"The consumer is the boss." - marketing - Master Sellers

"The Consumer Is The Boss"

James C. Tappan honed his selling knowledge in more than 30 years of running consumer operations of major corporations. He is now putting that experience to work in his own business-investment firm, Tappan Capital Partners, Westport, Conn.

In both careers, he says, his goal has been to "identify good companies that want to become better."

He offers this advice to companies wanting to keep on getting better:

"Develop a strategic plan carefully. It should determine the competitive environment, the strengths and weaknesses. Develop a road map of where you want to go in that environment. Set specific objectives to get there. It's a road map to the future--the most important way assuring good success."

The key to planning for a consumer business, Tappan says, is an analytical ability "to identify and understand consumer needs and preferences, to recognize that the consumer is the boss."

That process, he adds, does not necessarily require extensive and expensive marketing research but can be based on intuition, good judgment and some grass-roots study.

For example, says Tappan, a veteran of the consumer divisions of Procter & Gamble and General Foods, he will frequently spend a day in a supermarket observing and talking with customers. He observes what the stores are offering, what people are buying in what order and what quantities. He strikes up conversations in which he asks customers about their preferences and other considerations that shed light on consumer trends.

It is also critical to remember, he says, that not only is the consumer the boss but a very volatile one--"consumer tastes can change very rapidly." All businesses struggle to be able to adapt to those changes, and new companies are started if existing ones falter.

Firms find themselves unable to survive in that type of competitive atmosphere for different reasons, Tappan notes, but he says that troubled companies often have common denominators. He warns managers to guard against:

Lack of focus: "They are trying to do too many things. They find themselves in business areas in which they are not comfortable, and they are diverting resources to nonproductive areas. Business people should recognize what they are good at and concentrate on that as their market niche."

Excessive overhead: "Too many American businesses develop overhead structures, ranging from management to marketing apparatuses, that become a burden. Sooner or later those costs are going to mean trouble. Managers should make a determined effort, long before they get into difficulty, to slim down."

Lack of managerial skills: "Companies often don't have the management depth they need. There is an opportunity today to take advantage of all the restructuring going on in corporations and hire managers who are becoming available. But they often wind up in operations they are not familiar with. I would rather have somebody who is an experienced manager with 10-15 years' experience than a hotshot with terrific credentials and a years' experience.

"A related problem in this area involves the founder of a business that has outgrown the capabilities of the existing management. You get to the point where the company is doing $25 million a year in business and the entrepreneur still insists on making every decision.

"You can't possibly do that successfully. It is a leading example of an inability to adapt to changing circumstances when adapting can be critical to survival."

The key to running a successful consumer business, Tappan says, is a combination of "planning for the future and executing today's program." Some business people will spend so much time working on expansion that they fail to give the base business the attention it needs. Or they will become so wrapped up in today's problems they won't be ready to grow when they have to do so to survive. It's a fine balance but a crucial one."

Richard Echikson, chairman of Retail Consultants, Inc., Millburn, N.J., is also a former corporate executive turned entrepreneur. He worked for R.H. Macy Company, left to found a retail fabrics business that grew to 65 units, became executive vice president of the W.R. Grace Retail Group, which included such stores as Hermann's sporting goods, and then founded his present business.

Retail Consultants advices investors considering the acquisition, construction or improvement of shopping centers. Its services range from site evaluation to improved performance by tenants. In the latter role, the company identifies any problems that are keeping tenants of the shopping centers from realizing maximum potential and assists them in improving their performances.

In making such analyses, Echikson says, Retail Consultants finds that managers of troubled stores often fail to ask themselves such basic questions as "Who are my customers?" and "What does this store stand for?"

Managers who fail to ask those questions wind up making basic mistakes, Echikson says. He cites the case of a store that was doing well selling junior women's apparel but lost its focus. "It added a shoe department, probably because somebody's brother-in-law wanted to sell shoes, and then a lingerie department, and pretty soon it was hard to tell just what the owner was trying to do. You can't be all things to all people. You have to have a focus."

Echikson offers these suggestions to those in the business of selling:

Conduct market research: "Do exit interviews with your customers--ask them what they bought and why they chose those items. If they left your store without buying, learn the reasons for that, too. Did they find what they went into your store to buy? If not, why not? How did employee performance figure in decisions to buy or not buy? Stay on the sales floor as much as possible so you can monitor customer behaviour for clues to what works and what doesn't in you sales approach. You can do more extensive market research inexpensively by hiring students to interview people about their attitudes toward your store."

Be sure your stock is clean: "This may seem so fundamental that it doesn't have to be said, but a lot of store managers don't adhere to this rule. If you don't have fresh, attractive stock, take your markdown and get rid of it. It's going to hurt you in the long run anyway. There's an old saying in the retail business that 'you're only as good as your goods.' It's as true today as it ever was."

Don't put to much emphasis on margin: "Sales people often look at their markups as money in the bank and set prices accordingly. But if the merchandise doesn't sell, the margin doesn't mean a damn thing."

Beware of overbuying: "Set a budget for what you plan to buy for your stock. Don't buy something just because you like it. Keep asking, 'Who are my customers? And how will this item sell to them?'"

Use cooperative advertising: "Find out what arrangements your shopping center, your suppliers, your merchants' association has for mutual advertising. It will give you more bang for your buck."

And Echikson can discuss from his own experience the importance of keeping a sharp lookout for trends that will have an impact on a business. His fabric-shop chain, which served the home sewing market, ran into rough seas in the late 1960s because of fundamental changes in American society. At that time, the number of women in the work force began growing rapidly and the market for home sewing materials shrank accordingly; the daughters for whom mothers had traditionally made clothes discovered all-purpose jeans, further depressing incentives for home sewing, and the emergence of discount stores made homemade apparel less economical.

He and his associates were able to sell the chain, but the experience underscored a cardinal rule of business, one that every entrepreneur in every line should be aware of: If you're not positioned correctly to handle change, it's going to run right over you.

COPYRIGHT 1988 U.S. Chamber of Commerce
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