01-kotler-frontiers of the marketing paradigm in the third millennium - achrol and kotler 2012

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CONCEPTUAL/THEORETICAL PAPER

Frontiers of the marketing paradigm in the third millennium

Ravi S. Achrol & Philip Kotler

Received: 11 March 2011 /Accepted: 13 April 2011 /Published online: 11 May 2011# Academy of Marketing Science 2011

Abstract The domain and theories of marketing have been

expanding since the origins of the discipline. Since the

1970s marketing science has been organized around the

exchange paradigm. Marketing concepts apply to all formsof exchange, whether it is goods, services, personages,

places or ideas, and whether it is between individuals, for-

profit and nonprofit firms, governments and NGOs. Marketing

theories evolved from a firm oriented view to encompass the

exchanging dyad. More recently the paradigm expanded to a

network level of explanation, and relational theories have

come to the fore. But even as the field struggles to grasp its

newfields of explanation, there is a Kuhnian shift happening at

its boundaries. The shift significantly bends the marketing

worldview as well as the theoretical tools and methodologies

we use to study it. In this paper we develop a three-tiered

explanation of the emerging field of marketingits subphe-nomena (consumer experiences and sensory systems), its

phenomena (marketing networks), and its superphenomena

(sustainability and development).

Keywords Marketing paradigm . Marketing future .

Marketing theory . Consumption experience .

Consumer sensory processes . Consumer neurophysiology .

Nanotechnology. Marketing networks . Consumer

networks . Sustainable marketing .

Marketing and poverty alleviation

Introduction

A number of prominent scholars have analyzed the evolution

of the marketing paradigm (for example Bartels 1962; Hunt2002; Sheth et al. 1988). The evolutionary path can be traced

from the functionalist paradigm to the marketing manage-

ment paradigm to the exchange paradigm. The functionalist

paradigm described the institutions of marketing and their

functions. The marketing management paradigm is rooted in a

firm view of marketing processes (the archetype firm being the

classic manufacturing company). Under it, marketings role and

responsibilities expanded from sales and advertising to product

development and a firm-wide responsibility for customer care.

The impetus behind this major expansion was provided

by the generic and exchange paradigms (Bagozzi 1975;

Kotler 1972; Kotler and Levy 1969). Marketing theories

and research were generalized beyond the exchange of

goods, services and money to include any valuable resource

like time, energy, feelings, places, ideas, symbols or

information. They were extended to exchange with customers,

employees, suppliers, the public, and even competitors, and

applied to all types of organizationsfor profit, nonprofit,

social service agencies, government, NGOs and nation states.

The exchange paradigm, with its focus on inter-firm

relationships (Achrol et al. 1983; Dwyer et al. 1987), brought

the concept and theories of the marketing channel to the fore,

and from there it was almost a natural step to where we stand

todayat the threshold of the networkparadigm (Achrol and

Kotler 1999; Iacobucci 1996). Relational theories of

exchange are highlighted in an exchange network (Achrol

1997; Anderson et al. 1994; Gummesson 1998; Morgan and

Hunt 1994; Sheth and Parvatiyar 1995). These changes in

the marketing paradigm are significant in themselves, but

they are occurring at a time of even greater change at the

boundary and foundations of the discipline.

The plurality of domains and theoretical riches is difficult

to address systematically without an organizing framework.

R. S. Achrol (*)

Professor of Marketing Science, School of Business,

The George Washington University,

Washington, DC, USA

e-mail: [email protected]

P. Kotler

S. C. Johnson & Son Distinguished Professor of International

Marketing, Kellogg School of Management,

Northwestern University,

Evanston, IL, USA

J. of the Acad. Mark. Sci. (2012) 40:3552

DOI 10.1007/s11747-011-0255-4
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As marketing expanded over the years, scholars sought to

synthesize its fundamental premises into general theories.

Prominent among early contributions are the theories of

Robert Bartels and Wroe Alderson (see discussions in Sheth et

al. 1988). Of more recent origin are the resource-based

theory of competition (Hunt2002) and the service dominant

logic (Vargo and Lusch 2004). Bartels and Aldersons

general theories addressed aggregate levels of marketingphenomena. The service dominant logic builds its arguments

on a reductionist foundation. The resource-based theory is an

intermediate level of generalization. The debate over the

superiority of reductionist versus phenomenal theories will

surely rage for a long time. Perhaps the complexity of

marketing phenomenology and the infancy of its theories are

such that it behooves the discipline to pursue a multi-tiered

paradigmatic structure to its science.

In this paper we pursue a somewhat unusual line of

inquiry. This paper is not about a general theory. Neither is

it synthetically constructed from the theories and research

about the phenomenon of marketing as we know it. Ratherwe construct a three-tiered framework based on emerging

shifts in the phenomenology of marketing. The three fields

are (1) consumption experiences, (2) marketing networks, and

(3) sustainable development. The fields span a reductionist to

holistic construal of marketing phenomena.

A paradigm for the third millennium

It is frequently useful for marketing to organize the growinginventory of empirical and theoretical data in a codex that

consolidates that which is important in what we know and

points to that which is important in what we do not know. We

decided not to look in the rear view mirror. However, for the

purpose of providing some reference points and summarizing at

a glance what is proposed in the shift discussed in the rest of

this forward-looking article, Table 1 contrasts key assumptions

defining marketings current paradigm with how these are

transformed under the emerging paradigm. The received

paradigm is a collection of a number of streams of literature,

some enduring and some of more recent vintage. A few of the

theories span current and future possibilities. For example,some aspects of the service dominant logic (co-creation and

co-production) and network and relational theories can only

Table 1 Key assumptions of the received vs. emergent marketing paradigms

Received paradigm Emergent paradigm

Consumer satisfaction Consumer sensations and sense-making

Cognitive psychology of behavior Neurophysiology of consumer behavior and sensory experiences

Products as delivered services Products and services as sensory experiences

Massive-scale manufacturing by contract manufacturers

(phase one networks); early phase two innovation networks

Small-scale distributed production-consumption networks.

Products built atom-by-atom. Customer co-creation

and co-production (phase three networks)

Dominant technologies: digitization and computer controlled

systems

Dominant technologies: biotechnology, nanotechnology

Management as internal coordination of finance, marketing,

production, R&D and personnel in the firm

Management as customer care and network developmentinterorganizational

coordination of finance, innovation and production.

Core competency: idiosyncratic resources, usually technology Core competency: Focal firmmarketing; Networkrelational solidarity,

synergy and mutuality

Management priorities: growth, customer life-time value,targeting middle and upper class high value markets Management priorities: sustainable marketing (including demarketing,counter-marketing), growth from lower middle and

base-of-the-pyramid markets

Dyad as unit of analysis; theories of hierarchical control,

power and dependence; early relationship marketing,

social norms of behavior

Multi-level networks as units of analysis; bottom-up networks;

relational management of the economic and ecological

commons; social engagement (proactive)

Corporate social responsibility (reactive, adaptive) Proactive corporate strategies in ecology and development

Public policy: laissez-faire capitalism Public policy: regulated capitalism (embedded regulation, self regulation);

conscientious capitalism, conscious capitalism, social capitalism

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be partially realized at present but are likely to achieve their

full potential under the emergent paradigm.

Looking ahead, how does one extract the critical features

of a turbulent field that pervades the entire fabric of society

and condense them into a forward-looking framework for

marketing? We propose the way to make this complexity

tractable is to conceptualize it in three dimensions

marketings substructure, its structure and its superstructure.In this way we can span:

(1) the theoretically more tractable domain of the marketing

microcosm, its subphenomena;

(2) its phenomenal realm (including the managerial realm)

with its mid-range theories that have predictive power

even if their putative mechanisms are less than

rigorously explicated; and

(3) the superphenomenal realm of marketing and society,

a largely descriptive field of analysis.

