Marketing on the Move; 2; Is the Manufacturing Misunderstanding the Retailer?

I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, I don't know what you're talking about, marketing on the move, a probing by leading American businessmen of major marketing problems being faced today, presented by the International Marketing Institute in association with WGBHTV Boston. This program was originated and made possible by a grant from the Bresnick company advertising. Our topic is the manufacturer misunderstanding the retailer.

Discussing the relationship of the independent retailer to the manufacturer are Alan Bratman, president, market tire company, Hermann W. Lightsoh, vice president for marketing, the sharing corporation, and Dr. Warren J. Wittry, vice president, national analysts and corporations. Our moderator is Professor Edmund C. Bresnck, editor of the Harvard Business Review and director for the International Marketing Institute, Professor Bresnck. We're concerned with a retailer, the small to medium sized independent retailer, the owner manager who makes his living out of his own business, grosser, retail drugist, retail tire outlet, tap room it could be. The kind of retailer who, in the hundreds of thousands, constitutes the large portion of the total retail activity in this country and for many manufacturers

is the major if not the primary outlet for his goods. I understand Warren from the article that you wrote for the Harvard Business Review last spring, that you feel a lot of manufacturers actually misunderstand the retailer on whom they depend. Very definitely. I state that as strongly as I can. I think there's a very serious problem in American business today with a misunderstanding, a lack of proper communication between on the one hand the people who manufacture the goods and on the other hand the people who have the ultimate responsibility for moving the goods into the hands of the consumer, namely the retailer. And I feel that there's two bases for this misunderstanding for this breakdown of communication. On the one hand corporate management in manufacturing corporate management. Yes, when I use that term I definitely mean manufacturing corporate management, the manufacturer producer.

The assumption is made that the retailer is also a businessman. Therefore, the manufacturer assumes that because the retailer is also a businessman that they have the same goals, the same objectives and I just don't think this is true. They may both in a general sense want to run their business successfully. But the key difference is that almost without exception the corporate management wants to run their business more successfully this year than last year and more successfully next year than this year. There's this constant drive for growth. And you don't get this with the great majority of these independent retailers. You're saying they're both business men but the kind their businesses are different and so they have different different goals. The comments, the observations you're making about the retailer. These are based on surveys which you people have made at National Analysts as part of your regular operations. Yes, this is well worth clarifying at this point. The basis upon which

I make these statements I hope is primarily a series of studies that we have conducted at National Analysts over the years for clients who in the large majority of instances are manufacturers among retailers to get at retailer attitudes and problems and things of this nature. And in doing a variety of studies in a variety of industries we have found that certain common things have emerged and these commonalities and essence are as I've just mentioned this failure to have similar goals and then on the other hand the simple failure to speak the same language. That management often talks in a language that's clear and meaningful when you're talking within the management fraternity so to speak. But when you turn around you talk to the retailer and you use words like marketing and merchandising and profit and quality control. Words of this nature. The retailer just doesn't understand quite often and the very fact that

these words are used is a source of antagonism to the retailer. And he feels he's being talked down to that so you actually see some some resistance is developing because of this of this lack of understanding. Very definitely. Herm and your experiences at the sharing corporation I guess you actually distribute through what to 55 ,000 drugstars. Do you agree with Warren that this is a problem? Well I think it's a question of degree there's no doubt that there there is misunderstanding between the manufacturer and the retailer. But I believe that the more successful company is in their operations the more they do understand the problems of retailer and I think it's sharing we have to understand the problems of retailer. And I disagree a little bit with what Warren said which was basically. You disagree a lot if you'd like to. Well I disagree with them in that

the motives or the objectives are different. I think the objectives are primarily the same between the manufacturer and the retailer. They both want to serve the consumer and they both want to make a profit in so doing. I think that most independent retailers don't grow or don't have the motivation to become large. Let's say either because of a lack of capital on the one hand or perhaps because they are satisfied to serve a particular local community. Well you're really in a sense of agreeing as much as disagreeing aren't you? Well let's turn to our colleague. Al your operation down there in the Washington Richmond area has created a lot of... I'm going to say controversy I suppose it has but gotten a lot of attention anyway. So you're a retailer. Now maybe you're not a small retailer in the same sense that we're using here. You were a small retailer now you're getting to be a pretty good sized retailer. What are your sales running now?

