What Business Are You In?

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Written By Tom Darlington

Theodore Levitt, author of Marketing Myopia

I really liked the below tweet from Richard Huntingdon last week and the question it poses: What business are you in and how do you define your relationship with your consumer?

Do you compete purely for ‘share of market’, seeking to maximise your portion of natural, in market customers and revenue?

Or, do you compete in a wider, broader and potentially more lucrative field? As Richard says, do you compete for ‘share of life’? Do you seek to broaden the places and spaces you appear, building new associations and new routes to market through your communications, your products and your services...

The conversation following this tweet is worth looking at. For many, the ‘share of life’ concept seemed to cause some confusion and it’s understandable as to why. ‘Share of life’ is quite an abstract concept and at least practically, would be far less easy to manage and monitor than metrics we’re all too familiar with such as share of voice, share of market, share of basket, share of wallet or even ‘share of throat’. Nor is it likely that we’ll ever get to the stage where a metric such as this is proven to have a clear and irrefutable impact on other business critical measures, such as the relationship between share of voice and share of market or the correlation between salience and sales growth.

During my IPA Excellence Diploma studies Peter Field led a module on brand measurement. He assigned delegates the task of devising a new suite of metrics for Research in Motion (RIM), the makers of the Blackberry phone. At the time (c. 2012), RIM was in trouble - handset sales were decreasing as Android and IOS devices began to gain traction, offering users the same intuitive messaging and email functionality, as well as access to a new generation of apps and games. Erosion of market share with both business and ‘retail’ users followed. We were asked to diagnose the nature of the brand challenge, identify the tasks that RIM’s managers should undertake and then identify relevant metrics to help monitor and manage their progress against these tasks.

A consistent theme in the feedback to delegates was that whilst the primary function of metrics is to give some indication toward the underlying health of the business, they can also fulfil a symbolic or transformative function for business managers too. If you subscribe to Stephen King’s view of the ‘planning cycle’ - then a core component of brand planning and brand strategy is to imagine a desirable state for where a brand might be in the future. Once this desired end state is identified, metrics can help promote and encourage the change required to start the journey, but also help establish whether or not you’re getting closer to your destination.

Huntingdon’s argument that “the only question” planners and strategists should be asking our clients at the moment is such a reframing. To ask whether our clients compete for ‘share of life’ or ‘share of market’ positions metrics as a transformative force within the marketing process. Whether or not this metric is ever reported at the board level is irrelevant. Philosophically, it represents a choice about how a brand will define and interact with the market in which it chooses to operate. People within a business can rally around this target and make decisions about how they allocate resources accordingly.

The trajectory of Netflix’s business can point to why this sort of approach to market definition is important. In an earnings call in April 2017, Reed Hastings dismissed concerns about the volume of brands entering the streaming market, suggesting that there was more than enough time and spend available for a wide range of brands to succeed.

On the same call he claimed, with some hubris, that in fact the real competitor was their subscribers desire to sleep. But pride often comes before the fall. Five years later and Netflix face some serious challenges.

The current economic climate is causing consumers to right-size their exposure to subscription services. The days of lockdown are, hopefully, behind us and consumers are starting to scrutinise the services they signed up to when they had a surplus of free time and a surplus of disposable income. People have realised that they don’t need a subscription to Amazon Prime, Disney + and Netflix. Netflix may have popularised streaming, but the product they offer has been proven to be easily replicable and their business model subject to many systemic weaknesses (such as the requirement for cheap capital and licensing from third parties) to make it truly invulnerable to external forces. Hastings may have suggested the enemy was sleep, but in reality the company continued to act as if it had an unassailable position within a tightly defined set of ‘inmarket’ competition.

In 1960 Theodore Levitt published Marketing Myopia in the Harvard Business Review. Alongside Stephen King’s Has Marketing Failed (Or Was It Never Really Tried?) it is perhaps one it is perhaps one of the pieces of writing about our industry that I think about the most. The myopia he references in his title pertains to managers within a business failing to identify and take advantage of adjacent opportunities because they are too focussed on what it is they do today, rather than what they might do tomorrow. He suggests that business need to orientate themselves continuously around the needs of the customers they serve not the products they manufacture. Levitt argues for the need to adopt a broad definition of what a business is or does. And not in the way that the Brand purpose movement of the present day might suggest. We’re not in the territory of real-estate companies claiming to elevate the human consciousness. In his argument, he suggests that the railroad business in the US failed as it saw itself as being in the business of railways, not as a transportation business. Hollywood narrowly avoided the same fate when TV emerged. They were in the movie business, not the Entertainment business. In the case of Netflix, are they a streaming business or an entertainment business? Disney, which has moved into streaming but also has theme parks, a distribution business, TV channels and plenty more besides, clearly orientates around the provision of entertainment in the broadest sense and has much more traction with consumers as a result.

The line which always sticks from me from the article is Levitt’s assertion that the best leadership within a business or organisation is constantly plotting their own obsolescence. In other words, they are looking ahead to how they can meet the needs of the customer tomorrow, rather than overly obsessing about what they do today. Blockbuster video (who nearly bought Netflix) and Kodak all spring to mind as cautionary tales.

The idea of orientating around ‘share of life’ rather than ‘share of market’ aligns neatly to this advice. No market is static. And no brand is invulnerable to competition and innovation, even those as big and successful as Netflix. This is especially true as we move into a highly challenging commercial landscape and teeter on the brink of recession.

In the last few weeks there have been a number of high profile articles on how brands can protect themselves against recessionary conditions.

R/GA’s Tom Morton has talked about the coming ‘brand audition’ and prescribed evolutionary innovation to manage the ‘fever economy’. Blackstone’s Jonny Bauer has talked about the power of incorporating ‘brand thinking’ into business strategy as a means of creating value for consumers but also facilitating operational change required to facilitate market realignment. Finally, we’ve also had J.Walker Smith of Kantar talk to WARC about the need for businesses to move away from ‘functional, RTB’ led messaging and define a new, broader relationship with consumers as a means of surviving the inevitable belt tightening the cost of living crisis will cause.

In times of recession we inevitably fall back on the well trodden argument that brands who continue to invest through recession typically end up in a better place than they started. But, perhaps the question of how and where advertisers choose to interact with their customers is also a crucial one to be considering at the moment, too. Perhaps it is too often taken for granted that there is a market for what we have to sell. It is time to refocus on some of the fundamental principles of marketing.

Thinking in terms of share of market alone, encourages the myopia discussed by Levitt. Incorporating a thought such as ‘Share of Life’ encourages a broader, more customer orientated approach to marketing and brand building. As does deliberately plotting your own obsolescence. As the pace of change and disruption in markets increases as recession bites, more and more brands could benefit from asking themselves ‘what business are we in?’ and ‘who are we competing with? Doing so can help define what you do in as broad a way as possible, informing decisions around the way you approach your products, services and communication that can drive a more ‘sustainable’, secure relationship with consumers today and tomorrow.

Tom Darlington
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