Description
This document is explain about the concept of marketing myopia.
Thoughts of Management Gurus Case Analysis On
MARKETING MYOPIA
By Theodore Levitt
Introduction
Marketing myopia is a term used in marketing as well as the title of an important marketing paper written by Theodore Levitt. This paper was first published in 1960 in the Harvard Business Review; a journal of which he was an editor. One of the most important marketing papers ever written was that on ‘Marketing Myopia’ by Theodore Levitt. Some commentators have even gone as far as to suggest that its publication marked the beginning of the modern marketing movement in general. Its theme was that the vision of most organizations was constricted in terms of what they, too narrowly, saw as the business they were in. It exhorted CEOs to re-examine their corporate vision; and redefine their markets in terms of wider perspectives. Myopia means short-sightedness and Levitt claims most failures of firms are due to short-sighted lack of vision in top management. His view of marketing is long-range vision, anticipation of change, and planning for the future. There are numbers of companies and whole industries that went bankrupt or nearly failed due to lack of vision. It was successful in its impact because it was, as with all of Levitt's work, essentially practical and pragmatic. Organizations found that they had been missing opportunities which were plain to see once they adopted the wider view. The impact of the paper was indeed dramatic. The oil companies (which represented one of his main examples in the paper) redefined their business as energy rather than just petroleum; although Shell, which embarked upon an investment programme in nuclear power, subsequently regretted this course of action --even good ideas can sometimes lead to unforeseen, and costly, problems. Levitt's concept of myopia is invaluable. Even now, too much of marketing is constricted by the narrow vision of marketers using
just the few tools they have bothered to learn. The world is a large place; and cannot be limited by a few crude rules-of-thumb --no matter how expert, or charismatic, their inventors!
Analysis
Case Summary
For decades many companies have learnt the truth, the hard way. Their focus has largely been towards building more and more sophisticated products, without realising that the problem as to why “growth” is declining actually lies elsewhere. On the other hand many people would argue that if it were not for the narrow and specialised focus of some companies on the products they make, the company would stagnate. In his ground-breaking paper on the short-sightedness of many companies, Theodore Levitt argued that many companies/industries are handicapped by a Marketing Myopia, and that “there is no such thing as a “growth” industry”. He said that cocooning of business objectives by top business executives invariably leads to decline. Theodore Levitt in his insightful argument – Marketing Myopia, put forward a simple point – top management is too busy concentrating their energies and resources on the improvement of existing products, rather than on understanding customer needs. Indeed, many industries have fallen victim to this shortsightedness – believing that the industry they think they serve is an infinitely growing one. Haziness over the definition of purpose has sent many companies to their doom. As Lew Platt, former CEO of Hewlett Packard (HP) put it: “If HP knew what HP knows, it would be three times as profitable.”
Background
With the start of industrialization, when firms focused on improving their productivity and reducing their costs through mass production the "Production Concept" evolved which left many firms unprofitable because they could not overcome on the problems of excessive inventory being worsened in their warehouses. After adequate observation, organizations changed their strategy and depended on the quantity demanded in the market, linking to appropriate production equal to demand, and
placing it for selling, the "selling concept" evolved, its focus remained on increasing profitability by controlling excessive inventory. The demand was explored to quality aspect as well, that customers preferred. This introduced the "Marketing Concept" which meant taking in account preferences of the buyer rather than seller, but still case after case organizations fell under the shadow of mismanagement. What usually got emphasized was selling not marketing. That was blunder, because selling focused on the needs of the seller where as the customer still remained ignored. Myopia means "lack of foresight or a long range perspective". In terms of marketing, it means the lack of developing long range perspective about changing consumer needs. It was the time when, Levitt's perception evolved through the pages of Harvard business review with introducing "Marketing Myopia" in which He stated "the history of every dead and dying 'growth' industry shows a self-deceiving cycle of bountiful expansion and undetected decay." The railroads serve as an example of an industry whose failure to grow is due to a limited market view. Those behind the railroads are in trouble not because the need for passenger transportation has declined but because cars, airplanes, and other modes of transport have filled that need. And, those behind it assumed they were in the railroad business rather than the transportation business. They were product oriented, instead of customer oriented. For companies to ensure continued evolution, they must define their industries broadly to take advantage of growth opportunities. They must determine and act on their customers' needs and desires, not escalate their commitment by assuming the longevity of their products. No doubt, focusing on existing needs of the customer was a good approach but still it was overestimated by Levitt to have a longer vision of the changes taking place in the environment in which customer lives which actually caused customer's needs to
change. And if organizations did that, it could and did lead them to success. In short, an organization must learn to think of itself not as producing goods or services but as doing the things that will make people want to do business with them. And in every case, the chief executive is responsible for creating an environment that reflects this mission. He should be aware of "marketing myopia" and be able to understand the complexity of the consumer-needs by developing an approach that justifies it.
Marketing Positioning
It starts with understanding that different kinds of customers buy different kinds of customers buy different kind of value. In general, the customers fall into three basic categories. 1. Customers want low prices with minimal level of customer service. 2. Customers want state of art services 3. Customers constantly want improvement’s and are less sensitive to price.
