Thefirst is an adaptation of one of marketing’s oldest theoriesadopted from sociology—Maslow’s venerable hierarchy ofneeds (Maslow 1943). It is a time worn tool in marketingpedagogy and probably largely irrelevant in a developedsociety. But it is a useful framework to order and align theproblems and solutions of subeconomic communities, issueswhich are leap-frogged by Sen’s empowerment model andPrahalad’s MNC business model. The second is theapplication of the concept of marketing networks and thedistributed production-consumption model discussed earlier.

The needs-means hierarchy

Maslow’s hierarchy is well known to marketing—a person’smotivations progress from satisfying physiological needs, tosafety needs, to the social needs for love and belonging, to theneed to be recognized and esteemed among society, andultimately to the need to actualize oneself. Once a need level issatisfied it ceases to be a motivating factor, and the personswitches to pursuing the next higher order need. Theinterpretation of each need is likely to be different for people


http://www.wikipedia

http://www.wikipedia

raising themselves out of abject poverty. Most important, theneed hierarchy of the poor has to be understood in the contextof a critical parallel hierarchy—a hierarchy of means. This isdepicted as an inverted pyramid in Fig. 5, implying anexpanding horizon of means.

One reason for the meager results of global aid programs isthat they target multiple levels of the hierarchy simultaneous-ly, maybe even indiscriminately. Many are missing theirtargets and the motivations of their targets. Instead of creatinga harmony of ends and means they are creating a muddle ofinefficiency and dependency. Marketing logic teaches us tostart by analyzing the unique needs of specific groups of thepoor, and then develop products, services, solutions, distribu-tion channels and communication programs reflecting theirunique circumstances. Needed are instrumental measures forsegmenting the poor, and targeting and positioning need-solutions and means to them.

Figure 5 highlights that a comprehensive povertyalleviation campaign needs to integrate two parallel worldsof the poor. On the one hand it should design interventionstrategies that match the subjects’ movement along the needhierarchy. On the other it must create the wherewithal andpathways for the subjects to navigate themselves along anopportunity hierarchy such that their means-motivationsmatch their needs-motivations. Thus the second integralcomponent of our model is applying the concepts ofnetworks and distribution channels to operationalize theneeds-means hierarchy in a way that the economic benefitsare shared among the poor and become the means by whichthey can satisfy their needs. The franchising model can beapplied to creating distributed production-consumptionnetworks in ways that foster economic opportunities.

Many articles have been written about the need to re-engineer products and packaging for the poor markets. Butthe game-changing innovation may be reengineeringproduction itself. Flooding the markets of the poor withproducts manufactured in modern plants in distant cities

and countries is not a self-sustaining solution. Poverty has alocal face. More value-added must be located near valueconsumption. Automated small scale production distributedas close to the consuming populations as possible is thesolution. Only then can the needs-means hierarchy becomeself-generating and self-sustaining.

The distributed production-consumption model

Distributed production is the opposite of the mass productionfactories of the 20th century; it is the anti-Flextronics. It wouldbe terribly cost ineffective if it wasn’t for the revolution inautomated, computerized manufacturing. It is now conceiv-able to develop village-level automated micro productionsystems linked to the parent company via the Internet andprogrammed to assemble modern quality products in smallquantities on demand. One does not even need to wait fornanotechnology to make this happen. Such systems wouldtake just-in-time from production all the way to consumption,and eliminate much of the costs of marketing, logistics anddistribution, which constitute the largest chunk of thedelivered price of many consumer goods.

An excellent example that this can be done is offered by theNGO KickStart. This NGO’s approach is to developrudimentary mechanical products that are directly connectedto improving the productivity and income of rural popula-tions in impoverished areas of Kenya, Tanzania and Mali,with plans to extend to West Africa, India, Haiti andKyrgyzstan. It sees its mission in the spirit of the Chineseproverb “Give a man a fish and he will eat for a day; teach aman to fish and he will eat for the rest of his life.” KickStartdeveloped a leg-powered irrigation pump that allowed poorfarmers to move from subsistence farming to growing cashcrops like fruits and vegetables. It developed a hand press forprocessing oil seeds into higher value products like cookingoil and oilseed cake. It developed a technology for makingcheap building blocks for constructing homes. It produces

Fig. 5 The needs-meanshierarchies of subeconomiccommunities


the products locally and markets them through ruralchannels, maximizing as much downstream employmentand profits as it can. The NGO claims to have created 88,600enterprises generating $88.7 million in profits and wagesannually, and moved 439,000 people out of poverty foreverat a cost of $60 per person (www.kickstart.org).

