The competition of modern industry is such that a constant effort to obtain greater efficiency and lower costs in every industrial activity is an economic necessity if the individual firm is to survive. * * * there is no escaping the final fact that only a combination of scientific production and scientific marketing will result in the firm establishment of industrial operations on a sound economic basis. * * *

* * * it has been found that the real base of marketing must be in the location and size measurement of the potential market; that is, the definite statistical picture of where the potential customers who need any industrial products are located and the density of their concentration. * * *

That, gentlemen, is from the Bureau of Foreign and Domestic Commerce, assisted by the Bureau of the Census.

In anything I have said about the proposed sampling method, I do not want to be misunderstood that I am against any type of sampling. Sampling is all right for certain types of information, and if the Department cares to do a sampling job in the interim between the census of manufactures reports, we shall be very happy to have that additional information; but we protest very strongly against the substitution of a general sampling of the over-all size of an industry as a substitute for the actual location of the plants and the density of distribution.

It has been brought out before you that we are asking for a disproportionate share of Government statistical information. I think if you gentlemen will realize that this book [exhibiting] is all that we get from the census of manufacturers, from the Census Bureau, as compared to the elaborate material that is gotten out for the census of businesses, you will realize that we, with our 180,000 manufacturers representing 15,000,000 workers, are not being disproportionately aided in comparison with the 5,000,000 business houses and their 6,500,000 workers.

Gentlemen, you are expecting a lot of industry in these days. There is not anybody in Washington here that does not say that smokestacks and not cannons are going to win this war, and men without materials are very poor defenders. I think you will all admit that industry is doing the best it can for the all-out job of defense. A great many of our industrial concerns are being turned wholly to defense needs. After defense, they must somehow or other get back into the normal type of distribution. Give them the details for planning for the distribution they will have to return to after the war is over. With the chaotic conditions that industry is facing today, it is essential that those who have the job of planning ahead for the days after this crisis must be given information which will enable them to establish their firms on some sort of a sound basis when we return to normal industry in the country.

I should like to call your attention also to the fact that there is no organization in the country so closely representing industrial marketing as does the National Industrial Advertisers Association. And as you here in Washington expect the cooperation of industry, all we ask is that you give us a sympathetic attitude toward our desire for this. data; and remember that there is only one thing that we are asking, and that is the retention of the 2-year census. The other portions of the measure are immaterial to us. But we would like to rest our case on that one request, that you retain the 2-year census.

Thank you, gentlemen.

The CHAIRMAN. Are there any questions of the witness?

Mr. GRANT. Mr. Murphy, what group is it that you speak for? Mr. MURPHY. The National Industrial Advertisers Association. Mr. GRANT. How large is that group?

Mr. MURPHY. Approximately 750 members as of today. They represent about 900 to a thousand industrial concerns through the United States; probably 200 industrial advertising agency members and the balance industrial publishers.

Mr. GRANT. That would be less than 1 percent of the manufacturing firms of this country.

Mr. MURPHY. That is true. But it also happens to be the largest organized body in advertising. There is no other body that represents a larger section than we do, and if a method of sampling which in this case is pertinent holds, our sample is a true cross section of industry as it exists in this country today.

Mr. GRANT. You mean by that, that your organization is made up of fully as much of small business as it is of what we call big business? Mr. MURPHY. It is made up to a much larger extent of small business than what we call big business. Big business is preponderant only in the quantity of goods that are produced, not in numbers. In numbers, small business is by far the biggest factor in American industry.

Mr. GRANT. You are right. And that is the group we are concerned about today most of all.

How does the smaller businessman make use of the statistics that come from this Census of Manufactures?

are.

Mr. MURPHY. He makes use of it by locating where his markets In other words, if he wants to sell to a certain industry-you must realize that our selling problem is interindustry. We sell from manufacturer to manufacturer and not from manufacturer to the public. If a small manufacturer wants to find out where there is a market for the gadgets that he happens to make, he knows how they are used, so he looks up the various industries in which he thinks there might be a use of them, and if he finds out where that industry is located, how many plants there are, the number of employees, the pay roll, the value added to the manufactures, he gets a pretty fair picture by States of exactly what his market is in that particular industry. Then he can concentrate his sales and advertising efforts in the localities where the market actually exists.

