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CHAPTER ONE

MARKETING STRATEGY

In the spring of 2004, I debated Sergio Zyman, author of the foreword to this book. We conducted a debate in Boston entitled Marketing Mayhem on the importance of smart strategy vs. big ideas. It was billed as Sergio Zyman “the Armani-wearing Mexican” versus Doug Hall, “the Jimmy Buffet–wearing Canadian.”

I defended the power of big ideas and stated that when “gurus” like Sergio bring their strategic tablets down from their lofty mountains, nothing happens until they’re translated—if they can be translated at all—into a customer-relevant big idea.

Sergio defended the power of marketing strategy and argued that without strategic discipline, “touchy-feely” creativity is a waste of time.

Following numerous jabs and pokes, including a healthy discussion on Sergio’s strategic misfortune introducing “New Coke,” we came to the conclusion that no matter how hard we tried to defend our singular positions, STRATEGY and the IDEA are of EQUAL importance.

Great strategy not translated into a compelling marketing message is just as ineffective as a great message that lacks strategic discipline.

In effect, great marketing is about “whole-brain” thinking. It’s a blend of left-brained strategic discipline with a right-brained big idea.

The Scientific Advice and Practical Ideas on the following pages will cause you some anxiety. They will challenge your established beliefs. That’s GREAT! It means I’m making progress on my mission to incite a revolution in your marketing thinking.

With respect to my friend Sergio Zyman, this first chapter focuses on Marketing Strategy.

In this chapter you will find Scientific Advice and Practical Ideas on 1.) the fundamentals of smart strategic thinking, 2.) selecting target audiences, 3.) naming—the single most important decision you make as a marketer, and 4.) advice and ideas on marketing plans.

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SCIENTIFIC

ADVICE

WHEN IT COMES TO DRIVING NEW PRODUCT TRIAL RATES AND CORRESPONDING SUCCESS RATES, YOU HAVE THREE DISTINCT STRATEGIC OPTIONS

A monumental study involving 239 new products and 3,500 consumers tracked over 52 weeks identified three distinct strategies for achieving success in generating trial of new initiatives. As the leader of your organization, you need to make a commitment to one and focus your organization’s energy.

1. Be Bold and Brave!: New products offering a major point of difference generate above-average trial rates. Interestingly, the research finds a U-shaped distribution. You can succeed with a low price and little uniqueness or by being Dramatically Different. Moderate levels of uniqueness are the least successful. At this level of uniqueness, customers are asked to make a change in their behavior for no good reason. To be successful with a uniqueness strategy, the uniqueness must be big enough and bold enough to be worth the hassle of changing.

2. Spend! Spend! Spend!: Spending MORE MONEY does work. The research found direct relationships between new product trial rates and 1.) higher average advertising spending, 2.) higher levels of feature, display, and distribution, and 3.) lower average price. The challenge with this strategy is to balance the investment relative to the longer-term return.

3. The Original Wal-Mart Strategy: The third approach is to attack the market where there is little competition. New products generated greater trial when introduced into 1.) categories with fewer existing brands, 2.) less existing advertising spending, and 3.) less intense competitive reactions. This is the Wal-Mart strategy. Wal-Mart focused their initial expansion in small towns to avoid strong competition. And as Sam Walton said, “There was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.” When they achieved skill and scale in distribution and merchandising they were then ready to compete in the major metro markets.

PRACTICAL IDEAS

Leverage Courage: Dramatic Differences in products and services can occur only when management has the courage to direct resources on the discovery and development of true new-to-the-world inventions. Courage is a necessity because with real R&D, there is a risk of failure. Fortunately the rewards are also spectacular. To the courageous go higher trial rates, sales, profit margins, and government-granted monopolies in the form of patents.

Combine Resources to Create a SURGE in Spending: American distance runner Frank Shorter used a SURGE strategy to win the 1972 Olympic Marathon. “At nine miles, the front pack slowed going around a hairpin turn,” he explained. “My momentum carried me to the front. I put down my head and ran to get away just as I had on the playgrounds of my youth. In track races, if you’re willing to take the risk, you can throw in surprise surges. If you train to do this, you can recover more quickly than the opposition. You keep doing it until no one covers the next surprise surge and you win. The surge lasted almost eight miles. At 17 miles I slowed down to let my body recover, but I didn’t look behind.” Shorter destroyed his opponents through the use of a SURGE of energy. Think: How can you create a SURGE in spending that will break the “will” of your competition? Can you “borrow” marketing money from other divisions within your company or partner with other small businesses for a joint marketing effort to create a SURGE in spending?

Have Patience: Unlike Target and others who went to small towns only after having saturated the big cities, Wal-Mart took the opposite approach. It entered the small markets—the low-potential markets—first, then went to the BIGGEST MARKETS. Can you do the same? Can you first enter a more minor channel of distribution, sell some, learn a lot, and make improvements in your offering, your marketing, and your plan?

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SCIENTIFIC

ADVICE

THE EASIEST WAY FOR YOU TO IMMEDIATELY IMPROVE YOUR MARKETING RESULTS IS BY MAKING DECISIONS BASED ON A 60/40 WEIGHTING OF PURCHASE INTEREST AND UNIQUENESS

The value of uniqueness as a driver of marketing success is well known. Uniqueness sets off a chain reaction of benefits. When your offering is unique, it’s easier to get distribution and awareness. Your trade customers have a real reason to stock products that are genuinely new, as opposed to simply another variation of the same old stuff. When you’re really new and different, it’s easier to make a profit, as customers have no viable alternative. And with no direct competitor, you don’t have the downward pricing pressure that commodity markets experience.

To dramatically improve your ability to select between two new product options, consider BOTH customer purchase interest and uniqueness.

Research comparing customers’ initial purchase intentions and perceptions of uniqueness with actual marketplace behavior found that a weighting of 60 percent of customers’ purchase intention score and 40 percent of uniqueness perception score is most predictive of actual marketplace behavior.

This approach can be challenging to execute. The vice president of a major beauty care company had two new products to decide between. Concept A had strong purchase interest and horrible uniqueness scores. Concept B had very good purchase interest scores with exceptional uniqueness scores. Despite my pleading to take uniqueness into account when making the decision, the vice president selected New Product A because, as he said, “It’s the safest choice to go with the idea liked by the most consumers.” Fast-forward twelve months: New Product A is introduced and fails. Without a unique product, the trade is reluctant to take the item, and because the product isn’t inherently newsworthy, the brand has trouble generating awareness.

