November 14, 2018
I was reminded of this gem of marketing commentary as it was handed out in a boardroom breakfast. The meeting included a panel discussion titled “What Business Are You In,” a timely topic for any company today. What’s interesting about the classic article and the meeting is that both were meant to provide a clear tie between marketing and business. That is, how does the very act of defining who you are as a company limit or expand growth opportunities?
Levitt’s case in point was the railroads identifying themselves in the railroad business rather than in the transportation business. He discussed in detail the typical obsession by companies to be product-focused rather than customer-focused. His article has become a seminal work in marketing, is heavily quoted and used by countless marketers. And it’s still true today. Pick any website or talk to your average salesperson. How many companies are talking about their market-leading product instead of your needs as a consumer or business? Marketing was and still is often viewed as “a necessary consequence of the product – not vice versa, as it should be.” Levitt made a point of clear distinction between marketing and sales, “Selling focuses on the needs of the seller, marketing on the needs of the buyer.”
But it doesn’t make the key points of Levitt’s manifesto any easier to act upon today than decades ago. As he pointed out, companies have a tough road ahead, and this is as true now as it ever was: “To survive, they will have to plot the obsolescence of what now produces their livelihood.”
It’s a hard pill to swallow, and it’s certainly not a popular way to conduct strategic planning sessions by starting with a presumption that one day your company will be a shadow of itself. It’s true that you should look beyond your specific product to keep a watchful eye on what you may be missing in customer value to create future success (particularly if you are currently a market leader and growing exponentially).
In many ways, companies today have dramatically improved the customer-centric business model by listening more to customers and then acting quickly on what they’ve learned with the development of new products, service improvements, stronger sustainability practices, and so much more. This doesn’t mean catering to every customer request, as such behavior will likely ensure putting your company out of business. What it does mean is to deliberately and consistently make an effort to understand the customer and define your company’s value based on the customer’s needs.
Levitt’s examples of the railroad and oil industries could be replaced with any number of industries, with companies like Borders, Kodak, and Blockbuster as further evidence that indeed Levitt was right in saying, “The point of all this is that there is no guarantee against product obsolescence.”
No one believes they are going to be obsolete, especially when you’re the best at creating your current products right now. But innovation and customer demand can both be viewed as opportunities as much as threats. From a business and a marketing standpoint, it would certainly be interesting and arguably revolutionary if every company - regardless of their current profits and market success - operated as though that they would be dead in 10, 20 or 30 years, and then planned on what they were going to do to prevent it.
Henry Ford is not typically considered a marketing genius (consumers can have any color car they want, as long as it’s black), but his invention of the assembly line was driven by marketing after he concluded that by selling cars for $500, he could sell millions of them.
While there is certainly dispute as to whether great innovation comes from the study of customer desires or visionaries, there is no disputing the fact that inventiveness and adoption are key ingredients to the long-term health of a company.
You don’t have to look too hard to find good examples of companies looking beyond their current product to create new solutions, often to problems consumers didn’t know they had.
- Listerine is probably my favorite example. The nineteenth-century surgical antiseptic didn’t invent mouthwash; they invented halitosis. Did people not know or not care that they had bad breath before 1914 when they changed their marketing focus?
- When William Wrigley gave away chewing gum as an incentive to purchase his baking powder, he realized consumers were more excited about the gum than the product he was initially trying to sell. The gum stuck.
- In 2002, developer of online games Ludicorp introduced a feature that allowed players save pictures. As this feature became increasingly popular, Flickr was born.
- YouTube, the world’s second most visited site (after Google) started in 2005 as a video dating site. After realizing that users posted highly popular videos with non-dating-related content, they pivoted, and now visitors consume 3.3 billion hours of video each month. *
- Starbucks started in 1971 as selling espresso makers and coffee beans. In 1983, now CEO visited Italy and became, determined to transform the company into a European-style coffeehouse.
- When Groupon launched as ThePoint.com in 2007, a ‘tipping point’ of consumers had to commit to purchasing a good/service at a certain item before the ‘deal’ was active. Now, merchants offer up discounts regardless of sales volume.
The list could go on endlessly. People don’t buy gasoline; they buy the ability to continue to drive their cars. Unless management shifts the focus from selling their product/service to customer satisfaction, their companies will fail.
It’s interestingly circular in logic that we look backward to insights like Levitt’s to propel business forward, and that we do this by reversing typical corporate thought processes by beginning first with the customer, then the creation of the product, then the materials needed for the product. Marketing ultimately boils down to a loop that begins and ends with the customer. Considering the proliferation of marketing myopia that still exists today, it’s a loop worth revisiting.