For 60 years, Sears was the largest general merchandise retailer in the world, the most profitable retailer, and the most feared by competitors.  In October 2018, this once-great company declared bankruptcy, and may not be long for this world.  The rise of Sears and its downfall both contain many lessons for marketers and managements in general.

First, the rise.  Sears’ founder Richard Sears began selling cheap watches by mail in the 1880s, but he did not care about product quality.  In the late 1890s, he sold controlling interest to his supplier of menswear, Julius Rosenwald.  Rosenwald raised the quality standards by opening product testing labs.  He reorganized the company to insure quick and accurate fulfilment of the hundreds of thousands of orders that poured in via the U.S. mail. He and his team built new facilities and systems which were efficient.  He shared in the wealth by giving employees large amounts of company stock.  Sears blew past the older catalog company Montgomery Ward, and became number one.

 

In the 1920s, Rosenwald was ready to retire, and turned the company over to General Robert E. Wood.  Wood might be the greatest retailer of the 20^th century, as he maintained Sears’ catalog dominance while entering the bricks-and-mortar retail business.  New stores were built from coast-to-coast, and soon Sears was bigger than any other general merchandise retailer (only grocer A&P was larger, but later Sears passed even them).  It is from Wood that we have the most to learn.

Building upon Rosenwald’s talented and highly efficient organization, Wood first put prime emphasis on finding the best products and innovating in every product category.  Whereas in the past, retailers tended to sell whatever was available or whatever they had on their shelves, Sears’ buyers worked directly with the best manufacturers they could find.  In the stores, they listened to customers to find out what they wanted.  They bought rubber in advance to help their tire suppliers save money.  They found they could make refrigerators larger with just a little more inexpensive steel.  Sears’ people learned every step of the supply chain and the manufacturing process, becoming free consultants to their suppliers.  Sears made more money, the suppliers made more money, and the customers got lower prices – a hard combination to beat.

What are your company’s relationships with suppliers like?  Are you at odds or working together?  Do you start with studying what customers need and then work backward to deliver it, as Sears did?

Robert Wood was an information addict.  He reportedly read a new page of a statistics book every day.  He became an expert on demography and trends.  His strategy was based on these facts.  Over and over, this allowed Sears to trounce the competition.  Do you know more about long-term trends than your competitors do?

Robert Wood was a believer in making mistakes, in trying experiments.  He thought failure was part of learning, and failure rarely held someone back from promotion, as long as the company learned from it.

 

Sears under Wood made enriching his customers and their communities a key priority.  When he found poverty in the south, he asked his suppliers to build plants there.  To support local communities, he kept his cash in local banks rather than in New York or Chicago where he might have made more profit.  His managers were expected to lead the local Chamber of Commerce, the YMCA, and help fund schools.  Sears became the ultimate example of being a good corporate citizen, but this was always based on how it would help their customers.  Today many companies support various charities, but is it really helping your customers or broadening your audience?

General Wood said, “There are four parties to any business….the customer comes first…the employee comes next……then comes the community….last comes the stockholder…..if the other three … are properly taken care of, the stockholder will benefit in the long pull.”  Would this description fit your company?

These are among the many ways Sears rose to the top of its field.  For more on General Wood and his fascinating life, read this.

Now, the decline.  Most of Sears’ long and tragic decline started at the top, with general management issues.  Of course, these problems found their way into every aspect of the company, including marketing.

At the top, the leadership began infighting, something Rosenwald and Wood did not tolerate.  The bureaucracy at headquarters grew and grew, until the company in the 1970s built the world’s tallest building, something that did no good for customers, employees, and certainly stockholders.  Experimentation died.  The arrogance that comes with success rose.  Talented young retailers found work elsewhere, not at Sears.  Because the company was so strong, it took years for this decay to kill the company.

From a marketing standpoint, Sears failed to defend its fortresses, or “moats.”

Sears was America’s source for auto services and supplies, lawn and garden items, tools and hardware, and major appliances.  They were very strong in sporting goods and other major categories.