In the subphenomenal field we focus on the consumption

experience as the fundamental domain of relevant theoryand human sensory processes as the fundamental bases of

explanation. Major advances in the science of the mind are

imminent due to a covergence in the understanding of its

psychology and its physiology. This promises to shift the

theoretical tools of consumer behavior analysis from

cognitve concepts such as attitudes, information storage

and retrieval theories to the mechanisms of sensory

depiction of reality and its experience.

The field of phenomenal marketing is complex and is

shifting. Hierarchies have given way to marketing net-

works. The theories of exchange that served marketing well

for 40 years are giving way to relational concepts. Networksare inverting many aspects of traditional marketing processes.

In the post-information economy, vertical integration is

receding. Marketing functions and value-added are moving

forward in the network and closer to the consumer. This

process may take a giant leap in the future by bringing

production and consumption close together.

The third dimension is marketings superphenomena.

This is an area of marketing where our science, including

its theories and empirical findings, is likely to be more

descriptive than causative. Nevertheless, as marketings

footprint and societal consequences loom ever larger, the

superphenomena of marketing are going to represent a

critical agenda in its paradigm. There are too many issues to

address in a single article. We picked the two we believe are

the most significantsustainability and poverty.

Sustainability has been creeping up on Eric Fromms

homo consumens for a long time (Kotler 2011). Marketing

has well-known negative impacts. It encourages rapid

consumption of limited natural resources, it does not

restrain the wants it encourages, and it over-fulfills

materialistic wants and under-serves nonmaterial wants.

Poverty, on the other hand, is a novel subject for marketing.

The poor do not consitute a marketable segment. They are

the subject of government agencies, NGOs, charitable

trusts, religious orders, altruists, sociologists and econo-

mists. But there is a growing realization that the world of

business and the world of development are on convergent

paths. Leading scholars in business schools are proposing

models for development that offer alternatives to conven-tional approaches originating in economics, sociology and

anthropology.

The subphenomena of marketing

The fundamental process in marketing is consumption, and

the elemental concepts in consumption are satisfaction,

value and utility. If there is a new concept in the digital

age of information, knowledge products and the service

economy, it is that of consumer experiences. Yet as

Holbrook (2006) points out, the idea that the consumptionexperience is at the bottom of consumer value goes back

some 25 years, and even further back to the economist

Lawrence Abbott:

The thesis may be stated quite simply. What

people really desire are not products but satisfying

experiences People want products because they

want the experience bringing services which they

hope the products will render (Abbott 1955, p. 40)

At the nucleus of consumption is a need and its

satisfaction. As consumers, we go about need satisfaction

via a complex of experiences filtered through our senses.The senses record and filter all that we feel and know about

the world around us and its pleasures and pains. These

include the visual (perceptual), auditory and olfactory senses,

the sense of taste and the so called other sensesthe

sense of touch and feel (tactile and haptic sense), the sense

of limb position and motion (proprioception and kinesthesis)

and the sense of whole-body orientation and motion

(vestibular sense).

The senses are the vehicles by which we experience the

world, but the question remains, what does it mean to say

that we experience something, and that the experience

was a satisfying one or not? That is the primary subject

domain of consumer behavior theory and research. The

bulk of it is informed by cognitive psychology (including

theories of attitudes, emotions and information processing),

which has constituted the dominant behavioral paradigm in

marketing and psychology for many decades now. But there

is an important shift in the behavioral sciences from

cognitive psychology to neurological psychology. The

disciplinary divide between mind (cognitions) and the brain

(the physiology of the mind) is rapidly disappearing.

J. of the Acad. Mark. Sci. (2012) 40:3552 37
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Marketing and the human senses

Beyond the obligatory treatment in consumer behavior

texts, little research attention has been directed to consumer

sensation and sense-making (Jacoby et al. 1998). There

may be a good reason for the long hiatus in academic studies.

We draw much of our inspiration in consumer behavior from

psychology, and the psychology of the senses has beenmoribund for a while. In the preface to his 1953 edition ofThe

Human Senses, Princeton psychologist Frank Geldard notes

that not too long ago the greater portion of psychology was

about the human senses: Experience was psychologys

proper object of study, and experience comes by way of

mans senses. He goes on to lament that psychology

evolved into the science of behavior and concepts like

learning, motive, attitude and interest rose to the fore: These

trends in psychological fashion, partially account for the

current rarity of books on sensation (Geldard 1972).

This leaves a void in how behavior and the reality we live

in are connected to the building blocks of matter and to thetheories of mind and body. The void appears to be narrowing.

The convergence of physiological and behavioral theory in the

shape of neurophysiology has led to a revival of scientific

interest in sensory processes (e.g., Zaltman 2003). On the one

hand are phenomenological reasons. In his A History of the

Senses: From Antiquity to Cyberspace, Jutte (2005, p. 16)

observes: The rediscovery of the senses, which is in some

ways a mere few decades old, certainly has a lot to do with

commercialization, but it is also a response to the growing

needs of a post-industrial leisure society, in which the senses

are befuddled by artificial worlds and overstrained by

incessant stimulation.

On the other hand are a growing field in cognitive

neuroscience linking cognition and molecular genetics (e.g.,

the Journal of Cognitive Neuroscience) and an emerging

field in neuroeconomics (e.g., Sren et al. 2008). Interest in

sensory research in marketing appears to be increasing

(Bloch 1995; Groeppel-Klein 2005; Gulas and Bloch 1995;

Li 2008; Mitchell et al. 1995; Morrin and Ratneshwar 2003;

Peck and Childers 2003; Raghubir and Krishna 1999;

Spangenberg et al. 1996). The attention is focused on visual

and auditory processes, which is to be expected in a media

and communications driven managerial paradigm. Sight and

sound are often considered the superior senses. The classical

hierarchy of the senses dates back to Aristotle who ordered

them thusvisus (sight), auditus (hearing), odoratus (smell),

gustus (taste), and tactus (touch). Jutte (2005) observes that

the hierarchy of the senses is both a cultural construction

and a product of the phylogenetic development of the human

species.

There may be a cultural evolution happening in what

stimuli we respond and relate better to. Some believe we

are now entering a haptic age (John Naisbitts high touch

society). The German weekly Die Zeit published a

Manifesto for the Emancipation of the Sense of Touch

(April 11, 1997). The popularity of leather seats, massages,

touching zoos, hugging and the like are witness to a more

touchy-feely culture. Marketing practitioners are quick to

pick up on stimulating consumers olfactory and haptic

sensations. The popular press is abuzz with article titles like

Dollars and Scents (Hoppough 2006) and BringingSenses into Play (Musgrove 2007). Predictably, the buzz

follows the old sales-orientationi.e., how can I get

customers to turn on the buying impulse?1

Early efforts by the movie industry (dating as far back as

the 1940s) to incorporate scents into the movie experience

were largely failures (LA Times 2006), probably due to

rather crude technology. Today there is a whole new

technology of artificial aromas, including the possibility

of transmitting them electronically to TVs fitted with

artificial-scent boxes. There is a push to design haptic

experiences into virtual products. New game systems by

Sony and Philips incorporate sense effects via vibrations,breezes, thunder and lightening, 3-D, and so on. A company

called Immersion claims to have designed a computer mouse

that can obtain tactile impressions of the textures of solid and

liquid surfaces (e.g., the softness of a mattress) provided

suppliers program their websites to facilitate it (Jutte 2005,

p. 251). Seeing, hearing, tasting, smelling, and touching are,

thus, well on the way to becoming digitalized, computer-

transmitted processes that will progressively complement or

even replace impressions traditionally supplied by the five

natural organs of sense (Jutte 2005, p. 330).

