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BEC : Marketing - George

Hi, it’s George here and I’ve got a commentary lesson for you on marketing. I want to talk a bit about the total marketing organization particularly in your large companies, but this is also true all the way down to the local store in your town.

To begin with, you need to understand that the marketing organization, no matter how large it is, is probably, at least in their minds and probably mine too, the most important and most powerful organization in the company. Now, I know the folks in finance are going to disagree with me because they control the money, but let’s think about why I make that statement.

Marketing is the key element in a business. Why is that? Because it’s the marketing organization that is going to not only generate, but commit to the president, the CEO and the stockholders on revenue generation for whatever the next period - probably the next year - is. In other words, it’s the marketing director or vice president’s responsibility to come to the head man or the head woman in the company and the stockholders and tell them this is our objective. In other words, this is our budget for sales and revenue for the next accounting period.

Now, that’s important because no company runs without revenue. It’s a precise process that needs to take place before somebody comes forward and makes a statement like that. You will find that usually the top manager in a marketing organization has reporting to them underneath them a marketing organization, which includes: o Advertising, o Research and development o Product development, o The sales force, and o The entire sales organization So the sales manager generally will report to the marketing manager. Makes sense, the marketing manager makes the commitment to bring in the revenue. Well, after all the advertising and research, everything is done, somebody who is responsible to the sales manager has to go out there and make it happen. They’ve got to sell it.

It all starts with that budget where the director or the vice president says here’s how much revenue I’m going to generate for this company. He or she makes that commitment to the chief executive officer or the president, whatever the title is of the top person in the company and it becomes a contract.

Their job is literally on the line based on fulfilling that contract because the CEO then in a publicly-traded company goes to the stockholders and says here’s what we’re going to do. We’re going to increase our profit by five percent next year and the reason is we’re going to increase our revenue by 20% or whatever it is. So how is all this done? Well, it’s not done in a dark room or throwing darts against a board or something like that. The marketing organization in good companies is a well-organized research organization, because the only way you can determine or make a good guess on how much money you’re going to bring in or how much you’re going to sell, basically, is by researching and figuring out what is really possible out there. So how do you research these things? Well, the big companies use customer meetings. They use seminars. They use conferences. Some of the really big companies literally will call five of their key customers and have them come to the corporate office and the top management in the corporation will sit down and talk with these people - these customers - and find out what is it they like about our products, what is they don’t like about our products, what is it that they think we should do in terms of new products to satisfy their needs. In other words, they’re looking for what does the customer what, how can I satisfy their needs.

Large and small companies also use a thing called an opinion survey. You’ve probably seen some of those where they come back and ask you a whole bunch of questions if you went into a store maybe. I know Home Depot was very big on that in the United States. On your little ticket you can go in afterwards and do a survey.

What they’re looking for is did you have a good experience in the store.

Were all of the clerks nice to you? Did you check out quickly when you were done? Was the store neat and clean? Was it easy to find the things that you were looking for? Were there things you were looking for you couldn’t find? Well, even though the return rate --meaning the number of people that go in and buy something versus the number of people who actually fill out one of those forms --is probably pretty low, but they use those things because the ones who do fill them out have something to say so the company listens to them.

Another key factor, particularly for the big companies and, well, actually small companies too, is demographics. Demographics simply is and I don’t know if you’ve heard about it or not, but probably the baby boomers. You’ve heard about that. You’ve heard about the Grays, the XYZ generation. Well, all of those are nothing more than labels by researchers that have been put on certain age groups.

I know that the Grays are the old folks like me. I know the baby boomers are the ones that I think just turned 50 recently. The XYZ I’m not sure what their age frame is, but each one of those just identifies an age group. Well, that’s a big demographic because the products that companies come forth with and the price range they come forth with is very dependent on what age group they’re trying to sell something to. You see that in lots of companies.

Another one is the geographics. This is extremely important in the fast-food industry, the grocery store business, what we call the drug stores, gasoline stations, hotels. They look at the geographic situation and the geographic traffic patterns and things of that nature to determine where to put their businesses.

Another part of the research is trends. What are the buyers’ trends? What are they buying these days? Are they buying red telephones, green telephones or blue telephones? Are they buying the Big Mac or are they buying the Quarter Pounder? Are they buying the fish or the chicken? In other words, what are we selling now? What’s the trend in our business? Additionally, what’s the trend in our industry whatever our industry is? The most obvious example of this is I think something we talked about in AJ and my conversation about the use of the trans fats. All of a sudden all of the hamburger fast-food places in the country started serving chicken and not just fried chicken, but you’ve got broiled chicken and steamed chicken. You know all of these things. They’re now serving milkshakes and ribs and things that are well beyond what they used to.

