Marketing as Production:
The Development of a Concept
Donald F. Dixon
Penn State Great Valley
The conventional view of marketing as somehow adding
to the work of manufacturing is rooted in the concept of
production as the creation of material attributes. A view of
marketing as an integral part of a productive process
generating "bundles of utilities" has a long history in
economic analysis. This approach offers several advantages
for marketing thought.
INTRODUCTION
In economic theory production is "The process of increas-
ing the capacity of goods to satisfy human desires or of
rendering services capable of satisfying human desires"
(Sloan and Zurcher 1970, p. 348). Marketing activity falls
within this definition. However, the way that marketing
textbooks have differentiated marketing from other produc-
tive activity has created theoretical difficulties. For example,
a generation of marketing students have been told that
"Stated simply, the job of manufacturing is to create form
utility, while marketing's job is to provide time, place, and
possession utility" (McCarthy 1981, p. 5).
Cox identifies a significant problem arising from this
approach:
By a long-established convention, what manufactur-
ers and farmers do results in "production," or "value
added." What "distributors" do is more likely to be
counted as a "margin," a "bill," or simply a "cost."
The bias inherent in this usage undoubtedly makes
much more difficult a disinterested evaluation of
what marketing is and does (Cox 1965, p. 26).
Journal of the Academy of Marketing Science
Volume 18, Number 4, pages 337-343.
Copyright 9 1990 by Academy of Marketing Science.
All rights of reproduction in any form reserved.
ISSN 0092-0703.
JAMS
The definition of marketing in terms of types of value or
utility generated has been criticized in the marketing litera-
ture. Alderson argues that "It is a highly arbitrary procedure
to divide the utility to the consumer into two parts and to say
that one part is created by production and the other by mar-
keting" (1957, p. 68). In referring to the distinction drawn
between form and other aspects of utility, Alderson remarks:
"There is only one kind of utility--namely the value which
a product contributes to the potency of an assortment... All
economic activities create a single form of utility" (1957,
p. 198).
Beckman also argues against any distinction between mar-
keting and manufacturing: "The best current economic think-
ing" is that "values are created through the addition of
utilities, which are capacities in goods or services to satisfy
human wants." Moreover:
It is now generally recognized among economists
and other students of the subject that the creation
of these utilities spells the creation of economic
values and that this is the essence of production.
This means that whoever creates these utilities is
engaged in production, so that a wholesaler or a
retailer who normally creates place, time, and pos-
session utilities is as much a producer as is a proces-
sor who changes a product from one form to another
(1957, p. 8).
Beckman concludes that "It is high time that we all get in
line with sound economic thinking and stop the silly argu-
ment" about who is engaged in production and who is not
(1957, p. 9).
Although Beckman's conclusion is similar to Alderson's,
the conceptual foundations underlying the two discussions
are different; each writer uses a different concept of value.
Beckman is arguing in terms of value-in-exchange, basing
his calculation of value added upon "the selling value" of
products ( 1957, p. 7). On the other hand, Alderson is reason-
ing in terms of value-in-use. Because the exchange transac-
tion increases the utility of the assortment held, "It creates
337 FALL, 1990
 MARKETING AS PRODUCTION:
THE DEVELOPMENT OF A CONCEPT
value in the sense that there is greater value in use after the
exchange" (1957, p. 198). Clearly Atderson's concept of
utility as "increasing the potency of an assortment" differs
from Beckman's "selling value."
The failure to recognize different meanings of "value"
leads to conflicting interpretations of economic theory. In
McCarthy, the distinction between marketing and other pro-
ductive activities lies in "what economists believe" (McCar-
thy 1981, p. 665), while "the best current economic think-
ing" leads Beckman to consider such a distinction to be
"silly9 Such confusion also leads to a misunderstanding of
the influence of economic theory upon the analysis of mar-
keting as a productive process9 Barrels asserts that "In 1900
there was no clear concept of marketing as a productive
activity or as a contribution to economic production" (1962,
p. 16). This situation is said to have obtained because
"economists" were mainly concerned with "value in tangible
goods created in the process of physical production." Con-
sequently, "New concepts of value were required after 1900"
(1962, p. 15). The inference seems to be that marketing
writers in the United States developed these new concepts9
This paper demonstrates that there was a clear concept
of marketing as a productive process at the turn of the
century. The discussion traces two streams in the develop-
ment of value and utility theory in the literature of
economics9 Value as usefulness or utility, underlying Alder-
son's work, is examined first, and then the focus shifts to
exchange value, that underlies Beckman's position. Finally,
the treatment of marketing in the context of utility by some
early marketing writers are examined.