Cyberspace and virtual reality have the potential to

separate our minds and bodies, to allow us to experience

the bodys needs by a virtual projection of the mind into

cyberspace. There exist well-known virtual worlds on the

Web such as Second Life, where one can create an avatar to

move around, shop, meet other avatars, and in effect, lead a

second life at that site. Soon avatars will be able to move

freely about the Internet, connecting virtual worlds and

stand alone sites. 3-D avatars created to ones measure-

ments can meet other avatars anywhere on the Web, hold a

conversation, socialize, go shopping with friends, try on a

pair of jeans for fit and so on (McConnon 2007).

Those of us who grew up in the physical world cannot

begin to imagine life as it will be for those who grow up in

a digital world. The digital world will offer nearly endless

1 In the early 1990s a study by the Chicago based Smell and Taste

Treatment Research Foundation in a Las Vegas casino purported to

show that the right kind of scent induced customers to spend 45

percent more on the slot machines (Lee 2004). Now Sony stores are

being spritzed with a custom vanilla-and-mandarin scent created for it

by Scent-Air of Charlotte, NC. Other Scent-Air customers reportedly

include Doubletree Hotels, Westin Hotels & Resorts, Hard Rock Hotel

in Orlando, and Procter & Gamble (Hoppough 2006). Some advocates

see a brand having a unique scent image of its own.

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possibilities of shaping life and experiences so that the

physical world will pale in significance and may well

become a secondary world in which our bodies live wired

to a digital reality. Like so much of science fiction, the

movie Avatar may be prophetic. It triggered a rush to 3-D

television. We stand at the threshold of a virtual world of

experiences and an incredible expansion of the science by

which experiences are experienced.

Neurophysiology and marketing

The relationship between the brain and mind has puzzled

scientists and philosophers for centuries (the classical

model is often traced to Rene Descartes). The modern

science of sensation and perception takes a neurophysio-

logical approach to the subject based on cellular biology.

The core concept is that of cellular mapping networks

located in specific areas of the brain. For example, a

monkeys visual system (the human system is believed to

be similar) consists of some 34 different maps whichanalyze different attributes (color, shape, orientation,

speed, depth) of what is recorded by the retina. Specific

cells in the map are linked to specific areas of the retina,

and adjacent areas in the retina are linked to adjacent

cel ls i n t he brain. T he m aps are organized i n a

hierarchical manner into what pathways and where

pathways that connect the primary visual area in the back

of the brain to the temporal lobes in the lower middle of

the brain and parietal lobes in the upper middle,

respectively (Posner and Raichle 1994). The important

point here is that neuroscientists believe human sensory

and motor systems are analyzed and controlled by

precisely located networks of cells in the brain. That is

one part of the unfolding mind-brain puzzle. The second is

monitoring the activity and functioning of the networks.

Two functional processes are noteworthy.

There are about 100 billion cells or neurons in the brain.

Neurons come in many configurations and consist of a

nucleus, dendrites, axons, etc. Signals are transmitted and

processed by the nervous system as electrical energy and

are subject to the concepts of electricity such as charged

particles (ions), resistance and potential difference. The

signals can be transmitted to distances up to a few meters.

One methodology of analyzing the functioning of the brain

is measuring its electrical activity (EEG); this has been used

in clinical practice for over sixty years. But the EEG is not

very effective in isolating the multiple cell assemblies

located in different parts of the brain. It was not until the

development of PET and MRI methodologies, especially

fMRI in the 1990s, that the cognitive neurophysiology of

the brain really took off. Both technologies involve highly

sophisticated measurement systems (working at the level of

atoms and positrons) that measure changes in the blood flow

in response to neural activity (Posner and Raichle 1994).

Neural cells increase consumption of energy from glucose

and decrease their use of oxygen, resulting in a local increase

of blood flow to the precise region of neural activity.

The reason for this brief discussion is to highlight the forces

behind the growth of a physiologically driven cognitive and

behavioral science. The methodologies driving this momen-

tum are only going to become more and more sophisticated.The future science of consumer behavior and consumption

experiences is inextricably linked to this future. The new

science shows some interesting throwbacks to marketing

quandaries of the past: (1) how large a role do Skinnerian

stimulus-response processes play in consumption behavior,

and (2) is there asubliminal learning process after all (due to

the so called priming effect)?

For those who believe all this is too premature for an

applied behavioral science, or that this is just another

galvanic skin response fad, here is the reality. The field of

neuroeconomics has been quickly established, led by

economists like Colin Cramer at Caltech. The UKs Journalof Consumer Behavior devoted a special issue in 2008 to

neuromarketing. And long before it is clear that there is a

verifiable body of knowledge here, marketing consultants

are charging into the practice of neuromarketing (notably

UK-based Neursense and Bright-House Neurostrategies

Group of Atlanta). For example, a company called Mind-

Sign Neuromarketing says:

We look at the subject brain response to your ad,

game, speech, or film. We look at how well and how

often it engages the areas for attention/emotion/

memory/and personal meaning. We also look at howwell it activates the brain as a whole. From this data

we can tell what your audience was thinking while

using your software or watching your content,

moment by moment, regardless of what that content

is. Were they scared or sleepy, happy or sad? Were

they even paying attention? We can show you how

your product is affecting the consumer brain even

before the consumer is able to say anything about it.

Additionally, an fMRI experiment using the Pepsi

Challenge by neuroscientist Read Montague (published in

Neuron, October 2004), articles in Forbes, Time and the New

Yorker, and a book by Martin Lindstrom titled buy.ology

(2008), had a lot to do with publicizing the new science.

Marketing and nanotechnology

Nanotechnology is the creation of materials, devices and

systems through manipulation of matter at scales of 1100

nanometers, essentially via manipulating atoms and mole-

cules. A nanometer is a billionth of a meter (the width of a

human hair is 200,000 nanometers). In the realm below 50

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nanometers the common laws of physics no longer apply,

and the surreal world of quantum physics takes over.

Materials take on surprising new properties: something that

was red may now be green, metals may become translucent

and thus invisible, insoluble substances may dissolve and

much more (Montague 2004).

The U.S. National Science Foundation has labeled the

impending revolution in science as NBICa nanotechnologydriven convergence of nanotech, biotech (manipulation of

genes), infotech and cognotech (cognitive). Largely unno-

ticed, the application of nanotech to consumer products is well

on its way. Nano particles, nanotubes and carbon nano crystals

are being manufactured in ton quantities for commercial use.

Scientists have made breakthroughs in the holy grail of

nanotechself-assembling systems that can grow and evolve

like the human cell (NewScientist.com 2003).

The U.S. is investing big in nanotechnology. The

National Nanotechnology Institute was created in 2001

and will have disbursed $12 billion for research in the field

through 2010. Hundreds of products containing nanoparticles have already reached the marketmetal surfaces

and paints that clean themselves when it rains; sub-

miniature data storage devices (aiming to hold the Library

of Congress in a computer the size of a sugar cube);

specialty lubricants; long-mileage vehicle tires; nano-

reinforced plastics for stronger automobile fenders; light-

weight military armor; anti-reflective and scratch-resistant

sun glasses; super-slippery ski wax; powerful tennis rackets

and long-lasting tennis balls; inkjet photographic paper

intended to hold an image for 100 years; efficient drug and

vaccine delivery systems; anti-wrinkle cosmetic creams;

and so on (Montague 2004).

NBIC promises consequences so radical that they are

likely to change the very nature of the world and human

experiences as we know them. According to Freitas (1999)

Nanomedicine, artificial nanodevices can be designed and

programmed to proceed directly to our approximately

12,000 taste buds and trigger any combination of desires

or taste sensations. Likewise thousands of nanodevices can

target our 50 million odd olfactory sensors and provide

complete olfactory sensation control. Consider the scary part:

nanotech portends the ultimate in targeted marketing, directly

(even surreptitiously) targeting an identified individuals

senses. It reads like science fiction, but it is very real science:

Just like bloodhounds and mosquitoes follow a

quarrys scent, airborne nanobots can be designed to

identify and home in on the senses of host patients

identified by specific characteristics (odortypes).

