Marketing and Economic Development

Author(s): Peter F. Drucker

Source: Journal of Marketing, Vol. 22, No. 3 (Jan., 1958), pp. 252-259
Published by: American Marketing Association
Stable URL: http://www.jstor.org/stable/1247116
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 MARKETING AND ECONOMIC DEVELOPMENTt
PETER F. DRUCKER

Montclair, New Jersey

In the "underdeveloped" countries of the world, the more "glamorous"

manufacturing or construction are generally high-lighted while market
neglect, if not with contempt. Yet marketing holds a key position in t
is generally the most backward of all areas of economic life.
Marketing is also the most effective engine of economic development,
its ability rapidly to develop entrepreneurs and managers. And it contributes what is the
greatest need of an "underdeveloped" country: a systematic discipline in a vital area of
economic activity . .. a discipline which is based on generalized, theoretical concepts
and which can, therefore, be both taught and learned.

MARKETING AS A BUSINESS DISCIPLINE society, toward the design of new and

better products and of new distributive
THE distinguished pioneer of market-
concepts and processes.
ing, whose memory we honor today,
was largely instrumental in developing On this contribution and similar ones
marketing as a systematic business dis- of other Founding Fathers of marketing
cipline: during the last half century rests the
rapid emergence of marketing as perhaps
-In teaching us how to go about, in an the most advanced, certainly the most
orderly, purposeful and planned way to "scientific" of all functional business dis-
find and create customers;
ciplines.
-To identify and define markets; to create
But Charles Coolidge Parlin also con-
new ones and promote them;
tributed as a Founding Father toward
-To integrate customers' needs, wants, and
preferences, and the intellectual and crea- the development of marketing as a social
tive capacity and skills of an industrial discipline. He helped give us the aware-
ness, the concepts, and the tools that
* About the Author. Born in Vienna, and with make us understand marketing as a dy-
basic education received in Austria, Mr. Drucker namic process of society through which
took his law degree from Frankfurt University in
Germany. After four years of newspaper work, he business enterprise is integrated pro-
was associated with an international banking house
t Editor's Note. This is the text of the Parlin
in London from 1933 to 1937. He then came to the
Memorial Lecture, presented to the Philadelphia
United States and worked first as an American
Chapter of the American Marketing Association on
economist for British banks and insurance com-
June 6, 1957. The annual lecture, given since 1945,
panies. For the past fifteen years he has been a
is in memory of Charles Coolidge Parlin, for many
consultant on business policy and management years Director of Commercial Research at the Cur-
organization for some of the country's largest en- tis Publishing Company, and frequently referred to
terprises. He also served for a number of years as as the founder of modern marketing research. The
Professor of Politics at Bennington College and has Parlin Memorial Award is presented each year to a
been, since 1950, Professor of Management at the
lecturer chosen for his ability to make a distin-
Graduate School of Business, New York University.
guished contribution to the science of marketing
A steady contributor to Harper's, the Harvard and for outstanding achievement in the marketing
Business Review, and Nation's Business, Mr. field.
Drucker is the author of such well-known books as
Although THE JOURNAL OF MARKETING ordinarily
The End of Economic Man (1939), The New So-
does not publish speeches as such, an exception is
ciety (1950), Practice of Management (1954), and
made in this case, because of the great significance
America's Next Twenty Years (1957). of Mr. Drucker's remarks.

252
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MARKETING
MARKETING AND ECONOMIC DEVELOPMENTDEVELOPMENT 253
AND ECONOMIC 253

ductively with society's purposes

marketing has becomeand hu-
a discipline
role of marketing in economy an
man values. It is in marketing, as we now
understand it, that ciety.
we satisfy individual
And I shall single out as my
and social values, needs, and wants-be it the role of marketing in the econ
through producing goods, supplying serv- development, especially of under-d
ices, fostering innovation, or creating oped "growth" countries.
satisfaction. Marketing, as we have come My thesis is very briefly as foll
to understand it, has its focus on the cus- Marketing occupies a critical role in
tomer, that is, on the individual makingspect to the development of such
decisions within a social structure and "growth" areas. Indeed marketing is th
within a personal and social value system.most important "multiplier" of such de
Marketing is thus the process through velopment. It is in itself in every one o
which economy is integrated into societythese areas the least developed, the mos
to serve human needs. backward part of the economic system
I am not competent to speak about Its development, above all others, mak
marketing in the first sense, marketing possible economic integration and th
as a functional discipline of business. I fullest utilization of whatever assets an
am indeed greatly concerned with mar- productive capacity an economy already
keting in this meaning. One could not possesses. It mobilizes latent economic
be concerned, as I am, with the basic energy. It contributes to the greatest
institutions of industrial society in gen-
needs: that for the rapid development of
eral and with the management of busi- entrepreneurs and managers, and at the
ness enterprise in particular, without same
a time it may be the easiest area of
deep and direct concern with marketing. managerial work to get going. The rea-
But in this field I am a consumer of mar-
son is that, thanks to men like Charles
keting alone-albeit a heavy one. I am
Coolidge Parlin, it is the most systema-
not capable of making a contribution. tized and, therefore, the most learnable
I would indeed be able to talk about the
and the most teachable of all areas of
wants and needs I have which I, as a con-
business management and entrepreneur-
sumer of marketing, hope that you, the
ship.
men of marketing, will soon supply:-a
theory of pricing, for instance, that can
serve, as true theories should, as the INTERNATIONAL AND INTERRACIAL

