Marketing and Public Policy Contributions: Comments on Three Papers

Citation:

Frederick D. Sturdivant (1979) ,"Marketing and Public Policy Contributions: Comments on Three Papers", in NA - Advances in Consumer Research Volume 06, eds. William L. Wilkie, Ann Abor, MI : Association for Consumer Research, Pages: 529-531.

Advances in Consumer Research Volume 6, 1979      Pages 529-531

MARKETING AND PUBLIC POLICY CONTRIBUTIONS: COMMENTS ON THREE PAPERS

Frederick D. Sturdivant, The Ohio State University

INTRODUCTION

Marketing seems to have suffered throughout most of its history as an academic discipline with an inferiority complex. At first it was probably related to our standing relative to the parent discipline of economics. Not only do they not give a Nobel prize in marketing, but marketing scholars have yet to come up with a label which enjoys such universal usage and status as "economist." It would appear that little improvement in the discipline's mental health has accompanied its expanding identification with other basic disciplines such as mathematics and psychology.

Perhaps one of the major burdens of the field has been a rather deep-rooted need to have a practical effect. While researchers in other disciplines see m not to be terribly troubled by relevance, usefulness, and the like, marketing scholars appear to have a more empirical-practical bent. And yet, the results on that score are not very encouraging. As I wrote in the Preface to Managerial Analysis in Marketing:

The objective observer would have to admit that most of the significant conceptualizations and applications have originated with practitioners in the field. In like manner, scholars of marketing have played only a minor role in the formulation of public policy (Sturdivant et al., 1970).

Given our misgivings about lack of impact, it is not surprising that the three papers included in this session received positive votes from the reviewers. Two papers not only focused on "real" problems, but were empirically based and, best of all, were submitted to agencies of the federal government (Department of Transportation and the Federal Communications Commission) to guide them in making policy. As a reviewer of one of these papers commented, "[The] paper presents an interesting case or example of consumer research used in public policy." Another reviewer said about one of the papers, "I like it because it was done to assist the development of real-world policy."

THE TWO EMPIRICAL STUDIES

The reviewers placed considerable emphasis on the applied nature of the two empirical papers. One reviewer in commenting on the Golden, Betak, and Alpert paper said that it was "An interesting application of conjoint analysis to transportation mode choice. The problem is not new. The methodology isn't either, but applications have not been published very much." .While one would assume that I had not been selected as a discussant because of my extensive use of conjoint, discriminant, and regression analyses, the reviewers' emphasis on utility came as a great relief. [One of my former doctoral students described me in a recent letter as "an individual who wouldn't know a Chi Square from a Mann-Whitney. Although I will concede that you probably have a thorough familiarity with the Mann Act." I trust his career will flourish at Guatamala Tech.]

Given the importance of the usefulness criterion, the Golden et al. paper as well as the one prepared by Burger and Venkatesh will be evaluated largely on that dimension. The latter paper focuses on a problem which grew out of the enormous boom in citizen's band radio usage in this country. While the problem may not rank with the search for a cure for cancer in national priorities, capacity constraints on CB channels and the telephonic/entertainment trade-off issues are by no means trivial in the eyes of some 20 million Americans.

Having conceived an "emergent policy consumer paradigm" and collected and analyzed a variety of data related to CB ownership, usage, and attitudes, one needs to consider the utility of the conclusions reached. It would appear that Burger and Venkatesh offer some mildly supportive words for the notion of increasing the number of radio bands and hence the telephonic properties of CB radios. The lack of strength in their recommendations may 'be attributed to the broad scope of their research activity. In sum, did the factor analysis of psycho-graphic data or the semantic differential analysis provide data which were directly related to the research question? My principal concern about the paper was the lack of specificity in research design and conclusions vis-a-vis the policy issue. It would be interesting to know the extent to which their results influenced the FCC.

The paper authored by Golden, Betak, and Alpert also addresses a question of considerable importance to millions of citizens. Indeed, the reluctance of Americans to use mass transit facilities has been a subject of considerable interest to urban planners and transportation policy-makers for years. As noted above by one of the paper's reviewers, the authors for the first time applied conjoint analysis to the problem of attracting potential mass transit users.