The need to maintain a healthy tension between uniqueness and meaningfulness was shown in a study of 312 project managers. The research found that “meaningfulness” of uniqueness in new products and marketing plans was twice as predictive as “uniqueness” alone in explaining new product sales, market share, relative profitability, and return on investment.

PRACTICAL IDEAS

Get Data Fast and Cheap: If you don’t usually collect this kind of data, here’s the fast way to gather it: Prepare written descriptions of each of your ideas for new products or services. Ask thirty or more potential customers (the more the better) the following questions for each of the new ideas:

1. On a scale of 0 to 10, how likely is it that you would purchase this product/service if it were offered?

2. On a scale of 0 to 10, how unique do you believe this product/service is?

Calculate the average value for each question, then multiply the first question’s value by 60 percent. Multiply the second question’s average by 40 percent, and add the two figures together. Finally, compare the weighted scores for each of the written descriptions.

Mine Archives: If you already have lots of past concepts that you’ve tested, review the results from a fresh perspective. Apply a 60/40 weighting to the purchase intent and uniqueness questions and look for potential big ideas that you might have overlooked in the past.

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SCIENTIFIC

ADVICE

WHEN YOUR STRATEGY IS FOCUSED ON INNOVATIONS THAT CREATE NEW MARKETS OR INDUSTRIES, YOU’RE 9.6 TIMES MORE LIKELY TO REALIZE PROFITABLE SUCCESS THAN YOU ARE BY “PLAYING IT SAFE” AND FOCUSING ON INCREMENTAL INNOVATIONS

Be bold! Be brave! Strategies focused on close-in ideas or “low-hanging fruit,” as they’re called, are for losers. There is no such thing as easy profits. The smart path, the only reliable path to big SUCCESS, is BEING BOLD!

A study of 108 companies found that 86 percent of new offerings were “safe ideas” (line extensions or other variations of current offerings) and these safe ideas collectively delivered 62 percent of sales and 39 percent of the average company’s profits from innovation. Alternatively, the 14 percent of innovation offerings focused on creating new markets or industries delivered 38 percent of sales and some 61 percent of innovation profits. Comparing the ratios of percentage of profits with the percentage of initiatives, we find that products or services focused on creating NEW MARKETS generated 3.8 times more sales and 9.6 times more profit.

Automobile visionary Henry Ford rejected the prevailing view that cars were for “rich people” and saw a future where everyone could afford a car. He described the importance of a focusing on new markets and ideas this way: “Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change. One sees them all about—men who do not know that yesterday is past, and who woke up this morning with their last year’s ideas.”

Sadly, the depth and breadth of the challenge is huge. Research of 120 brands across 13 different countries found that only 1 in 10 users felt their brand was even modestly different from others. And the perceptions of those who are not brand buyers was only half as strong.

The Harley-Davidson motorcycle company is in business today because of its early focus on new markets. It looked for sales opportunities beyond consumers. It convinced the U.S. Postal Service to move from bicycles to motorcycles. It also found great success with sheriffs, state patrols, and the military. By the end of World War I, all of Harley-Davidson’s production was going to the military.

PRACTICAL IDEAS

How NOT to find unique ideas: Focus groups are the worst way to find big, bold ideas. Customers can only tell you the world as they know it. Quality guru W. Edwards Deming once said, “Customers can’t say what new product or service would be desirable three years from today. New ideas are generated by imagination, risk, innovation, trial and error by the producer.”

How TO FIND unique ideas: Take personal responsibility for the challenge. Get personally involved in your category and in categories near your category. Seek out the “thought leaders” in your industry. Who are the retailers, salespeople, consumers, customers, or even members of the media who are most aware of where categories are going? Seek them out and ask about tomorrow. Ask them what they anticipate the future looking like in three years, five years, and ten years. Don’t be bashful. Just ask those involved in your industry for their ideas and insights. Listen especially closely to those ideas that contradict your established thinking. Radical ideas, different ideas offer the greatest potential for helping you realize meaningful growth.

Think NEW TO THE WORLD, Not New to You. It’s common to confuse “new to our company” with new to the world. Customers don’t care whether you’ve never offered a certain type of product or service before. They’re interested only in what you can do that NO ONE ELSE CAN DO.

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SCIENTIFIC

ADVICE

A STRATEGY THAT ANTICIPATES CUSTOMERS’ FUTURE NEEDS IS TEN TIMES MORE PREDICTIVE OF SUCCESS THAN ONE FOCUSED ON CUSTOMER SATISFACTION

GET IT? Read it again! Innovation strategies focused on “serving customers” are for losers. To win big, you must find the courage to be a true LEADER! You must ANTICIPATE the future.

Here’s the research: Leaders of 120 different business units were asked a series of questions to determine their innovation strategy. Their orientation toward a CUSTOMER SATISFACTION strategy was determined based on agreement with such statements as: We are more customer-focused than our competitors, We measure customer satisfaction systematically and frequently, and Our business exists primarily to serve customers.

Their orientation toward a FUTURE FOCUS was determined based on agreement with such statements as, “We help our customers anticipate developments in their markets,” “We continuously try to discover additional needs of our customers of which they are unaware,” and “We innovate even at the risk of making our own products obsolete.”

The results of the two orientations were then correlated with each business unit’s innovation success versus competitors. Modeling found that a FUTURE FOCUS beat a Customer Satisfaction focus by a factor of TEN!

Another study of 312 project managers found that a “customer-focused” orientation significantly reduced the uniqueness of new products created by a company. Finally, research has found that a customer-satisfaction focus often results in major pressure on profits. John Naver of the University of Washington Business School described it this way: “Customers’ expressed needs and benefits can be known readily by all competitors—a situation that leads typically to competitors offering the same benefits to a given set of customers and then having to engage in aggressive price competition in the attempt to create superior value for the subject customers.”

PRACTICAL IDEAS

Follow the Questions: Take the questions from the research and use them as stimulus for new ideas.

How can we help customers anticipate developments in their markets?

How can we discover additional needs of our customers of which they are unaware?

What could we do that would make our own products obsolete?

Unlearn the Past: Dominant firms in disk drives, copiers, minicomputers and mainframe computers stayed in their existing businesses too long. Stop asking current customers for ideas. Akio Morita, co-founder of Sony said, “Our plan is to lead the public with new products rather than ask them what kind of products they want. The public does not know what is possible, but we do.” Rather, focus some energy on the fringes. Spend time with customers who NEVER EVER buy your category. Look into the future for your industry. What would you do if you were starting your business all over again right now?

Exceed Customers’ Expressed Needs: To win customer loyalty, set a standard of exceeding customers’ expressed needs. When you exceed customers’ expectations, you will reduce your need to offer price discounts in order to create a value perception.