foundation for actual pricing decisions INEQUALITY

and for an understanding of price be- Looking at this world of ours, we see
havior; or a consumer-focused concept some essentially new facts.
and theory of competition. But I could For the first time in man's history the
not produce any of these "new products"whole world is united and unified. This
of marketing which we want. I cannot may seem a strange statement in view of
contribute myself. To use marketingthe conflicts and threats of suicidal wars
language, I am not even "effective de-
that scream at us from every headline.
mand," in these fields as yet.
But conflict has always been with us.
What is new is that today all of mankind
THE ROLE OF MARKETING
shares the same vision, the same objec-
I shall today in my remarks tive,
confine
the same goal, the same hope, and
myself to the second meaning believes
in which in the same tools. This vision

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254
254 THE JOURNAL
THE JOURNVAL OF MARKETING
OF MARKETING January Tanuary 1958
1958

might,
rich and thein
many very poorgro
as lived all
called "industrialization." earlier societies of man. But what used
It is the belief that it is possible to forbe national inequality and economic
man to improve his economic lot through tension is now rapidly becoming inter-
systematic, purposeful, and directed ef- national (and unfortunately also inter-
fort-individually as well as for an entire racial) inequality and tension.
society. It is the belief that we have the This is also brand new. In the past
tools at our disposal-the technological,there were tremendous differences be-
the conceptual, and the social tools-to tween societies and cultures: in their
enable man to raise himself, through hisbeliefs, their concepts, their ways of life,
own efforts, at least to a level that we and their knowledge. The Frankish
in this country would consider poverty, knight who went on Crusade was an ig-
but which for most of our world would norant and illiterate boor, according to
be almost unbelievable luxury. the standards of the polished courtiers of
And this is an irreversible new fact. It Constantinople or of his Moslem ene-
has been made so by these true agents of mies. But economically his society and
revolution in our times: the new tools of theirs were exactly alike. They had the
communication-the dirt road, the truck, same sources of income, the same pro-
and the radio, which have penetrated ductivity of labor, the same forms and
even the furthest, most isolated and mostchannels of investment, the same eco-
primitive community. nomic institutions, and the same distri-
This is new, and cannot be emphasized
bution of income and wealth. Econom-
too much and too often. It is both a tre- ically the Frankish knight, however
mendous vision and a tremendous dan- much a barbarian he appeared, was at
ger in that catastrophe must result if it
home in the societies of the East; and so
cannot be satisfied, at least to a modest
was his serf. Both fitted in immediately
degree. and without any difficulty.
But at the same time we have a new, And this has been the case of all so-
unprecedented danger, that of interna- cieties that went above the level of
tional and interracial inequality. We on purely primitive tribe.
the North American continent are a The inequality in our world today,
mere tenth of the world population, in- however, between nations and races, is
cluding our Canadian friends and neigh- therefore a new-and a tremendously
bors. But we have at least 75 per cent ofdangerous-phenomenon.
the world income. And the 75 per cent What we are engaged in today is es-
of the world population whose income is sentially a race between the promise of
below $100 per capita a year receive to- economic development and the threat of
gether perhaps no more than 10 per cent international world-wide class war. The
of the world's income. This is inequalityeconomic development is the opportu-
of income, as great as anything the worldnity of this age. The class war is the
has ever seen. It is accompanied by very danger. Both are new. Both are indeed
high equality of income in the developed so new that most of us do not even see
countries, especially in ours where we them as yet. But they are the essential
are in the process of proving that an in-economic realities of this industrial age
dustrial society does not have to live inof ours. And whether we shall realize the
extreme tension between the few veryopportunity or succumb to danger will

