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Contemporary Logistics 04 (2011) 1838-739X
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Contemporary Logistics
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The Provision and Application of Marketized Goods
Yisong Li 1, Jianguo Wang 2, Yew-Kwang NG3
1. School of Management, Beijing Sports University, 100084, P.R. China
2. Guanghua School of Management, Beijing University, 100871, P.R. China
3. Faculty of Business and Economics, Monash University, Australia
KEYWORDS
Marketized goods,
Public goods,
Marketization
ABSTRACT
The present paper presents a new concept: marketized goods. The authors define
marketized goods as goods that have marketing functions of delivering information for
other goods. By using the concept of marketized goods, the authors classify goods into two
categories: marketized goods and non-marketized goods. The present paper argues that
marketized goods can be free, or priced at quite lower levels than that of other functionally
equivalent goods that have no marketing aspects (non-marketized goods). Through
studying the characteristics of public goods and marketized goods, the authors argue that if
a public good is supplied jointly with a marketing service, the full and free supply of the
public good is possible when the demand for the marketing service is high enough. The
concept of marketized goods has a profound implication in marketing theory. The new
marketized goods concept exceeds the limits of popular marketing concept. The possibility
of marketizing non-marketized goods to marketized goods is discussed in the paper. The
authors argue that the marketization of non-marketized goods to marketized goods will
elicit lower price for the marketized goods, and therefore, bring competitive advantages for
producers. With this marketized goods concept, the authors propose a two-layer marketing
system: marketing in the selling stage and marketing in the production stage. The new twolayer marketing system can be a good tool for business organizations to expand their
business in the 21st century information economy.
© ST. PLUM-BLOSSOM PRESS PTY LTD
1 Marketized Goods and Its Optimal Provision
1.1 The nature of marketized goods
Marketized goods are goods that can provide marketing service of delivering information for other goods. Marketized goods satisfy
the general attributes of goods: usable, exchangeable. But they are different from other goods in having a marketing aspect of
information delivering. In the sense of delivering information, marketized goods can be viewed as a kind of information carriers, or
in other words, media vehicles. However, they are far more than media vehicles. To be a marketing good, it must satisfy the
following distinctive characteristics.
As an information carrier, a marketing good must be able to transmit some information to consumers concerned. Here, the producer
of a marketing good may not be the same with the information service buyer. The term “consumers concerned” here refers to the fact
English edition copyright © ST. PLUM-BLOSSOM PRESS PTY LTD
DOI:10.5503/J.CL.2011.04.009
45
that the information communicated by a marketing good has a specified target audience. This specified target audience, which comes
from the consumers of the marketing good, is the consumers that the information service buyer is concerned with. Not every
consumer of a marketing good is the target audience of the information. An example of goods possessing this characteristic is plastic
(paper) shopping bag. After buying things, consumers will be given these colorful shopping bags to hold their stuff. There is some
information printed on the bags. Some of the consumers are interested in the information provided, others not. Here, the interested
consumers are the target audience of the information, not the others. But all of them are consumers of the marketing good.
Secondly, the information transmitted through marketized goods is useful both to information service buyers and customers. The
information may be about product, service, brand, price, and other aspects related to the information service buyer.
Thirdly, a pure marketing good should be free of charge; and a mixed marketing good has a lower price than that of other
functionally equivalent non-marketized goods. (Goods that cannot provide a marketing service) Advertisement-carrying shopping
bags are again a good example of a pure marketing good. Consumers are given the bags free of charge.
Fourthly, suppliers of marketized goods can charge for the service of delivering information. That is, producers of marketized goods
generate revenue from their marketing services. Information service buyers, those who want to transmit information via marketized
goods, have to pay for the service.
Another characteristic related to marketized goods is accessibility. A marketing good may have a large number of consumers as well
as the ease of access. This characteristic may not be true for some special marketized goods. However, most marketized goods have
this attribute.
With the marketized goods concept, we can now group goods into two groups: marketized goods (pure or mixed), and nonmarketized goods. Non-marketized goods cannot deliver information for other goods.
1.2 Marketized goods and free goods
As we defined before, pure marketized goods are free. However, the concept of pure marketized goods is quite different from that of
free goods. A free good is free because the freely (costless) available amount is already larger than the demand. Whereas, a pure
marketing good is free through its marketing aspect.
1.3 Existence of marketized goods
Although we have already provided a definition for marketized goods and differentiated the concept of marketized goods from free
goods, we have not shown whether it is possible for some goods to be free or priced at lower levels through their marketing aspects.
