EXCHANGE Intoratg of GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART I. ANALYSIS OF THE PRODUCT BY MAC MARTIN BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. 8. JANUARY 1914 Entered at the Post Office Minneapolis as second-class matter Minneapolis. Minn. GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART I. ANALYSIS OF THE PRODUCT BY MAC MARTIN n PROFESSORIAL LECTURER IN ADVERTISING, PRESIDENT MINNEAPOLIS ADVERTISING FORUM, MEMBER EXECUTIVE COMMITTEE ASSOCIATED ADVERTISING CLUBS OF AMERICA BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. 8. JANUARY 1914 Entered at the Post Office Minneapolis as second-class matter Minneapolis, Minn. COPYRIGHT 1914 THE UNIVERSITY OF MINNESOTA PLAXXIXG AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART I. ANALYSIS OF THE PRODUCT A. Demand B. Supply C. Quality D. Prices E. Profits P4RT II. ANALYSIS OF THE MARKETS A. Geographical B. Climatic C. Seasonal D. Social E. Financial F. Competitive G. Distributive PART III. ANALYSIS OF THE CHANNELS OF DISTRI- BUTION PART IV. ANALYSIS OF THE MEDIA PART V. DETERMINING THE AMOUNT OF MONEY TO BE SPENT PART VI. PREPARING THE ADVERTISEMENTS FOR EACH MEDIUM 316964 PART 1. ANALYSIS OF THE PRODUCT TO BE ADVERTISED Each student is to choose a product with which he is familiar and which he may wish to advertise. This course from the first lecture to the last will consist in preparing a campaign to adver- tise that particular product. Name of Product and Brief Description of Its Uses Please answer as many of these questions as refer to your par- ticular product. In cases where more than one question is asked in a sentence, if you can answer the first part of the question in the affirmative, you will probably find your product more adapt- able to extensive advertising. A. DEMAND Cherington, Paul Terry, Advertising as a Business Force, chap. 1, p. 48 A. W. Shaw Company, How to Write Advertisements that Sell, pp 10-13. De Weese, Truman A., Principles of Practical Publicity, pp. 7-13. Fowler, R. K, Printers' Ink, Feb. 8, 1912, p. 54. 1. Is the demand developed? undeveloped? or overdeveloped? :.;. pp. 11-14. 2. Is the product a necessity? or a luxury?. . . .pp. 14-15. 3. Is it a staple? or a novelty? pp. 15-17 e 4. Is it a "repeater" ? -. . . or can but one sale be made to each customer? ; pp. 17-19. 4 OUT LI ^ 5 . 5. Is it a" "year-round seller"? or "seasonable"? pp. 19-20. Deland, Lorin F., Imagination in Business, pp. 42-51. Printers' Ink, April 24, 1913, p. 27. 6. What is the present annual consumption? pp. 20-21. Mahin Advertising Data Book, 1913-1914, pp. 424-26 B. SUPPLY 1. What is the present total capacity of your plant? p. 22. 2. Raw material a. Is your supply of raw materials steady in amount? or in danger of becoming soon exhausted? p. 23. b. Is your supply of raw materials steady in price? or fluctuating ? pp. 23-24. 3. Labor a. Is your supply of labor "open shop" ? or "union" ? p. 24. b. Is the larger proportion of your labor skilled? or unskilled ? pp. 24-25. 4. Management a. Does final word in management of details of your ad- vertising depend upon one man? or a group of men ? pp. 26-27. b. Does management consider advertising as an invest- ment ? an expense ? or a gamble ? pp. 27-28. ^'ADVERTISING CAMPAIGN c. Will the personal conceit or tastes of the rnanagement affect the advertising? pp. 29-30. d. Is the sales force well organized? pp. 30-31. e. Will the management of the sales and manufactur- ing departments cooperate with ? or dictate to the advertising department? p. 31. Hoyt, Charles W., Scientific Sales Management, pp. 65-165. f . Can the management be duplicated ? or is it dependent upon the knowledge and ability of one individual ? pp. 31-32. 5. Capital a. What per cent of increase in the present demand will the capital accommodate? p. 32. b. How much of an investment in "good will" will the present capital accommodate? pp. 32-34. Printers' Ink, Oct. 31, 1912, p. 4. C. QUALITY 1. The substance itself The American Medical Association, Nostrums and Quackery. a. Can it be improved upon in quality of material*? or workmanship? pp. 35-37. b. Can your article advisedly be made more attractive to the ultimate consumer through sight ? OUTLINE 7 touch ? taste ? hearing ? or smell ? pp. 37-38. Scott, Walter Dill, The Theory of Advertising, pp. 208-28. c. Can it be made more convenient for any of its uses in substance ? in size ? or in shape ? pp. 38-39. 2. The name Cherington, Paul Terry, Advertising as a Business Force, pp. 49-50. Rogers, E. S., Mahin Advertising Data Book, 1913-1914, pp. 391-402. Chapman, Clowry, The Law of Advertising and Sales, pp. 276-356. a. Must the consumer call for your product by one or more names ? pp. 40-41 . b. Can the name be protected as a trademark? pp. 41-42. c. Is it distinctive ? p. 42. d. Does it relate to the product? its uses? or associations? in sound? or in meaning ? p. 43. e. Is it easy? or hard to pronounce? p. 43. f. Is it short? or long? p. 43. 3. The container, cover, label, or package Cherington, Paul Terry, Advertising as a Business Force, p. 51. Chapman, Clowry, The Law of Advertising and Sales, pp. 259- 61, 359-60, 486-87. a. Is it distinctive ? p. 44. 8 PLANNING AN ADVERTISING CAMPAIGN b. Is it convenient for all of the purposes to which it may be put? p. 45. c. Is it in any way related to the name? or the article ? its uses ? or its claims? in color? in shape? or in style of type? pp. 45-46. Miinsterberg, Hugo, Psychology and Industrial Efficiency, pp. 272-81. D. PRICES 1. Do you allow quantity discounts? .pp. 47-48. Cherington, Paul Terry, Advertising as a Business Force, p. 36. 2. Are your prices to the consumer maintained or cut? pp. 48-49. Cherington, Paul Terry, Advertising as a Business Force, pp. 252-55, 273-79, 380-428. Fernley, Thomas A., Price Maintenance. 3. How do your prices compare with competition in the fol- lowing : a. To jobbers lower? the same? or higher? p. 49. b. To retailers lower? the same? or higher? p. 49. c. To consumers lower? the same? or higher? p. 49. Cherington, Paul Terry, Advertising as a Business Force, pp. 386-90. OUTLINE E. PROFITS Cherington, Paul Terry, Advertising as a Business Force, pp. 128- 34, 209-10, 434. The Curtis Publishing Co., Selling Forces, pp. 103-44. How do your profits compare with competition in the follow- ing: 1. For the manufacturer (yourself) higher? the same? lower? pp. 50-51. 2. For the jobber higher? the same? lower? pp. 50-51. 3. For the retailer higher? the same? lower? pp. 50-51. PLAXXIXG AN ADVERTISING CAMPAIGN FOR A MANUFACTURER It will not be my purpose in these lectures to lay down any hard and fast rules. Rules are not of one man's making. I will simply attempt to tell how some others have answered some of the questions which should be asked before the question, ''How shall I advertise," can be answered. You can then draw your own conclusions as to whether or not these answers will help you to answer these same questions in relation to that which you have to advertise. Some of these questions will not apply to your business. You may not care to ask them in this order. Certain answers may affect some businesses more seriously than others. I do not say that these are all of the questions which must be answered. But I do insist that you put yourself in the position of the owner of some product you may wish to advertise. Let us commence now at the very beginning to plan your ad- vertising campaign. PART I. ANALYSIS OF THE PRODUCT \Ye will first begin by asking a few questions about the article or product itself. A. DEMAND 1. Is THE DEMAND DEVELOPED, L'XDEVELOPED, OR OVER- DEVELOPED ? R. E. Fowler, advertising manager of the Printz-Bredemand Company, of Cleveland, in commenting upon a similar analysis says. "The first question is 'is the demand developed or unde- veloped' and upon this may rise or fall the success of your ven- ture. If the answer should be 'developed,' you immediately know that the heavy expense of an educational campaign will be elinii- 12 ANALYSIS OF THE PRODUCT nated from your calculations and your plan will be to convince the jobbers, dealers, and consumers that your product is desirable. On the other hand this answer to this question immediately brings into the scene the element of competition with established con- cerns." Although creating new demands is one of the recognized functions of advertising, the fact that the mind of the masses moves slowly must be taken carefully into consideration. My father tells me that he first used a telephone in 1878. He did not feel the need of a telephone in his office until 1886 and it was not until 1898 (and then only after strong urging from the younger generation) that he felt the need of a telephone in his home. It required twenty years to educate my father to the use of the telephone in his home. Yet now that that demand has been created my father's children and his children's children will ever after pay monthly toll to the genius and the perseverance of the inventor of the telephone. In 1890 when Edison first outlined the advantages to the world which would result from his new invention, the phonograph, he laid particular stress on its possible use in business correspond- ence, yet it was twenty years before business men seemed to develop any considerable demand for talking machines. When the Thermos bottle was introduced by William B. Walker in 1907 there was, of course, no developed demand. A carefully planned educational campaign of advertising was con- ducted, yet it was not until the beginning of 1913 that any appre- ciable demand for Thermos bottles was developed among me- chanics for use with their dinner pails the class of demand which will probably be its greatest and the use which would appear to the outsider as the most evident. It is interesting to note what the same man is able to do with an article for which the demand has already been developed. In the later part of 1912 William B. Walker began to put the Mark Cross safety razor on the market. With the aid of a developed demand, a well-planned advertising campaign, and a startlingly low price, the sale of Mark Cross razors in New York City alone amounted to over 98,000 the first day. The sale for the first three days in New England and New York state reached the startling figure of 2,000,000. DEMAND 13 It must be borne in mind that a low price greatly assists, and a high price often retards, the development of demand. (The mat- ter of price will be taken up in a later chapter, page 47.) There are some people who can be made to buy just because the price ap- pears low. There were enough Thermos bottles sold to automo- bilists at $7.50 to $12.50 to keep the American Thermos Bottle Company running at full capacity, but it was not until the price reached $1 to $2.50 that the demand of the laboring classes began to be felt. Mr. Walker's own words in relation to how quickly the demand was created through advertising are interesting. He says, "New manufacturing concerns usually spend $200,000 or $300,000 and wait three or four years to establish a demand for their prod- uct and see their money coming back. From the moment we took six full-page spreads in the New York City papers, to tell about the Thermos bottle, we have never caught up with the demand.'* Mr. Walker's success with the Thermos bottle in an educa- tional campaign to develop demand is no more remarkable than his success with the Mark Cross safety razor with a developed demand but in the face of a supposedly well-supplied market. When you are considering the question of the extent of the development of your demand, it is well also to consider whether or not the demand has not been overdeveloped. Others in the field may have already forced the demand to such an extent that it is now at the zenith and you may be entering just when a fall- ing-off is about to begin. If you had entered the bicycle busi- ness in 1898, you might have encountered such an experience. I remember distinctly the expressions of high hopes and con- gratulations when my father left the practice of law and entered the real estate business in Minneapolis in 1887. For the few years previous, my father's friends had all been getting rich in Minneapolis real estate. Two of his clients, mere boys still in their teens, had each cleared over $100,000 during the two years previous. As these two boys (for some reason known only to themselves) had developed a sudden desire to quit business and go to college, my father was given the opportunity to buy them out and to start in with what was recognized as the leading real estate business in this great and booming western city. Was there ever such an opportunity? Hopes were high. Yet they soon began to tumble. The high-water marks in Minneapolis 14 ANALYSIS OF THE PRODUCT real estate had been reached. The demand had been overdevel- oped. I remember distinctly the day when one of my playmates had given me the explanation but, not understanding it any better than before, I ran home to my mother and brought tears to her dear eyes when I said, "Mamma, what does it mean when 'the bottom drops out of the boom'?" You will always find someone to tell you that every business is overcrowded and that every demand is abnormally developed. As early as 1905 there were people who predicted doom to the automobile business. Those who seemed to think five years ago that the moving picture business was at its zenith, to-day admit that it still is only in its infancy. There are several ways to test a demand in advance. It is said to be no uncommon thing among technical book concerns to send out a few thousand letters soliciting orders for the book exactly as though it was printed, before a single line of a book is written. If the demand is not sufficient, the book is not published. Whether the book is published or not, the money is always returned immediately with a note explaining that the pub- lication has been delayed or indefinitely postponed (as the case may be) and that the subscriber will be again notified when the book is "off the presses." When Crawford Marmaduke built the fourteen-story Alaska Building in Seattle, a city of not more than 125,000 population in 1904, his old St. Louis friends encouraged him by telling him that he was crazy. But Mr. Marmaduke had taken no chance with the possible demand. He had had his architect's plans and sketch reproduced in an attractive prospectus and had had every room in the great office building rented before the first stone of the foundation was laid. 2. Is THIS PRODUCT A NECESSITY OR A LUXURY ? W r hile many fortunes have been made through supplying the world with luxuries, the greatest and the most lasting institu- tions have been built up.on supplying people with things they must have. The great impetus which advertising has gained in the last half century is in part due to the fact that instead of using this influence only to sell patent medicines, fortune tellers' arts, and such things it is now used to sell food, shelter, and clothing. DEMAND 15 As civilization advances it is hard for us to distinguish the luxury of yesterday from the necessity of to-day. The demand for necessities is universal, while the demand for luxuries must always be limited by the purchasing power of the individual. We eat up to-day the food we bought yesterday. We wear out the clothing and we consume the fuel we bought a few months ago. We must always come back for more. There is much more momentum in the demand for a necessity than there can be for a luxury even when price is not a considera- tion. 3. Is THIS PRODUCT A STAPLE OR A NOVELTY? Many advertisers can not forget the story of the man who made a fortune by inventing a game called "Pigs-in-ciovet." They do not stop to ask themselves how much they would be willing to pay for stock in his company to-day. The American people are said to be novelty crazy. Fortunes have been made by catching the public fantasy. Through the influence of a tremendous amount of advertising a demand for a novelty can be created. Yet the sale of a novelty, requiring a heavy investment either in machinery or advertising, is a very hazardous business in which to engage. If you wish permanently to engage in a business built on public fantasy, two things are quite essential: (1) that you have in readiness some other novelty which you can produce with the same organization, and (2) that you prepare yourself to "gei out from under" when the fickle fantasy of the public begins to change. Mr. Joseph Strong, of Strong and Warner, Milliners, is inter- ested in nearly fifty retail .millinery stores situated in different parts of the United States. He conducts the advertising himself in each of these stores every day from his office in St. Paul. Xow the millinery business is built entirely on the fleeting fantasy of Her Royal Highness, the Lady-of-the-Fashion. The hat is considered a necessity, to be sure, but the particular shape and color of a hat which her ladyship will wear or discard depends entirely upon her fantasy or the "fantasy of the season." Milliners spend thousands of dollars to determine in advance what the "fantasy of the season" will be, but there are always 16 ANALYSIS OF THE PRODUCT some shapes and colors which do not sell as well as others and, despite Dame Fashion's rigid dictates, tastes seem to vary in different localities. Mr. Strong receives daily reports on chart sheets from each of his stores on just how each of that season's shapes is selling in each color at each price. When the season is advancing and he sees that in certain cities certain shapes and certain colors at certain prices are not selling, he draws a line across his chart of shapes and colors, running it up and down with the prices, and announces that all hats falling in the chart below the line shall sell at a certain reduced price while all those above the line shall remain at their former prices. Thus all purple hats of shape No. 1, selling as high as $12, all black hats of the same shape selling as high as $10, and all purple hats of shape No. 2 selling as high as $9, and all white hats of shape No. 2 selling at $6, shall sell at $5 until further notice. If a week goes by and still there are hats in this lot which do not move fast enough, he may draw another line still higher up on the price scale and offer still higher priced hats for $5 or he may use the same line and cut to $4. In making these cuts he never regards the original manufacturing cost, basing his prices only on demand, knowing full well that a novelty out of season has practically no value in the eyes of the public. A high school classmate of mine and his father-in-law be- came partners in the first organization to sell physical culture training by mail. It was a wonderful success while it lasted. I can remember distinctly visiting my friend in his palatial offices in Chicago a few months after I left college. I had come to that city with a total capital of $4 in my pocket and was looking for a job. I sat humbly by and watched my friend open his morning mail. It was brought in in a good-sized wastebasket, and the basket was filled to the brim, I watched him take out twenty- dollar bills, money orders, and gold pieces until my head swam. He had no capital invested in equipment or machinery of any kind. He told me he was spending for his advertising $100,000 a year. Now that I think of it I do not suppose he made a profit of more than $50,000 a year, but at that time it seemed as though there was a million dollars before my very eyes. About a year after the time of my call this advertising stopped. DEMAND 17 In the meantime my friend had attempted to sell a course in legerdemain by mail and had spent considerable money in an attempt to popularize a corn cure, both of which ventures proved unprofitable. A year later one more advertisement for the physical culture business appeared and, as I was rather surprised to see it, I inquired and learned that the physical culture business, while no longer profitable when promoted on a large scale, was "not quite dead" and, as my friend expressed it, "is being milked carefully for what there is still in it." 4. Is THE PRODUCT A "REPEATER" OR CAN BUT ONE SALE BE MADE TO A PERSON? In estimating the yearly demand for your product it is quite important to determine how soon a satisfied customer will come back for more. Is your product of such a nature that but one sale can be made to a customer in that customer's lifetime ; will that customer buy twice or three times in a lifetime ; will the customer buy once a year, once a month, or possibly once each week? You may get well under way in your advertising and suddenly discover that you have sold every person in your market who cares to buy and that to sell more you will be compelled to wait for a new generation. It often costs more than the selling price to gain the con- fidence of a customer. The profit in most businesses is in the re-orders. The business which finds itself in the position of having a new market of already-convinced customers every