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 MARKETING
MARKETING AND ECONOMIC DEVELOPMENTDEVELOPMENT
AND ECONOMIC 255
255

largely decide not only the economic Lack of Development in

future of this world-it may largely de- "Under-developed" Countries
cide its spiritual, its intellectual, its po- (i) First, in every "under-developed"
litical, and its social future. country I know of, marketing is the most
under-developed-or the least developed
SIGNIFICANCE OF MARKETING -part of the economy, if only because of
the strong, pervasive prejudice against
Marketing is central in this new situa-
the "middleman."
tion. For marketing is one of our most
As a result, these countries are stunted
potent levers to convert the danger into
by inability to make effective use of the
the opportunity.
To understand this we must ask: What
little they have. Marketing might by it-
self go far toward changing the entire
do we mean by "under-developed"?
economic tone of the existing system-
The first answer is, of course, that we
without any change in methods of pro-
mean areas of very low income. But in-
duction, distribution of population, or
come is, after all, a result. It is a result
of income.
first of extreme agricultural over-popula-
It would make the producers capable
tion in which the great bulk of the peo-
ple have to find a living on the land
of producing marketable products by
providing them with standards, with
which, as a result, cannot even produce
quality demands, and with specifications
enough food to feed them, let alone pro-
for their product. It would make the
duce a surplus. It is certainly a result of
product capable of being brought to
low productivity. And both, in a vicious
markets instead of perishing on the way.
circle, mean that there is not enough
And it would make the consumer capa-
capital for investment, and very lowble of discrimination, that is, of obtain-
productivity of what is being invested-
ing the greatest value for his very limited
owing largely to misdirection of invest-
purchasing power.
ment into unessential and unproductive In every one of these countries, mar-
channels.
keting profits are characteristically low.
All this we know today and under- Indeed the people engaged in marketing
stand. Indeed we have learned during barely eke out a subsistence living. And
the last few years a very great deal both "mark-ups" are minute by our standards.
about the structure of an under-devel-
But marketing costs are outrageously
oped economy and about the theory high.
and The waste in distribution and mar-
dynamics of economic development. keting, if only from spoilage or from the
What we tend to forget, however, is
accumulation of unsalable inventories
that the essential aspect of an "under-
that clog the shelves for years, has to be
developed" economy and the factor theseen to be believed. And marketing serv-
absence of which keeps it "under-devel-
ice is by and large all but non-existent.
oped," is the inability to organize eco-What is needed in any "growth" coun-
nomic efforts and energies, to bring try to make economic development real-
istic, and at the same time produce a
together resources, wants, and capacities,
vivid demonstration of what economic
and so to convert a self-limiting static
system into creative, self-generatingdevelopment
or- can produce, is a market-
ganic growth. ing system:
And this is where marketing comes-Ain.
system of physical distribution;

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256 THE JOURNAL OF MARKETING January 1958
25 TEJORALO MRKTNGJnur 15

-A financial system to make possible the Marketing can convert latent demand
distribution of goods; and into effective demand. It cannot, by it-
-Finally actual marketing, that is, an ac- self, create purchasing power. But it can
tual system of integrating wants, needs,
uncover and channel all purchasing
and purchasing power of the consumer
power that exists. It can, therefore, cre-
with capacity and resources of produc-
tion. ate rapidly the conditions for a much
higher level of economic activity than
This need is largely masked today be- existed before, can create the opportuni-
cause marketing is so often confused with ties for the entrepreneur.
the traditional "trader and merchant" of It then can create the stimulus for the
which every one of these countries has development of modem, responsible,
more than enough. It would be one of professional management by creating op-
our most important contributions to the portunity for the producer who knows
development of "under-developed" coun- how to plan, how to organize, how to
lead people, how to innovate.
tries to get across the fact that marketing
is something quite different. In most of these countries markets are
It would be basic to get across the of necessity very small. They are too
triple function of marketing: small to make it possible to organize dis-
tribution for a single-product line in any
-The function of crystallizing and direct-
effective manner. As a result, without a
ing demand for maximum productive ef-
fectiveness and efficiency; marketing organization, many products
for which there is an adequate demand
-The function of guiding production pur-
at a reasonable price cannot be distrib-
posefully toward maximum consumer sat-
isfaction and consumer value; uted; or worse, they can be produced and
-The function of creating discrimination distributed only under monopoly con-
that then gives rewards to those who ditions. A marketing system is needed
really contribute excellence, and that
which serves as the joint and common
then also penalize the monopolist, the
channel for many producers if any of
slothful, or those who only want to take
them is to be able to come into existence
but do not want to contribute or to risk.
and to stay in existence.
This means in effect that a marketing
Utilization by the Entrepreneur
system in the "under-developed" coun-
(2) Marketing is also the most easily
tries is the creator of small business, is
accessible "multiplier" of managers and
the only way in which a man of vision
entrepreneurs in an "under-developed"
and daring can become a businessman
growth area. And managers and entre-
and an entrepreneur himself. This is
preneurs are the foremost need of these
countries. In the first place, "economic thereby also the only way in which a true
development" is not a force of nature. Itmiddle class can develop in the countries
is the result of the action, the purposeful,in which the habit of investment in pro-
responsible, risk-taking action, of men as ductive enterprise has still to be created.
entrepreneurs and managers.
Certainly it is the entrepreneur and Developer of Standards
manager who alone can convey to the (3) Marketing in an "under-devel-
people of these countries an understand- oped" country is the developer of stand-
ing of what economic development ards-of standards for product and serv-
means and how it can be achieved. ice as well as of standards of conduct, of