Important Concepts
1. The Value proposition represent’s the implicit promise a company makes to deliver a particular combination of values. 2. The Value driven operating model is the combination of operating process, management systems, Business structures and culture that gives a company the capacity to deliver on its value proposition. 3. The Value discipline represents one of the three ways that companies can combine operating model and value propositions to be the best in their markets. Each discipline produces different kind of value.
Marketing Myopia
The commercial processes involved in promoting and selling and distributing a product or service that describes an unnecessarily common affliction among business people. ? Many business people make their decisions based on current circumstances. They do not think about what will likely occur in their industry in the future. ? Because the world is inherently unpredictable, we are all subject to myopia to a certain extent according to Theodore Levitt (1960) who coined the term. ? People who focus on Quick Facts about: marketing strategy. ? Subject Customer's lifetime value can rise above myopia to a certain extent. This can entail the use of long-term profit objectives (sometimes at the risk of sacrificing short term objectives). ? Management with Short vision often fail to recognize that in fact there is no such thing as growth industry. ? The companies defined their industry in a wrong segment. E.g.:- Railroad business they were railroad oriented instead of transportation oriented. They were product oriented instead of customer oriented. ? Growth is always threatened, slowed or stopped because of the failure of management. ? If companies are not customer oriented their new products might have been wrong and their sales method is useless.
Major factors which made the Industry believe their potential growth:
1.
Population Myth: The companies believed that profits are assured by and expanding and more affluent population is dear to the heart of every industry. If the product has an automatically expanding market, then you will not give much thought to how to expand it.
E.g. Petroleum industry Major improvement and Major innovations in the fuel marketing will affect the sales. Oil has never been a superior product for any purpose for very long, but it also shows that the oil industry has never really been a growth industry. It has been the succession of different business that has gone through the usual historic cycles of growth, maturity and decay. There is no guarantee against product obsolescence.
2.
Production Pressures: Mass production industries are impelled by a great drive to produce all they can. The prospect of steeply declining unit cost as output rises is more than most companies usually resist. Mass production does indeed generate great pressure to ”move” the product. But what usually gets emphasized is selling, not marketing. E.g. Ford Motors
3.
Based on Research and Development: This is a major danger to firms who believe and R&D, that top management is wholly transfixed by the profit possibilities of technical research and development. E.g. The Electronic Industry (The organization tends to making things rather than satisfying customer needs).
Overcoming Marketing Myopia
Even if your company has a successful product with very little competition, it's important to stay on the defence. Getting too comfortable can leave you vulnerable to competitors - or, even worse, leave you unprotected if your product becomes obsolete. This process starts by shifting from a sales based approach to a marketing based approach, allowing you to focus more heavily on the customers' current and future needs.
Defining your Business
When defining your business, it's important to have an open mind. For example, a car manufacturer may choose to expand their business from automobiles to transportation - looking at new ways to address customers' needs. Having a vague or outdated definition of your business can negatively impact the future of your company and severely limit growth opportunities.
Reshaping your Focus
Companies need to think about customers in a new way. Often times, companies are focused on sales efforts which directly impact revenue. However, understanding the customers' unique needs, and addressing them through marketing efforts, will do a better job of driving results.
Piggybacking on New Innovation
New technology that makes a company's core products irrelevant or obsolete often feels devastating. However, this should be a welcomed opportunity for businesses, allowing them to tap into new customer needs, or even serve an untapped market segment. This can also reduce the amount of time a company spends at the drawing board coming up with new products designed to sustain and grow a company.
Watching for Signals of a Changing Industry
The four factors that can indicate that, the turbulent conditions may be ahead. 1. There isn't any competition for your product. Once your product gains popularity, competitors will quickly swoop in to cash in on the new "needs" created by the product. 2. Your product serves an affluent client base. This gives businesses a false illusion that their product is safe from the highs and lows of market conditions. 3. Having too much confidence in pricing the product lower, and selling more volume. This creates a disproportionate focus on sales instead of marketing efforts. These two components need to be carefully balanced. 4. Your product is reliant on scientific experimentation and improvement to continue to grow.
Focusing on Improving Efficiency
Many companies focus on improving efficiency in hopes that larger profits and growth will follow. However, this can be a mistake for companies if it results in neglecting other important areas, such as focusing on marketing efforts or improving their generic product for future growth. Striking a balance between these factors will produce the best results.
Breaking a False Sense of Security
Often times, when a company creates a product that appeals to an affluent consumer base, they feel overly confident in the success of their business. This lack of focus can open up opportunities for other competitors to create products that appeal to the customers' needs.
Also, some companies have the misconception that their product is "indispensable". Although you might not see an immediate substitute for your product, it's important to not get too comfortable. New developments in the market can quickly make your core product irrelevant, which will result in a downward spiral of profits.
Evaluating Mass Production
As a product gains popularity, often times a company will ramp up production to drive down per unit cost. However, companies should be careful about managing this process. This also creates a high amount of pressure to "move" the product. This attitude can shift the focus of staff to sales, rather than marketing the product to drive sales. This process is important because selling focuses on meeting the needs of your company, while marketing addresses the needs of the consumer. And, ultimately what drives growth is the connection consumers feel with your product.