Our sales are in the neighborhood of $7 million ad and we hope that in the next few years to reach 10. But if every I understand is correct you're still an independent retailer, an independently independent retailer. Well we're not independently wealthy but we do hope that we are independent and if I may just take one minute of your time to differ with Warren for just one moment. I don't believe that if you were to talk to the retailer in terms of marketing or in terms of profit or in terms that a retailer would understand that he would necessarily be antagonistic. I am firmly convinced that the retailer without any question of a doubt understands these terms and wants to know. In fact he has a tremendous desire to learn these terms. As far as the manufacturing misunderstanding the retailer I think it goes way back to the point that a manufacturer generally in our very very close association we feel that a manufacturer does not know what the customer

wants in the ultimate long run. The manufacturer doesn't know what the customer and you're talking about yourself as the customer or your customer. The retail consumer, your customer and if I may quote one of your colleagues Mr. Levitt from his book he very very succinctly states that a manufacturer today is not what he calls customer oriented or product oriented. He is a matter of fact feels that he is making what the customer let me correct myself he feels that he should be making more of a product so that we'll sell rather than what the customer wants. And I think this is the crux of the matter and this is where the misunderstanding could possibly occur. I disagree with that because in our business the growth of the volume of the work that we do and the growth of clients has been primarily in doing consumer research and that we have a more difficult time talking clients into going out and doing research on consumer attitudes and studies of this nature. Then we do in talking them into also studying other

points in the distribution chain namely distributors or retailers. I think that most manufacturers today who are doing any kind of research at all have a much greater willingness to go out and talk to the consumer than they do to do surveys among their retailers. Are you suggesting that they go out and look at what the consumer wants and then chart their course accordingly and just sort of push it through force it through the retailer? No I'm definitely not because we can say chapter in verse of where the manufacturer may have a good product and on the other side the consumer may have a need for which this product is ideally suited. But because of certain things in the nature of the distribution, the nature of the marketing effort, the retailer is in a position to undermine both the efforts of the manufacturer and the desire of the consumer on the other hand to get that product.

Let's take that last point a minute I think it's important to put this in perspective. You are saying in the fact that the retailer in this chain of distribution is an important link and he can undo the manufacturer's effort or he can... Absolutely, the manufacturer can spend millions of dollars in pre -selling a consumer or building a large consumer franchise. Particularly with what we refer to as high -ticket low -turn -over products such as flooring or automobiles or record players or things that are bought infrequently and require a fairly large expenditure of the family budget to purchase. How about tires? I would say that tires would fall into that category. Tires are not like toothpaste and buy a new tire every week. I certainly would agree to that. We've had some experience in our company with a product called Chorusiden or Chorusiden as it's sometimes called. And actually the independent retail drugist to put this product over

for us and it was I think because of our understanding of the tools and the information that he required to do the job and because we were able to give him enough profits so that he could do this for us that we were able to make this a successful product. Okay, anyway, we're all in agreement. If we're not Al L, that even today when manufacturers do so much advertising direct to the consumer, the retailer who is the physical link and makes the product available, it's still tremendously important. Absolutely. He is tremendously important but I don't think that the manufacturer's pre -selling was as important as it's important now as it once was because I do think that the retailer today is finding to his benefit that he can sell non -branded merchandise and create his own image in his own community thereby selling himself. You're doing this with tires. Yes, we are. Yes, we are. We're doing branded tires. And we feel very strongly

about this. Well, let me ask another question. Suggested by something that you said a minute ago Al, is it possible that the retailer understands the consumer better than the manufacturer because the retailer is closer to the consumer? I think you were innovating that. I don't think there's any question about that. I think that the consumer and the retailer day to day are much closer than the manufacturer who for lack of a better term sits quite far away in his office sometime. It's not able to evaluate the day -to -day field needs as it were of the consumer. The retailer performs this very valuable function of liaison, I do believe. Isn't some of this probably true to the fact that today in this era of professional management and the complexities of running a large manufacturing operation at so much time as a necessity spent in administrative problems, legal problems and things of that type that the corporate officers who really make policy don't have the opportunity to get out there at the grassroots level.

Therefore, they have to depend communications through several channels of communications to get the information. This is why I think market research has become so valuable. I'm glad you said several channels because on the one hand you could take the your statement Al, and say that the retailer does understand the consumer better than the manufacturer. But I would hate to go from that statement, which is very true and say the only way that the manufacturer ought to try and understand the consumers to depend upon the retailer to tell him what the consumers think. Let me carry this one step further. Is it possible that the retailer acts more directly for the consumer? Forget the matter of understanding and misunderstanding and communication. Let's just think a little bit about what everybody is trying to do. For example, can the manufacturer expect

the retailer to do all the things that he, the manufacturer, wants the retailer to do? Follow his suggestion on price, on merchandising, on display, on inventory. Is this actually more than the manufacturers are right to expect? I would argue that it is in this sense. As long as the manufacturer is competing with other manufacturers for the attention and concern and floor space and what have you that the retailer has to offer, he has to earn his right to have the retailer act in his behalf. And I think the only way the manufacturer can earn this is to show the retailer how he, the manufacturer, and what he has to offer in terms of his products and his marketing approach and what have you can better help the retailer to service his customers, which is the retailer's first interest. He wants to satisfy his customers and service his customers out of profit, of course. Let me just interrupt you. One thing that occurs to me in our own type of business is that so very often we are put in a position

