Most of the major industries today were once considered as growth industry’s. However some of the industries that are on the rise up the mountain or undergoing a boom in business may very much be in the shadow of downfall. Other industries which are considered as veteran growth industries have in reality ceased to grow. In every case the reason for this stint is not because the market is impregnated, it is because of the failure of management as they have fallen prey to a phenomenon called ‘Marketing Myopia’.
Defining Marketing Myopia
‘Marketing myopia’ is a term made up of two words: Marketing and Myopia which is used to describe the short sighted (myopic) approach adopted by organizations which often leads to their premature decay. The term was coined by ‘Theodore Levitt’ in a paper which was published in the Harvard Business Review in the year 1960. This paper has been regarded by several industry experts as a revelation for the modern marketing era. It has set aside most of the myths and has proposed a visual modality for the modern day CEO and is being successfully implemented by most of the biggest corporate houses in existence today.
His theory suggests that “most of the industries are restricted in their thought process and implementation of their future endeavors”. He felt that the world was living in the ‘selling concept’, where the objective was to follow a push model instead of a pull model thereby forcing the customer to buy whatever you produce. Profits earned in the short term were regarded as a measure of success for the organisations. Organizations hence were hence living a lie and failed to see the larger picture. This form of marketing could fetch them profits in the short run; however, as time faded, this led to the customer being dissatisfied accompanied with brand switching, tapering sales figures, and eventually, closedown. Levitt also advised CEOs ‘to extend their horizons, delimitate their corporate objectives, and most importantly have a vision’. The basic ideology was to broaden the vision from a product level to an industry level or for that matter to a more generic level. The idea was well assimilated among the organisations and finally realized that what they were missing was a well defined vision which could serve them in the future. Levitt illustrated about the of oil companies several times in his publication. His stand was that, “at a generic level, the oil companies were in the business of providing energy, and not petroleum, as was the norm then”. The ideology overturned the industry, which is now one of the most productive industries of the modern era.
The moral to be ascertained is that thinking unconventionally and differently is what is the order of the day to drive any business. He suggested that one has to get out of the ‘comfort zone’ (of doing what we do) and explore the undiscovered. For an example, if performance in a particular niche is good, the concept needs to be extended further. Once this is done the next logical step would be to climb up the ladder and to capture the segment, then a market, and finally the industry. Things may not always go as planned, but built on the basis of logic; they definitely provide the foundation to a thriving business in the long run.
Theodore Levitt has explained the concept of marketing myopia with the help of the examples of railroads and Hollywood industry. He has pointed out that the failure of railroads was not due to the introduction of other transportation facilities availability rather the incapability of the management in defining the purpose of railroad industry as just ‘railroad-oriented’ instead of a ‘transportation-oriented’. If they had identified themselves as transportation-oriented, they would have been able to see the market conditions more clearly and hence be prepared for any threats coming their way. Levitt has also explained about the Hollywood business in the same context: that they failed to define their purpose as ‘entertainment-oriented’ and stuck with their myopic view of Hollywood as ‘movie-making business’ which led to its near collapse because they did not treat TV as an opportunity. This led to their self-deceiving belief and TV became their threat and a much bigger industry.
Why does Marketing Myopia occur?
The reasons for occurrence of such a phenomenon are as stated with cited examples from the industry:
- Fateful Purposes: The reason lies with the failure at the top management level where the decision making is done. The executives who deal with the policy making and who document the objectives are the ones responsible for this. It is their myopic view of the industry or the product which often leads to reduction of scope of the product as a whole. Still the bottom-line remains that the industries are now endangered not because of lack of opportunity in the market but because of not defining their business in a broader perspective and not having a customer oriented approach.
- Error of analysis: The error of analysis refers to the defining the industry, or a product, or a cluster of know-how so narrowly as to ensure its untimely ageing. What is lacking is not the opportunity but some of the managerial imaginativeness and audacity to make them great.
Impact of Marketing Myopia
As already stated in the preceding paragraphs, having a myopic vision not only reduces the scope of the industry but also leads to stagnation of the product which may have tremendous potential. It is analogous to saying that Marketing Myopia leads to falling into a trap called the ‘Self-deceiving’ cycle. The cycle consists of majorly 2 end states of existence; bountiful expansion and undetected decay. The conditions which generally ensure this impact are as illustrated:
- This is related to the population myth that growth of an industry is ensured by an expanding and more affluent population. This was supported by the common ideology that a market which is on the rise will keep the manufacturer from having to think out of the box. Iridium, which once was a high-flying organization on Wall Street, got the biggest failure in the market. Iridium introduced satellite phones in late 1990s that could work anywhere in the world. It was a brilliant idea which was flopped within a year pushing the company towards bankruptcy and leading the CEO to resign. The company invested billions of dollars in this project which backfired because the focus of their initiative was not the consumer. They assumed that the growing advancement in information technology and the larger customer base for mobile phones would be enough to build an expensive project on. They did not take marketing efforts seriously and failed to realize ahead of time that the consumers were not willing to pay high prices for their product and they did not take note of the fact that the cellular phones could become popular during that same time period. The market for satellite phones was not tested before launching the phones which did not get the success hoped by the management.
