Change: what marketers need to do.

Companies are downsizing and competition is fierce. Now is the time for change in order to survive and prosper in the next five years.

These days, profitable results come from changing in profound ways, not just blindly following what has been accomplished in the past. No longer do you

Unfortunately, because of our locked-mind thinking we tend to follow blindly along the road of "this is what others are doing so I guess it's OK for our company." Even worse, many of us can be heard saying: "This is what worked in the past, so we'll continue building on that." After all, that's what direct marketing is all about, right?

So, we develop plans, develop tests, create new copy and graphic platforms and launch new promotional offers--only to find that we are building on the past rather than the future.

We get so wrapped up in "the numbers," cost-per-lead, cost-per-order, return-on-investment, etc., that we fail to spot changes in the environment--changes that we should be adjusting to in our overall business operations.

When you don't plan for change, problems can easily develop. As a result, decision makers are confronted with business growth problems, strategical and tactical errors, unnecessary losses and missed opportunities.

When you finally realize you must change to survive and prosper--and this is usually the result of a mailing or advertising/sales campaign that bombed--you can be months and even years behind. So we plan catch-up.

And this catch-up tends to generate more problems; such as the time involved in getting up to speed on know-how and the time and money you'll need to gain access to the markets and the customers who may have developed business relationships with your competition.

Gaining advance information gives you a competitive advantage on the way you think and compete. Having an advance warning system to spot change can get you into the right market and the right profit margins a lot quicker than competition. In theory, when you are first with a product or first in the market, you have a better chance of owning the market.

Here are some changes Abbott Enterprises, a manufacturer of truck tachographs, anticipates in its industry (and the company has already adjusted accordingly).

Fast turnaround on orders--one business day is ideal. (Faster responses mean happier customers and better cash flow.)

Produce more products that solve customer problems and anticipated problems. For example, the company recently introduced the electro-mechanical tachograph. It's not as expensive as electronic tachs and it has the same reliable benefits as mechanical units. If Abbott wasn't perceptive, it would have introduced an advanced electronic model, like the competition. By taking a step down and improving on a good product, the company was first in the market with a popular product.

Changing Too Quickly Can Be A Problem

An emerging mail order force is Apple Computer. Yet, in terms of new products and recognizing changes in specialized segments, many experts believed that Apple recently missed the boat on the fastest growing segment of the computer industry--laptops and notebooks.

Apple was a couple of years late introducing their versions of these computers. Now Apple has developed a high-design line of Powerbook computers. Even with the high suggested price-points, they are quickly appealing to customers and prospects.

Apple did see the change in laptop computers, but they actually waited about two years before they introduced their Powerbook computers. The new computers--based on the changes the customers were really looking for--are in great demand and short supply across the United States.

Another example is Health Valley Foods. This "healthy eating" niche marketer was laughed at by the food giants during the years because of its mission to carefully expand its line of healthy eating foods.

The healthy eating change was clearly perceived by Health Valley's president, George Mateljan, almost 13 years ago, when he noted more articles and ads on diets and weight loss fads and more "puffed-up" health-food claims by major food companies. He also noted an increase in disease and medical problems allegedly traced to poor eating habits as reported in various medical research studies.

While the big food companies virtually ignored or didn't spot the move toward healthier eating, George started to add and improve his line of low-fat and fat-free products.

Today, Health Valley is the largest speciality food company in fat-free and low-fat foods in the United States. And direct response advertising and mail order are a major part of its long-term strategy. Meanwhile, all the big guys--Heinz and Stouffer Foods, for example--are just getting in on the fat-free movement.

Dynamic Structure Provides Competitive Advantage

Dynamics in an organizational structure that continues to change, helps build solid, progressive and profitable marketing-oriented companies--those that can anticipate change and respond to it quickly.

Some of the well-known companies, such as Johnson and Johnson, Procter & Gamble, and Siemans, are already breaking down into smaller units to be more responsive to change. Decentralization (giving more decision-making responsibility to the employees who are closer to the customers), flexibility and fast responses are the key to the future; and these companies have started to adapt to the future now.

But what about the smaller companies? In general, the small business and growing entrepreneurial company tends to be very vertical in structure. The founder or president is on top and he or she directs the company toward its goals and objectives. Here are some guidelines based on making the structure of the small business more friendlier, unified, aware and responsive:

Present your long-term strategy. Continue to ask open-ended questions on how the strategy can be improved.

Put everybody in charge of scanning the environment and reporting back on a regular basis.

Get everyone talking about anticipating customers' needs--encourage active communication among employees and outside consultants and vendors. Be sure to provide the support and feedback necessary to make this program flourish.

Look for patterns, similarities, differences and distinguishing points in situations, trends, fads and shifts in the environment based on observations and studies. The more associations you can pinpoint, the more opportunities you can perceive.

Get customers and prospective customers together on a regular basis, so you and your employees will have the opportunity to brainstorm idea starters with them.

Put everyone in charge of a total customer satisfaction program, rather than just a customer service program.

