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.

6 comments:

  1. Very interesting post! What happened a few months/years later? Did the company went belly up or succeeded at selling under-quality products? You might have achieved your goal, but was it in the best interest of the company or a shorter view to satisfy the bosses and investors?

    Thanks for sharing your experience.
    Stephane
    immeria.net

    ReplyDelete
  2. A few years later, the merchandise was discontinued, and the merchandise executive was let go by the company.

    You'll find that retail/online businesses move with a surprising efficiency ... there is a Darwinian element to it. If your executive team doesn't agree with you, let the customer take care of business for you!

    ReplyDelete
  3. I had the same thought as Stephane - great marketing can only do so much for a poor product. The situation Kevin described took a few years to sort itself out. The damage to customers and to the brand can be significant and sometimes not recoverable for smaller businesses.

    Kevin, looking back is there a way you could have included customers in that discussion, and not just limited the negative back-and-forth to "internal" points of view?

    ReplyDelete
  4. There was a lot of input from customers, from executives all over the company (not just the division we were working for), from our advertising agency, you name it, somebody had an opinion.

    Worst on the customer front ... folks picked out the one comment from one customer that matched their point of view, and then ran with that one opinion.

    ReplyDelete
  5. Anonymous8:05 PM

    Kevin,
    I will play devil's advocate here..the merchandise executive has 1. Limited budget, 2. Intense pressure to perform already exists, and 3. reliant on many factors that are not in his/her direct control--manufacturing issues, logistics issues, trying to find right mix for customers, etc. As you said, the results they had from a customer skewed his results. Not defending poor decisions, just explaining.
    That being said, leads me to point that you were there to explain to your bosses your sales plan...I have feeling other gentleman was called on carpet many times before and since that meeting.
    The difficulty isn't you were stuck with a bad merchandise executive, it is how do you do your job? As you, Stephanie and Paul point out, if merchandise is that bad, than no amount of successful marketing will make it work. You later point out it is Darwian process as you stated so you just wait for that process to follow through and both bad merchandise and bad merchant are gone.
    Is there a way you could have increased sales in other lines, increased overall sales or anything else that would have satisfied your bosses and yourself?
    I believe it is called the AA prayer where the prayer is for serenity to accept the things you cannot change, the will to change the things you can, and the wisdom to know the difference.
    You were called on carpet for what you could do...you had to accept problem of bad merchant(or have tried a better tactic like a one-on-one with the guy rather than embarrassing him in publc). Were there any bright spots in the product line? Maybe 2 of 10 items actually sold well---focus on the 2. Items constantly out of stock? What is a good substitute and focus on that.
    There is a movie called suckers about car dealers--really goofy movie and I only recommend it for one scene--the head honcho trying to inspire his salesteam says "Give me the worst lines you got" and for every customer line he has a great comeback.
    That's what you have to do---no matter if you don't have a product customers want, convince them you do.
    Not picking on you, just what I took from your story.
    K

    ReplyDelete
  6. K --- good comment, those are reasonable thoughts!

    ReplyDelete

Note: Only a member of this blog may post a comment.

I Just Don't Understand It

E-commerce pros ... I'll address you tomorrow. Can I share something with the rest of you? I'm as busy right now as I've been in...