The Dynamics of Differentiation, Cost-to-Serve, and Marketing Myopia

How does “Success Through Differentiation--Of Anything” resonate (or fail to resonate) with “Manage Customers for Profits (Not Just Sales)”?

Shapiro, Rangan, Moriarty and Ross point out an example early in their essay “Manage Customers for Profits (Not Just Sales)” of a plumbing fixtures manufacturer who raises prices on their custom orders in order to get rid of these accounts. This business thought of the small custom orders as worthless, yet later learned that those very orders were their most profitable (1991, Dolan, Strategic Marketing Management, p. 307.) This is a perfect example of differentiation as described by Levitt in his article “Success Through Differentiation—Of Anything.” The plumbing customers were willing to pay a higher price and be loyal to the company because that business offered something that no other did—a unique product.
Levitt writes that “the more a seller expands the market by teaching and helping customers to use his or her product, the more vulnerable the seller becomes to losing them” (1991, Dolan, Strategic Marketing Management, p. 200.) He explains that the customer has then had all questions answered and so goes on to base his or her decision on price. This reminds me of Shapiro’s description of aggressive customers which aren’t worth serving because of their expensive demands yet fickleness on price (p. 312).
There are also ways that these two articles don’t resonate at all. Most obviously, Levitt is focused on the customer, Shapiro on the producer. Shapiro develops a plan where to win requires pinpointing costs, knowing profitability dispersion, doing and repeating analysis and providing support systems (1991, Dolan, Strategic Marketing Management, p. 314-318.) Levitt’s formula for winning is simply to make sure that you stand out from your competitors and continue to innovate your product to please your customers (p. 194). Finally, Levitt asserts that “intangibles” make the difference (p. 194) but doesn’t take into account Shapiro’s warning to measure the “cost to serve” that intangibles could increase (p. 311).

How is this discussion tied into Levitt’s article “Marketing Myopia”?

In “Success Through Differentiation—Of Anything” Levitt offers the differentiation by product development as an antidote to marketing myopia, the apathy some companies fall into when they believe they are at the pinnacle of success. Levitt writes on p. 199 that an augmented product “goes beyond what was required or expected by the buyer” while in a state of marketing myopia the company assumes the product or service does not need to be improved (1991, Dolan, Strategic Marketing Management.)
Shapiro’s article enhances the overview of marketing myopia by pointing out the difference between sales and profit (1991, Dolan, Strategic Marketing Management, p. 307.) Levitt makes a corresponding analogy between selling and marketing on p. 38. Shapiro’s notion of what is profitable compares to Levitt’s description of true managerial marketing, a holistic look at the entire lifespan of the creation of a product.

Is it possible for a manager to successfully differentiate her products, segment her customer base and avoid the pitfalls of marketing myopia?

Surely this goal must be possible to achieve. However, it would require constant complex effort and understanding. All three of these objectives are leaning toward a business model that focuses the long term, insists on detailed managerial analysis, and refuses to be complacent in the midst of success. Customer satisfaction, profit margins, and innovation need to be balanced into that magic formula for long-term success.



References
Dolan, Robert, ed., Strategic Marketing Management, 1991, McGraw-Hill Book Company: United States.