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Bringing Radio into America's Homes: Marketing New Technology in the Great Depression

Published online by Cambridge University Press:  01 June 2016

Abstract

We examine the early marketing and distribution of entertainment radio sets. Manufacturers used distribution networks to both maximize profits and create barriers to entry. Lacking the market power of auto manufacturers, they developed cooperative strategies with authorized distributors and dealers. Dealers often complained about the costly activities manufacturers required of them. However, these underpinned the dominant quality and branding competition model of the 1920s, while the Depression-era switch to a simpler radio format, sold on price, proved catastrophic for the specialist retailer.

Type
Research Article
Copyright
Copyright © The President and Fellows of Harvard College 2016 

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References

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32 Ibid.

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34 Friedman, Birth of a Salesman, 195, 202–203.

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36 RCA Victor, “Merchandising Policy of the Radiola Division for the Year 1930–1931,” 24 July 1930, RCA Victor Camden/Frederick O. Barnum III collection, 2069/9/38, Hagley Museum Library, Wilmington, Del. [hereafter Hagley, RCA Victor].

37 Eoyang, “Study of the Radio Industry,” 137.

38 E. E. Bucher, general sales manager, RCA, circular to authorized Radiola Dealers, 18 Jan. 1926, 55, 239/1, Smithsonian, Clark.

39 RCA Sales Dept. Retail Dealers Discount Schedules, 55/97, Smithsonian, Clark; M. B. Sleeper, “Distributing Problems of Radio Manufacturers,” Wireless World and Radio Review, 23 Dec. 1922, reprinted in Douglas, Radio Manufacturers of the 1920's, 1:viii.

40 RCA Sales Dept. Retail Dealers Discount Schedules, Smithsonian, Clark.

41 E. A. Nicholas, manager, Radiola Division, RCA, circular to RCA Radiola Distributors, 3 Dec. 1928, 55, 108/2 Smithsonian, Clark.

42 Paul Klugh, speech to annual meeting of Zenith stockholders, 25 June 1930, cited in Cones and Bryant, Zenith Radio, 92.

43 Alfred D. Chandler Jr., Strategy and Structure: Chapters in the History of the Industrial Enterprise (Cambridge, Mass., 1962), 145–53.

44 Cones and Bryant, Zenith Radio, 25.

45 Roy A. Forbes, circular to RCA Victor distributors, 15 Oct. 1930, 2069/9/41, Hagley, RCA Victor.

46 “RCA Victor Production Control and Requisition Plan,” 1 July 1931, 2069/9/41, Hagley, RCA Victor.

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48 BLA to Tom, 6 Apr. 1943, 2069/9/47, Hagley, RCA Victor; Clarke, “Closing the Deal,” 62–63.

49 Surviving copies of some of these documents and periodicals are available on Jim's Crosley Antique Radio Page, accessed Jan. 2015, http://www.crosleyradios.com.

50 Neil H. Borden, The Economic Effects of Advertising (Chicago, 1942), 404–406.

51 Memorandum to all RCA Radiola Distributors, 9 Oct. 1929, 55/97, Smithsonian, Clark.

52 Crosley Broadcaster, 1 Nov. 1928, 13.

53 “RCA Victor Company Inc. Co-operative Advertising Plan, Oct. 1 to Dec. 31, 1931,” circular, c. Sept. 1931, 2069/10/14, Hagley, RCA Victor.

54 “Special Discount and Cooperative Advertising Plan for Large Accounts, season 1931–32,” c. Sept. 1931, 2069/10/14, Hagley, RCA Victor.

55 W. H. Stellner, “Radio and Phonograph Sales Promotion and Advertising,” in RCA, The Field Representative's Training Course 1935–36 (1935), 42–44, 2069/10/5, Hagley, RCA Victor; RCA memorandum to all RCA Radiola Distributors, 9 Oct. 1929, 55/97, Smithsonian, Clark.

56 Minutes of Deforest Interdepartmental Committee, 28 May 1925, 55, 104/4, Smithsonian, Clark; “Course in Radio Salesmanship and Service: Manual or Discussion Meetings,” De Forest Radio Institute (n.d. [1920s]), 55, 110/3, Smithsonian, Clark.

57 RCA circular to all RCA Radiola distributors, 8 Jan. 1927, 55/97, Smithsonian, Clark.

58 New York Times, 14 Feb. 1926, cited in Leslie J. Page Jr., “The Nature of the Broadcast Receiver and Its Market in the United States from 1922 to 1927,” in American Broadcasting: A Source Book on the History of Radio and Television, ed., Lawrence W. Lichty and Malachi C. Topping (New York, 1975), 470.

59 National Electrical Manufacturers Association, The Radio Market (New York, 1928), 3.

60 U.S. Dept. of Commerce, Bureau of Foreign and Domestic Commerce, “Merchandise Problems of Radio Retailers in 1930,” Travel Information Bulletin No. 778 (Washington, D.C., 1931), 4–5.

