16
What little I know about marketing
When they told me I had won the Parlin Award for Marketing, I thought they were kidding. I cannot even understand what the experts write on the subject. Stuff like this from Professor Paul Warshaw of McGill:
If you can understand this kind of thing, you may find it useful to look up other models of consumer behavior, such as Lavidge and Steiner, Andreason, Nicosia, Engel-Kollat-Blackwell, Howard and Sheth, and Vaughan. All double Dutch to me. However, thirty odd years of rubbing shoulders with marketing practitioners has taught me some things which have helped in my work.
New products
About 35 per cent of supermarket sales come from products which did not exist ten years ago.
You can judge the vitality of a company by the number of new products it brings to market. I have known Chief Executive Officers who made enough profit from the products they inherited from their predecessors to obscure their failure to introduce new ones of their own. It is not uncommon for such men to grudge a measly million dollars for developing a new product, but to shell out $100,000,000 to acquire somebody else’s product, without turning a hair. Their borrowing-power is greater than their brain-power.
The opposite is seen in the pharmaceutical industry. Merck, for example, spends $200,000,000 a year on new-product research. Years may go by without their discovering anything, then bingo…up comes a miracle drug. The effect on the share price is lovely to behold.
Why do eight out of ten new consumer products fail? Sometimes because they are too new. The first cold cereals were rejected by consumers. More often new products fail because they are not new enough. They do not offer any perceptible point of difference – like better quality, better flavor, better value, more convenience or better solutions to problems.
It helps if the point of difference goes hand-in-hand with a chord of familiarity that links the new product to the consumer’s past experience – a disposable diaper, a light beer, a diet cola, a paper towel.
Naming your product
Finding any name which has not already been registered by another company is infernally difficult. There are three kinds of names:
Names of men and women – like FORD, CAMPBELL and VEUVE CLICQUOT. They are memorable, they are difficult to copy and they suggest that your product is the invention of a human being.
You can use consumer research to find out whether a name says what you think it says, whether it is easily pronounceable, whether it is confused with existing names, and whether it is memorable.
Once I told a computer that I wanted a name for a new brand of coffee, specifying that it had to begin with the letter M and contain no more than seven characters. The computer spewed out hundreds of permutations, and I was back where I started.
If it is important that the name appear as big as possible on a package, choose a short one like TIDE, and not a long one like SCREAMING YELLOW ZONKERS.
If you want to use the same name in foreign markets, make sure that it does not have an obscene meaning in Turkish or any other language. There have been some nasty accidents.
I have suggested names for dozens of new products, but have not yet had one accepted. Good luck to you.
Sleeping beauties
Some products which sell well without being advertised may sell better, and make more profit, with advertising. For 40 years the Lambert Pharmaceutical Company sold modest quantities of a mouthwash called Listerine, without advertising it. When young Jerry Lambert started advertising it – as a remedy for halitosis – sales went through the roof.
Milton S. Hershey built the biggest confectionery business in the world without advertising. Some years after his death, his successors asked my partner Bill Weed to find out whether advertising could increase their profits, most of which went to the Hershey orphanage. Bill had commercials made for three of their products and tested them in local markets. One of the products did not respond to advertising, but sales of Hershey Bars went up, and Reese’s Peanut Butter Cups went up 66 per cent. By 1980, Hershey was spending $42,000,000 on advertising.
The end of the block-buster brand
It has become prohibitively expensive to launch brands aimed at a dominant share-of-market. Even the manufacturers with the biggest war-chests are finding it more profitable to aim their new brands at narrowly defined segments of the market. The recent launch of a new cigarette cost $100,000,000. The advent of cable television, with 50 or more channels, will make it easier to aim your advertising at special groups of consumers. There may never be another universal giant like Tide or Maxwell House.
Don’t waste time on problem babies
Most marketers spend too much time worrying about how to revive products which are in trouble, and too little time worrying about how to make successful products even more successful. It is the mark of a brave man to admit defeat, cut his loss, and move on.
Concentrate your time, your brains, and your advertising money on your successes. Back your winners, and abandon your losers.
Don’t dawdle
Most young men in big corporations behave as if profit were not a function of time. When Jerry Lambert scored his breakthrough with Listerine, he speeded up the whole process of marketing by dividing time into months. He reviewed progress every 30 days, with the result that he made a fortune in record time.
Promotions
In 1981, US manufacturers spent 60 per cent more on promotions than on advertising, and distributed 1,024,000,000,000 coupons. Bloody fools.
In the long run, the manufacturer who dedicates his advertising to building the most sharply defined image for his product gets the largest share of the market. The manufacturer who finds himself up the creek is the short-sighted opportunist who siphons off his advertising dollars for short-term promotions. Year after year I find myself warning clients about what will happen to their brands if they spend so much on promotion that there is no money left for advertising.
Price-off deals and other such hypodermics find favor with sales managers, but their effect is ephemeral, and they can be habit-forming. Said Bev Murphy, who invented Nielsen’s technique for measuring consumer purchases and later became President of Campbell Soup Company: ‘Sales are a function of product-value and advertising. Promotions cannot produce more than a temporary kink in the sales curve.’
Says Dr. Ehrenberg: ‘A cut-price offer can induce people to try a brand, but they return to their habitual brands as if nothing had happened.’
Don’t get me wrong. I am not opposed to all promotions. I would not, for example, think of launching a detergent without sampling to consumers.