Creating an Consumers
Emotional
Connection
with
When a consumer is purchasing a product, they need to be able to connect with the item. For example, products that consumers "have" to buy instead of "want" to buy lack emotional appeal. For this reason, it's important to approach these products differently. For example, buying gas for your car isn't always pleasurable, but getting more gas mileage or another added benefit can create an emotional connection. This will drive growth in sales, and create enhanced profitability.
Creating Better Marketing Campaigns
Focusing on creating more creative advertising strategies and sales promotional strategies can protect your product from competition, and help establish a unique position for new products. Often times, when exploring these strategies, companies will discover they haven't asked basic marketing and sales questions.
Changing the way your company thinks about marketing can give your business a competitive edge in the marketplace. Also, understanding that even though your company has a strong position in the marketplace right now - it's possible for that to change anytime. Investing resources in marketing will help protect and grow your company in the future.
India Inc: A Case Study
Bajaj Chetak
The Bajaj group was founded in 1926 by Jamnalal Bajaj. In 1945, Kamalnayan Bajaj, Jamnalal's son, set up Bachraj Trading Corporation Ltd. (BTCL), a trading company, to import and sell two- and three- wheelers. This business continued till 1959. In 1959, the company secured a license from the Government of India to manufacture two- and three-wheelers. In 1960, BTCL was renamed Bajaj Auto Ltd. (BAL) and the company went public. The same year, it entered into a technical collaboration with Piaggio for the manufacture of scooters under the Vespa brand name. With its collaboration with Piaggio coming to an end in the early 1970s, BAL started manufacturing scooters under the Bajaj brand. Named after Maharana Pratap’s legendry stallion, The Chetak, BAL's first scooter model under the Bajaj brand, was introduced in 1972. The BAJAJ CHETAK became the most popular Indian made motor scooter produced by the Bajaj auto company. Originally based on Italian Vespa, Chetak was the only choice for millions of Indian families as an affordable way of transport for decades. The Chetak, a geared scooter, reigned over the Indian two-wheeler market in the late 1970s to early 1990s and had come to occupy a near-iconic status.
Success Factors
•
Bajaj Chetak had huge brand equity. The brand had the persona of a “workhorse". With reasonable price and the low maintenance cost made this product a huge hit among the middle class Indians.
• “BULAND BHARAT KI BULAND TASVEER---HAMARA BAJAJ” was the popular slogan of Bajaj scooters which were a roaring success all over India.
•
Most middle-class Indians preferred scooters because of their durability, low maintenance costs, and versatility, and the Bajaj Chetak name became synonymous with scooters. Affordable prices, powerful engine, world class mileage made Bajaj Chetak a class apart. At that time, the motorcycles available in India were heavier and not as fuel efficient as scooters. They were also costlier.
•
•
• Its performance made it outstanding and the number of proud satisfied consumers swelled.
•
The brand ‘Chetak’ thrived during the license raj with virtually no competition.
Brand Failure
In the late 1990s, the Indian two-wheeler market witnessed a shift in consumer preferences. The popularity of geared scooters began to wane while that of motorcycles soared. There were various reasons for the shift: • India was undergoing a demographic change, with the proportion of younger people in the population growing significantly. • The economy was growing, which increased the disposable incomes of the middle class. • Many newer models of motorcycles, with improved designs and modern technology had become available in the market.
While these changes were taking place in the market, the features of scooters, especially those of the Bajaj Chetak, remained essentially unchanged. The brand thrived during the license raj with virtually no competition. It was during 1990-91 that the brand began the journey to the end. Promoted along the
base line "Hamara Bajaj", this was the Indian Family vehicle - a position now owned by Maruti 800. In January 2006, BAL announced that it had stopped production of the Chetak. Scooters were BAL's main products, and when market preferences shifted to motorcycles, the company was faced with declining sales and revenues. Reasons for Failure
• •
The primary reason is that the Brand forgot the customers. This was another case of Marketing Myopia. The company failed to understand the changing perception of the customers towards scooters. Rather than looking at the customers, the company focused on influencing Government to block the opening up of economy. There was nothing wrong with the Promotion. "Hamara Bajaj" and "No one can beat a Bajaj" were famous base lines. There was nothing wrong with distribution and the pricing was very reasonable. The major problem was in the first P i.e. Product. Although there was an emotional connection with the customer, the needs for better mileage, styling etc. was not satisfied by the Chetak. Bajaj never did anything with the product. For 40 years Chetak had the same look, same quality and style. Bajaj never was serious about product development. The R&D spent for a long time was a miniscule 1%.The average cycle time for the new product development was 4-5 years compared to 2-3 years of Japanese competitors. Bajaj never seriously looked at customer perception about Chetak. The product had serious problems like starting trouble and riding comfort. The “Tilting the Chetak to the side for starting" was a common joke.
