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Marketing Strategy of Consumers Union

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Marketing Strategy of Consumers Union
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Marketing Strategy of Consumers Union - December 16th, 2010

Consumers Union is a non-profit organization best known as the publisher of Consumer Reports, based in the United States. Its mission is to "test products, inform the public, and protect consumers."[2]

In addition to its research and publishing activities, Consumers Union has four advocacy offices that attempt to influence policy that affects consumers, in Washington, D.C.; San Francisco, California; Austin, Texas; and Yonkers, New York. Employees based in these offices "testify before federal and state legislative and regulatory bodies, petition government agencies, and file lawsuits on behalf of the consumer interest."[2]

Consumers Union's advocacy staff focus on policy issues related to telecommunications, mass media, vehicle safety, health care, product safety, financial services, investing, food safety, housing, and energy and utility deregulation.

Nonprofit Company
Incorporated: 1936
Employees: 455
Sales: $120 million (1997)
SICs: 2721 Periodicals; 2741 Miscellaneous Publishing; 8299 Schools & Educational Services, Not Elsewhere Classified; 8999 Services, Not Elsewhere Classified; 8733 Noncommercial Research Organizations; 8734 Testing Laboratories

Company Perspectives:

Test, Inform, Protect. Consumers Union, publisher of Consumer Reports, is a nonprofit organization established in 1936 to provide consumers with information and advice on goods, services, health, and personal finance, and to initiate and cooperate with individual and group efforts to maintain and enhance the quality of life of consumers.

Company History:

Consumers Union is the nonprofit organization that publishes the monthly magazine Consumer Reports, dedicated to providing consumers with information and advice on a wide range of consumer issues, including product safety, health care provision, financial services, and food production. Over the years, the Consumer Reports magazine has garnered an extensive and loyal following of approximately 20 million readers, largely due to its reputation for impartiality. Before each issue of the magazine is published, more than 100 experts work in 47 labs to test, analyze, evaluate, and rate the performance, safety, reliability, and value of products made by companies throughout the world. Consumers Union does not accept any fees for product samples, and refuses to grant permission for the commercial use of its name on any test results for a product it has evaluated. In addition to a national testing and research center in Yonkers, New York, and an auto testing facility in East Haddam, Connecticut, Consumers Union staffs advocacy offices in Washington, D.C.; Austin, Texas; and San Francisco for the purpose of testifying before state and federal regulatory agencies and filing lawsuits on behalf of consumers relating to product safety, housing, the environment, economic discrimination, and the telecommunications industry, just to name a few. Consumers Union has also established The Consumer Policy Institute, also located in Yonkers, New York, to conduct research and implement education programs in the areas of toxic air pollution, community right-to-know laws, pesticides, and biotechnology issues.

Early History

Consumers Union was the outgrowth of a book entitled Your Money's Worth, written by F. J. Schlink and Stuart Chase. When the book first appeared in 1927, it quickly became a bestseller, and it was easy enough to understand why. The book was the first of its kind to describe in detail the fraud and manipulation surrounding the manufacture of food, medicine, cosmetics, automobiles, and household appliances, and clearly showed how consumers were victims of dishonesty and misrepresentation that were common in the marketplace. The popularity of the book can be seen as an indication of the growth of the modern consumer movement within the United States during the 1920s. Authors like Upton Sinclair had already exposed the problems within the food industry, and President Herbert Hoover, himself an engineer, had encouraged the formation of groups such as the American Standards Association, and given more authority to the National Bureau of Standards to prescribe a standardization system for testing foods, textiles, and other products that the American government was likely to purchase.

Schlink, a former staff member of the National Bureau of Standards, employed its work and findings as a model for testing products that were used by consumers. After the publication of his book, Schlink utilized his men's club that he belonged to in White Plains, New York, and summarized the experiences the members of the club had with certain products. Assembling his findings into the Consumer Club Commodity List, he began to sell mimeographed copies of the listings for one dollar each. By 1929, Schlink had received such an enthusiastic response from the general public that he formed Consumers' Research, an organization incorporated as a not-for-profit consumer testing firm, the first such organization of its type in the world. Schlink opened an office in New York City and renamed his mimeographed list the Consumers' Research Bulletin. By 1933, there were over 42,000 subscribers.

