> In traditional business school theory, as products become closer and closer in a
> physical sense, the pre*** way to differentiate your product from others
> with consumers is through marketing/advertising.
True, and this often focuses on creating the perception that one product is better
than another when there is no real advantage.
> Over time it isn't unusual to
> see marketing/advertising expense make up a larger and larger amount of product
> cost. A prime example of this is Nike's Air Jordan. In the beginning (1985), the
> physical production cost was about $15 per pr. Retail - $75. Endor***t and
> marketing expenses basically doubled the cost. I'd be very curious to know how
> much endor***ts/advertising add to the costs of K2, Rossignol/Dynastar and
> Solomon products. The fact is manufacturing costs of skis CAN'T vary that much
> unless electric power is supplied by stoned hamsters or massive capital outlays.
I suspect the marketing professors would tell us that the money Salomon etc. puts
into advertising and endor***ts is an investment in providing better "information"
to help consumers make better choices. :-) It helps move towards a "perfectly
competitive market". :-)
> I think the tragedy in all of this is that many manufacturers decide that the
> endor***ts are more important than the quality of the product. K2 recently
> announced some cost cutting moves, they are moving a significant portion of
> production to China (causing Vashon Island layoffs) while maintaining the
> endor***t deals. From a more socially conscious point-of-view why didn't they
> maintain the US production and cut down on the endor***t hype?
I suspect they were convinced that the "Made in USA" "endor***t" wouldn't boost
sales as well as the "Joe Blow Hero skis K2" endor***t. They may be right. How
many adventure-seeking hedonists will choose what they perceive as a lesser ski just
to support some schmuck who works on a production line in Vashon Island? Some will,
but not many. If you can't establish the perception that your product is superior,
appeal to patriotism will get you a few more sales but won't keep you alive.
> I would think
> that would be more consistent with the "Made in the USA" hype they have been
> expousing for years. They have targeted the Young Male segment as the most
> important and have gone after it unmercifully (What's ironic is that this
> segment is usually pretty poor and depends upon Mommy and Daddy for funds). This
> mindset is not unique to K2 but to many companies in mature industries. How to
> maintain growth and profitability in the face of increasing pressure?
> My personal philosophy would be to 1.) build the highest quality product
> possible with a very simple and easy to understand product line 2.)Establish a
> stable production environment - I hate the concept of layoffs - it frequently
> shows bad planning.
Or peaky demand--such as in seasonal industries.
> People's lives should not be disrupted from bad managment
> decisions. Production theory advocates level production throughout the year and
> letting finished inventories rise and fall.
That depends on the ratio of fixed costs to variable and the investment in
inventory. What's the ratio in the ski mfg business? I don't know. I'd suggest
the move to "just in time" mfg and delivery is opposite to what you have suggested
> A conscious decision has to be made
> as to acceptable levels of finished goods write-offs vs. lost sales but this can
> be done (that's why they pay Mgmt their fabulous salaries) 3.)Identify specific
> market segments that are crucial to survival - and develop a comprehensive 5
> year plan (strategic planning) 4.) Design and implement program to take
> advantage of developing trends and TRY to influence trends. 5.) Get the most
> bang for the buck out of any program - Why does K2 need 10 zillion extreme
> skiers - For years they just had the Mahres, Plake, Schmidt and Hattrup - now
> they have the Village People. They need just a couple of personalities that can
> really PROMOTE the product.
True. Like "ethical endor***ts"? Maybe an oxymoron, but if they could find a
highly credible figure, who knows what's possible. Look at Jordan and Nike. So
many kids think Jordan wore Nike because they were better. I have watched many kids
squirm when I told them that Jordan was paid tens of millions to wear Nikes, and
that he would probably wear the shoes of whoever paid him the most. Many of them
don't really understand that.
> If they weren't spread so thin maybe they could have
> had the money to keep Moseley - A True Media Darling - as opposed to the Tatooed
> Bozos. Also maybe to us older skiers, the Mahres are more appropriate than
> anyone else they have in the fold. Are they writing off the people with the
> money? Instead of having skiers all over the planet - go in big on the
> production of ONE ski flick per year and get it out to the public.6.) And this
> is a MAJOR problem with the big boys, take advantage of new methods of
> distribution and sales. Their current policy of propping up brick and mortar
> retailers while exhibiting total hostility towards the Internet is going to
> really kick them in the derriere. They are frantically trying to hold on to the
> past while the future is*** over them like a 5000 lb lead weight. Some
> creativity is demanded here and I just don't see it. For instance - why not let
> someone order skis off the net and set the delivery up at a local retailer.
> Often times retailers don't carry a full complement of sizes and models, and
> this might help.
Maybe what's wrong with the industry is the distribution chain? We need more
innovative channels, like Remmington. And the idea of starting a test program that
relies on unpaid skiers has potential. I think most people want to buy the ski that
will work best for them. But how to choose?
> 7.) Realistic pricing - Ski pricing is a joke. Price skis as
> low and realistically as possible - This will probably have more impact than any
> advertising program.
This suggests that you think somebody in the chain from mfr to retailer is raking
off higher returns than are justified given the risks they are taking. That may be
true--I have no evidence to support or challenge your position. But my experience
helping hundreds of mgmt teams create and implement strategies suggests that it's
always a lot harder to make a profit than it seems to outsiders.
> I see an industry that suffers from knee-jerk reactions and short-term planning
Ahhhhhhhh, I still have fertile fields to cultivate.