•
•
•
•
•
•
•
The decline was directly related to neglect of this segment over mileage, contemporary technology, and non-stop excitement of launch of newer and newer models offered on the motorcycles platform. The biggest drawback of Bajaj Chetak was its handling during heavy breaking. During this time, competitors like Kinetic Honda managed to carve a niche with its gearless scooters. Although Bajaj got into the motorcycle segment, Hero Honda had already wrested market share from BAL.
•
•
•
A comparison with its competitors in the scooter segment
Bajaj Chetak
2 stroke- scooter maximum speed of 50 km/ hr fuel capacity of 6.5 litres works on kick start mechanism
Kinetic Zoom
2 stroke- scooter maximum speed of 73 km/ hr fuel capacity of 7 litres works on electric start mechanism
Honda Activa
4 stroke- scooter maximum speed of 80 km/ hr fuel capacity of 6 litres works on electric start mechanism
Key Learnings
• Bajaj should have looked into R&D to improve the looks of the Chetak. • It could have come out with a gearless scooter.
•
Brands should make efforts to change the quality & style of their products to suit the tastes & preferences of its customers.
The Ambassador
Hindustan Motors is the first Indian car manufacturer and was the largest in India before the rise of Maruti Udyog Ltd. (MUL). HM launched the Ambassador in 1958. Known as the first Indian car, it owed its design and technology to British car model Morris Oxford built by Morris Motor Co at Oxford, U.K. It ruled the Indian markets from 1958-1980.
Success factors
There were several factors leading to the Ambassadors success on Indian roads. • It was widely used as a taxicab and as a government limousine • It was the only car with Diesel option • Being a sturdy car, it was ideal for Indian roads • It was perceived that the ambassador was less expensive to maintain • Being large Spaced, it appealed to the average Indian joint family • Over 16% of the brand sales came from the Indian Government • The license raj, lack of capital and the unfriendly Indian economic policies ensured that no automobile manufacturers entered the Indian market
Brand Failure
Over the years, the sales of the Ambassador started dipping. The Indian governments started using imported BMWs and it lost the position of being the politicians’ first choice. The failure of the Ambassador can be attributed to the myopic vision of the leaders at Hindustan Motors.
• HM never knew where they fit in the changing economy. • Ambassador never changed with times. It focused on only one segment till 1997 and within that time MUL was able to bring out brands for each segment within the nation • HM did try to make some changes and upgrades but overall the look and built-in quality remained the same • Ambassador sales dipped badly in the year 2000 but HM never bothered to rationalize the price of the brand. Even today it costs over Rs. 4 lakh • Indica then took away the taxi car market and the customers got a new option for diesel car with modern technology • The car lacked the quality and refinement. Rattling sound and rustling were some of the common complaints
Key Learnings
• A brand exists in the market till it becomes dated, after that it is virtually impossible to rejuvenate the brand. • Brand must go to the customers for new ideas. • Rationalize the price in the light of emerging market. • Changes in product along with the change in market can sustain the brand even in emerging market. • Best example is MARUTI 800; the brand is still surviving because it made changes along with changing consumer values and demands.
Conclusion
Thus, in conclusion we see that companies or industries have a myopic outlook towards their business, largely due to the fact that they are oblivious of future trends of their resources. This is especially so, because the pressure on resources comes not from their own industry but related ones. However, the dependence of these companies on related sectors is grossly overlooked by top management. What is more is that, as we have seen, competition comes from sectors that might seem totally unrelated to the business in question. In case of efficiency of the energy saving appliances – an imminent threat came from an already existing sector – architecture, which till then seemed completely unrelated to energy saving. To counter such threats top management has no choice but to think “out-of-the-box”. New developments in upcoming industries must be thoroughly analysed and their impact upon one’s own business must be thought of. This kind of knowledge comes by “engaging with the world” in an innovative way. In one paper in the Ivey Business School journal, the authors say “As the transportation of goods, information and knowledge becomes more fluid, we must choose to engage with the world; otherwise, it will engage with us”. The advantage obtained by giving more than a passing look to sectors or industries that might seem completely unrelated is immense. An Ivey Business School journal paper recommends a high level strategy for CEOs to “engage with the world.” “Pick a pilot project of strategic importance that is largely outside the realm of existing operational experience. Use the project to get people involved in prospecting the world for new knowledge. Allow the others to lead. Err on the side of excessive interaction and communications among members of the project team. As the project’s deliverable takes shape, forge a direct link between the project team and people in day-to-day operations”. The authors essentially put forward the same idea so as not to fall into the trap of thinking that one’s own business/product is invincible and that it can stand or progress with no dependence on any other business/product, however remote the relation might seem.
Shutting out the world is a grave mistake. Thomas L. Friedman in his book The World is Flat, says “But what can happen is a decline in our standard of living, if more Americans are not empowered and educated to participate in a world where all the knowledge centres are being connected”. The same applies to companies as well. If top management chooses to remain isolated from the knowledge that exchanges hands within seconds in the world, it leads to them being myopic about their own businesses. The vicious cycle of faith in a permanent market share, over-obsession with their own product and the false aura of invincibility of the product starts, and corporate management lose out more and more failing to keep pace with the rapidly changing world. This spells doom in the long run.
doc_632546615.doc
This document is explain about the concept of marketing myopia.