Since the 1970s, when Sears peaked, demand for these categories have boomed.  AutoZone, Advance Auto Parts, O’Reilly, and tire stores have covered the nation.  Home Depot is now our most successful big retailer; Lowe’s and Menard’s are also large companies.  The home appliance business has been transformed by innovation and higher average ticket prices.  Academy and Dick’s do well in sporting goods.

Sears “let” these folks murder it, in categories where Sears’ expertise was unrivaled.

Sears also knew more about non-store selling (catalogs) and distribution than any other company on earth.  But they shut down their catalog in 1993, the year before Amazon was started.  ECommerce represents the natural evolution of the catalog, merely using the latest technology.

Strategic failure often reflects such inability or unwillingness to defend your own moats or fortresses.  It isn’t easy, but you’ve got to fight back if you are smart and want to have a future.

What are your company’s fortresses?  What is worth defending?  How far would you go to defend your position?  Yahoo, MySpace, AltaVista, and others show how fragile online leadership can be.

There is always a great deal to be learned by the successes and failure of others, and few companies have as much to teach as poor, old Sears, Roebuck.

Gary Hoover is a serial entrepreneur.  He and his friends founded of the first book superstore chain Bookstop (purchased by Barnes & Noble) and the business information company that became Hoovers.com (bought by Dun & Bradstreet).  Gary served as the first Entrepreneur-in-Residence at the University of Texas at Austin’s McCombs School of Business.  He has been a business enthusiast and historian since he began subscribing to Fortune Magazine at the age of 12, in 1963.  His books, posts, and videos can be found online, especially at www.hooversworld.com. He lives in Flatonia, Texas, with his 57,000-book personal library.

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As the old phrase goes, everything is bigger in Texas, and that’s particularly true when it comes to Texan businesses. The Lone Star State is home to some of America’s largest companies, including ExxonMobil, AT&T and Pizza Hut.

But how does a small local business grow to the point where it is known both nationally and, in some cases on our list, globally?

The answer is by developing a highly effective marketing strategy. Marketing is the vehicle that builds a brand’s image and drives customer acquisition, which is the bedrock of a successful business. Here are seven Texan businesses that have got this just right.

Southwest Airlines

Southwest Airlines are masters at emotional storytelling, a clever marketing strategy that allows them to connect with customers on a deep and authentic level. During 2017 and the first half of 2018, Southwest Airlines hosted an interactive microsite called 175 Stories, a nod to the fact that there are 175 seats on each of their new Boeing 737 planes.

Each of these seats contains a passenger with their own story to tell, a story that the brand leveraged in their marketing by exploring each passenger’s emotional journey as well as their physical one.

Southwest Airlines has also utilized empathy as part of their social media strategy. In their Dallas ‘Listening Center’, a team of 40 customer service experts monitor social media channels around the clock with one primary goal: to simply listen to customers.

Being on hand to respond to complaints, queries and comments immediately is an excellent marketing strategy because it makes customers feel like the company cares about their experience.

With 64% of customers expecting a reply on Twitter within 60 minutes, Southwest Airlines are cleverly aligning their social media efforts with customer expectations.

Dr. Pepper

A young pharmacist called Charles Alderton invented Dr. Pepper in Waco, Texas, and it has since become a staple in American culture.

Though a perennially popular brand, Dr. Pepper enjoyed a significant boost in sales by embracing both social media and online gaming. The brand launched ‘Pepperhood’, a college-style fraternity of friends and fans of the drink, which offered challenges, prizes and the chance to become Pepperhood President.

This strategy garnered huge social engagement, with more than 70,000 players registering and more than 4,000 pieces of user-generated content being uploaded to the Pepperhood site.

Most importantly, sales increased significantly during the five month campaign by an impressive 385,000 units. Dr Pepper might be 130 years old, but it’s ahead of the game when it comes to marketing.

Shiner Bock Beer

Shiner Bock is a craft beer brewed in Texas, which is beloved by its home state, but has also grown in popularity nationwide. With rapid growth in the craft beer industry, there is a constant focus on what is new.

