17 December 2008

Hey There Mighty Brontosaurus: Marketing Myopia Lives On

by Freddy J. Nager, Founder of Atomic Tango + Diehard Newspaper Reader…


Hey there mighty brontosaurus
Don’t you have a lesson for us
You thought your rule would always last
There were no lessons in your past…

— The Police, “Walking In Your Footsteps”

If you unfold the business pages and vultures start circling overhead, you know times are tough. (And if you start seeing visions of the Grim Reaper, you know you’re reading a Tribune Company newspaper.)

While it’s easy to blame the economy for business struggles, times like these also present a ripe opportunity for struggling businesses to reassess what they’re doing. Kind of like cardiac arrest makes you reassess whether chicken-fried bacon with cream gravy is the most sensible bedtime snack.

One classic perspective on reassessing a struggling business — or an entire industry — is “Marketing Myopia.” Written by the late great marketing guru Ted Levitt in 1960, “Marketing Myopia” accuses failing industries of defining themselves too narrowly, which renders them incapable of adapting to changing markets. Wrote Levitt, “The history of every dead and dying ‘growth’ industry shows a self-deceiving cycle of bountiful expansion and undetected decay.” (Levitt was also a colorful writer. Yes, it’s OK to write about business and do it with style.)

Levitt cited the railroads as a classic example. Once the titans of American industry, railroads defined themselves as being in the business of conveying people and products by train. Consequently, when their customers came to prefer airplanes and highways, the railroads couldn’t adapt and went from being titans to dwarves. Had they defined themselves as being in the “transportation business,” they could have followed their customers to new opportunities.

Cue The Police…

A contemporary example is the music industry. Humans have made music for at least 4,000 years, but the era when sounds were encased in plastic (or wax or vinyl) covers a 131-year blip on that timeline, and the CD encompasses only 26 years of that. But the music industry clings tenaciously to the concept of music as a packaged good, and continues to devote energy and dollars to compel consumers to buy CD’s. It even goes so far as to sue its fans rather than adapt to changing consumer habits.

While I defend every artist the right to demand payment for their work, siccing packs of lawyers on your fans is not a customer-loyalty strategy I’d recommend.

From a Levitt perspective, the music industry should have taken this opportunity to redefine itself far beyond mere songs. Once their distribution oligopoly was blown wide open by the Internet, the major record labels should have redefined themselves as marketing companies with expertise in building and promoting music brands. These brands go by such names as “Feist” or “Metallica” or “The London Philharmonic” (to name a few), and music labels should be helping those brands generate revenue streams from multiple sources, such as concerts, merchandise, and commercial licensing. These multi-faceted revenue models are called 360-degree deals. Some savvier companies, such as Live Nation, are already taking that approach, with the major labels only now realizing the future is not encased in plastic.

I Know You’re Sick Of Hearing About Them, But…

It took another company outside the music industry to drag the brontosauruses into the 21st century. I’m talking Apple, of course. Now, my regular readers know I can’t write a post without including Apple or Steve Jobs. (It’s an addiction, I know, and I may seek a support group for it.) But in the case of “Marketing Myopia,” Apple really applies.

As a pure computer company in the 90s, Apple found itself circling the drain, so it turned to what many companies resort to when they run out of ideas: “best practices.” Seeing that Microsoft had become an empire — albeit an evil one — by licensing out its operating system, Apple did the same, and the results were disastrous. Apple’s computer sales plunged. It got to the point that rival Michael Dell suggested that Apple should shut down and “give the money back to the shareholders.”

So as soon as Lord Jobs regained the Apple throne, he canceled those licensing agreements. He then oversaw product redesigns and a new distribution channel (Apple stores). Most significantly, in 2001, Jobs redefined Apple as the center of a digital universe, and that year, the iPod was born. In 2007, “Computer” was dropped from the Apple name. Jobs successfully pulled off a full Levitt.

Meanwhile, according to a December 15, 2008 article in the NY Times (“Dell Trails Its Rivals in the Worst of Times”), Michael Dell “has grown tired of discussing his company’s reinvention.” Dell corporation’s shares now sit at an 11-year low. Its market cap is now $22.7 billion compared to Apple’s $79.3 billion.

Other examples of companies that have avoided “Marketing Myopia” include Disney and Nike, who long ago redefined themselves beyond their original products.

Starbucking Reason

Of course, there are dangers to redefining yourself too broadly. Starbucks redefined itself as a lifestyle brand in 1999, and after some successful experiments in the music business, it got into movies and launched a couple of box office flops: “Akeelah and the Bee” and “Arctic Tale.” As Starbucks discovered at great expense, impulsively buying a CD with a latte is a far different consumer activity than going to a movie because a coffee shop hypes it. Instead of defining itself as a lifestyle, Starbucks should have expanded on its success as a “third place” — a regular destination beyond school/work and home.

(Of course, Hollywood is a brutal place to venture for practically any corporation. Coca-Cola and Matsushita both plunged into the movie business headfirst only to leap out screaming when they found it full of piranhas and leeches. The one outsider who seems to have excelled in Hollywood is, um, Steve Jobs with his Pixar acquisition.)

Black and White and Nearly Dead All Over

I’d like to close with a brief look at another dying industry: the aforementioned newspapers. The newspaper industry has been losing readers and advertisers at “terrifying” rates. Management responded by cutting costs, but that entailed cutting pages and editorial staff, which only turned off more readers and accelerated the decline. While the newspapers wisely redefined themselves beyond ink-and-paper and ventured onto the Web, online revenue is but a fraction of what the newspapers make with print.

So I say, why stop redefining there?

With CNN and the other cable news networks eschewing real journalism for celebrity-mongering, sensationalism, and punditry, I’d love to see a Los Angeles Times channel. Sure, print journalists aren’t always camera friendly, but L.A. is full of these people we call “actors” who can fluidly recite what other people write. And sure that’s a lot of risk, but with flocks of slavering vultures closing in and the Grim Reaper crying for more cowbell, it’s the perfect time to redefine.

Update 5/6/9: TechCrunch reports on the Senate committee hearing on the “Future of Journalism,” quoting such luminaries as Arianna Huffington and David Simon, creator of the HBO series “The Wire” (interesting choice of speakers there). No mention of how bloggers like Huffington, TechCrunch and, to a much lesser extent, me are stealing readers from professional journalists, who do all the heavy lifting, while we read their stories and expound from the comfort of our living rooms… We do need professional journalists, and I, for one, am happy to pay for their dedication. Perhaps the public broadcasting model should be applied to newspapers, as some have suggested, since they truly do provide a public service.

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

One Response

  1. Great article, Freddy! I think that Cynthia should be the newscaster for the Los Angeles Times channel :) More cowbell!

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