Anticipate the Future: Clayton Christensen of Harvard, author of The Innovator’s Dilemma, described the problem this way: “An excessive customer focus prevents firms from creating new markets and finding new customers for the products of the future. They unwittingly bypass opportunities and allow entrepreneurial companies to catch the next great wave of industry growth.” Instead of discovering the one right answer, challenge yourself and your staff to create three “future-focused scenarios”: If X happens, then what will customers want? Translate your thoughts into writing, and step back and assess the probability of each scenario. Then TAKE ACTION.

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SCIENTIFIC

ADVICE

HAVING THE COURAGE TO BE THE FIRST TO MARKET NEARLY DOUBLES YOUR SALES VERSUS BEING THE FOURTH TO MARKET

When you are the first, you win a chain reaction of advantages. When you are the first to discover a new technology, the government gives you a government-guaranteed monopoly. When you are the first with a new idea, you generate real NEWS—positive publicity and “buzz.”

When you have the courage to take a stand, stick your neck out and be a pioneer, you gain a laserlike focus on your development efforts. Your packaging, pricing, positioning, and product or service development efforts are more efficient as a result of a common alignment.

Research on the impact of order of entry for new brands quantifies the advantage of being first versus being a follower. On average, brands that are second to market generate 71 percent of the sales of the pioneer. Those that are third generate 58 percent, and those that are fourth some 51 percent of the sales of the brand that is first to market.

By definition, the first to market is news. When you have news, then you have information to communicate, and as the first, you command a customer’s conscious attention.

When you have a copycat offering, you are more likely to have to resort to low prices and other Mindless gimmicks to get customers’ attention.

IMMEDIATE FIVEFOLD IMPROVEMENT IN EFFECTIVENESS: When you offer “real news,” the impact of your sales and marketing efforts is multiplied. A study found that advertising for products offering REAL NEWS was FIVE TIMES more effective at growing sales than advertising for more familiar or less novel, established brands.

NOTE TO SKEPTICS: There are studies indicating that pioneers fail. Truth be known, pioneers, followers, and followers of followers all fail. However, if you read ALL the studies—and I have—the lesson is clear. When you’re a true pioneer, you measurably increase your odds of success.

PRACTICAL IDEAS

Define Yourself from the Point of View of First: Look within your offering and find something that you are the first to offer. Ideally, this is a simple and dramatic statement: the first computer repair service that does house calls, the first beer with zero calories (we can dream, can’t we?). Don’t be surprised if you don’t have something simple to claim. Most products and services don’t. Don’t despair. You have other options.

Define First as a Limited Category: Define what you’re the first at based on a limited subset. For example, we’re the first in our town to offer in-home repair of consumer computers. Or we’re the first in our industry to offer 24/7 customer service.

Define First as a Combination: Define what you’re the first at based on a unique combination. For example, we’re the first to offer French cuisine dining in thirty minutes. Or we’re the first industrial lubricant company to offer twenty-four-hour delivery and credits for recycled oils.

Repeatedly Articulate What Makes You the First: Articulate your point of difference everywhere—at the start of every sales presentation, on every advertisement, on every brochure, on your voice mail message, on your business cards, on your letterhead, and on every T-shirt, mouse pad, and coffee cup that you print.

Meaningful Difference Affects Development Success: The lack of a Meaningful difference is a common reason why many managers have a hard time generating momentum on “small” ideas within their organizations. When you seek the support of fellow employees on an idea that is not meaningfully different, you are in effect asking them to make an operational change or disruption for no good reason.

THE SECRETS TO SUCCESS ARE SIMPLE!

First, be Bold and Brave.

Second, add Uniqueness to innovation-decision metrics.

Third, seeking new markets is ten times more successful than pursuing incremental innovations.

Fourth, a FUTURE-FOCUS strategy is ten times more valuable than a “Voice-of-the-Customer” approach.

Finally, PIONEERING results in DOUBLE the sales volume over being fourth to market.

The bottom line is simple:

S.O.S. = S.O.L.

If you offer the S.O.S. (Same Old Stuff) you are S.O.L. (---- Out of Luck).

GROW OR DIE!

THERE IS NO OTHER OPTION!

Become a FANATIC for uniqueness! Be so distinct you’re perceived to be a MONOPOLY, or don’t whine when you become a price-driven COMMODITY. The only thing that holds back most companies from success is the lack of courage in the executive suite. Instead of boldly blazing new trails and anticipating the future, most executives play not to lose.

There are two ways to fight the fear that comes with change:

1. Focus on SERVING OTHERS: The most effective way to gain the courage to change is to focus on SERVING others. The soul of heroic acts, be they storming the beaches of Normandy, discovering a life-saving drug, or defending your children from harm, is sacrificing oneself for others. When you are on the right side of “RIGHT,” you will have the courage necessary to win over those who are WRONG.

2. Evoke the only emotion more powerful than fear—GREED: If your organization or banker lacks a soul that can become truly committed to serving others, then evoke greed. When the opportunity for financial gain exceeds the fear of failure, then you will win support from even the most heartless of financial plunderers.

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SCIENTIFIC

ADVICE

PLAN PATIENCE INTO YOUR MARKETING PLANNING TO ENSURE THAT YOU HAVE THE ENERGY TO ENDURE THE JOURNEY TO BIG SUCCESS

Research indicates that it takes thirteen months of research and development to make a 20 percent change in a product, it takes 20 months for a 40 percent change, and 41 months for a 100 percent change.

Research also indicates you need to have PATIENCE with your introductory marketing plan when you’re introducing a new product or service that represents a GENUINE REVOLUTION.

This advice comes from a long-term study of thirty-one mega innovations such as automobiles, color TVs, camcorders, compact disc players, cellular phones, direct broadcast satellite TV, and home VCRs. On average, it took six years before volume grew rapidly. Volume in the early years was pathetic. In fact, just before the takeoff point, only 1.7 percent of customers had made a purchase of items that today are multi-billion-dollar industries.

Really big ideas take time to educate the marketplace and to gain customer trust. It’s possible that with a huge advertising budget you can break the cycle of history. However, the probabilities are clearly against you.

The CEO of one of America’s largest companies told me that he has come to the same conclusion. The more UNIQUE the company’s new product or service, the more it spreads its marketing dollars over a longer period of time. “It’s been hard, but we’re learning patience,” he says. “We now lower our initial volume objectives and spread our marketing investment over as much as four years instead of focusing on twelve to eighteen months.”

The message is simple: If you wish to CHANGE THE WORLD—you need PATIENCE with your development and marketing of your BIG IDEA.

