MARKETING MYOPIA by Theodore Levitt Team #8: Aaron Indridson

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?