Aerial nanorobots could be released as aerosols

(chemtrails) engineered to deliver complete visual

and auditory hallucinations to recipients. The odor-

types which can be used to target individuals may

include naturally produced scents; behavior related

scents (due to exercise, fear reactions, sexual activity,

intoxication, and the like); artificial scents (cosmetics);

and taggants (messenger molecules). The airborne

nanorobots can stationkeep in the vicinity of the host

patient, navigate and avoid no-fly zones, and commu-

nicate among themselves. They can also be spread from

person to person like diseasesby direct physical contact(e.g., handshaking or sexual activity), by indiscriminate

broadcast transfers (e.g., sneezing, bleeding, sharing

tools or utensils), by serendipitous anonymous contacts

(e.g., doorknobs, public toilet seats, library books), or by

deliberate airborne nanorobot migrations. (Freitas 1999)

The aim of a subphenomenal marketing is to enhance the

consumption experience. But, with the lengthening shadow

of NBIC, it is equally important that the discipline be in a

position to protect the consumer from insidious marketing.

Regulation and regulatory norms are seriously lagging.

Congress intended to create the American NanotechnologyPreparedness Center (to study nanotechs potential societal

and ethical effects) when it created the National Nanotech-

nology Initiative, but apparently that part of the legislation

ran into trouble. Recently a coalition of consumer protec-

tion groups led by the International Center for Technology

Assessment filed a legal petition with the EPA seeking a

ban on consumer products (over 200 of them such as odor

resistant socks, baby bottles and clothes washers) which use

nanoparticles of silver as a germicide (www.icta.org; www.

nanoaction.ord).

The phenomenal structure of marketing

The previous section recounted the directions of prospective

change in the micro science of marketing. Equally powerful

changes are occurring in the way business organization is

structured and functions. The post-industrial, vertically

integrated, multidivisional firm is evolving into complex

global business networks from the production end to the

consumption end.

Network theory is rapidly becoming the lingua franca

of all science, from anthropology to physics (Borgatti

and L i 2009). Marketing networks are superior to

hierarchies in the production and exchange of knowledge.

To function, networks rely on relational governance

processes rather than hierarchical authority or power

(Achrol 1997). One stream of the literature highlights the

vertical disaggregation of functions in the network and the

reorganization of individual firms along horizontal syner-

gies rather than vertical ones (Achrol and Kotler 1999). It

emphasizes the shift in control and coordination mecha-

nisms from power-based systems to norm-based relational

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systems (Anderson et al. 1994; Dwyer et al. 1987; Morgan

and Hunt 1994) and parallels the development of relation-

ship marketing theory in general (Gummesson 1998;

Sheth and Parvatiyar 1995).

The evolution of production and innovation networks

Contemporary business networks evolved in two phases.First came the routinization of the production function and

its backward outsourcing. The focal firm specialized in

the innovation and marketing functions. The fortunes of the

leading production specialists like Flextronics and Jabil

continue to soar.

Phase two networks involve the routinization and

outsourcing of innovation. In the last five years smaller

aggressive competitors (primarily from Taiwan) have

carved away a large share of the contract manufacturing

business in cell phones, PDAs, laptops and digital cameras.

This pushed contract manufacturers like Flextronics into

technology development, product design and engineering.R&D constitutes a key part of the strategic core of the

firm, guarded zealously as its primary source of sustainable

competitive advantage. Nevertheless, even technology

leaders such as Philips, Motorola, Boeing and Eli Lilly

are being forced to turn to faster and cheaper innovators

around the globe for significant portions of their technology

and design needs. A VP of a Taiwanese innovation

company was quoted as saying: Customers used to

participate in design two or three years back. But starting

last year, many just take our product. Because of price

competition, they have to (Engardio and Einhorn 2005).

Cost is one factor, but equally important are the complexity

of tomorrows technologies and the uncertainty of success.

Few firms have the knowledge resources to tackle major

innovation on their own. Network organization is not only

about utilizing knowledge resources; it is about creating new

knowledge. The open innovation model, as this network form

has been dubbed (Chesbrough 2003), is more effective in

both creating and applying new knowledge.

Alongside the outsourcing of these core functions there has

been a quiet spinning-off of many support functions, including

accounting and human resources. HR hiring through contract

suppliers has expanded from clerical and labor to include

technical professionals and managerial talent in areas such as

marketing. This leaves what used to be the classic manufac-

turing firm close to becoming apure marketing company. A

recent survey of executives by the Economic Intelligence

Unit and Anderson Consulting (Vision 2010: Designing

Tomorrows Organization) concluded that:

The company of the future will consist of a small team

running its affairs from a single office. The team will

build and use its knowledge of market demands and

customer requirements, potential suppliers and partners,

and bring them together through sophisticated electronic

links to respond quickly and painlessly to changes in

fashion and economic circumstance. The process of

creating value will be set free from all unnecessary

activities, and for that reason alone will be significantly

more efficient.

Evolution is an ongoing process. As firms search out

new sources of efficiency, their attention will inevitably

focus on the remaining vestige of the industrial era

economy, the distribution system. The business environ-

ment and technological possibilities are pushing network

structures slowly but surely toward phase three. We predict

that phase three networks will invert functional disaggre-

gation to forward outsourcing. Production will move as

close to consumption as possible.

The distribution component accounts for the largest share

of the final price of consumer products, and this share has

been growing steadily. When the Internet and e-commercearrived, many expected widespread disintermediation would

follow. Conventional resellers survived the threat of obsoles-

cence from e-marketing. Disintermediation didnt happen.

Rather, the electronic medium became intermediated by

etailers like Amazon and eBay. The growth of the echannel

has been slower than anticipated. In 2009 e-commerce

accounted for just 3.7 percent (up from 3.3 percent in 2008)

of the $3,683 billion in total retail sales (U.S. Census Bureau).

Its biggest impact has been in products and services that can

be delivered electronically: thus the demise of Tower Records

and Hollywood Video, the impending demise of Blockbuster,

and the rapid growth of online sales of travel and leisureproducts. But we predict the story of the 21st century is going

to be about products which cannot be delivered electronically;

it will be aboutmicro production systems.

Distributed production-consumption networks

We call phase three networks distributed production-

consumption networks. They represent the ultimate in the

just-in-time model. Technology is approaching the point

where production can be enjoined to or juxtaposed with

consumption. Leading the way is the power industry of the

future. Distributed generation (also called on-site, dispersed

or embedded generation) produces electricity from small

energy sourcessolar, wind, fuel cellsat or close to the

consumption site. A large number of commercial buildings

already use in-house systems that produce a significant

amount of their power needs. Figure 1 pictures the

difference between the conventional centralized production

system and the distributed generation system.

Solar and wind powered units for individual homes are

available and growing in efficiency. The consumer market

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in Europe for rooftop wind-powered systems is off to asolid start and is emerging in the U.S. In Marketing

Myopia, Ted Levitt (1960) predicted that in the future

homes will be powered by a small chemical fuel cell unit

sitting in a closet. That is a technical reality today and no

doubt will become a commercial reality soon. Recently the

media featured the success of California-based Bloom

Energys fuel cell that can run on natural gas or biogas

and is in operation at Google, eBay, Wal-Mart, FedEx,

Coca Cola, and the like. The startup anticipates it will be

able to produce refrigerator-sized units for the home for

about $3,500 within the decade.

Similar distribution of production or assembly capabilitiesto wholesale and retail levels can be visualized for many kinds

of products except the most technologically complex. Xeroxs

Book-In-Time system, properly marketed to local retail-

producers (e.g., small printing firms, Kinkos), could have

seriously eroded the position of the giant publishing houses and

retail chains in the book business. Now Amazons Kindle and

Apples iPad threaten to do away with printed media altogether.

The same technologies that facilitated the emergence of

giant production specialists in phase one networks lie behind

the opportunity for distributed micro production systems.

