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Condos in Miami, traditional music stores, gas-guzzling cars, pharmaceuticals that get bad press and foods made with trans fats: All marketers, from time to time, confront products that, for whatever reason, become difficult to sell.
While the ultimate goal of marketing is to target products to customers who are ready to buy, occasionally products or services require an additional push. When that happens, marketers need creative ideas to tide them over until the market returns or the company is able to change strategic direction, according to Wharton faculty and marketers. “From the individual marketer’s point of view, there are times you feel selling something is impossible. But if you think more about it, there are so many different kinds of customers out there. You just need to find them,” says Wharton marketing professor John Zhang.
If customers aren’t buying, more often than not it is an indication that a company is targeting the wrong people. “We all know the saying about one man’s trash being another man’s treasure, and you just need to find the man who treasures your trash,” Zhang quips. To find that man, a company must study its market and customers, figure out why its product is or is not clicking with certain segments, and decide what buttons it can push to get targeted customers excited. “Believe me, going through a systematic, rigorous process of segmentation, targeting and positioning — an age-old marketing approach — is much easier than finding a man who loves your trash,” Zhang continues. “A selling job is always difficult if you don’t really know your customers well and if you simply make projections based on your own experience and intuition. You think, ‘If I hate this, everybody else will hate it.’ But that assumption may not be true.”
Zhang recommends marketers put themselves in the shoes of customers and think critically. “You may find the selling job is not impossible.”
The Last Hummer Dealership Standing
According to Wharton marketing professor Stephen Hoch, when a product or service becomes a tough sell, it’s because customers have obvious objections to it. The goal, therefore, should be “to frame an offer to get rid of the objection.” For example, in response to concerns about high gas prices, a car dealer can offer free gasoline to move SUVs off the sales lot. However, Hoch says, that will obviously only work for customers who object to SUVs because of the price of gas. It won’t work for customers who have turned against the product based on concerns about the environment.
At Lynch Hummer in St. Louis, Mo., the world’s largest seller of new and pre-owned H1 Hummers in the world and one of only two dealers that sell Hummers and Hummer parts exclusively, the strategy is to remain focused on the vehicle it knows best, but also to develop new lines of business.
According to Jim Bushart, parts director at the dealership, the company has already been through several cycles of Hummer ups and downs since the H1 was introduced to the consumer market in 1994. Most of the swings were due to inconsistent production. As a result, the dealership has always been closely attuned to its customers to keep them interested when supplies were limited as well as when supplies were plentiful. “Whatever we did, we never sacrificed customer service or satisfaction. We always asked, ‘What would our customer want?'” says Bushart.
The company is now expanding its business into pre-owned Hummers, parts and accessories for Hummers, and other cars and trucks. “You have to make up your mind to stick with it or not,” says Bushart. “If you decide to stick with it, you have to go all out. You must set yourself apart from the competition and build on what makes you unique.” Lynch Hummer will be the last Hummer dealer standing, if Bushart has his way. “Even if the manufacturer pulls out, we will probably be the last ones offering parts and service.”
According to Hoch, retailers also face situations where consumers hesitate to buy a new product because they have a similar product that still works. Auto marketers addressed this issue by encouraging vehicle trade-ins, an idea that might also work for other products. Hoch says recent Wharton student research shows people are more willing to buy a new item for a trade-in discount than they are for the same discount without the trade-in.
For example, someone might want a new digital camera with more features than the camera he or she already owns. A savvy retailer can offer a trade-in discount on the old camera — even if there is no market for the used camera. “In this case, the objection is, ‘It still works and I haven’t gotten my money’s worth,'” Hoch says. Rolling the perceived value of the old item into the new purchase seems to nullify that objection. “It has to be the case that the person wants the object, but something is in the way,” Hoch continues. “That’s where creativity and understanding the customer’s perspective is important.”
Identifying Recent Buyers
Business cycles can make certain products difficult to move until excess inventory or confidence in the market returns. At the moment, real estate is in one of its cyclical slumps, and in some markets it is not clear where the floor will be.
Wharton marketing professor Leonard Lodish says in this case, marketers need to think seriously about adjusting their price until the market corrects. “At some price, [developers] will sell all those condos in Miami,” says Lodish. Pricing is a critical element of successful marketing, in good times and in bad, he adds, and many companies do not focus enough on getting their pricing right. Marketers need to consider not only the value of the physical assets for sale, but also non-tangible elements that play into what consumers will be willing to pay.
John Paul Rosser, a commercial and residential real estate broker in Miami, says the condo market has yet to hit bottom. His advice to sellers in this situation is to identify the most recent buyers — even if there is only a handful of them — and try to find other people in the same category. For example, he says, a few venture funds active in the condo market in South Florida are willing to buy if they can assemble entire blocks of condos. “Once you find out who the buyers are in today’s market, you can expand on that,” says Rosser.
Lodish points out that some products, like SUVs and real estate, take time to respond to market demand. For example, an automaker needs about four years to readjust its production capability to respond to changes in consumer trends. In the meantime, marketers should rely on pricing and sophisticated segmentation of the consumer market to find buyers who might still be interested in the waning product.