USE VALUE
Aristotle distinguishes between use value or utility, and
exchange value (4th c. B.C., I, iii, 10). However, it is the
Medieval Schoolmen who give utility its primacy of position
in economic analysis, arguing that the origin of economic
value lies in the needs of consumers. St. Augustine (d. 604),
the first archbishop of Canterbury, holds that the price of
marketable goods depends upon their usefulness or utility
to men (5th c9 709149
The originator of the concept of subjective utility is the
Franciscan, Pierre de Jean Olivi (1248-1298), who asserts
that one aspect of the value of a commodity is "according
to how it is more or less pleasing to our will to have it in
our possession," and "In this way one person considers a
commodity, which appears inferior to another, very much
to be appreciated." Thus value will vary "within some suit-
able range, with respect to times, places and persons" (13th
c., f. 295c).
And the times and places that influence value are recog-
nized as contributions made by marketing activity9 St.
Thomas Aquinas (c. 1225-1275), the best known of the
Schoolmen, confirms that "The price of saleable things
. . . depends upon the usefulness to man" (13th c., 779
This "usefulness" created by altering commodities, gener-
ates income; if a man "sells at a higher price something that
he has changed for the better, he would receive the reward
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of his labor9 And this "changing for the better" can occur
in several ways:
Either because he has bettered the thing, or because
the value of the thing has changed with the change
of place, or time, or on account of the dangers he
incurs in transferring the item from one place to
another, or again in having it carried by another
(13th c., 77.4).
By the close of the Middle Ages the Schoolmen understood
that value arises from the creation of form, time and place
utility, and risk bearing. The analytical similarity between
the contribution to a product's usefulness made by merchants
and other economic agents was generally acknowledged.
A Seventeenth Century secular work written by Nicholas
Barbon (d. 1698), who Schumpeter considers "one of the
top half dozen English seventeenth century economists"
(1954, p. 294), gives the impression that the contribution
of marketing activities is so obvious that it does not require
elaboration: "The Value of all Wares arises from their Use.
9 Use of Things are to supply the Wants and Neces-
sities of Man." Two types of wants are identified, those of
the body and of the mind. The wants of the mind are infinite:
"Man naturally Aspires, and as his Mind is elevated, his
Senses grow more refined, and more capable of Delight;
his Desires are inlarged, and his Wants increase with his
Wishes."
What is the role of marketing in this process? Barbon
states simply that "The Use of Trade is to make, and provide
things Necessary, or useful for the Support, Defence, Ease,
Pleasure, and Pomp of Life." In the event that this statement
is not sufficiently clear, many participants in the productive
process are listed, among whom appear various types of
manufacturers and retailers (Barbon 1690, p. 21).
In the following century the concept of subjective utility
was carried to its logical conclusion by Ferdinando Galiani
(1728-1787), the Italian economist who Schumpeter consid-
ers "one of the ablest minds that ever became active" in
economics (1954, p. 292). Galiani asserts that "It is certain
that nothing has a price among men except pleasure, and
that only satisfactions are purchased" (1751, p. 304). This
view makes it possible to develop the precise mechanism
by which marketing activities create use value.
An early effort to accomplish this is found in the work
of Etienne B. de Condillac (1715-1780), the noted French
philosopher and associate of Rousseau9 The discussion be-
gins with the statement that the value of goods is based
upon the use made of them, and this is based upon men's
needs9 Two types of needs are identified: those that are "a
consequence of our makeup," such as food, and those "born
out of our practice of choosing to satisfy our natural needs
by particular methods9 It is especially interesting that social
needs, which "are a consequence of civilized societies," are
as "natural" as the need for food, for example (1776, p. 6).
