Ahaebook.com
Management Business
One of the things of most value to a company is its relationships—
with customers, employees, suppliers, distributors, dealers, and retailers.
The company’s relationship capital is the sum of the knowledge,
experience, and trust a company has with its customers, employees,
suppliers, and distribution partners. These relationships are often
worth more than the physical assets of a company. Relationships determine
the future value of the firm.
When a recession strikes, most companies rush to cut their expenses,
the most obvious one being advertising. Those in top management
(mostly finance guys) don’t believe in advertising, anyway; they tolerate
it as a form of defensive insurance, not as a profit generator.
It continues to amaze me how many Americans accepted bad quality
in the past. When I took my newly purchased Buick to the dealer one
week after purchasing it, he said: “You’re lucky. We have only one repair
to make.”
I expect companies to start shifting more money from advertising to
public relations. Advertising is losing some of its former effectiveness. It
is hard to reach a mass audience because of increasing audience fragmentation.
Should a company aim at maximizing current profits? No! Companies
formerly thought that they would make the most profit by paying the
least to their suppliers, employees, distributors, and dealers. This is
zero-sum thinking, namely that there is a fixed pie and the company
keeps the most by giving its partners the least.
Most companies define themselves by a product. We are a “car manufacturer,”
a “soft drink manufacturer,” and so on. Theodore Levitt,
former Harvard Business School faculty member, pointed out years
ago the danger of focusing on the product and missing the underlying
need.
Oscar Wilde saw a major difference between price and value: “A
cynic is a person who knows the price of everything and the
value of nothing.” A businessman told me that his aim was to get a
higher price for his product than was justified.
Thanks to Al Ries and Jack Trout, “positioning” entered the marketing
vocabulary in 1982 when they wrote Positioning: The Battle for
Your Mind.47 Actually the word had been used earlier in connection
with placing products in stores, hopefully at the eye-level position.
However, Ries and Trout gave a new twist to the term: