https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif 0 0 jeff https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif jeff2004-09-15 17:51:102014-09-28 09:41:24“Jeff, This is a Hard Business!” Why Is That and What Can You Do About It?
That unsolicited quote is from the President of a snowboard brand that you all know and that’s been around for a while. It would generally be considered successful. I consider it successful.
It’s not the first time I’ve heard the comment. I’ve responded by agreeing and by explaining why it was true. Over the years I’ve had some suggestions as to how you could work to counter, it but I’ve never really had a strategic answer about how to deal with it.
Now, as a result of some thinking, consulting, and reading I’ve done, I’ve got some new ideas on the subject. This article does not end with a Deus Ex Machina like an ancient Greek drama that resolves everything, so don’t rush to the end to read THE SOLUTION. It’s not there. But I think I’ve maybe figured out how some of our old assumptions about snowboarding, and marketing in general are no longer valid, and how and why they have changed. Maybe when we know that, we’re a step closer to running our businesses better.
Somewhere around 1995 I started the process of making myself the messenger that everybody wanted to shoot by writing that there wasn’t room for 300 snowboard companies and that most of them were going to go away. I talked about what happened when a fast growing industry matures and consolidates.
Any of you who may have followed what I had to say about consolidation back then can relax. I’m not going to say it all again, though lord knows I’ve gotten a lot of mileage out of my list of changes in consolidating industries over the years.
I use to write about how you could find a competitive advantage in the snowboard industry. Maybe you could get your product faster, or cheaper, or have a better pricing structure, or make it better with more features, or have a business that was less seasonal. Then I talked about controlling distribution to have a market niche. Some of those things worked well when snowboarding was younger- for a while. A little while. A very little while.
Snowboarding, because of changes in information technology, the sheer speed of market evolution during our growth and consolidation phase, the impossibility of maintaining a real product advantage, etc. was experiencing what other industries were already experiencing. Access to and control of information has moved down the food chain from the manufacturers, to the distributors and now, via the internet, etc. to the consumer. Nothing stays the same very long. And nothing stays exclusive. What one company has done, another can duplicate sometimes literally over night.
Though it took us all (in snowboarding and lots of other industries) a long time to figure it out, it turns out there was no longer a sustainable competitive advantage as traditionally defined resulting from anything you do operationally. The price of entry was making a good product, pricing it right, delivering it on time, supporting your dealers, having good information systems, hot team riders and, uh, well, a whole lot of other stuff.
Let’s say that again for emphasis. Doing everything right doesn’t give you a competitive advantage. It just let you play in the game. It was the entry ticket.
A few years ago I even wrote that. I said, “Hey, you got to do everything well just to be here!” I was right, but I didn’t make the leap I needed to make.
The Focus on Branding
Well, if everybody can do what you can do, and pretty much do it at least as quickly and as well, and if the consumer can compare prices and product features with hardly any work, what exactly can you do besides price it lower, give the dealers longer terms, sell it to anybody who will carry it, and spend more money on marketing? No wonder this is such a hard business.
Back in 1997 I wrote, “Realize that all you have is your brand name and do everything you can to build and protect it.” Perhaps that wasn’t quite as obvious back in1997 as it is now. But it quickly became obvious and companies did the usual things to try and build and protect their brand names to give them that alleged Holy Grail of business, the sustainable competitive advantage.
They boosted the marketing and promotional budget, hired more team riders, made films, did deals with resorts, sponsored contests, expanded product lines, put stores in stores. Fighting for market share was the mantra, and it killed a lot of brands who couldn’t afford it.
Nobody would deny that some of these companies did great marketing- and it worked. They grew and their brands became better known and established. But no amount of good marketing changed the fact that product was the same, consumers had lots of information, what one company could do another could duplicate, and the demand for growth caused sprawling distribution.
Advantage to the big diversified players with the year around business. But even they weren’t getting rich in snowboarding.
So I was right- we were all right. Your brand was all you had and you had to do the right things with it. But I still didn’t make the leap. Maybe some of you did.
What is Marketing?
Well, it sure isn’t The Four Ps anymore- product, price, place, promotion- like they taught in the 60s and 70s. Your only advantage may lie in your brand. That’s what everybody apparently thought as they spent buckets of money on marketing.
But the marketing they spent, and are still spending, all that money on was developed back when the conditions of rapid change, perfect consumer information, etc. that I describe above didn’t exist. It was done not for the benefit of the customer but for the benefit of the company to tell the consumer, what to buy, where, and why. The consumer, having many fewer choices of product and purchase location and no easily available product comparisons tended to do what they were told.
It must have been wonderful.
Now the consumer doesn’t need you, or anybody else thank you very much, to tell them what to buy, where to get it, how much it should cost and whether it’s good or bad. Just what the hell, exactly, do they need you for?
Just make it good and sell it cheap and they’ll figure out the rest. Not much of a business model from our point of view is it. Might it imply that a goodly chunk of your marketing spending, as currently configured, is wasted?
Marketing is no longer about telling your customer what they want and where they can get it. They don’t need you for that because of their ease of access to information. But you have the same access to information, and you can make your company one big marketing machine.
But it isn’t up to the marketing department. It’s the job of the whole company. Oh god, how’s that for an overused cliché? Let me be more specific.
First, marketing happens, and you are probably gathering information on your customer, every time they are in contact with you. When they call customer service. When you send them an invoice. When you try and collect that overdue bill. When you ride up with a kid on the lift. Every point of contact creates an impression with the customer. What impression? How can you make those points of contact, to the extent they are predictable, into a positive experience that reinforces the customer’s relationship with your brand?
You can’t- unless you identify them and analyze how you can make them better in a coordinated way. The best example I can think of in winter sports is the way some resorts have evaluated, torn apart, and completely reconstructed the process of renting equipment and taking lessons to make it more pleasant for the customer. That’s what I think marketing means now. And obviously it wasn’t done by the marketing department.
Second, your customers may have all this information that makes them less dependent on you, but you know a lot more about them now as well. Who are your best customers? What are they worth to you over a period of time? Why do they identify with your brand? Easy questions for me to ask. Damn hard to answer. See, I warned you at the beginning you would not find THE SOLUTION at the end.
At least some of this information is already available in your existing data bases. But often the various systems aren’t compatible and they haven’t been structured to provide the data you need. If you think the accounting department designed it’s systems to make it easy to extract information on customer behavior, you’re dreaming. But the accounting department has a lot of contact with and information on your customers. Get your hands on it
Use your information to find out why your customers are loyal to you. Or why they aren’t. Take just a bit of the money you’re throwing at advertising and promotion and use it to extract this information where available from your existing data. I’ll bet you do a better job of spending that advertising and promotional budget when you know more about your customer.
We don’t sell products any more. We sell a customer brand experience. Certainly your traditional marketing influences that, but it doesn’t get to the heart of customer motivations. Please stop telling me how “rider influenced” your product line is unless you can prove to me that your best customers have the same motivations as your team riders.
Marketing means something different than it use to. This new marketing may be the only way to create a competitive advantage that lasts longer than twenty minutes.