In 1933, Schlink decided to relocate his operation from New York City to the rural village of Washington, New Jersey. However, after a short period, the engineers and journalist that formed the core of his staff grew disenchanted with country life and the long hours and low pay Schlink had imposed. When employees asked for a raise, their request was summarily rejected. When three employees attempted to form a union within Consumers' Research, Schlink fired them. His action precipitated a strike, however, and the demand that the fired workers not only be reinstated but all employees given a raise. Schlink retaliated with strikebreakers and private detectives, refusing to either mediation or arbitration, and described the strikers as communists.

In February 1936, the strikers from Consumers' Research decided to form an organization of their own in New York City. Named Consumers Union, the new organization brought together journalists, engineers, academics, and scientists committed to testing products used by consumers. Arthur Kallet, an engineer and former director at Consumers' Research who joined the strikers against Schlink, was appointed the first director of the organization. By May of the same year, Consumers Union Reports appeared, with detailed articles evaluating and rating milk, soap, stockings, breakfast cereal, credit unions, and Alka-Seltzer. With little money and a circulation of only 4,000, the organization in its early reports was forced to concentrate on inexpensive items such as hot water bottles, radios, and fans. The reports were so successful, however, that by the end of 1936 circulation had increased dramatically to over 37,000 subscribers.

During the late 1930s, Consumers Union and its reports garnered a large amount of hostility from traditional magazine publishers. In fact, more than 60 publications refused to provide advertising space for Consumers Union since it had an explicit policy of criticizing products by name. In addition, during the late 1930s with the Depression still affecting most Americans, not many people were buying the reports since they were not buying large amounts of consumer products. Yet, despite these challenges the organization and its magazine continued to grow. By 1939, Consumers Union Reports numbered over 85,000 subscribers.

The advent of World War II changed everything. Since the focus of manufacturing was on the production of tanks, guns, airplanes, trucks, and military uniforms, rather than on radios, refrigerators, and automobiles, the staff at Consumers Union just did not have enough products to test and evaluate. When rationing was imposed, the staff at the organization found it even more difficult to procure items that it normally tested, such as shoes and soap. In 1942, Consumers Union changed the name of its magazine from Consumers Union Reports to Consumer Reports in order to indicate that it provided a service to all consumers, not just union members. Yet during the same year circulation dropped to half the level of 1939, and the main office in New York City was forced to cut its staff.

The Postwar Era

When the war ended in 1945, Consumers Union and its magazine was poised for rapid growth. After nearly five years of getting by on the necessities of life, people across America were ready to embark on a buying spree. Fortunately for Consumers Union, the American public turned to its magazine for advice on what to buy. In 1946, the circulation of Consumer Reports numbered 100,000, but had increased to 400,000 by 1950. In 1952, Consumer Reports published the first automobile frequency-of-repair table, in 1953 the magazine published the first of a series of articles and tables on the tar and nicotine content of cigarettes, and the dangers of smoking, and in 1954, Consumer Reports issued its first tests and ratings on color television sets. One of the most important turning points for Consumers Union also occurred in 1954 when the organization had become financially successful enough to expand and improve its laboratory and testing facilities. Consumers Union moved from New York City to Mt. Vernon, New York, in order to take advantage of larger space for its administrative office and laboratory facility.

