Words by Warren Moss CEO and founder of Demographica
One of the most-profound marketing insights from Theodore Levitt, the late Harvard Business School professor, was that customers buy ¼ inch holes, not ¼ inch drill bits — that the purchase decision is made based on the solution to the problem, not the tool that solves it.
Ask the majority of companies what business they’re in and they’ll tell you what product they sell or what service they provide, rather than focusing on the solutions that those wares offer their customers. Levitt believed that was a cardinal marketing sin: that too many companies were focused so narrowly on their products and services that they missed the bigger picture — what their clients really need. He coined the phrase “marketing myopia” to describe this state and the corporate landscape is littered with the skeletal remains of some big-hitting companies which failed to heed his advice.
The railroad industry in the US is a prime example: it was so focused on delivering the best railroad facilities that it missed that it was actually in the transport business, — so its revenues decreased dramatically when its market’s transportation needs grew and others innovated with cars, planes and boats, when it had been in a prime position to pioneer that market itself. Old-school Hollywood made a similar mistake: it thought it was in the film business, while it was actually selling entertainment. Citing movies as its focus, it dismissed the role of TV and paid the price when, suddenly, there was a TV in every lounge and scores of companies emerged to produce content for an entirely new audience.
B2B marketing clients must be advised to think broadly about their business — inside-out as opposed to outside-in. Being customer-oriented doesn’t mean finding ways to sell your customer new things, but rather understanding how to solve your customers’ needs. Creating a customer-oriented marketing strategy means that your company is in a better position to innovate and develop new markets, not grow within your existing one.
Companies which believe theirs is purely a growth industry are in trouble; obsolescence is a short hop away, if they put too much faith in the current superiority of their offerings. Those which think broadly — outside their industries — are the ones who will spot new opportunities. Every industry was a major growth industry, until it wasn’t. Similarly, those which believe that over-expanding and targeting a more-affluent market will guarantee their growth are looking at the problem from the wrong angle. Believing that more people will need your product if you make more of it, or try to sell it to people with more money, will land you in trouble. The trick is to understand what it is your customers are really using your products for, and how, and work to make it better, faster, simpler or more cost-effective, to use.
There’s also a common belief that, if there’s no competitive substitute for an existing product, there’s no need to innovate. Innovating around changing customer needs instead of current ones will set the company up for longer-term success. Others believe that making their production methods more efficient may deliver a better product and improved margins, but this often means taking their eye off the marketing ball. When output is high, efforts are concentrated on moving product and the company’s focus falls on selling, rather than marketing — often leading to a disconnect from customer needs. Instead of moving more products, try to satisfy customer needs by creating goods and services that customers want to buy…
Positioning a company for the unthinkable is impossible; repositioning a company with foresight to innovate is much more achievable.