1.7 The Austin Seven
What happens if an organisation does not have internal marketing? A good example involves Austin Morris, the predecessor to MGRover, a British car manufacturer. This example is based on stories that have emerged from people involved in the car industry in the 1950s.
Like Henry Ford, Austin Morris identified an unmet customer demand in the market – the need for a compact, cheap, family car. The result was the launch of the Austin Seven (later called the Austin Mini) in 1959, which sold at a relatively low price of £537 (including taxes of £158). Although not an immediate success, it went on to become a mass selling car for Austin Morris.
The launch of the Austin Seven caught the attention of the competition, in particular the Ford Motor Company who also produced and sold cars in the UK. A story arising at the time of the launch involved a discussion between the President of Ford Britain and the Chair of Austin Morris in which the Ford President declared his disbelief that Austin Morris could be earning a profit from every Austin Seven it sold.
From Ford’s perspective, the car was simply priced too low to be financially viable. The Chair of Austin Morris protested strongly, arguing that its unique body structure and quick assembly process enabled Austin Morris to produce a profit. When asked what that profit margin was, he was unable to answer.
Fearing that Austin Morris had found a new way of producing low cost cars, the Ford President demanded that Ford engineers buy an Austin Seven car and calculate how much profit was being made per car. The Ford engineering team dismantled an Austin Seven, calculated the price of every individual component and reassembled it to calculate the cost of construction. The result? Ford calculated that the cost of producing each Austin Seven was far greater than the selling price. In other words, Austin Morris was making a loss on every Austin Seven it produced.
Why did Austin Morris allow this? The answer lies in the lack of internal marketing within Austin Morris. Apparently, the finance department had not worked out the financial cost of producing the car, believing the sales department’s assumption that it would produce a profit.
This assumption was based on what it thought the market would pay; if the price was wrong, surely the finance department would challenge it?
Internal marketing would have ensured that the departments involved worked to produce a car that not only satisfied customer needs but created a profit.
Needless to say, Ford’s President never raised the issue again.
Activity 1 Measuring marketing orientation
The purpose of this activity is to assess the extent to which your organisation is marketing orientated. It uses a questionnaire devised by Kohli et al. (1993) to measure marketing orientation levels in various organisations.
This activity gives you an opportunity to compare your organisation’s marketing orientation to the sample group used in Kohli et al.’s study. You will also be able to consider areas where your organisation may need to increase its marketing orientation.
In the first part of the activity you are asked to respond to 20 statements and indicate your level of agreement by using a Likert rating scale where 1 = strongly disagree and 5 = strongly agree. For each statement click on the appropriate circle to move the orange line to the number that indicates your level of agreement.
This questionnaire was constructed using sound design principles. It uses a reverse technique so you cannot simply agree with all the statements. For this reason you may correctly disagree with some statements.
When you have responded to each statement, click on the Show Mean button. This will superimpose the scores for Kohli et al.’s sample group.
You should think about how your scores differ from those of the sample group. In some instances your scores may be very different – why? What is your organisation doing better and worse than those used in the study?
You can view help by clicking on the Help button or pressing the H key within the activity.
Now click on this thumbnail or View to access the questionnaire.
This exercise should have shown you how your own organisation’s level of marketing orientation compares to a larger sample. You may have found that your organisation exceeds the sample average (congratulations) or that for some questions your organisation scored lower than the average. In this instance you should ask yourself what your organisation could do to address this problem.