Presented by Group 6: Brittney Graber and Katy Kiser

my·o·pi·a /mīˈōpēə/nounnoun: myopianearsightedness• lack of imagination, foresight, or intellectual

insight

Theodore LevittTheodore Levitt a lecturer in business administration at Harvard Business School,

introduced this famous question,

What business are you really in?

MARKETING MYOPIA

THE RAILROAD BUSINESSLevitt’s claim: “…had railroad executives seen

themselves as being in the transportation industry rather than the railroad business, they

would have continued to grow.”

FATEFU

L PURPOS

E

• NEED FOR TRANSPORTATION DID NOT DECLINE

FATEFU

L PURPOS

E

• NEED WAS NOT FULFILLED BY OTHERS

FATEFU

L PURP

OSE

• PRODUCT ORIENTED INSTEAD OF CUSTOMER ORIENTED

THE

MOVIE

BUSINESS

FATEFU

L PURPOS

E

• NOT BECAUSE OF TV’S INROADS

FATEFU

L PURPOS

E

• NOT BECAUSE DEFINED TOO BROADLY

FATEFU

L PURP

OSE

• MOVIE BUSINESS INSTEAD OF ENTERTAINMENT BUSINESS

HOLLYWOODTELEVISION

Had Hollywood been customer oriented instead of product oriented it potentially wouldn’t have gone through the economic agony it did.

How do you keep a growth industry growing?

• Nylon and Glass(E.I. du Pont de Nemours and Company and Corning Glass Works)

Technical Competence

• Aluminum(Kaiser Aluminum & Chemical Corporation and Reynolds Metals Company)

Technical Competence

SOPHISTICATED EYE ON THE CUSTOMERWithout a refined eye on the customer, most of their new products might have

failed and their sales methods unusable.

Levitt believes the railroads, as transporters, still have a good chance for substantial growth. He thinks rail transportation is theoretically a stronger transportation method then originally believed. What the railroads lack in not opportunity, but some managerial creativity.

Even an amateur like Jacques Barzun can see what railroads are lacking, “…the will of the companies to survive and to satisfy the public by inventiveness and skill.”

Error of Analysis

Levitt believes the railroads, as transporters, still have a good chance for substantial growth. He thinks rail transportation is theoretically a stronger transportation method then originally believed. What the railroads lack in not opportunity, but some managerial creativity.

Error of Analysis

Even an amateur like Jacques Barzun can see what railroads are lacking, “…the will of the companies to survive and to satisfy the public by inventiveness and skill.”

Example 1: Dry Cleaning

Once a growth industry with extravagant prospects, now 30 years later the industry is in trouble.

Where did the competition come from?

Synthetic fibers and chemical additives cut the need for dry cleaning.

Ultrasonics are ready to make chemical dry cleaning totally obsolete.

Example 2: Electric Utilities

Allegedly a “no substitute” product

When the incandescent lamp came along, kerosene lights were over.

Later the waterwheel and steam engine were dismantled by flexibility, reliability and availability of electric motors

However, powerful chemical fuel cells and solar energy became competition.

To avoid these prospects utility companies will too have to develop these and other powerful sources to not become obsolete.

Example 3: Grocery Stores

Big food chains barely escaped being wiped out by the aggressive expansion of independent supermarkets.

The first genuine supermarket was opened in 1930, in Jamaica, Long Island.

By 1933 supermarkets were thriving, yet established chains ignored them.

According to the National Wholesale Grocers convention and the New Jersey Retail Grocers, “If the neighborhood grocers would have cooperated with their suppliers, paid attention to their costs and improved their services, they could have weathered the competition until it blew over.”

A Self-Deceiving

Cycle

1. Growth is Assured

2. No

Competitive Substitute

3.Too Much

Faith in Production

and Unit Cost

4. Preoccupation with a product

The Population Myth: The belief that profits are assured by an expanding and more affluent

population

If number of consumers grow sales will grow

If consumers are multiplying and buying more of your product or service you can feel more comfortable than if the market were dwindling.

For example:

Petroleum Industry

Asking for Trouble

Levitt believes the petroleum industry is ceasing to be a growth industry and in fact becoming a declining industry relative to other businesses.

Individual companies are trying to out do their competitors by improving on what they already do.

John D Rockefeller sending free kerosene lamps to China is really the first and only example of the oil industry creating demand for its product.

The Perils of Petroleum

Focused on Improving Efficiency of making the product and NOT improving the Generic Product or its Marketing

Major improvements in gasoline quality originate outside of oil industry

The Idea of Indispensability: The petroleum industry is almost convinced that there is no substitute for its major product, gasoline, or if there is, it will continue to be a derivative of crude oil.

The Perils of Petroleum

Demand was greatly expanded by the use of oil in kerosene lamps.

But then Edison invented a light that was totally nondependent on crude oil

Two greater innovations occurred, neither of which came from the oil industry

Centralized oil-heating came into severe competition with natural gas

The gas revolution was made by newly formed transmission companies.

NOTHING EVER STAYS THE SAME

“The best way for a firm to be lucky is to make its own luck. That requires knowing what makes a business successful. One of the greatest enemies of this knowledge is mass production” (Levitt 143).