Mr. GRANT. Did I understand you to say that he would locate his plant in that area where he found the greatest demand?

Mr. MURPHY. He would locate his concentration of distribution; in other words, he would find that there is a concentration of plants of one particular industry in a certain area. If he had a general over-all picture of the size of the industry, it would be helpful, but it would only tell him that there was a certain-sized market available for his goods, and he would not know where to turn. But if he knew that that market existed in Pennsylvania or West Virginia or exclusively in the Northeastern States, or in the far West, he has that much additional information in planning his marketing program. That work is even more important to the small manufacturer than it is to the large manufacturer, because the large manufacturer has at his command research facilities that the small manufacturer cannot afford. Mr. GRANT. I believe that is all.

The CHAIRMAN. Any questions, Mr. Allen?

Mr. ALLEN. Just a question, Mr. Chairman. The distribution of your clients I suppose you call them clients; the people connected with your organization-will you give us a word about their distribution. Where do you have them?

Mr. MURPHY. Our chapters parallel very closely the industrial activity of the country. We have 22 chapters. Two of them are in Canada, Toronto, and Montreal, and do not enter into the present discussion. But the rest of our chapters are located-if you will bear with me I will read the location of the chapters. They are as follows:

Boston.

Chicago.

Cincinnati.

Cleveland.

Detroit.

Gettysburg, Pa.

Ind anapolis.

Los Angeles.

Milwaukee.

Newark, N. J.
New York.
Philadelphia.
Pittsburgh.
Rockford, Ill.
St. Louis.

San Francisco.
Toledo.

Youngstown.

and western New England, which would be Waterbury, Stamford, in that neighborhood.

Mr. ALLEN. You do not have any at all in the South?

Mr. MURPHY. No. We have what we call members at large. We have a number of members at large scattered through the South. We have a concentration of members at large in the Houston territory, and there is some reason to believe that there will be a chapter of our organization in Houston. We take into account the thinly populated industrial districts, as far as our interindustry problem is concerned, through members at large.

Mr. ALLEN. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Talle, have you any questions?

Mr. TALLE. Mr. Murphy, you hold that the information would be valuable now?

Mr. MURPHY. Yes.

Mr. TALLE. Do you believe there will be a recession following this war?

Mr. MURPHY. I do not believe I can qualify as a prognosticator of future trends. I know that the way I have always operated, either as an advertising or sales manager, is to keep up with current efforts, with business indices, to the best of my ability, and to try to forecast the situations that we might be confronted with from the material available at the time.

I know that we are going to have a very severe, competitive condition, because we have an enormous expansion of industry for defense. work. When the defense crisis is past, then you are going to have very keen competition between the firms which have overexpanded beyond normal requirements and who want to stay in business. Some of them are going to be in competition with their own material. The machine-tool industry will be in competition with its own material because of the large amount of machine tools that have been built for defense work, which will be thrown back on the market for salvage value or disposed of as second-hand machinery after the crisis is over. Mr. TALLE. There is not any record of a world war that has not been followed by a recession, is there?

Mr. MURPHY. That is quite true. I do not think we are playing under the same rules this time, though. I think we had the organiza

tion of business and industry practically at the end of the crisis of the World War, whereas in this war we are anticipating it, and we are organizing business and industry in advance of the actual peak of the crisis.

Mr. TALLE. Do you remember the book that a professor in one of our major universities wrote in the twenties, about the new age that would come, when prices would not behave as they had before? Mr. MURPHY. I am not familiar with it.

Mr. TALLE. And that it would be safe to buy stocks at prices people considered too high before. The publishers wondered whether they should turn out the book in late 1929. They finally decided to do it, and it came just at the moment when stock prices broke, in October and November. Through the twenties, they thought there would not be a recession, too. I am wondering if we have all of the armor that we need to avoid it in the aftermath of war which lies ahead.

