Probably one of the best articles ever written on strategic marketing is the article by Theodore Levitt entitled Marketing Myopia, written in the year 1960. The author analyzes the failures of previous growth industries, mainly because companies haven’t paid attention to changing consumer needs and general market trends, not realizing that they are part of a more significant industry. Furthermore, they focused on their product and sales promotion instead of thinking about strategic marketing. I think we are currently seeing a similar trend in the logistics industry. I’m not saying that all companies are missing out, as some monitor this new shift and change along with the consumer needs. However, a significant number of companies still focus on the product and don’t look at what’s going on around them. And there are a lot of fundamental changes going on in the logistics sector right now. We will discuss them in this article.
So what happened to oil, rail, and other previously influential industries?
Oil is, of course, is still essential today. Still, we are all seeing its importance diminishing with the emergence of renewable energy sources, by-products of crude oil, which are already diminishing the importance of this sector and will diminish in the future. What Lewis says and his thoughts, given that they were expressed in the 1960s were very prophetic. Lewis argues that the decline in the influence of these two industries is not due to a reduction in the need for transportation services or the need for energy resources. No. The influence of these industries has diminished because they have not addressed consumer needs. Consumers demanded a cleaner and more convenient energy source in the case of oil and a faster, more flexible means of transportation in railways.
Nevertheless, the evident sings, these industries have refused to recognize the need for change, believing that this will result in a loss of existing product sales. Most importantly, they believed that their goods and services were irreplaceable. And of course, we have more examples of this happening to other industries; we all remember Blackberry, Polaroid, and other industries disrupted by the competition.
Nevertheless, all these companies had a chance to be the first to invest in the areas in which their competitors had invested and thus become even more powerful, but they did not. For example, oil companies could invest in finished chemical production and renewable energy before competitors did. Blackberry could have pivoted into the smartphones business like Apple and thus grow into an even bigger company than Apple is today. But it didn’t. In other words, these industries did not realize that they were part of more prominent industries. That phones are not just in the phone market but the broader entertainment market as well, and that they need to focus not on a specific service or product but the consumer.
One cruel but excellent example of how companies can adapt is the cigarette producer Philip Morris. We all know that this industry is responsible for many deaths and illnesses, but they have managed to reorient themselves strangely enough. They pivoted in a rather strange way. Of course, I am talking about Philipp morris’s investment in private medical clinics and smoking vitamins. If you leave behind the morality, the business model is bulletproof – you make people sick first, then you treat them.
What similarities do I see in the logistics sector?
It is important to emphasize that the logistics sector is one of the largest service sectors in the world and is currently undergoing a great deal of change. Let’s start with the fact that this is one of the first industries to begin a broader application of robotics and automation. Moreover, many new modes of transportation are currently emerging: drones, underground pipelines, electric cars, and more. In addition, brand new market players are emerging: digital brokers, hybrid brokers, various digital systems for visibility and order processing. Also, let’s not forget that both customers’ buying habits and customers’ needs are changing. More and more companies are requiring the most convenient communication possible (Seamless experience). They want to receive more value-added services from one source, and they want services or closer partnerships, advice, and cooperation focusing on long-term projects. Another significant transformation is taking place. More and more trading companies (like Amazon, Walmart) are creating their own logistics operations or companies because now it is easy to do it using modern technologies.
However, when I’m talking and working with logistics companies, I still notice that many of them do not understand the change that is taking place in their field of activity. Many executives still focus on their particular service and ignore what’s happening in the market, thinking it doesn’t affect them.
In other words, many companies make the same mistake that previously successful companies have made – focusing on a specific product, not thinking that they are part of a much broader market, and not thinking about how they can take advantage of this market shift for even more significant growth. We often hear from company executives, so we are a small company, we do not need to invest in improving the quality of customer service. Or we are not afraid of digital competitors, as we do have a close relationship with our customers.
And that’s a big mistake because this sector will whiteness a significant transformation over the next few years. And traditional logistics businesses may face more competition. I’m not just talking about Amazon or Walmart, but companies that provide you with telematics or supply chain management systems can also become your competitors.
If this seems like a utopia to you, then consider what’s a logistics service consists of. It consists primarily of capacity assurance (tractor, warehouse), information management (when and where to provide the service), customer-specific needs (aligning services to a particular customer needs), and operational fulfillment (planning and other operational functions).
Which of these parts do you think is most important? If you think of securing capacity, you are wrong because the bank will finance any company to buy capacity if they have a strong business case. You’ve probably already realized that the most important thing is information. With vast information data, you can analyze it in various ways, which allows you to optimize costs and better adapt your services by analyzing the data of a specific customer.
Add good sales, marketing, customer service, operational departments to the information management, and combine them properly to create the most exceptional service possible for your customer. And here you go – you are a solid competitor to any traditional logistics business that cannot invest in advanced technologies that will improve services. And here’s just one possible variation. We haven’t discussed what Walmart, Amazon, and other companies with large cargo volumes and resources are currently building logistics companies that can become your competitors in the future. Nor have we thought about the sharing economy; we may be able to monitor the uberization of the transport sector in the future, or maybe 3D printers will eliminate the need for any transport. Or maybe the logistics business, on the contrary, can go the other way and start performing certain functions of trading companies themselves? As you can see, there are many options, threats and possibilities involved.
What should logistics companies do to shift with the new market realities?
The most critical advice for logistics businesses is to watch with a wide-opened eye what is happening in the market and invest funds to create unique services for their customers. Let’s analyze any dominant company in any industry. We will find that they all had direct access to customers and perhaps, I would say, the closest access to the customer. Therefore, logistics companies need to take advantage of this situation by creating exceptional services for their customers. It is necessary to tailor them to the needs of specific customers as much as possible. Marketing, sales, service development, customer service, and technology departments need to be maximized to better understand and respond to these needs. For this entity to function appropriately, new positions need to be created, and existing structures need to be reviewed, depending on the company’s size.
Another essential element that many logistics companies do not appreciate and exploit is the various additional services they could offer to their customers. Logistics companies have close relationships with both shippers and consignees that can be exploited in addition. I am not talking about the harmful practice of logistics service providers taking over a customer from manufacturers or traders and thus gaining the status of an unreliable service provider. But why not think about cross-selling opportunities? Why not tap into this limitless potential. I know the previous business logic contradicted this. The previous business had to be made as Lean as Possible (do the best outsource the rest). It was true earlier as it was difficult to manage additional business processes, but now, with the rapid development of technology, it is becoming easier to manage processes. Furthermore, every sales professional will tell you that selling services or product’s to an existing customer is 10 times cheaper than finding new customers. Moreover, Logistics companies can create extraordinary service experiences by adding additional services and functionality to their existing offerings.
And while many processes can’t be turned around anymore, you won’t get the Genie back, but it’s not all lost yet. Many companies can still pivot in the right direction. If your organization is planning to pivot, you should follow the main idea of going as far as possible from the paper-moving business and moving to a value-creating business. Moreover, you need to keep an eye on what’s going on in the market, understand how your customer’s needs are changing, and look for ways to become an indispensable partner.
If you plan to improve your sales, marketing, customer relationships, service strategies or want to provide new services and expand to other markets, talk to us before making changes. We can help you make those changes smoother and save loads of money.
About the author:
Tomas Ananjevas is a supply chain professional with 15 years of experience purchasing and selling Logistic’s services and building a supply chain from scratch. He founded a consulting, training, and staffing company that works exclusively with the logistics industry. Tomas is currently helping logistics companies implement the necessary changes that ensure business growth and continuity. You can arrange a time to talk with tomas by clicking here.
