Law #11: The Law of Perspective
(This entry is part of a series I am writing on
Immutable Laws of Marketing.)
The Law of Perspective says that "marketing effects take place over an
extended period of time", but the basic point of this chapter is that some
marketing actions are negative in the long-term even though they seem positive
in the short-term.
The authors include an interesting discussion of sales and coupons in the
retailing industry. They argue that these devices are like drugs -- they
produce a short-term high, but the only way to maintain the high is to keep
going. Eventually, you have to "keep those coupons rolling out not to
increase sales but to keep sales from falling off if you stop." I assume
this is the reason that our local furniture store is always
running a sale -- they are afraid of going through withdrawl.
This advice can be applied in a small ISV. Resist the temptation to run
short-term special sales. You may increase revenue in the short-run, but
you may eventually train your customers not to buy at "regular" prices.
It is generally understood that public companies are forced into a
3-month planning horizon. Earnings must be reported to the public every
quarter. If the stockholders are not happy with those earnings, then they
will sell the stock, and its price will go down. In other words, the
public is short-sighted, so publicly-owned companies must therefore find a way
to be short-sighted as well.
This is one of the things I like about running a privately-held
company. We have the freedom to be patient and look a bit further down the
road. We don't have to do things which are positive in the short-term and
negative in the long-term.