THE MOMENT OF TRUTH IN MARKETING

THE MOMENT OF TRUTH IN MARKETING

In the early sixties I got my first job as personal assistant to the Director of Finance, who was an American and the name of the company was International Harvester Company Ltd. Branch Office in Copenhagen, Denmark that was in charge of IHC’s operations in Scandinavia. At that time IHC was a very dominant player on worldwide markets selling agricultural equipment, construction machines, pickups, vans and trucks. I joined the company at a time when it started to face some problems. Throughout the 1960s despite good sales, IHC’s profit margins remained slim. The continual adding of unrelated business lines created a somewhat unwieldy corporate organization, and the company found it difficult to focus on a primary business, be it Ag equipment, construction equipment, or truck production. An overly conservative management, combined with a rigid policy of in-house promotions tended to stifle new management strategies as well as technical innovation. These facts are well known today but at that time not properly recognized. I have not been able to get the exact figure of the number of employees all over the World, but we were more than 100.000 as far as I recall. I remember however that IHC had more than 10.000 dealers selling tractors only in more than 20 countries.

In Copenhagen we responsible for the Overall Busines Areas the most important of course sales of all above mentioned products mainly through regional dealers and our own I-H sales outlets and service centers. We were organized in at that time the typical pattern for USA based companies in Europe: American CEO, ditto CFO but Danish sales and marketing management. The total of all IHC European operations was headed by a European IHC HQ in London.  So with the IHC HQ in USA, the European in London and the various subsidiaries in Europe including Denmark the chain of command was very long, communication often complicated and on top the usual cultural “conflicts”.

My job was to assist the American CFO and we had the main focus on financial burdens increasing heavily in the early 60ties and the liquidity picture represented a serious threat and the reasons were many, but mainly due to the fact that IHC had to provide the expansive dealerships with IHC products. The dealers were of course divided into groups, some selling agricultural machines only, some trucks etc. But they all had one thing in common IHC was to supply them with products on the condition that payment are first due, when the product is sold. So in consequence IHC had to finance a pile of businesses and it was one of my duties to pay visits to dealers in order to teach them financial management and keep proper accounts so IHC DK could maintain track all the products put at their disposal on a consignment basis. Without a reasonable display of IHC products in the dealer’s showrooms, how could they sell?

As mentioned above in the 60ties in spite of a rapid growing economy in Europe IHC started to get into troubles, but they did not realize it. The management was old fashioned and had the view that only Americans could hold the top executive positions in Europe even if they had no clue about European culture and relevant marketing management. On top came that the new series of tractors introduced on the market in 1959 (the models with a high powered engine) faced tremendous problems and caused additional financial burdens and resulted in very low sales. So one morning I was summoned by my American boss, who showed me a memo from our CEO. The content related to the fact that our liquidity was strained and the solution was to increase sales at almost all costs never mind the consequences. Let us just say that the focus was on sales of I-H trucks.  We all knew that our trucks were extremely good and we knew all the USPs by heart:

• US quality
• Optimal performance
• Best service
• Economical/Low mileage costs
• Strongest truck on the market
• Safe and comfortable
• Best value for money

And so the list went on. All catalogues in color and praising the trucks up to the sky, we advertised in all professional magazines and paid 50 % of all advertisements by the dealers and in spite of those active efforts the sales dropped and started to worry the top CEO of IHC and of course the BIG Chairman in USA. Now the next picture is purely from my imagination but this is what I discussed with my boss and I used the picture as an illustration for him to understand the many pitfalls on the way from USA to the final point, where the sales person meets the potential buyer the moment of truth.

In the IHC USA HQ the board has a meeting and with an agenda of course. The board is rather large, composed of experts and of course at a certain point during the meeting the President in charge of the Division Sales/Trucks/Worldwide is asked to present the results for the last quarter. Since the figures (my guess) comprised of the totals from the worldwide operation it was a short presentation; Expected sales say 100 million $, actual sales only 81 million$, result not satisfactorily, actions will be taken, the forecast for the coming quarter looks better. The words are marked by caution and selected very carefully and in appropriate board meeting traditions; “The prevailing market circumstances worldwide, in view of the facts that, the company to undertake strong actions in order to recapture a profitable market share etc”.  The texting is nice, professional and the board is protecting is ass. A statement is mailed to the Stock Exchange in order to ensure the shareholders that everything is under control. Within one hour after the board meeting the President of the Truck Division calls his secretary and dictates a memo to all executive VPs and the words are just a little bit different from the words he used in his presentation to the board. The VP in charge of Sales in Europe receives the message from the USA and  then dictates a memo to his secretary addressed to the CEO in London responsible for all European activities and now the wording of the memo changes, the tone is sharper:   “In view of the fact that sales have dropped significantly over the last months I strongly urge you to come up with a plan within one week of how you intent to ensure our company that you are capable of running the European operation”  Within a split of a second the London based CEO is producing a memo to all European CEOs and now the text becomes even sharper and again changes when the local CEO calls his Sales and Marketing Manager:”Bob what the hell is going on, what are you guys doing, look at this shit from London”.  The SMM then calls an urgent meeting with all regional sales staff (this is way before modern means of communication). The message is loud and clear: “ Starting from now and one month ahead this rule applies; all sales staff who cannot meet the target we set at the beginning of this year can start to look for another job”. The regional sales manager will then go to the dealer and urge him to sell more trucks and if that could be done yesterday please? “Otherwise this shitty boss of mine in Copenhagen may start to look for another dealership in your district”.

That was almost the end of my explanation to my boss, who looked at me and asked what now and I answered; “You come with me tomorrow, we will visit a dealer/trucks near to Copenhagen. I will find a dealer, who tomorrow will do a sales presentation to a truck owner, who is interested in buying a new I-H super truck”. So I did and in the morning we drove to a dealer and were allowed to participate in his presentation to a potential buyer (truck owner) of all the USPs an I-H truck had compared to the competition.  The superlatives were all over in the air, and even my Boss and I were almost on the verge of buying one. When the dealer had finished his presentation and asked the truck owner if he had any questions, he simply came up with this one” How much will you pay me for my old Volvo truck?”  That was the moment of truth, when the fine and carefully selected words from the board meeting in USA, passing a long communication line should result in higher sales. The truck owner did not care about all the USPs; he only paid attention to the price any truck dealer would pay him for his used truck.

This was back in 1962, today in 2009 in Thailand, where I live now I saw a few days ago this message in the local Business News: “The sale of TOYOTA vans will depend on the coming harvest of rice, the quantity, amount and the kilo price for the farmers”. TOYOTA is a high quality product with a range of USPs but the sales will depend on the value of the harvest not the exceptional quality of the product.

What happened to all the modern and fancy expressions we learned about Marketing Management? The key issue of my message is, that the focus on the second when seller meets buyer and the importance of understanding each other has always existed. Back in tthe 1960ties we called it common sense today it is called CUSTOMER INSIGHT.

However we all learned from that lesson back in 1962. The example was evidence of the changes in the market situation and not only IHC but all manufacturers of the products mentioned had to face a new challenge that took not only IHC but many other similar companies to the sad end.

I shall explain more about why in my next article: ” SAD RESULTS OF AGRESSIVE MARKETING”

CHONBURI THAILAND

July 2009

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