March - 2001 - issue > Cover

There are a small number of quite simple core concepts in marketing. Think of them as bricks. You use them to build a sales edifice so strong that, to paraphrase the Bard, it looks on tempests and is not shaken. Do it right and you will not merely survive the upheavals of business cycles. You will actually thrive in boom times and bust.


Here is one of the most important concepts. Nobody ever buys a quarter inch drill.


Mark what I said. Nobody buys it. Ever.


“Wait,” you protest. “I have a drill in my basement and a quarter inch bit as well.” Maybe you do. But I stand by what I said. You did not, repeat NOT, buy a quarter-inch drill.


What you actually bought was the ability to put a quarter-inch hole where you wanted it. Think about it. You have probably never considered this notion before but its truth is self-evident.


Right now your ability to put a hole where you want is inextricably tied up with the kind of mechanical device sold by companies like Black & Decker. So today you buy a drill. Tomorrow there might be other, better ways of making perforations and you will happily junk the drill. When such a method comes along – and it will – check to see if Black & Decker is changing with the times. If not, reap yourself a financial windfall by shorting the stock.


This is not academic hairsplitting. It has real consequences. Major ones. Sixty years ago the US had by far the best system of railroads in the world. Today this system is in total disrepair and hardly anyone thinks of taking the train anywhere. Commuter railroads exist in a few parts of the country and some cargo moves on tracks. But the rest of the system has vanished.


Why did this happen? There are obvious answers, such as the development of the airplane and its evolution into the modern jetliner, the launch of the national highway system and the growth of the automobile industry, and so on. But these answers beg the question: If the railroad companies had talented executives, deep pockets and virtually unlimited resources, then how come they did not start the airlines or set up automobile factories?


The answer is simple. They were too busy being railroad companies and competing with other railroad companies. Meanwhile the passengers, of course, were busy buying transportation. For a few decades, in the glory days of the train, transportation was synonymous with railroads. When alternatives came up, railroads were toast.


Want a more recent example? Take IBM. It sold computers. Big clunky ones with proprietary systems that needed armies of devoted priests to keep them running. When Apple proved that there was a market for a personal computer IBM reluctantly developed one. The effort was so under funded that the pioneering group could not develop an operating system. They wanted to buy one and tried to acquire CP/M from DRI but were rebuffed. A college dropout from Harvard named Bill Gates acquired a system called DOS and was willing to deal with IBM. The rest is history.


The interesting question is why IBM didn’t simply acquire DOS? It did not even have to negotiate. The imbalance in power was so great that it could simply have informed Gates that it was willing to use his system and would take all rights. In which case Gates, while still enormously wealthy, would have had fewer zeros in his net worth and Microsoft would have been a division of IBM.


The reason, of course, is that IBM was busy selling Big Iron. It was willing to sell Small Iron in the form of PCs but thought of it as the same product with a smaller price tag. Meanwhile customers were busy buying solutions to their business problems. The Armonk, N.Y., behemoth never saw the tsunami that would shortly split solutions from hardware and put the value in software. It did not even occur to it that software, in the form of an operating system, could ever be valuable.
I repeat, nobody buys a quarter inch drill. Ever. Not you, not me. Nobody.


I meet technology company CEOs all the time and they routinely tell me “I sell software that … “ They don’t. Or maybe they do, but sure as hell that’s not what their consumers are buying.


Do you know what your consumers are buying? Ask them: “What can you do now that you could not do before? How does this help your business?” That is what they are buying and you better get your act together and start selling that. This mind set goes far beyond merely “selling solutions, not products.” It has implications for every aspect of your business from product design to sales presentations.


It’s hard work figuring it out, but both fascinating and rewarding. Do a good job and you are inoculated against the vagaries of economic downturns and your stock market multiples should make you very happy indeed.

Prof. Srikumar S. Rao is Louis and Johanna Vorzimer Professor of Marketing at Long Island University, New York. Write to him, with comments, and questions on marketing at: rao@corp.siliconindia.com.