MARKETING MYOPIA by Theodore Levitt Team #8: Aaron Indridson Ahmet B. Koksal Elkin Majidov Eric Salazar Errol Johnson Mark A. Robinson Background and History Mark A. Robinson Theodore Levitt • Born in Germany 1925 and escaped the Nazi forces by fleeing to America. • Worked his way up starting as a fifth grade editor to become a highly awarded author of seven published marketing books. • “Marketing Myopia” by Levitt was reprinted over 850,000 times and won him the McKinsey Award in 1960. • Was a highly esteemed lecturer and professor of marketing at the Harvard Business School. Marketing Myopia Defined • Myopia- a visual defect affecting the ability to focus properly. • A failure by management to effectively define their business based on customer demand. • The tendency of management to view their business too narrowly by relying on a growing population, product with no apparent substitute, or mass production that reduces costs. Marketing Myopia In Action • Railroads narrowly defined themselves as a “railroad industry” as opposed to a “transportation industry.” • Corner store grocery chains failed to see the threat of the “supermarket” store. • The dry cleaning industry has suffered major stagnation due to advances in clothing technology and new materials. • Electric utilities, while still a dominant player, should pay attention to the possibility of potential substitutes (wind, hydro, solar, fuel cell) Production Myths Eric Salazar Population Myth The belief that profits are assured by an expanding and more affluent population is dear to the heart of every industry. Example: Petroleum Industry Asking For Trouble • Too focused on improving efficiency of getting product. • Chief product still narrowly defined. • As a result, major improvements in gasoline are coming from outside the oil industry. • Major innovations in automobile fuel marketing come from small, new oil companies. Asking For Trouble cont. • Focus now on multipump gasoline stations, large and clean layouts, rapid and efficient driveway service, and quality gasoline at low prices. • Oil industry is asking for trouble from outsiders The Perils of Petroleum Elkin Majidov Marketing Myopia The belief that there is no competitive substitute for the industry’s major product Idea of Indispensability • There is no substitute for the major product. The example is petroleum industry - Gasoline, diesel and kerosene are just the derivatives of oil. - Oil has never been a superior product for any purpose - Oil industry has never been a growth industry The Perils of Petroleum Kerosene lamp vs. Incandescent lamp The Perils of Petroleum • Coal burning domestic central-heating systems vs. The space heater The Perils of Petroleum • Internal combustion engine was invented by the outsiders. The Perils of Petroleum • World War II demand for aviation fuel. During the war and after that the industry growth came to its higher level. o Civilian aircrafts o Dieselization of railroads o Trucks and Cars The Perils of Petroleum • As in the past, the industry was blinded by its narrow preoccupation with a specific product and the value of its reserves. • It paid little or no attention to its customers’ basic needs and preferences. Uncertain Future • The total U.S. production of petrochemicals is about 2% of the demand for all petroleum products. - A 50,000 barrel-per day oil refinery is now considered the absolute minimum size for efficiency. - A 5,000 barrel-per day chemical plant is a giant operation. • Oil has never been a continuously strong growth industry. Marketing vs. Selling Ahmet B. Koksal PRODUCTION PRESSURES • Good: Lean manufacturing & mass production results in lower costs. • Bad: Production costs become so charming that marketing gets neglected. • Result of mass production: a need to move the product. • Usually, selling gets emphasized. • Difference between marketing and selling? Marketing vs. Selling • Marketing: customer oriented. • Selling: product oriented • Marketing: Building products consumers want to buy. • Selling: Converting product to cash • Goal of marketing: Satisfying customers • Goal of selling: Getting rid of the product A Detroit Example • Detroit car producers spend millions of dollars on consumer research. • Yet, consumers chose small-cars producers. • Why? • Marketing vs. selling again… A Detroit Example • Detroit car manufacturers: product oriented • What they surveyed was never what consumers wanted, it was always a choice between what they had already decided to offer. THIS OR THAT? WHAT DO YOU WANT? A Mistake • “The marketing effort is still viewed as a necessary consequence of the product – not vice versa, as it should be” (Levitt). Henry Ford • • • • • A marketing genius or a production genius? $500 a car, result of the assembly line. Ford set the price to $500. Price forced the costs down. Result: assembly line. A Delusion: Low Production Costs • Low production costs may be a danger: o Lose track of consumer needs o Failing to adapt consumer needs • Example: How low should a company produce buggy whips to thrive in the business? • No more buggy industry… Marketing Myopia • • • • Marketing myopia: Buggy whips Transportation business vs. buggy whip business Another example: Oil industry Nonpetroleum companies: – Energy systems to replace internal combustion engine – Electric storage batteries – Solar energy conversion systems Marketing Myopia • Nobody likes buying gas • Once these alternatives are perfected, they will replace gas, since consumers will prefer them over gas stations. • Creative destruction: “For their own good, the oil firms will have to destroy their own highly profitable assets” in order to survive in the changing business environment (Levitt). Preoccupation with Product Improvement Errol Johnson Preoccupation With Product Improvement • Management become “top-heavy” with scientists • Favor product research versus customer research • Focus on what can be controlled versus the market in which they provide for Conclusion Aaron Indridson Guarding Against Marketing Myopia • Define the mission of the company – Broad statement not focused on product provided. – Expands the market view of the industry. – Defines the industry broadly to take advantage of growth opportunities. • Focus on marketing and not selling a product. • View the product as a consequence of the marketing effort. Guarding Against Marketing Myopia • Management duties – Creates an environment that reflects the mission. – Markets toward the needs of the buyers • Creative Destruction – Process in which a once dominant new industry sees their dominance vanish as rivals launch new designs or cut manufacturing costs. – Acts on customer needs and desires. Conclusion: Q&A Q: “Their is no such thing as growth industry, what we have is growth opportunities” Explain. A: If a company focuses on its industry as opposed to the opportunities presented by the market, it will in the end fall to stagnation. Q: What is “creative destruction?” How does this relate to the strategy of a company? A: Internal “creative destruction” occurs when a company plans for the obsolescence of its own product by creating the product that will replace it. Conclusion • Q: Why was Ford considered “the most senseless and the most brilliant marketer?” • A: “The most senseless” because of his failure to provide the customer with more than one color option (black.) “The most brilliant” because he realized that the market could produce millions of sales for a $500 dollar car, hence the creation of the assembly line to meet market demand. Questions?