How market research revolutionised advertising and shopping

In the early years of the 20th Century, US carmakers had it good. As quickly as they could manufacture cars, people bought them.

By 1914, that was changing. In higher price brackets especially, purchasers and dealerships were becoming choosier. One commentator warned that the retailer "could no longer sell what his own judgement dictated". Instead, "he must sell what the consumer wanted".

That commentator was Charles Coolidge Parlin, widely recognised as the world's first professional market researcher and, indeed, the man who invented the very idea of market research.

A century later, the market research profession is huge: in the United States alone, it employs about 500,000 people.

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Parlin was tasked with taking the pulse of the US automobile market. He travelled tens of thousands of miles, and interviewed hundreds of car dealers.

After months of work, he presented his employer with what he modestly described as "2,500 typewritten sheets, charts, maps, statistics, tables etc".

You might wonder which carmaker employed Parlin to conduct this research. Was it, perhaps, Henry Ford, who at the time was busy gaining an edge on his rivals with another innovation - the assembly line?

But no: Ford didn't have a market research department to gauge what customers wanted.

Perhaps that's no surprise. Henry Ford is widely supposed to have quipped that people could have a Model T in "any colour they like, as long as it's black".

In fact, no carmakers employed market researchers.

Parlin had been hired by a magazine publisher.

The Curtis Publishing Company was responsible for some of the most widely read periodicals of the time: the Saturday Evening Post, The Ladies' Home Journal, The Country Gentleman.

The magazines depended on advertising revenue.

The company's founder thought he'd be able to sell more advertising space if advertising were perceived as more effective, and wondered if researching markets might make it possible to devise better adverts.

In 1911, he set up a new division of his company to explore this vaguely conceived idea, headed by Charles Parlin. It wasn't an obvious career move for a 39-year-old high school principal from Wisconsin - but then, being the world's first market researcher wouldn't have been an obvious career move for anyone.

Parlin started by immersing himself in agricultural machinery, then tackled department stores. Not everyone saw value in his activities, at first.

Even as he introduced his pamphlet The Merchandising of Automobiles: An Address to Retailers, he still felt the need to include a diffident justification of his job's existence.

He hoped to be "of constructive service to the industry as a whole," he wrote, explaining that carmakers spent heavily on advertising, and his employers wanted to "ascertain whether this important source of business was one which would continue". They needn't have worried.

The invention of market research marks an early step in a broader shift from a "producer-led" to "consumer-led" approach to business - from making something then trying to persuade people to buy it, to trying to find out what people might buy, and then making it.

The producer-led mindset is exemplified by Henry Ford's "any colour, as long as it's black".

From 1914 to 1926, only black Model Ts rolled off Ford's production line: it was simpler to assemble cars of a single colour, and black paint was cheap and durable.

All that remained was to persuade customers that what they really wanted was a black Model T. To be fair, Ford excelled at this.

Few companies today would simply produce what's convenient, then hope to sell it.

A panoply of market research techniques helps determine what might sell: surveys, focus groups, beta testing. If metallic paint and go-faster stripes will sell more cars, that's what will get made.

Where Parlin led, others eventually followed.

By the late 1910s, not long after Parlin's report on automobiles, companies had started setting up their own market research departments. Over the next decade, US advertising budgets almost doubled.

Approaches to market research became more scientific. In the 1930s, George Gallup pioneered opinion polls. The first focus group was conducted in 1941 by an academic sociologist, Robert K Merton.

He later wished he could have patented the idea and collected royalties.

But systematically investigating consumer preferences was only part of the story. Marketers also realised it was possible systematically to change them.

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Robert K Merton coined a phrase to describe the kind of successful, cool or savvy individual who routinely features in marketing campaigns: the "role model".

The nature of advertising was changing: no longer merely providing information, but trying to manufacture desire.

Sigmund Freud's nephew Edward Bernays pioneered the fields of public relations and propaganda.

In 1929, he helped the American Tobacco Company to persuade women that smoking in public was an act of female liberation. Cigarettes, he said, were "torches of freedom".

Today, attempts to discern and direct public preferences shape every corner of the economy.

Any viral marketer will tell you that creating buzz remains more of an art than a science, but with ever more data available, investigations of consumer psychology can get ever more detailed.

Where Ford offered cars in a single shade of black, Google famously tested the effect on click-through rates of 41 slightly different shades of blue.

Should we worry about the reach and sophistication of corporate efforts to probe and manipulate our consumer psyches?

The evolutionary psychologist Geoffrey Miller takes a more optimistic view.

"Like chivalrous lovers," Miller writes, "the best marketing-oriented companies help us discover desires we never knew we had, and ways of fulfilling them we never imagined." Perhaps.

Miller sees humans showing off through our consumer purchases much as peacocks impress peahens with their tails.

Such ideas hark back to an economist and sociologist named Thorstein Veblen, who invented the concept of conspicuous consumption back in 1899.

Charles Coolidge Parlin had read his Veblen. He understood the signalling power of consumer purchases.

"The pleasure car," he wrote in his address to retailers, "is the travelling representative of a man's taste or refinement."

"A dilapidated pleasure car," he added, "like a decrepit horse, advertises that the driver is lacking in funds, or lacking in pride."

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In other words, perhaps not someone you should trust as a business associate - or a husband.

Signalling these days is much more complex than merely displaying wealth: we might choose a Prius if we want to display our green credentials, or a Volvo if we want to be seen as safety-conscious.

These signals carry meaning only because brands have spent decades consciously trying to understand and respond to consumer desires - and to shape them.

By contrast with today's adverts, those of 1914 were delightfully unsophisticated.

The tagline of one, for a Model T, said: "Buy it because it's a better car." Isn't that advertisement, in its own way, perfect? But it couldn't last.

Charles Coolidge Parlin was in the process of ushering us towards a very different world.

Tim Harford writes the Financial Times's Undercover Economist column. 50 Things That Made the Modern Economy is broadcast on the BBC World Service. You can find more information about the programme's sources and listen online or subscribe to the programme podcast.