Small computer controlled automated manufacturing or

assembly systems can be designed to operate at the level of

local markets. In concept, the distributed facilities are linked to

a core firm (a brand marketing firm or, in some cases, a

technology specialist) via an information system that provides

the technical information and controls the computers that run

the distributed plants. The operations will likely be franchised

to smaller local firms, retailers or wholesalers in the industry.

In some cases, the distributed systems may be decentralized

all the way to the ultimate customer and be located on

customer premises. Obviously, the economics upon which

such systems are contingent is that the efficiencies ofdecentralization are greater than its cost. Producing to demand

at the point of demand offers efficiencies in inventories and

logistics and reduces the uncertainties of innovation. These

advantages become bigger and bigger as the share of

distribution cost becomes disproportionately large and the

marketplace becomes the globe.

The previous section discussed how nanotechnology is

poised to dramatically alter consumer experiences. The

potential of the NBIC revolution to impact manufacturing

goes beyond our comprehension today. Today everything,

down to the tiniest micro-circuit, is fashioned by hammering,

melting, squeezing and sculpting chunks of matter, somethinglike force-herding masses of molecules into a desired form. In

contrast, nanotech construction or molecular assembly

arranges individual atoms or molecules one at a time (in the

ideal scenario they will self-assemble like living cells) into the

desired configuration. Instead of cutting trees to make a table, a

table will be grown by swarms of nanorobots that can be

programmed to fashion any kind of molecule and construct

any kind of product (see Bonsor 2007; Drexler 1992;

Feynman 1960; Montague 2004). How far removed is this

reality? In January 2011 the Department of Defense published

a request for proposals to develop micro robotic fabrication

machines. STTR Solicitation 2011.a states: Desktop manu-

facturing is the ability to use a personal computer to drive a

miniature fabrication station for the creation of new objects

with complex geometry ... This topic focuses on a particular

approach of using a coordinated and distributed swarm of

microrobots that are capable of handling and manipulating

nano- and micron-scale building blocks in the process of

synthesizing novel materials and structures.

What a transformation from Henry Fords famed

integrated factory on 2,000 acres along the Rouge River,

Fig. 1 Conventional and distributed power generation systems.

Source: Maribu, Karl Magnus (2006), Modeling the Economics and

Market Adoption of Distributed Power Generation, Doctoral Thesis,

Norwegian University of Science and Technology, Department of

Electrical Power Engineering

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Michigan, with its own blast furnace, steel mill, glass factory,

and more than 90 miles of railroad track and conveyor belts to

run the production lines. The manufacturing machines (nano-

robots) of the future may well be so small that thousands of

them will fit in the period at the end of this sentence (Bonsor

2007). It is not far fetched to go a step further and imagine a

general purpose production machine in every consumers

basement that can, with the right software and programming(accessed online), manufacture anything a consumer wants

from ajar of commodity atoms and molecules. Everything

in the physical world is simply the result of a particular

arrangement of atoms. Arrange them one way and you have

steel, arrange them another way you have corn. The ultimate

outsourcing of production and distribution will have taken

place, and a true era of consumer co-production and co-

creation will have arrived (Jaworski and Kohli 2006).

Consumption networks

Today when we speak of consumption networks we thinkmostly of the consumer communities organized by marketing

firms. Firms seeking to develop enduring relationship ties

with their consumers do so by creating forums for consumer

interaction, by developing extensive databases on the con-

sumers and by targeting customized communications and

offers to them. This is the classic relationship marketing

model. But firm-driven vertical consumer networks will likely

erode in the near future, giving way to a bottom-up marketing

phenomenon shaped by horizontal consumer networks.

The Internet has created a vast channel of horizontal

information flows, word-of-mouth and technical advice from

user communities and websites in practically every class of

consumption. There is probably no area of consumer interest

today that does not have a dedicated chat group, blog, or

interactive forum created by an enthusiast or a group. It is

frequently said that power is shifting from media institutions

to consumer communities and firms are taking note. This

explains the rapid growth of online brand monitoring services

led by market leaders Nielsen BuzzMetrics and Cymfony.

These firms specialize in automatic searching of text-based

keywords and data on blogs, chat rooms, message boards,

subject groups, social networks, bulletin and message boards.

Del Monte allocates between 10 and 15 percent of its research

funds on online research (see Kim [2006] for a review).

Consumer communities hold the power to usher in a

bottom-up market model to rival the top-down manufactur-

ing firmcontrolled information supply (the so-called

prescription model) with important effects on concentra-

tion and heterogeneity of preferences (Benghozi and Paris

2005; Gensollen 2005; both cited in Curien et al. 2005).

The sociology of consumer communities (Smith and Kollock

1999) will be important in understanding consumption in the

future. A community is a network of social relations

marked by mutuality and emotional bonds (Bender 1978,

p. 7). Brand communities are nurtured by avid enthusiasts

and fans of a brand. They perpetuate sentiments of belonging

orconsciousness of kind (Gusfield 1978). Because this is a

spontaneous consciousness and is not motivated by pecuni-

ary interests, it creates a fierce in-group loyalty, causing

feelings of betrayal and animosity toward members who

defect to other brands (Muniz and OGuinn 2001).Communities vary greatly in motivations and resources.

There are experience-sharing, brand rating and user commu-

nities that make consumer choice easier for experience goods,

epistemic communities (knowledge sharing communities)

which disseminate knowledge about complex goods and

subjects and file-sharing communities of peer-to-peer networks

that exchange cultural goods (Curien et al. 2005). Consumer

communities, with the exception of brand communities, are

particularly sensitive and inhospitable to individuals who are

seen as promoting particular products or companies.

Consumer communities are social networks and develop

complex organic properties but are inherently lacking in formalstructure and mechanisms. The networks are fluid and

membership is transient. Communities can form and reform a

number of times among leaders who come and go. They are

organized by mutuality, tradition, trust, reputation and norms

of behavior. Trust is one of the most important variables in the

success of a community and often the one most threatened by

opportunism. Consumer communities are a public good and

are subject to the tragedy of the commons. Individuals

under-invest in a public good because its non-excludability and

non-rivalry provide incentives to free riders who benefit from

the shared resource without contributing to it (Curien et al.

2005; Varian 2004). Curien et al. (2005) call itthe curse of

under participation, seemingly inherent to the management of

shared resources. The 2009 Nobel laureate in economics,

Elinor Ostrom (Ostrom 1990; Ostrom et al. 1994) argues that

self governing systems are possible for managing common

properties and interests.

Should consumer networks become embedded with firm

networks in a distributed production-consumption system, the

clash of values, interests, dependencies and vulnerabilities will

spawn a socio-economic environment the likes of which cannot

be fully visualized today. An example of the clash of consumer

and producer networks occurred in February 2004 when

Amazon.com mistakenly disclosed the real identities of some

of its book reviewers. A sizable proportion of those reviewers

were the books own publishers, authors and even competitors.

The network framework will need to evolve to provide a

structure for studying exchange as a social system. In that line

of thought, there is an even more encompassing dimension to

future marketing that reaches beyond economically empowered

networks of consumers, marketers and producers. It highlights

the social externalities of consumption and the well-being of

humankind. We call this the marketing superphenomenon.

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The superphenomena of marketing

We paraphrase Heinrich Kluver in his introduction to

Hayeks The Sensory Order (Hayek 1952):

It has been said that a philosopher is a man who has a

bad conscience whenever he hears the word philosophy.

Nowadays [marketing] scholars no longer seem todevelop feelings of guilt when they hear the word

[marketing]. This state of affairs certainly cannot be

accounted for by believing that the field of [marketing]

has acquired the status of a science.

Kluver was talking about psychologists. But is it time for

marketing scholars to develop a guilt complex over our

preoccupation with the managerial interests of marketing?