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 MARKETING AND MARKTINGAND
ECONOMIC DEVELOPMENT
CONMIC EVELPMEN
257
25

integrity, phia. reliability,

of Its impact and experience are, o
of concern therefore, fora fair the basic
test of what marketing
pact of decisions on the customer, the principles, marketing knowledge, and
supplier, the economy, and the society. marketing techniques can achieve.
Rather than go on making theoretical The impact of this one American busi-
statements let me point to one illustra- ness which does not have more than a
tion: The impact Sears Roebuck has had mere handful of stores in these countries
on several countries of Latin America. and handles no more than a small frac-
To be sure, the countries of Latin Amer- tion of the total retail business of these
ica in which Sears operates-Mexico, countries is truly amazing. In the first
Brazil, Cuba, Venezuela, Colombia, and place, Sears' latent purchasing power has
Peru-are not "under-developed" in the fast become actual purchasing power. Or,
same sense in which Indonesia or the to put it less theoretically, people have
Congo are "under-developed." Their begun to organize their buying and to
average income, although very low bygo out for value in what they do buy.
our standards, is at least two times, per-Secondly, by the very fact that it builds
haps as much as four or five times, that of
one store in one city, Sears forces a revo-
the truly "under-developed" countries lution in retailing throughout the whole
in which the bulk of mankind still live. surrounding area. It forces store modern-
ization. It forces consumer credit. It
Still in every respect except income level
these Latin American countries are at forces a different attitude toward the cus-
best "developing." And they have all the toward the store clerk, toward
tomer,
problems of economic development- the supplier, and toward the merchan-
perhaps even in more acute form than dise itself. It forces other retailers to
the countries of Asia and Africa, pre- adopt modern methods of pricing, of in-
cisely because their development has ventory control, of training, of window
been so fast during the last ten years. display, and what have you.
It is also true that Sears in these coun- The greatest impact Sears has had,
tries is not a "low-price" merchandiser. however, is in the multiplication of new
It caters to the middle class in the richer industrial business for which Sears cre-
of these countries, and to the upper mid-ates a marketing channel. Because it has
dle class in the poorest of these coun-had to sell goods manufactured in these
tries. Incidentally, the income level of countries rather than import them (if
these groups is still lower than that of only because of foreign exchange re-
the worker in the industrial sector of our strictions), Sears has been instrumental
economy. in getting established literally hundreds
Still Sears is a mass-marketer even in of new manufacturers making goods
Colombia or Peru. What is perhaps evenwhich, a few years ago, could not be
more important, it is applying in thesemade in the country, let alone be sold in
"under-developed" countries exactly theadequate quantity. Simply to satisfy its
same policies and principles it applies inown marketing needs, Sears has had to
this country, carries substantially the insist on standards of workmanship,
same merchandise (although most of itquality, and delivery-that is, on stand-
produced in the countries themselves),ards of production management, of tech-
and applies the same concepts of market- nical management, and above all of the
ing it uses in Indianapolis or Philadel- management of people-which, in a few

