22 Journal of Marketing, January, 1970

Industrial Marketing: Trends and Challenges ELMER P. LOTSHAW

Trends expected to dominate industrial marketing during the 1970s arediscussed. These are: (1) increased marketing involvement in providingdirection to R&D and acquisitions, (2) more formal marketing planning,(3) emphasis on systems, (4) better direction of line marketing activities,and (5) new directions in marketing research.

A FREQUENT, though not universal, character-istic of the industrial field is the dual problem

of gaining acceptance of the marketing concept andits effective implementation. Peter Drucker's gen-eral description of the problem is particularly rele-vant to the industrial marketing situation. "Mostbusinessmen," according to Drucker, "when theyspeak of 'Marketing' mean nothing more sophisti-cated than the systematic and purposeful organiza-tion of all the work that has to be done to sell aproduct, to deliver it to the customer, and to getpaid for it."i

There are at least two reasons for the prevalenceof this narrow view of marketing in the industrialfield. First, the education and experience of man-agement in industrial firms emphasizes technical andproduction considerations which result in a strongproduct orientation. In addition, much of the in-formation industrial marketing managers have towork with is classified on the basis of product,process, or material rather than markets. Second,demand for industrial goods and services is deriveddemand, whereby creating a customer often in-volves satisfying the needs of direct and indirectcustomers. Thus, the distance between the indus-trial marketer and those who are the ultimatearbiters of his fate is often so great that relevantneeds and competition are obscured. The ability totake effective action on indirect customers is fur-ther restrained by the conflicting interests of directcustomers.

While these features may lead to the conclusionthat industrial marketing has not progressed tothe same extent as consumer marketing, thereexists much further evidence to the contrary. Thereare few industrial executives who do not professthe importance of customer orientation and, whilethis does not guarantee either its understanding orimplementation, it is a necessary first step. Thegreater use of product and market managers, estab-lishment of new product and new venture organiza-tions, and the more extensive use of marketing re-search are all further evidence of moves in thisdirection.

In this article the expected trends in industrial

Peter F. Drucker, The Age of Discontinuity (NewYork: Harper & Row, Publishers, 1968), p. 52.

marketing will be developed and the necessarysupport from research and management will beoutlined if the full potential of the constructive de-velopments are to be realized.

Emerging Trends in Industrial MarketingThe 1970s promise to be a period of rapid

economic growth and turbulent social change. Al-though this is hardly news, environmental condi-tions affect not only industrial markets and com-petition, but also the very conception and practiceof industrial marketing. Four developments, whichhave significant current momentum, appear of par-ticular importance and provide the basis for ex-pected trends in industrial marketing. They arethe significant changes in the pattern of final de-mands, the rapid pace of technological change, theincreasing size and complexity of the industrialfirm and its customers, and the growing impact ofthe computer and management sciences.

Five emerging trends seem to exist in industrialmarketing practice within the broader context ofenvironmental change. Some imply radical depart-ures from present practices while others do not.However, all are related to the environmental settingof the 1970s. These emerging trends are (1) in-creased marketing involvement in providing di-rection to R&D and acquisitions; (2) increased useof formal marketing planning; (3) emphasis onsystems in all aspects of marketing; (4) more effec-tive coordination, direction, and control over linemarketing activities; and (5) new directions inmarketing research.

Marketing Involvement in R&D and Acquisitions

As the pace of change quickens, industrial firmsincreasingly look to R&D and acquisitions forgrowth and diversification. In theory, marketingplays a vital role in matters of diversification andexpansion, but in practice there is often a strikinglack of customer orientation in such matters.

The direction of R&D effort is presently domi-nated by those interested primarily in technologyand engineering, with marketing playing an after-the-fact role of seeking markets for what labora-tories create. Donald Schoen describes it as a rigiddivision of labor between those concerned with theneed (i.e., marketing) and those concerned with

Marketing in the 1970s 23

technology.- The same applies to acquisitionswhere financial and legal considerations are oftenforemost, and matters of customer orientation arean afterthought.

Even where the importance of a customer orien-tation is recognized, its implementation is frequentlydeficient. Industrial marketing personnel who haveworked principally with established products, areoften ill-suited to work in this field. Also, those withthe necessary talent and interest find limited as-sistance in the established theory and practice ofmarketing as it relates to R&D and acquisitions.