The demonstration of the significance of marketing ac-
tivities begins in the chapter titled "How Commerce In-
creases the Stock of Wealth":
We have seen that commerce, which consists of the
exchange of one thing for another, is carried on
338 FALL, 1990
MARKETINGAS PRODUCTION:
THE DEVELOPMENTOF A CONCEPT
principally by merchants, trafficers and wholesalers.
We now try to understand the utility which society
derives from all these men who have established
themselves between producers and consumers.
There are two steps in the argument. First, the transaction
itself creates wealth. Each party gains something that they
prefer to that given in exchange.
This idea that the transaction itself creates value is not
often stated explicitly, but it survived until the end of the
nineteenth century. Henry George (1839-1897), the Ameri-
can economist noted for his view that land values represented
monopoly power and should bear the entire tax burden,
argues:
In itself exchange brings about a perceptible increase
in the sum of wealth . . . . Each of the two parties to
an exchange aims to get, and as a rule does get,
something that is more valuable to him than what
he gives . . . . Thus there is in the transaction an actual
increase in the sum of wealth, an actual production
of wealth (1898, p. 33 1).
Besides the direct creation of value by the completion of
a transaction, marketing activity also makes an indirect con-
tribution. It makes it possible for transactions to take place:
"Exchange gives value to the abundance of production,
which without exchange would not have any value."
Specialists must conduct this exchange because "it would
be uneconomic for the producer to go to the market rather
than remaining at work in his fields." The contribution of
marketers is shown by analogy:
A spring that disappears in the rocks and sand is
not wealth for me; but it becomes wealth if I build
an aqueduct to carry it to my fields. This spring
represents the surplus production of the farmers,
and the aqueduct represents the merchants.
In conclusion, "exchange is also, in the last analysis, a
source of wealth" (1776, p. 50).
This result is accepted by J.B. Say (1769-1832), the
French economist whose treatise offered the first popular
treatment of economic principles. However, Say objects to
Condillac's argument that the contribution of marketing is
indirect: "The value added by commerce to the things ex-
changed is not operated by the act of exchange, but by the
commercial operations that precede it." The activities of
marketing create utility directly, and in a manner that is no
different than other types of productive activities. Transport,
for example, increases value because a good is more useful
in one place than another: "Transportation is a modification
that the trader gives to the commodity, whereby he adapts
to our use what was not before available." All branches of
industry increase value in this manner, that is, by the "ap-
proximation to the customer.., by fitting them [resources]
for the use of mankind" (1803, Vol. I, p. 9).
Other nineteenth century writers did little more than repeat
Say's argument. John R. McCulloch (1789-1864), whose
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textbook dominated English economics in the early
nineteenth century, states:
It is plain that the capital and labour employed in
carrying commodities from where they are produced
to where they are to be consumed, and in dividing
them into minute proportions, so as to suit the wants
of consumers, are really as productive as if they
were employed in agriculture or manufacturing . . . .
We do not owe our fires exclusively to the miner, or
exclusively to the coal-merchant. They are the result
of the conjoined operations of both (l 825, p. 177).
Toward the end of the century the argument was cast in
more modern terms. A work coauthored by John Hobson
(1858-1940), "an archeretic in the heyday of Marshallian
supremacy" (Schumpeter 1954, p. 832), held that "logically,
and in the last resort... 'utilities and conveniences' are non-
material; that is to say, they consist of the 'services' rendered
by instruments" (Mummery and Hobson 1889, p. 16).
Moreover, these writers carry the analysis through an entire
marketing channel. The process of producing a pair of shoes
is traced from the animal providing the hide to the ultimate
consumer, to show that raw material gathers value continu-
ously "by change of form or change of place."
