The yankee dollar; U.S. aid in Mexico

Television at the University of Texas presents the Yankee dollar. The Yankee dollar What is it Bud. Well that by. Radio television the University of Texas in cooperation with the National Association of educational broadcasters invites you to tour Mexico with Richard Ariano as he talks to political leaders and to voters to management and to labor to rich to poor to the people of Mexico. One thing will guide these conversations. What is the American dollar bought south of our border. What can it buy. And above all what image of us is our money creating.

American money finds its way into Latin American countries in different ways. Cheap of these are through foreign aid. The federal dollars through monies spent by vacationers the tourist dollar and through money invested by businessmen. The company dollar is the channels through which our money flows or fails to flow affect the image it creates is US federal aid needed or wanted in Mexico. What form should they take in order to find the answers to these and other questions. Mr Ariano spoke with Mr Evans Bardwell lecturer in marketing administration and business statistics at the University of Texas. Here is a recording of that interview as it took place in Mexico City. I'm talking with Mr. Al Birdwell who is in Mexico working with the centering on the probe Peavy doubt he has done on a grant from the United States a government working with the end product to be centered in a

program of market research and market research techniques. Mr. Berger where are you. Fine thank you Mr. around you. How do you think your program is working out here in Mexico City just for. Well certainly the program is not exactly as I expected to be however I have never worked in any program in marketing and it turned out to be exactly what I expected to be saying is that the pace here in Mexico City is not quite the same as it is in the United States but it's something that I'm finding that I'm adjusting to it fairly well. We are however making some progress which pleases me quite a great deal. You say that the piece isn't quite the same as in the U.S. where you're from Mr. Austin Texas. Do you work in Austin. Yes I'm a lecturer in the department of marquis administration and also on business statistics at the University of Texas. I see are you teaching these subjects here in Mexico. No my main job is the administration and the organization of a survey of

the food marketing industry here in Mexico. What we're trying to do is find out what the major problems the manufacturers have in. Getting their product to the Mexican consumer and also later we plan to do an in-home survey of Mexican consumers to find out what they believe to be the major drawback to their purchase of prepackaged foods in Mexico. What is the reason that these surveys in this program was set up in the first place. I think good in general what we're trying to do is trying my counterpart here at the CIA I think to do a project of the same sort of job that I am doing now. And addition to that I think we hope tickling some information from the Mexican manufacturer the Mexican food Packers. And in addition to that from the Mexican consumer that will aid the Mexican manufacturer

and providing a product that is more suitable to the Mexican consumer. Why is the United States government interested in this type of work. Well I think this is in general part of the program of the Agency for International Development which is a part of the I believe the Alliance for Progress. You mean the Alliance for Progress is the Latin American portion of the Agency for International Development actually exactly is that right. I see and they think that somehow they feel that from the development of the food industry although working in art they have people what the contract technicians and you know all the major industries that touch the consumer directly in Mexico in the in the garment industry in the shoe manufacturing industry in the food industry and also some follow ups on particularly technical programs particularly one in general quality control that are being carried out right now on the

advice of some other studies that were done previously. So a ID has a number of contract technicians here in Mexico that are working right now in other areas besides the food industry the ideas Agency for International Development exactly that is the Alliance for Progress. I see. Do you feel that this work that you're doing is really a step in the right direction for the economic development of these Latin American countries. Oh I certainly feel that if anything can be done too. Get the standard of living of the people of Latin America to some higher level. This is a step in the right direction and I think that the idea in back of the work that we're doing now is to try to satisfy the Latin American consumer you know manner more satisfactory than is being done

now. I really don't know that we're going to see a great deal of initial runaway type Vance's this is going to be a long run sort of thing I think more than anything by a long run do you mean 10 years. No no no no. The next five to six to seven years I mean you think that in this period of time we will see changes very definitely. Is there any connection between your work and the stimulation of consumer demand in other words do you feel that demand needs to be stimulated in Latin America. Definitely I do I think that in a lot of cases the Latin American consumer needs to be educated to the merits of. Items that are now available to him at perhaps a cost somewhat in excess of what he pays for fresh food. But he is not aware of the convenience nor the value of packaged foods in other words.

