To serve or not to serve. Why do some "markets" serve their customers so poorly?

4 minute read

My interest in macromarketing was triggered by my first course in marketing taught by Paul Solomon in the Fall of 1969 when he presented us with the social marketing concept: “Customer satisfaction through a profitable operation in a socially responsible manner”. This was at the end of the decade that also gave us “The Poor Pay More” by David Caplovitz and “Unsafe at Any Speed” by Ralph Nader. It was a time when we realized that not all customers were served well by firms and marketers.

Macromarketers are men and women with empathy, a conscience and a concern for marketing, markets and how our profession serves the weakest among us. Politicians are supposed to be public servants and marketers are supposed to serve markets. The language is biblical:

For you were called to freedom, brethren; only do not turn your freedom into an opportunity for the flesh, but through love serve one another.

(Galatians 5:13)

So how well do our institutions/marketers serve the poor fifty years after David Caplovitz’ book? A recent documentary from South Los Angeles (The Grim Sleeper) presents the reality of the disenfranchised, who seem poorly served by marketers and public institutions. The main part of the documentary deals with a serial killer. However the description of the people and the conditions under which they live is frightening. Being unfamiliar with these neighborhoods, I can only assume that similar conditions are found in several locations.

Internationally, we see massive migration of poor people in search of better lives in Europe and North America. They are escaping corrupt regimes, which are in part financed by transactions/exchanges with banks, firms dealing in natural resources and governments from The US and Europe. If marketing is “exchange facilitation”, we need to question some of these exchanges–many of which would not be regarded as legitimate at home. Poor countries, with corrupt governments, are often dominated by monopolies, government controls and relative weak market institutions. Some 140 of the UN member countries are considered seriously corrupt. (Transparency International) Corruption has no place in properly functioning markets.

The market will always fail those with a need, but without the means to pay.

So for some, we need non-market solutions–for example gifts, as well as good educational programs to ensure gainful employment.

The health care market is one of the most important markets for all of us. Despite big governments “gift” programs, it seems to be failing the very poor whose life expectancy is 10 to 15 years shorter than for the very rich1. The affordable care act may be an improvement for some, but it did little to address the main problems of the health care system.

The US spends 18% of the GDP on health services (private and public funds) for partial health care coverage. Canada spends 11%, Norway 10% for full national health coverage. The US government spends more on health per person than any other country in the world. So we are spending enough–the government alone is spending enough to cover everybody as it is today.

So does the market work? Does it bring effectiveness (the right product) and efficiency (at as low a price as possible)? The answer is a resounding YES in most cases. Normally this is the outcome of properly functioning markets. However, there are several arenas, like perhaps the heath care market, in which the market is not allowed to function well due to regulations, which keep the costs high.

Only governments can keep the market from working; either by protecting certain interests or failing to make sure markets/competition work as they should. As such, the government should be an umpire or a referee of markets/marketing and blow the whistle whenever someone tries to obstruct the competition game.

So–we have a mix of two systems: a private health market system with some 800 profit maximizing insurance companies and two non-market public systems; Medicare with 55 million beneficiaries and Medicaid with another 50 million members. Perhaps a well intended system however infested with certain privileges and dysfunctional incentives.

Following the era with robber baron monopolies and powerful unions, Teddy Roosevelt became a progressive champion of well functioning markets. He could inspire us today. This is macro and it is marketing, profit and non profit. Why do these markets not work as markets should? Are the exchange facilitators facing a set of unethical institutions aimed at avoiding the natural forces of properly functioning markets? Many customers are not satisfied. We are not serving one another well. Another biblical quote comes to mind:

What you do (or fail to do) to the least of mine you do to me.

(Matthew 25 35-45)

We may be more focused on opportunism for the benefit of a few, not intent on making markets work well for all.

It is time we once again focus on some important current domestic and world issues–if for no other reason–to give our students an insight into the darker side of political and corporate market mismanagement, and to point the way to some of the possible solutions. Sanders and Trump have tapped into current dissatisfaction, but I am not sure they have great solutions (I am sure they do not have great solutions …)

The New York Times: “The Rich Live Longer Everywhere. For the Poor, Geography Matters.”

Notes

  1. Life expectancy is not just a function of received health care. It also includes a number of other factors such as diet, exercise, stress, alcohol, smoking and the like.