The modem form of this line of reasoning was introduced
by the Austrian School. W. Stanley Jevons (1835-1882),
"one of the most genuinely original economists who ever
lived" (Schumpeter 1954, p. 826), is considered a member
of the Austrian School despite his English birth because he
independently discovered concepts associated with the
School. Jevons holds that value depends entirely upon util-
ity. "The keystone of the whole Theory of Exchange" is the
concept of marginal utility (1871, p. 95). He notes that one
limitation of this proposition is that quantities are not infi-
nitely divisible: "There is always, in retail trade, a conve-
nient unit below which we do not descend in purchases.
Paper may be bought inquires, or even in packets, which it
may not be desirable to break up" (1871, p. 125). A corollary
is that marketing activity, which enables purchasers to match
more closely the size of the unit purchased to the amount
required, results in exchange being more perfectly adjusted.
From his general proposition Jevons derives a result that
counters the "fallacious tendency to believe that the whole
benefit of trade depends upon the difference in prices" ( 1871,
p. 142). That is, "he who pays a high price must have a
great need of that which he buys, or very little need of that
which he pays for it; on either supposition there is gain by
exchange." The rule is that "no one will buy a thing unless
he expects advantage from the purchase" (1871, p. 145).
Karl Menger (1840-1921), the founder of the Austrian
School, develops a similar argument in his chapter on "The
Theory of Exchange." Two individuals are seen adjusting
their assortments of goods by exchange, and thereby increas-
ing their joint utility. In his concluding paragraph Menger
clearly states that the work of marketing contributes to the
well-being of individuals in the same way as other productive
activities:
An economic exchange contributes, as we have
seen, to the better satisfaction of human n e e d s . . .
339 FALL, 1990
MARKETING AS PRODUCTION:
THE DEVELOPMENT OF A CONCEPT
just as effectively as a physical increase of economic
goods. All persons who mediate exchange are there-
fore--provided always that the exchange operations
are economic--just as productive as the farmer or
manufacturer. For the end of economy is not the
physical augmentation of goods, but always the ful-
lest satisfaction of human needs (1871, p. 190).
Thus, during the nineteenth century writers in Austria, En-
gland, and France, offered a clear conception of the produc-
tive contribution of marketing to the usefulness of com-
modities. Moreover, these writers unequivocally demonstrate
that there is no analytical distinction between the contribu-
tion of marketing and other types of productive activity.
EXCHANGE VALUE
A parallel stream of thought, focusing upon exchange
value rather than use value, can be traced to Adam Smith
(1723-1790). Although Smith is aware of use value, as
"expressing the utility of some particular object" (1776, p.
28), he devotes his attention to exchange value. Wealth
consists of tangible goods, not the use made of them.
But even in the context of exchange value, Smith shows
that merchants are productive, just as manufacturers are,
because their labor "fixes and realizes itself in some particu-
lar object or vendible commodity, which lasts for some time
at least after that labor is past" (1776, p. 314).
Additional arguments also are presented. Where Smith
speaks of retail activity as breaking and dividing goods into
small parcels, he argues that this enables the workman who
purchases from the retailer to reduce inventory costs. As a
result the workman can earn a greater profit, which more
than compensates for the higher price he pays. The
wholesaler also makes a contribution, by affording a ready
market to the manufacturer, by taking his goods off his
hands as fast as he can make them, and by sometimes even
advancing funds. Thus the manufacturer may produce "a
much greater quantity of goods than if he was obliged to
dispose of them himself to the immediate consumers, or
even to the retailers" (1776, p. 342).
Here, as in Condillac's analysis, the contribution of mar-
keting is indirect. But in Smith's scheme the nature of this
indirect contribution has immense significance, because it
has to do with the division of labor. The division of labor
plays a dominant role in The Wealth of Nations because it
leads to increased output. There are two ways in which
marketing activity contributes to the division of labor. First,
if a workman must perform marketing activities rather than
doing his own work, then the potential gains from his
specialization cannot be enjoyed. In addition, since the
marketer is also a specialist, this means that the work of
marketing is carried out at the lowest possible price.
The second way in which marketing makes a contribution
arises because the extent to which specialization is possible
depends upon the amount of work to be done. That is, "The
division of labor is limited by the extent of the market." By
lowering costs and prices, marketing activity increases mar-
ket size. Increased market size leads to increased specializa-
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tion, which further increases economic efficiency.