Most Latin American housewives I think shop every day. The global alliances. There's quite a bit of inefficiency. Yes and then you know you know a number of cases they shop every day because they have no facilities for refrigeration no facilities for storage of food that could be overcome with the use of prepackaged or canned or processed foods. And it seems to me that they could eliminate some of this work that they do in shopping trips back and forth to the grocery store and things of this nature to the popular markets simply by the adoption of more convenient items for them and direct their work then into some more profitable direction. Do you think that there is any problem with. The fact that there is a lack of purchasing power in these countries and if so how do you see this problem solved.

Well first of all of course we know that the purchasing power of the Mexican population is limited. Is this true just in Mexico. Oh no I think it's true all over Latin America there are all economies are particularly project conscious because of the absence of a large amount of discretionary income particularly in relation to the amount of discretionary income that we find in the United States. One of the main barriers that we found in some of the initial work that we've done to the purchase of packaged food is that some packages simply don't fit the budget of the consumer. In other words if they have five vessels for oats and oats only come in six peso containers then I either don't buy loads or they buy them loose. In other words out of 20 kilos containers and have them wrapped in newspaper and take them on this manner. Well the problem here is that the six peso investment would

probably buy them more roads than a five peso investment for the road more. Grahams per peso and the sixth place or container than for five pesos is a much higher markup when they retire early Exactly. Well these channels of purchasing that are outside of the packaged group another way. Exactly. The economies of scale that we find in the United States that allow low profit per unit and things of this nature simply do not exist in Mexico. The High Cost of borrowed money the high cost of land the high cost of capital equipment all mean heavy markups at each stage of the channel of distribution for products to eventually get to the ultimate consumer. Retailers get about 12 to 20 percent wholesalers 17. I haven't been able to find out as yet an accurate range on what

manufacturers get but my impression is somewhere between 35 and 55 percent. So this means that from the time that the good is bought fresh until the time it reaches the ultimate consumer can its value has increased almost 100 percent. This means that tomatoes bought fresh in the popular market. Cost. 50 centavos a kilo. Yet when bought in Kilo size can probably cost five six pestles That's 10 times a tenfold increase exactly. Do you find that you're going to have much difficulty in educating sort of speak the Mexican manufacturer and wholesaler and retailer to the concept of lower markup in high regard. Not very definitely we are because the problem that we have with credit in Mexico and also the problem of high rates of interest on borrowed money.

So there's a noticeable absence of risk capital available in Mexico. And this mix. A quick return on capital investment. Prime consideration of most manufacturers. In other words they want to get their money back as soon as they can so that they can pay the banks back and not pay a great deal of interest. This means that they are going to continue to want to have markups so that they can get back their money quickly. If we think about low unit markups and high volume this is a sort of thing it takes time to get your investment back on. Is there room for North American investment. In other words investment that it does realize the potential of a high volume low profit market

situation. Apparently a large number of the American food processors believe that there is a lot of them are coming in Mexico right now. General Foods is getting ready to come in on almost a wholesale. At every opportunity they have just recently come in with Maxwell House coffee jello is their first product here. They don't have any of the Swann's down cake mixes or anything of that nature yet but I'm led to believe by the general manager who is the distributor for General Foods here that this is something that's coming quite soon. Have they been successful in these programs with jello Yes very successful. Maxwell House has just been introduced within the last two months and it's still in the development stage. They have some dried soup that they're marketing here that's packaged that is the number one seller on the market right now that has only been on the market for about two years. Apparently particular items that make up a part of the Mexican diet are

going to sell better in packaged wines than others. This is my own general impression and not to. To be held as gospel truth I'm not sure about that but we certainly thank you this has been a most interesting interview and I'm sure that it is one that is going to shed a lot of light so to speak on a subject that is an interesting one for the average North American mystery. Thank you Mr. Burke for further discussion on United States federal aid to Mexico radio television invited into its studios. Mr. William P. Dhamma Muth assistant professor of marketing administration the University of Texas speaking with Professor da move is Mr. Richard Ariano at Saddam who are glad to have you with us today. I enjoyed hearing Mr. Birdwell again on the tape there and I'd like to ask you some comments or ask for some of your comments whether said on particularly marketing administration's role in economic development does it have a role in

