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Author, direct marketing guru, and always entertaining Denny Hatch focuses on a major story in the news and shows how businesses can take advantage of–or avoid the pitfalls from–the lessons to be learned in terms of marketing, sales, PR and communications.
Oct 7, 2008
: Vol. 4, Issue No. 55
Turning a Business Model Upside Down - 1
How I fired 200,000 customers and saved a book club
IN THE NEWS
How Much Time Should CEOs Devote to Customers?
Customers are the source of all cash flow. Organic growth depends on developing relationships with new and existing customers. And future growth prospects are baked into stock market valuations of companies. Yet an increasingly high percentage of Fortune 500 CEOs have not come up the ranks through marketing or sales. At the same time, in many companies, the chief marketing officer position turns over every two years. Facing the current economic downturn, companies need marketing skills more than ever. But while every corporate mission statement pays lip service to respecting customer needs, actual customer expertise is typically a mile wide and an inch deep.
?John A. Quelch, professor of business administration, Harvard Business School, Oct. 1, 2008
Customers are the source of all cash flow. Organic growth depends on developing relationships with new and existing customers. And future growth prospects are baked into stock market valuations of companies. Yet an increasingly high percentage of Fortune 500 CEOs have not come up the ranks through marketing or sales. At the same time, in many companies, the chief marketing officer position turns over every two years. Facing the current economic downturn, companies need marketing skills more than ever. But while every corporate mission statement pays lip service to respecting customer needs, actual customer expertise is typically a mile wide and an inch deep.
?John A. Quelch, professor of business administration, Harvard Business School, Oct. 1, 2008
A great deal of palaver comes out of business schools and think tanks about the need of the CEO to spend time with customers and respond to customers' needs.
Customers don't have needs; they have wants. And marketing people are in the business of creating wants, not serving needs.
This is the story of how 200,000 customers managed to rip off a bunch of stupid marketers.
The year was 1969. After a meeting with Jack Barlass, president of the Meredith Book Publishing Division, and Bill Gohring, head of Meredith mail order in Manhasset, Long Island, I was hired to run book clubs at a salary of $15,000 a year.
It was my eighth job in nine working years since I got out of the Army.
On my first day at work in the Manhasset offices, I was handed a binder with a black pressboard cover. It was the annual report of book clubs for the prior years.
The bad news: The clubs had lost $250,000?a lot of money in 1968. My orders: "Fix this and make a profit."
The good news: Gohring told me that Meredith?with its massive magazine empire in Des Moines, Iowa, (e.g., Better Homes and Gardens) and legion of space salesmen?expected its various divisions to have expense accounts. With virtually no travel or entertainment in the mail order division, where we worked with computers rather than clients, it was incumbent on all executives to generate expenses just like every other division of Meredith. Therefore all lunches were to be expensed. We could eat anywhere?alone, with colleagues, outsiders or spouses?and charge it to the company.
I quickly acquired a taste for two- and three-martini lunches, gained lots of weight and had a splendid time with convivial company from noon to 2 every business day at the best eateries on Long Island's North Shore.
Best of all, the vodka anesthetized the perpetual pain in my gut.
The Premise
The major club under my aegis was Family Book Service with 350,000 members. They were offered books on cooking, decorating and home health guides. It generated the lion's share of revenue and was responsible for the big losses. It was imperative to turn that sucker around first.
Family Book Service was a "negative option club"?the same model as Book-of-the-Month and Literary Guild. Members received an announcement mailing 15 times a year describing the main selection; alternate titles; and a collection of flyers offering a mishmash of merchandise, other titles and?in late fall?Butterfield Farms fruitcakes, which were delicious.
See What Readers Are Saying About This Story...
Customers don't have needs; they have wants. And marketing people are in the business of creating wants, not serving needs.
This is the story of how 200,000 customers managed to rip off a bunch of stupid marketers.
The year was 1969. After a meeting with Jack Barlass, president of the Meredith Book Publishing Division, and Bill Gohring, head of Meredith mail order in Manhasset, Long Island, I was hired to run book clubs at a salary of $15,000 a year.
It was my eighth job in nine working years since I got out of the Army.
On my first day at work in the Manhasset offices, I was handed a binder with a black pressboard cover. It was the annual report of book clubs for the prior years.
The bad news: The clubs had lost $250,000?a lot of money in 1968. My orders: "Fix this and make a profit."
The good news: Gohring told me that Meredith?with its massive magazine empire in Des Moines, Iowa, (e.g., Better Homes and Gardens) and legion of space salesmen?expected its various divisions to have expense accounts. With virtually no travel or entertainment in the mail order division, where we worked with computers rather than clients, it was incumbent on all executives to generate expenses just like every other division of Meredith. Therefore all lunches were to be expensed. We could eat anywhere?alone, with colleagues, outsiders or spouses?and charge it to the company.
I quickly acquired a taste for two- and three-martini lunches, gained lots of weight and had a splendid time with convivial company from noon to 2 every business day at the best eateries on Long Island's North Shore.
Best of all, the vodka anesthetized the perpetual pain in my gut.
The Premise
The major club under my aegis was Family Book Service with 350,000 members. They were offered books on cooking, decorating and home health guides. It generated the lion's share of revenue and was responsible for the big losses. It was imperative to turn that sucker around first.
Family Book Service was a "negative option club"?the same model as Book-of-the-Month and Literary Guild. Members received an announcement mailing 15 times a year describing the main selection; alternate titles; and a collection of flyers offering a mishmash of merchandise, other titles and?in late fall?Butterfield Farms fruitcakes, which were delicious.
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Copyright 2008 | North American Publishing Company | All Rights Reserved
1500 Spring Garden Street, 12th Floor | Philadelphia, PA 19130 USA | (215) 238-5300
Privacy Policy
