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Saving Grace

August 1, 1997
URL: http://www.entrepreneur.com/article/14478

John Marrelli isn't one to complain about our throwaway society. After all, his Tustin, California-based company, Ironclad Inc., manufactures trash bags. But when the time came to find an innovative way to set his product apart from its competition, Marrelli ended up championing a package that actually reduces waste.

Beginning in March 1996, Ironclad began packaging its Ironclad Strap Bags inside plastic kitchen storage containers. So instead of ending up with a cardboard box to toss out when the trash bags are gone, consumers get a product they can use. The containers are freezer- and microwave-safe and come in two sizes.

"The trash bag business is a mature one, and the attitude in the industry is `Well, what can you do with a trash bag?' ' says Marrelli, who sees his competitors' complacency as an opportunity for breakthrough marketing. "With that kind of attitude, the market is ripe for innovation.'

Consumers and retailers seem to agree. According to Ironclad marketing manager Linda Desko, revenues and distribution are up since the packaging change--without the major marketing budgets of the big guys. "Instead of spending our marketing dollars on advertising, we wanted to give the consumer better value,' says Desko. Best of all, since Ironclad manufactures the containers itself, the cost of the value-added packaging is comparable to plain old paperboard.

Even if your operations don't allow you to make your own reusable packaging, bundling your product with another useful product can be an excellent way to grab consumer attention and win the sale. Reasons Desko, "Consumers always want to get something for free."

Do The Right Thing

Is virtue its own reward? A survey of 1,037 consumers conducted by research firm Walker Information in Indianapolis suggests that a company's reputation plays a significant role in consumer decisions. The survey showed:

47 percent of consumers indicated they would be much more likely to buy from a socially responsible, "good' company if quality, service and price were equal.

57 percent of consumers said they would be much less likely to buy from a company with questionable business practices.

70 percent of consumers would not buy--no matter what the discount--from a company that is not socially responsible.

Although the survey suggests that good business character has a payoff, the stronger message appears to be that poor business citizens are paying a price. If your company's reputation isn't as sparkling as it should be, now's the time to clean up your act.

Staying Alive?

Think the cost of strategic marketing is too high? Consider the alternative. Where the competition is cutthroat--as it is on supermarket shelves--getting your product right the first time is the cheapest way to go.

This was the conclusion of a study by David B. Linton at Linton, Matysiak & Wilkes, a Blacklick, Ohio, marketing and product development consulting firm. Linton compared the success rates of new products introduced by the top 20 new product manufacturers against the track records of everyone else.

The results? The national success rate for new products hovers between 20 percent and 25 percent, but a year after their introductions, at least 76 percent of the products introduced by the top 20 companies were still on supermarket shelves.

What sets winners and losers apart? For starters, the top 20 companies invest in strategic marketing. By doing so, these companies lower the cost of new product launches by reducing their number of failures. Granted, these companies are mostly big businesses with equally big marketing departments, but entrepreneurs can certainly learn a lesson from them.

"For small to medium-sized manufacturers, an estimate for a new product introduction would be $50,000 minimum,' says Linton. "[But] what is the true cost if the mortality rate is [close to] 90 percent?' In this scenario, nine out of every 10 launches is a dud. So the average cost of introducing one viable product could equal nine times $50,000, or $450,000.

No amount of analysis can turn a loser into a winner, but strategic marketing may help make the potential gems shine.