The managerial model for distributed networks is thefranchising model. The MNC that tries to set up its owndistributed production and distribution network will not belocalized enough to adapt to the structure and culture ofpoverty as it exists locally. It will not transfer enough of thewealth creation process to impact the means creation processlocally. It will not distribute enough motivational forcesamong the populations to make the model self-sustaining.

Distributed production-consumption networks must beorganized around the need and resource structure of poorcommunities, not around downsized need structures of thewealthy. The evolution of the need structure and itssatisfaction should be gradual and not driven by visions ofleap-frogging. No doubt there are areas such as communica-tions, entertainment and utilities where leap-frogging isinevitable, but pushing consumption across a broad spectrumcan 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 isleap-frogging the means hierarchy and may atrophy it.

The product-market composition of distributed networksis a function of the natural resources and livelihoodcharacterizing a particular community. Urban poor, for

example, most often provide manual labor or householdservices to the wealthy—services such as laundry, land-scaping, cleaning and cooking. Rural communities continueto be predominantly agricultural and pastoral. If the villagecommunity is large enough, it will also support the basictrades like carpentry, masonry and shop keeping. Sustain-able production-consumption networks are those thatdirectly engage the predominant indigenous sources oflivelihood in a community.

Figure 6 depicts typical rural livelihood clusters. At themost basic level is manual labor. This is literally manuallabor, with people working with their hands, usingrudimentary tools and carrying heavy materials around ontheir heads or backs. They do not even have the benefit of awheel barrow. In the semi-skilled building trades, masonsstill work with a hammer, chisel, trowel and a mixing pan.Powered tools just do not exist. A local production systemfor assembling modern mechanical tools and simplepowered work tools and power generators, supported by amicrofinance system and a training system, would have aprofound impact on the productivity, income and quality ofwork-life for the common rural laborer. Indeed, focusing onthe needs of the rural middle class has created the anomalythat one can spot a number of farm tractors standing in ruralvillages, but no power tillers or mechanized hand imple-ments for alleviating the toil of the menial farm worker.

Distributed production franchises can be designed totarget each employment cluster in Fig. 6. The opportunitiesinherent in each are self evident. Power failures are chronicin the villages, if they have power to begin with. Cooking

FranchisorMNCs

LeatherGoods

Franchises

Natural Gas

Electric

Bio Fuels

LeatherPrep

Fruits &Vegetables

MeatMilk

StapleGrains

CommunicationsPhone, TV

Sanitation

MicrofinanceBanks

Tailoring

Building Trades

Carpentry

Labor

ShopKeeping

Repairs

UtilityProductionDistributionFranchises

LeatherGoods

Franchises

PoweredTrade -ToolsFranchises

ProcessedFood

Franchises

Fig. 6 Distributed production-consumption networks


http://www.kickstart.org

gas supply is sporadic and comes through agencies in largercities. Bio fuel opportunities abound but are not fullyexploited because they tend to be government-sponsoredinitiatives which favor the middle class and are notentrepreneurially embedded in the BOP. In designingdistributed networks it is important not to lose sight of theproduction-consumption synergy. Training the consumer onhow to optimize the use and productivity of the products,adapting the product to his/her needs and providing themeans through leasing or microfinance are the keys to asustainable needs-means virtuous cycle of development.

Understanding how the marketing model can be adaptedand applied to raising the consumption capacity and qualityof life of the world’s 4 billion consumers in the BOP in asustainable way is vital to the future of globalization andworld prosperity. The developed world will benefit from thedegree of poverty alleviation in the developing world. Asthe poor acquire purchasing power, they provide the“missing” market that the developed world needs to supplyfull employment to its own citizens.

Yet the growth of the poor world’s purchasing powerwill pose the question once again of limited naturalresources and increasing pollution and climate damage.We cannot avoid the need to strike some balance in thedistribution of the world’s resources among the competingclaimants in different countries and social classes. Not onlymust the present generation arrive at an acceptable balancein the consumption of the world’s products and resources,but it must also make sure that current consumption levelsdo not prevent the next and future generations to inherit thesame capacities as this generation.

The marketing discipline must take a prominent positionin fashioning this understanding. Without a body ofknowledge that can address the social problems of theworld, marketing will surely lack the philosophical direc-tion and stature it needs heading into a future rife withglobal, economic, social and individual opportunities, butalso with conflicts of interest.

Conclusion

This has been a far ranging discussion of marketing’s futurepossibilities. Marketing is confronted with a Kuhnianparadigm shift, a transformation like nothing before. Theprominent features of the shift are consumer experiences,networks and a macro domain spanning the globalcommons.

