Marketing Myopia by Theodore Levitt spawned a legion of loyal partisans for years after it was published. However, I feel that it has outlived its use and relevance.
Marketing Myopia by Theodore Levitt spawned a legion of loyal partisans for years after it was published. However, I feel that it has outlived its use and relevance. Furthermore, I find that the author made a few assumptions which do not seem to stand the test of modern management experience, thus rendering it of little value for the marketing student of the 21st century. The velocity of change in industry structures, platforms of competition and rise and demise of companies and industries defy all traditional logic.
In Marketing Myopia, Theodore Levitt proposes that industries should define themselves broadly. This practice allows them to retain flexibility as well as to never lose sight of the basic customer need that their product is fulfilling, which in turn will lead to them developing and changing their product to better suit the needs of the customer. An example he gives is one of the buggy whip industry. If they had defined themselves broadly as being in the transportation industry, or even as providing a ‘stimulant or catalyst to an energy source’ they would have survived since they would have changed their product.
The author’s focus is on the long term changes- not on product development but on product change. In this article, Levitt proposes that companies fail to successfully maneuver market transitions because they have a myopic view of the scope of their business. With reference to the railroad industry, he notes, “The reason they defined their industry incorrectly was because they were railroad-oriented instead of transportation-oriented; they were product-oriented instead of customer-oriented.” This article stresses the importance of beginning with ultimate objectives rather than with operational goals. Take the example of K Mart. It tried to define itself as a full service retail chain catering to the entire gamut of needs of the customer. In Levitt’s view this would have been a customer-oriented definition of its scope of services. “Why would a customer need to go anywhere else if all her needs were fulfilled under one roof?” But it collapsed on account of cut throat competition from a stronger discount chain, Walmart. On the other hand niche retail companies like Home Depot and Toys r Us continue to flourish. They survived because of clear focus and specialized services and not because of defining themselves in a wider context of the customer’s needs.
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Every product has a product life- cycle. This is defined in our marketing textbook as the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline. When the product reaches its decline stage (or perhaps it is brought to its decline stage by,) another product is ready to take its place. The new product fulfills the same customer need, only more efficiently. Levitt reminds management to not get complacent since their product too will be replaced. His recommendation is to always keep an eye on the bottom-line which is how to fulfill the customer’s need better, and to come up with the replacement to their product themselves. As a concept this is true but in actual reality category killers appear from nowhere and redefine the industry. Very few incumbents manage to do that. IBM writes more patents in the computer industry than most of its competition put together. But the breakthrough technology invariably comes from other companies e.g PDA (personal digital assistant) cum phone from Treo , tablet PC from Toshiba, etc.
He claims that there is no such thing as a growth industry. A growth industry is defined as one in which the demand for its products, whether goods or services, grows faster than national income and/ or population. An industry in which the demand for its products or services grows as fast as national income and/or the population is a “mature” industry. And an industry in which the demand for its products or services grows less fast than national income and/or population is a “declining” industry, even if its absolute sales volume still continues to grow. (Drucker, P. (1999) Management Challenges for the 21st Century. Harper-Collins.)
Levitt claims that every major industry was once a growth industry of its own making
by creating and capitalizing on growth opportunities. And a failure of management is what leads a company to decline. He says that there is no such thing as market saturation. However, I consider this to be an erroneous belief. Furthermore, I would challenge his description of the situation facing railroads. As competitors offering different means of long-distance transportation (e.g. airplanes) entered the market, they ate away into the railroads near-monopoly over long-distance travel. The passenger- automobile industry of the western world has been a declining industry for the last thirty or forty years. It was a growth industry until 1960 or perhaps 1970. By that time US, Europe and Japan had become fully motorized. Total sales of passenger cars the world over are still growing worldwide (propelled by China), though only slowly. This is because they have reached near market saturation in most countries. Yet, the promise of growing demand for passenger transportation in emerging and Third World countries that had lacked the infrastructure thus far could produce a transportation boom like the one that fueled the economic expansion of the mid-19th century. (Drucker, P. (1999) Management Challenges for the 21st Century. Harper-Collins.). The steel industry (1 billion ton industry worldwide) has been facing over-capacity for the last decade and continues to be so even today inspite of runaway demand from China. Capacities have closed down in the western world leading to rise in prices but overall growth in demand is a paltry 1%. If this is not a fully saturated industry, what is?
This leads me to my next criticism of the article. Levitt warns against counting on growth as assured by “an expanding and more affluent population,” since it will eventually lead to decline. To search for opportunities of ones own making is what Levitt recommends. He warns against counting on external sources for opportunities (such as population increase or someone else’s invention that is beneficial to the sale of your product,) for the very reason that they are out of your control. He upholds John D. Rockefeller’s sending of free kerosene lamps to China to increase demand for oil as a fine example of a marketing effort that would increase sales for the industry. And yet this is exactly what he has warned against, for is not growth as assured by an expanding population and target market exactly what Rockefeller tapped into? Most multinationals that are making a beeline to China, whether in the auto, petroleum, aluminum, hardware, telecom or insurance are whipped by the excitement of the growing middle class affluence in China. If that were not so, China would not be sporting 6-8% growth in most industries where the world figures are in 2-4% range. And if the demographics were not so mouth watering, China would not have seen over $40 billion of Foreign Direct Investment every year.
Another implication of not counting on population changes for an industry’s success is to discount changes in demographics. Demographics as defined in our marketing text is the study of the characteristics of a human population. These characteristics include population size, population growth rate, gender, marital status, education, age, and so forth. The large aging population, the baby boomers- the generation of children born between 1946 and 1964, has made financial services the world’s fastest- growing and most prosperous industry in the closing thirty years of the 20th century. The demand for retail services to provide an affluent, aging population in the developed countries with financial products to provide retirement income has increased tremendously. The institutions that cater to these needs- mutual funds, pension- fund managers and a few, mostly new, brokerage houses-have prospered hugely, first in the United States, then in the UK, and increasingly in Continental Europe and in the Japanese markets. (Drucker, P. (1999) Management Challenges for the 21st Century. Harper-Collins.) As is apparent from the above example, demographic changes play a major role in determining the types of goods and services demanded by a population.
However, my chief criticism of Levitt’s article is that what he suggests is outdated. To define one’s business operation by industry at all can be a limitation in today’s world of integrated products and services with blurred differentiating lines.
The bottom line today, more than ever, is to fulfill the customer’s needs. If the makers of the Blueberry, the Canadian company Research in Motion (RIM), defined themselves as belonging to the communication industry they would not have taken the holistic approach to the product as they did. When RIM developed the Blackberry they did not define their industry as wireless hand-held devices, nor did they define themselves broadly, as Levitt suggests, as belonging to the communications industry. These categorizations would have only served as limitations to the makers’ vision.
The Blackberry has replaced the Wall Street Journal for financial news headlines and stock quotes. It has substituted boredom with mindless single- player games or automatically downloaded Letterman-like top-ten lists, personal computers with the facility to check email, and of-course it has replaced other telephones. The makers of the Blackberry identified different needs of the consumer and strived to meet them irrespective of which industry they were crossing into. The makers were not bound or limited to one industry.
In today’s world defining oneself by industry serves little purpose, and can be a restriction. Instead defining oneself by the ever-changing aspirational needs of the customer that one fulfills is crucial to the business’ success. Furthermore, numerous products today straddle several industries. Levitt’s recommendations, groundbreaking as they were in the 1960’s, are outdated to today’s marketing student and executive.