Thoughts of Management Gurus Case Analysis On
MARKETING MYOPIA
By Theodore Levitt
Introduction
Marketing myopia is a term used in marketing as well as the title of an important marketing paper written by Theodore Levitt. This paper was first published in 1960 in the Harvard Business Review; a journal of which he was an editor. One of the most important marketing papers ever written was that on ‘Marketing Myopia’ by Theodore Levitt. Some commentators have even gone as far as to suggest that its publication marked the beginning of the modern marketing movement in general. Its theme was that the vision of most organizations was constricted in terms of what they, too narrowly, saw as the business they were in. It exhorted CEOs to re-examine their corporate vision; and redefine their markets in terms of wider perspectives. Myopia means short-sightedness and Levitt claims most failures of firms are due to short-sighted lack of vision in top management. His view of marketing is long-range vision, anticipation of change, and planning for the future. There are numbers of companies and whole industries that went bankrupt or nearly failed due to lack of vision. It was successful in its impact because it was, as with all of Levitt's work, essentially practical and pragmatic. Organizations found that they had been missing opportunities which were plain to see once they adopted the wider view. The impact of the paper was indeed dramatic. The oil companies (which represented one of his main examples in the paper) redefined their business as energy rather than just petroleum; although Shell, which embarked upon an investment programme in nuclear power, subsequently regretted this course of action --even good ideas can sometimes lead to unforeseen, and costly, problems. Levitt's concept of myopia is invaluable. Even now, too much of marketing is constricted by the narrow vision of marketers using
just the few tools they have bothered to learn. The world is a large place; and cannot be limited by a few crude rules-of-thumb --no matter how expert, or charismatic, their inventors!
Analysis
Case Summary
For decades many companies have learnt the truth, the hard way. Their focus has largely been towards building more and more sophisticated products, without realising that the problem as to why “growth” is declining actually lies elsewhere. On the other hand many people would argue that if it were not for the narrow and specialised focus of some companies on the products they make, the company would stagnate. In his ground-breaking paper on the short-sightedness of many companies, Theodore Levitt argued that many companies/industries are handicapped by a Marketing Myopia, and that “there is no such thing as a “growth” industry”. He said that cocooning of business objectives by top business executives invariably leads to decline. Theodore Levitt in his insightful argument – Marketing Myopia, put forward a simple point – top management is too busy concentrating their energies and resources on the improvement of existing products, rather than on understanding customer needs. Indeed, many industries have fallen victim to this shortsightedness – believing that the industry they think they serve is an infinitely growing one. Haziness over the definition of purpose has sent many companies to their doom. As Lew Platt, former CEO of Hewlett Packard (HP) put it: “If HP knew what HP knows, it would be three times as profitable.”
Background
With the start of industrialization, when firms focused on improving their productivity and reducing their costs through mass production the "Production Concept" evolved which left many firms unprofitable because they could not overcome on the problems of excessive inventory being worsened in their warehouses. After adequate observation, organizations changed their strategy and depended on the quantity demanded in the market, linking to appropriate production equal to demand, and
placing it for selling, the "selling concept" evolved, its focus remained on increasing profitability by controlling excessive inventory. The demand was explored to quality aspect as well, that customers preferred. This introduced the "Marketing Concept" which meant taking in account preferences of the buyer rather than seller, but still case after case organizations fell under the shadow of mismanagement. What usually got emphasized was selling not marketing. That was blunder, because selling focused on the needs of the seller where as the customer still remained ignored. Myopia means "lack of foresight or a long range perspective". In terms of marketing, it means the lack of developing long range perspective about changing consumer needs. It was the time when, Levitt's perception evolved through the pages of Harvard business review with introducing "Marketing Myopia" in which He stated "the history of every dead and dying 'growth' industry shows a self-deceiving cycle of bountiful expansion and undetected decay." The railroads serve as an example of an industry whose failure to grow is due to a limited market view. Those behind the railroads are in trouble not because the need for passenger transportation has declined but because cars, airplanes, and other modes of transport have filled that need. And, those behind it assumed they were in the railroad business rather than the transportation business. They were product oriented, instead of customer oriented. For companies to ensure continued evolution, they must define their industries broadly to take advantage of growth opportunities. They must determine and act on their customers' needs and desires, not escalate their commitment by assuming the longevity of their products. No doubt, focusing on existing needs of the customer was a good approach but still it was overestimated by Levitt to have a longer vision of the changes taking place in the environment in which customer lives which actually caused customer's needs to
change. And if organizations did that, it could and did lead them to success. In short, an organization must learn to think of itself not as producing goods or services but as doing the things that will make people want to do business with them. And in every case, the chief executive is responsible for creating an environment that reflects this mission. He should be aware of "marketing myopia" and be able to understand the complexity of the consumer-needs by developing an approach that justifies it.
Marketing Positioning
It starts with understanding that different kinds of customers buy different kinds of customers buy different kind of value. In general, the customers fall into three basic categories. 1. Customers want low prices with minimal level of customer service. 2. Customers want state of art services 3. Customers constantly want improvement’s and are less sensitive to price.
