The P Word
By Steve Marzio
God love Business School and MBA programs, they serve a purpose. You learned the four P’s role in the marketing mix. You went through simulations and competitive gaming. The cases – ahh the cases. No matter how realistic those learning exercises seemed, you never really got your hands dirty in ways that you will in real life situations. For a practical example, here’s a case study that may sound all too familiar to anyone in marketing or sales for a challenger brand …
Case of The Dreaded P (aka The Walk of Shame):
A year ago, you launched that whiz bang Product of yours after years spent existing in only powerpoint and excel files. Product development came through and launched that gizmo with only one product delay. Your sales efforts landed some key shelf space (or “Pdistribution” as my business school professor liked to call it) in some national chains. You reviewed, edited and executed some killer agency Promotions to support the launch of the product which helped give it a nice initial spike of sales in the marketplace.
And now it is a year later, sales have NOT continued to climb, you look at your ad budget and don’t see one and wonder what the next move is. You know what the next move is, you just don’t want to go there. In dreaded fashion, you crack that door open…..
You’re down to the last P. The Dreaded P. The P that makes you feel squeamish and dirty inside. It’s excel’s version of the Walk of Shame. You open a new file and begin the exercise. What if I price my product lower? How much lift should I assume? Well, let’s try a sensitivity analysis here. A 10% lift yields this much extra revenue and does this to my profit. A 20% lift, a 30% lift and so on. At what point does a price move (it’s hard to even type the words) make sense? Can I really make it up in volume like my slick sales guy keeps telling me? I think I know what he is paid on, better not listen to him. Did the retailer really use the word “delist?” I severely doubt that. What will the VP marketing think of my when I even present this case? I know, she’ll think I’m a complete marketing failure and she will wonder whether she should still support those recruiting efforts from my Top Tier B-School. I’m spiraling now. Get it together. Simplify, simplify, what does this boil down to?
I need to make my numbers and see no other way. Let’s try a 50% lift to see what that does….
The “Dreaded P” example above actually highlights the secret 6th entry in the 5 sure-fire ways to get Retail Leverage. It is kept hidden behind glass with a “Break only in case of emergency” sign posted above. The reality is though – if you aren’t using one of the 5 ways to get Retail Leverage, your only resort is #6 – Price. Good luck selling that to your organization. By the time you get to this point your hand is likely to be forced by your buyer. Otherwise, de-listing is as close as the next reset. In the rearview mirror some of those 5 Retail Leverage strategies don’t look quite as expensive anymore.