First, we will show that it is possible for some goods to be free through their marketing aspects. (i.e. existence of pure marketized
goods)
According to the characteristics of marketized goods, we know that a marketing good X may be supplied by the producers of a nonmarketing good Y because X provides a marketing service for Y, or the producers of X receive payments from the producers of Y for
the marketing service. Taking the latter case, we assume there are many symmetrical producers of X and Y. In the short-run analysis,
the numbers of producers of X and Y are given, N x and Ny respectively. Each of the symmetrical Nx producers of X takes the average
quantity of X as given, the price r of marketing information M as given. We also assume that each producer is perfectly competitive
with respect to the supply of M. we have a representative producer of X whose objective function is:
Max: =p(x,X).x + r. ms (x,a) – Cx (x,a)
(1)
where the price p is a function of its own output x and the average output X, and ms is the amount of marketing information supplied
by a producer of X and is a function of output x and advertising intensity a. The total cost of this producer C x is also a function of
output x and advertising intensity a. The exclusion of aggregate output N xX and aggregate ad NxA from the cost function is justified
on the assumption of a small industry for simplicity. (The model is similar to that of Mesoeconomics, Ng, 1986, but with an extension
to include the marketing aspect.)
The maximization of (1) with respect to x and yields the first-order conditions
p + xpx + rmsx = Cxx
(2)
p(1+1/x) = Cxx  rmsx
(3)
rmsa = Cxa
(4)
Where subscript stands for partial differentiation, and x=(x/p) (p/x).
If the price r of M for the marketing service is high enough and/or the marginal cost of x attached with M (Cxx) low enough, we may
have p = 0. Cxx is the marginal cost of producing x attached with M, so we could denote it by MC x,m. And rmsx is the marginal
revenue received by delivering one more information M for y, which could be denoted by MR x,m. So when the marginal cost of
producing x attached with M equals the marginal revenue received through delivering M, and the marginal revenue received through
increasing one more intensity of advertisement (rmsa) equals the marginal cost of producing one more intensity of advertisement (Cxa),
the price will be zero. That is:
If MCx,m = MRx,m and rmsa = Cxa
We may have P = 0
If the producer of x is the same with the producer of y, we could also show that the price of x may be zero.
The proof shows that it is possible for the good to be free of charge to consumers if the good can provide marketing service for other
goods.
46
To prove the existence of mixed marketized goods (Goods are priced lower than other functionally equivalent non-marketized goods),
we can look a mixed marketing good as an integration of two parts: marketing part and non-marketing part. For the marketing part,
we have proved that it can be free. And the price of the non-marketing part is the same as the price of very part in other functionally
equivalent goods. Due to part of the good is free; the integrated price for the good can be much lower than that of other functionally
equivalent non-marketized goods.
1.4 Provision of marketized goods
The Model
We still assume there are many symmetrical producers of X and Y. In the short-run analysis, the numbers of producers of X and Y
are given, Nx and Ny respectively. Each of the symmetrical N x producers of X takes the average quantity of X as given, the price r of
marketing information M as given. We also assume that each producer is perfectly competitive with respect to the supply of M. The
representative firm of X industry has an inverse demand function in which the price (p) is a twice-differentiable function of its output
(x), the average output of the industry (X) and some exogenous factors (d). The amount of marketing information supplied by a
producer of X (ms) is a twice-differentiable function of output (x) and advertising intensity (a). The total cost of this producer (C x) is
a twice-differentiable function of output (x), advertising intensity (a) and some exogenous factors (c). The exclusion of aggregate
output NxX and aggregate ad NxA from the cost function is justified on the assumption of a small industry for simplicity.
The objective function of the representative producer of X is:
Max: =p(x, X, d).x + r. ms (x, a) – Cx (x, a, c)
(1)
The first order condition with respect to x and a:
gives
p + xpx + rmsx = Cxx
(2)
s
x
rm a = C a
(3)
The objective function of a representative producer of Y is:
Max: =q(y, Y, md, Md, y)y - rmd – Cy(y, z)
(4)
Where the price of y (q) is a twice-differentiable function of the output (y), the average output of the industry (Y), the amount of
marketing information demanded by this producer (md), the total amount of marketing demanded by all producers of Y (Md, Md =
Nymd) and some exogenous factors (y). The total cost of this producer (C y) is a twice-differentiable function of output (y), and some
exogenous factors (z).