PRACTICAL IDEAS

Be Prepared to Survive on Low Volume Levels: There is a good chance that volume will be a fraction of what you anticipate. Plan how you will make adjustments if the initial volume is smaller and growth is slower than expected. In the calm before introduction, you have significantly greater ability to develop smart and effective contingency plans.

Win in Niche Markets to Reduce Discouragement: Focus your sales and marketing efforts in the first few years on niche markets where the point of Meaningful difference you are delivering is most highly valued. These markets will be less price-sensitive to your initial high cost. And by staying focused on a market where you can “win,” you will reduce the chances for emotional wreckage and discouragement caused by your mega-meaningfully different idea taking time to generate major volume. The Iams Company initially sold its premium pet foods exclusively through veterinarians, a market it could defend and compete in. Its success was so great that Procter & Gamble paid more than $2 billion for the company. P&G then used its marketing muscle to take the brand into mass-market distribution.

Be Cautious with Early Investments and Forecasts: When your company’s development investment has been big, the tendency is to be aggressive with early investments and forecasts. Be cautious. Set up a conservative introductory sales and marketing program that you can clearly “win” at. Then separately, conduct investment tests in smaller markets to validate that a bigger investment will deliver a favorable return.

Reassure Customers of Your Staying Power: Reinforce the long-term viability of your company and offering. Research on customers’ perceptions of major innovations finds that beyond key benefits, customers are also concerned about long-term viability. Reinforce that your new product, service, or company is here to stay.

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SCIENTIFIC

ADVICE

TWICE AS MANY NEW PRODUCTS OR SERVICES FAIL BECAUSE OF A BAD IDEA AS BECAUSE OF A POOR MARKETING PROGRAM OR POOR PRODUCT/SERVICE PERFORMANCE

New products and services are a three-legged stool consisting of the idea, the product/service, and the marketing program. Mathematically, the three have a direct and multiplicative impact on success.

No matter how great your offering’s performance and marketing plan, without an idea that makes a Meaningful difference to customers, few if any will bother to purchase it.

No matter how great your idea and marketing program, no one will make a repeat purchase without a great product, and you will fail.

No matter how great your idea and product performance, no one will know to purchase or be able to purchase your product without a marketing plan that generates awareness and distribution.

Tracking forty-eight new products from entry into the marketplace, a study found that on average they generated 58 percent awareness. Of those aware, 9 percent actually purchased, and of those who purchased, some 38 percent made a repeat purchase. If we subtract each of these results from the theoretical 100 percent that could have been achieved, we find that the idea is the largest source of lost customers.

42 percent did not become aware of the offering—a failure of the marketing plan.

62 percent who tried the product didn’t make a repurchase—a failure of the product performance.

91 percent of those who were aware didn’t make a purchase—a failure of the IDEA.

NET: Bad Ideas are a 2.2 times greater source of failure than marketing plan and a 1.5 times greater source of failure than the product performance.

When your volume is low versus expectations, look first at improving your core idea. The meaningful benefit difference offered by your brand is the single largest source of lost customers.

PRACTICAL IDEAS

It’s the Idea, Stupid: Step back and ask yourself what meaningful difference you offer to customers. A classic mistake is to take one idea and spend 99 percent of your money, time, and energy optimizing marketing efficiencies through reviewing media buys, sales-force coverage, or mail-order list selection. At best, you can realize a net efficiency improvement of maybe 2 percent to 5 percent. A smarter strategy is to focus on the message itself. When small-business owners spend a full eight hours improving their marketing MESSAGE, they realize as much as a 10 percent to 50 percent improvement in marketing response rates.

Play “King of the Hill” with Marketing Messages: There is no such thing as a marketing message that can’t be made more effective. Challenge yourself and your staff to perpetually discover new and more effective ways to articulate your Meaningful Marketing message.

Develop low-cost test systems, such as direct mail or point-of-purchase testing systems, to quantify improvement. On a regular basis review the collection of tests you’ve conducted to identify patterns and trends regarding what’s working and what’s not.

Improve Marketing by Spending More on Product: Most marketing spending is a meaningless, Mindless waste. Challenge yourself to consider what level of product or service improvement you could deliver if you dramatically cut marketing expenses. Short term, the volume may take a hit, but long term, when word of mouth from customers kicks in, you could realize substantial growth.

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SCIENTIFIC

ADVICE

NEW PRODUCTS AND SERVICES THAT ARE CONCEPT EXTENSIONS GROW SALES AND PROFITS, AND CAN HELP GROW YOUR PARENT BRAND

The most obvious reason to pursue new products and services is to grow sales and profits. However, if we’re smart about it, we can also use them to grow our existing businesses. Note that concept extensions are not the same as concept variations, which might represent other flavors or sizes. Concept extensions belong in separate categories.

Research shows that the introduction of new products and services can revitalize customer perceptions of an existing Flagship brand. Research was conducted on the “halo” effect on the parent brand of introducing line extensions (new flavors or varieties of the same product) as well as new concept extensions (leveraging the Flagship Brand’s Overt Benefit in NEW PRODUCT CLASSES).

After just a twenty-five-second exposure to ideas for line extensions or concept extensions, consumers’ attitudes toward the parent brand improved significantly. Important, too, is that the attitude improvement remained even a week later to those shown the ideas for concept extensions.

Net: When you introduce concept extensions, i.e., take your trademark and benefit into new categories, you place a sustainable halo over your existing brand.

Research also shows that in the event that the concept extension is a failure, there is less risk of a negative effect on the parent brand’s image. Customers don’t appear to blame the parent brand for the failure of a concept extension.

Net: With Concept Extensions you gain a positive halo for your Flagship Brand with less risk of damaging that brand in the event of a failure.

PRACTICAL IDEAS

Think “could do” not “would expect”: A classic mistake when looking for concept extensions is to follow a path of asking consumers or customers what other products or service they would expect the Flagship Brand to offer. It’s a mistake because you’ll be sent chasing variations that are not true CONCEPT EXTENSIONS but rather minor, micro-niche line extensions. Instead, take responsibility and think “COULD DO” not “WOULD EXPECT.”

List the OVERT BENEFIT you deliver to customers. Then challenge yourself to think of categories beyond your current category, your current channel of distribution, your current knowledge base. Challenge yourself to think of categories by focusing on your loyal and your occasional customers. Where else do they shop? What do they do? What are their interests?

Having identified potential category extensions, now get customers to react to the ideas YOU’VE DEVELOPED. Check out the research article based on this advice (“The Dynamic Effect of Innovation on Market Structure”) in the Technical Appendix. Conduct a study similar to the one described, and quantify for yourself the impact of the Concept Extension on your Flagship Brand.

