I am not sure if it was just the awareness factor that having read the first few chapters of Ducker on Marketing by William Cohen that made me pick up on some real life applications of the book, or if it was just the universe having a slightly odd sense of humor with timing. The one real life application that stuck out to me was the concept in chapter two about profit. To give you a little sense of this chapter before doing the whole indepth academic disection of it, the chapter is called "The purpose of business is not to make a profit". First off, "wait, what?!" was my thought upon reading this title. However, I stopped and thought about it. What is the goal of a company, any company no matter what it is. A companies fundamental purpose is to sell/move product by having a customer. Granted this is done to make a profit, but at the end of the day that is the reaction of the selling/movement of product that the company to a customer. Sometimes, companies don't even want to make a profit, they would just be happy to break even and not lose money or as much money. I personally love this phase because that means sales, which is creating a customer (this is the real purpose of a company according to Drucker, but stay with me as we go along this long winded blogg and tale).
So the next function of a company is the way it markets and sells its product to consumers and customers. Now, there is a difference between selling and marketing. Bare with me as I try explain the difference. It is a concept I understand, but have difficulty explaing in words. The easiest way I think I can describe it is by suming it up as this, it is how a company looks at the customer or consumer. I am not talking demongraphically, or even the differences between customer and consumer. Rather the way a company views them. Think of a customer as an apple. What do see? Do see a piece of fruit for food? Or do you see a tree? How do you see a tree in an apple you might be saying. Well think about it. An apple has a skin, a tastey inside (sorry if you don't like apples), and a core filled with....seeds! These seeds can be strong trees that will produce more apples....and more seeds! Sales-orientated companies or sellers tend to see an apple only for the food if it (profit) where as market-orientated companies (marketers) see the trees that those apples could become if they pay attention to the customers wants and needs. Trees that will build an orchard of customers and lead to more product being sold, and therefore, well hopefully, make a profit. Where as if a company just eats the apple, it could find itself with apples to eat because it's supply has run out. This is a bit elementary in describing the difference between selling and marketing. However, it leads me to my first "OMG this book is my life right now" moment that also feeds straight into my second moment of this calibar.
I work in a marketing deparment, but in their events side. Our company sells a product that is socially considered necessary. We also pride ourselves on community. Recently though the word community seems to have transitioned to more internal than external. We used to have several non-profit companies in the community to our place of business to hold events at no cost to use except food and if they ended up hurting the property in some manner. These companies held events here with potential new consumers of either our event spaces or our products. Our product is rather expensive, so the cost of giving up a space that most likely would not have most likely not been used for rental space would be worth it if we gained even one new consumer of our product. So our marketing department (the otherside our department) did a lot of community marketing (other departments in the company) also brought in community groups), and when those generated events we handled the events and all the logistics that went with them. However, there has been what we can call a "vision change" based off of research were it was determined we really were not gaining a large volume of consumers from these events, so our bosses would like to see the companies who have events at our company charged so that we are not losing money and help create a bigger profit (which is part of my second "OMG this book is my life right now moment"). Which is understandable, but at the same time these companies do a lot for us (or at least let us market at their events and have signage and create news worthy moments for us in a positive light) with little to no expectations minus the occasional "hey could we use these spaces" return favor and us helping them create a first class event year after year. I am of course maybe over simplifing it, but from this view point this is what seems to be happening. Due to this "vision change" and having bought seperate advertising venue for spaces, our events department feels as if we might be changing from marketing department to that of a selling department that is still disguished as a marketing department because no one seems to realize there is a difference. So when I read this chapter about how marketing and selling are different it hit home.
Now on too what was supposed to be the main theme (as in the the theme that is mentioned everywhere so when you leave at the end of the day it what is remembered and so far that might only be apples and seeds) of this blogg post that of companies and profit. The chapter is called "The purpose of business is not to make a profit" really honestly circles directly around that of profit maximization. A company does need to make a profit just like we all need water or oxygen, but it needs to be (for the lack of a better term) in the correct "moderation". How can too much of a thing a company need be bad for it. Will lets use another analogy, as I tend to love those and hope they spruce up learning. Water, oxygen...yes I mention them a few sentences ago on purpose. We as humans need them to live. However, if you drink to much water at one time you can actually die from it. Something bad happens scientifically with your blood and well you don't meet a happy ending. Oxygen is also needed to live, however, if a room has too much oxygen and there is a spark....BOOM! The room explodes. So let's tie this back into business and my work life (minus the firey or watery bad endings, "knock on wood" as I'm slightly supertitous). When businesses look to maximize profit all the time this can be very bad for them. This is because if there are increased costs to an area of their supply chain or anywhere they will pass that cost right onto the customer, aka up the prices of their product. This could end up pricing them out of their target market or the customer they first intitially created (Target market -the customers that will end up most likely buy the most of a product). So the balance (in the most simplest of concepts because pricing is never just this simple) has to be finding a pricing point that will generate a healthy stream of profit. HEALTHY key word. A company can price an items so it makes mega profits, but if few to no customers can or want to buy it then bye bye profit. Where as if they have a good price for what they are selling then maybe they can earn more profit by selling more volume of their product. However, price too low and the opposite effect can happen with the same results of bye bye no more company. As the book states "And we might add the goal would be to achieve the success that would benefit both the business and society. So profit is necessary, but not the purpose of business." Since we are talking about marketing and marketing deals with people the purpose of business could be conclude as being that of peole/customers/consumers.
Ok so my "OMG this is my life right" moments on this topic. Now to make sure it completely understood, my company is doing fairly well. Perhaps not as well as it would like, but hey we are doing well ("knock on wood"-again I'm supertitous). Like I said before we recently started charging our former "non-chargable" clients because we are looking for immediate profit maximazition verse the potential (and if I can add my two cents without getting in trouble) greater profit down the line. But hey I get it. If these companies do have the funds to pay then they should (it is just not fun when they can't and you know they do a lot of good for the community). So right here in this moment, I understand a bit of what Drucker was getting at. The point that really was a true "OMG" moment was when we were discussing how we as a company were not able to reach certain goals. Because those goals were not reached, the cost of our product could end up going up in price, which makes our product even more expensive. Now like as I said before we are company that sells a product that is widely accepted and used and we offer good to great products. However, our office worries that we could end up pricing ourselves out of our target market. Now to preface we are only thinking of this based off of the limited information we have, and from a purely simplistic view point. Things could not be as easy as think they could be, but from our small limited view we do worry that cost of our product has risen too much or will raise itself too much and we will fall into a visous cycle that will end up hurting our company more than helping it, which we do not want to see happen as we love our company. Our solution is to lower the price of the product to gain more volume of customers/consumers. So that although we might not be making the maximium profit off one customer/consumer our profits could increase a more healthy fashion as it would be more affordable to more peole who want it but right now it is outside of their reach because of the price. If they were to buy our product they could help spread the word about how great it is and how price is well worth it. We could plant more seeds to grow a healthier orchard. These are thoughts and ramblings on how this book seemed to come a live infront of my eyes.
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