Excerpted from July–August 1960 HBR
Every major industry was once a growth industry. But some that are now riding a wave of growth enthusiasm are very much in the shadow of decline. Others that are thought of as seasoned growth industries have actually stopped growing. In every case, the reason growth is threatened, slowed, or stopped is not because the market is saturated. It is because there has been a failure of management…
The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented…
The belief that profits are assured by an expanding and more affluent population is dear to the heart of every industry. It takes the edge off the apprehensions everybody understandably feels about the future. If consumers are multiplying and also buying more of your product or service, you can face the future with considerably more comfort than if the market were shrinking. Am expanding market keeps the manufacturer from having to think very hard or imaginatively. If thinking is an intellectual response to a problem, then the absence of a problem leads to the absence of thinking. If your product has an automatically expanding market, thenyou will not give much thought to how to expand it…
The profit lure of mass production obviously has a place in the plans and strategy of business management, but it must always follow hard thinking about the customer. This is one of the most important lessons we can learn from the contradictory behavior of Henry Ford. In a sense, Ford was both the most brilliant and the most senseless marketer in American history. He was senseless because he refused to give the customer anything but a black car. He was brilliant because he fashioned a production system designed to fit market needs. We habitually celebrate him for the wrong reason: for his production genius. His real genius was marketing. We think he was able to cut his selling price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. 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…
…Let us start at the beginning: the customer. It can be shown that motorists strongly dislike the bother, delay, and experience of buying gasoline. People actually do not buy gasoline. They cannot see it, taste it, feel it, appreciate it, or really test it. What they buy is the right to continue driving their cars. The gas station is like a tax collector to whom people are compelled to pay a periodic toll as the price of using their cars. This makes the gas station a basically unpopular institution. It can never be made popular or pleasant, only less unpopular, less unpleasant.
Reducing its unpopularity completely means eliminating it. Nobody likes a tax collector, not even a pleasantly cheerful one. Nobody likes to interrupt a trip to buy a phantom product, not even from a handsome Adonis or a seductive Venus. Hence, companies that are working on exotic fuel substitutes that will eliminate the need for frequent refueling are heading directly into the outstretched arms of the irritated motorist…
In order to produce these customers, the entire corporation must be viewed as a customer-creating and customer-satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organization. It has to do this continuously and with the kind of flair that excites and stimulates the people in it. Otherwise, the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction.
After the Sale Is Over…Theodore Levitt
Excerpted from September–October 1983 HBR
The relationship between a seller and a buyer seldom ends when a sale is made. Increasingly, the relationship intensifies after the sale and helps determine the buyer’s choice the next time around. Such dynamics are found particularly with services and products dealt in a stream of transactions between seller and buyer–financial services, consulting, general contracting, military and space equipment, and capital goods.
The sale, then, merely consummates the courtship, at which point the marriage begins. How good the marriage is depends on how well the seller manages the relationship. The quality of the marriage determines whether there will be continued or expanded business, or troubles and divorce. In some cases divorce is impossible, as when a major construction or installation project is under way. If the marriage that remains is burdened, it tarnishes the seller’s reputation.…
…In the [traditional] selling scheme the seller is located at a distance from buyers and reaches out with a sales department to unload products on them. This is the basis for the notion that a salesperson needs charisma, because it is charisma rather than the product’s qualities that makes the sale.
Consider, by contrast, marketing. Here the seller, being physically close to buyers, penetrates their domain to learn about their needs, desires, and fears and then designs and supplies the product with those considerations in mind. Instead of trying to get buyers to want what the seller has, the seller tries to have what they want. The “product” is no longer merely an item but a whole bundle of values that satisfy buyers–an “augmented” product.
Thanks to increasing interdependence, more and more of the world’s economic work gets done through long-term relationships between sellers and buyers. It is not a matter of just getting and then holding on to customers. It is more a matter of giving the buyers what they want. Buyers want vendors who keep promises, who’ll keep supplying and standing behind what they promised. The era of the one-night stand is gone. Marriage is both necessary and more convenient. Products are too complicated, repeat negotiations too much of a hassle and too costly. Under these conditions, success in marketing is transformed into the inescapability of a relationship. Interface becomes interdependence.…
During the era we are entering the emphasis will be on systems contracts, and buyer-seller relationships will be characterized by continuous contact and evolving relationships to effect the systems. The “sale” will be not just a system but a system over time. The value at stake will be the advantages of that total system over time. As the customer gains experience, the technology will decline in importance relative to the system that enables the buyer to realize the benefits of the technology. Services, delivery, reliability, responsiveness, and the quality of the human and organizational interactions between seller and buyer will be more important than the technology itself.…
…It is reasonable for a customer who has been promised the moon to expect it to be delivered. But if those who make the promises are paid commissions before the customer gets everything he or she bargained for, they are not likely to feel compelled to ensure that the customer gets fully satisfied later. After the sale, they’ll rush off to pursue other prey. If marketing plans the sale, sales makes it, manufacturing fulfills it, and service services it, who’s in charge and who takes responsibility for the whole process?
Problems arise not only because those who do the selling, the marketing, the manufacturing, and the servicing have varying incentives and views of the customer but also because organizations are one-dimensional. With the exception of those who work in sales or marketing, people seldom see beyond their company’s walls. For those inside those walls, inside is where the work gets done, where the penalties and incentives are doled out, where the budgets and plans get made, where engineering and manufacturing are done, where performance is measured, where one’s friends and associates gather, where things are managed and manageable. Outside “has nothing to do with me” and is where “you can’t change things.”…
One of the surest signs of a bad or declining relationship is the absence of complaints from the customer. Nobody is ever that satisfied, especially not over an extended period of time. The customer is either not being candid or not being contacted–probably both. The absence of candor reflects the decline of trust and the deterioration of the relationship. Bad things accumulate. Impaired communication is both a symptom and a cause of trouble. Things fester inside. When they finally erupt, it’s usually too late or too costly to correct the situation.
We can invest in relationships, and we can borrow from them. We all do both, but we seldom account for our actions and almost never manage them. Yet a company’s most precious asset is its relationships with its customers. What matters is not whom you know but how you are known to them.
Read the articles and prepare a brief summary of your key learnings. How would you use these learnings in developing a marketing plan?
Submit about a half page for each article (total – 1 page report)