six months has a great advantage over the concern which must wait a year for a new market. It is often possible through a little ingenuity to change a "one time sale" article into a quite active repeater. There is a man by the name of King C. Gillette who has played this trick on the entire civilized world. We can all remember the razors our fathers used to prize. They not only lasted a lifetime but were known to improve with age. The razor your father prized the most was the sacred one you, as a boy, were never allowed to touch only to look at with 18 ANALYSIS OF THE PRODUCT wonder and admiration. It had been your grandfather's razor. You were told that some day it would be yours. The cutlery business was then centered around Sheffield, England ; it was said to be very profitable ; the population of the world increases so fast that the demand seemed always to be growing; and I do not suppose it ever occurred to the steel barons of Sheffield that anyone could tell them anything about the razor business. Just then (it always happened just then) along came a Yankee who separated the blade from the stock, called the atten- tion of the world to the time it was wasting every morning in stropping and, instead of selling us a razor at $2.50 to $3.50 which would last for generations, succeeded in separating us from $5 now and $1 for new blades every six months or so thereafter for the rest of our natural lives. Whether we buy blades for the rest of our lives from Gillette or from someone else, it was Gillette who got us into this expensive habit and made his millions by putting the element of repeat into the razor business. There are fortunes still awaiting the men who are clever enough to increase the element of repeat in any business. Among the professions, in the real estate business, and in the different retail lines the element of repeat is encouraged by the building of a clientele. While for manufacturing reasons it is not advisable to engage in two separate lines of business, if you have an article without the element of repeat, perhaps you can find some other article which has the element of repeat which you can sell with your article. This is the method employed by the American Multi- graph Sales Company. During the last few years much has been heard of the "Family of Products Idea." After a reputation for one product has been established, it seems to be easier to create a demand for another product under the same family name than to commence from the beginning again and attempt to establish a demand under a new name. Thus we have "Quaker Oats," "Quaker Puffed Rice," "Quaker Puffed Wheat," and so on throughout the rest of the family. Your article may have a wonderful element of repeat in the DEMAND 19 beginning but one of which, for the very reason of its constant use. the public may soon tire. In such a case you are very fortunate if you can introduce another member of the family. Oftentimes articles which appear to every one to have a primary element of repeat are found on investigation to be re- garded in the eyes of the public as mere novelties. If you are not satisfied on this point in relation to your article, it may be advisable to spend some money in an investigation. There are many ways to make such investigations. They are all based on the law of averages. Do as a chemist would do. Take a small cross section sample of your list of customers. test it under circumstances exactly similar to those which would exist in normal conditions (not letting any of your list know that they are being experimented with) and you can determine quite accurately the percentage of repeat in your business. You can not tell in advance how many times during a year any individual in your town will buy a certain article any more than you can tell just when that individual will die. But it is entirely different with the average of a group of indh-idiials. You can determine within a fraction of one per cent how many people will die in your town next year or the year after. The death rate in your town has probably not varied one half of one per cent in the last twenty years. If you have a million in your possible market, test one thou- sand and, if your test is made correctly, you can pretty accu- rately gage from the thousand what the million will do. One way to test the repeat of an article is to get a list of purchasers with the dates that they first purchased, if possible, send them a letter with a stamped return postal card (it is often advisable to insure a reply to offer as a further inducement a free sample of some other article in your line), ask if they are still using your article and how many times to the best of their memory they have re-ordered. 5. Is YOUR PRODUCT A "YEAR-ROUND SELLER" OR SEASONABLE? \Yhether your article is a repeater or not there may be certain times of the year in which the demand is greatest. There may be 20 ANALYSIS OF THE PRODUCT other times in which there is no sale for your article. You may or you may not be able to overcome this condition. One of the efforts of modern business efficiency is what the electricians call "superimposing the peak upon the valley." That is, raising the sale in the dull season and lowering it, if necessary, in the good season to make a more even output the year round. You can't sell ice skates in the summer but you can make ice skates and roller skates in the same factory. Probably the greatest thing which Artemas Ward, the great general of advertising in the last century, ever did was to take Sapolio out of the class of seasonable articles and make it a year-round seller. Mr. Ward says, "When I began the work of advertising Sapolio, the sales in May and September were nearly double those of the other ten months. I believed this could be changed and it was changed. Through steady and per- sistent advertising the sales in the slow months were so increased that all months came to look alike to Sapolio. That is one of the great things advertising will do. It will make business good in seasons that without advertising are dull." Mr. Bert M. Moses in commenting on this feat in Printers' Ink says, "Making two blades of grass grow where but one grew before is commendable, but to make twelve scrubbings grow where but two grew before is a vastly greater accomplish- ment." 6. WHAT Is THE TOTAL PRESENT ANNUAL CONSUMPTION OF THIS CLASS OF PRODUCT? This is a question which in most cases is very hard to answer, but it is startling to find how few advertisers have given it a thought. How can you determine your share of the demand, how can you estimate your market, unless you know what is the present total consumption? If your article is a new invention, perhaps it is designed to supplant a certain article now used. As a stepping-stone first determine the consumption of the article you are to supplant. Census reports give much of this information; or it may pay you to make a special investigation of your own. You can not always determine whether or not a line of goods is profitable DEMAND 21 by the amount of advertising or the amount of business one's competitors seem to be doing. Mr. Harry Tipper, advertising manager of the Texas Oil Company and special lecturer on Advertising at the University of New York, has found some interesting facts as a result of such an investigation. It was in connection with the utilization of a certain by-product of oil for the manufacturing of some household goods. An enlargement of the plant and an adver- tising expenditure of from $15,000 to $20,000 besides a consid- erable additional sales force was proposed. The investigation, however, showed that the total consumption of the article in question in the field proposed would not absorb more than one fourth or one fifth of the capacity of the present plant and that competitors were evidently carrying the line at a loss hoping to build it up. This, of course, is an extreme case but it shows the necessity of asking yourself this question. Before we take up the next subject, that of your ability to supply the demand which your advertising will create, are there not some other questions which, on account of the particular nature of your product, you will wish to ask yourself about your possible demand? It is said that when the telegram came saying that France had declared war on Prussia the great Franco-Prussian war Von Moltke was asleep. A messenger was dispatched to awaken him, but Von Moltke simply said, "You will find the plan of cam- paign in the third drawer of my desk," and then turned over and went to sleep again. He had estimated the demand upon his forces to such a nicety that the Prussians went out with that plan and defeated the great French nation in forty-five days. B. SUPPLY The admonition of the ancient sage, ''Know thyself," was never so necessary as it is in these modern days of advertising, in fact it seems to be the necessity of obtaining data on which to plan advertising campaigns which has brought many business men to a more thorough study of their businesses. In considering your ability to supply the demand which you have created I do not wish to be understood to infer that the advertising manager or the advertising agent should attempt to direct or to dictate to the manufacturing department. It is the province of the sales and advertising departments to sell and distribute a product, no more. But one can not properly sell and distribute any product unless he knows everything that is to be known about the quan- tity and the quality of that product from the very beginning of its inception until it is finally consumed. Bear in mind that, I say until it is consumed, not until it reaches the hands of the ultimate consumer. Of this we will talk later (Part III, A, 4.). The supply naturally falls under four heads : ( 1 ) raw ma- terials, (2) labor, (3) management, (4) capital. Economists tell us that these four elements mixed in proper proportions make any product. But first let us inquire : 1. WHAT Is THE PRESENT TOTAL CAPACITY OF YOUR PLANT? We do not wish to endanger your success by creating a demand you will be in no position to supply, thus making possible enemies of those who wish to become customers. A friend of mine once left a good position to become sales and advertising manager of a new company which was to manufacture automobile trucks. He was to draw a salary and to receive in addition a commission on every truck sold. There seemed to be a large market in that territory and he guaranteed to sell the entire output. His future looked bright. Within a short time he had sold eighteen trucks, as a starter, by personal solicitation. Then, and not until then, the superintendent told him that the plant was only equipped to build six trucks the first year SUPPLY 23 and that more capital would have to be raised and a larger factory built before more orders could be taken. 2. RAW MATERIAL a. Is your supply of raw materials steady in amount or in danger of soon becoming exhausted? Several years ago the manufacturers of Coca-Cola discov- ered that the supply of one of the ingredients used in the manu- facture of their product was becoming exhausted. Millions of dollars had been spent to popularize the sale of that ingredient mixed in a certain way with other ingredients and called Coca- Cola. Some manufacturers would have taken the chance of leav- ing the substance out of the formula and trusting that the public would not notice the difference. The Coca-Cola Company had higher business principles and more common sense than to do such a thing. Experts were sent to search the world for a sup- ply of that one item and, when it was found, the Coca-Cola Com- pany bought the source of supply and immediately arranged for a sufficient annual supply to meet the probable demand for many years to come. b. Is your supply of raiv material steady in price or fluctuating? The greatest danger of a supply of raw materials which is varying in amount is that it is also usually fluctuating in price. If the price of wheat did not fluctuate it would be possible to put up flour in uniform packages at $1 a package. It is much easier to sell any article at a uniform price. When the price is fluctuating jobbers, dealers, and consumers are all prone to wait to take advantage of the market. If your product is not a necessity or an article for which there is a strong demand, a fluctuating price may throw your product beyond the purchasing power of your customers and thus destroy your trade. One of the best ways to overcome a fluctuating price for raw materials is to put so much into the additional service you render the consumer that you can put your selling price high enough to make it impossible for a change in price of raw materials ever to affect your selling price. "Middlings" has a fluctuating price in the open market. Yet 24 ANALYSIS OF THE PRODUCT Elmer Mapes and Charles Clifford take middlings, put it through a cleaning process, pack it in a neat box, name it Cream of Wheat, and sell it for 15 cents a package. You can buy middlings if you want it this morning for $21 a ton. Granulated sugar costs from $4.75 to $5.25 a hundred pounds. But I have a notion that for coffee you prefer Crystal Domino Sugar at 50 cents for a 5-pound box just about double the price of sugar in bulk without the service of having it made "coffee size." The market price of granulated sugar may fluctuate, and jobbers, dealers, and consumers may wait as long as they can to take advantage of the market, but the price of Crystal Domino is the same the year round and the demand is said to be as steady as the consumption. 3. . LABOR a. Is your labor supply "open shop" or "union"? I know that every serious minded business man will under- stand me when I ask this question and will apply it only to the extent that he in his judgment thinks it should be applied to his own business. Some day labor conditions may become so adjusted that unionism will not stand for strikes and disturbances. But until that day comes it is the duty of the one who plans the advertising for a manufacturer to know, before he contracts for the ex- penditure of hundreds of thousands of dollars, if there is any danger of the labor supply suddenly being shut off by a strike. Please do not understand me to say when I point out these apparent hazards that if there is any danger of any one or all of them, one should not advertise. That would be just as foolish as to lock your doors, throw the key in the lake, and refuse to run your factory because there is danger some day of fire. In fact there are cases where strikes have been prevented or settled as a result of the fact that a concern did advertise, was known by the people, and had always taken the people into its confidence. b. Is the larger proportion of your labor skilled or unskilled f Some classes of business require such highly skilled labor that progress is absolutely limited to the whims or preferences SUPPLY 25 of that labor. For this reason the business which is not depend- ent upon skilled labor has more opportunities to supply any demand it may receive. There are very few classes of business which do not require a certain amount of money and a certain length of time to break in a new operator. In a business dependent upon seasons the element of time of production is a serious consideration. You may find that your advertising has created a demand which will require one hundred new operators to produce your supply ; your season may be only six weeks and it may take you eight weeks to teach these new operators to produce your product of a sufficient quality to allow them to make one single article. In such a business it is the duty of the sales and advertising departments to estimate each season's demand as accurately as possible in advance so that the manufacturing department can make its calculations. It cost the Northwestern Knitting Company, makers of "Mun- singwear," about $100 to teach or "break in" each new operator. The underwear seasons are very short. On account of efficient advertising the demand for Munsingwear has been increasing by leaps and bounds, sometimes doubling from one season to the next. There has not been a time in the last fifteen years when contractors have not been busy building one addition after another to the factory. The greater number of orders from dealers is taken six months in advance of each season, but there is an in- creasing number of re-orders which come in at the last minute and must be reckoned for in advance to supply properly the sea- son's demand. Each season throughout all these years Mr. Wm. B. Morris, the advertising manager, with a faith in advertising and an imagination almost superhuman, has gauged the demand so nicely that at the end of no season has the company ever had an appreciable amount of stock on hand. 4. MANAGEMENT "Most of man's misfortunes are due to man." "There is nothing men will not attempt when great enterprises hold out the promise of great reward." No. It was not Herbert Kaufmann nor was it Harrington 26 ANALYSIS OF THE PRODUCT Emerson who first uttered the above sentences. They were recorded by two Romans exponents of the doctrines of work and efficiency of nearly two thousand years ago Livy and Pliny. Undoubtedly every business man realizes that no matter how perfect his product may be, he can not expect success from his advertising unless the brains and the ability of a man a fearless man are given full play. I am not going to attempt to describe the ideal advertising man. I have a notion that all he needs is (1) the power of analysis, (2) common sense, (3) imagination, and (4) the cour- age of his convictions. But it is not the purpose of these lectures to champion any theories or to enter into any controversies. We are planning your advertising campaign. There are certain fundamental questions in relation to the management of your organization which must be asked and answered before we can determine whether or not there is any use in writing copy and spending money for your advertising. a. Does final word in the management of the details of your advertising depend upon one man or a group of men? "In every organization there are two kinds of positions, executive and detail, and fortunate indeed is the man who works under an executive who has learned this fact." I once heard William H. Young, Commissioner of Public Works of the city of Philadelphia, express himself in the above sentence, and, while it probably did not occur to him that he was uttering an epigram, it struck me so forcefully that I now recall it word for word. I once attempted to prepare advertising which had to be O.K.'d by five different bosses. Each man took time from his own department of the business to make changes in the copy and to suggest a different way to draw the illustrations. Each one seemed to feel that the amount of assistance he rendered the advertising department was measured by the number of changes he made. The other day I was talking about this subject with Mr. William B. Morris. I do not know of a man who relies more on competent counsel or who is quicker to take advantage of constructive criticism. Mr. Morris said, "Advertising is the product of imagination, of courage, and of other subtle, almost SUPPLY 27 spiritual forces which make it nothing short of cruel to subject it to interference from those who have not seen the development of the idea from the moment of its inception. Yet I do not know of any department of any business which receives so much direction from other departments. Advertisements are the rep- resentatives, the ambassadors of the organizations, and they should express the policy and the quality of that organization in every detail. It is right that "those higher up" should give counsel but they can not in justice to themselves give attention to details unless they give all of their time to those details. "The conscientious advertising man gets much valuable help from all other departments. He also gets' valuable suggestions from children, from books, and from his recreations." "But if one man is to be responsible for the advertising, no one by interference should relieve him of that responsibility." b. Does the management consider advertising as an investment, an expense, or a gamble? \Yhile it is not the purpose of these lectures to propound any theories, the convictions of the management as to what adver- tising really is may seriously affect the life and productivity of your advertising. If the management considers advertising as a gamble, you can be pretty certain that the time will come when just one more blue chip may be necessary to "win the pot" that some one in your organization will "pass." The advertising manager of one of the largest manufacturers of a household necessity has been vorking for years to get his organizations to do national advertising. He has proven the efficiency of a house organ which now has a circulation of nearly 50,000. He has secured distribution and wonderful dealer- cooperation. Each year for the last four years he has