Context of Marketing Myopia - Essay Example

Please put here Please put your here Please put the of the here 16th May 2008 Marketing Myopia Myopia means short-sightedness. Theodore Levitt in his classic article “Marketing Myopia” in the Harvard Business Review, argues that industries fail not because markets are saturated but because of the failure and short-sightedness of the management. For example, the railroad industry did not flourish as it could have because the players in the industry defined their business rather narrowly – as a railroad business rather than transportation business. The railroad industry faced problems not because other players like airlines, bus operators, etc., fulfilled the need of customers better but mainly because railroads could not fulfil the customer needs (Pinto, 2003). They focused on products instead of customer requirements. This lack of vision and the customer dissatisfaction paved the way for the success of the auto industry on the highways. Further, the construction of super highways has created better medium for freight and passenger traffic, posing a formidable competition for the railways. Similarly, when small cars were introduced in the US market by Japanese companies, they became a hit in the first year of their introduction. Though there had been major researches going on for a long time in the US, none of them were able to find out what exactly the customers wanted. They focused on what was the best alternative available for a customer of the available options. They totally ignored customer requirements. Their researches focused on the product, not on customer requirements. Marketing Myopia occurs when a marketer is excessively preoccupied with product development, manufacturing or selling and ignores customer needs wants and interests. Marketing is a long-term function that involves anticipating a change in the future, and planning for it accordingly (Saxena, 1997). Another example that is apt quoting in this context of marketing myopia is that of the pager industry and radio broadcasting. Pager companies could not foresee technology changes and changing customer expectations and adapt themselves to fulfil customer expectations while mobile companies fulfilled the needs and succeeded in the market. Most companies that did not consider customers’ needs and preferences have suffered losses. With the changing times, a good marketer needs the vision to be on top of the changes and trends. Theodore Levitt in his book The Marketing Imagination has cited four conditions for business obsolescence as a result of marketing myopia. The following are the conditions: 1. The belief of companies that as more and more of the population become affluent, the market expands and more and more people buy the products. In other words, if the market for a product expands automatically, companies do not think imaginatively about how to expand the market. 2. The belief that by producing in large quantities, per unit output cost can be significantly reduced, forgetting the market, demand and supply aspects. 3. The belief that there are no substitutes for the industry’s major products. 4. Preoccupation with a product that lends itself to carefully controlled scientific experimentation, improvement, and manufacturing cost reduction. Levitt has also devised ways to overcome marketing myopia. Some of the recommendations are that marketers should be customer led and not product oriented. Also, market orientation should permeate throughout the organization. Additionally, Levitt also says that managers need to be proactive and visionary. There is yet another interesting case rather an example that can be discussed in this context. It is about a product called Maggi, Nestle India’s formulation of a snack. In late 1997, global FMCG major Nestle S A’s Indian subsidiary Nestle India launched a ‘new, improved’ formulation of its noodles brand, Maggi. The product was actually a snack food cooked in water along with a flavouring agent called the ‘tastemaker.’ This change was the first since the brand’s launch in India in the 1980s. The new formulation had thinner noodles and a different flavour. The company reportedly wanted to infuse fresh life into the brand to deal with the stagnating sales. Nestle was in for a major shock. Maggi lovers all over the country rejected the new formulation. Sales started declining alarmingly and even maintaining the previous year’s sales level 13,000 tonnes seemed very difficult. To add to the company’s woes, Maggi lost its leadership status in the soup segment to a new entrant, Knorr, in the same year. Knorr cornered a 55% market share of the 425 tonne soup market – around 75% of which came by eating into the customer base of Maggi soups. Competition had intensified in the ketchup segment as well. Other products under the Maggi umbrella – instant food mixes, seasoning cubes, and pickles – were also faring poorly with limited sales scattered in different regions of the country. Even after more than 15 years of heavy advertising, promotion, and brand building, the Maggi brand remained a loss-making proposition for the company. Though