But Can They Sell It?

June 24, 2008 by Joe Ponzio

You’ve heard the clich├ęs: He could sell ice to an Eskimo. She could sell a ketchup popsicle to a woman in white gloves. The sales force is the lifeblood of an organization. After all, the best product in the world is worthless if nobody knows about it. And so, we move on to Phil Fisher’s fourth point:

Does the company have an above-average sales organization?

When your company is the company in its industry, your products virtually sell themselves. We’ve talked about Adobe here before (see the chart of Adobe market cap versus intrinsic value), but it applies once again to this discussion. Adobe’s products sell themselves. Why? The moat is absolutely massive. In the graphic design / web design world, Adobe is king, and adobe.com is the first place these people turn for new products, updates, and cutting edge tools.

It’s easy to spot the company in an industry – Adobe and Google come to mind. Then again, what if there is no true monopolistic leader? Or, what if you are the world’s leading provider of, say, operating systems for home and business computers, and then someone comes along and starts snatching your market share?

How did Apple leap from mediocre to marvelous? It’s not the mirrors; it’s the sales force.

The MP3 Revolution

It started with the iPod. In the 1990s, the popularity of MP3 players took off…and then seemed to die just as quickly. The industry remained dormant for some time as the broad public seemed to care very little about downloading music. The technology itself was mediocre. And let’s remember: This was a time when the internet was a free-for-all. Napster offered totally free music (and more), just waiting to be downloaded.

Enter the Apple Sales Force

The iPod was revolutionary in a sense, and not just because of its technology. Until Apple released it, MP3 players were poorly marketed. Along came Apple’s sales and marketing department with a crazy idea: Let’s put black silhouettes dancing in front of brightly colored backgrounds, with no detail but the iPod in white. You remember the commercials – a wild-haired silhouette having a blast, iPod earphone strings swaying along.

Was the commercial brilliant? Only for one reason – Apple incorporated widely known, well-loved (or extremely popular) songs into its marketing. Then, it rammed its commercials down your throat until you couldn’t help but see the silhouette dancing in your head every time you heard the song. After a while, the iPod became the industry standard MP3 player, and Apple became the company in portable music devices. Who knew people would rather spend hundreds on an iPod and pay for each song download from iTunes rather than spend pocket change for an “other” MP3 player and steal music for free (or buy it for peanuts)?

Apple shareholders: How about a big round of applause for Apple’s “above-average sales organization.”

Then, They Did It Again

If you have the best sales and marketing people in the world, you can sell anything. Having cornered the music market and having shut out the weak competition, Apple decided to go for the holy grail – Microsoft. Admittedly, I don’t know if Apple’s computers are better or not; then again, that’s not the point.

We could sell sand in the Sahara.

Apple came up with a brilliant strategy: Hit the techies first, and the people will follow. The “I’m a Mac; I’m a PC” revolution began, clearly geared towards “in the know” computer people. Admittedly, I didn’t even know that I had a PC – I had a computer, and it ran Windows XP. Having seen the commercials, I wanted to check out more. What the heck is an Apple / Mac? Why would I want one?

But Apple wasn’t trying to capture my attention. It wanted to let me know it was out there, and that I would eventually want a Mac. Initially, Apple wanted to capture developers – the people who would make my transition to a Mac easier because they would (i) be talking about it all the time, and (ii) be helping make the software and services I love Mac-compatible.

Me? Apple just wanted to let me know it was there, and that it would welcome me when I was ready to make the transition. While Apple waited for me, it gently, but constantly, reminded me of the headaches and problems I have with my “Microsoft” computer – too much garbage installed when I get the computer, not enough “fun” stuff (let’s face it – Microsoft Movie Maker stinks), and a constant threat of viruses with incessant updates leading to automatic restarts.

Though I’m still hesitant about switching to a Mac, many of my friends have done so. Though I have no need for an iPod, I’ll probably buy one for my wife and then use it all the time until I buy my own. And when I buy a new cell phone in the next month or two, you bet that I’ll look at that 3G iPhone. I don’t even know what 3G means; still, I know I don’t want to suffer through another Microsoft “smart” phone (nothing but nightmares) and my Blackberry is looking awfully boring now that I spend more and more time on the internet from my phone.

Judging The Sales Force

How does one judge the sales force? Better yet, what the heck is the sales force? The sales force is more than just the commission-based reps on the street. If Phil Fisher were around today, he’ probably change his point from “sales force” to “sales and marketing strategies that marry the various sales media, from the efforts of the sales reps to the quality of the print and broadcast advertising to the website.” (After all, Fisher would have known most of us check out websites long before we actually go to a store or call for more information and that the website is the “gentle half-step” between I’m interested and I’m ready to buy.)

You’ll know your company has an “above average sales force” if:

  • It has great “traditional” marketing (see this post about marketing);
  • Its website supports its sales efforts, rather than being little more than a “our company, about us, look what we can do” ego boost (it’s the 21st century; you can’t ignore the web anymore);
  • It’s generating a lot of revenue per employee relative to its competition (AAPL: $1.1 million per employee; MSFT: $647,000 per employee);
  • Its prospective customers know its name and products, and want them (even if they’re hesitant to switch today); and,
  • It is (or is becoming) the company, if not in its entire industry, at least in a powerful niche of the industry (I still can’t buy a Mac from Dell, but I know where to turn if I want an Apple computer).

How Does This Apply To Our Pharmaceutical Discussion?

In a highly competitive environment, few products will sell to their maximum on their own. This is not necessarily the case with pharmaceuticals. Looking to do right by their patients, most doctors will not prescribe just any old drug the cute sales rep pushed that day. The drug has to be the best, with the least risk. Then, the doctor has to make a judgment call.

To help increase awareness of the name and effectiveness of the drug, we’ve seen (way too many) commercials spring up, telling us to ask our doctor about this drug and that, assuming we don’t mind the minor risks of chronic vomiting, bleeding from the eyes, and risk of hearing loss (you get the idea).

From a consumer standpoint, I don’t know what’s good or bad – particularly when a company asks me to remember some 30-letter, half-Latin half-English drug name (if you suffer from indigestion with uncontrollable sneezing, ask your doctor about Alexiopropalinal Digestneezinate). Then again, I do know what the purple pill is, and I might ask my doctor about it if I had acid reflux.

Odds are, most of this site’s readers (myself included) are not capable of judging the sales force of a pharmaceutical company unless they are (a) in pharmaceutical sales, (b) in the pharmacy, or (c) doctors. In that case, we have to get our noses out of the EDGAR database and get on the phone with friends and family that might fit into the categories above.

(Now if only my wife would believe that golfing with Joseph at Eli Lilly is “research”…)

A Note From Joe Ponzio

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