The first-order condition is
q + yqy = Cyy
(5)
yqmd = r
(6)
The requirement of supply equals to demand in the market for marketized goods (assuming no other sources of supply and demand)
Nxms = Nymd
(7)
Totally differentiate equation 2 and divide through equation 2:
{[p(x+X)/A ccx/A – p(1+ 1/)(1/ +pX)/A] –sx}dx/x
= [p(1+ 1/)/A]d
/p – (c/A)d /c – (p/Ad
 + (sa – cca/A)da/a +dr/r
(8)
Where, dx/x =dX/X, ==(x/p)(p/x),  =(x/y)(y/x), C xc, m xs,
xy
x
s
A[c–p(1+1/)], d =(p/d)dd is the exogenous change in the price p of the representative firm, d =(c/c)dc is the
exogenous change in the marginal cost of the representative firm with respect to x, and d =(/d)dd is the exogenous change in
the demand elasticity of the representative firm,
Totally differentiate equation 3 and divide through it:
(tx – kx)dx/x +(ta– ka)da/a =d /k– dr/r
(9)
Where, Cxa= k, msa= t, and d =(k/c)(c/k) is the exogenous change in the marginal cost of the representative firm with respect to
a.
(8) and (9) yield:
dx/x ={E d /k+DI +(D – E)dr/r}/(DB+FE)
(10)
da/a ={Bd /k– (B+F)dr/r –FI}/(DB+FE)
(11)
in which B {p(x+X)/A ccx/A – p(1+ 1/)(1/ +pX)/A–sx}
I [p(1+ 1/)/A]d
/p – (c/A)d
/c – (p/Ad
}, D (ta– ka),
E ( – c /A), and F ( –  )
sa
ca
tx
kx
Totally differentiate equation 5 and divide through it::
{(1/+qY)–q(y+Y)/vvy}dy/y
= {q(w+W)/v(qw+qW)}dw/w + d /v –d /q +(q/vd /
(12)
Where, dy/y=dY/y, dmdmddMd/Md = (y/q)(q/y), Cyy  v, md w, and MdW d =(v/z)/dz is the exogenous change in the
marginal cost of the representative firm of Y industry. d =(q/y)/dy is the exogenous change in the price q of the representative
firm of Y industry. d =(/y)/dy is the exogenous change in the demand elasticity of the representative firm of Y industry.
47
Totally differentiate equation 6 and divide through it,
dy/y + (jy +jY dy/y + (jw +jW dw/w = dr/r d /j
qmdj,
y
(13)
y
Where,
and d =(j/ )/d is the exogenous change in the marginal price of y with respect to md.
From (12) and (13) , we can get:
dy/y=[H/(MH+LG)]dr/r + [M/(MH+LG)]d /q [M/(MH+LG)]d /v
[G/(MH+LG)]d /j Mq)/[(v)(MH+LG)] }d /
(14)
dw/w=[G/(MH+LG)]dr/r+[M/(MH+LG)]d /q [M/(MH+LG)]d /v
[G/(MH+LG)]d /j Mq)/[(v)(MH+LG)] }d /
Where, G(1/ +qY )–[q(y+Y)/vvy, Hq(w+ W) /v(qw + qW),
L jw +jW and jy +jY
Totally differentiate equation 7:
oxdx/x +oada/a = dw/w, where ms o
Substitute dx/x, da/a, and dw/w from equation 10,11, 15 into equation 16, we can get:
(15)
(16)
dr/r= [(oxE+oaB)/(DB+FE)]d /k+ {[(oxDoaF)p(1+1/) ]/[A(DB+FE)]}d /p
 [(oxDoaF) p]/[(A (DB+ FE)]} d 
 {[(oxD oaF) c] / [A (DB + FE)]} d /c
 [M/(MH+LG)] d /q [M/(MH+LG)] d /v  [G/(MH+LG)] d /j
Mq)/[(v)(MH+LG)]} d /






Where, ={[G/(MH+LG)+[oa(B+F)–ox(D-E)]/(DB+FE)}
For the stability of the system, the value of the value of (DB+FE) and the value of (MH+LG) must be positive. Hence, for the
purpose of singing the comparative statics effects, (DB+FE), (MH+LG) may be taken as positive. From equation 17, we have:
r
= (dr/r)/(d
/p)d
=d
=d
=d
=d
=d
=d
=0
=d
ox
oa
=0=[( E+ B)/(DB+FE)]
={[(oxDoaF)p(1+1/) ]/[A(DB+FE)]}/
r
= (dr/r)/(d
/k) d
=d
r
=(dr/r)/(d
)d
=d
=d
=d
=d
=d
=d
=d
=d
=d
=d
/
=0
= {[(oxDoaF)p]/[(A(DB+ FE)]}/
r =(dr/r)/( d
/c) d
=d
=d
=d
=d
=d
=d
=0
(18)
= {[( D  F)c] / [A(DB + FE)]}/
ox
oa
r =(dr/r)/(d /q) d
=d
=d
=d
=d
=d
=d
=0=
[M/(MH+LG)]/

=d
=d
=d
=d
=d
=d
=0=
[M/(MH+LG)]/
=d
=0
r
=(dr/r)/(d /v) d
 =(dr/r)/( d /j) d
r
=d
=d
=d
=d
=d
= [G/(MH+LG)]/
 =(dr/r)/( d /)d =d = d = d = d = d =d =0= Mq)/[(v)(MH+LG)] }/
For simplicity, we assume we are dealing with a small industry and ignoring any significant endogenous elasticity effect. (i.e.