While one might express concern about the reasonableness of such variables as "cost per mile" with a range of thirty cents, and the authors' assumption of respondent rationality as the basis for their conclusions, perhaps the principal focus again should be the usefulness of the findings. There would seem to be little question that the paper has made a contribution simply by exposing some policy-makers to the use of conjoint analysis. The interrelatedness of attributes is clearly revealed. The authors also offer a realistic perspective in noting that it may well be politically and/or economically impossible to alter the critical variables.

The research findings, however, are more exploratory in nature than actionable. As such they may well provide more of a basis for further research than for policy formulation. Given the apparent strength of feeling in favor of applied research, it would be helpful to know how the sponsoring agency did react to the report. Did the policy-makers understand the analysis? Were they inclined to base decisions on the results? While the authors should not suffer any great pangs of guilt over the exploratory nature of their work, they should feel guilty about heaping more jargon on an already jargon-laden world. In the conclusion of their paper they write:

Finally, in conjunction with the recommended study of incremental changes, further development should be undertaken of more parsimonious instrumentation for eliciting trade-off data from potential users of transportation services, minimizing the respondents' time investment, and reducing the computational costs of analyzing trade-off data.

I think that means that we need a simplified form of data collection and analysis. Given the bureaucrats' affection for obfuscation and their enthusiasm for murdering the English language, Golden and her colleagues need not contribute more twaddle to their vocabulary. This paper deserves to be quoted in Edwin Newman's next book!

In sum, both of these papers applied relatively sophisticated analytical techniques to two rather important problems. Their efforts are significant and should be applauded. In both instances there appears to be a need for greater precision and clarity in presenting the results to the general readership and to those who are formulating policy in these areas. They should also recognize that if more applied research is going to be undertaken and if that research is to be productive, writers will need to share their application re-suits more fully. They need to critique their own performance vis-a-vis the utility of their research. Without some discussion of client reaction, whether it be positive or negative, objective or political, other researchers will gain little from their real-world experience. Indeed, one of the hazards of failing to treat application experiences is that it may be tempting for some to fit a few exotic research methods to a "hot" policy problem without any concern for results.

A MEASURE FOR MARKET DELINEATION

While the two empirical papers treated topics of considerable importance, the conceptual paper by Bourgeois considers one of the most vital areas of public policy--antitrust. One would think that having been in the antitrust business for almost a century, the courts would have come up with a reasonably consistent measure of market delineation. Such is not the case, however. The fundamental and essential notion of relevant market is the subject of much confusion and considerable inconsistency.

Brown Shoe Company v. United States has long served as a bench mark for the discussion of relevant market. While it is not our purpose to present a review of the cases in this area, a few examples may serve to illustrate the complexities of the topic addressed by Bourgeois in his paper. In Brown Shoe the Supreme Court ruled that:

The outer boundaries of a product market are determined by the reasonable interchange-ability of use or the cross-elasticity of demand between the product itself and substitutes for it. However, within this broad market, well-defined sub-markets may exist which, in themselves, constitute product markets for antitrust purposes. The boundaries of such a sub-market may be determined by examining such practical indicia as industry or public recognition of the sub-market as a separate economic entity, the products' peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors (Brown Shoe Co. v. United States, 1962).

One might conclude that a product demonstrated to enjoy a high degree of interchangeability with other products would have a relatively broadly defined relevant market. Nevertheless, in a 1976 decision in the Eastern District of the U.S. District Court in Pennsylvania, the court ruled against the Mrs. Smith's Pie Company even though consumer research established a high degree of substitutability between frozen pies and other desserts. In describing the research conducted by Professor Daniel McLaughlin, the court wrote:

Consumers were given a list of food items and told to divide the list into groups in terms of menu planning and use .... More than 95 percent of those interviewed perceived frozen dessert pies as interchangeable with at least some other dessert item, and more than 90 percent actually would substitute another item for frozen pie (United States of America v. Mrs. Smith's Pie Co., 1976).

