Kodak's Marketing Failure
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The history of Eastman Kodak Company goes back to year of 1880. Founded by the high school drop-out George Eastman, a small firm began with manufacturing dry plates for sale. Shortly after that, the first camera was available on the market. Kodak films and photographic papers went into mass production at a rate of 400 miles per month. This business was growing rapidly by reason of being timely for that period. Photographic technology was on the rise then, filled with creation of new materials and ways for bringing images into people's daily lifes. Along with being very contemporary, George Eastman had very humanistic approach to his employees. He was the first to develop the concept of “wage dividents”. Wages were increased in proportion with earnings of the stock dividents the company had annually. (Schreiner, 2012). Such philanthropic strategy of marketing involving employees, took a substantial amount of profits from the company. Although, Eastman believed that prosperity of the firm depended on workers goodwill and loyalty. Certainly, this is quite a meaningful factor in building a strong enterprise, however it should be conducted in such a manner, it do not largely decrease the income of the company. It is a well known fact that companies experience a great deal of pressure on the market and additional revenues help to protect business from going bankrupt. It is important to highlight marketing strategies from the very birth of the firm being that those actions could become a prerequisite for company's failure. Kodak surely gave away a great deal of funds that was not necessary at all.
In the 1980's of the last century a great technological explosion occurred with the creation of digital camera. Ironically, it was Kodak's engineer who invented digital imaging back in 1972. ( Henry & Lucas, 2008) That was a moment of huge opportunity to be the pioneers of all current digital photography. However, they failed to dominate the electronic market in fear to loose the iconic status in film developing business. The marketing concept of creative new product systems involves achieving faster and easier means of satisfying consumer needs, allowing the customer to have more for less using creative approach.. This concept was grossly violated leading to gradual decay of the firm. Corresponding concept of marketing programs is product itself. The company must remain constantly in the mode of adaptation to technological shift and vision to produce more convenient, applicable goods or services. While competitors were making sleek looking cameras, Kodak's design reminded a cheap copy of it's rivals. Some of the materials could have been changed to bring more appeal to the product. (“A case study of Kodak”, n.d.) Digital camera could become a great substitute for Kodak's film developing speciality, yet due to lack of vision the technology was not perfected at the very early stage.
Price of the product plays a significant part in marketing strategies. If cost of production rises, the market value of the product has to increase either. This makes an item less competitive to other brands. Japanese corporation Fuji entered the market in the late 1980's. It attained a substantial market share in America creating huge rivalry for Kodak. Fuji was able to produce photo paper that was much cheaper than Kodak's. American company was forced to lower their prices therefore cutting the revenue. (“A case study of Kodak”, n.d.)
Place is a crucial point in marketing. We have to think of it as a convenience to buy something instead of a physical place. Digital technology presumed to make film processing faster and easier. Eventually small printers came on the market, that people could have in their homes. Kodak's marketing mistake was not to see that transition. They believed that film developing shops will attract customers forever.
Promotion encompasses allowing a customer to know about the product and it's values. Awareness programs should be run to frame customer's opinion on the product. Kodak certainly shrunk down their advertisement strategies that had a detrimental effect on sales. (“A case study of Kodak”, n.d.)
A notion of market planning and measurement systems is a significant aspect of profitable enterprise. After George Eastman passed away Kodak's future plans were paralysed. Company's far-sightedness was prejudiced by making wrong decisions in their market plan. Instead of concentrating on imaging business,they invested into other industries such as textile, medical and chemical. ( Henry & Lucas, 2008) In 1988 Kodak buys a pharmaceutical enterprise Sterling Drug. This financial step only increased already growing debt of the company. Kodak entered a high competitive market with very powerful rivals. ( Henry & Lucas, 2008)
Film company did not carry out a proper measurements of market demand, market potential and market forecast. Therefore they omitted a chance to conquest a rather vacant area of the industry, digital photo and video making. Kodak failed to concentrate on their regular customers, therefore lost a lot of money in the market. This was the breach of the marketing concept that involved customers as the main reason for creating an enterprise.
Refusing in giving managers equity stake in the businesses that they were investing, led to big failure in managing departments. Wage policies were changed. Employees were paid for the work not by time, yet according to the level of productivity. This had an adverse affect on their performance. Consequently, these are the mistakes in internal management. (“A case study of Kodak”, n.d.)
Brand and customer equity is a overall value of a lifetime customer. It is a well understood that consistent buyer is more valuable. As practice shows, it costs five times more to obtain a new customer than to keep one. A strong side of Kodak was due to a large distribution network that created a huge consumer base, who changed from film cameras to digital. A hundred years old brand name is hard to leave behind. This is a predominant concept of marketing policy.
Social responsibility is another important technique in marketing. Big companies do not work in isolation from the rest of the world. They want to be involved with the public and show concern for the environment. Sponsorships and charity donations can improve public image and increase consumer's loyalty. Kodak could use this strategy to gain stronger reputation.
Financial management includes cutting down on expenses, although funds assigned for customer support should not be reduced. Allocate spending on advertising. Focus on cash flow. Turnover is more essential for the company's growth, than the performance. (“A case study of Kodak”, n.d.)
Affordability in marketing is very strong concept. It does not mean that only cheap products should be made. It implies that the customers should not feel they can not afford an item or it does not satisfy their needs. Kodak has to stop focusing on developing high-priced products and concentrate on consumer market. If consumers believe that it is expansive to print photos with professional quality, they will choose to store them on disk or memory card.
The most important theme in marketing mix is acceptability. Customers should feel comfort and value in the product, so they had no problem to spend extra money buying it. Kodak's competitors were able to make digital cameras, that had more inviting look, therefore attracted more buyers.
Kodak’s market value has shrunk to less than 150 million from 31 billion dollars in the course of two decades. ( Henry & Lucas, 2008) They failed to consider digital technology to become predominant factor in customer's mindset. Determining the sales potential of each product and choosing the superior one for future development is a core principle of market value assessment.
There are many ideas we can learn from Kodak's experience. The most significant factor to recognize is that there are opportunities and dangers in technological growth. Marketers have to able to respond to these changes in order to take advantage of the dynamic capabilities of the company. It is virtually impossible to pick one factor behind Kodak's failure. Combination of events facilitated firm's gradual decay. Kodak is a small enterprise now. They finally committed to digital photography and printing. The brand survives with much lower sales, yet the company's future remains undetermined.
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