Big corporations make mistakes all the time. They can take higher risks than small businesses because they have more resources to fall back on than do small businesses. A disaster can wipe a small business. It happens all the time.
Big businesses lose money in different ways.
For example, one company that I was familiar with had a brainstorm in the boardroom. They could protect themselves from fluctuations in the gold market by buying and selling gold futures. They practiced right there in the boardroom and lost several hundred thousands dollars in minutes. They said, “So much for that idea, ” and went back to what they were good at, which was marketing their products.
Now a loss of several hundred thousand dollars would wipe out many small businesses. A big company takes such losses in stride. Of course a persistent loss would cause heads to roll.
Young marketers with fresh ideas are often sought out by big companies. If they replace old marketer because of salary limitations, then trouble can be at the door. It’s best to work young marketers into the system gradually and let normal retirement situations gradually remove the old marketers. (I know that some of you Ivy League guys may have reasons to disagree. )
The problem is that a person full of ideas has a mixed bag. He might have a few good ideas inside his idea cargo, but may not be a very good evaluator of those ideas. In fact he probably has irrational exuberance. That’s where experienced marketers can help.
Product flaws may not show up in focus groups or surveys because the questions that need answers are not asked.
Let’s take an example or two:
Example A: Folks are pulled off the floor of a super mall and brought into a small conference room. They are asked, “Which of these new dim winkles do you like best?” The attendees pick the red dim winkle 6 to 1 over the other colors. The participants are given a $25 bill as promised and sent on their way. The survey group calls the company making dim winkles and tells them to make sure their new dim winkles are red.
As these decisions are being made, Grace Snodgrass and Mary Hardcroft decide to go to Nordstrom’s Department Store to spend their newly-earned $25. As they leave the conference room and out of sight of the testing staff, Mary says, “I’d never buy one of those new dim winkles. I couldn’t figure out how to use the darn thing. ” Grace said, “I couldn’t even figure out what it was supposed to do. Well, we’ve got our $25.00. ”
Example B: Mary and Grace are again invited to take part in a focus group by the survey company. The group is given a watch-a-ma-call-it to look at. They are invited to test the gadget in the kitchen, to jump on it, try to bend it over a chair, and to do whatever else they want to test it. When they are finished, the survey folks decide that it passed every conceivable test and did what the customers expected it to do. They notified that the new product passed every test and could be placed in production.
Now walking to Nordstrom’s Department Store with $100 checks in hand, Mary and Grace are very happy indeed. Mary says, “That was a great gadget but I think I’ll stick with the old way that my grandmother taught me. Grace says, “I wouldn’t pay $11.95 for that thing. What would I do with the one I’ve got? Anyway, even if one of the kids dropped my old one down the garbage disposal I could replace it for $3.95. ”
The company I referred to above (where a loss was generated by trading gold futures) developed a consumer product for what I call a “Conceived Market. ” This is in contrast to an actual existing market. (I’ve never called it that before but I’m sticking to it here. At a talk at a national meeting I called it a “nonexistent market. " I also published an article internationally in trade magazines that referred to “an undesired product for a nonexistent market. ")
The product was a cross between what the rich would want for Sunday use and what the everyday housewife would want for everyday use. It was the first time that such a product tried to satisfy two different functions. The targeted group was supposed to be highly-mobile members of the business community.
It turned out, despite consumer testing, that this group did not exist. Exactly what did not exist was a target group that thought like the company marketers. What did exist was the age old concept that you should have the everyday product and the Sunday-only-product and it had nothing to do with position in society. It had a lot to do if you were a woman taught by your mother that you needed both products to be happy.
So the company was not too concerned. The women could buy the product for one purpose or the other. What happened was that the competition knew the cost structure. They offered a similar offshore product at two-thirds the price. This price could not be met. The product was dumped by a television marketer.
Having the resources to do so, the new technologies developed by the campaign were used to produce a superior everyday product that was very successful and required factory expansion. This is called making lemonade from a lemon.
Can you guess what the product was?
copyright©John T. Jones, Ph. D. 2005
John T. Jones, Ph. D. (firstname.lastname@example.org)is a retired R&D engineer and VP of a Fortune 500 company. He is author of detective & western novels, nonfiction (business, scientific, engineering), poetry, etc. Former editor of international trade magazine. Jones is Executive Representative of International Wealth Success. More info: http://www.tjbooks.com. Business web site: http://www.bookfindhelp.com (IWS wealth-success books and kits and business newsletters / TopFlight flagpoles)