the development of these backward nations or as they prefer to be called developing nations. Well I think Mr. Ariano that marketing has a very definite role to play in your developing nations and I think that it's a role which is very often overlooked by people in the country and perhaps by some of the advisers that are sent down to assist them in their development process. I think you could put it as simply is this the objective of all production is all I'm at least consumption and the process that cooks production up with consumption after all is marketing. You have both a physical distribution aspect to marketing administration the job of getting the product to the consumer or to the user. The job of negotiating the sale and you have a a process which in this country in any country actually which begins to develop a rather sophisticated economy becomes extremely important this is a two way communication

process really. I think Mr. Bird Wells comments bore largely upon his matter of a two way communication process. Do you feel that if there are resistances in these marketing channels that this has a severe effect in retarding economic development or economic growth. Well a very certainly does I think that much of the progress that has been made economically in this country can be attributed to a vigorous competition and willingness to change within. The channels of distribution some of it forced to corps members by manufacturers but much of it really exemplified by the growth of a variety of institutions supermarkets we've seen all sorts of changes still are. For that matter and retailing in this country one of the comments that interested me that was to bird well-made was the fact that the cost was increased by of these canned goods was increased of about 100 percent. As

a result of going through the marketing channels through the marketing process. Now it's my understanding that in the United States this cost is as high as 50 percent. This frequently this high cost is frequently criticized as being a impediment to the spread of economic welfare of individual welfare. How do you feel about this. Well let me say first of all I'm not quite certain of exactly what caused Mr. Birdwell was including in his estimate but I believe that he went from the tomato of a raw tomato being purchased in the public marketplace to the canned tomato being purchased in the grocery store. And of course part of the increase part of the difference there is a physical difference there is a difference obviously between the raw tomato when they are making a tomato. You would have to say also that it is a mistake to

view production costs as being one thing and marketing costs as being over here something entirely separate in nature. The two really are interwoven and the thing which is of importance is total cost not net. The individual breakdown so much is the total cost and this total cost occurs very often the increased marketing expense or the increased share of total expense that we see in going to marketing really is simply a reflection of the savings and production costs. This has been true in this country you have only to look at. All items such as electric light bulbs take a very commonly used item. Television sets in more recent years you have such things as. Charcoal grills price of all the ads for children playground equipment for your backyard. The price of all these things has fallen dramatically over a very short span of time and it's been made

possible largely because of mass distribution based upon mass production. Or rather I should say upon mass production based upon mass distribution coupled with an extremely competitive system. And this is marketing this is the very thing I began by saying that the production process must be coupled to a consumption process and the forced the element which couples the two together is marketing. Now this is a very interesting point. The fact is that although the share the percentage of the total cost is high. You're saying that the actual cost of the unit may decrease so that the consumer is ultimately benefited. Well that's very true after all the thing that do you as a purchaser are interested in and I believe is the total cost rather than the breakdown. Well look at it from a production standpoint suppose that in order to achieve a lowered production cost we had to raise the overhead

portion of production which of course had been true you see in the development of supervisory personnel etc.. But in so doing we lowered the the direct cross applied to a given item and in manufacturing. Now I think that you as a consumer are really disinterested in how the costing is arranged in the factory. The thing in which you're interested is the ultimate cost which you must pay. Now the same I think is is true of the division between marketing and production costs. After all if a can of pork and beans cost 15 cents and of 10 cents of this is production at 5 cents and marketing. If I can bring that cost of a can a bean can of beans down to 12 cents. But Ray's marketing share of the cost is 7 and lower productions to 5. Everyone is better off. And this I think is something that's very often overlooked by the critics of our American marketing system and by these people in your developing nations that is

they the relationship and the importance of marketing is all too often completely overlooked. Great concentration and production a little attention to what the consumer really wants. Mr. Bird was an example of the six pace all package of oatmeal for example. Here is a an instance of a lack of communication in this case the return communication process from consumer to producer. And so here you see you have a waste not due to marketing but due to inefficient marketing. Now there's a question of the role that demand plays in development as the so called Demand pool. Is this a true factor in economic development. Especially say in the case of these Latin American countries. Would you care to go further on these. Well of course any thoughts and I might have and those are her only originals and it's a man named discussed in quite a while Pak But let me say that I think that