Mr. MURPHY. I think that as rapid a picture as possible of changing conditions would be one of the best methods of preparation for that future condition that may arise, that we could get held of. I would certainly feel that industry, which is devoting itself largely to defense work, should be given every opportunity to prepare for whatever may come after the crisis; and since industry sells to itself, if some businesses are out of business entirely, as far as their normal production is concerned, and are in defense work, that fact ought to be known. We want to know the shifts that are occurring due to this defense work, and if we get it at 2-year intervals, it is none too often. But if we get it at 2-year intervals, it is certainly better than getting it at 5-year intervals when it will only be historical. We will already have been through it.

Mr. TALLE. As a matter of fact, no forecaster who was willing to call himself one guessed the break in 1929; is that right? Mr. MURPHY. I believe that is correct, with the exception of Babson. He claims he did.

Mr. TALLE. I disagree with him. I do not think he did. In any event, you agree, do you not, that to argue on the basis of a trend is very risky guessing.

Mr. MURPHY. I think that the trend is only helpful for very general policy decisions. I believe for the actual day by day work of the industrial marketing man, he is more interested in what lies just ahead based on what has just occurred than in trying to tell what is going to happen 10 or 12 or 15 years from now.

Mr. TALLE. You would be better off having comprehensive data every 2 years rather than at longer intervals?

Mr. MURPHY. That is right. You must distinguish between the professional research man and the average industrial marketer. The professional research man does not care very much about year to year changes. Anybody that has even given a casual look at books of statistics knows that they take 5- and 10- and 15-year jumps, and they smooth out the curve, so that you get a gradual trend up or down, and so on, which is very helpful historically, and even for forecasting a reasonable length of time. But the industrial marketer is not a trained research man. He wants actual business figures that he can use today and that he can understand today, and that are up-to-date and alive.

Mr. TALLE. It would appear that in the light of what we know about the behavior of the wholesale price curve as far back as reliable statistics seem to go, we may expect a recession following this activity. Personally I am afraid of what will happen. It would seem to me that we ought to get all the information we can possibly get at as short intervals as we can get it.

Mr. MURPHY. I quite agree with you.

Mr. TALLE. That is all.

Mr. GRANT. Mr. Murphy, you spoke about the efforts that are being made to cushion ourselves against this thing. Do you know what those efforts are; what is being done?

Mr. MURPHY. Cushioning? You mean what manufacturers are doing?

Mr. GRANT. Yes.

Mr. MURPHY. Some manufacturers are appointing one man, in some cases a committee, that will devote some portion of their time and thought to planning for the days ahead. We all know that there is going to be fierce competition after this is over. Just where each individual company is going to be in that picture requires a little thought. So that about the only thing a company can do under the present emergency is to devote a half day a week, or some periodic time, for a committee or for individuals to sit down and talk about the future, and not about today, and determine, just as nations have their mobilization plans for future information, why, so industrial units have to have their marketing plans for the future to take care of the compeitition that we can foresee.

Mr. GRANT. Just one other question. I believe you said that business would welcome a sampling between the dates of the biennial census of manufacturers?

Mr. MURPHY. That is quite right, but not as a substitute for the biennial. In other words, we want all the information we can get. If there is merit in these samplings, we will find the merit in them and use them. But we do not want them as a substitute for the actual statistical count.

Mr. GRANT. You will admit, then, that there is merit in the sampling?

Mr. MURPHY. There is merit in finding out approximately the size of a total market, but from the editorial that I read you from the Advertising Age, you see that the percentage error varies from 7 to 15 percent, and you cannot use that as an accurate gage. It is just an indication. You must not confuse that type of sampling with a type of consumer sampling, where you get a perfect cross-section of one class of people; such as, for instance, the Gallup reports, where they get so many in a certain wage bracket, and so many others in another wage bracket; some from one part of the country and some from another part of the country. That represents in one pellet, you might say, the population of the United States. They are able to predict with some degree of accuracy in that way what public opinion will be. That is a very different proposition than taking a small sample of an industry and then going back to your last census figures and saying that because we find this small sample shows an increase or a decrease by a certain percentage over what industry showed in the last census, we will assume that all of the industry has increased or decreased to that amount.