Another challenge for marketers arises when government regulators step in and change the rules of the game, says Hoch. This typically results in fewer players in the market. Companies that find a way to survive with a strategy that takes into account the government action stand to win big if they are able to continue to do business, or build an expanded customer base, as competitors die away. For example, he says, when the government banned cigarette advertising, Marlboro actually benefited because it was the strongest brand at the time and was able to maintain that position as other cigarette manufacturers lost their ability to build business through advertising.
Total Wine & More, owned by brothers David and Robert Trone, is another example. The Trones founded the chain in Delaware in 1991 and have expanded it to 10 states along the East Coast and California. Up until now, Hoch notes, no retailer has been willing to sift through the complex and restrictive laws regulating the sale of alcohol in each state in order to assemble a national chain that could amass buying clout and leverage costs across a far-flung operation. In some states, Hoch says, the company has been active in overturning Sunday blue laws restricting the sale of alcohol. “Government restriction can hurt an entire industry, but if one person can figure out a way around it, government restrictions can actually help,” says Hoch.
Even so-called “sin products,” such as those associated with trans fats, can find a market, says Lodish. “There are people who don’t care whether a product has trans fats while others won’t buy those products at almost any price.” Again, the key to selling a product in this situation is segmenting the potential customer base to sift out people who would never consider buying the product and focus instead on those who would. Companies should observe what they buy and don’t buy and relate it to other variables that can be used to segment — such as socio economics, demographics or stores people shop in. “I don’t think you can get a product with trans fat into Whole Foods, for example.”
According to Erin Armendinger, managing director of Wharton’s Jay H. Baker Retailing Initiative, consumers are always ready to indulge themselves when marketers are able to get their message through. Clothing and shoe designer Kenneth Cole, during a recent presentation at Wharton, observed that very few Americans actually need a new pair of shoes. “Even a product that is a little bit bad for you — like clothing you don’t actually need — is not about need. It’s about wants and desires,” Armendinger says.
Finally, products become a hard sell as new technology or innovation renders them obsolete. Music stores, Armendinger says, are a good example of a market that is becoming extinct as consumers move away from albums and CDs to buying and sharing music online. “Hopefully you see the market moving and make changes before it is too late,” she says, adding that Kodak is an example of a company that envisioned the demise of its signature product — photographic film — while embracing the future with digital imaging products and services. “You should realize when something is in decline and find a way to sunset that while at the same time, come out with a sunrise,” she says. “That’s what a smart company does, but it’s not easy.”
It can take a generation for a product or service to become completely obsolete, Hoch adds. As in the case of new government regulations, he says, companies able to survive in a declining or difficult market can benefit by winning a greater share of an albeit smaller pie as competitors pull out of the business altogether. He notes that as Wal-Mart expanded across the country, it drove many small, independent retailers out of business in local downtowns. “If you survived the Wal-Mart onslaught, you were in a better position going forward because you were not competing with every other mom and pop.”
Strong marketing, adds Zhang, takes into account product lifecycles — from initial growth to maturity. In the declining stages, he says, marketers want to continue to reap sales but avoid additional investment in the brand. “You probably want to squeeze the last ounce of energy out of your brand instead of build it up.”
The Line between Promotion and Deception
While troubled products need marketers’ most creative solutions, salespeople must be mindful of the line between promotion and deception, according to Wharton faculty. It’s fair for companies to do what they can to help consumers perceive a product in the best light, or stress a product’s assets that may make up for its failings, says Lodish. But perception is an important aspect of the process. “The perceptions about what your communications say should not be inconsistent with reality. You can say things that are technically true, but that people will interpret in ways that are not true. In my view, that’s morally wrong.”
The pharmaceutical industry frequently faces sudden marketing crises as a result of a new study or journal article reporting that a drug that is already on the market has more harmful side effects, or is less effective, than originally believed. Recent examples of products with this kind of problem include the cholesterol medication Vytorin, the painkiller Vioxx, and hormone replacement therapy used by women to combat the symptoms of menopause.
Wharton marketing professor Lisa Bolton says pharmaceutical companies need to find a way to respond to the concerns raised by the article or study. Multiple audiences may need to be addressed because concerns could be widespread among patients who use the drug, potential patients, the media, health care professionals, government regulators, the company’s own salespeople, employees and investors. These groups vary in their levels of expertise as well as in their involvement and interest in the issue. As a result, the response needs to be tailored to the audience.
“This kind of news also tends to be fairly complex, especially for the layman audience, so you need to find ways to communicate clearly and simply, without talking down, in ways that will reassure the consumer,” says Bolton. “The challenge here, of course, is that drug companies must be careful what they communicate, since drug advertising is subject to regulations. Above all, firms must be ethical and avoid deception. Their reputation — not just their bottom line — is at stake.”
Lisa A. Basara, a principal with The Resolutions Group, Inc., a Skippack, Pa., pharmaceutical consulting firm, says the specific approach a company should take depends significantly on the nature of the evidence indicating the product is unsafe or otherwise problematic. If, for example, there is valid evidence of safety concerns for a subpopulation of potential drug users, the most appropriate first step is to gauge the level of fear or concern on the part of both patients and prescribers.
On the basis of this market research, companies should then disseminate complete information to product users and prescribers, Basara continues. If certain patients are no longer considered appropriate candidates for the drug, the company should send out specific patient selection criteria in the form of emails, letters or labeling changes to ensure patients are safely managed. “Honesty and integrity, as well as prompt action, are arguably the hallmarks of companies that can successfully weather these types of storms.”