Alderson’s Contribution to Meeting Marketing and Economics With Psychology

Marketing managers and professionals are most probably familiar with the teachings of Philip Kotler (mainly through his textbooks) on marketing management from their student years. He is most strongly associated with the themes of marketing principles, management (revolving around the 4Ps of marketing mix), and strategy; although additional important academics have (co-)authored textbooks on these topics over the past forty years, Kotler remains a leading authority on theory of marketing management. However, marketing practitioners, and possibly also academics, are much less likely to be familiar with the foundational contribution of Wroe Alderson to the development of theory of marketing and its management. Furthermore, Alderson also made an important, pioneering contribution, to which this post is dedicated, in linking and complementing marketing and economics with theories and concepts from the broad discipline of psychology; in so doing, Alderson made steps preceding the emergence of the field of psychological economics (and further on, behavioural economics), with important implications in marketing and consumer behaviour.

Wroe Alderson (1898-1965) was a practitioner through most of his career, anchored in economics. In earlier years (1930s-1940s) he fulfilled jobs in public service in economic planning, research and market analysis (primary areas were distribution costs and price administration or regulation). Following that period, he founded in the 1940s a consulting firm, joined by Robert Sessions (his former boss), wherein he developed an increasing interest in marketing (it was strongly economic-driven in those years). As he proceeded, it seems Alderson was particularly intrigued by identifying some shortcomings of economics in explaining or predicting marketing activities and phenomena. He became especially concerned with the need for developing a marketing (management) theory, which was substantially lacking at that time (1940s-1950s).

Alderson has gradually worked towards establishing a theory in marketing through a series of consulting newsletters at Alderson & Sessions, articles and books he published, and leading seminars on marketing theory in conferences of the American Marketing Association (he was nominated President of AMA in 1948). After teaching as visiting professor in several universities in the 1950s, Alderson eventually joined the Wharton School of the University of Pennsylvania in 1959, where he continued giving seminars on marketing theory. This third period of academic acknowledgement in his career was sadly interrupted by his sudden death in 1965 from a heart attack, while hosting some of his doctoral students.

Shaw, Lazer and Pirog (2007) describe three major changes that Alderson advanced: (1) moving from distribution (macro) to marketing management (micro); (2) shifting from economics to behavioural sciences (particularly psychology, sociology, and cultural anthropology); and (3) evolving from classification of marketing phenomena to theory building (i.e., stepping-up from a descriptive level to an explanatory level and development of a theory). Alderson developed a functionalist approach to theory of marketing. His two key books putting forward his theory were ‘Marketing Behavior and Executive Action’ (1957) and ‘Dynamic Marketing Behavior’ (1965). Alderson is credited for his leading role in shaping the fields of both marketing and consumer behaviour, as well as in forming the domain of marketing science. Shaw and his colleagues argue that Alderson is entitled to be considered ‘father of modern marketing’ in honour of his achievements and the transformations he led [1].

The two ‘organised behaviour systems’ of primary interest to Alderson were the firms and the households. His functionalist theory pertains to both marketer behaviour and consumer behaviour. According to Shaw et al., Alderson shifted the focus from an economic viewpoint (the ‘economic man’) to including viewpoints of behavioural sciences such as social psychology and cultural anthropology (e.g., for better understanding consumer motivation), and attending to the social dynamics of a household.

The thinking of Alderson on the place psychology should have in relation to marketing and economics is well encapsulated in his article from 1952 — seventy years ago — in the Journal of Marketing: “Psychology for Marketing and Economics” [2]. In this article Alderson proposes how theories and concepts from different areas of psychology can complement a functionalist approach, and thereof enhance our understanding and explanations of economic and marketing phenomena, including the behaviour of marketers (sellers/suppliers) and consumers (buyers).

Alderson approaches the field of marketing as being concerned with problem-solving: marketers (e.g., marketing executives) as well as consumers (individuals or households) are engaged in activities and actions oriented towards solving problems. He actually identifies functionalism with problem-solving: a behaviour that is seen as instrumental (e.g., gaining rewards) or goal-driven, guided by a means-ends mindset. Another interpretation of functionalism ascribes to how individuals function towards (or upon) their environment. A goal-driven orientation is characteristically economic (rational), but Alderson recognises that problem-solving is contingent on the psychology of problem-solving. It is about better adjusting to the environment, and it entails most of the time selecting or adapting means available to accomplish a given end.