x+X=0, w+W=0, and y+Y=0). We also assume the representative firm of X industry has horizontal marginal cost curve
(MCC) with respect to both x and a. (i.e. cx=ka=0), and the representative firm of Y industry also has a horizontal MCC. (i.e. vy
=0).
r
Proposition 1: 1) An exogenous increase in the price of the representative firm of X industry, and/or an exogenous decrease in
the marginal cost of the representative firm of X industry with respect to x (i.e. C xx), and/or an increase in the demand
elasticity of the representative firm of X industry decreases the price r of the marketing information if tx > kx. 2) An
exogenous increase in the marginal cost of the representative firm of X industry with respect to a (i.e. C xa) increases the price
r of the marketing information if (sa /ca)>1.
Proposition 1.1 comes from equation18.1, 18.3, 18.4. For equation 18.1, as we know (DB+FE)>0, p(1+1/>0, A>0, and
(oxDoaF)<0 if tx > kx ( that is because ox>0, oa>0, ka=0, and ta<0 (law of diminishing marginal product)). We can see that
when tx > kx, r
r
<0. For equation 18.3, we also know (DB+FE)>0, p>0, <0, and (oxDoaF)<0 if tx > kx. We may have
<0 if tx > kx. For equation 18.4, we know (DB+FE)>0, A>0, c>0, and (oxDoaF)<0 if tx > kx. Therefore, r
than zero if  >  .
tx
kx
48
is greater
An exogenous increase in p represents an exogenous increase in demand of x, since the firm has an inverse demand function.
According to Ng (1986, ch.5), an exogenous increase in demand increases the output. The growth of output x increases t (tx>0)
hence, increases the output of ms, thus, decreases the price r of ms. On the other hand, the increase of output x increases k (kx>0),
hence increase r. If tx > kx, the decrease of r is faster then the increase of r with the growth of x. Therefore, an exogenous increase
in p decrease r if tx > kx.
An exogenous increase in the marginal cost with respect to x decreases the output of x. The reduction of output x decreases t (tx>0),
hence, decreases the output of ms, thus, increases the price r of ms. On the other hand, the decrease of output x decreases k (kx>0),
hence decrease r. If tx > kx, the increase of r is faster then the decrease of r with the decrease of x. We can see that an exogenous
increase in c increase r if tx > kx.
With the similar analysis, we can find that an exogenous increase in the demand elasticity of the representative firm of X industry
decreases the price r of the marketing information if tx > kx.
If tx < kx, the effect of an exogenous change in price (p), marginal cost (C xx), and the demand elasticity of the representative firm of
X industry is more ambiguous, since we may not be able to sign the value of (oxDoaF).
Proposition 1.2 comes from the equation 18.2. As we know (DB+FE)>0, ox>0, oa>0, sa >0, c>0, A>0, ca >0,
p(1+1/>0+pX)<0, sx<0, and (x +X)=cx=0, thus r
>0, if (sa /ca)> 1. An exogenous increase in k decreases the
output of x. The decrease of x decreases a, hence decreases s (sa>0). The decrease of s decreases the output of ms, thus, increases the
price r of ms. On the other hand, the decrease of a decreases c (ca>0), hence decreases r. If sa/ca>1, the increase of r is faster then
the decrease of r with the decrease of a. We can see that an exogenous increase in k increase r if sa > ca. If sa < ca, the effect of an
exogenous change in marginal cost (C xa) is more ambiguous, since we may not be able to sign the value of (oxE+oaB).