of reaction, the manufacturer acts. Now, we must react. In many cases, in fact most cases, am I going to say never are we consulted. We are put in a position, whether it's a geographical problem of distribution, whether it's a marketing problem of a particular line of tires or another product. We must react to whatever he says. In short, we either like it or we don't like it. And this, of course, I think is an area that could bear some further examination. And I suggest the marketing routine where the marketing manager is the man who serves as liaison between the retailer and the manufacturer. And this is a department that I would boy up tremendously if I were a manufacturer. You do a lot of this in your company. Yes, we do. And for the very reason that Alan mentions here because the salesman who is out there selling the merchandise doesn't have quite the same viewpoint and doesn't have quite the same recognition of the problems of marketing that a marketer might using that expression. Is that a good expression? Well, let's make it a good

expression. That the marketer does. And therefore we have developed a marketing managers and product managers who make it their business to look at these things from the standpoint of the satisfying the needs and to serve as the link between, let's say, the selling organization and the top management sales management. Are you giving more effort to this? Yes. Not only are we doing this, but I know that in my contacts, for example, the American Management Association, this is a very definite trend and they're doing much of this. It still remains true, doesn't it? And this gets back to the point that Warren made a little while ago that there is a difference in objectives and goals. I mean, they both want to make a good living. Everybody wants to make a profit, I suppose. But trying to, as I interpret our discussion so far, the manufacturer is concerned with getting the most of his particular

product sold down through the channels of trade that he can. True. The retailer is not concerned with an individual manufacturer's brand. He'd like to put together all sorts of things that he can sell the most of to satisfy on much broader range of needs on the part of his customers. If you look at it from the retailer standpoint, there's nothing to be gained by increasing the total share of one particular supplier's brand if it doesn't increase his overall volume. Well, too, I think the retail customer is looking for selection today. He or she is not particularly interested in one type of product or one line of product. He or she wants to go where he can go to the full line. In view of this, and should the manufacturer feel any responsibility? I mean, I use the word responsibility advisedly, any responsibility for trying to meet the needs and desires of the retailer, or should he try to resist these needs and desires? Well, I'd say that I'd try to use the word other than responsibility, because it

implies some sort of moral responsibility. I think it's in the manufacturer's way. A responsibility is a matter of practical business then. That's exactly it. I think it's a matter of practical business sense that the manufacturer, A, should know how the retailer feels and should take this knowledge into consideration in setting policy. I'd say take it into consideration because, after all, the retailer is only one element of a complex distribution system. And any intelligent policy making in the distribution system as in any other area of management requires a reconciliation of often competing viewpoints. So we don't want to set up a system where the retailer, in essence, is calling the shots. But by the same token, it seems to me that too often today... I think the customer calls the shot by consumer preference, as naive as the approach may sound. Who speaks for the consumer? The retailer. No question.

I was going to say that also the marketing research company, we hope, will speak for the consumer, that many companies today are leaning more and more heavily on this kind of information to tell them not what they should make, but what kinds of needs the consumer has so they can orient their product development towards the customer. It's not a satisfaction of these needs. But can't the manufacturer go too far in this respect? We're talking about the independent retailer. We used independent in the sense of he owns his own business and has no legal ties with any manufacturer. But most retailers are not only independent in this sense, most of them like to feel independent, too. Do we lose something if the manufacturer tries to help the retailer to do everything? Well, I think we do add. I believe that the manufacturer should resist some of the demands of the retailer, because I think one of the reasons that you have such

deficiency in selling at the retail level today is because the retailer has depended too much on the manufacturer to presel. And to display and do everything for them, to the point where the retailer has lost some of this function in the Senate to try to sell. Well, what's from the point of view of the manufacturer, is this a loss? I mean, or is this, is this make the manufacturer happy that he has a nice compliant retailer doing things the way? Well, I think the manufacturer would like to have both. He'd like to have his cake and eat it too. He'd like to be able to supply the tools, but he'd also like to see that they're used at the end of the day. Money is gone by. It seems to mean that we can summarize this discussion very simply. The one thing that the manufacturer is looking for is volume. And by a tremendous turnout of volume, generally what he can do is reduce his costs. And this normally makes everyone happy, including the retailer, including the manufacturer. He's also looking for profit, though. But of course, this would help determine a problem. This is

