BSNS103 Marketing Myopia

Problem: Defining the Market
Too narrow definition of the market prevents from foreseeing threats from substitution
Railroads
They did not think about transportation in general but only about trains
Hollywood firm industry
They did not consider the whole enterainment market but only firms
Solution: Focus on the Customer, not on the Product
Product oriented business
Example: Railroads, Hollywood
Define the market in terms of the product

Customer oriented business
Example: DuPont
Key to success: Apply thechnical know how to create customer satisfying users
Define the market in terms of the need

Why Industries Grow and Decline? – Growth
– Apparent customer need
– No other solutions = no substitutes

e.g. Growth Dry-Cleaning
>> Need driven by woolen clothes
>> No other tech solutions

Why Industries Grow and Decline? – Decline
– The need decreases because new tech
– Other solutions to the need are available

e.g. Decline Dry-Cleaning
>>Synthetic fiber replace wool = need decreases
>>Ultrasound tech replaes chemical = new solutions

Decline: are you willing to EXIT?
– When Market/Industry declines, companies must strive to EXIT it

– EXIT barriers can be Emotional:
Corner store groceriers beatern by supermarkets, the companies with the courage of their convictions (…kept their pride but lost their shirts)

– Other exit barriers:
When costs too high (Layoffs cost)
When equipment connot be reconverted/sold

“There is no such thing as a Growth Industry”
– Companies only capitalise on growth oppotunities
– Growing industries go into decay
Why Growth-Decline cycle?
Assume Growing demographics = growing industry
Faith in economical of scale
Assume No substitute possible for the product
Assume optimizing manufacturing is sufficient (cost reduction, better quickly)
Myth#1: Growing population=growing industry
Hypothesis:
if the number of customers grow, sales will also grow = growing industry

True, only if not substitute for the need
e.g. Oil industry

Mythe#2: Economic of scale marketing unnecessary
Focus on producint more at lower cost
Focus on selling more: market offering is just the generic product/service
Neglect the marketing aspects:
>>The role of marketing is to listen to the customer
>>Market Offering inculudes the 4Ps: Product, Price but also Place & Promotion – How the product is made available? When and under what conditions available?
Marketing vs Selling – Selling
Focus: the selling
Objective: convert the production into cash
Push strategy: salesmen try to sell as much as they can
Marketing vs Selling – Marketing
Focus: the customer
Objective: satisfy at the customer needs
Push strategy: salesmen capture customer needs
Example: US automobile industry – Detroit – Symptom
New models sell better than the old ones
Example: US automobile industry – Detroit – Problem
The producer does not know what the customer wants

Why??
>> Reseach of Customer Preferences limited only what already decided to offer
>> No listen to customer concerns: no attention paid to customer needs about point of sale or repair & maintenance

Henry Ford – misunderstood visionary
It is not the cost that sets the price
Its is the price at which the product can be sold profitably that drives the need to cut costs

Mass production results from marketing strategy, does not replace such

First – determine price for level of demand
Last – cut cost to be profitable at this price

Improving the Product is limited Creative destruction
Improving the Product won’t save sales if another substitute satisfies customer needs much better
Example: Oil vs electricity

Creative destruction: when a new (tech) solution fits better customer needs, the old one must be abandoned
Example: Petrol stations will become absolute if new fuel lasts much longer

Beginning with The End
Identify Customer needs

Physical of delivery of customer satisfaction

Creating the things that achieve the satisfaction

Find the raw materials to make the products
Begging with The end – Explannation
An industry is a customer – satisfying process, not a goods-producing process

Management must view business process as tightly integraded effort to discover, create & across customer needs

Build customer-oriented firm – Attributes of Leader
Will to succeed

Viewpoint: company is creating customer value & satisfaction

He/She knows where they’re going – which road is not important, only the final destination

Build customer-oriented firm – Human organisation
Redefining the firm from product to customer oriented
Drawbacks: misunderstanding customer-oriented
Marketing mania: chasing customer’s needs disregarding costs

Expand to new segments without effort to organise & integrade new business

bigger marketing department doesn’t automatically make more results

Change organisation from functional to customer-oriented without consideration of company culture

Create great product but being unable to educate the customer how to take advantage of it

Discussion: Does customer-orietation still hold today?
Yes, definitely.
However, must understand the relationshop between customer need, price, production technical solution
– The target is safety the need
– But can it be done at reasonable price/cost?
– Does it make sence to produce in mass?
– What technical solution(s)?

Must learn how to do SMART customer-orientation

Discussion: Are today’s business more customer oriented?
The big success stories recognise the need of customer orientation and take advantage of it
Starbacks, McDonalds, Coca Cola, Toyota

Good Example of customer-oriented business: Kodak
Since they defined themselces as being in the photo industry, they didn’t have problems going digital and remained a leader.