2-RelativeResourceManager - 76 BEYOND THE MARKETING CONCEPT...

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Unformatted text preview: 76 BEYOND THE MARKETING CONCEPT Corporations must be “need oriented” when they choose a strategic philosophy. The marketing concept, now three decades old, has too often been used when another approach was called for. ROGER C. BENNETT AND ROBERT G. COOPER The marketing concept was pioneered by the General Electric Company after World War II, and Theodore Levitt’s famous 1960 article, “Marketing Myopia,” cemented its acceptance as a corporate philosophy for business plan- ning.1 In North America, the marketing con- cept has been a way of life for large consumer goods firms, at least since the early sixties. Thirty years of experience provide ample evidence to subject the maturing concept to a rigorous critique. The marketing concept, 1. Theodore Levitt, “Marketing Myopia,” Harvard Busi- ness Review, July-August 1960: 4-5-56. ROGER C. BENNETT is an assistant professor of management at McGill University and a former research executive for j. Walter Thompson in Lon- don. ROGERT G. COOPER is associate dean of the management faculty at McGill and the author of Winning the New Product Game (1976). BUSINESS HORIZONS with its simple and intuitive appeal, has been heralded by practitioners and academics alike as the most advanced philosophy of business. For decades, authors have extolled its virtues. But can any business philosophy be so per- fect? Can it really be a case of all roses and no thorns? Surely not! Perhaps it is time to take a second look, with a particular focus on the negative aspects of this business philosophy. A favorite ploy in attacking any philos- ophy is to choose a narrow, possibly obscure definition to suit the needs of the attacker. But the rebuttal is all too easy: The defenders simply select yet another definition and claim that the original attack was due to a mis- understanding of the idea. In this article, we are deliberately avoiding this war of legalistic definitions. Rather, the results of implement- ing the marketing concept, rather than the concept itself, are examined. First, the mar- keting concept as defined by Kotler, Co ri ht©2001 All Ri hts Reserved 77 McCarthy, and others is very difficult to argue against. Second, the true test of a philosophy is the results of its implementa- tion. And the results of the use of the marketing concept have not been totally beneficial. Too much reliance has been put on the marketing concept, and the time has come to reconsider its place as the major business philosophy. The implementation results of the mar- keting concept can be examined in two key contexts. The first is product innovation. It is argued that the marketing concept has helped contribute to the death of true product innovation in North America. The second area of focus is business planning. The marketing concept has been widely proposed as a guide to the selection of business strategies. But an examination of the implications of such an application leads to conflicting conclusions. Finally, the main concern of this article is the weakness of the marketing concept from a firm’s perspective—that is, as a management tool. The impact on society at large, however, is also an important issue. PRODUCT INNOVATION New products are the life blood and hope for the future of many firms. And it is precisely in the new product arena that a religious adherance to the marketing concept has its most detrimental effects. Market Pull vs. Technology Push The marketing concept suggests that in their new product efforts, firms must be customer oriented, and that new products should be conceived and introduced to meet the needs and wants of buyers. In practice, this means that buyers’ needs and wants should be identified, qualified, and quantified as part of product idea conception and prior to product development. And marketing research is often Beyond the Marketing Concept cited as the tool for need identification. In short, a “market-pull” approach to product innovation is the logical outcome of imple- menting the marketing concept in product development. But the evidence over the years suggests otherwise. In fact, many of the great product innovations throughout history have been the result of a technological breakthrough, a laboratory discovery, or an invention, with only a vague notion of a market need in mind. Often these “great ideas” originated from men and women far removed from customers, from market needs and wants, and from the industry itself. Inventors, scientists, engineers, and academics, in the normal pursuit of scientific knowledge, gave the world the telephone, the phonograph, the electric light, and in more recent times, the laser, xerog- raphy, instant photography, and the transis- tor. In contrast, worshipers of the marketing concept have bestowed upon mankind such products as new-fangled potato chips, femi- nine hygiene deodorant, and the pet rock. Extreme cases perhaps, but ones which were deliberately chosen to make a point: True product innovation depends to a large extent on scientific discovery, which often must proceed in the absence of a clear and defin— able customer need or want. There should always be a place for pure or scientific research unshackled by the im- mediate demands of the marketplace. Reflect for a moment on what might have occurred had creative inventors, such as Edison or Bell, been forced into a rigid market-oriented approach. “Technology push” is the antithesis of “market pull” in product innovation. Yet history shows us that the major break- throughs, the truly innovative products, are often the result of “technology push.” An executive at a large electrical company summed up the problem: “We used to pro- duce many major innovations. But since the scientists have become marketing oriented, the major breakthroughs have not occurred here. We spent a lot of effort explaining to JUNE 1979 Copyright © 2001 All Rights Reserved 77 78 ROGER C. BENNETT AND ROBERT G. COOPER them that their ideas should meet market needs, but the main effect seems to have been that they have left the forefront of tech- nology.” Defining Needs The logical rebuttal is that all this is history, that tomorrow’s innovations will be the result of a strong market orientation. But here, too, it can be shown that the marketing concept, backed by marketing research, effectively discourages the development of product in- novations. Marketing research is cited as the answer to the operational problem of defining market needs and wants for generating new product ideas, but market needs and wants are invariably described by users in terms of the