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IT is not because they do not desire to consume all that can be produced that consumers are unable to absorb all that the nation can produce. Consumer desires are boundless.
It is true that there is actually a physical limit upon the quantity of food which men may eat and the time that they may devote to wearing out clothes, furniture, and other consumption goods. But the difference in quantity and quality of consumption between individuals in the poorest and individuals in the richest class is so great that no immediate increase of the means of production will enable everybody to consume as much as only the richest consume today.
The potential market for goods--the aggregate unfilled desires of consumers--is infinitely greater than our capacity for production. Human desire seems to be a bottomless pit. We have been pouring goods down that pit in ever increasing quantities and have never yet filled it. We can never satiate the human race. When an old appetite is satisfied, new desires take the place of the old. Time after time, we have multiplied capacity to produce a hundred-fold. Yet the potential market has expanded and grown beyond our capacity to saturate it.
It is not the potential market which has made me say that our capacity to produce is excessive. It is the insufficiency of immediate demand that makes consumption lag behind production and that makes charts of the state of business consist of alternate peaks and valleys of prosperity and depression. The problem is how to mobilize the potential market--how to convert mere desire into active demand--how to enable it to enter the market place and make the market absorb all that we can ever produce.
The theory which underlies our most conspicuous present day method of converting desire into immediate demand might be called the theory of the need of persuasion by the manufacturer. This is the theory that has resulted in the development of national advertising and all those uneconomic methods of distribution which I have called high pressure marketing. If we substitute for the extravagances of persuasion by producers, the economies of supplying and catering to natural demand by retailers, if we operate on the theory of the normal creation of demand by distributors, one cause of the rise in the cost of distribution would be eliminated.
Mr. Bruce Barton, a very eloquent and capable advertising man, voices his belief of the need of persuasion by the manufacturer on the ground that it is a necessary incentive to human progress. He illustrates the need of persuasion by the manufacturer with the following ingenious observations:
You go in to a savage tribe, and what do you find? You find men who have no wants. You find that the savage is perfectly content if he has a skin to wrap around his loins, another skin to keep the rain off his head, a skin to lie on, and a little food and a fire. So a savage tribe continues for a thousand years and there will be no change. The great-great-grandchildren will be living as their great-great-grandfathers lived. But suppose that out of an airplane an advertising man dropped into that tribe and brought with him pictures of red neckties and tan shoes, and underwear and new hats, and automobiles and bicycles, and feathers and strings of beads. Instantly there would begin in that tribe a transformation. Wants would be kindled, and the desire to satisfy those wants would overcome all other desires, and in obedience to them even a savage is willing to abandon his life of leisure and voluntarily enlist himself in servitude to the creation of a civilization. ("Advertising and Human Progress," by Bruce Barton, Advertising and Selling Fortnightly, November 4, 1925.)
Now the only thing that is wrong with this illustration is that it has not the slightest foundation in fact. There is scarcely a single statement which Mr. Barton makes concerning the savage tribe which will stand analysis. It is ludicrous to suggest that they need to be showered with rotogravure advertisements of our products. The experience of everybody who has dealt with savages shows that they are quick to grasp for any and every trinket of modern civilization. They have only to be shown mirrors, knives, guns, cloths, phonographs, and all the myriad of products which modern industry so proudly produces to desire them.
The reason the demand for the products of civilization among savages is limited is not because of any lack of advertising to the savages, but solely and simply because the savage lacks the income which will enable him to buy them. The fact that the majority of savages will not engage in sustained labor in order to acquire them is due not to any lack of desire for the products of civilization, but to racial deficiencies or climatic conditions which no amount of advertising will alter. Ignore these limitations of nature, as they have often been ignored by colonists who exploit savages, and the savages wither and die out.
Advertising, if it is successful, enables the advertiser to increase the proportion of business which he does and to decrease the proportion of business which his competitor does, but it can not increase or decrease the total amount of business which is done by all of them. It may shift demand from products of one industry to those of another industry, or from the brand of one manufacturer to the brand of another manufacturer, but it can not increase the demand of the nation as a whole. A market for one product may be stimulated, but the market for all products is unchanged and, of course, the concomitant to abnormal stimulation of one industry is usually a corresponding decline of another. If by some miracle of advertising, the manufacturers of silk were able to persuade human beings to wear nothing but silk, it is quite obvious that the market for silk would be enormously increased and that for a considerable period of time all the facilities for production in that field would be taxed to their uttermost, but it is also quite obvious that the production of all other textiles would cease. The millions invested in the production of wool and cotton and rayon would earn no returns. What the producers of silk would gain, the producers of other textiles would lose.
The actual methods used in the creation of demand in accordance with the theory of the need of consumer persuasion by the manufacturer have been described in considerable detail in the second part of this book. Branding of the product, national advertising, and high pressure distribution are necessary in order to make it profitable for individual manufacturers to create demand in that way.
Men like Mr. Barton defend this method of converting potential desire into immediate demand and justify all the extravagances of high pressure marketing on the theory that persuasion of the consumer is necessary if he is to use greater quantities of a product or better qualities than he used before. Above all, they claim that such persuasion is necessary if consumers are to use new products.
Persuasion may be necessary. But persuasion by the manufacturer is never necessary in the case of a staple product, and it is doubtful whether it is necessary in the case of many new products. The sheer desire to enjoy the good things of life is so elemental a characteristic of the human beings, that observation of people enjoying good things is sufficient to create a desire for them in the people who do not use or possess them.
Except in the case of new inventions, this potential desire may be converted into immediate demand by simply making the price of the product low enough to bring it within the means of those who may desire it, but who have not been able previously to buy it. But even as to new products which involve considerable demonstration to enable the consumer to use them, it is possible to create demand for them through the medium of the retailer at a much lower cost than through high pressure marketing by the manufacturer.
The retailer is equipped to do this more economically than is the producer. He has first of all direct contact with the consumer. He or his clerks can talk with the customer face to face. He can display the merchandise in his show windows and show cases and demonstrate them in his store and actually permit the consumer to examine the goods. He can advertise and display and sell new products as an incident to the performance of his economic function of supplying the consumers with the staple and established products they desire and already buy. The producer can not possibly create desire with equal effectiveness. The methods which are open to him all involve costly substitutes for the direct contact which the retailer has with the consumer.
Only in exceptional cases is a manufacturer therefore justified in utilizing high pressure methods in order to create a demand for his products. In the overwhelming majority of cases, it is in the interest of consumers, distributors, and manufacturers that the creation of demand should be the work of the retailers and not of the manufacturers of the country.
Underlying these two theories as to the creation of demand are two totally different conceptions of value. One assumes that a product is worth the price established for it in a competitive market; the other is that the product is worth what the consumer can be made to think it worth. One is an economic conception, and the other is a psychological conception.
In spite of all that has been said by advertising men in defense of the psychological conception, it is at bottom nothing but an ingenious apology for the higher prices charged for advertised, branded goods.
If the psychological conception of value ever completely prevails, then the present objective method of determining the worth of our products will disappear. Our economic machinery today operates with the minimum of waste and the maximum of equity to both producers and consumers only when there is a common ground upon which values may be determined. Such an objective method of determining the value of our products is furnished us under our present economy only when prices are fixed in a competitive market. We are today moving further and further from the competitive market as a regulator of prices, and as we do so, prices are "pegged" by the manufacturers at levels which permit them to indulge in all the extravagances of high pressure marketing.