Selling everything a company can make until you have reached the point where the marginal spending to produce and sell the product won’t yield the return you want.
The implications of that and how a company needs to include marketers in all of its decision-making processes. That’s because if you really want to maximize profits, you need to know how much you can sell before you decide how much to produce. For the moment, however, I will focus on current capacity and simply say that
“A good marketer will sell everything that a company has the ability to produce, the whole shebang, not just two-thirds, or eighty percent of the shebang.”
The first destination that every marketer should be aiming for is to sell everything its company can produce.
Most companies build capacity to meet peak demand during certain times of the year, and then settle for letting that capacity sit idle during the rest of the year. Soft-drink makers are notorious for this, and most people in the industry generally accept that seasonal ups and downs are a necessary part of the business. But I don’t buy this time-honored myth. Using production capacity that is already in place is one of the most cost-effective ways to produce a product; so, it’s criminal to let it sit idle. A good marketer will sell everything that a company has the ability to produce, the whole shebang, not just two-thirds, or eighty percent of the shebang. The airlines call this yield management. In English, this means, sell every seat that you can, even if you have to discount.
The airline guys have it right. It’s the only business that I know of where consumers pay less if they buy early. The airlines cover their fixed costs and they deal for full yield.
The conventional wisdom is that your share should remain stable from winter to summer, and from your high season to your low. People do high fives when they hold share in the offseason, and they do high tens if share goes up in the high season. However, the real opportunities for gaining market share and the easiest time to steal customers from your competitors is in the low season. Unless you already have a hundred percent share of the market, you should always increase market share in the traditionally low periods. That is because most companies make the mistake of following the conventional thinking. They figure that sales are going to be lower, so they cut back their marketing in the low season. But I say, “So what?”
Maybe overall demand for your product category does slow down in one season or another. But seasonal trends don’t matter as much as you think they do unless you have a monopoly. Just because the public may be buying fewer airplane seats, golf clubs, or soft drinks in October, or February, or whenever doesn’t mean that they have to buy fewer of yours. Make seasonality the other guy’s problem. If you keep marketing while your competitors cut back, you can make, sure the products that customers don’t buy are your competitors, and not yours.
Sometimes I think that the whole idea of seasonality is just an excuse that marketers have come up with and sold to everybody else as a way to explain away their own shortcomings. Research suggests that people’s fluid consumption in fact does not drop during the winter. They may not be outdoors in the sun as much, but there are other reasons, besides wanting a break from the heat, why people drink sodas. Therefore, I think that it’s up to the marketers to figure out what those reasons are and to sell their product to consumers. I must have gone to five Miller Brewing annual sales meetings and heard that sales were soft in the spring because of the rainy weather (p.s., it apparently wasn’t raining on Budweiser those springs; it stole share from the guys crying about the weather). Some of the richest people in the world are those who simply refused to accept the time-honored myths of their business. Sam Walton would have opened a shop only on Main Street if he had simply believed the myth of local, high-touch/high-margin retailing.
I’m a great believer in self-fulfilling prophecies. If you think that you are going to fail, you will. People come up with notions, and those notions become institutionalized. I am sure you have a good deal of them in the company that you work for. So my advice to you is to demystify and kill them. But do it with the facts. (By the way, if you decide to test the principle of deseasonalizing the business, remember that the marketing dollars that you have allocated to the current business are untouchable. If you want new volume, you are going to have to spend new dollars. You can’t just spread the same number of dollars that you were going to spend in ten months over twelve months.)
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