familiar—existing products and existing product classes. Ask the consumer what his needs are for urban transportation, and he will give you a list of suggested improvements to his bus or subway service, or to his commuter car. As one senior executive in a multinational agricultural equipment firm noted, “Whenever we do market research to generate new product ideas, all we get back are descriptions of minor improvements, or worse yet, our competitors’ features. But the bold new ideas come from in house.” The inability of the typical buyer to raise himself above the level of the familiar means that any end-user market research is likely to identify “new” needs and wants in a very limited perspective. The end result is a preoccupation with “me, too” products and minor modifica— tions, while true innovative efforts take a back seat. Gauging Product Acceptance Any market-oriented, new product program will almost certainly result in killing off any genuinely new products. Implementation of the marketing concept leads logically to cus- BUSINESS HORIZONS tomer tests of the product concept at some point during the development process. In the case of product modifications, such research results prove invaluable. Because the potential user is familiar with the product class, he can make constructive comments about desired features and may even indicate an intent to purchase. But the situation changes dramat- ically when innovative product concepts are tested. Here, the result is likely to be quite negative. Picture the would-be market researcher eighty years ago attempting to gauge market reaction to a proposed new product, the automobile. Respondents to any question— naire would have assured the market-oriented innovator that cars would frighten horses, make too much noise, run too fast, and be generally unreliable. The competition of that time, the horse, would be judged just too strong for a successful market entry. The product would be labeled as a “bad product” with no future. Had it not been for tough- minded innovators and entrepreneurs who were driven by a vision of what they believed and who persisted in spite of negative market reaction, the automobile might never have come of age as quickly as it did. The problem of gauging market accep‘ tance of innovative products is complex and has serious consequences. Operationally, it is Virtually impossible to distinguish between a normal distrust for something new and the genuine lack of a market need or want for the innovation. Three-dimensional movies, for example, were not a success, but multichannel sound and instant photography brought for- tunes to their developers. Although we can identify post facto reasons for these different results, it is not clear that the most careful consideration of consumers’ needs would have resulted in a correct forecast thirty years ago. And the more innovative the product, the worse the problem. Edwin Land has been quoted as saying that Polaroid’s products are so innovative, marketing research just does not work. Implementing the marketing con- Qgpyu'ght © 2001 All Rights Reserved fin cept for innovative products by researching market acceptance is certain to spell disaster for most of them. Small Changes The marketing concept goes further than merely discouraging product innovation; it actually fosters a preoccupation with minor product changes. A customer emphasis has led not only to the development of sophisticated marketing research tools but to the emergence of such tools as major strategic weapons. Take, for example, multidimensional scaling with all its applications in the field of product-space segmentation and product posi- tioning. In the days before such methods were available, the market strategist, wishing to attack a new market, went to the product development group and requested a genuine new product. But with the marvels of modern marketing, this is no longer necessary. Rather, a product positioning study is commissioned. And behold, an existing product is “reposi- tioned” by tinkering with the elements of the marketing mix. So “new and improved” products reach the supermarket shelves daily—products which really are not that new or improved. But through shrewd use of media and packaging, they can be positioned in the consumers’ mind to be “new.” Stra- tegic tools such as product positioning backed up by various supporting elements of the marketing mix in some industries have all but superseded the traditional notion of better products through product development. This tendency to discourage true innova— tion and focus resources on product modifica- tion may not be an entirely bad situation from the firm’s perspective. Certainly, pro- duct modification is less costly and less risky than the innovation game, at least in the short run. Considerable profits have been earned by focusing on reformulations and repackaging, particularly in crowded markets. But as a long term strategy, a strictly market orientation Beyond the Marketing Concept does have its pitfalls. In the first place, those opportunities which require innovative pro- ducts backed by basic and applied research may simply never be exploited by the firm. If the market-oriented firm, content with re- sponding to market wants, does not reply with genuinely new products, then eventually other firms will. Second, society at large is the loser; society is cheated out of the talent and resources that are channeled away from pioneering product work into the nitty—gritty world of product modification. Today, facing more problems than ever, society requires bold and innovative technological break- throughs as answers to crises in transporta- tion, housing, energy, food, and the like. Many observers have wondered at the lack of genuine innovation in these major areas. Some of the fault may be ascribed to those who have slavishly accepted the marketing con- cept. Instead of major breakthroughs, they have given America thirty thousand new supermarket products each year. NEW BUSINESS STRATEGY The marketing concept has found many ad- herents in the field of strategic business planning. And here, too, the philosophy has given rise to serious problems. Supporters of the marketing concept would have the firm define its business in terms of the markets it serves. Levitt, for example, implores corpora- tions to remove their myopic blinders and to follow in a path to seek new business oppor— tunities consistent with the firm’s current markets: “[Hollywood] . . . thought it was in the movie business, when it was actually in the entertainment business.” The message for business strategists is that a market-oriented definition of one’s business is the appropriate guide to business