Foreword
A good friend of mine is into poetry. I've tried but I struggle with it... it's certainly dramatic in its own way, but I can't wrap a definition around it and that bothers me. So I asked Andy how he defined poetry. And he said, "Poetry is words made memorable." I like that.
I took my degree in Physics, but for virtually all of my working life, I've done marketing. Poetry did not fit into the cleanly defined categories that my physics background cried out for. And as it turns out, marketing is something like that too.
Marketing is the art of making companies and products memorable. To do that requires striking a chord with customers, building products and selling them in a way that resonates with the folks out there that buy such things. Understand, it's not just how you talk about those products, it's what the products are and how they match up with the customer needs, how they're priced, how they relate to competitive products, how they're sold by the sales force, how orders for them are handled, and how they're shipped. Marketing may not actually ship the products, but they certainly define how they're delivered into the hands of customers. The same is true of everything else on the list too -- marketing may not do the activity directly but they specify how it will be done to satisfy or exceed customer expectations.
Consider this marketing problem. A German car company at the end of World War II found itself with bombed-out factories, a local market that could not afford a car, and worse yet, the image of a car commissioned by Hitler!
Volkswagen did the only thing it could, and decided to market directly to the U.S. VW marketing defined a new model aimed at the U.S. marketplace. Changes were minimal but carefully chosen to make the car acceptable to post-war Americans. Marketing recruited a spectacular set of dealers chosen to fit the image of a small car not taking itself too seriously. And then marketing signed Ogilvy & Mather, one of the top ad agencies in the U.S. The ads became legendary in marketing circles. one proclaimed, aiming directly at families thinking, not of a new, primary car, but of a second car, something just becoming common in America. The VW was portrayed as small, practical, well-made, great gas mileage, and reliable under even harsh winter conditions, and was nicknamed the "bug" and the "beetle."
I still remember one of the early TV commercials black and white, of course. There was no voice, just a visual of a man's feet walking through newly fallen snow at night, then getting into a car, obviously a VW, though all you could see were the wheels and running boards. It started and drove off making tracks in the heavy snow. Then the car stopped and the feet reappeared. You could hear the crunch - crunch as the man walked. Then a pause while he opened a door a large sliding door. A longer pause, and then suddenly a large diesel engine came to life, and a snowplow emerged, lights on in the darkness, engine roaring. Then the first words , And finally the ubiquitous VW logo. Great stuff. It worked too. People would talk about the ads over the water cooler at work and laugh, but behind the laughter they were thinking that such a car would be perfect for their family a new, second car... a "bug."
And it isn't just about low-priced products or great ads. Take Ferrari. Thirty years ago I drove a 275GTB Ferrari back and forth to work -- believe it or not, it was my commuter car. Once, I was on my back on the floor of the passenger side looking up under the dash to check something. There, way up behind the dash and completely out of sight, was a finely polished walnut panel and every single wiring point on the car had been brought there. There were no wires hooked together out in the wiring harness -- each individual wire had been brought to that panel and all the connections made there. It was wonderful if you needed to do electrical work on the car, but it seemed crazy from a cost point of view. Over the life of the car perhaps only six people would see that panel. Why make it out of walnut? Any other car would have used cheap plywood. Hell, no other car would even have brought the wiring to a panel like that in the first place. But that was Ferrari -- no compromises, and that included stuff that no one would ever see.
So when a friend told me he had bought a 2-year old Ferrari 360, I understood completely. I think he paid about $160,000 for it. Originally he wanted a new Ferrari 430 which lists for about $225,000, but was talked out of it. It turns out there's a waiting list for new 430s that's almost a year long. To beat that wait, you have to buy a place from someone near the front of the line, and as of Spring 2008, that cost an extra $100,000. People looking for a 430 were gently guided by the Ferrari dealer to the used cars. When Chuck showed me his 360, he explained that by buying it, he was guaranteed that in two years he could buy a new 430 for the list price of $225,000. "Dave, I had to do it," he explained. From his perspective, he was paying $160,000 in order to drive a Ferrari for two years. Then, he'd trade it in for about what he had paid for it, and get a new 430 without having to pay the premium. Boy, talk about spectacular marketing! People are paying $160,000 so that they can then buy a $225,000 car at sticker price! Ferrari does that without running an ad. Instead, they have created a community of fans -- addicts actually -- that spend millions and millions on branded jackets and shirts, buy their cars, and every day spread the legend by word of mouth. That's marketing poetry.
This is a how-to-do-it book for people who want to create products that sell like Ferrari's. It explains how to build marketing teams that know how to do that, the systems for making it all work, and even the order you do things in. At every point, the key issue is gross margin -- how to get the most gross margin dollars out of every product, every sale, and every part of the sales channel. Although we'll talk about advertising -- actually messaging -- as the hood ornament on the car, real marketing is much, much deeper than that. Marketing as practiced by high-tech companies like Intel is what I refer to as Big-M Marketing -- marketing that begins with product definition, and that creates literature and trains the sales channel, that sets pricing and drives the forecast, and maximizes profits by creating defensible marketing niches. Although many of the examples are from the semiconductor industry, the lessons apply equally to any high-tech product, and for that matter, most products, regardless of how high-or low-tech they are.
Before diving into the world of Big-M Marketing, I would be remiss if I didn't thank my friend, Tom Rigoli, who prodded me daily to finish this book, my editor, Kim Justen who made sense out of all my stories, and my wife, Betsy, who thankfully totally ignored the project until it was done.