Even though the court rejected the testimony of the government's expert witness as "completely useless," the court ruled in favor of the government:

[The] government contends that frozen dessert pies constitute a distinct sub-market within the broader market encompassing all desserts, and that the sub-market is itself a "line of commerce" for the purposes of the Clayton Act. We agree.

This decision would appear to run counter to earlier rulings such as United States v. E. I. du Pont de Nemours & Co. which in 1956 emphasized "reasonably interchangeable" as the guideline for relevant market. The recent ruling in favor of IBM over Peripherals Leasing Corporation and Memorex Corporation relied heavily on du Pont-like standard. Hence, the Bourgeois paper addresses a topic greatly in need of research and clarification. [For a detailed and thoughtful discussion of this topic, see George S. Day, William F. Massy, and Allen D. Shocker, "The Public Policy Context of the Relevant Market Question," Working Paper 221, Graduate School of Business, University of Pittsburgh.]

Bourgeois' general concept of the market as a complex set of relationships between producers and consumers is sound. His emphasis on consumer perception of products is to be applauded. His assertion, however, that "The output on the supply side is clear--a product(s)" is simply not correct. For example, what is the relevant market for a supermarket with several thousand items ranging from traditional grocery, meat, and produce items to garden supplies and greeting cards? More directly, what is the product the consumer perceives: a cluster of goods and services, a market basket, convenience?

It is in this context that Bourgeois' model for market delineation may be viewed. From a mechanical standpoint his heuristic is useful and workable. It would be enormously time-consuming in a multiple product setting, but it could offer a degree of precision often missing from such estimates. As suggested by the supermarket example, however, one should not assume that "product" is that easily defined. Nor, it should be noted given the Mrs. Smith's Pie Company case, should one necessarily assume that courts will accept consumer perceptions as the basis for ruling on relevant market.

Bourgeois has indicated that application of his framework and methodology is the next task. Such a step might be premature. A method is not going to resolve the definitional problems surrounding the relevant market concept. The inconsistencies in the rulings between merger and non-merger cases, between various district courts and circuits, suggest a degree of conceptual confusion which is unlikely to be corrected simply by a research tool. A thorough review of court decisions, law review articles, literature on market segments, and perhaps a number of other topics will have to be explored in hope of constructing a theory of relevant market. In many respects, the effort may well parallel the contribution Areeda and Turner (1975) made to the concept of predatory pricing. One would hope, however, that it would be less dependent on traditional micro-economic theory than was true in the Areeda and Turner effort. In sum, as a critical element of antitrust, relevant market definition is of vital importance and deserves a thorough and broadly-based research effort.

CONCLUSION

A certain satisfaction may be derived from the fact that marketing scholars are being called on to contribute to the formulation of policy. The relevance of research conducted in the field can only be improved by such working relationships. Application does serve as an important guard against trivial and otherwise meaningless research. Application per se does not, however, necessarily serve as a barrier to poorly conceived research or poor communication of findings. It is also likely that the more broadly-based and theoretically-sound the research, the more likely it is to have a positive reception. "Quick and dirty" applications should not flourish. Perhaps the best measure marketing scholars will have in terms of quality will be the implementation of their recommendations with good results. If such efforts are to have a full impact, the application aspects must be shared with other researchers. Marketing needs to establish a tradition of reporting on the reaction of research users to the efforts of marketing scholars.

REFERENCES

Phillip Areeda and Donald F. Turner, "Predatory Pricing: Related Practices Under Section 2 of the Sherman Act," Harvard Law Review, Vol. 88:697 (1975), pp. 697-733.

Brown Shoe Co. v. United States, 370 U.S. 294, 82 S. Ct. 1508, 8 L. Ed. 2d 510 (1962).

Frederick D. Sturdivant et al., Managerial Analysis in Marketing (Glenview, Illinois: Scott, Foresman & Co., 1970).

United States of America v. Mrs. Smith's Pie Company, 440 Federal Supplement 220, 227 (1976).

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