Consumers experience products and services via theirsenses. Our understanding of sensory experiences is fastbecoming a neurophysiological science. The growing impactof digitization and virtual media considerably expand thescope and impact of sensory satisfactions. Approaching is a

nanotech driven NBIC phenomenology, a surreal world ofquantum physics and fantasy experiences far exceedingvirtual reality. To cope, marketing will need to develop avastly 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 thedays of vertical integration. The phenomena of marketing arebeing distributed between consumption networks, marketingnetworks, innovation networks and production networks. Theday is not far when micro production systems that produce todemand and are located close to or in the place ofconsumption can be developed. Network organization isevolving 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 consump-tion bases are racing ahead to economic prosperity. Amore prosperous world magnifies the side effects ofconsumption societies on the ecology and resources ofthe world. At the same time large sections of the worldpopulation languish on the sidelines. Economic theorybased models for alleviating poverty have had marginalimpacts. It is an opportune time, an imperative time, formarketing to step forward with its model for a sustainableconsumer society and base of the pyramid marketing.

What does the new marketing horizon portend for keymarketing stakeholders—management, scholarship and publicpolicy? For managers we emphasize the following thoughts:

(1) Managers need to understand the nature and theory ofnetwork organization. What are the various forms ofnetworks and the market and technology conditionswhich favor one type over others; the economics ofnetwork exchanges and the distribution of functions,risks and rewards; the governance structures and theorganization of control, coordination and relationships;and looking ahead, what will be the nature ofdecentralized production-consumption in their industry?

(2) There is a new consumption philosophy of customercare. Customer care means acting on behalf of thecustomer and his/her long-term interests. The focalfirm’s primary function in the network is marketingand branding, and its primary role is to act as the agentof the consumer. This may mean demarketing andcountermarketing as often as it means marketing.

(3) Growth is not a panacea in the new marketing. Forgrowth firms will increasingly look to lower middleand BOP markets. Micro marketing and distributedproduction models will be prominent, and the globalstrategies of firms like Nokia and Lever Brothers willbe carefully emulated.

(4) The new marketing will demand a new cost accountingfeaturing nature costing. Firms will need to be active


change agents in industry groups and government todevelop uniform conventions for measuring nature costsand incorporating them in delivered price to the consumer.

(5) The decision calculus will become further complicatedby serious intangible considerations. The possibilitiesfor stealth marketing and consumer manipulationposed by the NBIC revolution, demands a commit-ment to establishing high ethical and moral managerialvalues. For this too, firms will need to be proactivelyengaged with industry groups and regulators.

What about marketing science? All of the five forcesaffecting marketing management greatly expand thescope of marketing scholarship. We see an alreadybursting tool box of theories, areas of application, andcomplex methodologies, becoming far more exacting indetail and rigor. To be a skilled consumer researcher maymean one has to be half a neurophysiologist with expertise in,for example, fMRI besides the latest in research design andstatistical method. Marketing scholars will need educationalbackgrounds in marketing on top of education in special fieldsof science such as neurophysiology, nanotechnology andenvironmental engineering. No doubt there will be anincreasingly specialized academy. But marketing scholarsmay also need a new philosophical orientation, one which istied to the well-being of the consumer and society over thewell-being of marketing management.

Last, public policy. The implications of nanotechnologyand a threatened ecology greatly elevate the stakes of publicpolicy in marketing. Despite political currents to the contrary,we dare say the old laissez-faire capitalism is approaching itsend. Modern markets are highly concentrated andinterconnected in networks of global dependencies. They barelittle resemblance to Adam Smith’s competitive markets. Themeltdown of the financial system in the U.S. and the hugeamounts of public money required to save private firms fromcollapse have many scholars talking about the imperative of anew capitalism (variously called conscious capitalism, socialcapitalism and so on). This is compounded many times overby the potential for invasive consumer technologies aroundthe corner. One can expect a new kind of regulatoryenvironment that struggles to preserve market behavior andincentives amidst more closely monitored social performanceand obligations. One can expect a regulatory regime moreclosely engaged with industry groups to develop self-regulation norms and mechanisms (Achrol and Gundlach2011) but also demand a clear responsibility for amelioratingdamage to consumers and the environment.

There is an Aldous Huxley brave new world awaitinghumankind in the not too distant future. It will require braveconsumers to live in it and brave marketing scholars tounderstand it. The side effects and fallout of a neuro-mapped and nanotech invaded world of consumption are

hard to imagine. Are marketing scholars prepared tocontribute to the new social consciousness required toguide marketing practices and husband natural resources?In the millennial shift, will marketing develop the scholar-ship and methodologies to be biological and socialscientists and not just management engineers? We end thisarticle with this sentiment: one meaning of “millennium” isa hoped-for period of joy, serenity, prosperity, and justice.

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Kotler- The Frontiers of the Marketing Paradigm in the Third Millenium 2012

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