All of us should be asking and responding to these questions on an ongoing basis about change:

* What kind of changes do we perceive and how will they affect our customers, our prospective customers, our dormant customers, our marketplace (or potential new markets) and our business overall?

* Are these changes a threat or a long-term opportunity?

* What significance is the threat or opportunity--is it worth addressing now or later with some type of action?

* What is the timing--and who will be responsible for taking the necessary action?

The Written Plan

A written plan--whether it be a business, marketing or a strategical plan--is critical for success, even for the smallest companies. It is the framework for addressing change successfully.

The plan must include a feedback system for scanning the environment and anticipating and adapting to change.

One of the secrets of a good plan that addresses change is having everyone work together. For example, a retailer that also markets by mail order needs to work closely with its vendors, consultants and outside professionals--so close that these specialists actually participate in planning, brainstorming sessions and providing input about the environment for the retailer.

Usually, however, the so-called plan these days is retained in the mind of the company executive or owner rather than stored in writing.

Most of the plans that I have seen or audited are based on the continuation of programs that are rooted in the past and the current status of the companies.

When you look closer at the typical company, you'll find people who may be spending too much time focusing on merchandise and the financial aspects (product-oriented company), and not enough time on analyzing the environment, markets and strategy (environment/market driven company).

Business plans are indispensable management tools that give any size company the framework, direction (which should be a logical process), goals and objectives that best serves the company management, its investors, its employees and, most important, its customers.

It should be focused on long-term strategy, frameworked to take advantage of the company's existing resources and fine-tuned to anticipate change and adapt accordingly.

Planning Strategy And Tactics

Direct marketers must also link strategical planning (one year or more) with tactical planning (less than a year). The real goal of strategy is to cope with competition based on changes. A well thought-out strategy enables a company to find its place in the market and to position itself favorably in the minds of its customers and prospects, the way mail order marketer L.L. Bean does.

Strategy and tactics should be complementary and consistent with the overall marketing policies and with the marketplace and the competitive circumstances. This not only makes everything logical and unified, but it helps the company to deal with change quicker.

Working As A Team

Marketers should also build structure and stay flexible for change by continually evaluating and improving the actual day-to-day work process and purge unnecessary and inefficient activities. This means building on strengths already in place, allowing employees to take more of the decision-making responsibility (empowering), breaking up managers and supervisors into smaller operating units and planning more efficient production and distribution through sophisticated buying methods.

Also related to working closely with suppliers is the company structure that builds on customer market groups or segments (rather than company product groups). There are no product or brand managers, only customer segment managers. There are no measures of product or merchandise group performance, but only the measure of whether or not the customers are enjoying 100 percent customer satisfaction, not just good customer service.

One client stated that they were successful in meeting or exceeding customer wants or needs by 95 percent. I asked the president if he would be satisfied with a quality/accuracy rating of 99 percent from the USPS. He laughed and said yes, but that was asking for the impossible. I responded, if it were possible--and I'm sure it is--that 99 percent quality/accuracy rate would mean that the post office would lose or misplace about 17,000 pieces of mail every hour!

Build On Common Business Sense

Doing business over the next five years also calls for common business sense:

* Overestimating. The problem with successful companies is that they overestimate their own advantages and strengths and underestimate the advantages and strengths of their competitors.

* Measuring. "You can't manage what you can't measure," said Bill Hewlett of Hewlett-Packard fame. It's amazing the number of so-called direct marketers that don't carefully measure and evaluate their programs, other than tracking units, sales and margins.

However, rather than looking for the fast buck or the "quick fix," it's better to measure and manage for the long-term rather than the short ride. For example, you should emphasize the measurement of long-term benefits, value and profitability of customers rather than just evaluating how many customers responded to offer "A" rather than offer "B."

* Experiment. Let ideas form and then form new ideas. When we tinker and experiment we produce alternatives, opportunities and clear-eyed thinking in what we're doing.

* Youngness. Hiring and building a company based on mostly young employees is a mistake--even though they may be young highly educated employees. This is the wrong way to go. You can't put a price on the experience, wisdom, insights and value senior people bring to companies--and to your customers.

* Gut Feelings. What we feel based on experiences, education and hunches can be just as important as hard numbers.

Marketing With Change In Mind

The traditional view of marketing is to continue doing what's working and to build on your successes. But if you continue along this road, how will you change to meet the needs and wants of the marketplace? How will you uncover shifts in the environment that could affect you during the next five, 10 or 25 years?

On a similar topic, there are just too many marketers (ad agencies and advertisers) that tend to build marketing programs on ideas, catchy slogans or promotional offers. If an idea works, for example, then a continuation test is made to confirm the "beating of the control ad or package." If it doesn't work, everybody goes back to the drawing board for more ideas, slogans or offers.

Marketers must know what is happening in the environment before any kind of program is developed. For example, a marketer should be asking these questions at all times:

* "How are our customers thinking (which goes over and above evaluating customers' needs and wants)?"