planning. Had the railroads defined their business as “transportation of people and goods” instead of using a product definition of “railroading,” today they could JUNE 1979 Copyright © 2001 All Rights Reserved 79 80 ROGER C. BENNETT AND ROBERT G. COOPER well be in a variety of profitable products and markets, including road, air, and sea trans- port, and hotels.2 Levitt’s argument is convincing. In es-- sence, he proposes a market synergistic ap- proach to business strategy. And in the examples he cites, such a market-oriented approach may have worked. But we must be careful not to jump to the conclusion that Levitt’s market synergistic route is the appro— priate guide for all firms in all situations. In the first place, Levitt’s examples were simply illustrations deliberately chosen to reinforce his arguments. Certainly, dozens of firms followed a product or technology synergistic route and were also highly successful. Second, an after—the-fact analysis—an armchair recon- struction of cause-and-effect factors—is a 2. This often cited example of the railroads provides an interesting case where the marketing concept, as espoused by Levitt, in fact could not have worked. Most railroads were bound by their articles of incorporation not to enter nonrailroad businesses. This was to reassure nineteenth century European investors that their money would be used in a “safe” business and not squandered on doubtful projects. questionable approach to supporting any theory. It is not safe to develop a theory from a few examples and test them on these same events. This market-oriented approach to busi- ness strategy is not without its critics. H. Igor Ansoff points out that in pursuing a market path in new business strategy, there is little or no guarantee of synergy.3 Synergy, Ansoff argues, is the common thread, the essential relationship between new business and old, which is the key variable in the choice of new business areas. Through synergy, the whole is greater than the sum of its parts; the new business builds on the old business, and together the combined return on the firm’s resources is greater than the return on each business, had each been undertaken separate- ly. But if Levitt’s market-oriented approach were taken further, it should be quite reason- able for the railroads to be in the taxi and car rental businesses, or perhaps even in the 3. H. Igor Ansoff, Corporate Strategy (New York: McGraw-Hill, 1965). THE RAILROADS: AN ALTERNATIVE APPROACH* Rather than viewing themselves as being in the transportation business, railroad man- agers could have asked themselves: “What are our main strengths and weaknesses? What do we do well?” The obvious answers would have been: —— We run a labor-intensive business. — We deal with large numbers of people and large amounts of freight. — We manage a geographically dispersed business. — We sell direct. — We own a large amount of property or rights of way. Weaknesses might have included the following: — We have relatively old technology. — We have narrow managerial skills. — We have a unionized labor force. — We have a need for constant reinvest- ment in road beds. As a result of the analysis, logical busi- nesses to pursue would have included hotels, shipping airlines, and any business that could exploit the present property infrastructure. This strategy was followed by only one North American railroad—Canadian Pacific. It happens to be one of the most successful. *The obvious legal problems are ignored in this example. BUSINESS HORIZONS , Copyright © 2001 All Rights Reserved __k manufacture of automobiles along with Gen- eral Motors and Ford. An extreme example, perhaps, but it helps to illustrate where a purely market-oriented approach could lead a company—certainly with no synergistic effect. A market-oriented definition of new busi- ness strategy is certainly not the only, nor necessarily the best, guide. If a firm’s strength is its marketing capability to a loyal clientele, then it surely makes sense to pursue new opportunities on a market synergy path. Procter 8c Gamble is a good example of a firm where this is true. But if other strategic sectors or resources are the key to success— for example, technology or production facil- ities—then surely different routes or synergy paths are appropriate. The idea of product and market dimensions as two routes to business development has been widely ac- cepted. For example, a Montreal-based manu- facturer of extruded aluminum lamp poles expanded in the extrusion of aluminum seats for stadiums. The move was into a totally different market, but it was very successful. The point is that any business strategy model that is solely market oriented is only a partial model. Certainly there are other dimensions which may be just as important, or at times even more important, than “mar- ket” in defining business strategy. Alternate Perspectives The marketing concept has taught us to view the product as the “bundle of benefits” it brings to a consumer. But there are other ways that a firm can view a product. And certainly these alternate perspectives can have a bearing on how a firm develops its new business strategy. A product can be defined by a four-dimensional vector, whose dimen- sions are — the product’s use, -— the product’s customer, — the product’s technology, and — the product’s production process. Beyond the Marketing Concept Any one or more of these dimensions can be selected as a growth dimension—that is, a dimension of synergy along which the firm can seek new business opportunities. In com- panies where the first two dimensions— product use and customer—are important, the market-synergy approach works well. Many packaged—goods firms seek new business op- portunities in areas that are consistent with the existing business in terms of product use and clientele. Production and technology are simply not critical dimensions—hence a mar- ket-synergy approach to new business plan- ning. Procter 8c Gamble, for example, has continued to expand its offerings of soaps, detergents, and cleaners (same use, same customers) and has also moved ahead in the food area. For many other companies, the key to success and the firm’s distinctive competence hinges on technology or production. In these cases, business strategy based solely on mar- ket dimensions—product use and clientele—— can lead to major problems. A market synergy strategy led General Electric and Xerox into the computer business.4 Both firms had catered to these customers and had previously served similar needs. But in the computer field, a major key to success is technology, which a firm must either possess or develop at ...
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