Risk-bearing and Profitability Marketing
Marketing aims a maximizing the financial return from risk-bearing while minimizing risk.
The ideal position for any marketing man is to know beforehand that he can sell every single unit of the product! This would be a position of nil risk, and there are, of course, occasional periods when this position does obtain. It is called a “seller`s market”, and is found for instance in conditions of wartime, or post-war, scarcity. But a seller`s market attracts people into it, and the forces of competition re-assert themselves as soon as resources can be diverted from other users.
Can be diverted -one should rather say: “can be profitably diverted…”, for this is the criterion on which marketing judgements necessarily depend. Relative profitability is clearly the only test for such assessments, and this is what will decide the allocation of resources to exploit such an under-developed market.
For this what, in marketing terms, one must call a seller`s market-under developed; and this is so whether the reason is actual material shortage, or the opening up of new areas of demand as result of technical innovation. In an under-developed market, demand is strong and reatively by definition competition is either non-existent or very weak- for instance in the sweet market during sugar rationing.
True, in such a situation in there is usually price control and also “consumer-control” (rationing of purchases) but it is interesting that there also develops a black market or, in other words a diversion of resources from elsewhere to exploit the unsatisfied demand. To take an example from the natural sciences -water always finds its own level- that is to say, where two bodies of water are connected, and one is low, then water will flow from the other to equalize the levels. Instead of “low level” we say that there is under developed marketing potential- and competition is the influence bringing about an equalization of levels of profitability, more or less.