Proposition 2: 1) An exogenous increase in the price q of the representative firm of industry Y, and/or an exogenous decrease
in the marginal cost of y, and/or an increase in the demand elasticity of y increases the price r of marketing service when (jy
+jY)< 1. 2) An exogenous increase in the marginal price of y with respect to md(i.e. qmd) decrease the price r of marketing
information.
Proposition 2.1 comes from equation 18.5, 18.6, 18.8. As we know (MH+LG)>0, >0, q>0, <0, and v>0. We may have r >0,
r <0 and r >0 if (jy +jY)< 1.
An exogenous increase in the price q represents an exogenous increase in the demand of y. The exogenous increase in the demand of
y decreases j if jy <1. The demand of md increases with the decrease of j. (jw<0). The increase of md increases r. Thus, we can find
that an exogenous increase in q increases the price r of md.
An exogenous increase in the marginal cost of y (c) decreases the output of y. The decrease of y increases j if jy <1. The demand of
md decreases with the increase of j. (jw<0). The decrease of md decreases r. Therefore, an exogenous increase in c decreases the
price r of md.
An exogenous increase in the demand elasticity of y increases the demand of y. (Ng, 1986, ch.5) With the similar analysis we can
find that an exogenous increase in the demand elasticity of y increases the price r of md.
Proposition 2.2 comes from equation 18.7. As we assume (MH+LG)>0, (y +Y) =0vy =0, we can have r <0 from equation
18.7. An exogenous increase in j decreases the demand of y (jy <0), hence the demand of md. The decrease of md decreases r. An
exogenous increase in the marginal price of y with respect to md(i.e. j≡qmd) decrease the price r of marketing information.
From proposition of 1 and 2, we can see that an exogenous increase in the marginal cost of the representative firm of X industry with
respect to x (Cxx ), and/or an exogenous increase in the marginal cost of the representative firm of X industry with respect to a (Cxa),
and/or an exogenous increase in the price q of the representative firm of Y industry, and/or an exogenous increase in the demand
elasticity of the representative firm of Y industry decreases the price p of the marketing good with a higher equilibrium price r of the
marketing service under some circumstances.
We can also see that an exogenous increase in the price p of the representative firm of X industry and/or an exogenous increase in the
demand elasticity of the representative firm of X industry, and/or an exogenous increase in the marginal cost of the representative
firm of Y industry, and/or an exogenous increase in the marginal price of y with respect to md increases the price p of the marketized
goods with a lower equilibrium price of r. elasticity of the representative of Y industry decreases the price p of the marketing good
with a higher price r of the marketing service under some circumstances.
In long-run analysis, we know that free entry/exit makes (1) and (5)equal zero, therefore, we can get the proportion of N x to Ny :
Nx /Ny = (q.yCY)/ (CX px)
(19)
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2 Application of Marketized Goods on Public Goods
Public good is a polar case of externality in consumption. The decentralized market mechanism is difficult to satisfy the requirement
for Pareto-optimal provision of a public good. The introduction of marketized goods concept may provide an approach to solve the
problem of provision of public goods as well as achieve the requirements of Pareto-optimal condition.
2.1 Public goods
Analysis of public goods has a long history; many characteristics of public goods have been widely discussed in the related literatures.
The two distinguishing characteristics for public goods compared with private goods are non-rivalry and excludability. In his classic
1954 article, Samuelson focused on the non-rival consumption characteristic of public goods.
Non-rivalry means many individuals can consume the same unit of a public good: its availability to one does not diminish its
availability to others. Goods possessing this characteristic can be found everywhere in our daily life: TV and radio broadcasting,
bridge, the internet … One individual’s surfing on the Internet does not preclude the others from surfing on it.
Because of non-rival consumption, if P units of the public goods are produced, then P can be consumed identically by any individual.
In the sense of cost, this statement can be translated to mean that marginal cost of consumption for an additional person is zero.
However, marginal cost of production of the public good is not zero. Obviously, marginal cost of a public good can be evaluated in
two dimensions.
Some economists (e.g. Musgrave, 1959) emphasize the nonexcludability aspect of public goods. Nonexcludability refers to the
impossibility of preventing non-paying individuals from enjoying the benefits of a good or service. Once the good is provided for
some individuals, it is impossible or at least very costly to exclude others from benefiting from it. Internet here again a good example.
It is very hard to exclude people from taking advantage from it once provided.
Another characteristic related to public goods is nonrejectablity. It is close to nonexcludability, but it is more important to public bads.
(i.e. pollution etc.)
2.2 Pareto-optimal provision of public goods
Many famous economists have studied this problem with the help of complicated mathematical models. (Samuelson 1954,1969,
Musgrave 1959, 1969, Buchanan, 1968 among others.) According to them, the derivation of the requirements for optimal provision
of public goods is simply a variant of the familiar Paretian optimum conditions analysis for a world of private goods. Due to the
nature of public goods, the optimality conditions are a bit different from that for private goods. The Pareto-optimality condition for
the supply of a public good is formulated by MRSi = MRT, i.e. the sum over all individuals of the marginal rate of substitution (of
the public good for a numeraire private good) be equal to the marginal rate of transformation.
2.3 Market failure
Can the market mechanism be expected to satisfy the crucial MRSi = MRT condition for optimal provision of public goods? J. G.
Head answered this question clearly in his 1974 book “Public Goods and Public Welfare”.
Consider the case of two individuals and two goods. In terms of ordinary market variables the condition MRSA + MRSB = MRT
would be satisfied by the following:
For the private good X,
PX = MCX
(1)
And, for the public good P,
PAp + PBp = MCp
(2)
Where PAp and PBp are the prices of the public good to person A and B, and are chosen in such a way that
MRSApX = PAp/ PX
(3)
And
MRSBpX = PBp/ PX
(4)
So that
MRSA + MRSB = (PAp + PBp) / PX = MCp / MCX= MRT
Thus, in terms of ordinary market variables, Pareto-optimal provision of public goods requires in general a set of differential prices to
individual consumers summing to marginal cost.
In order to satisfy the requirement of differential pricing, consumers with different tastes or marginal utility for the good must
achieve the utility-maximizing equilibrium at the same level of consumption. But it is apparent that this is not possible in a perfectly
competitive market. Consumer with a relatively high marginal utility can always turn to alternative supplier. Perfect competition is
simply not capable of generating marginal prices that discriminate between different consumers of a given product.
In the case of a legal monopoly, differential pricing is in principle quite conceivable. But, the monopolist must in effect have full
knowledge of the preference maps of all potential consumers for practical purpose. However, this information is quite difficult to
obtain since individual consumer has no incentive to reveal his true preference for public good. Or consumer is not motivated to do
the signaling of his tastes needed to achieve a Pareto optimum.
50
We may see that neither a competitive market mechanism nor a legal monopoly can possibly expected to achieve the requirement for
Pareto-optimal provision of a public good. Noting the nonrival and nonexcludable nature of public goods, Samuelson’s theory yields
that there is no public goods provided, or if there some, then they must be supplied free of charge and financed out of general taxes.
2.4 Marketized goods: an approach to optimal provision of public goods
Is it possible to supply public goods by private sectors? Some economists (notably Oakland 1972,1974, Thompson 1968, Demsetz
1972,1973) have constructed some models to claim that private provision of public goods is possible. But most of the existing models
of private provision of public goods are based on some questionable assumptions. For example, Thompson assumes that producers
know the willingness to pay of consumers and Demsetz uses a false analogy between public goods and joint supply. In the present
paper, the authors argue that if a public good is supplied jointly with a marketing service, then it may be possible to be supplied fully
and freely by private sectors or by the government without taxing consumers.
It is possible for a public good to be supplied jointly with a marketing service. For example, television broadcasting could be
supplied jointly with an advertising service. Here, the good that combines a public good and a marketing service together could be
considered as a marketing good. Although the marketing service is jointly supplied with a public good, the marketing service itself is
not a public good. For instance, the advertising service supplied in the television broadcasting is a private good, which is just served
for those who pay for the service.
We assume a marketing good X jointly provides a public good P and a marketing service M. For the public good P, we know its
optimal provision condition is:
MRSip MRTp
(1)
For the marketing service M, the optimal provision condition is:
MRSimMRTm
(2)
Since MRTp + MRTmMRTx
(3)
We have the optimal provision condition:
MRSim + MRSip MRT x
(4)
As we know, The MRS and MRT are just respectively measures of the marginal benefits (or marginal valuations) and marginal costs
in terms of numeraire good. The equation (4) could also be written as:
MVm + MVp MCx
(5)
It is possible for public good to be supplied fully and freely if the demand for the marketing service M is high enough. The
illustration is given in Figure 1.
In figure 1, the marketing good X, the public good P and the marketing service M is measured along the horizontal axis. MVp curve
denotes the sum of individual MVp curve. MVm curve denotes the marginal valuation of marketing service M. MVm + MVp curve is
the vertical sum of MVm curve and MVp curve. MCx curve denotes the marginal cost of marketing good X. Abstracting from income
effects, these MV curves also correspond to the individual demand curves. In figure 1, MVm curve intersects MCx curve at the point
E. At this point, MVmMCxand MVpi.e. the production cost of the marketing good X is fully covered by the marketing
service M. Therefore, it is possible that, if the demand for M is high enough, for the public good to be supplied fully and freely.
The case of partial supply is also possible. In figure 1, the partial supply of public good is given by the point E’, where the MVm
intersects MCx’ curve.
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3 Marketing Implication of Marketized Goods
3.1 The limit of marketing concept
Marketing concept, first articulated in the 1950s, has evolved through the decades. The concept has changed from the incipient
market-driven to nowadays customer value-driven. (Frederick E. Webster Jr., 1994). However, the essence of marketing has not
changed. Marketing is still a managerial philosophy to create exchanges profitably, while generates revenue for business
organizations. (Even for nonprofit organizations, marketing is performing as a management process to generate donations.) The core
concept and main purpose of marketing elicit two limits that the existing marketing theory cannot exceed.
3.1.1 Customers’ costs give rise to negative and resistant attitude
Marketing is responsible for generating revenue in a business organization. Therefore, the task of marketing people is to identify,
anticipate and satisfy customers’ requirements, and then to stimulate customers to buy their products. Whereas, from the viewpoint of
customers, marketing is only a process taken by producers to squeeze money from them. Although customers receive products in
return, they always perceive out-of-pocket costs as losses. By virtue of this, marketing is perceived as a tool helping producers to
extract money from customers. Thus, it causes negative and resistant attitudes of consumers.
3.1.2 Customers are passive and producers are active
In order to generate revenue, producers actively push products to customers via marketing. On the other side, customers are passive
to accept products provided by producers. The whole marketing process is controlled by producers, whereas customers passively
accept what the producers offer. Although a new customer-oriented marketing concept appears, the aim of this concept is still to
facilitate products to customers.
These two limits bring about the toughness of marketing process. In order to generate revenue, marketing people have to break the
resistant and negative attitudes of customers. And to make satisfactory marketing, marketers need to activate customers. If the two
limits cannot be overcome, marketing will always be a tough and challenging work.
3.2 The breakthrough of marketized goods in marketing theory
In the 21st century new economy, products are infused with information, knowledge, and net-based services and consumers are
offered more choices. The popular marketing principles have to undergone critical changes to cope with the challenge of the new
knowledge-based economy. The authors argue that the concept of marketized goods may be able to break through the limits of
marketing principles.
As we know, consumption cost is any negative and resistant factor that hinders exchange. However, the marketing aspect of a
marketing good makes it possible to reduce consumption cost. For pure marketized goods, costs are zero, hence not a barrier any
more (if other conditions remain unchanged, such as time spent). For mixed marketized goods, consumptions cost are also lowered
via the marketing aspects. In the new knowledge-based economy, consumers have sufficient incentives to buy a low-cost mixed
marketized goods rather than buying a functionally equivalent non-marketized goods. The concept of marketized goods obviates or
reduces customers’ negative attitudes elicited by customer cost. (If other conditions remain unchanged, such as time spent).
The zero or lower customer cost also stimulates customers’ consumption incentives. Customers are more spontaneous to consume
marketized goods, thus the quantities demanded of marketized goods are boosted. The inter-relationship of producers and customers
are changed. The provisions of marketized goods are pulled by the increased demand. Customers are no longer the passive acceptant,
and they are the dynamic power to pull provision of marketized goods.
The concept of marketized goods has profound effects on marketing mix too. Marketing mix is a set of marketing tools to influence
consumers buying behavior. McCarthy (1996) 52l assifies these tools into four broad groups that he calls the four Ps of marketing:
Product, Price, Place, and Promotion. The four Ps come from the seller’s view of the marketing tools available for influencing buyers.