61 Langley, R. H., “Radio Developments in 1934: Part IV—A Review of Radio Broadcast Reception during 1934,Proceedings of the Institute of Radio Engineers 23 (1935): 433–41Google Scholar.

62 U.S. Dept. of Commerce, Bureau of Foreign and Domestic Commerce, “Merchandise Problems,” 7.

63 “Your Sales Program for 1929,” Radio Retailing, Feb. 1929, 36–37.

64 The earliest estimate, for 1927, indicates that new sets required around six tubes. “Broadcast: Published for the Radio Industry. An Analysis of the Radio Market,” leaflet [presumably included with a copy of the trade magazine Radio Broadcast], n.d. [c. 1929], 55, 207/3, Smithsonian, Clark.

65 “The RCA-C.I.T. Finance Plan,” 10 Sept. 1928, 55, 103/3, Smithsonian, Clark; Friedman, Birth of a Salesman, 196–97.

66 U.S. Dept. of Commerce, Bureau of Foreign and Domestic Commerce, “Merchandise Problems,” 12.

67 “The RCA-C.I.T. Finance Plan.”

68 Olney, Martha, “Credit as a Production-Smoothing Device: The Case of Automobiles, 1913–1938,Journal of Economic History 49, no. 2 (1989): 377–91CrossRefGoogle Scholar.

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70 “Finance Companies Re-enter the Field,” Radio Retailing, Oct. 1935, 20.

71 Powel Crossley Jr., “Ten Commandments to 16,000 dealers,” The Radio Dealer, Apr. 1926, 52–53.

72 Harold Barger, Distribution's Place in the American Economy since 1869 (Princeton, N.J., 1955), 32; Borden, Economic Effects of Advertising, 402–403; Eureka Co. advertisements in the Saturday Evening Post, 9 Mar. 1912 and Ladies Home Journal, Sept. 1914, 148, in Eureka Williams Electrolux archive, box 3, McLean County Museum of History, Bloomington, Ill.

73 Frank H. Williams, “How They Sell Radio by House-to-House Solicitation,” Radio Merchandising, Dec. 1924, 13–16.

74 H. U. Mann, “Selling in the Home Multiplies Desire,” Radio Retailing, May 1930, 22–24.

75 “Does House-to-House Selling Really Pay?,” Radio Merchandising, July 1925, 57–58.

76 J. J. Moore, “How Radio Is Sold in the Greatest Southern Store,” Radio Merchandising, Aug. 1925, 17–19.

77 “Your Sales Program for 1929,” 36–37.

78 The Crosley Broadcaster, 1 Feb. 1929, 5.

79 R. A. Fobes, “Building,” Victor Talking Machine Division, memorandum (n.d. [c. 1928]), 2069/9/36, Hagley, RCA Victor; “The Victor Resale Plan,” (n.d. [c. 1928]), 2069/9/36, Hagley, RCA Victor.

80 U.S. Dept. of Commerce, Bureau of Foreign and Domestic Commerce, “Merchandise Problems,” 8.

81 Fobes, “Building.”

82 “The Victor Resale Plan.”

83 “‘Specialty selling’—The Answer to Sales Slumps,” Radio Retailing, Mar. 1929, 44–46.

84 S. J. Ryan, “109 Radio Merchants Answer the Question—What of Selling Costs?,” Radio Retailing, Sept. 1929, 52–54, 92.

85 W. W. MacDonald, “4 Years in Business and Never Pushed a Doorbell,” Radio Retailing, June 1934, 14–15, 25.

86 Henry W. Baukat, “It's a Sale—Not a Demonstration!,” Radio Retailing, Mar. 1930, 18–19, 58.

87 “It Costs $13.43 for Every Home Demonstration that Doesn't ‘Jell,’” Radio Retailing, Mar. 1930, 45.

88 S. J. Ryan, “Expenses, 29.5%, Profit, 8.2%. Part II of Radio Retailing's Co-operative Industry Survey of the Costs of Selling Radio,” Radio Retailing, Oct. 1929, 56–60, 96. This survey was undertaken in conjunction with the Federated Radio Trade Association and the National Association of Music Merchants.

89 Ryan, “109 Radio Merchants Answer the Question.” The dealers whose returns were tabulated had sales ranging from $900 to $40,000 and totaling $7.2 million. There was some bias toward larger firms (who would be in a better position to produce the necessary accounting data). Their average net sales of $66,184 are higher than Census averages for 1929 ($52,769 for radio and musical instrument stores and $28,625 for radio and electrical shops, or $35,030 for both). U.S. Department of Commerce, Fifteenth Census of the United States: 1930: Distribution. Vol. 1: Retail Distribution (Washington, D.C., 1933), 48.

