THE COST OF COMPETITIVE SELLING 1. Criticism of marketing methods.—The cost of marketing is attracting the increasing attention of press and public. Recent years have seen large ad vances in the cost of staples and luxuries alike. In the desire to head off further advances and to find the reason for past increases, many people have come to regard the present marketing system as the most blameworthy single factor. The criticism is general that high prices are due to advertising; that the enormous wastes of publicity are responsible for many of our difficulties; that there are too many sales men, too many middlemen, too many appeals to the public, and too much buying; that the world is living beyond its means and that this or that phase of marketing is chiefly to blame. We may look into some of these charges in so far as they have reference to manufactured products.
The charges against the present marketing system are of two kinds. One has to do with the multiplicity of competitive appeals of all kinds, the effect of such appeals on prices generally, and their effect on ex travagant living and general economic conditions. The other charge is that any kind of intensive selling, whether carried on by advertising or salesmen, must necessarily increase to the consumer the price charged for the article so sold. Let us consider this latter charge first.
The criticism assumes many forms but it is most fre quently directed against advertising. Accordingly we may accept advertising as a type of intensive sell ing, and discuss the charge against it, with the under standing that what is said of it could with equal valid ity be said also of any other method of selling. In principle, the telling of a sales story to 10,000 people at a time by means of a printed advertisement is no different from the telling of it to each possible buyer in turn, either over the counter of a retail store or by a salesman calling on the prospective buyer. The ef fect of intensive selling on the selling price of an article must be the same no matter what method of intensive selling is used.
2. Who pays for the advertising?—The question is frequently asked: "Who pays-for the advertising?" with the implication that the answer will disclose the cause of high prices. Those who ask the question are prompted to do so by the thought that the adver tiser passes on his advertising expense to the con sumer, who pays it in the form of higher prices. Is this true? If it is, it is a serious indictment against advertising.
3. Advertising and the retail storc.—In the larger cities at least, the successful retail store spends huge sums for publicity ; it uses large space in expensive newspapers; it spends a fortune, perhaps, on the dec oration of its Christmas windows; it provides all sorts of conveniences for its patrons, all of which are charged to advertising. Do customers pay more in consequence for their purchases than they would if the store did no advertising? All these marketing activities have but one purpose--to make more,sales. Increased sales mean more rapid return on the invest ment, without a proportionate increase of capital. This means that the capital can be used more fre quently. A man with a capital of $10,000 may with out advertising make sales of $25,000 a year. If he spends a few hundred dollars in advertising his sales may amount to $40,000. He increases his turnover from two and one-half to four times. When he does this, lie can afford to take a smaller profit on each dollar's worth of goods sold. This is one saving that he can pass on to the public.
Another saving is in expense. Every article sold must bear a certain charge for the expenses of run ning the store—rent, labor, administration, etc. Some of these expenses remain the same regardless of considerable increases in the amount of sales ; some of them increase with the sales, but not proportion ately—advertising is such an expense. With the in creased sales caused by good advertising, each dollar taken bears a decreased proportion of the total ex pense of doing business. This is a second saving that can be passed on to the public in the form of lower prices.