Considerable progress has been made in recentyears in providing more and better marketingguidance and support in new product planning anddevelopment and in strategic planning activities.There is also the recognition that innovative newproducts are fragile commodities which seldomthrive, and much less prosper, within existing or-ganizational .structures. As a result, there hasbeen increased experimentation with organizationalforms that are more conducive to new ventures.^

Marketing research is also being called upon toplay a more imaginative and constructive role inproviding direction to R&D and acquisition activi-ties. Rather than simply sen ing as "fact finders,"market re.searchers are being called upon to devisemeans of discerning and interpreting trends. SATnp-tomatic of this is the growing interest in theprojection of economic trends and forecastingtechnology.Increase in Formal Marketing Planning

The emphasis on marketing planning for indus-trial products appears destined to increase in thefuture, although it is currently not well established.*This will be due to the increase in size and com-plexity of large industrial organizations, and alsobecause of the increased sophistication of the toolsavailable to the market planner. More informa-tion, improved forecasting methods, and advancesin decision theory and simulation techniques arebut a few of the developments contributing to moreeffective planning of marketing activities.

If the businessman has lacked a customer orien-tation because of a narrow viewpoint of marketing,those responsible for marketing can be accu.sed ofcontributing to this deficiency through their em-phasis on volume rather than profit, and the lackof precision in setting marketing objectives. The

= Donald R. Schoen, "Managing Technological Innova-tion," Harvard Business Revieiv, Vol. 47 (May-June,1969), p. 164.

3 Donald A. Kunstler, "Corporate New Product Ven-ture Groups: The Need, the Responsibility, the Or-ganization, the Leadership," in Marketing and theNew Science of Planning, Robert L. King, ed. (Chi-cago, 111.: American Marketing Association, 1968),pp. 449-454.

* B. Charles Ames, "Marketing Planning for IndustrialProducts," Harvard Business Review, Vol. 46 (Sep-tember-October, 1968), pp. 100-111.

expansion of formal marketing planning as a partof total business planning promises to assist in thecorrection of these deficiencies. The profit impli-cations of marketing actions can be seen, andplanning procedures provide a means of developingand implementing the precise objectives which arerequired in today's increasingly complex markets.Because of the proliferation of alternative productsand services resulting from the rapid pace oftechnological change, the industrial firm can nolonger be "all things to all people" but rather mustincreasingly focus on particular market segmentsin which the firm can achieve a competitive ad-vantage.

There are many examples of this in the containerand packaging fields as the result of developmentof new, and improvement of existing, materials.At one time soft drinks were packaged exclusivelyin glass, but now the market is shared with steeland aluminum cans. Paper cups and tubs thatonce were the only means of packaging a widerange of dairy products now find active competitionfrom a variety of plastic materials.

Emphasis on SystemsThere is a growing recognition in industrial

marketing of the value of viewing marketing as asystem, or, more properly, as a set of subsystems,and of the applicability of systems analysis to mar-keting problems. This is manifest among practi-tioners by emphasis on such things as "sy.stemsselling" and "marketing information systems," andthe investigation of the applications of systemsanalysis to a wide range of problems by students ofmarketing.

While there have been some notable applicationsof systems analysis to industrial marketing, theyhave been isolated and sporadic." The reasons forthi.>5 include not only the frequent preference ofmarketing management for acting on the basis ofinspiration rather than systematic analysis, butalso data limitations and the problems of translat-ing sophisticated models into operationally usefultools.

Despite these difficulties, it is reasonable to ex-pect the emphasis on systems and systems analysisin industrial marketing to grow in the future for

•'•' Lee Adler, "Systems .Approach to Marketing." Har-vard Business Review, Vol. 45 (May-June, 1967), pp.105-118.

• ABOUT THE AUTHOR. Elmer P.Lotshaw is manager of corporate mar-keting and economic reseorch atOwens-Illinois. Inc. He is currentlypresident-elect of the American Mar-keting Association. His BS and MAdegrees are from The Ohio State Uni-versity, and his PhD is from the StateUniversity of Iowa.

24 Journal of Marketing, January, 1970

two reasons. First, the more promising and com-plex types of sy.stems analysis will benefit from theincreased availability of computer facilities. Second,the growing complexities of industrial markets dueto technological change, and increasing competitionfrom new product development and diversification,will provide an incentive to employ the techniquesof systems analysis.

