Early in my executive career, our top salesman in the world (out of 400 salespeople) shared an allegory that has really stuck with me through the years.
As you walk the streets of various European towns and larger American cities, you’ll frequently see food stands of one sort or another – a cart with an umbrella, or perhaps a kiosk. The hero of our story had a hotdog stand.
Our hero had been sensing that the economy was getting rocky, and the consensus on the street was that it was only going to get worse before it got any better. He thought to himself, “How will I get through this? I’m barely getting by already. I need to tighten my belt.”
He looked at his business.
Cutting production costs wasn’t a very good option, since he was the main production cost.
Negotiating a better price for his hotdogs and buns also wasn’t a very good option; he liked his supplier and didn’t like uncomfortable conversations.
Then he had a brilliant idea.
He paid about 15% of his revenues to a college student who waved people in, and another 10% of his costs went to electricity for the brightly lit sign he had over his stand. He thought: “I can lay off the college student and turn off the lights on my sign to save money, just until these hard times blow over.”
So, he did both. His 25% cost reduction plan was a bold move! He congratulated himself for seeing things early and taking bold action.
Alas, it wasn’t enough. His business dropped by 75%, and he sold his stand.
When tough times loom, wise executives look at their marketing and promotional expenses in 2 categories:
Only when you know the answer to these questions can you make a good decision on whether it’s a good idea to cut in sales, marketing, and promotion.
Marketing and sales are the easiest thing to cut. And, as the song goes, we don’t know what we’ve got ‘till it’s gone. We don’t realize how important marketing is to sales revenue until there is no marketing and sales have dropped off as a result.
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