gone before his board of directors with complete plans for a national advertising campaign. Each year he has been ordered to go ahead and each year he has been stopped in his work almost before it started. I talked w r ith him at the Baltimore Convention of the Associ- ated Advertising Clubs of America. He asked me what I would 28 ANALYSIS OF THE PRODUCT advise him to do. He is a fine fellow with a big business brain and even under this handicap is recognized as one of the best advertising managers in America. "What shall I do?" he said, almost with tears in his eyes. "I am getting a good salary but here are people at this convention offering one-half again as much ? I don't want to go if there is a chance at home. I've put some of the best years of my life into that business. It is rec- ognized throughout the world as the leader in its line. It is rated into the millions and has plenty of capital. Anyone who under- stands the nature of the business can see that it is still only in its infancy and that there is in it one of the greatest advertising opportunities in this country. It is ready for bigger things, but the directors won't march forward, and even if they do I have no assurance that they will keep on marching. They seem to con- sider advertising as some kind of a gamble." When you once plant radishes, you can't afford to be pulling them up all the time to see if the roots are growing. There is hardly a city in the United States which does not have its list of would-be advertisers who, for fear of being called unprogressive, would never for a moment think of letting a new addition to the factory go unroofed, yet discontinue their advertising at the slightest apprehension. The roofless factory would be noticed by the few who pass it daily, while the dis- continuing of the advertising, by its very nature, is noticed by the millions. The only thing that I can think of which is a greater handicap to an advertising man than having the management consider advertising as a gamble is to have it considered as a "charitj." The day of the Church Fair Program and other such hold-ups is going fast. Yet "charity advertising" together with her big brother "fear-of-the-power-of-the-press advertising" are still in our midst and it is hard for me to hold my temper and simply say that it is very discouraging for an advertising man who has plenty of profitable channels in which to invest money to be called into the office of the president and there meet a s\\eet lady blackmailer or a big bully of what physiologists call a man, and be informed, "I think we had better take a $100 ad. in this program. Will you please prepare the copy?" SUPPLY 29 c. Will the personal conceit or tastes of the management affect the advertising? Look your subconscious self squarely in the eye and repeat this question. E. St. Elmo Lewis once told me that he hoped some day to write a book on "Advertising to the Man in the Mirror." It has been said that half of the advertising of to-day is writ- ten with one eye on what the advertiser's personal friends will say and the other eye on what his competitors will say. Is it any wonder then that so much of it looks cross-eyed? I once worked for a man who did not seem to care what we did with his money, just so we put a painted sign in a position to be seen best from the windows of his favorite club. And what do you think his product was ? Farmers' work shoes ! Oh, the times without number that my artists have had to make expensive drawings over again because some customer pre- ferred brunettes to blondes, or blue eyes or brown! A salesman for a large lithograph house, which sells to ad- vertisers, tells me that he never sends an order to his house for a sketch without accompanying it with a little chart of the buyer and his apparent personal tastes. From his tie and hose are determined the shade and degree of his favorite color. If his stenographer is pretty, shows interest in her employer, and is a blonde, the report is that he likes blondes. If she is not pretty and is a blonde, a chance is taken on brunettes. Everything about the customer's office that must at one time or another have pleased his fantasy is noted in the report and when the sketch is completed it is loaded down with his favorite color, his favorite girl, and any other favorite that can be discovered. All this may be very interesting and a very clever way to sell lithography, but it is not a very sure way to prepare adver- tising which will appeal to the ultimate consumer. Do not understand me to say that one should not let all of the taste that is in him be reflected in his advertising. There is a vast difference between taste and personal tastes. Neither will I enter into a discussion of the advantages and disadvantages of the use of the personal pronoun, the picture of the founder of the business, or the exaggerated drawing of ''our enormous plant'' in advertising. 30 ANALYSIS OF THE PRODUCT Simply .ask yourself how much of all this is personal conceit and how much is advertising. There are occasions when the signature or even the photo- graph of the one who takes the responsibility for a business is necessary in an advertisement. A man should not be ashamed to have his own name connected with the source of his bread and butter. People like to feel that they are dealing with a human being, not a great machine. Public service corporations are beginning to learn this prin- ciple. The founder of a great public service corporation who was known to all his fellow citizens as "Tom" died several yea-s ago. For about three years all the news in regard to that cor- poration emanated from "the company." The name of the new president was not mentioned. It was only a short time before the claim department noticed a surprising increase in personal injury cases and "kicks" of all kinds. Now all publicity goes out over the signature of the new president or as emanating from him and complaints are said to have greatly decreased. To refuse to allow one's name to be used in one's advertising when it is necessary, is as much an evidence of personal conceit as it is to flaunt it in the face of the world on the slightest possible provocation. d. Is the sales force ^vell organized? This is a vital question to consider before advertising. A manufacturer recently spent $5,000 in one month in a carefully planned local advertising campaign. When the campaign was being planned, the advertising agent on asking this question was told that the manufacturer had six well-trained city salesmen familiar with the trade and constantly at work. This number seemed sufficient and the agent proceeded with the advertising. The advertising manager reported that he had carefully outlined the campaign to the salesmen and each understood his part. Before the campaign had lasted a week the agent became alarmed at the meager results secured by the salesmen. On in- vestigation he found that the sales force of six had dwindled to two, that all of the salesmen were working on a flat commission basis and, instead of being well-drilled efficient men, were what might be called transient salesmen. The public was being famil- SL'PPLY 31 iarized with the product but no one was selling the dealers. Two letters had been sent to dealers but no response had been re- ceived. AYhat was to be done? Money was being spent at the rate of $200 a day to raise the plums yet there was no force to pick them. There were nearly 2,000 dealers to see in three weeks although the agent had been led to believe that they had all been seen before the campaign commenced. In desperation the agent, stepping in and assuming charge, put a corp of girls on the tele- phones and instructed them to call up the 2,000 dealers. This was. of course, a desperate and probably unheard-of way of attempt- ing to obtain distribution, but as there was no- time then to train new salesmen, as the girls' voices were more pleasant and less expensive than the men's, and as they could be trained for tele- phone solicitations in short order, it seemed the only way to save partially a great loss. The results were better than was thought possible. The advertising had been so effective that a mere men- tion of the proposition to the dealers secured more than a twenty per cent response. If this could be done by girls over the tele- phone, is it not reasonable to suppose that three or four times the number of orders would have been secured by a sufficiently large and well-trained force of salesmen? e. Will the management of the sales and manufacturing depart- ments cooperate with, or dictate to. the advertising depart- ment? Although reams have been written on this subject and it has often been the subject of debate I think all will agree that the sales and advertising departments should be married. The happily married couple wastes very little time arguing the ques- tion "who is boss.'' Bear in mind, however, that just because they live under the same roof is no sure indication that they are married. If such a condition does not exist in your organization I would suggest that you stop right now and "have it out" before you go any further in planning this advertising campaign. f. Can the management be duplicated or is it dependent upon the knowledge and ability of one individual? The day of the one-man business is passed. The greatest 32 ANALYSIS OF THE PRODUCT fruits of your advertising may become ripe the day or the year that the one who "keeps it all in his head" has left. I know a young man who holds in his head the secret of combining metals in a certain way to produce a certain result. A great business rests on this formula and that man's memory and skill. That business carries insurance on this man's life. If it should attempt to advertise, it should carry additional insur- ance to the extent of the value of all of its advertising contracts, for the supply will stop the week that that formula is lost. There is a business now being financed by a man eighty- three years old and his wife who is sixty- four. This business is also built on a formula but the formula is deposited in a trust company for the stockholders. Nevertheless this couple was unable to sell any of its stock until they had taken in with them a young man and started to build up an organization. 5. CAPITAL The element of capital comes last in the sources of supply but it is usually the first to be considered. In another chapter we will discuss this element again when we consider the amount of money you can afford to spend for your advertising. There are two questions which must be asked here, however. a. What per cent of increase in the present demand zvill the capital accommodate? You can not afford to get under way with your advertising and suddenly discover that you would have to lose control of your company in order to raise sufficient capital with which to produce enough of your product to supply the demand. This has often happened and many advertising attempts which have become known as failures have been cases where concerns have been com- pelled to stop "to catch up with their advertising." b. How much of an investment in "good will" will the present capital accommodate? In other words how much can you afford to invest in adver- tising before it brings returns? We will not discuss here the amount it will be advisable or profitable to spend (see Part V). SUPPLY 33 The question is "how much could you spend if you should have to?" Usually a man's nerve gives out before his pocketbook. William Wrigley is one striking exception. It is said that he lit- erally poured one fortune after another into advertising until he obtained his present wonderful success. Advertising requires three things: time, money and intelli- gence. In the beginning advertising seldom pays. As the farmer plants his seed and waits, knowing full well that if the seed is right and the soil is right the harvest will come, so the advertiser invests his money and waits, knowing full well that if his adver- tisements are intelligently prepared and if he has chosen his market carefully time will bring the harvest. When the Russell-Miller Milling Company began to advertise Occident Flour the officers knew, as every right-thinking business man knows, if he only has the nerve to admit it, that successful advertising does two things : First, it increases the asset of ''good will" in a business. Second, by increasing the volume it ultimately decreases the proportionate selling cost. As neither the increase in good will nor the decrease in pro- portionate selling cost comes in a minute or a month, the advertising expense was neither immediately listed as an asset nor charged to selling expense. The first appropriation was for -$600,000, one third of this to be spent annually for three consecutive years. "Our expenditure for advertising," H. S. Helm, the general manager, told me the other day, "was undertaken with no thought or expectation of an early harvest on the seed sown. It was considered at the start that material returns should not be conservatively looked for short of three years' continuous advertising. "The undertaking was looked upon and treated as an invest- ment in good will and insurance on business already established. It was perfectly plain that the current business, or that of the very near future, could not stand an increase in per barrel selling cost to absorb the advertising expense. We therefore made our appropriation covering a period of three years and prepared to charge the advertising out as expended from past earnings and 34 ANALYSIS OF THE PRODUCT surplus until such time as it could be charged to the current selling cost without increasing the per barrel selling cost." Six hundred thousand dollars, on an intangible and new venture, taken right out of past profits, requires some nerve, as every advertising man knows ; but the results have already proved the soundness of the theory ; for I am told that the propor- tionate selling cost has so far decreased that instead of waiting until three years were out, after the end of the second year the advertising expense was charged in as part of the current selling expense. And still the investment in "good will" because it is real good will, goes on drawing compound interest. Since the national advertising commenced, the consumption of Occident Flour has increased over five times as fast as the actual selling cost. C. QUALITY. Xow we are coming to the selling points which you will wish to use in your advertising. The advertising man is vitally interested in the quality of an article to the extent that it gives him his strongest arguments and assists in assuring permanent results to his advertising. It has been said that America is price mad and that the greatest effort of modern manufacture is to cut prices by cheapening quality. For convenience we have divided this subject into three classes: (1) the quality of the article itself, (2) the quality of the name by which your article will be known, (3) the quality of the container or package. 1. THE SUBSTANCE ITSELF a. Can it be improved upon in quality of materials or work- manship/ This question is one for the manufacturing department. It is, however, a great advantage to an advertising man to know in his secret heart that the product he is to champion before all the world can not be improved upon in quality of materials or workmanship. He need then fear no competition. It is not enough for him to feel that it is the best in the market. If that is the case the day may come when some competitor with a deeper belief in quality will enter his field. That the American people are not all price mad and that quality will be recognized if people are only told through forceful advertising where to look for it, is evidenced by the following story from an earlier chapter in the history of the great success of the makers of Occident Flour. There never has been a more vivid illustration of fierce com- petition than that furnished by the condition w r hich existed in the flour business at the beginning of the twentieth century. Ten thousand millers were crying each with a loud voice that their product was "the best, the best, the best." And yet each was competing on the same basis with all the others ; cutting prices by lowering quality. In this condition the larger mills, 36 ANALYSIS OF THE PRODUCT being able to buy wheat in the world's market, had preeminently the advantage, while the smaller mills, located in the small towns and forced to grind the high-grade local wheat, found hardly enough profit in the business to make a decent living. One of these small town milling companies was the Russell- Miller Milling Company, of North Dakota. In the spring of 1902 this company owned one little mill of only 225 barrels daily ca- pacity located at Valley City. In the spring of 1905 the Russell-Miller Milling Company opened an office in Minneapolis. It was not an unusual thing in those days for a small town mill, thoroughly convinced of the superiority of its product and with a faith in the discretion of the public, to establish a Minneapolis office and begin to raise its little voice and cry "best, best, best" with the rest. The result was usually the same. It was not long before the impudent little aspirant was caught in the "maelstrom of compe- tition," and all its breath was used up in hard swimming. Everybody predicted the same thing for these idealistic boys from North Dakota. I recall a remark which a friend of mine, familiar with the grain and milling business, made at the time: "Oh, they won't last long. They'll make a little noise and spend a lot of good money for advertising, but as soon as the big boys find these fellows the least bit bothersome they will cut prices, below cost if necessary, and drown them." Did they wish to advertise? Yes, they did. On the same day advertisements appeared in the Minneapolis street cars, on the billboards, in the newspapers, and in grocers' windows. Instead of the old phrases "best on earth" and the like there appeared the bold declaration, "Occident Flour costs more worth it." I do not know whether the feeling of pity in the minds of the grain men was increased or diminished by this declaration, but I do know that the price-cutting party which was scheduled for this town failed to come off. Simple as it was, the fact that quality is more important than price seemed to be a new idea in the milling business. Straightforward advertising with quality behind it has often cut the Gordian knot of price. The greatest danger, however, QUALITY 37 from which the good name of advertising has suffered is in cases where advertisers attempt to raise the price of their goods so that it will immediately pay for the advertising. b. Can your article advisedly be made more attractive to the ulti- mate consumer through sight, touch, taste, hearing, or smell? A customer will conceive your article through the senses. The more attractive the article to any of the senses the easier will be your sale. In some articles such as foods, toilet articles, and others, which have an intimate relation to the body, the addition of a sense will often greatly assist the sale. There is a certain substance used as a toilet article which has the property of softening hard water for the bath. The raw ma- terial from which this is made is not attractive to sight, but the manufacturer, through his chemist, has found a way to put it up in white crystals which are attractive to both sight and touch. The raw material is odorless but the finished product is attract- ively perfumed. The reaction of the crystals in the water is not visible to the naked eye, but the chemist has succeeded in making these perfumed crystals effervesce when they strike the water, so that Her Ladyship as she prepares for her luxuriant bath can apparently both see, smell, and hear the bath powder do its 'inter- esting work. When I left college I first attempted to sell advertising spe- cialties to the hard-headed small town merchants of Illinois. There was one article in my line of calendars which did not sell. It was a hideous looking thing, a picture of an ugly vase filled with red roses. I hated the sight of it, but it was up to me to make that piece sell. One day I sprinkled a little rose perfume on the back of the pad on which the picture was mounted. It 'was a trick, of course, but I was surprised to find how rapidly that calendar design sold after that. Few seemed to detect the odor ; yet even to me those roses seemed to stand out more vividly in that picture than they did before the sense of smell assisted the sense of sight. In the case of a new product the matter of attractive designing deserves careful consideration. You will probably wish often to show a picture of your product in your advertising. If it is so 38 ANALYSIS OF THE PRODUCT designed as to make you ashamed of it, you may rest assured that your customers. will be ashamed of you and they may completely refuse to buy. A few years ago the British Government appointed a commis- sion to investigate German merchandise, its manufacture and its distribution, to determine if possible why this merchandise was making such headway in England against articles manufactured in that country. After a most exhaustive investigation the com- mission reported that neither the materials nor the workmanship of the Germans was superior to the British, nor were the Ger- mans able to sell at a lower price; but that the quality of the designs for that merchandise and its packages were so superior that the articles themselves were so much more attractive to the British themselves that the German articles seemed to be worth more than those of their own manufacturer. I have often had a desire to design a really attractive coal stove. Can you imagine one thing of American manufacture more hideous (with its heavy, gaudy over-ornamentation) than the coal stove? But in this analysis we must remember that the question is "can the article advisedly be made more attractive to the ultimate consumer? Everyone is said to have a fundamental appreciation of art. Most people would recognize a good-looking stove from a hideous stove. There are, however, associations and sentiments connected with the stove, the central thing of interest in the home, which might make it very dangerous to change its appearance. Senti- ment is a deeper emotion than the appreciation of art. There are incidents of the changing of the designs of staple and long-estab- lished commodities which have not been successful. On the other hand, if I were designing an incinerator, which happened to be my privilege a few months ago (the owners of this invention did not go to an engineer nor yet to an artist, but to an advertising man because they wanted selling points built into the very appearance of their product), I would not attempt to design an incinerator like a stove just because it is made to burn things. QUALITY 39 c. Can it be made more convenient for any of its uses, in sub- stance, in size, or in shape? Follow your article through all of the stages of its use and see if it always seems to fit. It might be easier for the grocer to change the width of his shelves to accommodate your product but the chances are he will not do it and if after a time he can find no place for it he may not order any more. If you sell soap, get into the tub and play with it for a while. One of the greatest selling points for Ivory soap has been "It floats." The little fairy prefers "the oval cake that fits your hand." These are all selling points well worth considering. Xo one knows how much George P. Rowell, the pioneer ad- vertising agent, added to the consumption of Ripans when in 1891 he introduced the tablet (or as he trade-marked it "tabule") form. Before that day a person had to wait until arriving home before taking his medicine, or was forced to carry a bottle around with him. I understand that lately many have almost entirely discon- tinued the use of Sapolio because they find scouring powders more convenient than the cake which crumbles so readily in wa- ter. Sapolio is supposed to be used dry, but domestics are said always to leave it in the water. It would seem that there is room for argument on this point. But what is the use of arguing ? \Yhy can not one more be added to the Sapolio family? 2. THE NAME It has been said that the Royal Baking Powder Company has been offered $5,000,000 a million dollars a letter for the right to use the name Royal in connection with baking powder. The modern answer to Shakespeare's immortal question, '"What's in a name?" would probably be "years of persistent advertising and the reputation for square dealing which is behind that advertising." There are other products branded Royal. There is hardly a staple which has not one such brand. Every one of these is not worth $5,000,000. Nevertheless, the advantage of a short, distinctive, easy-to-remember and easy-to-be-pro- nounced name for a product is recognized by all advertisers. \Yhile the reputation of a concern which continually changes its name or the name of its product is often considered as doubt- 40 ANALYSIS OF THE PRODUCT ful as that of the progressive grass widow, there are often times when the change of name is quite necessary and is in fact a dis- tinct advantage. When Hugh Chalmers bought the Detroit factory of the Thomas Motor Car Company he wished to show that a change had been made in the management and at the same time to take advantage of the reputation whkh had been obtained for the Thomas name. The old name was the "Thomas-Detroit." The next year the product became known as the "Chalmers-Detroit." The following year the product established itself as the "Chal- a. Must the consumer call for your product by one or more names? A few years ago, before manufacturers gave much thought to the subject, it was quite customary, when a new product was put on the market, to choose a name which had no relation to other names in the same line. As years went by each had built up a clientele on its own merits which might be completely lost if the names were changed. It has been the task of modern advertising to unravel some of these snarled threads before it can weave its own fabric and in many cases this has been done without cutting a single strand. Men who have accomplished these tasks have become known as giants in the twentieth century advertising field. Sometimes these men have confronted literally hundreds of jobbbers' or dealers' brands as did George Coleman when he began to popularize the general name "McElwin Shoe." Others have found the multiplicity to come from a combina- tion of factories such as the conditions met with by O. C. Harn in the National Lead Company, and Hubbs in the United States Tire Company. It often takes years to untangle such snarls. Patience and educational advertising must be employed to the last degree. Mr. Harn solved his problem by establishing the moving char- acter trade-mark of the now famous Dutch Boy painter. He used this new character with the old trade-marks until all became ac- customed to this association. In national advertising he used all of the 32 brands with the boy at one time and for local advertis- QUALITY 41 ing he used the one or more brands which had been established in that territory. Old customers still called for the old familiar brands, and got them, but were given to understand that the old brand was also a Dutch Boy National brand. As the personality of the Dutch Boy was stronger and more easily remembered than some of the other names old customers in time began to call for the Dutch Boy National Paint. The change was made by the customers themselves and apparently at their own will and in no way interrupting the pulling power of the old brand names. The problem of the United States Tire Company was the most difficult with the jobbers for whom well-recognized brands had been established and to which they clung like grim death. To their surprise Mr. Hubbs did not even intimate that they discon- tinue their old brand names but showed them the advantage to themselves in putting in all of their local advertising "these tires are made for us by the United States Tire Company," so that they might take advantage of the national advertising for the United States Tire. Most of the jobbers saw the wisdom of this sugges- tion and thus the one name began to be established. b. Can the name be protected as a trade-mark? Some advertisers seem to find a name for their product which is so distinctive that they prefer to risk the chance of not being able to protect it as a trade-mark. The name ''HoleprooP is such a one an excellent name from all standpoints save one : it is held to be descriptive and can not be protected. If the name of your product can not be protected, you may find yourself in hot water most of the time. Xames which are held by the courts to be unprotectable are those which contain : 1. Any arrangement of words or devices descriptive of the goods with which they are used or of the character or quality of the goods. 2. Any misreputation of the quality, composition, character, or origin of the product. 3. Anything which resembles a name or a mark previously used for the same class of merchandise. 4. A geographical name or term, except as used 42 ANALYSIS OF THE PRODUCT a. In a fanciful way deceptive to no one (such as "Vienna'' for bread). b. For so long a time in connection with a certain product, commodity, or concern as to have a secondary mean- ing (such as "Waltham" and "Elgin'' for watches and "Kalamazoo" for stoves). c. In connection with the name of the manufacturer doing business in that place (such as "Stoddard-Dayton"). 5. The insignia, coat of arms, or flag of the United States, a sovereign state, a city, a foreign country, a fraternal society, or the American National Red Cross Society. 6. Merely the name of an individual, firm, corporation, or association unless it is in some distinctive design such as a signature or is accompanied by a portrait. 7. Anything against public policy, decency, or morals. 8. A portrait of a living individual unless by that person's consent, or, if a minor, by consent of his or her legal guardian. c. Is it distinctive? There are over 10,000 registered names for brands of flour alone. All of the common names have been preempted long ago. There are said to be nearly 200 Star brands of one kind or another in the market to-day. There are over 180 Standards, over 50 O.K.'s and 44 Twentieth Centuries. From the standpoint of registration as well as the standpoint of distinction it is often better to choose a proper name, a fanciful name, or a name having its derivatives in another language, such as Kodak, Phonograph, Cresco, and Crex. Uneeda is in a class by itself and any combina- tion of letters to make words, even if it can be registered, seems to be considered by the general public as an attempt at imitation. I am told that in the South when the negroes wish to purchase Takoma biscuits they say, "Gimme dat Uneeda biscuit in d' red package." A fanciful or new name on the other hand strikes the public so unfamiliarly as to require a distinct effort to remember and pronounce. Some of the best names are those which through other associations have become familiar and and not exactly de- scriptive but may at least be called relevant. QUALITY 43 d. Does it relate to the product, its uses, or associations in sound or in meaning? Some names in this class are : "Sunshine" (for biscuits "made in sunshine factories"), "Gold Dust" (of a golden colored wash- ing powder), "Ivory" (for soap of that color), "White Vulcan" (for white enameled incinerators), and "Cream of Wheat" (the well-known creamy looking cereal). This subject of relevancy will be taken up in other chapters and it will be shown how some advertisers have used the power of suggestion to paint pictures of their products in our minds not only with words but with colors and even with the style of the type used. e. Is it easy or hard to pronounce? Mr. Edwards S. Rogers, lecturer on the Law of Trade-Marks at the University of Michigan, tells a story of a housewife who, when asked in court how she usually called for a certain article, replied, "If I see it, I point to it; but if I don't see it, even if I have taken a special trip to purchase it, I don't ask for it. I never heard how to pronounce it and I don't want anyone to think I'm a fool." To its manufacturer the name of this product probably sounds very easy to pronounce. From this it would seem that an advertiser has no right to expect a person to inquire the correct pronunciation of the name of his product. Xo one will ever know how much business some concerns lose because the names of their products are not easy to pronounce. f. Is it short or long? How much easier it is to say Tiffany's than Hart Schaffner and Marx. An example of the shortening of a firm name is the now famous B.V.D. The new custom when the firm has but one product seems to be to have the name of the firm the same as the name of the product. It is asking the public a good deal more to remember "Munsingwear" made by the Northwestern Knitting Company, than it is to remember Cream of Wheat made by the Cream of Wheat Company. 3. THE CONTAINER, COVER, OR PACKAGE. The questions we have asked with regard to the quality of the 44 ANALYSIS OF THE PRODUCT substance will also apply in most cases to the container or pack- age. With some articles such as foods, drugs, and toilet prepara- tions the package in the mind of the consumer takes on the nature of the article itself. The public often forms its likes and dislikes for a package absolutely regardless of the substance itself. One of the most interesting advertising wars of modern times is that which is being waged between Colgate and Williams on shaving soaps. It would take an expert to distinguish the differ- ence in quality (if there is any) between the substances them- selves. The contest rests entirely upon the attractiveness and the convenience of the packages. One gets out a new and more convenient package and the public swings that way. Then the other comes into the field with "we couldn't improve the soap so we improved the package" and the trade swings back again. a. Is it distinctive? So many packages look as though they came out of the same mill good packages, nice looking and all that, but nothing about them which can be remembered over night. The effect your package will have on the grocers', the drug- gists', or the shoe-dealers' shelves can not be determined by ex- amining a single design on your own desk. It is surprising how many optical illusions may occur in making patterns as it were of cartons. If you do not take advantage of these optical illusions they may take advantage of you. Printers' Ink tells of the experi- ence of Mrs. Charles B. Knox, sole owner of Knox Sparkling Gelatine, who changed the design of the package of that product in August, 1913, because she found that when the old packages were placed in pyramids an optical illusion occurred which made each carton seem to be only half as large as it really was. While it is sometimes considered dangerous to change the design of a package the Colgate- Williams war would seem to prove that with sufficient advertising behind it, a change is at other times a talking point and a distinct advantage. Package designs are often changed by slow degrees in the same way that the Thomas-Detroit name was changed to Chal- mers, thus always giving the customer something old by which the package may be recognized, while adding a relief to sore eyes in a new color harmony or a new and more distinctive style of design. QUALITY 45 b. Is it convenient for all of the purposes to which it may be put? The package was what made Shaker Salt a household neces- sity. When the Ammo can was substituted for the Ammonia bot- tle every housewife in the country saw the advantage. The above are examples of more obvious uses, a container with a stopper from which salt can be easily poured, and a can of .unevaporable ammonia in solid form, to replace a bottle. The Murphy Varnish people discovered that boys were using their boxes as bodies for wagons. Realizing that, if this trait was en- couraged they might make moving advertisements as well as friends of the younger generation, they supplied wooden wheels. Women use muslin flour sacks for dish towels and the miller who wishes to change to the paper sack must estimate the num- ber of "dish towel customers" he will lose thereby. c. A? it in any way related to the name or to the article, to its uses or claims in color, in shape, or in style of type? Again we come to the subject of relevancy. Most Sunshine biscuits are put up in packages with a predominance of yellow- sunshine color. The most distinctive feature of Log Cabin Maple Syrup is the tin can retainer shaped like a log cabin. Most of Colgate's packages seem to be designed with this principle in mind. Every color tint used seems to suggest cleanli- ness and perfumed elegance. Even the style of the lettering seems to express the same thought. This appears to be the height of the art of suggestion. And why should it not be? We have our "warm" and our "cold" colors. Why should they not be made to work for the furnace advertiser or one who sells ice cream ? You have probably heard women exclaim, "that package looks good enough to eat." Did you ever stop to think what it may mean to a producer of a food, to have his package not look good enough to eat? Suppose it is so covered with dark greens and blues and black that it gives the suggestion of dirtiness and poison. Rather let us use those colors which appeal to the gastric juices when we are designing pack- ages for food products light lettuce greens or rich crusty browns. In his Psychology and Industrial Efficiency Dr. Hugo Miin- 46 ANALYSIS OF THE PRODUCT sterberg tells of an interesting example of the use and misuse of this principle. "A certain kind of chocolate was sold under twelve different labels. One of them was highly successful in the whole country and one other had made the same article entirely unsalable. The other ten could be graded between these two extremes. In all twelve cases the covers were decorated with pictures of women with a scenic background. "As long as aesthetic values were considered all were on nearly the same level, and aesthetically skilled observers repeated- ly expressed their preference for some of the unsuccessful labels. But as soon as an internal relation was formed betzveen the labels and the chocolates, in one case a mental harmony resulted which had strong suggestive power, in the other cases a certain unrest and inner disturbance which necessarily had an inhibiting influ- .ence. The label which was unsuccessful with the sweets would perhaps have been eminently successful for tobacco." When we consider that in all probability only the change from a tobacco brown to a chocolate brown stood between a success and the failure of that product, we see that the matter of rele- vancy is well worth considering. D. PRICES After quality comes price. There are some who seem to think that price is the greatest selling point in all advertising. \Ye will take it for granted that you are* conducting your business under the one-price-system one price to all. There are a few who attempt through advertising to establish an inquiry at a certain price and then as follow-up pretend to give the particular inquirer a special advantage and cut prices until "the sucker bites." This method is used more frequently by those who attempt to sell "fortunes/' "obesity cures/' and other such fakes through the mail. Thanks to the Printers' Ink Law, the Yigi lance Committees of the Associated Advertising Clubs of America, and the postal authorities such rogues are fast disap- pearing from the field of advertising. A reduced price is a great incentive to buying. Every reduc- tion, of course, brings new buyers into your field. Most adver- tisers agree, however, that a reduction should always be accompa- nied by a reason and that the reason should be a truthful one based on the conditions of the seller rather than the conditions of the buyer. The old way was to say, "because you are a good fel- low you can have this for so and so. Don't tell anybody else." The modern way is, "because I must move this stock before the season closes, I must sell at so and so or take a greater loss. Tell everybody." Since A. T. Stewart, in the early part of the nineteenth cen- tury, introduced the one-price system, the progress of merchan- dising has advanced by leaps and bounds. Nearly all are now agreed on this principle. There are, however, two great questions of price which affect the success of your advertising. These two questions are closely related. One is "price maintenance'' and the other is known as "the quantity discount." 1. t)o You ALLOW QUANTITY DISCOUNTS? Up to within recent years the giving of large discounts for orders in large quantities was considered the wisest way to mer- chandise. Costs are lower both for manufacturing and distrib- 48 ANALYSIS OF THE PRODUCT uting in large quantities. Dealers often order more and push goods harder in order to take advantage of such discounts. In fact, only the other day the salesmanager of a great national busi- ness told me that the best way he has found to sell his goods is to load the dealers up to such a point that they have to unload. It has been found, however, that in lines which depend in part upon their freshness for their quality, dealers will so over- stock to take advantage of quantity discounts that goods become stale before they are sold. Furthermore such discounts give the large buyers an oppor- tunity to cut prices and to squeeze out the small dealers. In the drug trade the quantity discounts are so large that many retail stores are combining for the purpose of taking advantage of these discounts, and herald themselves as "cut price stores." When artificial price-cutting starts, there is a danger of breaking down of your framework of distribution. For this reason such great successful manufacturers as the Kellogg Toasted Corn Flake Company and the Wm. Wrigley, Jr. Company have jobbers', dealers', and consumers' prices which are the same in any quantity. While R. H. Ingersoll & Brothers, watch-makers, sell Inger- soll $1 watches under the old method of quantity discounts, their newer products, their higher priced watches, are sold without quantity discounts. There are many arguments on both sides. It is for you to determine how much the question may affect you in your business. 