Robert Torrens (1780-1864), English soldier and
economist, sees marketing as the transport and exchange of
"articles of wealth" acquired from other sectors of the
economy. The first marketing activity, transport, makes a
direct contribution to wealth: "Many articles which possess
utility in one place, do not possess it in another place; and
therefore, the industry which conveys such articles is instru-
mental in conferring utility" (1821, p. 153). To this extent,
Torrens agrees with the utility approach and departs from
Smith's position.
The second marketing activity, exchange, which has "an
indirect operation in the formation of riches," is divided
into two parts. First, it makes possible the division of labor:
"The divisions of employment to which the exchange of
commodities gives occasion, augment, to an astonishing
degree, the productive power of human industry." The sec-
ond role of exchange is to make a continuous market by
setting up warehouses and shops for the "collection and
vending of commodities." As a result, each producer,
"knowing where he can at all times be supplied.., is ena-
bled to devote his whole time and labor to his proper calling."
In short, exchange gives "a more continued and uninter-
rupted motion to the cultivator and the manufacturer" (1821,
p. 177).
The position taken by Torrens is equivocal at best. No
conceptual scheme is introduced to Justify a different treat-
ment of the two types of marketing activity. If utility is
produced by movement in space, why is there not a similar
effect from movement in time? Alternatively, there is a
spatial aspect to exchange activity since it involves "setting
up warehouses and shops." Why then is it that transport
does not also contribute to the division of labor?
Such analytical inconsistencies were resolved as an under-
standing of the direct contribution of marketing to exchange
value emerged during the remainder of the nineteenth cen-
tury. The foundation of this subsequent work was provided
by James Mill (1773-1836), Scottish philosopher and
economist, and father of John Stuart Mill. Mill's Elements
of Political Economy is unique in its organization into four
chapters: Production, Distribution, Interchange, and Con-
sumption. This is the first time that the treatment of ex-
change, Mill's "interchange," is identified as a separate
topic, and it established the pattern for the next generation
of writers. This pattern focused attention upon marketing
activities because it was necessary to assign them to one of
the categories in the quadripartite arrangement. Various writ-
ers argued for the placement of marketing into one or another
of the categories, but agreement was finally reached that
marketing activity was part of the production process.
The relevant discussion Mill's Elements consists of little
more than the argument that "The agency of man can be
traced to very simple elements. He does nothing but produce
motion. He can move things toward one another, and he
can separate them from one another" (1821, p. 5). This
brief statement is of the utmost significance, for it removes
completely the possibility of any conceptual distinction be-
tween the work of marketing and that of any other productive
activity. Indeed, it leads to the same conclusion as the utility,
or use value approach.
340 FALL, 1990
MARKETINGAS PRODUCTION:
THE DEVELOPMENTOF A CONCEPT
John Stuart Mill (1806-1873), the classical economist
whose textbook dominated English economics for two gen-
erations, restated the argument of the Elements:
Putting things into fit places for being acted upon
by their own internal forces, and by those residing
in other natural objects, is all that man does, or can
do, with matter. He only moves one thing to or from
another... He has no other means of acting on mat-
ter than moving it.
This proposition inevitably brought J.S. Mill to accept Say's
view of the significance of utility:
All the labour of all the human beings in the world
could not produce one particle of matter . . . . Though
we cannot create matter, we can cause it to assume
properties, by which, from having been useless to
us, it becomes useful. What we produce, or desire
to produce, is always, as M. Say rightly terms it,
an utility. Labour is not creative of objects but of
utilities (1848, p. 24).
Yet even John Stuart Mill is trapped by the weight of trad-
ition. Despite his recognition of utility, he argues that the
term "production" must refer not to utility but wealth. And
wealth can be created only by utilities "fixed or embodied
in any object." Marketing activity adds properties to objects:
"It adds the property of being in the place where they are
wanted, instead of being in some other place; which is a
very useful property, and the utility it confers is embodied
in the things themselves" (1848, p. 47).
