December 04, 2014

Two Types of Companies

There are two types of companies I run into.

The first type of company spends a lot of money on marketing. I see catalogers spending 40% of net sales on marketing. I see e-commerce businesses spending 25% of net sales on a dizzying array of a thousand online marketing channels.

If you are an employee at this company, marketing is part of your DNA. You cannot generate orders without marketing. Anytime you have success, your success happened because of the marketing campaigns you executed. And you are right. Because your sales are generated from marketing, your success came from marketing. When the merchandising team fails, of course, and customers choose to not buy merchandise, marketing gets blamed - even though business failure has nothing to do with marketing - you DNA dictates who gets blamed. Is it any wonder, then, that CMOs get fired every two or three years?

The second type of company sells merchandise. Merchandise is in the DNA of the company. This company strongly believes that without great merchandise, customers will not purchase. Marketing is viewed in the same way that a call center is viewed in a direct business, or the point-of-sale system is viewed in retail - it is part of the process of a customer buying merchandise.

The first type of company gets the customer in the Upper Right segment.

The second type of company gets the customer in the Lower Right segment.

Both companies believe they are right.

The first type of company grows faster, experiences more stress, and generates less profit as a percentage of sales.

The second type of company grows slower, experiences less stress, and generates more profit as a percentage of sales.

Neither strategy is right or wrong, both strategies can be highly successful. But as a business leader, vendor, or consultant, how you deal with each company is fundamentally different.