the philosophy and the general idea of the theory that he put forth can be illustrated with very practical situation. As a consultant for example who spent some time in Egypt reports that in Egypt you face a real psychological problem in dealing with the Egyptian worker in that if you raise his hourly wage his immediate tendency is to cut his total working hours per week feeling that now he can maintain his total wages to a living standard Not course if you do this you really can't develop a country can you I mean in other words all you're really doing is. Running around in a circle your cap wishing presume with the objective of reducing it working hours all of this is not likely to be a very enduring benefit. Given this type of situation so that I think it is very true that demand creation coupled with an

understanding of consumer needs resulting in this increased demand which in turn results in a possibility of increased production increased the standard of living what have you. But it is a process which originates in part in large part with the people themselves with their desires with their or wants and needs. Is there such a thing as a contagion of wants when they for instance when a Mexican sees a movie made in the United States or in Europe and in this sees some facet of life that he would like to imitate. Is this what you would consider to be a contagion of want. Does this take place. Well I'm just giving you what I have to give you a guess and this I and my guess would be that human beings are basically pretty much the same whether they live in one country or another. Certainly it seems to have been very true in this country that there has been a contagion of once I think that

reducing it to my own personal situation or those of my friends I think that this business of keeping up with the Joneses for all the Kadam nation that it sometimes has given has been a strong force in developing this academy. And I see no reason why this wouldn't be true in any nation. What function does advertising play in the process of this contagion of winds. For one thing of course advertising is a means of letting people know what you have to offer them. The straight communication process but a very important communication process. The second function of advertising is to convince people of the desirability of adding your goods to their life play and if you will to achieve objectives which are natural to the normal two I don't think that advertising creates changes in human personality. I do think however it

creates changes in the way in which people fulfil their natural desires. It can be misused. I would grant you that. But let me give you some examples are one specific example. In the Mexican framework take one and other countries are sure the same thing is true. This business of changing the way in which the consumer feels about a given type of product can be a vital part of progress. This same thing has been true in this country canned goods like say mentioned in Mr. Bird Wells commentary canned goods in this country were not just readily accepted by the American consumer there was a job of persuasion and in fact I can remember not too many years ago the situation where a leading Cantor in the Chicago where you use the slogan see it in glass buy it in 10 and each grocer had each of the canned products displayed in a glass

container. I suppose the reason being that psychologically the housewife was distrustful of something which he could not see. Now I think this exemplifies one of the major jabs that advertising performs it's convincing people it is allaying their fears if there are fears or it is leading them through a train of thought which will explain to them how they can reach their objectives using a given product. What function what role can market research play in aiding a developing nation to more rapidly achieve its goals of vital role of mystery you know a very vital role the communication process and marketing that I mention must be a two way communication prices. It is demand creation consisting of advertising etc. going out from the producer to the consumer. But it must also be some

feedback from the consumer. Back to the producer. Now of course a portion of this comes in the marketplace. If they buy the item with the volume increases. This is a message and this is the one that The Economist typically talks about. Consumer cast his vote by spending is dollar or is pace allers rupiah or whatever it might be. However not every aspect of consumer attitudes consumer feelings consumer desires can come back this way. This is especially true in an era of change. It is especially true in the situation of Mr. Bird well-described getting back to the old serial case market research in one of its most vital roles is the avoidance of mistakes in marketing and in the production planning that lies back of marketing. Knowing what people want and knowing what you should tell them about what you have to sell. So I say it

has a very. Especially in a country which is attempting to develop rapidly as these nations are. It is a means of avoiding or at least reducing mistakes and that means increasing efficiency. This has been another in the series of interviews conducted by Richard Ariano in Mexico. Mr. Ariano has been talking with Mr and Evans Birdwell lecturer in marketing administration and business statistics at the University of Texas. Our studio guest was Mr. William P. Dahmer mooed assistant professor of marketing and ministration also from the University of Texas. The Yankee dollar was produced by Arsene RS and directed by BW Crocker at

Radio Television. The University of Texas under a grant in aid from the National Association of educational broadcasters. This is the end E.B. Radio Network.