This definition of production as adding properties to mat-
ter was widely accepted by later writers. But, although the
process of production was a unitary one, it nevertheless was
subdivided according to the types of "properties" added to
matter. For example, Henry Sidgwick (1838-1900), English
philosopher and economist, offers a tripartite arrangement
of agriculture, manufacturing, and commerce distinguished
by "the nature of the utility produced" (1883, p. 91).
The American economist Francis A. Walker (1840-
1897), identifies time, place, and form value, "in respect
of their origin," but denies any analytical distinction between
form and other aspects of utility. Walker emphasizes that
the creation of value does not imply any change in form:
"However little the material may be wrought, and by what-
ever agencies that little may be effected, we may say that
wealth is produced whenever value is added or acquired
through any act or process" (1888, p. 33).
Another list of values, offered in a textbook by Richard
T. Ely (1854-1943), American economist, includes elemen-
tary, form, place, and time value. Marketing produces time
and place value by adding properties to goods, "namely the
property of being in the right place and of being there at
the right time" (1889, p. 177). But the connection with
utility is made explicit, so that marketing is productive in
the same sense as other branches of industry:
Man creates no new matter. Neither the farmer nor
the merchant adds one atom to the existing material
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DIXON
of the earth. Yet they are both properly called pro-
ducers. What do they produce? Simply quantities
of utility. And how do they produce quantities of
utility? Simply by putting things in their proper
places. Man can only move things, and when he
moves them in a suitable manner he creates utilities
(1889, p. 143).
Thus, although the Classical writers emphasized exchange
value, it was seen that production resulted not in the creation,
but modification of matter, so that there could be no analyti-
cal distinction drawn between marketing and other produc-
tive activities. This point is restated by Alfred Marshall
(1842-1924), whose Principles was the most influential
economics textbook in the late nineteenth and early twentieth
centuries:
Man cannot create material things... He really only
produces utilities; or in other words, his efforts and
sacrifices result in changing the form or arrangement
of matter to adapt it better for the satisfaction of
wants . . . . It is sometimes said that traders do not
produce; that while the cabinet-maker produces fur-
niture, the furniture dealer merely sells what is al-
ready produced. But there is no scientific foundation
for this distinction. They both produce utilities, and
neither of them can do more (1890, p. 63).
DEVELOPMENTS IN THE
EARLY TWENTIETH CENTURY
American economics textbooks published in the early
twentieth century, and thus contemporary with some early
U.S. marketing literature, continued to present the argu-
ments that had developed in the nineteenth century. For
example, Irving Fisher (1867-1947) postulates two attri-
butes of wealth, "materiality" and "ownership." He then
divides the process of production into three categories. The
first two of these, "transformation," which changes form,
and "transportation," which changes position, are viewed
as so closely related that the distinction is "merely one of
convenience" (1910, p. 80). Both include marketing ac-
tivities. The third category of production is "exchange,"
which alters ownership. Fisher's contribution to marketing
theory is his demonstration of the unity of the production
process by including marketing activity in each of this three
categories of production.
John Bates Clark (1847-1938), classifying labor "accord-
ing to the particular result which it accomplishes," refers to
various types of utility. His discussion of form utility,
explicitly includes marketing activity:
A form utility is created when a raw material is
fashioned into a new shape, subdivided, or com-
bined with other materials, as is done in manufactur-
ing, and, in a certain way, in commerce. Buying
goods in bulk and selling them in small quantities
is the creating of form utilities and makes an addition
to total wealth.
341 FALL, 1990
MARKETING AS PRODUCTION:
THE DEVELOPMENT OF A CONCEPT
After offering two examples of this, Clark concludes that
"Merchants are not mere exchangers, for they make positive
additions to the utility of goods" (1907, p. 17).
These examples have a common theme, but perhaps the
best generalization is that of Frank Taussig (1859-1940),
who states that economic theory "is often brought to unity
and consistency by the analysis of production as ending in
utilities" and adds that "no conclusions of importance for
economics flows from the distinction between those who
shape material wealth and those who bring about utilities
of other kinds" (1911, p. 17).