Don’t Forget Licensing or Acquisitions: If you’re adventurous in your thinking, you will create ideas that make NO SENSE to develop and market. No problem. If the idea is big enough, it might justify your purchasing another company that has skills in the new category. Alternatively, if your Flagship Brand is well respected, it might be that you can license the idea and your trademark to another company to execute. Remember that the research indicates Concept Extensions offer significant opportunities and little risk.

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IF YOU WISH TO GROW BIG, FINDING NEW CUSTOMERS IS 2.8 TIMES MORE IMPORTANT THAN BUILDING CUSTOMER LOYALTY

A common debate when attempting to grow sales is, Should the primary emphasis be on increasing the number of customers or on increasing loyalty by selling more to existing customers?

Common wisdom is that it’s easier to build sales through increasing loyalty than it is by cultivating new customers. For small growth—1 to 20 percent—this might be true. But for mega growth—25 to 400 percent—the common wisdom is flawed.

This truth is based on analysis of 9,804 brands scanned by UPC (universal product code) numbers in grocery, mass merchant, and drug stores. A statistical model was created to explain total annual sales relative to the number of customers the brand had and dollars spent per customer over the year. Analysis found that the number of customers was 2.8 times more important in explaining big brand success than loyalty was.

As a secondary check, the 9,000-plus brands were divided into three equal-size groups based on total annual sales, and the relative importance of the number of customers versus loyalty was compared. Again, the number of customers was found to be about three times more important than the amount purchased per customer.

Specifically, versus small brands, big brands had 978 percent more customers who purchased on average 331 percent more per year. Clearly both factors are important. However, if your resources are limited, the data indicate that your first priority should be on increasing your total number of customers.

Research also indicates that the smaller your brand, the more likely you are to lose customers—“churn.” Research shows that small brands have nearly twice as many customers switching to another brand as big brands do. In category after category, research shows that brands with the greatest number of customers also have the greatest loyalty.

I recognize that many will resist this learning. That’s fine. As Dr. Deming said, “Learning is not compulsory … neither is survival.”

PRACTICAL IDEAS

Quantify Your Customer Count: Quantify how many customers you currently serve and determine whether that customer base is growing or declining. Identify where they are coming from or where they are going. Set a numeric and specific goal for growth. With data, you can make quantitative progress.

Perpetually Focus on Finding New Customers: As part of every sales and marketing plan, devise an overt and specific program for bringing in new customers. Regularly seek referrals from existing customers. Hold educational seminars that demonstrate the virtues of your product or service.

Relentlessly Seek New Customers, Occasions You Can Serve, and Problems You Can Solve: Think beyond people. Think of occasions when your product or service is used. How can you modify it to broaden appeal? Think of target problems that you can solve with your current offering or a modified offering. Be bold in your thinking.

Remember the Goal Is Total Customer Growth: Becoming really big requires more net customers. If you add 1,000 and lose 1,200, you’re not going to grow. As you focus on growth, be sure that you’ve committed the necessary resources to maintain vitality among existing customers.

Redefine Your Benefit to Broaden Your Audience: By redefining your benefit, you open yourself to new customers. Classical music concerts are usually thought of as entertainment for classical music lovers. The Indian River Festival of Classical Music doubled attendance by redefining events more broadly as experiences for nurturing romance—“Music You Can Hear with Your Heart.”

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INCREASING THE AMOUNT BOUGHT PER PURCHASE IS 3.5 TIMES MORE IMPORTANT THAN THE NUMBER OF TIMES A CUSTOMER PURCHASES

As stated before, increasing your number of customers is the MOST IMPORTANT strategic area for growth. However, that alone will not ensure success. In addition to bringing in new customers, you must be sure to keep current ones. You must ALSO build and maintain loyalty. Obviously, the most effective way to generate loyalty is to offer a GREAT SERVICE OR PRODUCT.

Annual purchase volume is made up of the amount of times customers buy and the amount they buy at each purchase. In the marketplace both strategies are pursued with brands offering frequent-buyer clubs as well as supersizes. But from a marketing strategy standpoint, it’s most important to increase the amount bought per purchase.

Statistical modeling of household purchasing data from more than 9,000 consumer products found that volume per purchase is 3.5 times more important than frequency of purchase in explaining the total amount that a customer purchases each year.

Conceptually this makes sense. Competition is not static. Your competitors are perpetually making offers to entice your most loyal customers to experience what they have to offer.

Think of customer loyalty as a giant roulette wheel. With more loyal customers, you have a larger proportion of the wheel dedicated to your brand. When customers make purchase decisions, they spin the wheel. With each spin of the wheel, there is a defined opportunity to win or lose your customer’s next purchase. When a customer purchases twice as much as normal, you receive 100 percent of both the current purchase and the next purchase.

PRACTICAL IDEAS

Design Tangible Incentives for Volume Purchasing: When customers are prepared to purchase, give them overt incentives to purchase more. Don’t harass buyers. Rather, delight them with a tangible opportunity to make a larger investment in your brand through a discount on larger-volume purchases.

Repackage—Supersize!: Repackage your product or service into larger sizes. If you market services, offer long-term contracts. If you sell products, create supersized versions. Increasing product package size increases both customer value and your profitability, as it rarely causes a proportional increase in your costs. The same is true for services.

Use Customer Service to Rewrite Purchase Orders: Use customer-service visits, calls, e-mail, or direct mail to upsell. Give customers a special opportunity to “rewrite the purchase order” and extend their product or service usage. This has multiple benefits to you: 1.) It provides you with direct customer feedback on quality; 2.) it enhances customer perception of your commitment to them; and 3.) it offers the opportunity to expand the customer’s initial purchase.

Design Complete Solutions: Think hard about what else a customer needs to purchase in order to more fully experience and enjoy your product or service. Challenge yourself to create a complete-solution package so customers don’t have to make a separate purchase.

Bundle Your Company’s Brands: Bundle a collection of your company’s products and/or services to increase your share of the customer spending. This is a way to realize genuine synergy from owning multiple brands.

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THE SIMPLEST WAY FOR YOU TO GROW TOP-LINE SALES IS TO CUT YOUR NUMBER OF VARIATIONS

The easiest way to increase sales and profits may be to discontinue 50 percent of your variations. Classic thinking is that offering a multitude of product and service options will help you increase sales because you’ll reach a broader range of customers. (As mentioned earlier, variations and extensions are not the same. This strategy applies to variations of the same concept—extra service plans, flavors, or sizes. Concept Extensions grow the brand in a different product class or category.)