2. ARE PRICES TO THE CONSUMERS MAINTAINED OR CUT? If big stores cut the price of your article to the consumer you will probably find the smaller stores which are unable to enter into competition discontinuing your line. Thus your entire distribu- tion system may crumble. There is now considerable data both pro and con on the sub- ject. If you should decide that you should maintain the retail price of your article, the question is how can you do it ? While there is a law in the state of New Jersey protecting manufacturers against this evil, and there will soon be similar laws in other states, the PRICES 49 best methods of protecting prices of advertised goods seem to come through moral suasion. The most natural method of maintaining such prices is to re- fuse again to sell to those merchants who persist in cutting prices. While the Supreme Court rules that you can not hold such a club over your trade it is usually not a hard thing to discontinue busi- ness relations. Often the credit of the dealer is found to be un- satisfactory (it usually is unsatisfactory anyway). If you sell but one dealer in a town or through your own ex- clusive agencies, your problem is easier. All you have to do is to transfer the agency. The American Fair Play League is now working toward a better understanding on this most important subject and it is to be hoped that more favorable legislation will result. 3. How DO YOUR PRICES COMPARE WITH COMPETITION IN THE FOLLOWING? a. To jobbers. b. To retailers. c. To consumers. Xo particular comment is necessarv to impress one with the vital importance of this question. Prices, like water, must find a level sometime. Quality alone is an excuse for higher prices than those of one's competitor. Some of the greatest failures of advertised goods have been due to the mistaken notion that one can make advertising pay from the start by tacking the cost of the advertising on to the prices. If your goods do not have quality, don't advertise. Re- member the Cremo Cigars. Advertising, by increasing volume, ultimately reduces the cost of both manufacturing and selling each unit. It is said that no concern to-day can afford to introduce a cake of soap of the size and quality of Ivory. This new company would lose money on every cake for years until it became able to manufacture in sufficiently large quantities to compete with Ivory. This is what continuous advertising, backed by increased quality, will do for a product. If you delay advertising now, you may find that some competitor has entered "the game" and has progressed so far in the confidence of the public and in cutting costs by increasing volume that you never can catch up with him. E. PROFITS How do your profits compare with competition in the following? 1. For the manufacturer. 2. For the jobber. 3. For the retailer. In many lines the idea of "forcing the dealer" still prevails. Some dealers are quite antagonistic to all advertising for this rea- son. Too high a profit invites the cutting of prices ; too low a profit puts the dealer out of business. A few years ago a manufacturer of a breakfast food who gave in each package a silver spoon decided to discontinue the spoon. The spoon cost just about the same as the food and the manu- facturer did not know whether he was selling spoons or break- fast food. His dealers were making 21 per cent. Grocers esti- mate that it costs them 17 per cent to do business. The net profit the grocers made in his article was only 4 per cent. He found that if he eliminated the spoons he could afford to give the dealer 28 per cent and still make the profit he made the year before even if he sold 35 per cent less than the year before. He expected to lose some business when he eliminated the spoon. The question was how much? He could afford to lose 35 per cent. To his surprise, the dealers seemed so much to appreciate the additional profit that, instead of losing about 30 per cent of the trade as was anticipated, the business without the spoon showed a gain over the year before of 5 per cent. The Commercial Research Division of the Curtis Publishing Company reports that 45 per cent of the jobbers and 54 per cent of the dealers who are opposed to advertised articles base their objection on the ground' that their profit on advertised goods is too low. No concern has a right to cut the percentage of profit to the jobber or the dealer when it begins to advertise. But as total profit depends on the "turn over," if a manufacturer, after years of advertising, can prove that he has increased a dealer's total profit and, in order to increase it still more, wishes to cut his own prices to jobbers and dealers as well as dealers' prices to PRICES 51 consumers, he certainly has a right to do so. This is a very dan- gerous undertaking, however, and should not be considered before a complete investigation of trade conditions. Before we take up the next subject, your markets, ask your- self if there are not some other questions which you may wish to have answered in relation to the demand, the supply, the qual- ity, the prices, or the profits of your product. When these ques- tions are satisfactorily answered, we shall be prepared to enter the market with eyes open and steps alert, confident of success and fearing no enemy. Httteratg GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART II. ANALYSIS OF THE MARKETS BY MAC MARTIN BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. 9. FEBRUARY 1914 Entered at the Poat-Office Minneapolis as second -class matter Minneapolis, Minn. 0f GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART II. ANALYSIS OF THE MARKETS BY MAC MARTIN PROFESSORIAL LECTURER IN ADVERTISING, PRESIDENT MINNEAPOLIS ADVERTISING FORUM, MEMBER EXECUTIVE COMMITTEE ASSOCIATED ADVERTISING CLUBS OF AMERICA BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. 9. FEBRUARY 1914 Entered at the Post-Office Minneapolis as second-class matter Minneapolis, Minn. COPYRIGHT 1914 THE UNIVERSITY OF MINNESOTA PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART II. ANALYSIS OF THE MARKETS This analysis applies to the product analyzed in Part I. Each member of the class has chosen a product with which he is familiar and is applying the experience of others in determining the most profitable policies and methods of procedure in selling the particular product or group of products which he has chosen. After reading the comments under each head contained in the body of this pamphlet and applying them, the references, and his own experiences to the particular case, the reader is expected to answer all questions which apply to his product, to make mar- ginal and interlinear notes, and to add other questions and refer- ences which seem to apply. Name of Product and Geographical Extent of Present Market A. GEOGRAPHICAL 1. Is your field international? national? territorial? or local? pp. 58-59. Mahin Advertising Data Book, 1913-1914, pp. 420-22. United States Daily Consular Reports. 2. Is your field in cities ? small towns ? , 63 54 ANALYSIS OF THE MARKETS or in rural districts ? pp. 59-60. Mahin Advertising Data Book, 1913-1914, pp. 414-20, 438. Curtis Publishing Co., Selling Forces, pp. 263-74. B. CLIMATIC Reports Weather Bureau, United States Department of Agriculture. 1. Is your greater field in warm? or cold climates? p. 61. 2. Is purchase more often made in sunshine ? or in rain? p. 61. 3. When do your selling seasons commence and what is the length of each season? pp. 61-62. (If you have both dealer and consumer seasons, list each separately) C. SEASONAL At what time and under what conditions does an individual come into your market? pp. 63-64. Any good Clipping Bureau. Dodge Lists. D. SOCIAL 1. Is purchase more often made by men ? by women ? or by children ? p. 66. OUTLINE 55 Hollingworth, Harry L,, Advertising and Selling, pp. 287- 305. Strong, Edward K., Jr., Relative Merits of Advertisement, pp. 78-81. Gale, Harlow, Psychological Studies, pp. 67-9. Curtis Publishing Co., Selling Forces, pp. 229-62. Mahin Advertising Data Book, 1913-1914. pp. 403-8, 435. 2. Is purchase made by rich? middle-class ? or poor ? p. 66. Mahin Advertising Data Book, 1913-1914, pp. 408-14, 423-24, 448-68. 3. Is purchase made by married? or single? : P. 66. Reports of marriage licenses issued may be obtained from any newspaper, from clerks of District Courts, or from any good Clipping Bureau. 4. Is purchase made by young? middle-aged? or old ? p. 67. Mahin Advertising Data Book, 1913-1914, p. 439. E. FINANCIAL 1. Are "times good" or "bad" for the sale of your product ? p. 68. R. G. Dun & Co., Monthly Reports. Bradstreet Mercantile Agency, Monthly Reports. 2. Are transportation charges low or high for your product ? p. 68. F. COMPETITIVE Bradstreet Mercantile Agency, Special Reports. R. G. Dun & Co., Special Reports. 1. How many competitors have you? p. 69. R. G. Dun & Co., Lists. R. L. Polk Co., Lists. 56 ANALYSIS OF THE MARKETS 2. How long has each been established and how long has each been advertising? p. 70. 3. What is the present total business of each on this product ? p. 70. Mahin Advertising Data Book, 1913-1914, pp. 424-26-33-34. 4. How much increase or decrease has each experienced dur- ing a period of years up to the present time?, .pp. 70-71. 5. What territory does each cover at present? p. 71. 6. What are the policies of each in regard to a. Sales p. 71. b. Advertising p. 72. Any national clipping bureau. c. Credits pp. 72-73. G. DISTRIBUTIVE Cherington, Paul Terry, Advertising as a Business Force, pp. 52-53. Mahin Advertising Data Book, 1913-1914, pp. 477-80. R. L. Polk & Co., Lists. R. G. Dun & Co., Lists. OUTLINE 57 1. How many purchasers have you at present among jobbers? dealers ? consumers ? P- 74. 2. How many possible purchasers of your product are there among jobbers ? dealers ? consumers ? pp. 74-75. PART II. ANALYSIS OF THE MARKETS In Part I you answered the question, what have you to adver- tise? In this part, the analysis of the market, we shall take up your advertising from the standpoint of where, when, and to whom? In the days of wait-for-the-trade-to-come-to-you a market meant nothing more than a central place where a vender of mer- chandise would go and sit. If a certain market was deemed profitable or competitors were found in that locality, merchants would go there or would send a salesman "to see what he could do." In the days of modern advertising it is necessary for a mer- chant to study his markets in advance. This is one lesson that modern advertising has of necessity added to merchandising. As we study the market, keep in mind your answers to the questions about your product. The answers which you make here in regard to your market will also assist you in choosing your advertising media, for nowa- days no sooner does a market appear than up springs an adver- tising medium, or a flock of media, claiming to be able to carry your message to that market. Remember also that markets are constantly changing. What may have been your most profitable market yesterday may not be your most profitable market to-day. New customs, new habits, and new inventions make new markets. A. GEOGRAPHICAL 1. Is YOUR FIELD INTERNATIONAL, NATIONAL, TERRITORIAL, OR LOCAL? The Industrial Commissioner of a large city once told me that he estimated that fully ninety per cent of the manufacturing plants of this country are not situated efficiently in relation to their markets. 58 GEOGRAPHICAL 59 A factory springs up in a certain place because capital is avail- able at that place, because there appears to be some immediate local demand, or because some plant manufacturing the same product is already situated at that place; and no reckoning is taken of the possible extent of the true market. There is a great manufacturing institution in Madison, Wis- consin, which was established in 1886. At the Chicago World's Fair in 1903 the president of the company began to study mar- kets and discovered that his market, instead of being confined to a territory covering a few states, was international, and that his greatest market was in Europe and Asia. To-day the greater proportion of his product is sold on the continent of Europe and his advertising is prepared in all civilized languages. It is inter- esting to note that a few years ago two competitors came and squatted right down beside him so that to-day Madison, Wiscon- sin, situated away from the market and the sources of raw ma- terial as well, is the center of the world for the manufacturing of that product. Some products, however, which seem to have national or even international possibilities are found, after a study of the customs of the people in other parts of the country, to have markets confined only to a restricted territory. The United States Daily Consular Reports are said to be more complete on the subject of markets than those furnished by any other country in the world. These are indexed and avail- able at most public libraries, or your congressman will have them sent to you free of charge. In this country most markets radiate around cities and in most large cities there are Boards of Trade, Chambers of Commerce, Commercial Clubs or Associations of Commerce, one of whose offices it is to impart up-to-date information on conditions in local markets. The advertising departments of some newspapers will furnish you this information. 2. Is YOUR FIELD IN CITIES, SMALL Towxs, OR ix RURAL DIS- TRICTS? The criticism has often been made that flour advertising is misplaced when it is directed to the larger cities, as the women 60 ANALYSIS OF THE MARKETS in the larger cities do not bake their own bread. They either buy bakers' bread or it is baked by servants. An investigation made by the National Association of Master Bakers shows that in the city of Chicago sixty-five per cent of the families use bakers' bread exclusively. Those who wish to sell space in farm journals are sure that millers will find their greatest field in the country, while investi- gations made by millers tend to show that the average farmer uses more vegetables and therefore less flour than the resident of the small town. It is the province of the advertising man to determine his most profitable field and to study the habits, customs, likes, and dislikes of the people in that field so that he may not only know the people he is talking to, but so that he may talk to them in their own language. B. CLIMATIC Most advertisers realize how much the climate and the weather affect sales, but few seem to know how to take advan- tage of these conditions and plan for them in advance. The facilities of the great United States Weather Bureau are at the disposal of those advertisers who know how to take ad- vantage of them. Most advertising managers of department stores keep in close touch with these reports. Bakers are said to rely upon weather reports to determine each day the amount of bread that will be consumed. If it is to be a cold or rainy day, a greater proportion of housewives will probably bake their own bread. If it is to be a hot day, they may not care to make the exertion and if it is to be a beautiful, sunny day, they will probably prepare to go calling or shopping. After years of experience bakers are said to gauge quite ac- curately the day's demand in this way. 1. Is YOUR GREATER FIELD ix WARM OR COLD CLIMATES? Suppose you were selling ice-skates, furs, mufflers, sleds, sleigh-bells, sun helmets, fans, seeds or bulbs. A careful study of climatic conditions will show you the centers of your most natural markets. 2. Is PURCHASE MORE OFTEN MADE ix SUXSHIXE OR ix THE RAIX? If your article happens to be rubbers, rubber coats, or um- brellas, a study of the average rainfall in different sections may assist in determining your most profitable markets. 3. WHEX DO YOUR SELLIXG SEASOXS COMMENCE AXD WHAT is THE LEXGTH OF EACH SEASOX ? You will remember that you have already considered the ad- visability of extending the length of your seasons. If you are selling straw hats, underwear, or awnings you will find that climatic conditions and unswerving customs will arbitrarily fix your seasons for you and you must time your advertising accord- 61 62 ANALYSIS OF THE MARKETS ingly. It must be borne in mind, however, that seasons come much earlier in some parts of the country than in others. Spring clothing is sold in New Orleans during March, while in Duluth May is often early. There are two seasons for selling underwear. The summer season commences in some sections as early as May and rarely lasts longer than eight weeks. The winter season commences in November and rarely lasts longer than six weeks. The adver- tising of such concerns is timed to commence about a month in advance of each season so that one has begun to think of that particular brand of underwear before nature's climatic conditions make the suggestion a command. The season for wearing straw hats is supposed by custom to commence promptly on June the first and to end, as promptly, on September the first. But this is not the buying season'. If every- one marched out on June first with a new straw hat, that day would be the only day throughout all of the year that there would be any sale for straw hats unless one's hat wore out or blew away before September first. As a matter of fact the season lasts about three weeks and lucky indeed is the dealer who by cutting prices many times is able to dispose of the rest of his stock to those whose hats wear out before September first. If you were advertising straw hats you would probably want your advertisements ready and in the hands of the local news- papers by the first of May. For those who sell through dealers there are, of course, two classes of season, the dealers' seasons and the consumers' sea- sons. With some products, namely, automobiles, these seasons are practically the same. With others, as wearing apparel, there may be six months between the time the dealers order and the consumers' seasons. The advertising man knows this and pre- pares his literature accordingly. He usually prepares his "dealer literature" and his "consumer literature" for one year's work at the same time so that he may show the dealers reproductions of the "consumer literature" which is to appear later. In these days the dealer, after satisfying himself as to the quality of the goods, next wishes to satisfy himself as to the quality and the quantity of the advertising which will assist in creating the de- mand for those goods. C. SEASONAL AT WHAT TIME OR UNDER WHAT CIRCUMSTANCES DOES AN INDIVIDUAL COME INTO YOUR MARKET? There is another way of subdividing the buying season which may be of even greater advantage to the advertising man, but which may require considerable imagination to discover. A laundryman holds the greater amount of trade in a large city. He can not count on increasing his business to any extent except under two conditions : (a) when people have not been well treated by competitors and are ready to make a change; (b) when new families move to the city. To reach his market he uses street-car cards. To reach the second class particularly, he writes letters to lists of newcomers furnished him by a clipping bureau. These letters welcome the newcomer and offer the laundryman's services. Paint manufacturers have such large lines that once a dealer has put in a line he can not well afford to change to another without a great sacrifice. A paint manufacturer has a clipping bureau furnished him with records of all fires and removals of paint dealers in his ter- ritory. This information prepares him both to secure new cus- tomers and to hold old ones. A large retail store making a specialty of boys' clothing keeps records of the birthdays of all of its boy customers and writes each boy a letter on his birthday. Marriages, wedding anniversaries, births, and birthdays are all times which call for changes and bring buyers into markets. A photographer keeps track of birthdays of children and each year writes their parents a courteous letter reminding them that their children are growing up, that another milestone is about to be passed and that the picture of the child at this age can not be obtained next year. He secures many sittings in response to this automatic system. A jeweler keeps track of wedding anniversaries and not only obtains much business through this effort, but probably prevents many family catastrophies by reminding husbands of this impor- tant, but forgetable, date. 63 64 ANALYSIS OF THE MARKETS A house furnisher puts most of his sales effort on moving time, and through transfer companies obtains names. Some great businesses are built up entirely on reports re- ceived from clipping bureaus. The Jensen Artificial Limb Company sells over $75,000 worth of artificial limbs every year to unfortunates whose names are learned through reports of accidents furnished by clipping bu- reaus. Brick manufacturers secure reports not only of the letting of all building permits, but of the contemplated building of all schools, churches, and public buildings. A careful study of any business often reveals a particular condition when many new buyers enter a market. D. SOCIAL The analysis of the classes of people who will purchase your product is probably the most interesting of all. In this connec- tion there are two elements to take into consideration : ( 1 ) who makes the purchase, and (2) who influences the purchase. I buy the typewriters for my office, but my stenographer uses them. I know from experience nothing about the merits of type- writers. The advertising I see may influence me in the purchase, but my judgment is formed by my stenographer's say so. I may think I am buying a typewriter (and it is well for both the sales- man and the advertisement to flatter me into that belief), but it is not really I who buys it. It is my stenographer who makes that purchase and it is perhaps more important "to sell her" than "to sell me." Remember that in this analysis we are determining not only the extent of your advertising, but through a study of geography and people are determining your most profitable sales appeal. Many advertising managers deem it advisable to visit differ- ent territories in which their product is sold so that they may get acquainted with the classes of people to whom they speak. It is told of Edward Bok that one day while driving through a small town he saw a lady sitting on a porch who seemed to attract his attention. There was nothing about the woman to cause any particular interest. She seemed to be plainly but neatly dressed. Her home was well kept and showed some individu- ality. She seemed to possess the average amount of intelligence and, as a little girl came through the doorway just as Mr. Bok was passing, he decided that she was a mother. That was all. Yet the impression of that woman remains still in his memory. She was the woman for whom he had been seeking. She is the typical subscriber to the Ladies' Home Journal. She is the per- sonification of the average. She is the woman for whom the Ladies' Home Journal is written. She is his absolute dictator, his supreme master ; it is her fifteen cents that makes his hun- dreds of thousands of dollars. Fortunate is the advertiser who has as clearly pictured in his mind the person to whom he intends to talk. 65 66 ANALYSIS OF THE MARKETS 1. Is PURCHASE MORE OFTEN MADE (OR MOST INFLUENCED) BY MEN, WOMEN, OR CHILDREN? The arguments by the representatives of different media have made this apparently easy question quite a hard one for some advertisers to answer. While Dr. Hollingworth's psychological experiments performed at Columbia University tend to show that women buy men's clothing eleven times more than men buy women's goods, yet in advertising men's clothing it is hardly considered safe to run the chances of insulting the intelligence of men by appealing to women alone. Most of us poor men have some sympathy for the man for whom his wife was purchasing collars. His wife did not remem- ber the size. The clerk suggested that perhaps it was thirteen and a half. The wife recognized the size at once but expressed her surprise that the clerk, who had never seen her husband, should know the size of his collar. "Oh, that is nothing, madam," replied the clerk, "thirteen and a half is the size of collars worn by most men whose wives buy their collars for them." 2. Is PURCHASE MADE BY RICH, MIDDLE-CLASS, OR POOR? Sixty-four per cent of the families of the United States live on incomes of less than $900 a year and ninety-three per cent on incomes of less than $3,000. Determine the average income of the family which can afford to use your product and you begin to get the size and extent of your market. As the average income varies in different localities, so you may find that your market varies. 3. Is PURCHASE MADE BY MARRIED OR SINGLE? While a young lady may be associated with household articles all of her life, she seldom becomes interested in the purchase of such articles until she is married and until then it is of very little use to advertise to her. Many concerns keep careful records of marriages. This is one of the principal sources of supply for insurance solicitors. SOCIAL 67 4. Is PURCHASE MADE BY YOUNG, MIDDLE-AGED, OR OLD PEOPLE? A certain magazine was thought to be an ideal medium for a certain product until it was found that the magazine was circu- lated only among old people while the article was sold only to young people. A fashionable tailor who holds the greatest portion of the wealthy trade in a certain city once told me of an interesting trait. He said, "While the greater part of my trade is old men, have you noticed that I advertise only to young men? When a young man begins to consider tailor-made clothes, he has passed the age of to-be-a-man-I-must-look-like-papa. He begins to think that the old man is a little seedy. Just at that age also a father is very proud of his son. I have found that (contrary to what might be supposed to be natural) you can not expect a young man's trade just because you hold his father's trade, but that you can often get the father's trade through the son." You may be able to divide and subdivide the classes of people in your market until you have an exact picture of the average of the group to whom you wish to talk. Perhaps you are selling only to professional men, or only to clerks, or only to skilled mechanics. Perhaps your product appeals only to mothers, per- haps only to society women. Here is an important point. A woman can be both a mother and a society woman. The ques- tion is to which side of her nature do you wish to appeal when you sell your product. At one time she may be in one group and at another time in another. As the first of his famous ten tests for an advertisement John Lee Mahin puts the question of whether or not an advertisement is institutional, that is, appears to the "group spirit" of the people to whom it is directed. E. FINANCIAL 1. ARE "TIMES GOOD'' OR "BAD" FOR THE SALE OF YOUR PRODUCT ? By studying the crop records, the banking- power, the scale of wages, and land values in any district you can secure some valuable information in relation to the purchasing power of that district. Many advertisers become easily frightened by a cry of hard times. Some of our greatest fortunes have been obtained by in- vesting when others are in panic. Articles are often developed to take advantage of "hard times." Such a case is that of Karo Corn Syrup which was introduced at the time of a financial panic and obtained immediate success because people welcomed a spread for bread that was cheaper than butter and jam. 2. ARE TRANSPORTATION CHARGES Low OR HIGH FOR YOUR PRODUCT ? In certain businesses transportation charges greatly limit markets and new factories or distributing depots have to be estab- lished before it becomes advisable to advertise in certain sections. The sale of many food products is retarded on the Pacific Coast on account of freight charges. Until 1913 Cream of Wheat sold for twenty cents on the Pacific Coast. Now this company lays down the product in any part of the United States at a uniform price. 68 F. COMPETITIVE Until recent years it was believed that competition was the mother of advertising. People said: "Why advertise when I get all the business anyway ?" Xow that we realize the power which advertising has for developing a demand and for creating good will, we no longer hear such expressions. Competition is, of course, one of the vital factors in every market. In fact, Xorris A. Brisco, author of Economics in Busi- ness, gives as his definition of a market, "the place where prices are determined by competition." Some advertisers seem to do nothing but copy their competi- tors. This policy seems to be just as disastrous as the counter policy of not regarding competition. It is always very difficult to obtain reliable information in regard to one's competitors. Most of it is mere gossip. There is a vast difference between the policy of spending one's time gossiping about one's competi- tors and spending one's money to prepare written estimates and to obtain reliable information about competitors. 1. How MANY COMPETITORS HAVE You? Investigation seems to show that the ideal market consists of at least three competitors. In an investigation of retail depart- ment stores made by the Curtis Publishing Company the story is told of a storekeeper who was doing a very satisfactory business when he had two competitors. He had an opportunity to buy one competitor out and the other failed : but to his surprise he found that when he was alone in the market, he did less business than before. He finally discovered that the reason was that most of his old trade, before buying of him, seemed to think it necessary to investigate prices in a neighboring town and, as there was a feeling of added distinction in purchasing "out of town," they usually bought in the neighboring city. Too many manufacturers are prone to sweep this question aside with the rather egotistical assertion, "we have no competi- tors." Because a concern makes an article of inferior quality or for a different price is not sufficient evidence of its not compet- ing with you in your market. 70 ANALYSIS OF THE MARKETS 2. How LONG HAS EACH BEEN ESTABLISHED AND HOW LONG HAS EACH BEEN ADVERTISING? An answer to this question may determine the amount of cumulative good will you may have to counteract. It may also give you a line on your competitors' enemies. 3. WHAT is THE PRESENT TOTAL BUSINESS OF EACH ON THIS PRODUCT? Accurate estimates rather than mere gossip on this point may determine your own share of the total business obtainable. There is hardly any necessity to elaborate on this question or its impor- tance. The moment a manufacturer begins to make investiga- tions on this point, his surprises begin. I recall an engraving company which was doing a local business, prodding its sales- men to get more business, and rinding on investigation that it was doing eighty per cent of the business of its market, leaving the remaining twenty per cent to be shared by three competitors. No wonder advertising would not increase its volume. When the condition was discovered, the market was enlarged, and both advertising and sales effort were directed to new territory. 4. How MUCH INCREASE OR DECREASE HAS EACH EXPERIENCED DURING A PERIOD OF YEARS UP TO THE PRESENT TIME? A young man with considerable capital and some experience in the wholesale glass business wished a place in which to locate. It took him a long time to decide between two locations, one in the center of a fast-growing territory but with two old and pow- erful competitors and another in a territory which was not in- creasing so rapidly but with four weak competitors. He finally cast his lot in the growing territory and did not understand the rapid growth of his business until one day he learned that the competitors whom he most feared had been standing still and had not made any increase for a number of years, while the building operations in the territory were increasing very fast. It was another case of the trade quietly slipping out of the mar- ket and the entrance of a new competitor in the field seemed to stop the practice. COMPETITIVE 71 Another concern about to advertise in a certain territory, found after investigation that competitors had for several years been doing business without any appreciable increase, and, as there was no natural demand for the product in that territory, it was decided not to make the appropriation 5. WHAT TERRITORY DOES EACH COVER AT PRESENT? Many manufacturers keep careful record of every move of their competitors, and, whenever a new territory is entered by special sales and advertising effort, attempt to "beat them to it." For this purpose are the famous ''flying squadrons" of certain national advertisers. Advertising literature is prepared applic- able to any territory. High-salaried special salesmen are ready at a moment's notice. When news reaches the advertisers that a certain sampling campaign is to be introduced by a competitor in a certain market, this literature and these men are "fired" into that territory with instructions to "stock the dealers" and other- wise to lead off the attack. A few years ago such a move usually called for a period of price cutting. To-day we more often see a "battle of advertising." 6. WHAT ARE THE POLICIES OF EACH IN REGARD TO a. Sales. I know of a concern which has a competitor which has the habit of overselling. It might seem that to avoid substitu- tion the only way to meet such competition would be to oversell also. But the sales manager, realizing the weapon he has in the argument, instructs his men to undersell rather than to oversell and to make a talking point of it. The advertising man seeing his advantage calls the attention of the public to the fact that his goods are always fresh and the policy of the competitors is' made to pay handsome returns. Salesmen on the road always try to keep track of the fre- quency of calls made by salesmen for competing houses, but this information seldom gets further than the salesman's hat unless perhaps he uses it as an excuse for not selling more goods. A sales manager, instructing his salesmen to turn in records of the dates of calls of competing salesmen, is often able to keep track of a competitor's salesmen as accurately as of his own. 72 ANALYSIS OF THE MARKETS b. Advertising. It is not a bad idea to have a scrap-book and to keep in it copies of advertisements of competitors. There is no particular advantage in referring to it daily but at the end of the year by comparing it with the records of sales you may be able to determine many things more accurately than by hear-say. In planning a campaign it is always advisable to get a list of media i-n which each competitor has advertised and how much each medium has been used. In active competition a manufac- turer always tries to reach those his competitors are reaching. Do not jump at the conclusion, however, that just because a competitor is using certain media, his investment is proving profitable. I recently planned a national campaign for a manu- facturer who at first insisted upon using every medium his prin- cipal competitor was using. I found that in many publications the competitor had contracts for but one insertion and from the nature of the product and the medium I am certain he lost money. On more thorough investigation I found that this competitor was simply a plunger and that he had no set plans or records to guide him in his advertising. I found, however, that another, a much younger and smaller competitor, kept very careful records of returns, and, on using some of the media he used when they tallied with my own judgment, I found them invariably bringing satisfactory returns. c. Credits. I once had charge of the advertising of a shoe manufacturer who had been established for over a half century. Our greatest difficulty seemed to be that we were constantly los- ing the more progressive dealers and that no amount of advertis- ing would convince our trade that the shoes we made were as up-to-date as those of a certain competitor. The superintendent examined this competitor's merchandise and I examined his ad- vertising. It certainly looked to both of us as though we had beaten him at every turn. One morning on passing the sales manager's desk I happened to overhear his conversation with a salesman who was tendering his resignation. I had some idea of this salesman's record and from the conversation I judged that he was not a man we cared to lose. An advertising man must always be alert to complaints of any kind, so I determined to take this salesman out to luncheon and to discover, if possible, his real reason for leaving. It took COMPETITIVE 73 a long time to draw it out, but finally it came. "It's no fun sell- ing this line," was his explanation. "I'm only an order taker here. Every customer is in debt to the house and he doesn't dare to buy of anyone else. Quality doesn't make any difference. Salesmanship doesn't make any difference. Even price doesn't make much difference. Your dealers don't have any choice. The only hope your dealers have is to get out of debt, to throw off your yoke, and to buy where they please. You can't make a man think you are giving him a square deal when you have him by the throat." Here then was the answer to our problem too liberal credits. That which had been fostered in the beginning as an additional accommodation or service to the trade had now come home to roost, and even forceful advertising could not prevail against it. G. DISTRIBUTIVE 1. How MANY PURCHASERS HAVE YOU AT PRESENT AMONG THE JOBBERS, THE DEALERS, THE ULTIMATE CONSUMERS? 2. How MANY POSSIBLE PURCHASERS ARE THERE AMONG THE JOBBERS, THE DEALERS, THE CONSUMERS? In other words how much of the possible distribution have you, and are you reaching- your share of purchasers ? There is a certain "school" (we might so call them), that will ask this question this way, "What are the chances of supplying the demand you create with your advertising? A woman reads your advertising, decides to buy your product, and asks her dealer for it. Are the chances one in two that her dealer will, have it, are they one in ten 1 , or one in one hundred?" Others say that the majority of people do not make the first move in demanding advertised brands. They say: "A woman goes to the grocery store to buy breakfast food. The grocer says : 'We have a number of different kinds. We have Thoma- son's Corn Flakes and we have Kellogg's Corn Flakes. You have probably seen Kellogg's advertised. Many of our customers like it.' This woman has never tried either but she feels more fami- liar with Kellogg's because she has heard of it and she has never heard of Thomason's. If, after trying it, she decides she likes Kellogg's, the next time she comes to buy she may ask for Kel- logg's but she will not ask the first time." There is still another "school" (this theory was quite preva- lent ten years ago) who say, "Force the dealer. By advertis- ing you can create such a demand that dealers will have to carry your goods." Many advertisers are perplexed with the question : "Shall I advertise to get distribution or attempt to get distribution before I begin to advertise?" The problem of distribution is a great deal like the problem of the Irishman's boots, they were so tight that he could not get them on until he had worn them a year. Wm. H. Ingersoll says in Printer's Ink, March 9, 1911, "Neither distribution nor demand can precede the other without 74 DISTRIBUTIVE 75 loss. If we are going to wait for distribution, we will wait for- ever, or nearly forever. On the other hand, if we are going to create a demand without distribution rather if we are going to try to create a demand without distribution, without advertis- ing then again we are going to delay the time that we reach the success to which we are entitled. In other words the most eco- nomical, the most efficient way, in my opinion, of handling this subject of distribution and demand is to go ahead in a moderate way and advertise and take the sales methods that are at hand and keep the demand going by getting all the distribution you can." A recent very complete investigation conducted by the Com- mercial Research Division of the Curtis Publishing Company seems to prove that, other things being equal, seventy-four per cent of the dealers in the United States favor carrying advertised brands over unadvertised brands. Furthermore, this proportion seems to be on the increase. \Yhen a new concern comes into the field or a brand changes from an unadvertised to an advertised brand, the quantity and the quality of that advertising is a great asset in increasing its distribution among the majority of dealers. For this reason the custom of advertising one's advertising is increasing. Many advertisers have their complete campaigns prepared in the form of portfolios for the salesmen to carry with them at the time of the dealer season just preceding the consumer season. These portfolios show not only the advertisements themselves and the dates they are scheduled to appear but the circulation of the dif- ferent media in each dealer's own town. Through this method the distribution is often increased and there are many cases of such advertising campaigns having thus paid for themselves be- fore a single advertisement appeared. Hnterattg of m GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART III. ANALYSIS OF THE CHANNELS OF DISTRIBUTION BY MAC MARTIN BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. It). FEBRUARY 1914 Entered at the Post-Office Minneapolis as second-class matter Minneapolis, Minn. of GENERAL EXTENSION DIVISION PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART III. ANALYSIS OF THE CHANNELS OF DISTRIBUTION BY MAC MARTIN PROFESSORIAL LECTURER IN ADVERTISING, PRESIDENT MINNEAPOLIS ADVERTISING FORUM, MEMBER EXECUTIVE COMMITTEE ASSOCIATED ADVERTISING CLUBS OF AMERICA BULLETIN OF THE UNIVERSITY OF MINNESOTA GENERAL SERIES NO. 10. FEBRUARY 1914 Entered at the Post-Office Minneapolis as second-class matter Minneapolis, Minn. COPYRIGHT 1914 THE UNIVERSITY OF MINNESOTA PLANNING AN ADVERTISING CAMPAIGN FOR A MANUFACTURER PART III. ANALYSIS OF THE CHANNELS OF DISTRIBUTION Each member of the class has chosen a product with which he is familiar and is applying the experience of others in determin- ing the most profitable policies and methods of procedure in sell- ing the particular product or group of products which he has chosen. After reading the comments under each head contained in the body of this pamphlet and applying this, the references, and his own experiences to the particular case, the reader is expected to answer all questions which apply to his product, to make mar- ginal and interlinear notes, and to add other questions and refer- ences which seem to apply. Name of Product and Present Methods of Distributing (If different in different markets, please classify) 77 78 THE CHANNELS OF DISTRIBUTION THE FIVE AGENCIES OF DISTRIBUTION (p. 81) THE FOUR CHANNELS OF DISTRIBUTION AND THEIR SUBDIVISIONS (p. 83)- Shaw, A. W., Quarterly Journal of Economics, August, 1912, pp. 703-65. Calkins and Holden, Modern Advertising, Chapter III. Cherington, Paul Terry, Advertising as a Business Force, pp. 29-67, 119-27, 171-204, 210-56. A. CONDITIONS RELATING TO THE PRODUCT 1. Is your product salable by description? by sample? or must it be sold in bulk? pp. 85-86. 