June 12, 2007

Improve The Product

Yesterday, I asked for suggestions to grow a hypothetical business by ten percent.

The options I provided were channel-based tactics, things you can do in the short-term, to grow top-line sales.

One should ask the obvious question, "why don't you just improve the product, why don't you create something remarkable that the customer craves?"

I take you to a board room I was in, many, many years ago. Customers did not want to buy our merchandise, they were voting "no" with their wallet ... for at least a year.

Most of the merchandise we sold was private label. This means we created, designed and sourced our own merchandise. If we wanted to improve the product, we had a nine to twelve month process ahead of us. You don't simply go out and find new, better product. You improve product today --- but the product isn't available to the customer for almost a year. Your job is to increase sales today.

So we're meeting in this board room. It is November, and we are talking about our sales plan for the next fiscal year, which begins in February. Remember, new product takes nine to twelve months to develop and make available to the customer.

Our sales plan, based on what has happened over the past year, did not meet the expectations of our President or our CFO. I was responsible for creating the sales plan.

After taking a half-hour of heat from the executives, I became defensive. I simply turned to our Chief Merchandise Officer, and said "If we could just improve our merchandise productivity, we wouldn't be in this situation."

Once words leave your mouth, you cannot take them back. As the light-hearted smile that previously adorned the face of the merchant turned into a rage-based, crimson-colored scowl, I realized my choice of words, while honest and accurate, were not going to produce the result I desired.

Eight executives watched as the merchandise executive shared thoughts, opinions, and assorted non-positive commentary with me.

Our President and CFO turned their attention back to me, and asked "What are YOU going to do to improve sales next year?"

When faced with constraints, you go back to the tactics that you are accountable for. You try to add catalogs, add pages, remail old catalogs to your best customers. You look to add a second or third e-mail contact each week. You try to add affiliates who could refer sales to your website. You look at marketing strategies surrounding your best customers, your most productive customers, because you simply cannot afford to send crappy merchandise to customers who are unlikely to buy anything --- that's a recipe for financial disaster.

Of course, the strategy of adding remailed catalogs, adding additional catalog contacts, adding pages, adding e-mail contacts, adding affiliates, increasing online marketing spend, you name it, is a long-term recipe for financial disaster. We add these tactics to grow sales. Then the merchandising team does a good job, and these tactics become profitable. Inevitably, however, customers don't want to buy your product, or become frustrated by being spammed by your marketing activities.

In many cases, you cannot "retreat". Your shareholders won't tolerate a "rightsizing" of the marketing plan, in order to profitably drive sales. In other words, you couldn't reduce your bloated catalog or online marketing budget by forty percent, because it would come with a twenty percent reduction in sales --- a result that is not acceptable to your executive team or shareholders.

In a perfect world, you create great product that customers crave. In our world, not everybody creates great product that customers crave. Regardless, we have to find ways to grow sales without the benefit of great product. That's the job of a Database Marketer.