Nestle had successfully created an entire product segment afresh with Maggi noodles, analysts commented that the company had made some serious blunders somewhere down the line. In order to handle the dropdown in sales and also to better the situation, the company decided to reduce the price of Maggi noodles. This was made possible by using thinner and cheaper packaging material. The company also introduced ‘money saver multi packs’ in the form of two-in-one and four-in-one packs. As a result of these initiatives, volumes of sales increased phenomenally but this was only for a very short period. These initiatives taken by the company were only short lived. The reason for saying so is because the sales stagnated in 1995 at the previous year’s level. Nestle made plans to stretch the Maggi brand to include ethnic regional foods to complement its existing range of offerings. It tied-up with the Pune-based Chordia Foods to launch pickles under the Maggi brand in mid-1995. The company also tied up with some other food companies to market popular south Indian food preparations such as batters and spices in consumer packs. Nestle agreed to source up to 2000 tonnes of products. The company reportedly saw a lot of untapped potential in the market for ‘ready-to-use’ south Indian food, which actually took a long time to prepare. Products from these tie-ups received lukewarm response from the market; sales were rather poor in the regions in which they were launched. Analysts attributed the failure of these Maggi extensions to the fact that Nestle seemed to be particularly bad at dealing with traditional Indian product categories. The major problem that was noticed in case of Maggi was the taste of the new product. Adding to this, the operational costs of Maggi noodles had increased considerably, forcing the company to increase the retail price and the company did so. It was at this point in time that the company decided to change the formulation of Maggi noodles. The purpose was not only to infuse ‘fresh life’ into the brand, but also to save money through his new formulation. The company used new noodle processing technology, so that it could air-dry instead of oil-fry the noodles. The tastemaker’s manufacturing process was also altered. As a result of the above initiatives, cost reportedly came down by 12-14%. To cook the new product, consumers had to add two cups of water instead of one-and-a-half cups. The taste of the noodles was significantly different from what it used to be. The customer backlash that followed the launch of the new noodles took the company by surprise. With volumes of sales declining and customer complaints increasing, the company began to work on plans to re-launch ‘old Maggi’ to win back customers. In addition to these continuous efforts of brand re-launch, the company also began working out a strategy to regain Maggi’s position in the soup segment. To counter the threat posed by its other market competitors, the company re-launched Maggi soups under the ‘Maggi Rich’ brand. The soups were not only thicker in consistency than those produced earlier, the pricing was also kept competitive and the packaging was made much more attractive. However, the other players in the market took Nestle by surprise by launching one-serving soup sachets priced as low as Rs. 4. As Maggi did not have any offering in this price range, it lost a huge portion of its market share to its competitors. Undeterred by these failures, and buoyed by the fact that the Maggi brand finally broke yet another time. Nestle continued to explore new options for leveraging on the brand equity of Maggi noodles. The company realized that the kids who had grown up on Maggi noodles had become teenagers by the late 1990s. As they associated the product with their childhood, they seemed to be moving away from it. To lure back these customers and to explore new product avenues, Nestle launched ‘Maggi Macaroni.’ Even this turned to be a failure among the consumers because of many factors like the pricing, taste, cooking time and many other similar aspects. The relevance to this example of Nestlé’s Maggi can be established to Marketing Myopia in the following way. If the above example is observed keenly, it can be noticed that the company, in order to boost its sales focused on various aspects but ignored the most important aspect of customer needs and expectations. Critics claimed that the company kept on hoping to repeat the success of Maggi noodles by extending the brand to various product categories – and failed on most occasions. As discussed in the introductory paragraphs of this paper, Marketing Myopia occurs when a marketer is excessively preoccupied with product development, manufacturing or selling and ignores customer needs wants and interests. This is what happened with the case of Nestle India’s innovative product Magi. Bibliography 1. (ICMR), I. C. (2004). Marketing Management. Hyderabad: ICMR. 2. Pinto, R. (2003). Flying Feelings. Business India , 14-17. 3. Saxena, R. (1997). Marketing Management. Delhi: Tata McGraw Hill Publishinng Co. Ltd. 4. Thill, C. L. (1992). Marketing. McGraw-Hill Inc. Read More