- The notion that there is no competitive substitute for the industry’s major product. When the management tends to have faith in the fact that their offerings are indispensable, they stop thinking about the future. They focus on producing that ‘indispensable’ product and do not take into consideration the changing environment and the threats of possible entrants or substitute products. This belief takes the organization into stagnation.
- Having excess amount of faith in mass production and being under the impression that output rises as unit costs decrease. Declining unit costs as production rises is a very attractive incentive for producers. They tend to focus on the production and costs rather than focusing on the marketing and consumer preferences. Once they have mass produced their products, they are inclined towards selling it instead of marketing it which becomes the reason for their downfall. As time changes, the consumer preferences change as well. . It is a known phenomenon that people and their behaviors have to change with the changing environment they live in. With today’s changing milieu, an individual must be willing to abandon old techniques and learn new ones. Henry Ford, developer of assembly-line technique for mass production, introduced Model T automobile and revolutionized the transportation business. He started producing Model in large quantities. It was a success initially and was hailed as the everywhere. As time changed, the consumers started thinking in terms of benefits and value they get from the Model T car. They demanded more features especially color options. Ford replied saying, “Any customer can have a car painted any color that he wants so long as it is black”; it was because black color used to take less time in drying. After some time, the production of Model T stopped as consumer wants changed and the industry got competitive. It is important for the organizations to take in view the changing trends and consumer wants. The industries in today’s age are highly competitive and uncertain. Thus to avoid stagnation, marketing should be given specific importance.
- Engrossment with a product that lends itself to carefully controlled scientific experimentation, improvement, and manufacturing cost reduction. It is true that most technological firms tend to focus their efforts towards scientific implementations and research and development which raises their cost and increases their chances of failure if the innovations are not receptive to the consumers. Nokia, a world-leading organization in cell-phone industry, is fighting a battle with Apple Inc. for the market share of smartphones. The recent milestone in the cell-phone industry is the application feature. Apple has the largest market share in smartphone segments while Nokia is spending millions of dollars for R and D in this area yet its sales are diminishing. The software Nokia uses is failing which is the reason for continuous scientific research in this regard. According to Bloomberg.com, “Nokia’s share of worldwide smartphone sales fell to 41.2 percent in the first quarter of 2009 from 45.1 percent in the year- earlier period, while Apple’s doubled to 10.8 percent.”
Avoiding Marketing Myopia
Over the past half century, marketers have given their advice on how to avoid Marketing Myopia. They primarily focus on the fact that the customer is the most important element in marketing and hence the sole focus should on them. The problem with this approach is that the advice has been taken too seriously thus resulting in a new type of myopia, which may cause deformation in strategic vision and could possibly lead to business failure.
The result of doing so would however lead to other consequences as listed below:
- A single-minded focus on the customer could lead to the exclusion of other important people in the organisation like the stakeholders.
- Narrowly defining the customer’s needs.
- A failure to recognize the changed societal context of business that necessitates addressing multiple stakeholders.
Thus having an extremely customer scopic view is not the solution to this marketing syndrome. The following are the measures which could be adopted to avoid or mitigate the problem:
- Mapping the company’s stakeholders to show who influences or should influence the company and what issues most concern them.
- Determining stakeholder salience.
- Researching the stakeholder issue, their expectations and the measure impact.
- Engage with stakeholders as they are also an integral part of the decision making process and in most cases fund the particular programme.
- Embedding a stakeholder’s involvement.
Cases of Marketing Myopia
The effect of the marketing myopia syndrome has been in existence for several decades now. There are various cases pertaining to this phenomenon which is illustrated below:
Splendid and Starbucks
For several decades Procter & Gamble owned Splendid, an Italian coffee roasting company and a leading brand in the Italian take-home coffee market. Through Splendid, P&G had access to a powerful reservoir of knowledge about the production, distribution and marketing of authentic, Italian espresso coffee, and to powerful insights on the consumer experience of enjoying an espresso or a cappuccino in an Italian coffee bar. But it viewed the potential of this knowledge narrowly: as a way to adapt the famous P&G brand building and product management skills to the Italian market — a peculiar place where people drank thick, dark coffee in preference to the traditional American brew. P&G’s myopic view of competition — both in Italy and, back home, in the U.S.- and its failure to engage with the world as a source of innovation, left the way open for Starbucks, a minute coffee roasting company from Seattle.