Important Concepts
1. The Value proposition represent’s the implicit promise a company makes to deliver a particular combination of values. 2. The Value driven operating model is the combination of operating process, management systems, Business structures and culture that gives a company the capacity to deliver on its value proposition. 3. The Value discipline represents one of the three ways that companies can combine operating model and value propositions to be the best in their markets. Each discipline produces different kind of value.
Marketing Myopia
The commercial processes involved in promoting and selling and distributing a product or service that describes an unnecessarily common affliction among business people. ? Many business people make their decisions based on current circumstances. They do not think about what will likely occur in their industry in the future. ? Because the world is inherently unpredictable, we are all subject to myopia to a certain extent according to Theodore Levitt (1960) who coined the term. ? People who focus on Quick Facts about: marketing strategy. ? Subject Customer's lifetime value can rise above myopia to a certain extent. This can entail the use of long-term profit objectives (sometimes at the risk of sacrificing short term objectives). ? Management with Short vision often fail to recognize that in fact there is no such thing as growth industry. ? The companies defined their industry in a wrong segment. E.g.:- Railroad business they were railroad oriented instead of transportation oriented. They were product oriented instead of customer oriented. ? Growth is always threatened, slowed or stopped because of the failure of management. ? If companies are not customer oriented their new products might have been wrong and their sales method is useless.
Major factors which made the Industry believe their potential growth:
1.
Population Myth: The companies believed that profits are assured by and expanding and more affluent population is dear to the heart of every industry. If the product has an automatically expanding market, then you will not give much thought to how to expand it.
E.g. Petroleum industry Major improvement and Major innovations in the fuel marketing will affect the sales. Oil has never been a superior product for any purpose for very long, but it also shows that the oil industry has never really been a growth industry. It has been the succession of different business that has gone through the usual historic cycles of growth, maturity and decay. There is no guarantee against product obsolescence.
2.
Production Pressures: Mass production industries are impelled by a great drive to produce all they can. The prospect of steeply declining unit cost as output rises is more than most companies usually resist. Mass production does indeed generate great pressure to ”move” the product. But what usually gets emphasized is selling, not marketing. E.g. Ford Motors
3.
Based on Research and Development: This is a major danger to firms who believe and R&D, that top management is wholly transfixed by the profit possibilities of technical research and development. E.g. The Electronic Industry (The organization tends to making things rather than satisfying customer needs).
Overcoming Marketing Myopia
Even if your company has a successful product with very little competition, it's important to stay on the defence. Getting too comfortable can leave you vulnerable to competitors - or, even worse, leave you unprotected if your product becomes obsolete. This process starts by shifting from a sales based approach to a marketing based approach, allowing you to focus more heavily on the customers' current and future needs.
Defining your Business
When defining your business, it's important to have an open mind. For example, a car manufacturer may choose to expand their business from automobiles to transportation - looking at new ways to address customers' needs. Having a vague or outdated definition of your business can negatively impact the future of your company and severely limit growth opportunities.
Reshaping your Focus
Companies need to think about customers in a new way. Often times, companies are focused on sales efforts which directly impact revenue. However, understanding the customers' unique needs, and addressing them through marketing efforts, will do a better job of driving results.
Piggybacking on New Innovation
New technology that makes a company's core products irrelevant or obsolete often feels devastating. However, this should be a welcomed opportunity for businesses, allowing them to tap into new customer needs, or even serve an untapped market segment. This can also reduce the amount of time a company spends at the drawing board coming up with new products designed to sustain and grow a company.
Watching for Signals of a Changing Industry
The four factors that can indicate that, the turbulent conditions may be ahead. 1. There isn't any competition for your product. Once your product gains popularity, competitors will quickly swoop in to cash in on the new "needs" created by the product. 2. Your product serves an affluent client base. This gives businesses a false illusion that their product is safe from the highs and lows of market conditions. 3. Having too much confidence in pricing the product lower, and selling more volume. This creates a disproportionate focus on sales instead of marketing efforts. These two components need to be carefully balanced. 4. Your product is reliant on scientific experimentation and improvement to continue to grow.
Focusing on Improving Efficiency
Many companies focus on improving efficiency in hopes that larger profits and growth will follow. However, this can be a mistake for companies if it results in neglecting other important areas, such as focusing on marketing efforts or improving their generic product for future growth. Striking a balance between these factors will produce the best results.
Breaking a False Sense of Security
Often times, when a company creates a product that appeals to an affluent consumer base, they feel overly confident in the success of their business. This lack of focus can open up opportunities for other competitors to create products that appeal to the customers' needs.
Also, some companies have the misconception that their product is "indispensable". Although you might not see an immediate substitute for your product, it's important to not get too comfortable. New developments in the market can quickly make your core product irrelevant, which will result in a downward spiral of profits.
Evaluating Mass Production
As a product gains popularity, often times a company will ramp up production to drive down per unit cost. However, companies should be careful about managing this process. This also creates a high amount of pressure to "move" the product. This attitude can shift the focus of staff to sales, rather than marketing the product to drive sales. This process is important because selling focuses on meeting the needs of your company, while marketing addresses the needs of the consumer. And, ultimately what drives growth is the connection consumers feel with your product.