PRODUCTION PRESSURES

Mass production industries are encouraged to produce all they can because declining unit costs as output rises is irresistible; However, marketing gets neglected.

What happens is mass production generates pressure to “move” the product, emphasized by selling not marketing. Again marketing gets ignored.

Selling focuses on the needs of the seller, while marketing focuses on the needs of the buyer.

PRODUCTION PRESSURES

“Henry Ford was both the most brilliant and the most senseless marketer in American History.”

Ford cut his selling price; therefore, he was able to sell millions of $500 cars. Mass production was the result, not the cause of his low prices.

Fords idea was to price so low that it forces everybody in the place to the highest point of efficiency. The low price makes everybody dig for more profits.

Ford believed more discoveries were made by this forced method than by any investigations.

A LAG IN DETROIT

Auto companies annually spend millions of dollars on consumer research.

Detroit never researched customers wants it only researched customers preferences between the kinds of things it had already decided to offer them.

This is a prime example of being product not customer oriented.

Point of sale and repair and maintenance are the area of greatest customer dissatisfaction. These needs are being shown step-child attention.

Q. Why should the oil companies do anything different? Wouldn’t chemical fuel cells, batteries, and solar energy kill the present product lines?

A. Actually, in fact they would. And that is exactly why the oil firms should develop these power units before their competition does, so the oil firms will not end up without an industry!

PRODUCTION PROVINCIALISM

Replacements for internal combustion engines which will eliminate the demand for gasoline and eliminating the need for frequent refueling stops.

Electric storage batteries designed to power automobiles

Solar energy conversion systems

PRODUCTION PROVINCIALISM

Stealing great opportunities

PRODUCTION PROVINCILISM

THE BUGGY WHIP EXTINCTION

This industry defined itself as being in the buggy whip industry not the transportation industry.

What is it?

Creative destruction is a process through which something new brings about the demise of whatever existed before it. 

Customers strongly dislike the hassle, delay, and experience of buying gasoline, but do so to buy the right to continue to drive their cars.

Gas stations can be viewed as a tax collector who customers are obligated to pay a periodic toll as the price of using their cars. Making gas stations unpopular. To reduce the unpopularity of gas stations one option would be to eliminate them.

No one likes even a nice tax collector; therefore, no one likes to interrupt a car trip to buy a phantom product.

The phantom product being gas in which you can not see, feel, taste or appreciate.

CREATIVE DESTRUCTION

A danger to the electronics industry would be that they pay attention way too much to research and development.The conditions the electronic industry is facing is very close to the illusion that a superior product will sell itself.

Dangers of Research & Development

Factors that support this belief are:1. Management becomes top heavy with engineer and scientist because electronic products

are very complex and sophisticated creating a biased for R&D at the expense of marketing.

2. Dealing with controlled variables through studies, experiments, practices in the lab, and tests.

21 featured articles announced the industry’s greatness and only one mentioned its achievements in marketing.

Customers and markets rarely get asked basic questions, they are recognized as existing, needing to be taken care of, but not given much more value or attention then that.

STEP-CHILD TREATMENT

For example: In 1959, American Petroleum Institute Quarterly celebrated the discovery of oil in Titusville, Pennsylvania.

An industry should begin with the customers needs, not with a patent, raw materials, or a selling skill.

Given the customer needs the industry should try to work backwards first worrying with the physical delivery of customer satisfactions.

Then back to creating things in which these satisfactions are achieved. How the materials are created makes no difference to the customers.

Finally, moving all the way back to finding the raw materials.

THE BEGINNING AND END

In order for an organization to achieve greatness it needs a vigorous leader that is driven by a will to succeed, and must have a vision that produces large amounts of followers (customers).In order for this to happen, the corporation must be viewed as a customer creating and customer satisfying organism. “In short, the organization must learn to think of itself not as producing goods or services, but as buying customers, as doing the things that will make people want to do business with it.” –T. Levitt

The Chief executive officer has this responsibility“…for unless a leader knows where he is going, any road will take him there.” –T. Levitt

THE VISCERAL FEEL OF GREATNESS

1960 NOW

A Timeless Marketing Classic

HOW WE HAVE CHANGED?

WHAT CAN WE LEARN?

James J. Rouse, Vice President of Exxon’s Washington office said, “…oil production in the US is declining. The United States will continue to depend on oil well into the future, although more of it will come from foreign sources.”

We believe power generated from photovoltaic cells and from other renewable sources of supply could meet up to 50 percent of world energy demand by 2050.

Mike Bowlin, CEO has been the most candid about the petroleum situation, announcing, “We’ve embarked on the beginning of the last days of the age of oil. So, I believe it’s time to prepare ourselves for the ‘new look’ of the energy industry of the 21st Century.”

http://www.youtube.com/watch?v=ujR9K0cFNBE

Chevron’s Corporation's Chairman, Ken Derr,

expressed similar confidence “Contrary to what

some have predicted, we feel there will ample

supplies of oil and natural gas in the future.”

However, they are investing in alternative fuel

energy for the future.

Can We Talk?

Questions?