Some early marketing writers in the U.SI were familiar
with contemporary economic theory, and incorporated the
analysis of production in their textbooks. Ralph Starr Butler,
for example, begins his discussion by defining a producer
as "one who creates utility," and notes that "The definition
says nothing about the kind of utility created." Reference
is made to Ely's work to justify the position that "A producer
is one who creates any kind of utility." It is concluded that
the middleman is a producer (1923, p. 22).
Ralph Breyer reaches the same conclusion in the following
decade. Specific citations are no longer provided; Breyer
simply reviews "a few fundamentals of economics." The
reader is informed that "the economist.., defines 'produc-
tion' as the creation of utilities, and 'utility' as the capacity
to satisfy a want." From a description of marketing functions
it becomes clear that marketing creates all types of utilities,
and "It is evident, then, that marketing is a productive activ-
ity" (1934, p. 13).
The stream of economic thought, as well as the work of
some early marketing writers in the U.S. provides a justifi-
cation for Alderson's rejection of the notion that different
aspects of utility can be attributed to production and market-
ing (1957, p. 68). But Alderson seems unaware of his pre-
cursors. First, he views his position as unique, commenting
that "It may appear to stretch the meaning of marketing to
imply that it is concerned with changes in form utility"
(1965, p. 27). Moreover, he has difficulty in reconciling
his argument with the "conventional view," for he admits
that "The choice of methods for changing the form is indeed
within the realm of production technology." Ultimately, he
is forced into an indirect justification of his position: "The
decision to change the form at all is explicitly or implicitly
a marketing decision" (1965, p. 27).
IMPLICATIONS FOR MARKETING THEORY
The "conventional view" of marketing as adding proper-
ties to matter, caused a problem for Alderson and "makes
more difficult a disinterested evaluation of what marketing
is and does" (Cox 1965). This view also underlies the dis-
satisfaction with marketing theory that led to the services
marketing literature. If marketing is the process that adds
properties to matter, then it cannot contribute to the produc-
tion of "immaterial" goods. These problems do not arise
once the contribution of the two streams of thought examined
above are recognized.
Since marketing has to do with satisfying needs, the em-
phasis of the Schoolmen and other early writers on system
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output suggests the starting point. A market offering must
be perceived as meeting the needs of a purchaser. That is,
the purpose of marketing activity is to supply output "Neces-
sary, or useful for the Support, Defence, Ease, Pleasure,
and Pomp of Life" (Barbon 1690). Emphasis must be placed
on the concept of "useful," since "only satisfactions are
purchased" (Galiani 1751).
Usefulness is increased by the "approximation to the cus-
tomer" (Say 1803). When this process results in a market
transaction, usefulness is increased directly, because each
party gains more than is given up in exchange (Condillac
1776; George 1898; Jevons 1871). Most of the sources re-
viewed held that usefulness is indirectly increased by ac-
tivities such as breaking and dividing, transport, storage,
and "nonmaterial" elements, such as information.
Marketing systems also contribute to usefulness by reduc-
ing the cost of its production. When markets are expanded,
specialization increases, so that costs fall. The Classical
School also understood that the emergence of specialized
marketing organizations reduce cost by reducing uncertainty;
that is, it gives "a more continued and undisturbed motion"
(Torrens 1821).
Alderson called for "a marketing interpretation of the
whole process of creating utility" (1957, p. 69). The ele-
ments of such an interpretation were available early in the
Twentieth Century. The task of responding to Alderson's
challenge remains.
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THE DEVELOPMENT OF A CONCEPT

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ABOUT THE AUTHOR
Donald F. Dixon is a Professor of Marketing in the Graduate
Management Program at Penn State Great Valley, near
Philadelphia. He received a B.A. in economics from Brown
University (1951), and M.B.A. in marketing from Wharton
(1952), and a Ph.D. in economics from the London School
of Economics (1961). His area of specialization is market-
ing. He has published articles in economics, buyer behavior,
channels of distribution, marketing theory, multinational
marketing, and the history of marketing thought, and (with
I.F. Wilkinson) a textbook, The Marketing System.

JAMS 343 FALL, 1990