They Don’t Wear Shoes

They Don’t Wear Shoes

There are two and only two things that matter in a successful business: marketing and innovation.  Both marketing and innovation produce results; all the rest are costs.   Seem hard to believe?  Don’t be fooled, it’s one of today’s most important business realities.

If you don’t believe me, do a little snooping and I think you’ll uncover some interesting facts?  First, I think you’ll find that marketing has lost its relevance.  And next, marketers have lost their influence.  It shouldn’t be that way, but it is.

The decline of marketing has been slow, consistent and almost predictable.  Blame it all on a single word; strategy … or the lack of it.  These days there doesn’t seem to be much difference between the phrase “marketing promotion” and “marketing strategy”.      Commoditization, market fragmentation and customer expectations are probably the culprits behind this trend, but that’s just scratching the surface.

In the past, commoditization wasn’t that much of a problem.  Quality and service innovations made differentiation simple.  And since it was easy to be different, it was easy to market.  Now the opposite is true.

From the customer’s point of view, it’s hard to tell one builder from another.  And to make things worse, most of the homebuilders can’t tell the difference either.  That’s the good news and the bad.  As far as a solution, it leaves only one answer.

Differentiate or die.

So if you want to separate yourself and be different, you need to reinvent your marketing and innovation strategies.  And to begin this process, marketers and CEO’s need to see eye-to-eye.

Recapturing Trust

Let’s face it; CEO’s don’t have much use for marketers.  Marketing to them has become a department, or worse yet, a department that spends a lot of money.   And who can blame them for feeling that way.  Most marketing programs don’t generate a CEO’s trust and confidence.  Let me show you why.

At any one time most CEO’s have two or three major initiatives on their plate.  They’re focusing on things like shorter cycle times, better scheduling, lower costs, better quality, higher satisfaction and more focused communications.   And this doesn’t take into consideration their meetings with bankers, lawyers and landowners.  On the other hand, marketers have a different set of priorities.

Marketers are focused on creating new campaigns, developing brochures, redesigning collateral material, landscaping their model homes, setting up sales offices and generating more traffic.  Their meetings bring them together with advertising agencies, merchandisers, landscapers and architects.   Compare the two and it’s easy to see why each says of the other, “They don’t get it.”

For marketers to add value to the organization, they need to get on their CEO’s agenda.  And to do this, they must accomplish three things.  Marketing departments must become:

  • More strategic
  • More cross functional
  • More bottom line oriented

I guess I’m really saying that marketers need to become visionary, responsible and accountable.   Let me explain with a story.

“They Don’t Wear Shoes”

During a recent vacation, a Hong Kong shoe manufacturer became aware of a remote South Pacific island.  Being a good businessman, he wondered if a market existed for his shoes.  Not having the time to find out, he sent an order taker to the island who, upon a cursory investigation, wired back: “The people here don’t wear shoes.  There is no market.”  Not convinced, the Hong Kong shoe manufacturer sent a salesman to the island.  The salesman wires back: “The people here don’t wear shoes.  There is a tremendous market.”  Afraid that the salesman was being carried away by the sight of so many shoeless people, the shoe manufacturer sent a third person, this time a marketer.  The marketer interviewed the tribal chief and several of the natives and wrote back:

“The people here don’t wear shoes.  However, they have bad feet.  I have shown the chief how shoes would help his people avoid foot problems.  He is enthusiastic.  He estimates that 70 percent of his people will buy shoes at the price of $10 a pair.  We probably can sell 5000 pairs of shoes in the first year.  Our cost of bringing the shoes to the island and setting up distribution would amount to $6 a pair.  We will clear $20000 in the first year, which, given our investment, will give us a rate of return on our investment (ROI) of 20 percent, which exceeds our normal ROI of 15 percent.  This is not to mention the high value of our future earnings by entering this market.  I recommend that we go ahead.”

Upon returning, the marketer quickly began work on developing a plan to market his company’s shoes.  He developed a strategy by defining the:

  • Target market
  • Core position
  • Price position
  • Value proposition
  • Points of difference
  • Marketing mix

The Hong Kong shoe manufacturer, delighted by the plan, approved the move into the new South Pacific market.