* "Is the market (customers, dormant customers, prospects) looking for substitute products or services--and can we accommodate these wishes?"

* "Are there changes in customer priorities and preferences (including a preference for competitive products or services) and what do those changes mean to us and the purpose of our company plan?"

* "Are there changes occurring in the distribution channels that we may be able to capitalize on?"

* "What new technology should we look closer at for the ultimate benefit of our products, services and our customers?"

* "What opportunities are changes bringing now and how will these opportunities develop over time?"

The constant feedback from the environment and the building on tested and proven direct marketing methods is an unbeatable combination for developing and launching marketing programs that adapt to changes. All this should be accomplished incrementally rather than constantly shooting for breakthroughs or abrupt changes.

Building Stronger Barriers Against Competition

One of the fundamental characteristics of a mail order company that has a sustained advantage is its ability to build a number of barriers against competition. These could include the holding of various patents or owning hard-to-duplicate production equipment for producing its distinctive products. The more barriers the company has, the less chance of competition competing on the same level.

While it's easier for larger companies to achieve a parade of barriers, the smaller companies can (and should) create barriers, too.

Here are three ideas that the smaller company could benefit from:

* Find the best, most talented people you can afford. A few experienced, top-drawer people can usually give you more over time than a number of second-tier people who may save you a few bucks in the short run, but they can cost you a small fortune in productivity over time.

* Make the most of differentiating your company, products and services sufficiently from your competition so that you project distinctiveness. Then combine this differentiation with the idea of marketing in multiple segments or niches that offer more profit opportunities, rather than choosing the segments that are the largest (because that's were most of the competition is).

* Develop multilevel custom programs for customers that make the cost of switching over to competition too high. For example, for years Apple's Macintosh featured a high pricepoint. The cost of changeover in terms of learning and compatibility was far too great to even consider an IBM, an IBM compatible or a clone. So I moved up to a more sophisticated Mac computer and further entrenched myself into the world of Apple computers. Apple had me where they wanted.

In a marketplace of change and uncertainty, marketers need to develop the capabilities to predict change, to adapt to change and to even create change. Maintaining a dynamic, organic flow is important. Creating growth for tomorrow needs planning today.

Differentiating Your Business

All businesses have the opportunity to build barriers against competition by differentiating their businesses, products or services. Here are some idea starters:

* Satisfy unmet customer needs. This could be through improved technology that leads to improved products or guaranteed faster service.

* Tailor products or services to customers. Custom-design products or services targeted to customers who want special attention (i.e., the wealthy) or have special needs.

* Develop multiline extensions or brand offerings. Aim these products at user-specific applications, geographical segments or subsegments within the market.

* Take advantage of your competitors' lack of resources. Build a stronger, more aggressive business by capitalizing on your competitors shortcomings, such as the lack of responsive vendor resources, minimal technical knowledge and limited sales and service specialists.

* Negotiate favorable terms with suppliers of raw materials or component parts. This could give you a competitive edge, especially if your competition later finds that these materials or parts are in short supply or on constant back order.

* Uncover new channels of distribution. Consider everything from vending machines to kiosks to manufacturer representatives to school bookstores.

* Strive for proprietary products and services. Either buy out or develop those products or services that have patents, copyrights or limited licensing privileges.

* Consider forward or backward integration. You can buy a key retailer or dealer (forward) or a manufacturer or main supplier (backward).

* Look into joint ventures or partnerships. A business partnership, for example, can enable you to get into new markets, strengthen positions in current markets or enjoy the capital to plan and create new products and models or styles.

Helping Employees Accept Change

Building-in a system that accepts and adapts to change is one thing, but how do you handle employees and stakeholders in the company who resist it?

* Tell how change can (or will) benefit them, as specifically as possible.

* Ask for their involvement in making change happen.

* Give examples on how other companies are anticipating and adapting to change.

* Ask for support and involvement from suppliers, vendors, professionals and consultants.

* Encourage a team effort.

* Get progress reports frequently (verbal and written).

* Give your team support and confidence, including positive reinforcement when things don't work as planned.

* Ask for suggestions for improving the plan, program or transformation.

How To Scan For Change

The following is a partial list on how to scan for changes:

* The editorial pages of good city newspaper will address potential changes on a daily basis. Read what people are saying about their problems, their needs and dreams and their ideas for a better lifestyle or workplace.

* The customer complaint file is a good place to note commonalities, such as more and more customers complaining about your short business hours or your lack of coordinated colors. Don't just view these letters as problems that need correcting, but look for common threads of opportunities that you should start addressing now.

* The business and trade publications should be scanned on a regular basis for changes that are happening in other industries that could apply to your industry.

Richard Siedlecki is an independent management and marketing consultant. He has been consulting for nearly 13 years for companies, ad agencies and associations of all sizes and budgets. Siedlecki is also adjunct professor of marketing at Emory University and adjunct professor of management at Georgia State University. He can be reached at 2996 Grandview Ave., Ste. 305, Atlanta, GA 30305--404/816-4040.