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258 THE JOURNAL OF MARKETING January 1958
258 THE JOURNAL OF MARKETING January 1958

short years, have

can supply, and should advance
supply more. But
science of management
the supply of men we can offer to thein
by at least a generation.
people in the "under-developed" coun-
I hardly need to add that Sears is not tries is of necessity a very small one.
in Latin America for reasons of philan- The demand is also much too urgent
thropy, but because it is good and prof- for it to be supplied by slow evolution
itable business with extraordinary growth through experience, or through depend-
potential. In other words, Sears is in ence on the emergence of "naturals."
Latin America because marketing is the The danger that lies in the inequality
major opportunity in a "growth econ- today between the few countries that
omy"-precisely because its absence is a have and the great many countries that
major economic gap and the greatesthave not is much too great to permit a
need. wait of centuries. Yet it takes centuries
if we depend on experience and slow
The Discipline of Marketing evolution for the supply of entrepre-
(4) Finally, marketing is critical in neurs and managers adequate to the
economic development because market- needs of a modern society.
ing has become so largely systematized, There is only one way in which man
so largely both learnable and teachable. has ever been able to short-cut experi-
It is the discipline among all our busi- ence, to telescope development, in other
ness disciplines that has advanced the words, to learn something. That way is
furthest. to have available the distillate of experi-
I do not forget for a moment how ence and skill in the form of knowledge,
much we still have to learn in marketing. of concepts, of generalization, of meas-
But we should also not forget that mosturement-in the form of discipline, in
of what we have learned so far we have other words.
learned in a form in which we can ex-
press it in general concepts, in valid prin- THE DISCIPLINE OF ENTREPRENEURSHIP
ciples and, to a substantial degree, in
quantifiable measurements. This, above Many of us today are working on the
all others, was the achievement of that fashioning of such a discipline of entre-
generation to whom Charles Coolidgepreneurship and management. Maybe
we are further along than most of us
Parlin was leader and inspiration. realize.
A critical factor in this world of
Certainly in what has come to be
ours is the learnability and teachability
called "Operation Research and Synthe-
of what it means to be an entrepreneur
sis" we have the first beginnings of a
and manager. For it is the entrepreneur
systematic approach to the entrepreneur-
and the manager who alone can cause
ial task of purposeful risk-taking and in-
economic development to happen. The
novation-so far only an approach, but
world needs them, therefore, in verya most promising one, unless indeed we
large numbers; and it needs them fast.
become so enamored with the gadgets
Obviously this need cannot be sup- and techniques as to forget purpose and
plied by our supplying entrepreneursaim.
and managers, quite apart from the fact
We are at the beginning perhaps also
that we hardly have the surplus. Money of an understanding of the basic prob-
we can supply. Technical assistance we lems of organizing people of diversified

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MARKETING AND ECONOMIC DEVELOPMENT M
259

because it first looks at the values and

together in one effective organization, wants of the individual, and because it
although again no one so far would, I then develops people to act purposefully
am convinced, claim more for us than and responsibly-that is, because of its ef-
that we have begun at last to ask intelli-fectiveness in developing a free economy
gent questions. -marketing is suppressed in a totalitar-
But marketing, although it only cov- ian system. If we want economic develop-
ers one functional area in the field, has ment in freedom and responsibility, we
something that can be called a discipline. have to build it on the development of
It has developed general concepts, that marketing.
is, theories that explain a multitude of In the new and unprecedented world
phenomena in simple statements. It even we live in, a world which knows both a
has measurements that record "facts" new unity of vision and growth and a
rather than opinions. In marketing, new and most dangerous cleavage, mar-
therefore, we already possess a learnable keting has a special and central role to
and teachable approach to this basic and play. This role goes:
central problem not only of the "under-
-Beyond "getting the stuff out the back
developed" countries but of all coun- door";
tries. All of us have today the same sur--Beyond "getting the most sales with the
vival stake in economic development. least cost";
The risk and danger of international and -Beyond "the optimal integration of our
interracial inequality are simply too values and wants as customers, citizens,
great. and persons, with our productive re-
Marketing is obviously not a cure-all, sources and intellectual achievements"-
not a paradox. It is only one thing we the role marketing plays in a developed
need. But it answers a critical need. At society.

the same time marketing is most highly

In a developing economy, marketing
developed. is, of course, all of this. But in addition,
Indeed without marketing as the hinge
in an economy that is striving to break
on which to turn, economic development
the age-old bondage of man to misery,
will almost have to take the totalitarian
want, and destitution, marketing is also
form. A totalitarian system can be de-
the catalyst for the transmutation of la-
fined economically as one in which eco-
tent resources into actual resources, of
nomic development is being attempted desires into accomplishments, and the
without marketing, indeed as one in development of responsible economic
which marketing is suppressed. Precisely
leaders and informed economic citizens.

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