He identifies three types of problem-solving situations: (1) Matching Means and Ends: Select an appropriate means, from available options, to best match a given end (i.e., most fit for achieving the end); (2) Improving the Available Means: The end is given but a suitable means for achieving it may not be readily available in one’s ‘toolbox’, so one has to create, modify or perfect a means that exists to make it fit (this implies, for instance, a need to acquire or develop new skills); (3) Reorganisation of Ends: In this case there is no apparent end that is familiar so that any of the existing means could match with it, therefore the solution is to modify or reorganise the ends sought for to match a ‘new’ end with an available means (i.e., adapt one’s goal to the means in access — seemingly the least usual situation and also the more difficult to solve).

Alderson finds a psychological grounding for each type of situation (e.g., for either defining or solving the problem), which departs from conventional (neoclassical) economic thinking. With regard to matching means and ends, he suggests that in many marketing situations the solution is more likely to involve a process of matching or sorting rather than allocation (e.g., of alternative means, tools or resources). Improving the available means is connected with different types and contexts of learning processes. Alderson suggests that reorganising the ends may be called for when individuals set for themselves unrealistic levels of aspiration and conflicting goals (this situation is also connected with the subject of motivation). (Note: We can think of additional conditions such as a state of novelty or surprising stimuli information, picked-up in a bottom-up process, that may trigger consumers to modify their ends.)

Sheth, Gardner and Garrett (1988) made a distinction in concept between the functionalist school of thought, following Alderson, and the more accepted school of thought of buyer behaviour. On one dimension, the functionalist school is identified as an interactive approach (enacted in the marketplace by a balance of power between suppliers and buyers), whereas the buyer behaviour school undertakes a non-interactive approach (one of the parties, notably the buyers in this particular school, is more dominant in setting the rules and having impact on behaviour of the other party). (Note that in the earlier period of marketing theory, the suppliers were considered the more dominant; the power turned to the side of buyers in the 1960s-1970s, and it is even more empahsised these days in the age of ‘customer-centric’ approach). On the second dimension, the functionalist school is characterised as economic whereas the buyer school is characterised as non-economic [3].

This classification might do (or expose) some injustice to Alderson. First, his approach was more multifaceted — while the origin of his viewpoint was economic, his approach clearly did not stay so, augmenting his approach with subjects and concepts from the behavioural sciences. Second, his interactive approach can be said to be more realistic and sophisticated than the one-sided approach of a non-interactive school of buyer behaviour in describing and modelling the exchanges or relations between suppliers and buyers. Third, Alderson was early to focus on problem solving in his theory as a guiding theme of behaviour. He referred, as his inspiration, to George Katona, a founding economic psychologist, who distinguished between the more frequent habitual-routine consumer behaviour and engaging in deliberate and elaborate decision-making when it really matters to consumers. Later Howard and Sheth (1969) developed their model of buyer behaviour with different levels of Extended Problem Solving, Limited Problem Solving, and Routine (or habitual) behaviour; this approach was also elaborated by Engel, Blackwell and Kollat as a centerpiece of their decision-making model in consumer behaviour (cf. their textbook editions of 1968, 1973, 1978).

Turning back to Alderson’s article [2], he raised issues with relevance to marketing and economics by reference to additional topics in psychology. Selected concepts and notions are highlighted below:

  • In addition to a goal-driven, instrumental behaviour, individuals engage in ‘congenial behaviour’ — these are activities where performing the activity itself may be regarded as the end. Alderson gives as examples eating, drinking, entertainment, and social intercourse. This is a manifestation of the classical distinction between economics that focuses on end outcomes and psychology that delves on processes (e.g., the enjoyment from eating a good meal rather than the outcome of quelling one’s hunger; consider relatedly also the distinction between substantive rationality and procedural rationality drawn by Herbert Simon).
  • Alderson notes that changes in personality structure that occur through the course of one’s life may shift the relationships individuals perceive and hold between means and ends: “The individual cherishes aspirations which he expects to see fulfilled at a later time, as well as demands for immediate gratification. He counts on developing capacities for later action beyond the scope of his present powers” (p. 126). These propensities are thereby connected to human ability of behavioural adaptation to the environment, especially as one’s personality evolves.
  • Individuals do not act in a social vacuum: they interact with each other, cooperate or compete between them. Alderson notes the emergent recognition, at the time of writing, that “much of the structure of personality is acquired in a social setting” (p. 127). Particularly influential are the relationships of the individual to membership or reference groups (e.g., exerting influence in defining one’s ego). Another example is socially dynamic behaviour in the family or household, where its members take part in making decisions together, or how one may influence the choice decisions made by another member (e.g., consulting between husband and wife, involvement of children).
  • Broadly speaking, Alderson sees a linkage of interdependence between his problem-solving approach and the means-ends relationship, driven by personality psychology, and social (dynamic, interactive) behaviour of individuals, corresponding to social psychology.
  • Alderson proposes that Gestalt theory was helpful in setting the groundwork for a more comprehensive psychology of problem solving by contributing useful principles of organisation to guide individuals in grasping problem situations. Individuals apply gestalt in perception and information processing, then advancing to actively making movements and manipulations onto objects to accomplish results.
  • Alderson addresses the relation of a behaviouristic approach to learning and stimulus-response mechanisms. and the impact of intervening variables.
  • The behaviouristic approach supports the notion that most consumer purchases are conducted in an habitual (‘mindless’) manner, allowing for stable short-term predictions of behaviour. However, Alderson recognises the limitation of behaviourism, which ignores the role of conscious thought and rational insights (e.g., as emphasised by gestalt psychologists). He is also critical of the fallacy in the assumption made by behaviourists, underlying those predictions of behaviour, that “because much behavior is routine no other kind is possible”, which brings us back to important observations made by Katona.
  • Alderson shows interest in psychoanalysis, regarding conscious versus unconscious thought or action, motivation, and learning.

The impact of social relations and affiliations of individuals on their personality and behaviours is like a thread going through much of the ideas and notions raised by Alderson. He makes the noteworthy point, for example, that “[i]ndividuals are loyal to groups because groups are instrumentalities for achieving individual ends” (p. 134), a notion that many marketers would probably sign-on today (e.g., groups and communities that consumers join on digital social media networks). He even considered the importance of leadership in consumption and the influence of some consumers on product choices of their peers.

Alderson foresaw in his article that marketing will be increasingly recognised in the future as a branch of the behavioural sciences, and that marketing research will “provide a laboratory for testing new psychological insights”. He gave an advice already then that would stay as a challenge for many years to come (e.g., in modelling consumer choice): “Market analysis must find more effective ways of dealing with groups rather than merely isolated individuals” (p. 134).

The starting point of Wroe Alderson was an economic viewpoint, yet he bravely foraged into the fields of behavioural sciences, particularly psychology and its extensions, to suggest theories and concepts that can be imported and adapted for implementation in economic and marketing contexts. He may have tried to touch on too many subjects, where some of his suggestions seem less well-grounded, confusing or stretching too far. Yet even though his functionalist approach stayed outside the ‘mainstream’, concepts and models later developed seem to have been influenced by notions, concepts and ideas Alderson had proposed — that applies especially to his suggestions and arguments on meeting psychology with marketing and economics in his functionalist framework. This makes a good reason to give greater place to Alderson’s contributions in courses on marketing and consumer beahviour.

Ron Ventura, Ph.D. (Marketing)

References:

[1] Wroe Alderson: Father of Modern Marketing; Eric H. Shaw, William Lazer, & Stephen F. Pirog III, 2007; European Business Review, 19 (6), pp. 440-451.

[2] Psychology for Marketing and Economics; Wroe Alderson, 1952; Journal of Marketing, 17 (2 / October), pp. 119-135.

[3] Marketing Theory: Evolution and Evaluation; Jagdish N. Sheth, David M. Gardner, & Dennis E. Garrett, 1988; New-York: Wiley (The authors classified and evaluated 12 schools of thought in total.)

One thought on “Alderson’s Contribution to Meeting Marketing and Economics With Psychology

  1. Walter

    Glad to see someone writing about Wroe Alderson this day and age. I recently found out about him myself. I think all marketers and student of marketing should be awareof his work.

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