2. Is there an element of shopping in your product? pp. 86-87. 3. Does selling seem to require especially educated salesmen? p. 87. 4. Is the product of such a nature that it will require special attention after it is sold in order to keep the customer satisfied? pp. 87-89. 5. Can a retail dealer profitably carry a full line of more than one competing brand of a product like yours? pp. 89-90. B. CONDITIONS RELATING TO THE MARKET Curtis Publishing Co., Selling Forces, p. 134. 1. Have satisfactory available depots of distribution already been established in this territory? p. 91. Cherington, Paul Terry, Advertising as a Business Force, pp. 135-40. OUTLINE 79 2. Is the possible demand in the territory sufficient to support profitably a separate selling organization? pp. 91-93. 3. Are distributors in this territory accustomed to extend long or short terms of credit? pp. 93-94. Bradstreet Mercantile Agency. R. G. Dun & Co. 4. Is the period of time between one demand and the next from the same consumer shorter or longer than the period of time required for the most rapid transportation between producer and con- sumer ? pp. 94-95. 5. Is this territory near enough to producer so that transpor- tation charges on the smallest unit demanded will not materially affect the price in competition? pp. 95-96. C. CONDITIONS RELATING TO CLASSES OF DISTRIBUTION Curtis Publishing Co., Selling Forces, pp. 103-33. 1. Which group of distributors comes most closely in contact with consumers, when purchasing competing or asso- ciated classes of goods? p. 98. 2. Which group can distribute your product most rapidly? pp. 98-99. Mahin Advertising Data Book, 1913-1914, pp. 477-80. . PART III. ANALYSIS OF THE CHANNELS OF DISTRIBUTION After you have studied the product which you wish to adver- tise and the markets in which you can most profitably sell this product, your next great question is, "How can I most profitably distribute this article in these markets?" Will it be more profit- able to sell direct to consumers through your own organization either by mail or by sales agents; will it be more profitable to sell direct to all dealers, or to but one dealer in a town, eliminat- ing entirely the middlemen ; or is your proposition of such a nature that your most profitable channel of reaching the con- sumer is through wholesalers to dealers to consumers ? Mr. A. W. Shaw, president of the System Company and organizer of the Department of Business Research of Harvard University, asserts that the greatest problem of modern business is the problem of distribution. During the last half century many of the problems of production have been solved. Mr. Shaw says, "Methods of study that have proven successful in other fields have been applied to the problems of manufacture and a body of organized knowledge is being built up. "The problems of market conditions are no less worthy of systematic study than are the problems of factory production. As yet there has hardly been an attempt even to bring together, describe, and correlate the facts concerning commercial distribu- tion." The writer has been searching for years for some book or magazine article dealing with the reasons why certain concerns choose certain channels of distribution. System and Printers' Ink have published some very helpful articles on such subjects as the advantages and disadvantages of chain stores. We have been told by others of the great fortunes that await any one con- ducting a mail order business until we might be led to think that anything can be sold anywhere by mail. We have been told that advertising tends to eliminate the middleman; and to an extent 80 FIVE AGEXCIES OF DISTRIBUTION 81 this is true. Yet some of the greatest and most successful adver- tisers are still selling through middlemen. When can he be eliminated and when can he not? About fifteen years ago the manufacturer of heating plants "had a hunch" that he could sell to consumers direct by mail. His advertising agent doubted the practicability of the plan. The "hunch"' proved sound, however, and a big business has been built up. To carry out the plan, however, it is necessary to extend very long terms of credit so that while the business is growing steadily it is not able to grow as fast as it might if it were not extending such credits and perhaps not as fast as it would have if it had sold through dealers who might have taken part of the financial burden and the responsibility of accounts. About 25 years ago three poor men were convinced that they could sell merchandise more profitably by catalogue without sales- men direct to dealers. The result \vas the great concern of Butler Brothers, with enormous warehouses in different parts of the country and an annual business running into the millions. Yet the same merchandise is sold by others through salesmen. Most manufacturers of breakfast foods employ salesmen and have large sales forces, yet the Cream of Wheat Company has never had but one salesman and, as Colonel Mapes says, "he only lasted for a few fruitless months." The channels of distribution are constantly changing. The same concern is often found using different channels in different markets. A few concerns seem to be able to sell successfully through more than one channel in the same territory. The Baltimore Bargain house, for example, a concern doing an annual business of over $16,000,000 sells to dealers in small towns, sells by mail direct to consumers in the country, and also conducts a large retail store in Baltimore. THE FIVE AGENCIES OF DISTRIBUTION There may be as many as five links in the chain of selling or five stopping places for the channels of distribution. They are as follows : 1. The manufacturer or producer. 82 THE CHANNELS OF DISTRIBUTION 2. The importer, broker, or sales agent, a person who usually contracts for the entire output of a plant or the entire distribu- tion in a specified country or territory. He may, or he may not, be a part of the manufacturer's organization. He sells to the next one in the chain. 3. The wholesaler or jobber. The same concern often "jobs" some lines and manufactures others. If the jobber is a part of the manufacturer's organization he is called a territorial repre- sentative or agent. He sells to the dealer. 4. The dealer or retailer. He also may be a part of the man- ufacturer's organization. He is the last link between the manu- facturer and the consumer. 5. The consumer. THE FOUR CHAXXELS OF DISTRIBUTION AXD THEIR SUBDIVISIONS So far the business world has developed four main channels of distribution. These may be again subdivided, giving a choice of ten different ways of delivering goods to consumers. 1. From producer to consumer a. By mail. (This class does not include what is known as the "mail order houses," as the larger proportion of such goods is manufactured by others.) b. By salesmen or canvassers 2. From producer to retailer to consumer (This channel is apparently growing more popular and therefore exhibits more subdivisions.) a. Through unrestricted sale to retailers b. Through sale to exclusive retail stores c. Through retail stores owned by the manufacturer (This plan was first introducted in the shoe business. It has many variations. The plan is often reversed, the manufacturing plants being owned by retailers. The Rexall Stores, a combination of druggists who own the manufacturing plants making certain prod- ucts, is an example.) d. Through sale to mail order houses or other consignment agencies (This channel excludes advertising by manufacturers as the entire output is usually sold to one or more houses and is seldom trade marked by the manufac- turers.) 3. From producer to wholesaler to retailer to consumer a. Through any wholesaler and through any retailer (This is the most used channel of this class.) 84 THE CHANNELS OF DISTRIBUTION b. Through producer's oivn territorial agents to any retailer (In some territories a producer finds a sufficient de- mand for his goods to justify him in establishing a part of his own organization in that territory to take the place of a wholesaler.) c. Through producer's own territorial agents to exclusive retailers (This is simply a case of where the producer's agent acts as wholesaler but where it is deemed advisable (as in 2 b) to establish but one retail outlet in a com- munity. An example of this class is the Sherwin- Williams Paint Company.) 4. From producer to selling-agent, importer, broker, or commis- sion agent to wholesaler to retailer to consumer You may find as many variations as the sands of the sea, but I think you will find in every case that a little analysis will place any particular method in one of these ten classes. Of late there has been a great revival of what is known as Buying Clubs. This is .especially true in the drug business. Sometimes these represent dealers getting together and acting as their own wholesaler. Other times these represent consumers clubbing together and apparently acting as their own dealer. As has been said above, a choice of the most profitable chan- nel varies with the conditions of a market as well as those of the article itself. The following are a few of the questions which have guided manufacturers in choosing the different channels. These are not all of the questions, but these are sufficient to uncover in many businesses a multitude of sins. A. CONDITIONS RELATING TO THE PRODUCT 1. Is your product salable by description, by sample, or must it be sold in bulk? You immediately eliminate the possibility of selling by mail if your article is of such a nature that it can not be sold by descrip- tion. You may be able to sell through peddlers if your article is of small size, but the very fact that your article is not amenable to sale by description puts you out of the field of advertising except as you may be able to send samples to distributing points. The first great effort of modern advertising has been to put mer- chandise in such form that it may be sold by description or by sample and called for by a name. Nowadays there are very few articles still sold in bulk. During the last few years special brands of sugar, salt, vinegar, oysters, and such articles which the world thought impossible to sell except in bulk have been harnessed by ingenious trade-marking devices and are sold to-day by description. A sample assists any sale and a combination of description and samples is usually considered a better method than descrip- tions alone. The National Biscuit Company attempts to intro- duce its goods by description alone. The Loose-Wiles Biscuit Company employs a combination of description (general adver- tising) and sampling. It has been said fchat the Loose- Wiles Biscuit Company makes sales at a lower cost per package than the National Biscuit Company. It is hard for the imagination to grasp a new taste, a new odor, or a new harmony of sounds. Through a picture, how- ever, the imagination can conceive anything which exhibits itself purely through the sense of sight. Each year for a number of years the manufacturer of a certain wall board sent out through the mail 100,000 samples of his product to contractors and build- ers. He did a nice business but the selling expense was enor- mous. One day an advertising man persuaded him to try to sell his product by description alone, reserving the sample only for those who requested it. It was found that in less than ten per cent of the new sales was the sample necessary. 85 86 THE CHANNELS OF DISTRIBUTION But we are not here discussing the advantages or disadvan- tages of the sample. We are trying to determine the most profitable channel of distribution for your product. If you must sell by bulk or by sample, you must have distribu- tion centers in each territory where samples of the article can be shown or distribution can be made in bulk. If you can sell by description, every channel may be open to you. 2. Is there an element of "shopping" in your product? If your product is a staple such as a breakfast food, a medi- cine, or a toilet article which consumers are accustomed to order at the nearest store, you may lose many sales if you do not have a thorough distribution. On the other hand, if the article is one for which consumers are accustomed "to shop" you may be able to establish but one agency or distributor in a community and still obtain your share of the trade. Here we see the advantage of having already determined whether your article is most often purchased by men or by women. Men shop for a few high-priced articles such as automobiles. Women shop for many things. For this reason it is more often found safer to establish exclusive agencies for goods sold to women than for goods sold to men. A man will not take the trouble, unless the article is a high- priced one, to go out of his way for it. A woman will take more time to find you. She "loves to shop." The higher the price, and the less of "repeat" there is in an article, the greater the "shopping" element. The purchase of a suit of clothes involves a sufficient amount of money to suggest shopping, yet as clothing has a steady ele- ment of repeat as soon as a clothing store or a tailor has once satisfied a man, we find him doing very little shopping as com- pared to his habits in purchasing other articles of the same price but with less of the element of repeat. On the other hand, even if a woman buys her suits from the same establishment year after year, she is said always to "want to do a little shopping first. (The principal reason manufacturers of clothing establish exclu- sive agencies will be taken up in another division, AS.). If your product possesses the element of shopping, every CONDITIONS RELATING TO THE PRODUCT 87 channel may be open for you, but if it does not possess this ele- ment, it will probably be inadvisable to sell through but one dis- tributor in a community. 3. Does selling seem to require especially educated salesmen? Every time a sales story is told it loses some in the telling. The jobber may handle one thousand different products. His salesmen can not be expected to remember the particular sales talk for each. To sell life insurance you must have your own organization from start to finish. You may for convenience have territorial agents but it must be your own organization, and the salesmen to be successful must devote their entire time to the sale of that one thing. Advertising is, however, fast making its inroads on the classes of business which require especially educated salesmen. It is becoming more and more possible to let literature do all of the preliminary part of the sale, leaving only the closing to the salesman. The National Cash Register is an example of a product which evidently requires especially educated salesmen. It would probably be much more economical to distribute Cash Registers through department stores or by mail, but prob- ably not one-tenth of the present business would be obtained if Cash Registers were sold in this way. Others have found that if an article requires especially edu- cated salemen there are but two natural channels open, selling direct to consumers through producer's own salesmen (la), or through retail stores owned by the manufacturer (2c). There is a possibility, however, by giving exclusive sale to one concern in a town and in turn securing an exclusive understanding from that concern, to selling through two other channels, from pro- ducer to exclusive retail stores, to consumer (2b) and through producer's own territorial agents to exclusive retailers (3c). 4. Is the product of such a nature that it will require special atten- tion after it is sold in order to keep the customer satisfied? This is a very important question in the sale of machines or, mechanical devices of every kind. Many mechanical devices are 88 THE CHANNELS OF DISTRIBUTION used by those who are not at all mechanical. If my typewriter gets out of order, I telephone the Underwood agent. The trouble may be a very simple one and one which will take but a moment to correct, but the longer my machine is out of order the more impatient I shall probably get. If I had to take my typewriter to a hardware dealer and he in turn had to send it to a jobber and the jobber in turn had to send it to the manufacturer before it could be fixed, I might in the meantime listen very attentively to the salesman for the Remington or the L. C. Smith. But the Underwood people take no such chances. They not only have their own representatives within easy call but they send a representative to my office once each six months to inquire if there is anything the matter with my machine. He called only a couple of months ago. Then, and not till then, I remembered that for the last few weeks the alignment had not been as per- fect as I wished. The result of it all was that I bought a new machine. If I had bought my typewriters of the Warner Hard- ware Company I probably should not have bought a new one so soon but would have waited until the Underwood was completely out of order. Then, when I finally did decide to buy, I probably should have asked to see another make of typewriter, having seemingly had unsatisfactory experience with the Underwood. Each year the Burroughs Adding Machine Company sends a letter to everyone who has ever purchased a Burroughs asking about its condition at the present time and whether or not the person is still using it or another Burroughs. While the great cost of this work is said to pay for itself in new machines sold, the company considers this effort as insurance against displeased customers. Without its own organization through every step of distribution (or at least without exclusive agencies), this could hardly be accomplished. Last year it was rumored that the Ford Motor Car Company planned to sell Ford Automobiles for $333 and that this was to be done by discontinuing the Ford agencies and selling entirely by mail. This rumor presented a very interesting problem. Ford has cut many Gordian knots of manufacture. Would he have been aEle to accomplish this feat in distribution ? Apply to this problem the questions which we are now dis- cussing. You will probably find that the question of the atten- CONDITIONS RELATING TO THE PRODUCT 89 tion each car should receive after it is sold would have been the most dangerous stumbling block. Others have found that a positive answer to this question leaves but three channels of distribution open to them : from producer to consumer through producer's own salemen (1 a), through exclusive retail distributors (2b), or through stores owned by manufacturers (2c). 