90 Ryan, “Expenses, 29.5%, Profit, 8.2%.”

91 Survey schedule, published in Radio Retailing, July 1929, 83. Occupancy included rent, light, heat, water, etc. Where the property was owned by the retailer, a notional rent was estimated, based on 6 percent of the cost of land and buildings, together with depreciation at 2.5 percent of building costs. Selling expense involved the costs of the sales force, selling-related stationery, other miscellaneous selling expenses, delivery (including depreciation on equipment at 40 percent of cost), and demonstration expenses. Publicity included advertising, circulars, and window dressing. Gross margins were found to be substantially smaller than the discounts from selling prices received by retailers—reduced by trade-ins; sets sold at prices below original list prices (including obsolescing stock or, occasionally, stock where the manufacturer had cut the list price); and breakages and returns.

92 Of the 109 firms in the full sample, seven do not have information on publicity expenditure and one has no information on occupancy.

93 One caveat with this methodology is that higher profits may have an impact on promotional expenditures. This endogeneity issue is not accounted for and may lead to estimates that are biased upward (Richard Schmalensee, The Economics of Advertising [Amsterdam, 1972], 98–100). As the data are cross-sectional, we cannot use the typical approach to resolving this—i.e., instrumental variable methods with time lags and other exogenous variables—as there are no candidates for instruments. However, we do not consider this to be problematic in our case. We examine the relative impact of promotional and selling expenses, so if higher profits lead to higher expenditures, it would seem likely they would do so for both promotion and selling. Furthermore, as our findings show large and very well-determined differentials between the two forms of sales promotion, the extent of bias would need to be extremely large. Previous studies suggest a relatively modest bias, in the context of well-determined results: Scott, Peter and Walker, James T., “Advertising, Promotion, and the Competitive Advantage of Interwar U.K. Department Stores,Economic History Review 63, no. 4 (2010): 1105–28Google Scholar; Scott, Peter and Walker, James T., “Sales and Advertising Expenditure for Interwar American Department Stores,Journal of Economic History 71, no. 1 (2011): 3359 Google Scholar; Greuger, Matthias, Kamerschen, David, and Klein, Paul, “The Competitive Effects of Advertising in the U.S. Automobile Industry, 1970–94,International Journal of the Economics of Business 7, no. 3 (2000): 245–61Google Scholar; Kwoka, John E. Jr., “The Sales and Competitive Effects of Styling and Advertising Practices in the U.S. Auto Industry,Review of Economics and Statistics 75, no. 4 (1993): 649–56CrossRefGoogle Scholar.

94 Radio output data taken from Carter et al., Historical Statistics of the United States, 1:667; 4:1027. Store data taken from U.S. Dept. of Commerce, Bureau of the Census, Sixteenth Census of the United States: 1940. Census of Business Vol. 1: Retail Trade: 1939 (Washington, D.C., 1943), 57.

95 Chandy, Rajesh K. and Tellis, Gerard J., “Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize,Journal of Marketing Research 35, no. 4 (1998): 474–87Google Scholar; Alfred D. Chandler Jr., Inventing the Electronic Century (New York, 2001), 133–35.

96 Chandy and Tellis, “Radical Product Innovation.”

97 Giachetti, Claudio and Marchi, Gianluca, “Evolution of Firms' Product Strategy over the Life Cycle of Technology-Based Industries: A Case Study of the Global Mobile Phone Industry, 1980–2009,Business History 57, no. 7 (2010): 1123–50Google Scholar; Tushman, Michael L. and Anderson, Philip, “Technological Discontinuities and Competitive Environments,Administrative Science Quarterly 31, no. 3 (1986): 439–65Google Scholar.

98 Maclaurin, Invention and Innovation, 137–48.

99 Ibid., 148–49.

100 Emerson Radio and Phonograph Co., Small Radio: Yesterday and in the World of Tomorrow (New York, 1943), 28–30.

101 “Midgets Hit the East,” Radio Retailing, Aug. 1930, 56–57, 65.

102 Peter L. Jensen, “A New Major Development in Radio,” Radio Industries, July–Aug. 1933, 56.

103 Emerson Radio and Phonograph Co., Small Radio, 34–36.

104 Maclaurin, Invention and Innovation, 148. Crosley survived the Depression, but on a much reduced scale.

105 “Midgets Hit the East.”

106 See Scott, “When Innovation Becomes Inefficient.”

107 See Jonathan Rees, Refrigeration Nation: A History of Ice, Appliances, and Enterprise in America (Baltimore, Md., 2013), 141–61; and Robert Hoover and John Hoover, An American Quality Legend: How Maytag Saved Our Moms, Vexed the Competition, and Presaged America's Quality Revolution (New York, 1993), 105–72.

108 See Klepper, Steven, “Industry Life Cycles,Industrial and Corporate Change 6, no. 1 (1997): 145–81Google Scholar.

109 Tushman and Anderson, “Technological Discontinuities.”

110 These were available to all firms, with a short lag, owing to the industry's patent pool agreements. Sobel, RCA, 84–108; Maclaurin, Invention and Innovation, 132–36.

111 Giachetti and Marchi, “Evolution of Firms' Product Strategy”; Klepper, Steven and Thompson, Peter, “Submarkets and the Evolution of Market Share,Rand Journal of Economics 37, no. 4 (2006): 861–86Google Scholar.

112 See Tushman and Anderson, “Technological Discontinuities.”