2004-06-15 14:52:48

Law #11: The Law of Perspective

(This entry is part of a series I am writing on The 22 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.

Short-Term Highs

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.

Patience

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.