Whereas, Robert Lauterborn (1994) suggests that the sellers’ four Ps correspond to the customers’ four Cs: Customers solution,
Customer Cost, Convenience and Communication. Price (corresponding to customer cost) is one of the crucial elements in the
marketing mix. The change of it will bring immediate effects. The concept of marketized goods may lower the price and hence the
customer cost. The zero or lower price brings about competitive advantages for marketized goods than other functionally equivalent
non-marketized goods. Other components of marketing mix will become less important when the price is the key element of
competition.
3.3 Two-layer marketing system
The concept of marketized goods gives rise to two-frame market structure. Here, we define one-frame market as consumer market
and the other frame as production partner market. Consumer market consists of current or potential customers who are interested in
acquiring and consuming goods. While, production partner market is composed of marketing service buyers who are interested in
attaching their information to the goods. With the two-frame market structure, the authors propose a two-layer marketing system for
marketized goods.
For mixed marketized goods producers, part of their revenue comes from the production partner market. The marketing efforts in
consumer market are not enough to achieve the revenue objectives of the organizations. To be profitable, producers will have to
conduct marketing in production partner market. (i.e. marketing in producing stage)
52
Marketing
Production
Aspects
Partners Market
Marketing in Producing Stage
Mixed
marketing
goods
Non-
Marketing in Selling
Consumers Market
marketing
Stage
Chart Aspects
1 Tow-layer Marketing System for Mixed Marketized goods
These two marketing layers are interactive. The marketing success in one market can facilitate marketing effort in the other market.
This two-layer system works for pure marketized goods too. In selling stage, producers’ marketing efforts are now easier without
negative cost factor. Producing stage is the main market for pure marketing producers to conduct marketing.
3.4 The concept of marketized goods benefits business organizations
Some marketized goods already exist in the economy such as free shopping bags, free newspaper, free broadcasting. Besides those
existing marketized goods, the authors argue that any other goods can be marketized to become pure or mixed marketized goods. A
car can deliver information for oil producers and tire producers; a refrigerator can transmit information about food, beverage, fruit
and vegetable…. Marketization of non-marketized goods will bring some benifits to producers:
3.4.1 Gain competitive advantages
Marketiation of non-marketing good will reduce price of the good. Compared with other functionally equivalent goods, the
marketinized good has a lower price. Assuming that other costs (time spent, inconvenience, ect.) are equal, fully informed consumers
would choose the marketized goods. The more parts are marketized, the lower price will be the good. The significance of
marketinization is to reduce price to a sufficient lower level and then bring competitive advantage rather than to zero price.
3.4.2 Save marketing expenditure
Although the concept of marketized goods elicits a complicated two-layer marketing system, the marketing expenditure of
organizations is reduced. The two layers are interactive with each other. In consumer market, the marketinized good has comparative
advantages; hence save marketing expenditure a lot. Although producers need to add some marketing inputs into production partner
market, the expense in this market is much less than that in the consumer market. The target audiences in the market are more
concentrated and the quantities are much less than that in consumer market. The components of production partner market are always
business organizations or nonprofit organizations. Their requirements are far easier to be identified, anticipated and satisfied than
scattered individual consumers. In general, the total marketing expenditure will be reduced.
4 Conclusion
Marketized goods (pure and mixed) are goods that can deliver information for other goods. Five characteristics of marketized goods
are discussed. Unlike free good, pure marketing good could be free through its marketing service for other goods. For mixed
marketized goods, the marketing aspects can reduce its price to a sufficiently lower level. The provision of pure marketized goods
will totally depend on the marketing cost of information service buyers, and those information service buyers also support certain
part of the revenue of mixed marketized goods. Some results of comparative statics analysis shows that the price, the demand, the
demand elasticity of Y industry has directly effects on the price of X industry. To some extent, we can say that the market size of
marketized goods relies on the market of information service buyers.
Nonrival and nonexcludable nature of public goods yields the failure of market mechanism to achieve the Pareto-optimal
requirements for provision of public goods. However, if a public good is supplied jointly with a marketing service, the full and free
supply of the public good is possible when the demand for the marketing service is high enough. The production cost of a marketing
good which combines a public good and a marketing service together could be fully covered by the revenue derived from the
marketing service if the demand for the marketing service is high enough. That makes the optimal provision of public good possible.
The concept of marketized goods breaks through the limits of marketing principles: customer passiveness and customer resistance.
With the marketization of non-marketized goods to marketized goods, the price of marketized good is reduced to zero (pure
marketized goods) or to a sufficient lower level (mixed marketized goods). And therefore, marketization will bring competitive
advantages for producers. In knowledge-based new economy, the concept of marketized goods will help business organizations to
win and dominate market.
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