Pricing is guesswork
It is usually assumed that marketers use scientific methods to determine the price of their products. Nothing could be further from the truth. In almost every case, the process of decision is one of guesswork.
The higher you price your product, the more desirable it becomes in the eyes of the consumer. Yet when Professor Reisz of the University of Iowa tried to relate the prices of 679 brands of food products to their quality, he found that the correlation between quality and price was almost zero.
Most of the marketers I know are afraid of pricing their products above competiton. At a dinner in Europe three years ago, the head of Research and Development in a famous company told me, ‘I have never seen my company go to market with the best product I could make. Time after time our marketers force me to give them an inferior product at a lower price.’ I was able to tell him that there are now unmistakable signs of a trend in favor of superior products at premium prices. The consumer is not a moron, she is your wife.
Marketing in recession
What should you do in times of recession, when you need every penny to sustain your earnings? Stop advertising?
If you stop advertising a brand which is still in its introductory phase, you will probably kill it – for ever. Studies of the last six recessions have demonstrated that companies which do not cut back their advertising budgets achieve greater increases in profit than companies which do cut back.
In a Morril survey of 40,000 men and women involved in the purchase of 23 industrial products over five years, it was found that share-of-market went up in bad times – when advertising was continued.
I have come to regard advertising as part of the product, to be treated as a production cost, not a selling cost. It follows that it should not be cut back when times are hard, any more than you would stint any other essential ingredient in your product.
During World War II, the British Government prohibited the marketing of margarine under brand names, but Unilever continued to advertise one of their brands during all the years it was not on the retailers’ shelves. When the war ended and brands returned, the Unilever brand emerged at the top of the heap.
Keynes might have advised manufacturers not to advertise during boom times, but instead to set aside the money in a reserve for advertising during recessions.
Heavy users
Thirty-two per cent of beer-drinkers drink 80 per cent of all beer. Twenty-three per cent of laxative users consume 80 per cent of all laxatives. Fourteen per cent of the people who drink gin consume 80 per cent of all the gin.
In everything you do, keep your eye glued to the heavy users. They are unlike occasional users in their motivations.
This chart compares sales for companies which cut back their advertising expenditure during the 1974-75 recession with sales for companies that did not cut back.
The companies that did not cut their advertising budgets did better in every year. By 1977 their sales had more than doubled, while sales had barely gone up 50 per cent fo companies that cut their advertising. 1975 sales were down for the companies that cut their advertising, but up for those that didn’t.
By 1977 the net income of companies that did not cut advertising had more than trebled, while for companies that did cut back during the recession, it had barely doubled.
Why advertise at all?
Many manufacturers secretly question whether advertising really sells their product, but are vaguely afraid that their competitors might steal a march on them if they stopped. Others – particularly in Great Britain – advertise ‘to keep their name before the public’. Others because it helps them to get distribution. Only a minority of marketers advertise because they have found that it increases their profits.
On a train journey to California, a friend asked Mr. Wrigley why, with the lion’s share of the market, he continued to advertise his chewing gum. ‘How fast do you think this train is going?’ asked Wrigley. ‘I would say about ninety miles an hour’ ‘Well,’ said Wrigley, ‘do you suggest we unhitch the engine?’
Advertising is still the cheapest form of selling. It would cost you $25,000 to have salesmen call on a thousand homes. A television commercial can do it for $4.69. If you spend $10,000,000 a year on advertising, you can now (1983) reach 66 per cent of the population twice a month.
Repertory of brands
A.S.C. Ehrenberg of the London Business School has established that consumers do not buy one brand of soap, or coffee, or detergent. They have a repertory of four or five brands, and move from one to another. They almost never buy a brand which has not been admitted to their repertory during its first year on the market.
Dr. Ehrenberg goes on to argue that the only thing you can expect from post-launch advertising is that it will persuade present users to buy your brand more often than the others in their repertory.
If this is true, your launch advertising is a matter of life and death. Spend every penny you can lay your hands on. Now or never. Dr. Ehrenberg writes:
’People have a repertory of brands, each of which they buy fairly regularly … buying behavior remains broadly characterized as being steady and habitual rather than dynamic.
’Real conversion from virgin ignorance to full-blooded, long-term commitment does not happen often … sales levels of most brands tend to be fairly steady.
‘Consumers mostly ignore advertising for brands they are not already using.’
Dr. John Treasure agrees: ‘The task of advertising is not primarily one of conversion but rather of reinforcement and assurance…sales of a given brand may be increased without converting to the brand any new consumers, but merely by inducing its existing users, those who already use it at least occasionally, to use it more frequently.’
Sales meetings in the WC
Always hold your sales meetings in rooms too small for the audience, even if it means holding them in the WC. ‘Standing room only’ creates an atmosphere of success, as in theatres and restaurants, while a half-empty auditorium smells of failure.
Use the absolute minimum of electrical equipment. I have seen the sound systems fail in some of the most elaborately equipped convention centers in the world, including Berlin, where they have 24 operators.
What is marketing?
I once heard Marvin Bower define marketing as objectivity. I cannot beat that.
2) is a more precise (although slightly biased) measure (Cattin 1978a, b; Schmitt, Coyle, and Rauschenberger 1977). It utilizes all available data simultaneously rather than bisecting the sample into arbitrary estimation and holdout components. Because of these comparative advantages, 