In the mid-eighties, Starbucks’ CEO Howard Schultz spent some time in Italy and studied the technology and consumer behavior in the Italian coffee market — knowledge that P&G had already “in-house” at Splendid for ages. He then combined what he learnt in Italy with world-class retailing and “fast-food” management techniques perfected in the United States. To the recipe, he added his understanding of American consumers and New York financial market to craft Starbucks strategy. The results are now legendary.
What made the success of Starbucks was not an innovative coffee blend — but rather an innovative “knowledge blend.” The amazing thing is that P&G had privileged access to all the components of the recipe, though some components were in other countries (Italy, for starters) or in other industries (for example, fast-food). But myopia was surely limiting — and hurting – P&G, as it couldn’t see much beyond its existing markets across the street. Eventually, in 1992, P&G sold Splendid to Philip Morris’ Kraft General Foods.
The Indian Classic Vintage car: Ambassador
Ambassador entered the fray in 1958. The great Hindustan Motors (HM) launched the Indian version of the classic ‘Morris Oxford’ as the Ambassador in the year 1958. From then on for about three decades the Ambassador was the king of the road. At that point in time there were only two stalwarts in the Indian market — Ambassador and Premier Padmini. Issues like the licensing, lack of capital and less conducive economic policies ensured that the above mentioned enjoyed a healthy duopoly. All said and done the year 1983 saw the emergence of a new epoch in the Indian car market. During this period Maruti Udyog Ltd surged into the market with their epic Maruti 800 model. Eventually the Ambassador lost its numero-uno position to Maruti. Ambassador’s major target audience the ‘family segment’ which was the largest segment in the car market embraced Maruti. The Ambassador was soon reduced to a marginal player a short period of time. One of the major market segments for Ambassador was the Indian Government. More than 16 % of the brand sales was courtesy the Government. So much so to say the Ambassador was used as the Prime Minister’s car till 2002.
Soon the officials at Hindustan Motors also lost interest in the brand. With other automobile makers entering the Indian scenario resulted in a substantial drop in the orders from the Government. For four decades, the brand has not taken its customer seriously. Reasons are plenty for brand’s failure, the fundamental issues related to the product and price.
From the product’s point of view, the Ambassador never changed with time. There were a lot of minor changes to the appearance of the model from 1958-2000 in the form of three major upgrades namely as Mark II, Mark III and Mark IV without any significant value addition between these upgrades. It still looked like a rock with four wheels and the architecture never changed. However one of the major transformations undergone by this brand was in their 1800 Isuzu engine. The new and improved Ambassador with the Isuzu engine managed to increase the sales marginally. But the euphoria was short lived. HM’s inability to offer product changes with changing times and with the onset of new players in the market made the brand stale.
The other issue which that worked against them was the price of the vehicle. HM never bothered to rationalize the price of the brand as they were of the ideology that decreases in price would correspondingly mean decrease in quality. Ambassador costs more than Rs 4,80,000 a price at which one could afford a grander Indigo sedan.
Reports suggest that, the HM plant had achieved full depreciation by the year 2000. But it never crossed the minds at the company to pass on this reduction in cost to their customers. If the company had rationalized the price of Ambassador in 2000, the brand could have fought of competition.
A final hammering came with the launch of Indica which took away the taxi car market from Ambassador which was then the mainstay for the brand. Now even their Unique Selling Proposition of producing diesel run cars was lost as individual consumers had a better affordable modern car in Indica as compared to the ageing Ambassador.
In another attempt to boost their sagging sales, HM launched a radically designed Ambassador variant named “Avigo” in the year 2004. Even with this radical styling, there was a cold response from the customer.
The automobile industry today has so much to offer that the Indian consumer is now not restricted to choices .Competition has increased manifolds with new and improved models rolling out of showrooms by the day.
In today’s scenario considering the value proposition domain, Ambassador never even figures in the radar of the consumers. The reduced price gap between diesel and petrol has also eroded the value in investing in an outdated Ambassador.
To top it all of HM never thought of investing surplus cash for this brand and hence closed all doors of escape for this product. This is a classic example of Marketing Myopia from an Indian context.
Dettol and Proctor & Gamble’s Safeguard soap
Dettol was market leader for a very long time because of its multi uses and category leadership strategies. For years, it reaped profits without the need of innovating and giving its customers that extra bit of value. This strategy worked fine for them until there weren’t other strong players in the market. In came Proctor and Gamble’s Safeguard soap with a completely new approach that not many would have thought of. They came out with a soap having better fragrance and launched a campaign that targeted kids. The campaign was based on a super hero cartoon character called Commander Safeguard that created waves amongst children. Children, being strong influencers worked as wonders for Safeguard and their sales saw remarkable rise. Eventually, because of the un-reactive approach of Dettol and the extremely customer centric and creative approach of Safeguard, it gained market share and market leadership from Dettol; a clear case of marketing myopia on Dettol’s behalf.
Hence, it is essential companies now keep innovating and designing all their strategies keeping the customer’s ever changing needs and value requirements in mind because if you don’t, someone else surely will.