How Could Sales Destroy Your Business?
Why Strategy Is More Important Than Tactics
Your company's sales are through the roof, marketing's throwing money at getting even more sales and everyone's making their numbers. However, if the overarching strategy isn't right, beware the law of unintended consequences, says columnist Willian Cohen. Here's how high sales might be concealing major problems.
"Marketing and selling are not necessarily complementary and may even be adversarial." I had heard Drucker make some rather unusual statements during the two years that I had been his student, but this certainly had to be one of the most astonishing. Yet he was right.
Some years later, my old friend and wizard marketer, Joe Cossman, was telling me about the time he had such high sales that it almost put him out of business and with a sudden insight I finally understood what Drucker had told us.
Cossman had gotten control of an unusual product called "My Son, the Musician." The inventor told Cossman that it was guaranteed to end parental problems of helping to potty train male infants and to use the toilet bowl properly when doing so. The device consisted of a bowl with a sensing device connected to a music box. When the bowl sensed liquid, it would immediately begin to play a nursery tune.
Cossman wrote advertising copy and rushed the item into production, engaged salespeople, and began to promote the product. The number of products ordered prior to actual production was one of the largest of any of his products.
One day his enthusiasm suddenly came to a dead end when a child psychologist called to tell him that he was looking at future legal problems. "My Son, the Musician" worked all right. The problem was it worked too well. It would absolutely train the child to go to the bathroom when he heard the music he could create by using the toilet bowl. The problem was the act of going to the bathroom became permanently associated with the music.
It doesn’t take much imagination to understand what might happen years later. The selling had been a great success, but it if continued, law suits from parents or former users could have put Cossman out of business. The more he sold, the greater the danger.
Strategy More Important Than Tactics
Cossman’s problem relates to the fact that the strategy employed is at a higher level and is more important than the tactics of selling. The strategy used was based on a flawed concept, flawed not because the idea that the link between use of music when the device was used wouldn’t encourage usage, but flawed because of the unintended consequences of music causing a physiological reaction would be undesirable at a later date.
My Son, the Musician is but one example of something that is true in many situations. Robert E. Wood , who was chief executive officer of Sears, Roebuck & Company during its years of greatest growth once stated, "Business is like war in one respect – if its grand strategy is correct, any number of tactical errors can be made, and yet the enterprise proves successful."
Unfortunately, the reverse is not true.
Why Good Selling Can’t Overcome Poor Marketing
The importance of sales is undeniable - without sales there is no business. But some have the simplistic notion that effective selling automatically can overcome a poor marketing strategy. I recall some years ago that a professor at one of our top universities wrote exactly that in a journal article. He was wrong. If the selling is good enough, it can result in high sales, even with a bad strategy. However, this is misleading and the high sales may conceal a major problem would could result in disaster as was the case with Cossman’s product, or it could cause the marketer to misallocate resources to a strategy which is far less efficient in creating customers or to a business which should never have been entered in the first place.
Put Strategy First
Drucker wrote, "First decide what business you are in" and then went on to say that the purpose of this, or any, business is to create a customer. This was Drucker’s rationale for stating that marketing is the distinguishing basic function of business. In this sense strategy or marketing is the means used to create a customer. But strategy and tactics are not the same. A marketer whose strategy is actually a tactic is at great risk. Should that tactic fail, he soon finds himself in trouble. This is what happened to the company which has become the poster child for wrong government investment.
Solyndra was founded in 2005 and designed, manufactured and sold solar photovoltaic(PV) systems. However, they were not conventional flat solar panels. They were cylindrical in shape, and in their most efficient configurations, mounted horizontally. Solyndra claimed that covering more of the typically available roof area, they produced more electricity per rooftop. There were other technical advantages. Because of their shape they could capture more solar power than conventional panels, and they could do so without moving. The company was attractive at a number of other levels. There was the "green" aspect of the electricity produced. Then there was the hiring of over 1000 employees at a time when jobs were scarce.
The problem was that the strategy was a tactic - low pricing due to materials, design and technology. However, as the years went by the price of conventional solar panels plummeted as more conventional solar panels were sold. Solyndra’s panels became far more expensive than the old flat panels and the total system became more expensive as well. Solyndra panels were still novel and technically more sophisticated, but there was no competitive advantage and the company failed.
Solyndra’s marketing was a tactic based on price. A closer look would have exposed Solyndra’s vulnerability. If the price of the standard solar panel came down, a virtual certainty as worldwide sales increased, it would have been obvious that Solyndra could not succeed despite its good intentions.
Strategy Determines Tactics
A marketer must first have strategy firmly in mind. Then, he is in a position to develop tactics to support that strategy. During the Great Depression, Proctor and Gamble’s President Richard Deupree realized that consumers were still buying essential household products and competitors were cutting back on advertising. His strategy was to introduce a phalanx of new, innovative products and to significantly increase advertising as competitors reduced theirs.
This was a strategy he initiated against significant pressure from his own team. At a time when his shareholders were demanding that he cut advertising budgets, and reduce other expenses, Deupree did the opposite. Moreover, just as President Obama took advantage of new technology in the 2008 election by using the cell phone and tweeting to get his messages out to millions of potential voters, P&G looked at the radio as the new vehicle of advertising choice. In 1933, P&G began advertising Oxydol, a clothes washing soap it had acquired several years earlier. It did so by sponsoring the radio show "Ma Perkins."
Soon the radio introduction for the show became,"Oxydol’s own Ma Perkins." This sponsorship was so successful that six years later P&G was sponsoring 21 radio shows all associated with specific products. P&G not only significantly increased its sales, it doubled its radio advertising budget every two years during the Depression, and virtually built the daytime radio industry single handed. It even gave a new terminology to the English lexicon: "the soap opera."
Good Tactics are not only Complementary, They are Synergistic
Selling and marketing may not be complementary, but tactics should not only be complementary with each other, but synergistic as well. This means that the sum of the individual parts or tactics should be greater than the whole. During the Great Depression P&G emphasized product and advertising. Both worked together. Oxydol really was better than competitive products at the time. It really did make clothes come out 4 or 5 times whiter and save the poor housewife twenty five minutes of pounding wet clothes against washing boards assisted by suds as necessary with other brands.
Swatch watches present another example as to how this synergism of tactics supporting a workable strategy should be applied effectively. Swiss watches had been under attack by Japanese companies like Citizen and Seiko for years with the digital watch.
Then in 1983, the Swiss struck back. Through manufacturing improvements and design, the Swiss almost halved the number of working parts, brought the price down by 80%, and re-introduced the analogue watch as an entry level product. They actually made it a fashion watch with bold new styling and design. Since fashion watches are usually highly jewelled and expensive; this was a very gutsy thing to do. They also did the right promotion to promote these innovations and distribution was limited to fashion outlets. They sold 1,000,000 units the first year, and more than doubled sales the year after. Drucker was right again. A marketer needs to ensure that selling is complementary and not adversarial and strategy is of prime importance.