Three separate studies indicate that reducing the number of variations you offer can have a dramatic positive impact on sales. It appears that more variations result in more customer uncertainty and consequential delay of decision making and purchasing.

Study 1: Retail stores eliminated 10 percent of the least popular items in eight categories from their shelves. This alone resulted in a 4 percent increase in category sales.

Study 2: The bottom 54 percent of products were discontinued across forty-two categories of an Internet-based retailer. This resulted in an average 11 percent increase in sales.

Study 3: Consumers were offered samples of twenty-four or six flavors of jam to taste and purchase. When twenty-four flavors of jam were offered, 2 percent of customers purchased. When six flavors of jam were offered, 12 percent of customers purchased.

Basic production economics tells us that low-selling variations are often a drain on profitability. Yet often we fall into the temptation of offering something for everyone.

PRACTICAL IDEAS

Get the Real Numbers: Assess your business situation with mathematical honesty. What are the real sales and real net profit of each and every product variation you offer? Look at the long-term trends and identify those offerings in long-term decline. Examine the bottom 50 percent of your offerings. If you were to eliminate them, what percentage of the volume would shift to other offerings? What cost savings could you realize? Tom Monaghan, founder of Domino’s Pizza, simplified his menu by limiting the number of sizes and toppings—and enabled consistent thirty-minute delivery by doing so.

Evaluate for Meaningful Differences: Review your brand’s offerings and classify them according to their Meaningful benefit difference to customers. Challenge yourself to document the tangible differences between products. Review your marketing materials for the clarity of your differences. Ask your customers for their understanding of the differences. Having made your evaluations, make courageous cuts in the variations and permutations you offer. Items that offer the same basic benefits are excellent candidates for elimination.

Focus on an Area Where You Can Be Excellent: Leslie Wexner was running a moderately successful women’s clothing store. After noticing that sportswear was his biggest seller, he opened THE LIMITED (so named because he had a limited selection of sportswear only). As Wexner explained, “[Sportswear] was our most profitable line, and my feeling was that if you made money in chocolate ice cream, why sell other flavors?”

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WHEN YOU PURSUE INNOVATIONS THAT CREATE NEW MARKETS YOU REALIZE 9.6 TIMES MORE PROFITS THAN WHEN YOU TRY TO “PLAY IT SAFE” WITH INCRMENTAL INNOVATIONS

Success in sales and marketing is a relative concept. It’s relative to how much you’ve sold versus a predetermined objective. Most managers have an intense personal interest in results relative to the objective because that’s usually the basis for personal commissions and bonuses.

Sadly, sales usually fall short of forecasts. A study of fifty-three new products found that the average sales forecasting error was 65 percent and that the median error (middle value) of sales forecasts was a 26 percent shortfall. In effect, if you miss your objective by less than 26 percent, you’re doing better than half of the researched companies.

A study involving 103 computer software firms was conducted to determine what traits influenced companies’ sales forecasting accuracy. The companies with more reliable forecasts conducted more customer interviews before creating their forecasts. The data clearly showed that conducting interviews with a few potential buyers produced better forecasts (a 91 percent confidence level), and interviews with fifty or more potential buyers produced even greater improvement (97 percent confidence level).

Many factors classically assumed to impact forecast accuracy showed no significant impact, including judgment of founder, judgment of industry experts, competitive analysis, and market research concept tests.

Net: To increase forecast accuracy, talk to more customers to gauge their reaction to your new idea.

PRACTICAL IDEAS

Get Out and Talk to Fifty or More Potential Buyers: When it comes to forecasting customer interest, nothing beats the value of face-to-face conversation; the more the better. Instead of debating the merits of your offering in internal conference rooms, go out and talk with real customers face-to-face. As you talk, listen and learn earnestly. Don’t try to persuade; rather, listen and understand what customers perceive. Remember, customers are far more likely to act on their perceptions than on your view of truth.

Talk to Customers in Different Ways: You can maximize the reliability of your customer feedback by providing them with multiple perspectives of your offering. Provide customers with the facts and the feelings of your new offering. The more they can honestly analyze, feel, and experience what you have to offer, the greater the accuracy of their feedback. Provide customers with a real demonstration. If that’s not possible, provide them with a clear, honestly written description of how your offering will affect their lives or businesses.

Don’t Hide Your Negatives: Detail the strengths and weaknesses of your offering. Be honest with your customers. In a straightforward manner, detail every trade-off you’ve made in your product or service design and why you feel those were the correct decisions. Customers understand that 200 percent greater performance at 20 percent of the cost is rarely reality. Explaining trade-offs in a calm and confident manner removes the chances of emotional overreaction.

Document Your Past to Prevent Repetition: Review what you did to generate your past sales forecasts. Document the methods used and the accuracy of the results. Then estimate the real cost of forecasting errors. This figure provides the necessary data to support additional forecasting research before the next new product or service is shipped.

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TO INCREASE YOUR LONG-TERM ODDS OF SUCCESS, DON’T CUT YOUR PRICE IN THE SHORT TERM

Customer expectations of value received and cost paid are set when they make a purchase. When customers make initial purchases at a discounted price, they develop a lower value perception than if they purchase at the regular price.

A study was conducted of matched sets of stores for five new products. In one set of stores, during the first few weeks of availability, the initial price was set about 20 to 30 percent below the regular price. In these stores, the price was increased to the regular list price after the trial period. In the other stores, the products were introduced at regular list price.

Across all five of the new products, long-term volume was higher when the brand was not sold at artificially cheap prices upon introduction.

I don’t have the data available, but if we were able to calculate cumulative profit, it’s likely we would find an even more dramatic negative impact on bottom-line profits.

Artificially low prices “rent” customers, and rentals must eventually be returned. When you sell on price, you mindlessly train customers to perceive low price as the primary benefit of your offering.

Meaningful Marketing means customers make a conscious choice for good reasons. It means that they perceive real value. The net result is a deeper, more Meaningful connection with customers and longer-term sales and profits.

PRACTICAL IDEAS

Provide Proportional Trial-Size Offerings: Lower price reduces customer risk, but it also creates an artificially low price/value relationship. To prevent this, offer miniature sizes of your product or service. A trial size, a single use or limited supply that is proportionally priced reduces the absolute price while still maintaining the appropriate price/value relationship.

Pursue Exclusive Distribution Arrangements: When your offering has a Meaningful difference, it can become a tool to help retailers build customer traffic by using it as a loss leader. And when one retailer discounts your price, soon all do, resulting in an artificially low price perception by customers. By building exclusive distribution agreements in specific areas, you reduce the chances that competitive forces will unnecessarily depress your pricing.

