Marketing myopia

If there is one article which every aspiring professional marketer should read it is ‘Marketing myopia’ by Theodore Levitt. It was written in 1960, but the fundamental point has withstood time and it can correctly be called a classic. Indeed for a long time it was given to most new MBA students on their first day. I think it is still relevant today.

In ‘Marketing myopia’ Levitt criticises the management in businesses for failing to recognise the business they are in. They then fail because they think they are in a growth industry and they lose sight of the business they are actually in. The key question that you should therefore ask yourself as a professional marketer is ‘what business are you in’?

The main examples Levitt quotes, which are obviously from the 1960s, are the railway (railroad) and Hollywood, i.e. the film industry (although he mentions other industries) in the US. The railways were criticised for thinking they were in the railway business, when they should think of themselves as being in the transportation business. As a result they have lost out to cars, truck, aircraft and phones and declined relatively. The film industry similarly lost out to the rise of TV through thinking that it was in the movie business when actually it was in the entertainment business.

There are arguments against the idea. Are there any successful transportation businesses? I can think of airlines, rail companies, shipping companies and package delivery companies, but few transportation companies. The main one that springs to mind is Virgin who run airlines in the UK, USA and Australia and trains in the UK. While Virgin previously operated both trains and planes between London and Scotland, they now only operate trains on the route, and so are not really operating as a transportation business within the UK. Virgin though is a much broader business than just transport with a wide range of other businesses in the travel, music, entertainment and health industries.

Some businesses in declining or static markets, and generally conscious of the threat of technology, have tried to follow Levitt’s concept, but without success. However, this is often because their brand is associated with their specific activity as opposed to the general industry. They therefore face the difficulties and challenges of brand extension. Thus Xerox struggled to move beyond copiers, Kodak beyond photographic film and BP with its efforts to rebrand itself as Beyond Petroleum.

Others have mentioned that the reason that businesses in the two main industries Levitt emphasises, railways and film, did not expand out of their respective areas is because of government restrictions. This can be a factor for which myopic management cannot be blamed (assuming they can’t get the restrictions removed or bypass them). Of course technological developments can change any industry. Most travellers will choose air over rail over longer distances irrespective of what the rail business can offer (although price can still be a factor). According to Levitt’s argument the railway companies should therefore have set up their own airlines. As it happens the four British railway businesses set up an airline in 1934 called Railway Air Services in conjunction with Imperial Airlines (a predecessor of British Airways), but it was nationalised by the Government in 1946. So even when they tried to do the ‘right’ thing they couldn’t!

The fact that there aren’t good examples does not invalidate the concept. I realise that does not sound right, but the key point of ‘Marketing myopia’ in my opinion is not the difficulties of finding examples of businesses following the wider view, but that businesses cannot survive if they are product orientated rather than customer orientated. There are plenty of examples of successful customer orientated businesses. A belief that they are in the railway business as opposed to the transportation business would lead management to fail to realise that their customers do not want to go by train, they want to get to their destination quickly, safely and cheaply and generally don’t mind which method they use. If they can obtain the combination of those factors through travelling by train then they will do so instead of the alternatives. Businesses therefore have to concentrate on their customers and their needs.

Levitt argues that there is no such thing as a growth industry. There are only businesses organised and operated to create and capitalise on growth opportunities. Businesses deceive themselves in four ways:

  • The belief that growth is assured by an expanding and more affluent population
  • The belief that there is no competitive substitute for the industry’s major product
  • Too much faith in mass production and in the advantages of rapidly declining unit costs as output rises
  • Preoccupation with a product that lends itself to carefully controlled scientific experimentation, improvement and manufacturing cost reduction

Therefore ask yourself, what business am I in, (but don’t define it by specific products and services!) and what needs and wants do my customers actually have? Also think about substitutes and potential technological changes (but equally don’t let that dominate your thinking!). Plus these days don’t forget other stakeholders. In a nutshell, look at the bigger picture!

Ian Fraser

Principal and Director