Creating an Consumers
Emotional
Connection
with
When a consumer is purchasing a product, they need to be able to connect with the item. For example, products that consumers "have" to buy instead of "want" to buy lack emotional appeal. For this reason, it's important to approach these products differently. For example, buying gas for your car isn't always pleasurable, but getting more gas mileage or another added benefit can create an emotional connection. This will drive growth in sales, and create enhanced profitability.
Creating Better Marketing Campaigns
Focusing on creating more creative advertising strategies and sales promotional strategies can protect your product from competition, and help establish a unique position for new products. Often times, when exploring these strategies, companies will discover they haven't asked basic marketing and sales questions.
Changing the way your company thinks about marketing can give your business a competitive edge in the marketplace. Also, understanding that even though your company has a strong position in the marketplace right now - it's possible for that to change anytime. Investing resources in marketing will help protect and grow your company in the future.
India Inc: A Case Study
Bajaj Chetak
The Bajaj group was founded in 1926 by Jamnalal Bajaj. In 1945, Kamalnayan Bajaj, Jamnalal's son, set up Bachraj Trading Corporation Ltd. (BTCL), a trading company, to import and sell two- and three- wheelers. This business continued till 1959. In 1959, the company secured a license from the Government of India to manufacture two- and three-wheelers. In 1960, BTCL was renamed Bajaj Auto Ltd. (BAL) and the company went public. The same year, it entered into a technical collaboration with Piaggio for the manufacture of scooters under the Vespa brand name. With its collaboration with Piaggio coming to an end in the early 1970s, BAL started manufacturing scooters under the Bajaj brand. Named after Maharana Pratap’s legendry stallion, The Chetak, BAL's first scooter model under the Bajaj brand, was introduced in 1972. The BAJAJ CHETAK became the most popular Indian made motor scooter produced by the Bajaj auto company. Originally based on Italian Vespa, Chetak was the only choice for millions of Indian families as an affordable way of transport for decades. The Chetak, a geared scooter, reigned over the Indian two-wheeler market in the late 1970s to early 1990s and had come to occupy a near-iconic status.
Success Factors
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Bajaj Chetak had huge brand equity. The brand had the persona of a “workhorse". With reasonable price and the low maintenance cost made this product a huge hit among the middle class Indians.
• “BULAND BHARAT KI BULAND TASVEER---HAMARA BAJAJ” was the popular slogan of Bajaj scooters which were a roaring success all over India.
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Most middle-class Indians preferred scooters because of their durability, low maintenance costs, and versatility, and the Bajaj Chetak name became synonymous with scooters. Affordable prices, powerful engine, world class mileage made Bajaj Chetak a class apart. At that time, the motorcycles available in India were heavier and not as fuel efficient as scooters. They were also costlier.
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• Its performance made it outstanding and the number of proud satisfied consumers swelled.
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The brand ‘Chetak’ thrived during the license raj with virtually no competition.
Brand Failure
In the late 1990s, the Indian two-wheeler market witnessed a shift in consumer preferences. The popularity of geared scooters began to wane while that of motorcycles soared. There were various reasons for the shift: • India was undergoing a demographic change, with the proportion of younger people in the population growing significantly. • The economy was growing, which increased the disposable incomes of the middle class. • Many newer models of motorcycles, with improved designs and modern technology had become available in the market.
While these changes were taking place in the market, the features of scooters, especially those of the Bajaj Chetak, remained essentially unchanged. The brand thrived during the license raj with virtually no competition. It was during 1990-91 that the brand began the journey to the end. Promoted along the
base line "Hamara Bajaj", this was the Indian Family vehicle - a position now owned by Maruti 800. In January 2006, BAL announced that it had stopped production of the Chetak. Scooters were BAL's main products, and when market preferences shifted to motorcycles, the company was faced with declining sales and revenues. Reasons for Failure
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The primary reason is that the Brand forgot the customers. This was another case of Marketing Myopia. The company failed to understand the changing perception of the customers towards scooters. Rather than looking at the customers, the company focused on influencing Government to block the opening up of economy. There was nothing wrong with the Promotion. "Hamara Bajaj" and "No one can beat a Bajaj" were famous base lines. There was nothing wrong with distribution and the pricing was very reasonable. The major problem was in the first P i.e. Product. Although there was an emotional connection with the customer, the needs for better mileage, styling etc. was not satisfied by the Chetak. Bajaj never did anything with the product. For 40 years Chetak had the same look, same quality and style. Bajaj never was serious about product development. The R&D spent for a long time was a miniscule 1%.The average cycle time for the new product development was 4-5 years compared to 2-3 years of Japanese competitors. Bajaj never seriously looked at customer perception about Chetak. The product had serious problems like starting trouble and riding comfort. The “Tilting the Chetak to the side for starting" was a common joke.
