Theodore Levitt, considered by many to be the marketing Guru, made famous the question, ‘What is your business?’ forcing companies to think of their businesses from the perspective of the kind of consumer needs they would satisfy. One of the famous examples he gave was how the railways in the US didn’t see their business as being in transportation of men and materials, eventually losing out to the road sector. He was not being nitpicking. Defining your business this way helps you think strategically about your business. It is what you might like to call an outward looking approach.
Peter Drucker once asked this question to the board of directors of a company that made bottles for pharmaceutical companies. Irked at being asked such a basic question, they answered that they were in the business of making bottles. Drucker replied, ‘Gentlemen, you are in the business of packaging’. When you describe it like that, the perspective changes. And, when you pose the question in these terms, you really don’t have to get caught in a positioning discussion. Think about it. Rather than ask yourself what unique space in the consumers’ minds you can find for yourself, you are finding out what consumer needs you want to satisfy and how. It is really a pity that most discussions are fixated on positioning as if it is an all-encompassing word.
Anyway, if you then followed the logic inherent in such a way of asking and finding, you focus on whether and how consumer needs are shifting, are they getting superceded by another set of needs, who else is satisfying these needs and so on. Once you have freed yourself from the shackles of a product or technical orientation, you only think of what needs you are satisfying.
But Levitt’s question does something more: it brings you face to face with strategy. In the last few years, most business stories have revolved around operational effectiveness, whether as a focus on cost cutting or productivity or some form of internal restructuring. Michael Porter, author of the concept of competitive advantage, makes a sharp distinction between operational effectiveness which means doing similar things more effectively than rivals, while strategy means doing different activities from rivals in different ways.
Why talk about this now? Take the Indian automobile sector. There is an interesting development taking place. Maruti has been advertising the 800 in very strategic ways. The by now famous Rs 2,999 a month advertisement was Maruti’s way of persuading potential customers not to get too worried by how it is going to hurt their wallets. You won’t feel the pinch, seems to be the message. It is trying to create new category of car buyers: those who would have otherwise bought a two-wheeler. It is wooing two-wheeler customers to look at the 800 as their first choice of vehicle, not just car. This is deeply significant. Don’t you see nuclear families with a two-wheeler as their choice as a family vehicle, one child at the front and another at the back, squeezed between the mother and father? And Maruti has deepened the aspirational value with improvements to the car, which still remains the first car of choice for a number of Indian families.
Now go back to Levitt’s question. Maruti may be redefining its business as being in transportation. Or someone might want to qualify that its principal business is in the transportation of families. Again, this is not a trivial point. How many Indians buy a car just for pleasure? The family still remains the principal reason behind buying a car, at least where individuals are buying. We will set aside the question of corporate buying.
In Porter’s language, Maruti is making a strategic move and not compete only on operational effectiveness. There is an interesting corollary to this. Let us say that Maruti does succeed in getting customers to shift. You know who will benefit? Any one who intends creating car priced lower than the Maruti.
Years ago, BMW effectively used a similar theme while marketing its sports car. A four-piece print advertisement, the first three feature a man with wife and family, with each car a marriage between a man’s love for a sports car and his desire to think of his family, while deciding to buy a car. The final advertisement breaks out. It flashes an absolutely stunning sports car with the headline: Ah, come on, haven’t you had enough of your family!
There is a fine example of how looking at and trying to understand consumers needs opens up possibilities. Steve Jobs, co-promoter of Apple, talks of how they came to the business of digital music, after almost missing it. Admitting to Fortune (February, 2005) to being distracted by his fixation on perfecting video editing on the Mac, he says how he suddenly noticed that kids were using computers and CD burners to make audio CDs and to download music from the internet through illegal online sources like Napster. Bingo, he grasped what he had missed till then. In a matter of months, the first version of itunes was ready. We now know what has happened since.
And now Apple has launched the MiniMac. If he succeeds, this will lead to a significant change in the market for PCs. What is really interesting is the way he describes Apple. In his interview to Fortune, he says, “Apple’s core strength is to bring very high technology to mere mortals in a way that surprises and delights them and that they can figure out how to use.” He goes to say that software is the key to (achieving) that. “In fact, software is the user experience”. Notice that he doesn’t mention any product in his definition, how looks at it from the consumers’ perspective. Don’t know if he read Levitt, but Levitt would surely be proud of him.
What else can be drawn out of Levitt’s way of looking at business? You realize that you are not making a product; you are making something that someone is using for a specific purpose to achieve a defined output. Sounds contrived? Consider the case of Intel. In November, 1994, Intel faced angry customers who demanded replacements of their Pentium microprocessors, reporting a flaw that affected mathematical calculations. Initially, Intel stood its ground, insisting that customers demonstrate that the chips were flawed. But then, Big Blue (IBM) stopped shipments. Intel reacted with a no-questions asked returns policy. The late Andy Grove admitted that, ‘the kernel of the issue we missed was that we presumed to tell somebody what they should or shouldn’t worry about, or should or should not do’. And he mad a compelling observation: ‘We got caught between our mindset, which is fact-based, analysis-based engineer’s mindset, and customers’ mindset, which is not so much emotional but accustomed to making their own choice’.
Our choice is clear. Embrace Levitt.
USP Age magazine 2004