Along with the move to a new location, Consumers Union decided not only to test and rate the quality of consumer products, but to advocate on behalf of consumer interests. Staff personnel and board members of the organization began to testify on a regular basis before federal and state committees on a wide range of issues, including watered ham, the price-fixing of drugs, and automobile safety. At the same time, due to the increased revenues from growing subscriptions, Consumers Union began to provide financial assistance to various other consumer groups such as the American Council on Consumer Interests and Ralph Nader's Center for Auto Safety. By the end of the 1950s, Consumers Union had grown large and influential enough to start building a world consumer movement, providing funding and advice to newly formed organizations such as the International Organization of Consumers Unions, and the British-based Consumer's Association. When the founding director, Arthur Kallet, retired in 1957 after 21 years of devoted service, Consumers Union had grown to become the largest and most influential organization promoting consumer interests.

Growth and Influence, 1960s-80s

Consumer Reports continued to enhance its reputation as an impartial judge of consumer products in the 1960s. In 1962, the magazine issued its first report on automobile insurance and discovered that reform was needed due to rates that varied by hundreds of dollars for the same level of insurance. In 1965, Consumer Reports rated the Toyota Corona particularly favorable for "long-distance driving." By 1975, the Corona was the number one import in the United States automobile market. After Ralph Nader published his famous book Unsafe at Any Speed in 1965, Consumers Union asked the author to serve as a board member for the organization, and dedicated itself to providing even more information on the cars and trucks made within the automobile industry.

During the decade of the 1970s, Consumers Union's influence as an advocate for consumer interests increased significantly. Due to the years of product ratings provided by Consumer Reports, the U.S. government established the National Commission on Product Safety. In 1972, Consumers Union opened an office in Washington, D.C., to impress government officials with its research and make them more aware of changes that were needed surrounding consumer issues. Regional offices were later opened in San Francisco, California, and Austin, Texas, for the same purpose. In 1974, Consumer Reports published a series on the extent of pollution in the waterways throughout America, with detailed recommendations for cleaning them up. The series was regarded so highly that it won the National Magazine Award, the first of three given to Consumer Reports.

In the 1980s, Consumer Reports initiated a television section, and also a magazine for children called Penny Power. In 1983, the magazine implemented a phone-in service for consumers to check automobile prices and the cost of repairs. Since the organization, especially under the earlier influence of Ralph Nader, continued to develop its methods for testing and rating automobiles, in 1986 the board of directors voted to purchase a drag strip in East Haddam, Connecticut, to renovate and construct a state-of-the-art evaluation facility for cars, trucks, and the growing market for recreational vehicles. Based on tests conducted at this facility, Consumer Reports discovered that the Suzuki Samurai easily rolled over, and rated it NOT ACCEPTABLE. By this time, the reputation and influence of Consumer Reports had become so great that sales of the Suzuki Samurai dropped precipitously.

The 1990s and Beyond

Having decided to transform the organization into a multimedia publisher, rather than stick with a single magazine, Consumers Union began to disseminate information in many forms, thus expanding its role of providing consumers with detailed evaluations and ratings of products. This expansion included a radio program, a newspaper column, television programming, online services, CD-ROM products, newsletters, Consumer Reports books, and Consumers Union's Price Services for cars, auto insurance, and household appliances.

In 1992, paid circulation for Consumer Reports reached two million; however, by the end of 1995, paid circulation had increased to approximately 4.7 million, placing the magazine in the top ten list for paid subscriptions. By the end of 1996, the publishing industry estimated that Consumer Reports had a total readership of over 18 million, including library subscribers and an estimated four readers per copy pass-along factor. One of the most popular magazines in America, Consumer Reports showed no sign of decreasing readership. Revenues for Consumers Union amounted to over $100 million at the end of fiscal 1995.

The influence of Consumers Union through its publications, especially Consumer Reports, has been vast and measurable. For instance, sales for a particular men's suit skyrocketed 50 percent after it was rated a BEST BUY in the magazine. At the same time, Consumers Union has influenced product improvement. The marketing war over the use of caffeine in soft drinks is just one example. What is less measurable, however, but equally as important, is the influence Consumers Union has had on empowering consumers. By providing impartial, unbiased, and accurate tests and ratings about particular products and services in the marketplace, Consumers Union has helped consumers make their way through a winding and sometimes convoluted road of misrepresentation and misleading product advertisement.

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