The premise of the Production Concept is that the customers would always acquire products that are cheaper and more readily available (or widely available). It is the earliest concept of Marketing Philosophy. But due to its limitations, the uses of this concept have declined.
What is the production concept in marketing?
The production concept is a subset of marketing concepts whereby you focus on producing goods and services in such a way as to make them highly available and affordable to your customers.
On the basis of this philosophy, your business decisions will drive you to improve your production efficiency and find better distribution channels so you make more of your product and drive prices down.
The idea is the more your customers can readily find your product and benefit from lower prices achieved through your economies of scale.
A company adopting the production concept is of the view that it can increase demand for their product by reducing costs.
The idea is the more your goods are affordable, the more people will want to buy them.
To decrease cost, in most cases, you’ll need to produce on the large scale.
By mass-producing your product, your company will attempt to reduce the cost per unit and benefit from economies of scale.
The production concept is a concept leading you to think strategically about your production and operations.
Advantages of the production concept
There are some advantages when you consider the production concept in itself.
The production concept forces your company to find ways to produce more for less.
Companies will look at optimizing their operations and logistics in such a way that they can reduce their overall cost per unit and offer their products in a more affordable way to their customers.
Achieving economies of scale is an important advantage of the production concept.
A company that believes they could produce more of equal quality for less can certainly offer value to their customers.
The advantage for your customers is that they can find your products anywhere and in an affordable way.
Your customers will not need to go out of their way to find what you are selling.
Disadvantages of the production concept
Companies that focus too much on the production concept may lose focus on what their customers need or want.
Considering this is fundamentally based on the fact that producing more can help the company reduce costs and lower prices, the constant urge to reduce prices may lead companies to cut corners and degrade the quality of their product.
There is a point in time where the lower prices will no longer drive customers to buy more but actually drive customers to buy less.
If the company cuts quality to drive prices down, eventually their customers will no longer see value in paying for a cheap low-quality product.
The more your customers perceive your products as lacking in quality, the less they will have the inclination and motivation to buy your products.
This results in the reduction of demand for your product, the opposite of what you were trying to achieve.
Another disadvantage of the production concept is that not all customers will make purchasing decisions primarily on the basis of cost and affordability.
Depending on your industry and the products, your customers may have other important considerations, not just price.
If product safety is important for them, they’ll pay more for a safe product than pay less for an unsafe product.
Examples of Production Concept
Following are the real-life examples of production concept in marketing management
Ford Motor Company – Ford’s Model-T
The whole philosophy on Henry Ford was to perfect the production process of Ford Model-T.
The initial cost of the Ford Model-T vehicle was roundabout 800 US dollars, and it was high at the beginning of the 20th century.
The company followed the production concept and developed its assembly line and other manufacturing processes.
The price jumped from $800 to $300 and $300 was an affordable price to many Americans at that time.
Texas Instrument (TI)
For several years Texas Instrument followed the philosophy of increased production and lower cost so that they can offer the products on low prices.
TI won a significant American market share for handheld calculators. By following the production philosophy the company manufactured cheaper and affordable handheld calculators and offered them to the customers.
Key Notes:
The production concept is a subset of the marketing concept.
The production concept is a marketing philosophy where your business focuses on producing more goods in such a way to drive prices down.
The idea is that the more your products are available and affordable, the more people will buy your goods.
The production concept has advantages such as leading a company to achieve economies of scale but also disadvantages where a company may compromise its product quality just to continue driving prices down.
Depending on your product and industry, you’ll need to see if the product concept is a philosophy that should primarily guide your business decisions and marketing efforts or not.