One other research and I haven’t covered all of them I’m sure, but one other major one, particularly in the United States and I’m sure this true throughout the world, is the economy. How’s the economy going? What are the trends in the economy? What makes sense to try to sell and what makes sense that we probably ought to just forget and not plan on any revenue for it.

Now, the implementation of the marketing organization is pretty simple. It really boils down to advertising. There are a few other little things, but basically it’s advertising. It’s television advertising. It’s direct mail advertising. It’s newspaper advertising, magazines, the Internet, signs, billboards, all of those things, all based on not only the message of the ad, but the location of the ad is based on this research that the companies do.

The good companies do their homework. What do I mean by that? The good companies do their research and find out where are the customers at, what do the customers want, how do we appeal to their needs and they put up advertising to cover that need. Let me give you a few examples of what I’m talking about.

I talked about geographics. In the United States we have this interstate system. I’m sure you’ve got something similar, if not you’ve got highways and roads. On the interstate system you can go from one end of the country other and be on a four-to-six lane highway all the time. Well, there are periodic places where there are exits where you can get off. You get off most interstate exits and what you find is a whole bunch of fast- food places, a lot of gas stations and some hotels or motels.

Now, that doesn’t happen by accident. Each of these types of industries has done their homework. They did the research - geographic homework --and determined this exit would be a good one to put up one of our stores. Now, every exit you get off on that’s not true. There are some places where you get off and maybe you’ll find a local filling station. Maybe you’ll find one of those gas stations for trucks that have a little restaurant inside, but all the other stuff isn’t there.

The reason you ask? Why is that? Geographically it doesn’t make sense. Maybe it’s the first exit right outside of a big town, either after the big town or before the big town depending on which direction you’re going. Well, geographically that doesn’t make sense, probably demographically also, because if people want fast-food, they want motels and they want gas, they probably stop in the big city to get it. I’m too close to the big city or this exit is too close, so they don’t use it.

Let me give you another geographic example in the Untied States - McDonald’s. When you see a McDonald’s being built and I’ve watched this for 10-20 years, you see a McDonald’s going up somewhere, within a half a mile very shortly after the McDonald’s starts construction, more times than not you’ll see the construction of a Pizza Hut. Now, why would that be? Well, my contention is Pizza Hut doesn’t have as good a research organization as McDonald’s does.

McDonald’s does an outstanding job of researching where to put their stores, so Pizza Hit in a way is very smart. Their research is if it’s good enough for McDonald’s, it’s good enough for us. That means there must be a lot of traffic. What I’m talking about in terms of traffic is the traffic patterns, whether it’s people walking, people in cars or trains or buses, a key part of the geographic research.

What’s the flow of people either by car, bus, train or just walking? You don’t want to put a McDonald’s up out in the middle of the suburbs where there’s nothing but homes. You want some kind of traffic there to insure that somebody is going to stop, a very key point. The grocery stores are the same way. You notice where they are? They’re right in a spot where you’re probably going to drive by so you can stop in there. So small businesses, grocery stores, they do their research also and it’s a marketing function.

Large corporation, it’s all the same thing except on a bigger scale. They look to their competition --to the industry --what are the new products that are coming out. They look to their research and development people for innovation to meet these needs that have been identified by the research organization. They rely heavily on customer opinions, customer reviews, customer ideas.

Most large companies are also very queued in. In other words, they really pay attention to the demographics depending on what their product is - demographics - and they look at the trends. What are the trends, the buying trends, not just in their company, but in their industry as a whole and outside their industry, because there are factors, other things that are outside their industry, trends that may have an affect on their industry and the big one certainly now and always has been is the economy. A good company will look at the economy to determine what its future is and what its marketing organization needs to focus in on.

That’s a small-capsule definition of what a marketing organization is all about, what they do for a company and why they are usually very powerful and obviously, very important.

That organization is the one that is given the responsibility to sell something, to generate some money, to keep the company going.

So with that thought in mind, as AJ says listen, listen, listen up to 14 days. In fact, 14 days are the days we would like you to do to listen to this entire lesson set. Until you’re ready for the next one, it’s George. Goodbye.

The End.