Monday, April 12, 2010

What to do when you're fucked.

On Saturday it was Cracker Jacks. Today it was the newspaper industry. They both beg the same question. What do you do to your product when you start losing your profitability?

Let's start with Cracker Jacks. I don't know what forces limited their viability as a snack--whether they couldn't get distribution or shelf-space, whether people's tastes changed or if there were some other factor. Whatever the exact case, let's posit that Cracker Jack does not occupy the position it once did. So the Cracker Jack people are making less money than they used to. So what do they do? They cheapen the prize inside, their leverageable point of difference. They make the box smaller. They put in fewer peanuts. In other words, they alter the product in an attempt to hold onto their profit margin.

Newspapers, of course, have done exactly the same things. They are losing or have lost their profitability and viability. So, they fire all their points of difference. Their local reporting. Their book reviewers. Their staff is decimated. They revert, instead, to news from the wire services which is available everywhere. In short, they get rid of their soul in an attempt to maintain their profits.

Of course, myriad businesses make the same decisions, agencies included. And of course, this is exactly the wrong thing to do. Because while cuts may have given you an extra penny per dollar, slowly and inexorably you have lost your reasons for being, your points of difference.

What you need to do when you're fucked is redouble your points of difference--and reframe the argument. You need to show the coolness of the prize inside. The value of local reporting or, in advertising, the power of imparting useful consumer information in an executionally brilliant way.

Here's the point. Cheapness never wins. Not long term, certainly, and hardly ever in the short term. Because someone will always be cheaper. Let's face it, about 1/4 of the world provides slave labor. Cheap is not leverageable.

Of course, this advice will be ignored, as it should be.

It's free.

1 comment:

rebrivved said...

I overheard a conversation at a small, but popular neighborhood grocery store recently. It went like this:
Manager 1: products X & Y are selling well. But, product Z isn't. Should we stop selling it?
Manager 2: no way. it's a great product. Maybe it's just priced incorrectly.
Manager 1: should we discount the price?
Manager 2: no way. let's raise it by 20%.
Manager 1: do you really think that'll work.
Manager 2: it's worked before. and if it doesn't, at least we tried.
Food for thought.