Marketing ethicist George Brenkert (2008) says it best:

marketing does not simply surround us, it envelops us; it is

in part how a society defines itself and its treatment of its

members. A person might think that such a pervasiveactivity would be the object of widespread moral agreement

or that it is at least subject to well developed norms of

social behavior and accountability.

Notwithstanding the tireless work of a dedicated cadre of

researchers in public policy, non-profit, environment and

social marketing fields, marketing has not embraced a

worldview commensurate to its vanguard role in the social

and economic well-being of nations.

Ultimately marketing is about more than individual firms

and their consumers; it is about the economic, social and

ecological sum of these contributions. The U.S. consumer-

driven economy (consumer spending accounts for 70

percent of GDP) has proved superior in creating wealth,

raising standards of living and providing opportunity. But

the consumer economy has created excesses, waste and

harmful side effects. How much marketing-at-any-cost can

society tolerate? The current crisis in financial and real

estate markets is a product of such excesses on the part of

firms and consumers.

Just as economists are engaged with stimulating the

growth of the economy as much as they are with controlling

its malfunctions (inflation, recession, unemployment, pov-

erty), marketing is responsible for the functions and

malfunctions of consumption. Marketing science should

be about creating a healthy consumption environment as

well as about protecting the consumer from overconsump-

tion. There are too many facets to the superphenomena of

marketing science to be covered in an article, so we focus

on two very large and pressing facets: the concept of a

sustainable marketing ideology and the dark side of the

middle-class prosperity created by consumption economies,

i.e., the dark face of poverty. There are two powerful forces

driving our attention on these two areasthe carrying

capacity of the environment and the consumption capacity

of developed economies.

The sustainable marketing concept

The three decades of unprecedented prosperity following

the Second World War swept companies along a path of

relentless growth to become multi-product, multi-market,multi-divisional firms. Despite concerns voiced by promi-

nent voices like Rachel Carson (Silent Spring, 1962), Ernest

F. Schumacher (Small is Beautiful, 1973) and the Club of

Rome report (Limits to Growth, 1972), the growth model

remained the dominant logic of the corporation. It is not

until the late 1980s that we see the first signs of maturing

markets and overconsumption beginning to slow corpora-

tions and right size them.

Sustainable marketing is founded on the key premise that

society and marketing are poised at a fundamental transition

from an anthropocentric (human centered) paradigm to a

biocentric (nature centered) one (Fuller 1999, p. 12). Theimperative for sustainable marketing can be characterized by

two types of carrying capacitymarket capacity and

resource capacity. Market capacity concerns whether the

present consumption level in a society is too high to permit

the next generation to achieve the same consumption level.

More and more economies are operating near their market

capacity limits; Europe, the U.S., Japan and the Five Tigers

are all bouncing near the limits. Operating at near market

capacity is a recipe for marketing excesses. The resulting

crises are due to the marketing shadowoverconsumption

whether it is oversold currencies, financial instruments, real

estate, business opportunities or dreams.

On the other side of the consumption capacity problem is

the resource capacity problem. In nature populations grow

faster than their stabilizing forces (such as predation) when

there is a surplus of supporting resources. In the days when

food was the limiting factor, Thomas Malthus postulated

that the human population was growing at a faster rate than

the food supply and this would lead to mass starvation.

Now there is even more at stake. The ecological con-

sequences of a mass consumption society range from

rapidly depleting scarce resources, environmental degrada-

tion due to extractive and manufacturing processes,

dangerous pollutants that persist in the environment,

emissions and waste due to logistics and distribution, and

emissions, waste and waste products due to the consump-

tion and post consumption processes. Together they

threaten to make planet Earth uninhabitable to many

species, including humankind.

Approaching the limit of carrying capacity, small displace-

ments cause large oscillations. To illustrate the argument, the

instability in the system as it approaches carrying capacity is

depicted in Fig. 2. The carrying capacity K is depicted as an



11/19

increasing function over time to allow for growth in resources

due to new discoveries and technology. It may indeed be

characterized by periodic discontinuities or steps (for

example, corresponding to revolutions in mechanization and

polymer chemistry in the past, digitalization and biotechnol-

ogy in the present, and coming soon, nanotechnology). Even

when the function steps up, the speed with which businesses

respond globally to exploit the opportunities is such that re-convergence is a matter of a few years (not decades like it

was with mechanization and the industrial revolution).

The theoretical impact curve is depicted here as the well-

known Ehrlich equation I=PAT (where P is population, A per

capita affluence, and T the damaging side effects of

technology per unit of consumption). If overshoot is

accompanied by irreversible damage to carrying capacity,

the result could be catastrophic extinction of species (called r

selection). K selection, on the other hand, means a stable

equilibrium population, but a turbulent equilibrium due to

human tendencies. Hence the recurring bubbles. The impact

function and its variants have been empirically tested (e.g.,Chertow 2001), and a number of alternative measurements are

also being used like ecological footprint, critical natural

capital, materials flow and economic throughput analyses.

Marketing scholars are cognizant of the imperative for a new

and probably radical reformulation of its fundamental philos-

ophy, its operational premises and the heuristics that are used to

make marketing decisions. But what are the conceptual

underpinnings of such a worldview? How can we construct

an orderly set of criteria that can reverse or at least slow down

the operational mindset and theorems that have guided

marketings activities for over a half century? Sustainable

marketing starts where marketing starts, at the very beginning

of the product development cycle. It ends where marketing

ends, disposal of the side effects and detritus of consumption.

In his influential book The Ecology of Commerce, Hawken

(1993) phrases it succinctly, Business has three issues to

face: what it takes, what it makes, and what it wastes. These

three principles can be laid across marketings venerable

planning framework, the product life cycle, to create its

shadow life cyclesee Fig. 3. At the bottom of the figure are

listed the kinds of questions that will need to be answered as

part of marketing decision making. So far marketing has taken

a passive and reactive position vis--vis sustainabilityby

developing alternatives (often perceived as more expensive

and less effective) for the ecology-sensitive consumersamong, for example, the LOHAS segments. In contrast we

emphasize a new philosophy for firms to proactively:

(1) communicate the harmful side-effects of wasteful

consumption,

(2) grow the segments of environmentally conscious

consumers, by developing superior products at stan-

dard market prices, and

(3) demarket/countermarket certain products, technologies,

and marginal consumer segments (e.g., consumers who

cannot afford expensive homes).

Currently, in their decision calculus, companies have toworry only about the costs of operations they undertake (and

in some cases, the costs of foregone opportunities) relative to

projected returns. Society bears the cost of environmental

impact, but there is a growing accountability to agencies like

the EPA that can require companies to clean up their

environmental messes and a growing movement around the

polluter pays principle. The BP oil spill tragedy in the Gulf

is a stark case in point. In the not too distant future firms will

be required to cost-in theirnature costs of operation. It is an

opportune time for the discipline to be developing environ-

mental cost accounting models that can become an integral

part of its decision calculus.

In Fig. 4, three types of hypothetical nature cost curves

have been overlaid on the product life cycle. Curve A may

be a company in the petroleum industry, with a bipolar

distribution depicting high nature costs during exploration and

refining and during the consumption (combustion) of its

Fig. 2 Carrying capacity



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products. Curve B could be a firm in the transport industry(automobiles, airlines, trucking, shipping) where the products

have a long consumption life span. Curve C could be a firm

with a product that contains persistent organic or chemical

pollutants (like DDT, lead, mercury, nuclear waste) and leaves

lasting long-term damage in the ecology at a growing cost of

recovery. There is a pressing need for:

(1) developing the accounting concepts for measuring

such nature cost curves,

(2) defining thejoint space of environmental and marketing

decisions over the product life cycle, and

(3) a cap-and-trade framework for consumption relatedenvironmental effects.

Sustainable marketing almost inevitably implies a slow

down in sales growth and product obsolescence cycles, and

in some cases, even shrinkage of the market. Assuming then

that developed economies are going to grow slowly close to

market saturation and are able to rein in their consumptioncapacity at some stable level just below carrying capacity,

what does that mean for the global economy and the growth

opportunities for business? That is where the BOP, the billions

of people at the base of the pyramid that the consumer society

left behind, enters the equation.

