This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Recent Economic Changes in the United States, Volumes 1 and 2 Volume Author/Editor: Committee on Recent Economic Changes of the President's Conference on Unemployment Volume Publisher: NBER Volume ISBN: 0-87014-012-4 Volume URL: http://www.nber.org/books/comm29-1 Publication Date: 1929 Chapter Title: Marketing Chapter Author: Melvin T. Copeland Chapter URL: http://www.nber.org/chapters/c4959 Chapter pages in book: (p. 321 - 424) CHAPTER V MARKETING MELVIN T. COPELAND In the marketing field, the changes which have occurred since 1922 have been fully as notable as the changes in most other types of business activity, and of as great significance to the community.In order to keep the subject within manageable proportions for this survey, the .topics selected for concentrated study, on the ground that they are of particular significance or of especial interest, are as follows: changes in demand, changes in retail trading areas, hand-to-mouth buying, changes in dis- tribution, co-operative marketing, installment selling, and advertising. As the facts brought out in the analyses of these various topics will show, there have been numerous cross-currents and counter-currents among the marketing influences at work.While these conflicting influ- ences have benefited some industries and trades, they have reacted adversely upon other types of business.The purpose of this chapter is to show, so far as possible, the changes that have occurred and their relation to the general economic structure of the country. I. CHANGES IN DEMAND During the period since 1922, changes in demand have been one of the chief marketing developments.'As a consequence of the World War and of the boom preceding the crisis of 1920, various cakes-of-custom were broken.Old buying habits were changed and consumers subsequently manifested receptivity to new types of merchandise without all the customary delay and diffidence.New tastes and new buying habits developed more rapidly and more extensively than usually is the case under normal conditions.Wages did not decline at anything like the rate at which prices fell after 1920; consequently, buying power was available among large numbers of consumers to make the new demands effective.The merchandising imagination of some energetic manu- facturers had been stimulated by the experiences of 1914 to 1920, with the result that they proceeded expeditiously to take advantage of consumers' receptivity.In numerous industries, furthermore, producing capacity was awaiting opportunity for utilization which furnished a strong instandards of living, which constitute a major type of changes in demand, is given in Chap. 1. Consumption and the Standard of Living. 32! 322 RECENT ECONOMIC CHANGES tive to the exercise of merchandising imagination.The changes in demand during the last ten years, therefore, arose broadly from the offer- ings of new types of products, of improved types of old products, changes in the tastes and desires of consumers, increased purchasing power, and changes in the "tempo" of living. These changes in demand brought business activity and prosperity to some industries and to some companies.They brought hardship and adversity to other industries or to individual companies.Any marked change in the quantity of merchandise of a particular sort that is desired, or in the character of the demand for the products of one industry, almost invariably has ramifications which are difficult to foresee and which are sometimes impossible to counteract.Herein is found one of the causes for the mixed conditions in American industry from 1922 to 1928, some industries manifesting great prosperity, others suffering from, adversity. New Commodities—Radio.—In theenumerationof changes in demand which occurred duriiig the period covered by this survey, radio sets furnish the outstanding example of a new type of merchandise placed on the market with an almost phenomenally rapid increase in demand. The influences of this new medium of communication, furthermore, ramify widely.For the farmers, for example, the radio is not only furnishing news and crop information much more quickly than it hitherto has been available, but is also helping further to break down the differ- ences between the wants and interests of the urban and the rural popula- tion.It is tending to make the market for various types of merchandise more homogeneous, since it increases the farmers' receptivity for, and even insistence on, merchandise' similar to that bought by urban consumers. A totally different quarter in which the radio is almost certain to exert an influence, of unforeseen significance, is in such districts as the lower East Side of New York City.On the roof of practically every tenement house on the lower East Side numerous radio antennae are in evidence, thus indicating that this new means of. communication is already exten- sively installed in homes that so often have been looked upon as being somewhat impervious to the rapid spread of new ideas.The socializing influence and the possible effects of such a' development on the standards of living of large numbers of consumers are subjects for interesting speculation. The demand for radio sets spread within a few years from the homes of the well-to-do, through the middle-class urban community, to the farmers, in one direction, and to the homes of the tenement dwellers, in another. This spreading of demand resulted in a large volume of sales of radio equipment.Further than that, the use of radio equipment had an effect upon the demand for other types of commodities to which attention was called in radio broadcasting. MARKETING 323 Airplanes.—Another new commodity which came to have commercial significance after 1920 was the airplane.By 1928, the volume of produc- tion of airplanes had not become sufficient to have a marked effect upon general business activity, nor had the influence of the airplane as a means of transportation then exerted a strong influence on commerce.Never- theless, the industry was started during this period on a commercial basis and a demand was manifested for airplanes for commercial purposes not only for transportation of mail and the public conveyance of passen- gers, but also for private use by corporations in the conduct of their affairs. Automobiles.—The period after 1920 also was marked by a rapid increase in the number of automobiles in use and by a change in the most popular type.In Table 1, data compiled by the National Automobile Chamber of Commerce are given on the annual production of closed and open cars from 1919 to 1927. TABLE 1.—PRODIJCTION OF CLOSED AND OPEN CARS,a UNITED STATES AND CANADA Year Open Closed Per cent closed 191gb 1,496,652 161,000 10.3 1920b 1,581,610 323,950 17.0 1921 1,191,220 337,945 22.1 1922 1,701,675 729290 30.0 1923 2,481,404 1,278300 34.0 1924 1,891,024 1,426,562 43.0 1925 1,694,774 2,201,258 56.5 1926 1,113,180 2,862,460 72.0 1927 530,795 2,555,223 82.8 National Automobile Chamber of Commerce,Facts and Figures of the Automobile Industry, 1928, p. ii. 6UnitedStates only. In1922, 30 per cent of the cars produced were closed cars; in 1927, 82.8 per cent.In 1927, the number of closed cars produced was three and one-half times as great as in 1922, whereas the number of open cars produced had declined 69 per cent.This change in the demand for auto- mobiles had a marked influence on the demand for various fabricating materials; for example, much larger quantities of plate glass were required for closed cars and a different sort of upholstery from that which com- monly had been used in open cars. The increased production of automobiles and the increased number in use does not tell the whole story of the effect of automobiles upon demand, because, with the increased number of closed cars in service and the improvement in roads, all-the-year-round use became far more common. The effect of this more constant use was to increase the demand for gaso- line, lubricants, and tires, to provide an almost new market for alcohol, glycerine, and other nonfreezing preparations, and, not least, to increase the demand for labor for repair and maintenance service. 324 RECENT ECONOMIC CHANGES The year 1927 also brought a striking example of another change in the character of demand for automobiles.The experience which culminated in the closing of the Ford factory and in the announcement of the new model of the Ford car showed that consumers not only were interested in economical operation and utilitarian service of even the cheapest automobiles, but that they also desired greater comfort and more attrac- tive appearance in the cars which they purchased.This manifestation of consumers' desires was in keeping with changes that were taking place in other industries. Heating Equipment.—In homes and apartment houses the use of oil-burning furnaces was another significant development during the period under review, and the introduction of gas furnaces for home heat- ing began.The increased use of oil-burning equipment not only affected the prosperity of companies manufacturing such equipment and that of the producers of fuel oil, but it had an adverse effect on the demand for anthracite coal.In the northeastern section of the United States, in fact, the increased use of oil-burning equipment spread sufficiently to place the anthracite coal producers on the defensive marketwise, probably for the first time since the mining of anthracite coal had become a large- scale commercial undertaking.