As such, it seemed natural for Austin ad agency McGarrah Jessee to return to Shiner’s roots when creating a campaign for the beer. By focusing on the 108-year history of the brand, McGarrah Jessee marketed Shiner as authentic and part of America’s history.

Shiner’s marketing strategy was a multipronged one, and the company paid $1.2 million for a Super Bowl spot in 2018 to get their message out there. By leveraging several different marketing methods at once, Shiner is retaining the image of a local beer whilst offering it to a national audience.

This strategy is evidence of the importance of branding when it comes to marketing a product or service. A rejuvenation of a brand’s image could be enough to turn around an ailing business. Indeed, you could pick up a local Texas business that isn’t performing so well and turn it around with a careful, considered brand revamp. You could then easily flip it for a quick profit.

Dickies

Texan brand Dickies has successfully made the jump from workwear to lifestyle brand, via an unexpected foray into skatewear. This is due in part to the success of DickiesStore.co.uk, the online distributor in the UK for the global Dickies brand.

Digital marketing specialists MediaVision were asked to help Dickies grow their market share by developing new audiences. Due to their product range, Dickies had assumed that their target audience lay naturally in the building trade but research identified other lifestyle verticals including gardening, camping and agriculture.

MediaVision implemented a paid search strategy based on factors such as seasonality and geographic location, and developed bespoke landing pages for niche interest groups outside of the workwear industry, such as dog walkers.

This worked particularly well on Facebook, with focus being steered away from products and towards lifestyle, taking likes for the Dickies page from 2000 to 20000 in just one year.

Whole Foods Market

Whole Foods Market was founded in Austin by four people who believed that the natural foods industry was ready for a supermarket format. They were right: Whole Foods Market is now a Fortune 500 company and is America’s largest retailer of organic foods.

The company was acquired by corporate behemoth Amazon for $13.7 billion earlier this year, but has retained its image as an alternative to the usual supermarket offerings in its latest marketing campaign.

Under the tagline Whatever Makes You Whole, the new campaign puts emphasis on shoppers rather than produce, and attempts to help Whole Foods shed the ‘whole paycheck’ image that had dogged it for years.

And it seems to have worked: sales at Whole Foods have soared in the past year. Whole Foods have managed to walk the tricky tightrope of offering ethically sourced organic food at lower prices, and their marketing reflects that.

Dell

University of Texas student Michael Dell founded the huge multinational computer technology company in 1984 with capital of just $1000. As of May 2014, Michael Dell’s net worth was approximately $18 billion. Such a figure is clear evidence of Dell’s impeccable marketing strategies over the last three decades.

Dell utilizes content marketing as an important part of their marketing strategy and has created a hugely popular podcast called Trailblazers. Though chiefly aimed at C-suite executives, the podcast is interesting for anyone with an interest in disruptive technologies.

Trailblazer has been nominated for a Webby award, garnering huge publicity for Dell, and their overall content marketing strategy was named in the NewsCred Top 50 Best Content Marketing Brands of 2018.

This method highlights the value of content marketing for businesses, both small and large. Take a look at local Texas business listings and you’ll find any number of brands that, regardless of their business niche, have implemented a solid content marketing strategy. Content marketing creates ongoing value for their customers, which in turn ensures they’ll return to buy from a brand again and again.

Chuck E. Cheese

Restaurant Chuck E. Cheese is an excellent example of how being prepared to be flexible and think quickly can create a hugely successful marketing strategy.

In 2017, McDonald’s hit headlines when an Arizona mom began swab testing play areas in the fast food chain and finding dangerous pathogens. In response, McDonald’s banned her from its restaurants and created a storm of negative PR.

Enter Chuck E. Cheese, who came forward and volunteered to partner with the mom to establish new sanitation standards for their family restaurants. Chuck E. Cheese were clever in playing the part of the rescuer in this story. But they also recognized that a brief switch in loyalties doesn’t necessarily mean the customer won’t return to a competitor.

They turned this into an effective marketing strategy by making a long-term commitment to their customers in the shape of their Kids Play Safe certification. The logo gives visible assurance of their care for children’s safety, something that is hugely appealing to all parents.