Market Free Samples or Bonus Discounts with a Partner: Generate sampling yet maintain pricing integrity by jointly promoting your new product or service with another brand. The combination of your product with another will enhance the special one-time-only aspect of the promotion and not allow customers to tie the deal they got on your product to your brand’s price. For example, when a customer receives a free one-year subscription to a cooking magazine when they purchase a gourmet cook stove, they don’t expect the magazine to be free forever.

Encourage Customers to Use Competitive Discounts: If you’re feeling really bold, tell your customers when your competition is offering special discounts. Especially in business-to-business situations, this demonstrates your confidence in your product’s Meaningful difference.

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TO SPEED SUCCESS, TARGET YOUR INITIAL SALES AND MARKETING RESOURCES ON THOSE CUSTOMERS WHO ARE MOST OPEN TO TRYING NEW THINGS

Customers have varying levels of acceptance and interest in Meaningful Marketing messages.

On the cover of their book, The Influentials, Ed Keller and Jon Berry wrote, “One American in ten tells the other nine how to vote, where to eat, and what to buy.” They make a compelling case for the existence of a group of thought leaders who have a disproportionate power to persuade the masses.

A research study on customers’ attitudes toward innovative product concepts conducted in Canada, France, and North Africa classified roughly one-third of the population as innovators—those very open to new products and services. Two-thirds of the population was classified as imitators—those content with following the innovators.

In general, the research indicates that those most likely to try new ideas tend to have higher self-esteem, are better educated, and are more informed than the average customer. The good news, according to Keller and Berry, is that when you make an impression on influentials, they are prone to vigorously spread the word about your product’s virtues.

You have limited sales and marketing resources. If you’re not careful, you can use them up trying to sell to those who, frankly, no matter how hard you try, are not likely to purchase in the beginning. An important part of sales and marketing effectiveness is knowing when to stop chasing the prospect who asks lots of questions and uses lots of your energy yet is highly unlikely to buy in a reasonable amount of time.

PRACTICAL IDEAS

Focus on Whom Your Difference Means the Most To: Step back and consider what type of customer can realize the greatest benefit from your offering. Who will see your difference as the most Meaningful? Identify them and write them a one-page letter proclaiming the good news of how you can make a real difference for them.

Leverage Your Fanatics: All business categories have fanatics. In the case of technology, it’s user groups. With celebrities it’s fan clubs. With restaurants it’s their most frequent diners. Identify and then leverage this group by giving it the first opportunity to experience your newest product or service. Afterwards, seek its help in spreading the word.

Fuel Influentials’ Passion for Being Smarter: Influentials, fanatics, and other thought leaders have a natural passion for in-depth understanding. The masses are content with simple understandings of your technological wonder. Influentials love to be seen as smarter. Fuel this passion with detailed test results, technical schematics, and perspective on your development pedigree. Empowered with knowledge, influentials will spread the word to others.

Follow the Historical Thought-Leader Patterns: Research indicates that high-performing salespeople tend to focus their attention on those customers with the ability to influence others. The quickest way to identify the thought leaders among your existing or potential customers is to research when they bought the most recent big innovation in your category. Those who led the last time are the most likely to be the thought leaders with your new offering.

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FOR FAST PROFIT GROWTH, TARGET FIRST-TIME AND ONE-TIME CUSTOMERS

A common marketing strategy mistake is to focus all energy on loyal customers. Against conventional wisdom, research finds that on average, loyal customers actually pay a lower mean price than do first-time or one-time customers. Loyal customers often represent a healthy percentage of profits because of the volume of their purchasing. However, on a profit-margin basis, they are often the least profitable customers.

If you focus 80 to 90 percent of your energy on your loyal customers, the odds are you’ll lose sales and profits. To grow your business, you need to use a portfolio approach to marketing where you invest in the core as well as in helping short-term/one-time customers become loyal customers.

In most cases at least one-third of sales and profits come from non-loyal customers. This finding is confirmed by two separate studies.

The Scanner 9000, a data set of 9,804 brands that have been tracked by UPC numbers in grocery stores, mass merchants, and drug stores, found that 62 percent of the average brand’s customers and 34 percent of annual volume came from those who made only one purchase during the year.

A two-year tracking study of a mail-order catalog found that 47 percent of its customers and some 38 percent of its profits came from short-term, non-loyal customers.

NET: Not only is growing customers 2.8 times more important than growing loyalty (see Marketing Strategy Advice No. 9), new customers are often MORE PROFITABLE. And first-time customers are also the source of all future loyal customers.

Many short-term customers are mindless buyers; they’re attracted by a promotional offer or simply an impulse desire to try something else. Our challenge is to be sure they are aware of our Meaningful difference so that they fully notice and appreciate it, thus laying the basis for developing a Meaningful connection with our brand.

PRACTICAL IDEAS

Make It Easy for Customers to Impulse Purchase: Make purchasing for new customers as easy as possible. If you have a Web-based business, remove lengthy sign-in processes. If you offer a product or service, streamline paperwork and remove credit checks on small orders. The benefits in increased sales and profits will more than make up for the few losses from fraud.

Continually Test New Customer Segments: Dedicate a portion of your time and resources to discovering unexpected customer segments and business opportunities. When you do direct-mail programs, test new mailing lists. When you work a trade show, focus extra energy on those who don’t currently buy from you. Place your products in unexpected retail locations and track the resulting reactions.

Issue Direct Marketing Challenges: Overtly challenge non-buyers to give you a try. Communicate your advantages persuasively through side-by-side demonstrations and testimonials from customers who’ve recently switched to buying your brand.

Celebrate the Arrival of New Customers: Define special methods for handling new customers’ needs. Provide special instructions, guidance, and help with their “rookie” needs. Warmly welcome them to your brand and your people.

Create Special New Customer Follow-Up Systems: Have a defined follow-up process to learn your new customers’ satisfactions and dissatisfactions with your product or service experience. Overtly ask for another sale, and if it’s not appropriate at that time, define when in the future you should contact the customer again—then do it.

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STEALING YOUR COMPETITORS’ CUSTOMERS OFFERS A GREAT OPPORTUNITY IN HEAVILY PRICE-PROMOTED CATEGORIES

Just as occasional customers represent a significant amount of sales and profits, so too do your competitors’ customers. They can be shifted away from their current choice when provided with a Meaningful difference or when presented with an even easier and more mindless option: a discounted price.

Mathematical modeling was undertaken on the source of weekly sales increases for various brands of coffee among one hundred households over a two-year period. The results indicated that more than 84 percent of sales increases were due to brand switching (non-current customers switching to the promoted item), 14 percent from purchase acceleration (current customers repurchasing sooner than normal), and 2 percent from stockpiling (current customers buying more than normal at one time).

