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Analysis of "Marketing Myopia" by Levitt Theodore

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Table of contents

  1. Fateful Purposes
  2. Error of Analysis
    Shadow of Obsolesce
  3. Creative Destruction
  4. Visceral Feel of Greatness

Marketing Myopia occurs when company leaders define their mission too narrowly. It is a form of business short-sightedness.

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In this article, Theodore Levitt expresses his views on how industries failed to continue their growth due to lack of realizing the need of expanding into sectors adjacent to which they are already working. Levitt believes that the major mistakes of the industries were being produced or service-oriented when they should be customer oriented.

Fateful Purposes

Companies went into decline because they did not define their industries adequately. In the article Levitt considers examples of some successful and unsuccessful companies that were product oriented and not customer oriented; Railroad Industry (moving goods vs. transportation industry), Hollywood (movies vs. entertainment) and Petroleum (oil vs. energy business).

Error of Analysis

Levitt proceeds to discuss the Error of Analysis whereby company’s scope is defined inaccurately and is unable to grow due to restricting itself. He follows this up with an example of the railroads which have declined because they ‘‘were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.” They decline not because of cars, truck,airplanes, and telephones, but because of their own myopia. In a similar example, the Hollywood industry had declined because they focused on films and not the industry of entertainment. An industry is, therefore, better positioned for growth if they focus on meeting the customer’s wants and need rather than mass production and selling techniques of their products.

Shadow of Obsolesce

This is where Levitt expands on why companies stop growing once their products lose their life due to being outdated or easily substituted competition over time. He gives the example of the dry-cleaning industry which faces some shadow of obsolescence due to new innovations and alternatives that meet customers needs. It was once a thriving market which provided an effective way to clean wool garments, but over time the introduction of synthetic fibers which are easier to clean do not require dry cleaning services and innovations such as washing machines make the industry obsolete. Other examples that he goes into are, the Electric Utilities: electric motors replace steam engines and incandescent lamps replace kerosene lights and lastly the grocery stores being replaced by large supermarket chains.

Companies that suffer from myopia are also subjected to self-deceiving cycle because they think there is nothing wrong with their approach even though there is. Its recurring in nature because most companies make the mistake of focusing on production and sales and not enough attention to customer needs.

The self-deceiving cycle has four conditions;

  1. The belief that growth is assured by expanding and more wealthy population.
  2.  Believing there is no competitive substitute for the industry’s major product.
  3. Too much faith in mass production and advantage of rapidly declining unit cost as output rises.
  4. Preoccupation with a product that lends itself to carefully controlled scientific experiment, improvement, and manufacturing cost reduction.

Levitt discusses the mistake of the Population myth whereby companies assume that a growing population is equal to a growing market demand. Companies believe that they are assured profits based on expanding the population. This myth limits a company’s imagination. “…the absence of a problem leads to the absence of thinking.”

Using the petroleum industry as an example, they mostly focused on improving the efficiency of sourcing and making the product and no improving the generic product or its marketing. Levitt argues that in that industry, the product is defined in the narrowest terms namely gasoline, not energy or transportation. This has enabled innovations to originate outside the oil industry such as new companies expanding multi-pump gas stations with the emphasis on large layouts, rapid and efficient driveway service and quality of gasoline at affordable prices.

The idea of indispensability is whereby companies think they are safe from competition due to their product being irreplaceable. Levitt used the petroleum industry as an example due to its success throughout its history bearing in mind it had to shift focus several times due to inventions arising from outside the industry. The petroleum industry has become content in its strategy and assumes that if the world’s population keeps growing, then its customer base will always increase. This leads to the industry being myopic to the fact that now people are becoming aware and conscious of the environment and are interested in other alternative forms of energy that reduce greenhouse gas emissions.

“If a company’s own research does not make a product obsolete, another’swill,” Levitt explains that a company cannot just rely on a complacent strategy and process, they must expand into new markets and produce customer-oriented products or services otherwise their competitors will.

Mass production industries focus on producing all they can and are occupied with meeting production goals and neglect marketing of those products. John Kenneth Galbraith argues the opposite, all efforts are on trying to ‘move’the product. Therefore, selling is emphasized, not marketing. Levitt demonstrates how industries have too much faith in mass production and take advantage of rapidly declining unit costs as output rises.

Levitt uses Detroit as an example of how it followed the trend of mass production in the automobile industry. Detroit’s researchers failed to recognize its customers wants. Detroit believed customers wouldn’t want anything different from what they were already getting until it lost millions of its customers to other small car manufacturers. Detroit only researched the customer’s preferences for the products it had already decided to offer them. Detroit did not concentrate on the customer’s choice.

Levitt criticizes the notion of Ford as a manufacturing genius. Ford invented the assembly line to perfect and ship thousands of cars. He correctly predicted that he could sell millions of cars for a modest price to consumers. It’s how he sold and not what customers bought. Levitt refers to the assembly as a marketing exercise.

Creative Destruction

Regarding the petroleum industry through the eyes of customers, customers do not buy gasoline for its taste, color or smell at the gas station, they buy the right to drive their cars. Answering the consumer’s needs would be giving them the right to drive their cars definitively, therefore the future of petroleum is a fuel that prevents the need for frequent refueling.The future of any product is not a more technological one but a product that satisfies a customer’s needs. Companies must react by listening to customer preferences, understanding the mind of their customers, why they bought, what they bought, and why they will buy again. Companies that succeed are not afraid to scrap one product to deliver the next or destroy what they built to best serve the customer. It is the necessary “creative destruction” process due to the historical fate of any growth industry; “product provincialism.”

Paying to much attention to research and development is the danger of electronic companies. They grow with the illusion that a superior product will sell itself because they have created a successful product. Possible reasons for this belief: a bias toward the complex products over its marketing; scientists tend to not care for customers needs. Even when companies are focused on marketing, they are more concerned about ads and promotions of the products rather than finding out the needs of the customers.

This occurs in some industries such as the petroleum industry where all activities are more concerned with the sourcing/searching and operations and less concerned with marketing. Questions about customers and markets are not asked. The customers’ needs are not considered – “Marketing is a stepchild.”

Customer satisfying process is vital in an industry, but scientific methods violate this rule by defining the problem, developing a hypothesis to solve the problem and not considering the customer’s satisfaction as the problem. Industries need to be aware that selling and marketing are very different. The main functions of an industry should be;

  1. Marketing(satisfying the customer’s needs)
  2. Delivering
  3. Selling
  4. Production
  5. Research and development

Visceral Feel of Greatness

Leaders need to have a vision that can produce eager followers, the followers are the customers. Management must not produce products but provide customer creating value satisfactions; consider the buying customer’s needs. The leader must also have a vision and know where they are going ahead. “A vigorous leader who is driven onward by a pulsating will to succeed.”

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For a company to be able to cater to the needs of a market, it not only needs to be technically sound but also customer oriented. It should regularly conduct research to find out various ways of improving its products to retain the customer’s interests for as long as possible. The company should always keep adapting itself to the ever-changing market conditions and demands, in order to survive the increasing competition.

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