Through employing excellent customer service, creating amazing content, making clever use of social media and positioning their brand as authentic, credible and trustworthy, these Texan brands have got their marketing strategies just right.

Patrick Foster is an ecommerce guru who knows a thing or two about marketing. He shares his years of experience on his blog and ecommerce community, Ecommerce Tips. Find the latest posts on Twitter @myecommercetips.

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It is April 7, 1964.  One hundred thousand businesspeople gather in 165 the company’s offices across America to hear the news.  That morning at 8:30 AM, a chartered train fills up with two hundred reporters at New York City’s Grand Central Terminal.  About ninety minutes and seventy-two miles later, they arrive up the Hudson River in Poughkeepsie, New York.  No one knows what they will hear, but they all know it is something worth learning about or reporting to their readers.

Arriving in Poughkeepsie, the Chief Executive Officer of International Business Machines (known far and wide as IBM), Thomas Watson, Jr., greets them in a warehouse.  Surrounding him are forty-four different mainframe computer models and peripherals.  The reporters and the one hundred thousand business people are then introduced to System/360, the most revolutionary product in computer history up to that time.

Over the preceding four years, IBM has agonized over the decision to junk their entire successful line of business computers and replace it with one new product line.  A great deal was at stake: in the prior year of 1963, IBM had posted after-tax profits of $290 million on sales of over $2 billion, ranking them 18^th in sales and 8^th in profits among Fortune Magazine’s list of the 500 largest American industrial companies.  Excluding IBM’s sales of other office equipment like typewriters, the company’s “data processing” revenues (software and hardware) of $1.2 billion were nine times those of its nearest competitor.  Just nine years earlier, when Fortune began its famous list, IBM had ranked 61^st in sales ($461 million) and 24^th in profits ($46 million).  Why tinker with success?

Nevertheless, under the leadership of the ever-ambitious Watson, Jr., the company pressed ahead with one of the biggest bets in American corporate history.  In the four years leading up to that fateful day in April of 1964, the company spent $5 billion on the development of System/360 (the equivalent of over $40 billion today).  Such audacious courage was only rivalled by Boeing’s introduction a few years earlier of the 707, the first commercially successful passenger jet (the British had tried a few years earlier with their first Comet, but that airplane had the unfortunate tendency to fall out of the sky in mid-flight).  Such ventures are referred to as “betting the whole company.”

Adding to the risk, rather than introducing the System/360 model by model, Watson chose to introduce the entire line all at once.  Technical advances over existing mainframes included the use of solid logic technology, the capability to adapt to a wide range of software and applications, the ability to respond to inquiries from remote locations, and much faster memory.  Core memory, what we would call RAM today, ranged from 8k to an amazing 1024k, 1/8000^th of that in the older laptop on which I type this post.  Perhaps most striking, and most unusual for a technology company of any era, Watson believed in great design, and the System/360 looked like no other machine on the market.

Watson, Jr., had been well schooled by his father, unsurprisingly named Thomas Watson, Sr.  Before being asked to lead the company that became IBM in 1914, the elder Watson was the sales chief for the National Cash Register Company (NCR or “the Cash”) of Dayton, Ohio.  At the Cash, Watson had learned from the John Henry Patterson, the father of modern salesmanship, the inventor of many of the techniques and policies still in use today.  Watson leased rather than sold IBM’s punch card machines, providing consistent revenues and profits even through the great depression of the 1930s.  When competitor Remington Rand pioneered the mainframe computer in the late 1940s and early 1950s with its UNIVAC machine, IBM leapt into dominance by focusing on the customer rather than on technology alone.  While the numerous competitors focused on a faster Central Processing Unit (CPU), Watson’s customers told him they’d rather have a faster printer.  He delivered on it, and IBM soon generated more sales than all its competitors combined.  The company’s “Future Demands” department was told to discover “what the customer is going to ask for next.”