Clearly, when an industry is heavily promoted, like the coffee category, a large segment of the population becomes trained to purchase only when the price is reduced.

The Meaningful Marketing challenge is to find ways to convert the price switchers into deeper and more loyal customers. This requires customers to first notice and then value our Meaningful points of difference.

PRACTICAL IDEAS

Be Relentless in Articulating Your Differences: In the face of perpetual discounting, you must become relentless in articulating what makes your product offering unique. Communicate your distinctiveness even when articulating price discounts. Through continuous communication, you will eventually build awareness that your offering delivers value, not just low price. You won’t reduce the need for discounts totally. However, even a small shift can create a big improvement in your bottom-line profits.

Leverage Customer Purchase Cycles: Understand the purchasing cycles of your customers. Arrange your follow-up e-mail, direct mail, and personal contacts to maximize your chances of making connections just before a new purchase is required. As you’re planning, don’t be shy about directly asking your customers when they anticipate making another purchase.

Segment Your Offerings for Extreme Differences: Challenge yourself to strip your offering to the absolute lowest possible cost. Consider the unthinkable: Eliminate packaging, options, variations, and “nice” extras. Focus this stripped-down version on those customers motivated by price alone.

Push your offering to the ultimate in service. Provide added value to those customer segments that value Meaningful differences.

Use Endorsements to Talk of Differences: Use endorsements to articulate the dramatic differences that customers have experienced as a result of switching to your offering. Better yet, leverage testimonials that speak of the value customers have received from repeated use of your product or service.

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IF MEGA-GROWTH IS YOUR GOAL, TAP THE FOUR CORE FUTURE GROWTH OPPORTUNITIES—WOMEN, GEEZERS, CHINA, AND INDIA

The world economy is changing, and trillions of dollars are at stake.

WOMEN are vastly under-marketed to. Do the math. Women are responsible for 83 percent of consumer purchases, 91 percent of all new homes, 90 percent of cars, and 80 percent of do-it-yourself home projects. Women write 80 percent of all checks and actually own 53 percent of all stock in America!

GEEZERS or Baby Boomers represent a seismic shift. Do the math. Today, geezers control 70 percent of all wealth and account for 50 percent of all discretionary spending. And this is just the beginning. In the future they will be even more important. By 2010, the number of people 18 to 44 will have declined by 1 percent. The number of Americans who are 55-plus will increase by 21 percent. The number between 55 and 66 will increase 64 percent.

CHINA & INDIA. These two markets are about to take over the world. From a human capital standpoint, India has 3.6 times more consumers, and China has 4.4 times more consumers than the United States. Together China and India have a population EIGHT TIMES BIGGER THAN THE UNITED STATES! Most importantly, both countries are making massive investments in education. And education is the fundamental driver of genuine economic growth. For example, Roosevelt’s GI Bill of Rights in 1944 made it possible for 8 million World War II veterans to attend college. For the first time, the idea that education was only for the elite was shattered. The rapid growth in students resulted in rapid expansion in the skills and abilities of the workforce. It also made possible dramatic increases in academic research—the kind of fundamental R&D that drives long-term economic growth.

In the United States, the next most promising market is the Hispanic population. After Mandarin (China) and Hindi (India), Spanish is tied with English as the world population’s “first language.” By 2050, the U.S. Census Bureau projects that 24 percent of the country’s population will be of Hispanic origin.

PRACTICAL IDEAS

Admit You Don’t Know: The first step in tapping into these opportunities is to admit that you don’t know. Don’t assume that your previous experiences apply to these new customers. Take the seemingly easiest category: women. Since when have men been known to understand women? When we are able to let go of our egos, our experiences, and our preconceived beliefs, we are able to learn and understand.

Create Quotas for GROWTH: I’m against government-mandated quotas. However I’m in favor of capitalism. Quite frankly, the days of the WHITE MEN’S CLUB running American business are done. Given the TRILLIONS IN REVENUE that is at stake, it’s irresponsible for any large company not to have an aggressive program of recruiting and promoting women and geezers, as well as managers from China and India. Yes, I did include geezers. As the market shifts, smart companies will need to find ways to attract, retain, and leverage the wisdom of older managers.

If in Doubt, Do ANYTHING: The challenge of marketing to the audiences listed can seem daunting. If we’re not careful, we will become mentally constipated. In our effort to get everything “right,” we’ll end up with analysis paralysis. It’s only by venturing into these markets that you will really learn. So if in doubt, get up, get out, and get going!

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TO ENSURE STRONG TRADE SUPPORT, FOCUS YOUR ATTENTION FIRST AND FOREMOST ON IDEAS THAT GENERATE INCREMENTAL SALES FOR YOUR TRADE CUSTOMERS

There isn’t much mystery in how to gain genuine excitement from trade customers: that is, customers who are resellers of our goods or services. Quite simply, offer them an OVERT BENEFIT. Show them how your offering can meaningfully grow their overall business. If you can’t, show how your product will grow your customers’ overall sales. Then be prepared to pay for the support you get.

Research conducted with 145 buyers on their sales priorities shows that their definitions of success are similar to your own for new products. On a ten-point scale (ten being most important), the following are the top three priorities for retail buyers when evaluating new products.

1. Generate Incremental Sales (8.6 importance): The new product should generate significant net extra volume, not just cannibalize existing volume.

2. An Exciting and Unique Consumer Advantage (8.4 importance): Trade customers look for big ideas that generate big volume. They make their evaluations by looking for evidence that your offering meets an unmet need, provides a unique advantage to consumers, or offers the potential for genuine shopping excitement.

3. Substantial Marketing Support (7.9 importance): Your level of marketing support is evidence of your confidence that your new product will generate significant sales. In addition, trade customers know that when one manufacturer makes a significant marketing investment, it causes healthy competition that results in more total category spending and overall category growth.

PRACTICAL IDEAS

Genuinely Grow Retail Sales Volume: Develop the products and/or merchandising concepts that can meaningfully grow the sales of your retail customers. Create higher-value product offerings that spark customers to “trade up” to higher-revenue-producing options. Develop merchandising programs that deliver incremental sales. For example, quantify the incremental category growth that occurs when products are shelved in multiple locations in the store or the customer’s catalog.

Prove Your Advantage with Comparisons: Make your difference clear. Develop promotional materials that bring your point of difference to marketing and display materials. Show your advantage boldly. If possible, bring a live taste test, demonstration, or other real-world experience to your meeting with the customer. Don’t shy away from demos that take some work. Your willingness to put in the effort is evidence of your personal belief in your offering.