- An industry is a customer-satisfying process, not a goods-producing process. Businesses will do better in the end if they concentrate on meeting customers’ needs rather than on selling products.
- Companies stop growing because of a failure in management, not because the market is saturated but because of MYOPIA.
Example 1: Railroads declined because they “were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.” They declined not because of cars, trucks, airplanes, and even telephones, but because of their own myopia.
It is the same kind of example 2 with Hollywood & TV. Hollywood declined because they thought they were producing films instead of entertainments.
There are no such bad ideas for a growing industry that:
- Growth is assured by an expanding and more affluent population;
- 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.
1,2,3. Looking for mass production is selling, not marketing. “The marketing effort is still viewed as a necessary consequence of the product – not vice versa, as it should be. That is the legacy of mass production, with its parochial view that profit resides essentially in low-cost full production”
The real legacy of Henry Ford is that when he decided to reduce the price of his cars to $500 he made the best marketing strategy of his time. Mass production obviously had a place in the plan but it followed a hard thinking about the customer. “Actually, he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices.
“Selling focuses on the needs of the seller, marketing on the needs of the buyer:
- Selling consists of tricks and techniques focusing on the seller’s need to convert the product into cash.
- Marketing is dedicated to the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering, and, finally, consuming it.”
Question: In what extend an industry can change is production model to another ? In other words, can a petroleum company can become a solar or electric company ?
4. In one hand, while regarding the petroleum industry through the eyes of customers, customers do not buy gasoline for its taste, colour or smell at the gas station, they buy the right to drive their cars. So answering customers needs would be giving them the right to drive their cars definitively. So the future of petroleum is a fuel that eliminates the need of frequent refuelling. The future of any product is not a more technological one, but a product that satisfies a powerful customer need. Sometimes, this process can carry out companies to destroy their more profitable assets to survive at long term. It is the necessary “creative destruction” process due to the historical fate of any growth industry: “product provincialism.”
On the other hand, paying to much attention to research and development is the danger of electronic companies. They are growing with the illusion that a superior product will sell itself because they have created a successful product. Other problems are:
- Too many engineers and scientists in the management board because of too complex and sophisticated products
- As it is difficult to get controllable and concrete variables of customers needs, engineers and scientists tend to see customers as unpredictable, varied, fickle, stupid, shortsighted, stubborn, and bothersome people.
Example: “scientists who occupy the high executive positions are totally unscientific when it comes to defining their companies’ overall needs and purposes” because they only think about “laboratory and product experiments.”
An industry is a customer-satisfying process, not a goods-producing process. Customers do not care about how materials are created. The mains functions of an industry should be:
- Marketing: Satisfying customer needs
- Research and development
CCL: General requirements to build a customer-oriented company:
- “A vigorous leader who is driven onward by a pulsating will to succeed”
- “Management must think of itself not as producing products but as providing customer-creating value satisfactions”, in other words: “buying customer”
- “The chief executive must set the company’s style, its direction, and its goals”
My opinion regarding this article is that T.LEVITT is a visionary because most of the subjects he underlined in 1960 regarding train, Hollywood and Petroleum industry turned out to be right many years after. It was a really good start regarding Marketing knowledges.