For those who missed it, take a few minutes to read Denny Hatch's column this week on the bankruptcy filings by Sharper Image and Lillian Vernon.
Denny makes two points that were not followed by either company:
1. Violation of the Core Principles for "Why People Buy":
People buy for three reasons:
* Price. Wal-Mart has become the largest corporation in the world (equal to the GDP of Poland) because it is seldom—if ever—undersold.
* Service. If an organization is a joy to do business with—helpful staff, ironclad guarantee, easy return policy and great customer satisfaction—people will pay a little more to do business there.
* Exclusivity. If a buyer really wants a specific item—Glenlivet Single Malt, Hermes, Rolls-Royce, Rolex—the guy who stocks it will get the order.
2. The second reason is that both cmpanies failed to adhere to the words of the late Joan Throckmorton
"As direct marketers, we’re
not here primarily to make a sale; we’re here to get a customer. Sales
are important, of course. (Where would marketers be without them?) But
the name of the game is repeat sales rather than one-shots. And to have
that, you need a customer."
To quote the end of the Denny's post:
"Richard Thalheimer and Lillian Vernon started out as kids with no schooling in direct marketing. Both tested single products using space ads, and both had huge successes with their first shots.
Both started by selling tchotchkes—amusing little stand-alone impulse items. Both founded businesses based on finding more tchotchkes and selling them to their original demographic group.
In the end, Lillian Vernon had 3 million buyers whose average order was $56, while the average sale to the 293,000 Sharper Image catalog buyers was $185."
They both failed to generate customers or in the words of Seth Godin in his column today points out via a quote from Gavin Potter,
“The 20th century was about sorting out supply, the 21st is going to be about sorting out demand.”
I guess that makes it 3 strikes and they are out.