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The decline was directly related to neglect of this segment over mileage, contemporary technology, and non-stop excitement of launch of newer and newer models offered on the motorcycles platform. The biggest drawback of Bajaj Chetak was its handling during heavy breaking. During this time, competitors like Kinetic Honda managed to carve a niche with its gearless scooters. Although Bajaj got into the motorcycle segment, Hero Honda had already wrested market share from BAL.
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A comparison with its competitors in the scooter segment
Bajaj Chetak
2 stroke- scooter maximum speed of 50 km/ hr fuel capacity of 6.5 litres works on kick start mechanism
Kinetic Zoom
2 stroke- scooter maximum speed of 73 km/ hr fuel capacity of 7 litres works on electric start mechanism
Honda Activa
4 stroke- scooter maximum speed of 80 km/ hr fuel capacity of 6 litres works on electric start mechanism
Key Learnings
• Bajaj should have looked into R&D to improve the looks of the Chetak. • It could have come out with a gearless scooter.
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Brands should make efforts to change the quality & style of their products to suit the tastes & preferences of its customers.
The Ambassador
Hindustan Motors is the first Indian car manufacturer and was the largest in India before the rise of Maruti Udyog Ltd. (MUL). HM launched the Ambassador in 1958. Known as the first Indian car, it owed its design and technology to British car model Morris Oxford built by Morris Motor Co at Oxford, U.K. It ruled the Indian markets from 1958-1980.
Success factors
There were several factors leading to the Ambassadors success on Indian roads. • It was widely used as a taxicab and as a government limousine • It was the only car with Diesel option • Being a sturdy car, it was ideal for Indian roads • It was perceived that the ambassador was less expensive to maintain • Being large Spaced, it appealed to the average Indian joint family • Over 16% of the brand sales came from the Indian Government • The license raj, lack of capital and the unfriendly Indian economic policies ensured that no automobile manufacturers entered the Indian market
Brand Failure
Over the years, the sales of the Ambassador started dipping. The Indian governments started using imported BMWs and it lost the position of being the politicians’ first choice. The failure of the Ambassador can be attributed to the myopic vision of the leaders at Hindustan Motors.
• HM never knew where they fit in the changing economy. • Ambassador never changed with times. It focused on only one segment till 1997 and within that time MUL was able to bring out brands for each segment within the nation • HM did try to make some changes and upgrades but overall the look and built-in quality remained the same • Ambassador sales dipped badly in the year 2000 but HM never bothered to rationalize the price of the brand. Even today it costs over Rs. 4 lakh • Indica then took away the taxi car market and the customers got a new option for diesel car with modern technology • The car lacked the quality and refinement. Rattling sound and rustling were some of the common complaints
Key Learnings
• A brand exists in the market till it becomes dated, after that it is virtually impossible to rejuvenate the brand. • Brand must go to the customers for new ideas. • Rationalize the price in the light of emerging market. • Changes in product along with the change in market can sustain the brand even in emerging market. • Best example is MARUTI 800; the brand is still surviving because it made changes along with changing consumer values and demands.
Conclusion
Thus, in conclusion we see that companies or industries have a myopic outlook towards their business, largely due to the fact that they are oblivious of future trends of their resources. This is especially so, because the pressure on resources comes not from their own industry but related ones. However, the dependence of these companies on related sectors is grossly overlooked by top management. What is more is that, as we have seen, competition comes from sectors that might seem totally unrelated to the business in question. In case of efficiency of the energy saving appliances – an imminent threat came from an already existing sector – architecture, which till then seemed completely unrelated to energy saving. To counter such threats top management has no choice but to think “out-of-the-box”. New developments in upcoming industries must be thoroughly analysed and their impact upon one’s own business must be thought of. This kind of knowledge comes by “engaging with the world” in an innovative way. In one paper in the Ivey Business School journal, the authors say “As the transportation of goods, information and knowledge becomes more fluid, we must choose to engage with the world; otherwise, it will engage with us”. The advantage obtained by giving more than a passing look to sectors or industries that might seem completely unrelated is immense. An Ivey Business School journal paper recommends a high level strategy for CEOs to “engage with the world.” “Pick a pilot project of strategic importance that is largely outside the realm of existing operational experience. Use the project to get people involved in prospecting the world for new knowledge. Allow the others to lead. Err on the side of excessive interaction and communications among members of the project team. As the project’s deliverable takes shape, forge a direct link between the project team and people in day-to-day operations”. The authors essentially put forward the same idea so as not to fall into the trap of thinking that one’s own business/product is invincible and that it can stand or progress with no dependence on any other business/product, however remote the relation might seem.
Shutting out the world is a grave mistake. Thomas L. Friedman in his book The World is Flat, says “But what can happen is a decline in our standard of living, if more Americans are not empowered and educated to participate in a world where all the knowledge centres are being connected”. The same applies to companies as well. If top management chooses to remain isolated from the knowledge that exchanges hands within seconds in the world, it leads to them being myopic about their own businesses. The vicious cycle of faith in a permanent market share, over-obsession with their own product and the false aura of invincibility of the product starts, and corporate management lose out more and more failing to keep pace with the rapidly changing world. This spells doom in the long run.
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