5. Can a retail dealer profitably carry a full line of more than one competing brand of a product like yours? To my question, "why do you sell your goods to but one dealer in a town?'' a leading national advertiser replies, "There is but one answer to that question. It is not a question of the size of the town or of the nature of our competition. It is because one dealer can not afford to carry a full line of our goods and a full line of a competitor as well. It is to our advantage as well as his for him to carry a full line. We can not expect him to sell our line to the exclusion of all others unless we sell to him to the exclusion of all others." This is also the primary reason given by W. L. Douglas for the establishing of his chain of retail shoe-stores. The chains of shoe-stores established by manufacturers have often been pointed to as examples of the enormous profits to be obtained by manu- facturers, eliminating both the middlemen and the dealers, but the man who first introduced this system staunchly asserts that the matter of profits does not have nearly as much to do with the question as the inability under the old system to get the entire line properly distributed. This condition more often occurs in businesses dealing in wearing apparel where many sizes must be carried. The condi- tion differs with the size of the territory covered by each dealer. While the manufacturer who grants exclusive agencies or estab- lishes his own stores is said to gain much in the cooperation of the dealers, he of course greatly restricts his number of dis- tributing outlets. Dunlap hats and Knox hats are sold through exclusive agencies only. Stetson hats are not sold under the exclusive plan. George A. Weinman, sales and advertising man- ager of Lord & Taylor, handling the well-known Onyx hosiery and Onyx underwear, believes that it is never advisable to con- 90 THE CHANNELS OF DISTRIBUTION fine the sale of a brand like Onyx to a single store except in towns where conditions practically eliminate competitive selling. In an ably written article, by S. Roland Hall in Printers' Ink of September 4, 1913, Mr. Weinman is quoted as saying, "A popular product, such as hosiery or underwear, in general use by the public, should never be confined. As a matter of fact the busi- ness of any concern attempting to do this would eventually dry up." In spite of this strong prophecy by one of authority, the North- western Knitting Company adheres strictly to the exclusive agency plan and is said to manufacture more standard underwear than any other concern in the world. Edward Freschl, president of the Holeproof Hosiery Com- pany, says that there are so many different phases of the subject of exclusive agencies that "even now we have no set policy in regard to the 'one dealer' or 'open town' problem ; we try to use our judgment when occasions present themselves." It would seem, however, to the writer from his experience and the more valuable experience of others from which he has been able to draw, that, if you are forced to answer the above ques- tion in the negative, your most profitable distribution will be found in selecting but one distributor or agent in each commun- ity. By one distributor in a community I do not necessarily mean but one dealer in a city. The extent of the community served depends upon the nature of the article. Whitman's Choc- olates are carried by but one dealer in cities of 15,000 or under, but in New York are sold in adjoining blocks. In New York candy can hardly be considered as a "shoppable" article, yet one dealer can not profitably carry a complete line of a number of trade-marked brands. B. CONDITIONS RELATING TO THE MARKET As was said in the beginning of this chapter the same concern may use different channels of distribution in different markets. Sometimes a very little thing determines the difference. Often it is the condition of the market itself. Other times it seems to be the amount of business one particular jobber or dealer seems able to deliver. 1. Have satisfactory available depots of distribution already been established in this territory? A successful manufacturer to whom I put the question, "what channels of distribution do you employ?" replied, "We usually sell through our own territorial agents direct to dealers. In Pittsburg we sell through jobbers, but our own territorial agents cover the territory, take orders, and turn them over to jobbers who in turn order from us. In Davenport, Iowa, there is a jobber who handles one line so satisfactorily that we would not only not think of supplanting him with a territorial agent from our own organization but we do not even send special salesmen into his territory." It has often been said that the channels of distribution are decided entirely by custom. One channel is chosen for a particu- lar product and all competitors in that line follow suit. The very complicity of the system would tend to argue against this conten- tion. Nevertheless it is only natural to ask, as the very first question in determining your channels of distribution, whether or not the stopping places have not already been prepared for you. If your article is any one of the principal branches, such as groceries, drugs, hardware, millinery, shoes, clothing, haber- dashery, or paper, you will find powerful channels of distribution already established. Your problem then becomes one of choos- ing the most profitable individual distributors. 2. Is the possible demand in the territory sufficient to support profitably a separate selling organization? Mr. Lamson, secretary of Dunlap & Company, in the Printers' Ink article above quoted, says, "We conduct our business strictly 91 92 THE CHANNELS OF DISTRIBUTION on the agency plan, dealing with only one representative in each city except in New York, Chicago, and Philadelphia, where stores are operated under our own management, but there is, we believe, no other point at which a store could be profitably maintained." When I asked Mr. George W. Hopkins, special sales and advertising manager of the Loose-Wiles Biscuit Company, how his company "scattered Sunshine," he replied, "We sell direct to grocers in all territories except those in which credit conditions make that policy ill-advised or in those where the possible demand is not sufficient to support profitably a separate selling organiza- tion/' If the jobbing or the retail territory will not profitably support a separate selling organization, you are certainly shut out for the present from channels 1 b, 2 c, 3 b, and 3 c, selling direct by salesmen, selling through your own retail stores, and selling through your own territorial agents. How soon you will be able to reach the territory with your own selling organization depends of course upon the possible consumers, the competition, and the power of your advertising. Most successful breakfast foods were first sold through merchandising brokers to jobbers to dealer to consumers. This is usually found the most economical method to distribute a food product of general consumption. All of these companies (with the exception of the Cream of Wheat Company) employed sales- men to call on dealers and often employed saleswomen to call upon and to leave samples with consumers. The salesmen who called upon dealers were often good window trimmers and the sample distributors often conducted demonstrations in dealers' stores. But when orders were booked from consumers, they were turned over to dealers to fill. When orders were booked from dealers, they were turned over to jobbers and the jobbers in turn ordered from the merchandising brokers. The salesmen seldom called on the jobbers. Gradually as the volume of busi- ness in each territory increased it was found possible to establish a territorial office and to dispense with the merchandising broker in that territory. I understand that only recently Kellogg did away with his last merchandising broker, but that in no terri- tory does a breakfast food company attempt to perform the function of a jobber. The reason for this can be readily under- CONDITIONS RELATING TO THE MARKET 93 stood when it is realized that in the Twin Cities alone there are 18 grocery jobbers and over 1,300 established grocery stores beside about 500 other constantly changing little dairy or candy supply stores which usually handle breakfast foods and must be sold on time. 3. Are distributors in this territory accustomed to extend long or short terms of credit? The five functions of the middleman as given by A. W. Shaw are (1) sharing the risk ; (2) transporting the goods ; (3) financ- ing the operations; (4) selling (communication of ideas about the goods) ; (5) assembling, assorting, and reshipping. In some territories the share of the risk and the amount of credit extended by the middlemen is a great item. The credits of different sections of this country seem to be built on certain crops. In the north it is wheat. In the central states it is corn, and in the south it is cotton. Up to the days of the cotton-boll weevil (1910), cotton was considered a sufficiently sure crop to "bank on." It is still the custom in the cotton country for dealers to carry consumers and for jobbers to carry dealers from one cotton crop to the next. As the expense for collecting is usually less for local distributors than it is for large organizations situ- ated at a distance, local jobbers and local dealers can afford to extend more liberal credits than could a manufacturer situated at a distance. It is said that there is no habit which is so hard to change as the habit of asking credit. In the matter of credits, manufacturers seem unable to compete with local distributors. Great organizations with plenty of capital find it advisable to change their regular methods of distribution to avoid the extending of long terms of credit with its attendant risks. In the textile industry in New England the sales agent is said to be as much a banker for the manufacturer as he is a distributing agent. The sales agent not only takes the goods off the hands of the manufacturer as soon as they are produced but endorses his commercial paper while the articles are in process of manufacture. From the standpoint of advertising this is a very unhealthful condition. The greater the number of middlemen and the more the middleman takes on the functions of the banker the less 94 THE CHANNELS OF DISTRIBUTION attention he seems to give to the functions of selling, the less incentive there is for quality, the less is the producer held responsible for his product, and the less justification has he for advertising. The new monetary law basing the currency of the country on commercial paper may make it possible for the banks to assume more of the risk in a proper and legitimate manner. This will also probably result in shifting the channels of distribution in many lines of business. Cash-with-order mail order houses have been known to make some headway in territories where long terms of credit are extended but well-equipped agencies as a part of the manufac- turers' own organizations have often found it impossible to com- pete under such conditions. If long terms of credit are customary in a territory, you may find it very difficult to distribute your goods except through jobbers and sales agents. 4. Is the period of time between one demand and the next from the same consumer shorter or longer than the period of time required for the most rapid transportation between pro- ducer and consumer? The primary function of both the wholesaler and the dealer is that of keeping a sufficient supply of the goods on hand to satisfy the demand of the dealers and consumers whenever that demand may arise. Most of us seem to live from hand to mouth as far as buying is concerned. I find that I wait until I feel that I need a new suit of clothes and then if my tailor has not prepared for my demand in advance to the extent of having on hand exactly the fabric which satisfies me, I feel shabbily taken care of. I have sometimes been persuaded to wait for a particular piece of goods to come from the wholesaler. But such cases are rare. Most families buy their provisions from day to day. Many classes of provision would spoil if a week's or a month's supply was bought in advance. When a very low price is offered as an inducement, my wife can be persuaded to buy laundry soap by the box, but soap is about the only household commodity I can think of at the present moment which is bought in this way. CONDITIONS RELATING TO THE MARKET 95 Most of us ''want what we want when we want it." That is the reason for the corner grocery, the corner drug-store, and the corner meat-market. We hear of exceptions, where a superior quality of eggs, of apples, and of grape fruit is sold by mail and of course the further the consumer is from the distributing center, the more inclined he may be to purchase stores of provisions in advance, but there are some goods such as fresh meats and fresh vege- tables which by their very nature can not be sold at any distance by mail. As transportation facilities improve, the size of the stocks which Jobbers and dealers find it necessary to carry, rapidly diminishes. The introduction of the parcel post has already changed the channels of distribution for many businesses. Of late years, jobbers seem to be ordering in smaller and smaller lots. Articles which a few years ago were ordered in ten gross lots are now ordered by the gross and gross lot orders are now reaching dozen lots. As transportation is improved, this develop- ment will probably increase. Orders will be more frequent but of smaller size. For this reason most manufacturers assume the function of jobber and sometimes of dealer also in their local territory. Even when selling is attempted through jobbers, it is found that jobbers will not carry a stock of local goods but buy only when they need it, realizing full well that a telephone call will bring the goods in dozen lots. 5. Is this territory near enough to producer so that transporta- tion charges on the smallest unit demanded will not mate- rially affect the price in competition? There are many articles now shipped to jobbers by freight in carload lots which, if shipped one at a time to consumers or in case lots to dealers, would have to be sold at a price which would be absolutely prohibitive. The price of any commodity is affected by transportation charges. It makes no difference whether the price to the consumer is with or without transporta- tion charges, the consumer ultimately pays his share of these charges. Jones may pay the freight, but you pay Jones. To equalize such transportation charges, mail order houses encour- age large orders or buying clubs. 96 THE CHANNELS OF DISTRIBUTION You may find some territories in which you can not success- fully sell in competition in less than carload lots. In others you may be able to sell in case lots. In others the transportation charges in handling a single unit will not materially affect the price. The question of the number of intermediaries required in your distribution system may depend upon your answer to this question. If you can afford to ship in single units you may be able to sell direct to consumers by mail. If you can compete only when shipping in case lots you will not be able to sell direct to consumers by mail but you may be able to sell direct to dealers or to your own salesmen or can- vassers in tHis territory. If, however, you can compete only when shipping in carload lots, it will be necessary to have an intermediary in that .territory to receive the carload and to assemble, assort, and deliver in smaller lots. This intermediary may be of your own organization or out- side, depending upon the other conditions which we have just been discussing. Thus we see that our channels of distribution are very much like the Missouri River. They are constantly changing their courses. There are a few fundamental conditions relating to articles themselves and to markets which determine the general direction. If an opening is made here or an obstacle removed there, in a moment, almost over night, our goods will be found flowing over a new course. New methods of transportation, new methods of credits, and new habits of people affect these chan- nels. But in the end the different channels all lead in the same direction and our goods are finally delivered to the father of waters, the ultimate consumer. C. CONDITIONS RELATING TO CLASSES OF DISTRIBUTORS If you find that the nature of your article and the market calls for sale through retailers, the next question is to determine the classes of dealers through whom it is most profitable to dis- tribute. To some manufacturers the answer to this question is a very easy one. Groceries should be sold through grocery stores, drugs through drug-stores, furniture through furniture dealers, and jewelry through jewelers. But are there not others who can profitably distribute your product? There are said to be less than 22,000 jewelry stores in the United States, yet the Ingersoll watch is sold by from 60,000 to 100,000 dealers. There seems to be constant mixing of lines. I know a dealer in optical supplies who makes a nice profit on a line of candies. There are said to be in the United States over 750,000 retail distributors. The number in the principal lines is about as fol- lows : Agricultural Implements 15,000 Boots and Shoes 20,000 Clothing 22,000 Groceries 171,000 Furniture 27,000 Drugs 43,000 Dry Goods 32,000 Hardware 30,000 Jewelry 21,000 Men's Furnishings 8,000 Stationery and Books 12,000 Besides these are over 1,700 department stores and 155,000 general stores. New and efficient distributing agencies are springing up every year. There are now over 20,000 automo- bile supplies distributors. Your product may be amenable to sale through only one of these groups or it may be more profitably sold by many. 97 98 THE CHANNELS OF DISTRIBUTION 1. Which group of distributors comes most closely in contact with consumers when purchasing competing or associated classes of goodsf A furniture manufacturer makes high-grade humidors and sells them to furniture dealers. He finds, however, that his most active distributors are cigar dealers and clubs where cigars are sold. Up to recently his sales effort was directed entirely to furniture dealers. The returns are found to be so much greater from the cigar dealers that he says he feels almost as though he had been "barking up the wrong tree." Many other similar stories might be related. 2. Which group can distribute your product most rapidly? The modern tendency among manufacturers of goods of steady consumption seems to be to place them in as many stores of as many kinds as possible. There are strong prejudices, of course, against selling cer- tain goods outside of what might be considered their regular channels. In many cases these prejudices are fast dying away. The story is told of Jap-A-Lac that at first it was sold only through paint dealers. Now a paint dealer, it must be remem- bered, comes in contact with his trade only once or twice a year. The next step was to distribute Jap-A-Lac through drug- stores, which come in contact with consumers much oftener. When some one suggested selling Jap-A-Lac through the grocers, the manufacturers first felt that the move would cheapen the reputation of the product. Against this danger was placed the assertion that grocers are "daily distributors," while, unless a druggist attracts trade by performing the office of a corner waiting-place, a customer is not often compelled to buy from a druggist more regularly than once a week. It was also argued that few druggists make deliveries. So, just as it was found necessary to add drug-store distribution to paint- store distribution to increase the repeat of the article, it was decided to add grocery-store distribution. And this move is said to be one of the greatest causes of the success of this product. CONDITIONS RELATING TO DISTRIBUTORS 99 Please notice that while the paint dealers come more closely in contact with consumers when purchasing competing or associated products (and are therefore still used), the grocers are able to distribute the product more rapidly. In this connection the way the distributor will display your goods must be considered. Your article may be one absolutely demanding display. A manufacturer recently told me that he had stopped making an effort to sell to hardware stores and confined his sales effort to druggists because hardware dealers as a rule would not prop- erly display his goods. Another manufacturer, when I asked him what class of dealers were his most profitable distributors, whimsically replied, "We display our goods in drug-stores, but we make the most sales through grocery stores." A careful study of the different classes of dealers will greatly assist you in answering this most important question in regard to the distribution of your product. When you have chosen your markets and your most profit- able channels of distribution, then and not until then are you ready to consider the advertising media best suited to reach these markets and to influence consumers to buy from these distrib- utors. The choice of media will be taken up in Part IV. UNIVERSITY OF CALIFORNIA LIBRARY BERKELEY Return to desk from which borrowed. This book is DUE on the last date stamped below. MAY 26 1948 FEB 3 1950 fl* T .N?1'36! > 290ct'64JD REC'D LD IWSTJP OfcT 2 1*64-11 AM JAN 22 1958 LD 21-100m-9,'47(A5702sl6)476 YC 25888 HF 58S/ M4- no. I - THE UNIVERSITY OF CALIFORNIA UBRARY