While the reporters and potential customers were unsure of what would unfold in Poughkeepsie on April 7, 1964, the company was even less sure.  Customers would have to junk their old systems, an ideal time to switch suppliers to giant competitors like NCR, Remington, RCA, Honeywell, and GE (which was twice as big a company as IBM).  Since the new machines would not ship until a year after the announcement, in the spring of 1965, customers could delay any decision on the new system or even desert IBM.  The new systems were not cheap, with monthly rentals ranging from $2,700 for the most basic system to $115,000 for a large multisystem configuration, equivalent to $22,000 to $930,000 per month today.

Thomas Watson, Jr’s big bet paid off.  In the next four weeks, one thousand orders were received.  Over the next three months, the orders totaled $1.2 billion, equal to the company’s entire data processing revenues in 1963.  In 1965, IBM was up to 9^th in sales on the Fortune 500, and 5^th in profits, outranked only by General Motors, Standard Oil of New Jersey (later renamed Exxon), Ford Motor, and Texaco.  At the end of five years, over 33,000 units had been delivered.  For decades, IBM continued as the world’s largest software and hardware company, with a market share of over two-thirds, an exceptional achievement in any industry.

Many years later, another computer innovator named Steve Jobs came along who also believed in the importance of design, putting the user first, and making a big splash with product introductions.  His company went on to become the first enterprise on earth to be valued at over $1 trillion.

Only you and your colleagues can accurately extract the best lessons from this story for your company and its products and services.  Questions worth asking include:

• Are you customer-first or technology-first?
• Does good design matter?
• How can you make a splash with new products and services? Are they worth making a splash about?
• Would you have the courage to bet the company if the rewards were high enough? Would your investors?
• Has your industry or industry segment ever had a product as innovative as the System/360? If not, what might it be?

 

Gary Hoover is a serial entrepreneur.  He and his friends founded of the first book superstore chain Bookstop (purchased by Barnes & Noble) and the business information company that became Hoovers.com (bought by Dun & Bradstreet).  Gary served as the first Entrepreneur-in-Residence at the University of Texas at Austin’s McCombs School of Business.  He has been a business enthusiast and historian since he began subscribing to Fortune Magazine at the age of 12, in 1963.  His books, posts, and videos can be found online, especially at www.hooversworld.com. He lives in Flatonia, Texas, with his 57,000-book personal library.

To get updated information about the team at Apogee Results, please follow us on your favorite social media channels.

 

We are so pleased to announce a collaborative education partnership with entrepreneur and business historian, Gary Hoover.  Gary blends a passion for the historical study of leadership with an engaging talent for storytelling. In this series for the Apogee Results blog, Gary will share marketing insights for entrepreneurs in start-up mode and proven marketing tactics for CMOs at large established companies.

We recently chatted with Gary about his background and his vision for the Legends of Marketing blog series.

 

Those of us who labor daily to promote our products and services often focus on the latest marketing bestseller. However, the more distant and oft-forgotten past is also filled with great examples and ideas that we may be able to re-interpret in today’s competitive world. Students of history often note that good ideas arise, peak, and lose interest over time, then come back years or even decades later.

Gary Hoover travels the world speaking to Fortune 500 executives, trade associations, entrepreneurs, and college and high school students about how enterprises are built and how they stand the test of time. His speeches and workshops have ranged from the Hong Kong and Jakarta chapters of EO (Entrepreneurs Organization) to keynote at the National Association of Convenience Stores Convention and the Mid-Atlantic Venture Capital Conference, from Microsoft and Oracle client conferences to strategic planning meetings of major law firms.

From his own successes and failures, and from the lessons of the thousands of companies he has studied, he draws real-life examples of the things that really matter. He talks about the role of history, of geography, of demography, of curiosity, and the other key things that aren’t discussed every day in the newspaper – or the classroom. Gary speaks from long experience and long study about the big picture, about the critical components of the successful business mission. In an era of fads and fashions, Gary keeps his eye on the timeless fundamentals of success, but with new and surprising stories.

The first article in this series features how a big business gamble in the 1960s is still paying off for IBM today. Be sure to bookmark this site and check back often.

You can keep up with Gary’s articles, books, videos and speaking engagements at the Hoover’s World website.

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