Base of the pyramid marketing

The economic miracle of the 20th century is far less amazing

when it is considered from its underside. Over three billion

people, nearly half the worlds population, live on less than U.

S. $2.50 (purchasing power parity) a day; using the standardof $10 a day for an affluent country like the U.S., puts maybe

about ninety-five percent of humanity in poverty (Ravallion et

al. 2008). The share of global income of the poorest forty

percent of the world population was a mere five percent in

2005, whereas the wealthiest twenty percent received

seventy-five percent of it (Watkins et al. 2005).

Technology Component Product Product Product Waste

Development Production Manufacturing Distribution Consumption Recycle

Search for Scarce, harmful materials Excessive consumption scarce material

alternative Footprint, emissions,waste Slowing planned obsolescence

technologies Emissions, waste

Health side effects of consumption

Fig. 3 Ecology of sustainable

product life cycles

Time

Sales Revenue/Nature Costs ($)

Product

DevelopmentIntroduction Growth Maturity Decline

Fig. 4 Nature costs and the

product life cycle



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It is perplexingwhy one of the oldest problems plaguing

humankind persists with few solutions in sight? Some argue

that it is due to a lack of determined effort by governments and

the community of nations Only a few nations achieve the

small UN target for development aid of 0.7 percent of GDP.

The Borgen Project, an anti-poverty advocacy organization,

estimates the annual cost of eliminating starvation globally at

$19 billion a year, a mere drop in the bucket compared to the$1000 billions spent annually on military expenditures (www.

wikipedia, 2007). Some believe that the solution calls for a

vast transfer of money from the wealthy to the poor nations

(Sachs 2005). But directing more and more money to the

problem will be only as effective as the development models

in use. The theories and development tools used to date have

had an impact (Watkins et al. 2005), but i t seems

insignificant in the face of the size and gravity of the

problem. It is possible that there are more effective

development models that can be designed based on the

theories and methodologies of business management.

Around the turn of the century Nobel Laureate in economicsAmartya Sen proposed the concept of empowerment,

arguing that economic development is fundamentally the

expansion of individual freedom of choice (Sen 1999). He

inspired a shift toward empowering the poor as the key to a

lasting end to poverty. Under Wolfenshon the World Bank

adopted empowerment as its primary strategy in attacking

poverty (Narayan 2002). But one cannot simply jump to

empowerment. Premature empowerment can be destabilizing,

as we learned from the Soviet Unions instant transition to a

market economy compared with the gradual approach adopted

by China.

After decades of programs designed around development

theories proposed by economists, sociologists and anthropo-

logists, there is a new movement in the fielddevelopment

approaches proposed by scholars in business schools. Two

events acted as catalysts. One is the late C. K. Prahalads

influential book Fortune at the Bottom of the Pyramid

(Prahalad 2005). The second is the award of the 2006 Nobel

Peace Prize to Muhammad Yunus. Business Week named

Yunus (founder of the Grameen Bank and modern micro-

finance), among the greatest entrepreneurs of all time,

joining Bill Gates, Steve Jobs, Henry Ford, Thomas Edison,

John Rockefeller and the like. These high visibility influen-

ces have drawn the attention of large multinational corpo-

rations (MNCs) and venture capitalists to the problems and

potential of the BOP.

Prahalads model is based on aggregating the demand of

the BOP and equipping poor people with the microfinance

to start and run businesses. According to Prahalad the

purchasing power of the BOP collectively amounts to $8

billion per day, making them a multi-trillion dollar annual

market for the worlds products. Prahalad recounts many

business success stories such as Hindustan Lever in India

and Casas Bahia in Brazil. An especially arresting example

is about cell phones in Africa. A single cell phone in a Sub-

Saharan region can create a business opportunity for a small

reseller of calls by the minute. In several African countries

cell phone sales are growing 150 percent a year, far in

excess of saturated Western markets. Prahalads calcula-

tions and assumptions have been questioned by Karnani

(2009), but we emphasize that a purely commercial solutionignores how vulnerable the poor consumer is to exploitation

(Chakravarti 2006). As narrated in a Business Week feature

story (Grow and Epstein 2007), commercial abuse of the

poor consumer is rampant even in a sophisticated and

regulated society like the U.S.

An alternative model has been developed by Kotler and

Lee (2009) based on the social marketing model. The

model is equally relevant to profit minded commercial

firms, nonprofit minded NGOs and charitable trusts and

public service minded government agencies. The theories

and methodologies of marketing can greatly enrich the

quality and effectiveness of ongoing programs. For exam-ple, the techniques for market segmentation, consumer

analysis, and targeting can immediately improve the quality

of program design and delivery. Almost all current

approaches use census-style mass market methods of

aggregating the poor and broadcasting aid programs to the

mass segments. To marketers it is evident that these mass

segments can be usefully analyzed based on differences in

needs, means, sub cultures, motivations, literacy, life

cycles, social class, benefits and so on. Even the poor have

distinctexistence styles.

In this paper we offer the elements of a different marketing

model for tackling poverty. It is based on two core ideas. The

first is an adaptation of one of marketings oldest theories

adopted from sociologyMaslows venerable hierarchy of

needs (Maslow 1943). It is a time worn tool in marketing

pedagogy and probably largely irrelevant in a developed

society. But it is a useful framework to order and align the

problems and solutions of subeconomic communities, issues

which are leap-frogged by Sens empowerment model and

Prahalads MNC business model. The second is the

application of the concept of marketing networks and the

distributed production-consumption model discussed earlier.

The needs-means hierarchy

Maslows hierarchy is well known to marketinga persons

motivations progress from satisfying physiological needs, to

safety needs, to the social needs for love and belonging, to the

need to be recognized and esteemed among society, and

ultimately to the need to actualize oneself. Once a need level is

satisfied it ceases to be a motivating factor, and the person

switches to pursuing the next higher order need. The

interpretation of each need is likely to be different for people

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raising themselves out of abject poverty. Most important, the

need hierarchy of the poor has to be understood in the context

of a critical parallel hierarchya hierarchy of means. This is

depicted as an inverted pyramid in Fig. 5, implying an

expanding horizon of means.

One reason for the meager results of global aid programs is

that they target multiple levels of the hierarchy simultaneous-

ly, maybe even indiscriminately. Many are missing theirtargets and the motivations of their targets. Instead of creating

a harmony of ends and means they are creating a muddle of

inefficiency and dependency. Marketing logic teaches us to

start by analyzing the unique needs of specific groups of the

poor, and then develop products, services, solutions, distribu-

tion channels and communication programs reflecting their

unique circumstances. Needed are instrumental measures for

segmenting the poor, and targeting and positioning need-

solutions and means to them.

Figure 5 highlights that a comprehensive poverty

alleviation campaign needs to integrate two parallel worlds

of the poor. On the one hand it should design interventionstrategies that match the subjects movement along the need

hierarchy. On the other it must create the wherewithal and

pathways for the subjects to navigate themselves along an

opportunity hierarchy such that their means-motivations

match their needs-motivations. Thus the second integral

component of our model is applying the concepts of

networks and distribution channels to operationalize the

needs-means hierarchy in a way that the economic benefits

are shared among the poor and become the means by which

they can satisfy their needs. The franchising model can be

applied to creating distributed production-consumption

networks in ways that foster economic opportunities.

Many articles have been written about the need to re-

engineer products and packaging for the poor markets. But

the game-changing innovation may be reengineering

production itself. Flooding the markets of the poor with

products manufactured in modern plants in distant cities

and countries is not a self-sustaining solution. Poverty has a

local face. More value-added must be located near value

consumption. Automated small scale production distributed

as close to the consuming populations as possible is the

solution. Only then can the needs-means hierarchy become

self-generating and self-sustaining.

The distributed production-consumption model

Distributed production is the opposite of the mass production

factories of the 20th century; it is the anti-Flextronics. It would

be terribly cost ineffective if it wasnt for the revolution in

automated, computerized manufacturing. It is now conceiv-

able to develop village-level automated micro production

systems linked to the parent company via the Internet and

programmed to assemble modern quality products in small

quantities on demand. One does not even need to wait for

nanotechnology to make this happen. Such systems would

take just-in-time from production all the way to consumption,

and eliminate much of the costs of marketing, logistics anddistribution, which constitute the largest chunk of the

delivered price of many consumer goods.

An excellent example that this can be done is offered by the

NGO KickStart. This NGOs approach is to develop

rudimentary mechanical products that are directly connected

to improving the productivity and income of rural popula-

tions in impoverished areas of Kenya, Tanzania and Mali,

with plans to extend to West Africa, India, Haiti and

Kyrgyzstan. It sees its mission in the spirit of the Chinese

proverb Give a man a fish and he will eat for a day; teach a

man to fish and he will eat for the rest of his life. KickStart

developed a leg-powered irrigation pump that allowed poor

farmers to move from subsistence farming to growing cash

crops like fruits and vegetables. It developed a hand press for

processing oil seeds into higher value products like cooking

oil and oilseed cake. It developed a technology for making

cheap building blocks for constructing homes. It produces

Fig. 5 The needs-means

hierarchies of subeconomic

communities



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the products locally and markets them through rural

channels, maximizing as much downstream employment

and profits as it can. The NGO claims to have created 88,600

enterprises generating $88.7 million in profits and wages

annually, and moved 439,000 people out of poverty forever

at a cost of $60 per person (www.kickstart.org).

The managerial model for distributed networks is the

franchising model. The MNC that tries to set up its owndistributed production and distribution network will not be

localized enough to adapt to the structure and culture of

poverty as it exists locally. It will not transfer enough of the

wealth creation process to impact the means creation process

locally. It will not distribute enough motivational forces

among the populations to make the model self-sustaining.

Distributed production-consumption networks must be

organized around the need and resource structure of poor

communities, not around downsized need structures of the

wealthy. The evolution of the need structure and its

satisfaction should be gradual and not driven by visions of

leap-frogging. No doubt there are areas such as communica-tions, entertainment and utilities where leap-frogging is

inevitable, but pushing consumption across a broad spectrum

can cause market fractures and is likely to be unsustainable.

Promoting markets for the shared use of cell phones and TVs,

cheap gas and electricity is one thing, marketing video games,

refrigerators, skin lightening cosmetics, and athletic shoes is

leap-frogging the means hierarchy and may atrophy it.

The product-market composition of distributed networks

is a function of the natural resources and livelihood

characterizing a particular community. Urban poor, for

example, most often provide manual labor or household

services to the wealthyservices such as laundry, land-

scaping, cleaning and cooking. Rural communities continue

to be predominantly agricultural and pastoral. If the village

community is large enough, it will also support the basic

trades like carpentry, masonry and shop keeping. Sustain-

able production-consumption networks are those that

directly engage the predominant indigenous sources oflivelihood in a community.

Figure 6 depicts typical rural livelihood clusters. At the

most basic level is manual labor. This is literally manual

labor, with people working with their hands, using

rudimentary tools and carrying heavy materials around on

their heads or backs. They do not even have the benefit of a

wheel barrow. In the semi-skilled building trades, masons

still work with a hammer, chisel, trowel and a mixing pan.

Powered tools just do not exist. A local production system

for assembling modern mechanical tools and simple

powered work tools and power generators, supported by a

microfinance system and a training system, would have aprofound impact on the productivity, income and quality of

work-life for the common rural laborer. Indeed, focusing on

the needs of the rural middle class has created the anomaly

that one can spot a number of farm tractors standing in rural

villages, but no power tillers or mechanized hand imple-

ments for alleviating the toil of the menial farm worker.

Distributed production franchises can be designed to

target each employment cluster in Fig. 6. The opportunities

inherent in each are self evident. Power failures are chronic

in the villages, if they have power to begin with. Cooking

FranchisorMNCs

LeatherGoods

Franchises

NaturalGas

Electric

BioFuels

LeatherPrep

Fruits &Vegetables

MeatMilk

StapleGrains

CommunicationsPhone, TV

Sanitation

Microfinance

BanksTailoring

BuildingTrades

Carpentry

Labor

ShopKeeping

Repairs

Utility

Production

Distribution

Franchises

Leather

Goods

Franchises

Powered

Trade-Tools

Franchises

Processed

Food

Franchises

Fig. 6 Distributed production-

consumption networks

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gas supply is sporadic and comes through agencies in larger

cities. Bio fuel opportunities abound but are not fully

exploited because they tend to be government-sponsored

initiatives which favor the middle class and are not

entrepreneurially embedded in the BOP. In designing

distributed networks it is important not to lose sight of the

production-consumption synergy. Training the consumer on

how to optimize the use and productivity of the products,adapting the product to his/her needs and providing the

means through leasing or microfinance are the keys to a

sustainable needs-means virtuous cycle of development.

Understanding how the marketing model can be adapted

and applied to raising the consumption capacity and quality

of life of the worlds 4 billion consumers in the BOP in a

sustainable way is vital to the future of globalization and

world prosperity. The developed world will benefit from the

degree of poverty alleviation in the developing world. As

the poor acquire purchasing power, they provide the

missing market that the developed world needs to supply

full employment to its own citizens.Yet the growth of the poor worlds purchasing power

will pose the question once again of limited natural

resources and increasing pollution and climate damage.

We cannot avoid the need to strike some balance in the

distribution of the worlds resources among the competing

claimants in different countries and social classes. Not only

must the present generation arrive at an acceptable balance

in the consumption of the worlds products and resources,

but it must also make sure that current consumption levels

do not prevent the next and future generations to inherit the

same capacities as this generation.

The marketing discipline must take a prominent position

in fashioning this understanding. Without a body of

knowledge that can address the social problems of the

world, marketing will surely lack the philosophical direc-

tion and stature it needs heading into a future rife with

global, economic, social and individual opportunities, but

also with conflicts of interest.

Conclusion

This has been a far ranging discussion of marketings future

possibilities. Marketing is confronted with a Kuhnian

paradigm shift, a transformation like nothing before. The

prominent features of the shift are consumer experiences,

networks and a macro domain spanning the global

commons.

Consumers experience products and services via their

senses. Our understanding of sensory experiences is fast

becoming a neurophysiological science. The growing impact

of digitization and virtual media considerably expand the

scope and impact of sensory satisfactions. Approaching is a

nanotech driven NBIC phenomenology, a surreal world of

quantum physics and fantasy experiences far exceeding

virtual reality. To cope, marketing will need to develop a

vastly expanded base of theoretical and methodological tools.

The way consumer products and services are created,

delivered and consumed is also in radical shift. Gone are the

days of vertical integration. The phenomena of marketing are

being distributed between consumption networks, marketingnetworks, innovation networks and production networks. The

day is not far when micro production systems that produce to

demand and are located close to or in the place of

consumption can be developed. Network organization is

evolving to a distributed production-consumption model.

Finally there is the marketing superphenomenon.

Globalization continues on its fitful but inexorable pace.

Nations like China and India with expanding consump-

tion bases are racing ahead to economic prosperity. A

more prosperous world magnifies the side effects of

consumption societies on the ecology and resources of

the world. At the same time large sections of the worldpopulation languish on the sidelines. Economic theory

based models for alleviating poverty have had marginal

impacts. It is an opportune time, an imperative time, for

marketing to step forward with its model for a sustainable

consumer society and base of the pyramid marketing.

What does the new mark

01-kotler-frontiers of the marketing paradigm in the third millennium - achrol and kotler 2012

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