Product

Most companies define themselves by a product. We are a “car manufacturer,”

a “soft drink manufacturer,” and so on. Theodore Levitt,

former Harvard Business School faculty member, pointed out years

ago the danger of focusing on the product and missing the underlying

need. He accused the railroads of “marketing myopia” by failing

to define themselves as being in the transportation business and overlooking

the threat of trucks and airplanes. Steel companies did not

pay enough attention to the impact of plastics and aluminum because

they defined themselves as steel companies, not materials companies.

Coca-Cola missed the development of fruit-flavored drinks, health

and energy drinks, and even bottled water by overfocusing on the

soft drink category.

How do companies decide what to sell? There are four paths:

1. Selling something that already exists.

2. Making something that someone asks for.

3. Anticipating something that someone will ask for.

4. Making something that no one asked for but that will give

buyers great delight.

The last path involves much higher risk but the chance of much

higher gain.

Don’t just sell a product. Sell an experience. Harley Davidson

sells more than a motorcycle. It sells an ownership experience. It delivers

membership in a community. It arranges adventure tours. It

sells a lifestyle. The total product far exceeds the motorcycle.

And help the buyer use the product. Explain how it works, how

it can be used safely, how its life can be extended. If I pay $30,000

for a car, I would like to buy it from a company that helps me stretch

the most value from its use. Carl Sewell preached this message in his

book (with Paul Brown), Customers for Life.50 He not only sold cars,

but assumed responsibility for fixing them, cleaning them, offering

loaners, and so on.

It costs more to build and sell bad products than good products.

The late Bruce Henderson, who was head of the Boston Consulting

Group, noted: “The majority of the products in most companies

are cash traps. . . . They are not only worthless but a perpetual

drain on corporate resources.” In slow economies in particular,

companies need to concentrate their investments in a smaller group of

power brands that command a price premium, high loyalty, and a

leading market share, and are stretchable into related categories.

Unilever decided to prune its 1,600 brands and focus its huge advertising

and promotion budget on 400 power brands.

Too many companies carry a poorly constructed product portfolio.

My advice is that your company must participate in several

parts of any market that it wants to dominate. Marriott’s major role

in the hotel marketplace is based on its use of different price brands

from Fairmont to Courtyard to Marriott to Ritz-Carlton. And Kraft

conquered the frozen pizza market by creating four brands: Jack’s

aims at the low-price end; Original Tombstone competes with the

midprice frozen brands; DiGiorno’s competes in quality with freshly

delivered pizzas; and California Pizza Kitchen aims at the high end,

charging three times the price per pound of the lower-end offerings.

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At the same time, it is not always the best product that wins the

market. Many users regard Apple’s Macintosh software as better than

Microsoft’s software, but Microsoft owns the market. And Sony’s

Betamax offered better recording quality than Matsushita’s VHS, but

VHS won. Sometimes it is the better marketed product, not the better

product, that wins. Professor Theodore Levitt of Harvard observed:

“A product is not a product unless it sells. Otherwise it is

merely a museum piece.”