Marketing vs. Regulation

Whenever something goes wrong with a product or service, politicians begin demanding more regulations to prevent future problems. They assume that businesses operate only to make money, therefore businesses are not concerned with consumer well being and will not incur the cost to change unless forced by the government. Well, half of the politicians’ assumption is correct. Businesses exist for the same reason most people work for them, to make money. However, it is this desire to make money that will motivate change when change is necessary. More than anything else, businesses need consumer confidence so customers will return and buy their products. The best tool businesses have to gain consumer confidence is marketing, which can solve all product issues such as safety, cost, and accountability. Government regulation interferes with businesses’ marketing process, raises costs, and destroys opportunity.

Marketing is the process by which companies identify consumer needs and try to address those needs. If performed properly, companies use marketing to answer several important questions. First, they uncover opportunities in the market and choose where to invest their money to get the best return. Second, businesses learn about the target market, which are consumers that are most likely to buy the product. Third, businesses discover the different product features that the target market needs before they will buy the product. These features often include but are not limited to ease of use, comfort, reliability, and safety. Fourth, businesses estimate how much customers are willing to pay for the product. Finally, businesses figure out the best ways to reach the target market through advertising. Once a company finishes its research and brings the product to market, consumers have the choice whether or not to buy the product. If consumers like the product they will show their support by buying it, if they do not, they will vote with their feet by spending their money elsewhere.

In a free market, every company’s success depends on its ability to market its products better than its competitors do. Failures in keeping up with consumer needs create opportunities for new companies to enter the market with improved goods. Therefore, changes in the environment and consumer needs spark changes in products. If oil prices rise sharply, consumers will demand more fuel efficiency, so automakers will produce more fuel-efficient cars. When consumers begin buying hybrid cars to save money at the pump, automakers do not need government to tell them to produce hybrids. In a free market, automakers will engineer and produce more hybrids to stay in business. The same holds true in every industry. Airline travelers will not set foot on a plane unless they are reasonably sure it is safe, so airline companies spend money to ensure the safety of their planes. Investors will not invest in companies if they are not confident in the companies’ accounting practices, so companies change their procedures to attract investment. Parents will not buy a toy if they fear it will harm their children, so toy manufactures spend money on safe materials. In a free market, if one company in any industry refuses to invest in consumer-required improvements, another company will step up and put the first company out of business.

Government regulation is almost the exact opposite of marketing. Government bureaucrats that create regulations do not invest their money into projects and are not responsible for a bottom line. As a result, they do not care what consumers want or how much the regulation will cost. Instead of trying to understand consumer needs, regulators assume they know what is best and do not give the consumers a choice. Without incentive to monitor customer needs, regulations are slow to change and often fail to keep up with the new business environment, generating waste, and slowing down progress. Moreover, many government bureaucrats do a poor job executing the regulations or provide favors to politically connected companies, creating a false sense of security. Consumers blindly trust that the government is protecting them, when it is not. Finally, regulation robs new companies of opportunities in the market by wiping out new niche segments. Even a regulation as simple as the National No Call List, reduced opportunities for new call screening technology, which cost people jobs.

In a free market, I consider marketing to be the purest form of democracy, because it grants the public choice over products without forcing anyone to comply. When a product is successful, only the people that value the product purchase it. If one group of people does not, they do not have to buy it. Other companies will step in to satisfy their needs in other ways. In contrast, government regulation imposes a cost on everyone and reduces our choices. The next time there is a problem with a product or service, trust the marketers over government regulation. After all, if marketers fail they go out of business and new companies replace them with better products. When government regulations fail, the regulators get more money and power. Which is the more productive incentive?