his management problem. This is really not the retailer's problem. And there's a lot in what you say. But unquestionably, the volume situation would help tremendously for the company. Not every retailer wants volume, does he? Manufacturer wants volume. And the manufacturer wants constantly increasing volume. This is essential now. Any business that is growing must have a necessity increasing volume because its expenses continually rise. The expansion expense, administrative expense, and the expense of marketing and selling. So volume certainly does cure a lot of bills. Again, now looking at this from the point of view of the retailer, the independent retailer and independent in the full sense of the word. How much does his, well, I don't know what word to use, but how much does his enterprise as an independent owner, manager, contribute to this volume picture? Well, of course, this depends solely on the man's motivation. If he wants to move, if he is an

aggressive retailer, if he has some access to capital, if he wants to grow reasonably large, he can certainly satisfy these ends. And both for himself and for the manufacturer. If not, then I think you run into the basic, one of the basic conflicts of this whole discussion here. The manufacturer wants volume at almost any cost. The retailer says, I want to make a living. Now, somewhere in between the two, there must be something that's reconcilable. Harman, how many of your 55 ,000 retail drugists would you say are interested in really growing, really expanding their businesses? Well, I suppose we might get some clue of that by the number of chain there. I believe there are about 15 % of all retail pharmacies are chains now. So most of them started as individual stores, or small groups of stores, and now have expanded to. But then of course there are some independence who have grown very large. And in fact, I can think of one that occupies practically a square

block and it's a tremendous operation. Probably makes more money as some corporation executive. Well, I would say so. I think some of the independent drugists that I know do very well. They live very comfortably. And they're very happy in their situation. I think that's a key point though, that they have reached a point of satisfaction, which as far as their own needs are concerned requires no further expansion or growth along the lines that they're suppliers. But one of the clues is to, who is right in this particular argument, I suppose is, is there anything that keeps an independent retailer from growing? I mean, is this lack of capital a real break, a real difficulty to break through? I think it's a real difficulty to break through. I've been on the other side of the fence, and I've been a retailer independent retailer, and I was unable to grow at the time because I wasn't able to get the capital to expand the operation. So you're saying that the fact that they haven't grown may reflect the fact that it's

been impossible to grow because of the lack of capital rather than desire. Yes. Well, no, I say that there are both situations, somewhere that's a lack of capital, and some simply a satisfaction with being able to operate in a local market. But this gives them a good living, and they're satisfied with this. I would have to say that certainly one of the first attributes a man must have is the willingness and desire to move ahead, and if he is able to demonstrate a profitable statement, a profitable operation, he can get the capital. Well, it's witness by our own eyes. Believe it or not, though, I know independent, not only drug us, but independent merchants who, and this, he's sound also very naive, but I think are in business because they like to be in business, and they like to serve the public, and they enjoy doing this type of thing. And the profit and motto is really

not the principal motto. It's incidental of there. I think there's another factor here in all of us who have any kind of administrative responsibilities that I think can recognize the problem that a lot of people just don't want their businesses to get any bigger than the point where they only have a few employees to deal with. Where they can handle it themselves. That's right. Well, he might not have the ability to do it either. The water generally sinks its level one way or the other. Let me ask one further question. Is the manufacturer in view of the way retailers are in the way they operate? Is the manufacturer right in expecting the retailer to feel a sense of responsibility for promoting and distributing that manufacturer's goods? Just asking too much. I think you have to make some differentiation as to the franchise. Shall we say retailer, a person who is, say, allied to a particular gas product or particular automobile product as opposed to the fellow, for example, who might be in the drug business. But

on balance, I would say absolutely and unqualifiedly know. And I think the reason I would evidence very simply is because the retailer can't afford to lose his competitive mobility. Further, I believe that the manufacturer has to, as Warren pointed out before, has to earn the right to get into this man's business and prove to him that he's got the product that he needs to pass on to the consuming public. I don't think anybody has a guide given right at any level whatsoever to demand unswerving loyalty from a retailer. Let me see if I can pull together what we've been saying. We have said very definitely without qualification that the retailer, this independent retailer we're talking about, is a tremendously important link in the distribution of goods. And this has not been altered by the fact that manufacturers do so much advertising. We've also said that the retailer running his business is bound to think, look at things somewhat differently from the way the manufacturer does.

Marketing on the move was presented by the International Marketing Institute and Association with WGBHTV Boston. This program was originated by and made possible by a grant from the Resonant Company Incorporated Advertising. Discussing our topic is the manufacturer of misunderstanding the retailer where Alan Brackman, President Market Tire Company, Hermann W. Lightsoh, Vice President for Marketing, the Sharing Corporation, and Dr. Warren J. Wittrey, Vice President, National Analysts Inc. Host and moderator was Everd C. Burst, Editor of the Harvard Business Review and Director for the International Marketing Institute. This program was pre -recorded. This is NET, National Educational Television.

Thank you.