Sound far fetched?  I hope not.  Philip Kotler, considered to be the father modern marketing, uses this story to illustrate the range and scope of a good marketer.   My purpose is different.

I want you to think about your company.  Most of all, ask yourself a couple of tough questions.  Do you have specific performance goals (market share, customer satisfaction, relative product quality, etc) for your marketing department?  Do you tie your marketing objectives to a financial scorecard (cost per sale, cost per visitor, profit per series. etc)?  And do have a written strategy (Premium customer, core position, value proposition, etc)?

Most builders believe they can say, “Yes, Yes and Yes.”  The sad truth?  Their customers have already answered for them.   They answer when they say, “Which one were you?  And, by the way, tell me about your incentives?”

“I Know, I Know …”

If you had the chance to sit and talk with Kotler he’d tell you, “Marketing’s basic mission is to create differences between what your company is offering and what your competition is offering.”  He’d finish by saying that each point of difference doesn’t need to be important to everyone, it only needs to be important to your company’s premium customer (customers that will respond best to your strengths).  There’s an important lesson here.  A lesson you need to remember.

The greater the perceived difference between one product and another, the greater the perceived value … and the more a customer will be willing to pay.

As many times as I scream, “differentiation”, builders scream, “I know, I know.”  But most builders don’t know.  They have a problem with marketing because they don’t know who they are.  If you don’t know who you are, it’s pretty tough to plan a marketing strategy.  And if you don’t have a strategy, a second marketing rule begins to attack you from a different direction.

The more a customer perceives two products to be the same, the more they will revert to price to make their choice.

Why mention these rules?  They’re proof that differentiation must be the foundation for your marketing strategy.  And your marketing strategy is important to every part of your business, from product design to production and from service to selling.

All Builders Look the Same

Marketing is much more than most people believe.  And it’s much more than the traditional product, price, place and promotion tactics developed in the sixties.  Sure, the four P’s get a lot of lip service, but how many of the P’s do builders really end up using?   An easy question to answer.  Just one … promotion.  And there’s a reason.

Marketers believe advertising, merchandising, collateral material and special events are the answers to generating sales and solving problems if sales are slow.  This causes them to spend their time with the Promotion tactic of the four P’s.

On the other hand, CEO’s are flying at a different altitude.  They believe that the combination of quality, cost and price are most responsible for selling homes.  And that means they end up overseeing the Product, Price and Place parts of the four P’s.

Actually, the chain of events happens like this.  Land is purchased and a product is designed.  Budgets are developed and based on what the company needs to sell.  Next, advertising, collateral and merchandising are designed to bring anybody and everybody.   And finally, price incentives are used when sales don’t match budgets.

In the homebuilding industry, a price discount equals strategy.  And there’s a simple reason why this happens.  From the customer’s point of view, all the builders look the same.   Blame poor marketing again.

Reinventing Marketing

Both marketers and CEO’s are going need to work together if they want any chance of reinventing their revenues and profits.  CEO’s will need to quit telling marketing what needs to be sold and start listening to them about what can be sold.  And they need to quit believing that marketing is selling.  Finally, they need to make sure marketers oversee each of the four P’s, not just one of them.

Marketers need to move beyond the classic skills of market research, advertising and sales promotions (grand openings, radio remotes, etc) and become proficient in value mapping, brand building, experiential (experience) marketing, profitability analysis, target pricing and question-based selling.  These are the tools that will end up separating the companies that struggle from those that don’t.

By the way, there’s one more thing you need to know.  That quote that I opened with … There’s two and only two things that matter in a successful business; marketing and innovation … it isn’t my quote.  It belongs to Peter Drucker.  And those that know who I’m talking about, know that he’s world’s foremost authority on business strategy too.

Twenty years ago Rick became the first trainer in the homebuilding industry introduce a sales training program that addressed the differences between high and low-ticket sales strategies.  Today, his Reimagine Selling program is still the only industry program that focuses on the behaviors most closely identified with high-ticket sales success. Reimagine Selling is supported by the longest and largest research study inside and outside the homebuilding industry and produces results better than any program ever.