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Why did major industries like the railway road fail?
They were product oriented instead of consumer oriented
-eg. defined themselves as railway business, not transportation business
marketing myopia
the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products
How can consumer oriented management help to keep an industry growing?
By looking out for new applications of their product to satisfy consumer needs
How does the shadow of obsolescence always linger?
Each new growth industry think there's no substitute for it, but there will be one
What are the 4 conditions of the self deceiving cycle that industries will always be growing/in demand?
1. believing the population myth
2. believing indispensability
3. too much faith in mass production & advantages of rapidly declining unit costs as output rises
4. preoccupation with a product (dangers of R & D)
Population myth
Growth is assured by an expanding and more affluent population
- because companies think the future of the industry rest assured, they focus on outcompeting other companies rather than creating demand for its industry product
Oil Industry
-not being creative ever since kerosene lamps were sent to China to create demand for product
-greatest improvement: tetraethyl lead came from outside the industry
-industry itself focuses on oil exploration, production, and refining
What is the oil industry focused on?
-improving efficiency of producing the product, not on improving the generic product/marketing
Why will oil industry fail
-focusing on oil, not energy
-innovations coming from outside the industry
-only small companies focus on marketing instead of production
indispensability
The idea that there is not competitive substitute for the product
mass production pressures
companies focus on declining unit costs of mass production and neglects marketing
What does Galbraith thinks about production pressure?
output is too much so all efforts concentrate on getting rid of it aka selling, not marketing
Selling vs Marketing
Selling focuses on needs of the seller, marketing focuses on needs of the buyer
Why did Detroit automobiles fail despite doing consumer research?
consumer research didn't research their needs, they just asked about preferences in already existing products
- product oriented not customer oriented
Detroit focused on production, not on retailing and service
- customers were dissatisfied with service but automobile industries don't listen
Mass production thinks profit only comes from low cost full production
What did Ford do?
Invented assembly line to cut costs because he concluded that at $500 he could sell millions of cars:
mass production is the result of marketing foresight to reduce price
Product Provincialism
focusing narrow-mindedly on products, therefore not adapting to market changes
Future of oil company
bleak because other industries are developing fuel cells that eliminate frequent refueling stops, or electric batteries for cars
-satisfy consumer needs because no consumers like stopping at gas stations unless mandatory
Creative destruction
the creation of new products and production methods simultaneously destroys the market power of existing monopolies
Dangers of R & D
-believes that building new innovative products will naturally attract consumers
What are the factors that strengthen the belief that new innovative products will naturally attract consumers?
1) management becomes topheavy with engineers
- create selective bias: research instead of marketing
-focus on production instead of satisfying consumer needs
2) bias of dealing with controllable variables
- scientific products are testable or functional
-but consumers and markets are unpredictable, fickle, stupid, shortsighted, stubborn, and bothersome
Why are electronic companies doing well now?
They are filling market needs not finding new markets -> doesn't have to discover consumer needs and wants
What is the stepchild treatment
Marketing is treated as a stepchild - they exist and are needs to be taken care of but not worth real attention
What should the industry do?
-focus on the DELIVERY of customer satisfaction
-CREATE the things to satisfy customers
-FIND necesssary raw materials
How can companies avoid obsolescence?
-visceral feel of greatness
---entrepreneurial vision & will to succeed
---customer oriented organization
---not producing goods, instead buying customers
