Marketing

CONTRARIAN MARKETING

by Roy MacNaughton

I once knew a man who knew nothing about the foodservice industry, but somehow he became a franchisee for McDonalds in another country. He learned a lot from them and was in the process of developing a huge region of this foreign country as his master franchise territory. He really wasn’t the ideally suited ‘franchisee’ that most large quick service restaurant operators are looking for however, because he had a mind of his own and he really wanted to do some things differently. But that’s really not the way the system usually works. Franchisers don’t want innovators; they want followers. They have a system set up to ensure that there is control, consistency, brand identity, and safety for the public. They are usually not too interested in entrepreneurs who might start fooling around with their nice, pat, system of doing things.

This fellow was and still is an entrepreneur in its truest sense. He was a consummate risk-taker, an innovator. A bit later, when someone in the corporation may have realized that this franchisee might have been granted too much ‘territory’ in this foreign land, they offered to buy his holdings back from him. He took them up on their offer, turned around and used that substantial money to start up a steak house chain, even though he had never been in that business either. He was smart, he was an accountant by trade, and he had an MBA. Most importantly, he knew what the customer wanted.

He started out selling bottles of wine for exactly what he paid for them plus a standard mark up of two dollars per bottle. This was not the generally accepted way wine was priced in restaurants. In those days, the seventies, and for previous decades, wine was usually marked up double. If it cost you ten bucks to buy it, you sold it for at least twenty on the wine menu.

Other restaurant operators thought he was crazy. He was, like a fox. He sold cases and cases of wine. Customers loved it. They believed the wine was so fairly priced, (he knew that they knew what it cost at the liquor store), that they decided to buy an even more expensive bottle or perhaps a fancy dessert when they hadn’t originally planned on it. He increased his average guest check, and bottom line profits with no extra amount of labor cost; and at the same time, differentiated his restaurants in a hyper-competitive market of mimicry. He was what today is called a “contrarian marketer”.

Recently the New York Times carried an interesting story on some of those contrarians that are continuing to make the headlines, both because they are building very profitable companies, and because they are doing it contrary to popular business wisdom. Firms like Southwest Airlines have been doing it for years. Amazon.com revolutionized the bookselling, and now the retail business. But what about firms like ING Direct, the online bank with no locations, no ATM’s, no checking accounts and no credit cards? This is the same bank that last year “fired” 3,500 of its own two million customers because they were people who kept asking the bank to bend their rules, or who called too many times wanting customer service of some kind. In a column I wrote for a local newspaper nearly nine years ago, I pointed out that 20% of your customers are going to account for 80% of your profits; and that 80% might only account for 20%. My point being, not all customers are created equal, and some of them are just flat out a pain in the butt. Fire them; get rid of these drains on your business. When I wrote this then, the manager of the local Chamber of Commerce was apoplectic. She could not understand why I would preach such heresy. Her contention, like so many still today, was that every customer is golden and should be treated that way. Of course she wasn’t operating, or responsible on a daily basis for running a business either. She was a salaried worker, even though the boss, of a NGO (non-government organization). She was not responsible to make the payroll or assume the risk on the firing line at the bank. Like ING Direct, I think you need to cull the ranks of your customer group regularly, eliminating the ones that just suck away at your resources and don’t make you any bottom-line profit.

Continuing with contrarians, there is Craigslist, the minimalist website in 65 different cities. It has no frills, no charges, and no pizzazz. It just makes lots of money. Because it is so straightforward and clean, people are attracted to it in droves. They place classified ads to sell everything in their city from pets to pizza to pearls.

Each of these marketing “mavericks” greatly reduce their operating costs, simplify their own marketing needs and offer a relevant, valuable service to the public. They each provide a range of diversity that is obviously needed and valued in this super competitive arena. They started out by asking themselves: “how can we do something that is radically different, yet valuable to the consumer?”

My friend the restaurateur went on to eventually sell off his chain of steak houses, after he had built up a sizeable reputation and bankroll. He retired to his horse ranch and continued to raise championship jumpers. The chain is still flourishing, doing well. He was ahead of his time because he didn’t accept the status quo. He closely examined each of several aspects of how steak houses were doing business. Then he set out to very proudly and loudly break many of those rules of engagement. For instance, as mentioned above, he didn’t agree with the way traditional wine and menu pricing had been calculated. He believed in a concept called “contribution margin”. He figured that if he made a clean two bucks on each bottle, the rest would take care of itself. And it did. Like gangbusters.

Is there an opportunity to take a long close look at your business?

Likely so. Is there a way to do things in an entirely different manner? When everyone was arguing about the business ethics of music downloads and the so-called pirating of music online with the free download sites, Steve Jobs at Apple decided to pay the copyright owners for their music right upfront; and to make the downloaders pay a modest amount for each song downloaded. But in return for that modest payment per song, he also created an extremely valuable musical library that was reputed to be the world’s best. In concert with that, he invented a proprietary system and a device that you could play your downloaded music on…the iPod. Who’s laughing now?

Two young guys doing doctorates at Stanford decided that there was a better way to do Internet search, so they developed then built a search engine that was very different in how it worked, and the fantastic and fast results it generated. These two guys didn’t seem to care about all the other big guys around them, like Dogpile, Copernic, Yahoo or MSN. They just plodded away. When Google finally went public last summer, amid much ballyhoo and millions of self-appointed pundit opinions, they blew away the market. Look at their share value today.

You don’t need a doctorate. Or an MBA. Or even a hospitality school degree. You need the awareness that maybe things could be done a little bit differently; and the desire to see if you can do it that different way. The list of innovators such as my friend the steak house entrepreneur is endless. You can be part of that list.

Take any other business, or your very own, and pull it inside out. Ignore the rules. Or break them. Take a contrarian view and re-orient that view to that of the consumer, not the producer or marketer. Ask yourself: “How can I do this entirely different, but better, while attracting the attention of those who will respect and support what I’m doing?” Then get out there and just do it. (There’s a slogan in there, somewhere, I think.)