Coordination, Direction, and Control ofLine Marketing Activities

More effective coordination, direction and controlof line marketing activities—advertising, promotion,and sales—will be possible through greatly ex-panded market and sales analysis and the applica-tion of the behavioral sciences to industrial buyingbehavior.

Before the advent of the computer, a substantialgap existed between the conceptually possible andthe operationally practical in both market and .salesanalysis. Timely information was difficult and costlyto obtain, and analytical techniques had to besimple and straightforward. Sophisticated tech-niques can now be employed to forecast marketpotential and to distribute it on a geographicalbasis. In addition, company sales data can bequickly broken down by combinations of region andcustomer. As a result of these improved procedures,programs keyed to specific market objectives canbecome something more than pious assertions forannual .sales meetings.

There has recently been a growing interest ingaining a better understanding of industrial buyinginfluence.s and behavior, resulting not only from agrowing appreciation of its complexity, but alsofrom the realization of the promise it offers for thedevelopment of more purposeful marketing strate-gies." While progress in this area is slow, evidenceof the application of behavioral sciences to indus-trial marketing is beginning to appear.'

Marketing Research

Several trends are under way in industrial mar-keting research. There i.s the growing trend tothink of marketing research in terms of marketinginformation and as part of a marketing informationsystem. A complete system would involve informa-tion from company records (the traditional domainof .sales analy.sis) and information about externalcondition.s obtained through continuous marketingintelligence and special purpose project research.The approaches and obstacles to conception and de-

velopment of a marketing intelligence system foran industrial firm have been described by RichardPinkerton.** Traditional marketing research hasfocused on project research but is now being calledupon to fulfill the broader function.*

Second, the analytical techniques employed in in-dustrial marketing research are becoming progres-sively more complex and computer based. In thepast, foreca.sting techniques were rudimentary, butnow the application of econometric methods is gain-ing acceptance. The combination of econometricmodels of the economy and input-output analysesholds the promise of providing not only improvedindustry forecasts, but also a clearer understandingof the way in which changes in final demand andtechnology affect particular industries.

Third, the behavioral sciences will play an ex-panded role in marketing research. Historically,industrial marketing research has drawn moreheavily on economics than on the behavioral sci-ences. While this emphasis will probably remain,the industrial researcher will find increasing appli-cation of the behavioral sciences to such things asthe study of industrial buying behavior. There isalso evidence of greater use of consumer researchamong industrial firms, particularly where theconsumer is an important and influential indirectcustomer.

The Challenge to Research and ManagementThe promise offered by constructive developments

now under way. and which are expected to dominatethe 1970s, is by no means assured realization. Suc-cess depends upon the continuing contributions ofresearch into industrial marketing and industrialmarketing management. The plea for marketingR&D made by Theodore Levitt a number of yearsago is as pertinent now as it was in 1962.i<* Thereis evidence of more work being done in corporations,universities, and by large independent research or-ganizations, but the effort is still limited when com-pared to the needs of the field. Part of the problemis the lack of professional identity on the part ofmanv in industrial marketing. This identity is arequisite for generating the sustained interest andsupport necessary to advance the science and prac-tice of industrial marketing. This is where thosewith established professional interests—those inthe academic world and in research—have a specialresponsibility. With conscious effort on their part,management support and interest will develop morequickly.

«Frederick E. Webster, Jr., "Industrial Buying Be-havior: A State-of-the-Art Appraisal," in Marketingin a Changing World, Bernard A. Morin, ed. (Chi-cago, 111.: American Marketing Association, June,1969).

' J . W. Thompson and W. W. Evans, "Behavioral Ap-proach to Industrial Selling," Harvard Business Re-view, Vol. 47 (March-April, 1969), pp. 137-151.

8 Richard L. Pinkcrton, "How to Develop a MarketingInformation System," Industrial Marketing, Vol. 54(April, 1969), pp. 41-44, and subsequent May, June,and July issues.

!» D. Cox and R. Good, "How to Build a Marketing In-formation System," Harvard Business Review, Vol.45 (May-June, 1967), pp. 145-154.

•"Theodore Levitt, Innovation in Marketing (New York,McGraw-Hill Book Company, Inc., 1962).