Marketing Myopia..

Marketing myopia is a title of an important marketing paper written by Theodore Levitt was included in July – August issue of Harvard Business Review in 1960. Simply Marketing myopia refers “focusing products rather than customer ". It is an advertising strategy which doesn’t actually focus on the needs and wants of consumers, but the desires of a company to sell the specific goods or services in the market. Marketing myopia can change a company’s view when managers aim more on what the company can produce rather then what customers are willing to buy. Marketing myopia may also occur when a company develops advertising strategies for wrong target markets.

Companies that fail to see the market behavior, through consumers’ eyes when advertising goods or services usually end up with marketing myopia. The perceptions of individuals that interact with the market view advertising strategies or techniques in different ways and they are linked with their culture, race age, religion and other personal desires. That is the main reason why most of the companies spend large sum of money on market researches, focus group activities, and test markets etc. to determine the strength of consumer demand before releasing a product to the market, so that they can avoid the terrible results of marketing myopia. Companies usually get trapped in this kind of situations because they drop the most important question; ‘What business are we in?’ So, basically the major mistake of the industries is; being product oriented, where they should be customer oriented. To keep the growth they should modify their services according to the market needs.

* A real world example for marketing myopia

Gypsy was one of India's first sports utility vehicle brand aimed to promote the offroaders with the tagline of “There is a Gypsy in Everyone". But the brand failed to capitalize on its first move but still one of best sportiest looking SUV in the Indian market. The brand is now glued to certain appropriate markets like Police and Army vehicle segments. Suzuki Jimny is the rebirth of Gypsy and it’s still surviving. The brand which was the pioneer of the offroader category has not existence anymore even though the SUV category has claimed a rapid growth in the market. The brand failed because of the carelessness of the company in investing and failed to look at the negatives of the brand. Such as; the driving quality and mileage was awful and the introducing price was ridiculously higher than the actual value and lack of space and comfort for the passengers in the rear seat. Theoretically, the vehicle was severely underpowered for an offroader. Only the outer look was splendid. Since the brand didn’t make any sense to the ordinary customers, it was sold to police and army. After 11 years the company re-launched the vehicle with a new brand name as Jimny, enhancing the engine capacity from 975cc to 1300cc and correcting the above mentioned mistakes they made when producing the Gypsy. It was a success and still survives in the market of SUV. Compare the both Gypsy and Jimny brands to see the difference and changes that has gone through for 11 years. Gypsy could have been a major brand but the life cycle of it just ended leaving another example for marketing myopia.

An Introduction to Income Hypothesis..

Income Hypothesis is mainly about observing consumers’ behavior proportional to their income. This can be divided into three main categories.

* Permanent Income Hypothesis (PIH)

This was formulated by the economist Milton Friedman and it explains that changes in consumption behaviors are not predictable, as they are based on long-term income expectations of customers. The key conclusion is short-term changes in income have a very little effect on consumer spending behavior. In permanent income hypothesis model, an individual's real wealth but not his current real disposable income is the key determinant of consumption and it’s determined by one’s both tangible and intangible assets. Such as properties, shares, education etc. The main idea of permanent-income hypothesis is that consumption depends on what people expect to earn over a considerable period of time. An increment in income should not increase consumption immediately by spending very much, but with time it should be affected.

C[i] = k[i] * Qp[i][t-1] + k[i] * g[i] *(Q[i] - Qp[i][t-1])
C[i] = consumption spending of an individual
k[i] = the proportion of the permanent income that is spent on consumption
Qp[i] = the permanent income / expected income, measured over a longer period of several years.

The equation can be extended with includes of how the expectations about future income resources can be formed, for instance with adaptive expectations: Qp[i][t] = Qp[i][t-1] + g[i] * (Q[i] - Qp[i][t-1]).
Q[i] = the actual income. If the actual income is above the expected permanent income, the expectations will be adjusted by a fraction g[i] of the difference between the expected (permanent) income and the actual income.

* Absolute Income Hypothesis (AIH)


This theory by Keynes based on the fact that the consumption level of a household depends on its not relative but absolute level hence the current level of income and also explains as income rises, the consumption will also rise but not necessarily at the same rate.
C = ^(W Y), additional variable W represents the state of the news, a term that changes with long-term expectation.
Consumption became a function, relating aggregate consumption,
C = mainly to aggregate disposable income
Y = income less taxes and transfer payments.

* Relative Income Hypothesis (RIH)


James Duesenberry’s, relative income hypothesis refers to an individual’s attitude to consumption and saving reflects more by his income in relation to others than by abstract standard of living. The aggregate ratio of consumption to income is assumed to depend on the level of present income relative to past peak income. Relative income hypothesis is the most realistic and successful theory when it comes to income hypothesis formulas. It shows how the consumption of a consumer reacts to the change of his/her income in a more acceptable way.