Radio broadcast .. (1922-30)

WHAT IS THE SIZE OF YOIIIT SLICE ? By HOWARD W. DICKINSON Merchandising Coniultant SPEND MONEY in advertising. Use the power of that advertising to maintain prices. By taking full profit per sale make the business pay. Why is it that so many dealers recognize the force of these three commands and yet fail to get their full price for either merchandise or service? Is any one thing in retail selling more important than to find out why this difference exists between right and provable theory on the one hand and common dealer's practice on the other? Every dealer wants full price and full profit. By all sound laws of commerce he should have them. What prevents his taking them? Should those things prevent the dealer from taking them? What remedy has he in his own hands to cure the situation? There are no more important questions than these among all the complications of buying and selling for a profit. We accept sound theory as theory, then, in practice, we go out and give away the shirts off our backs because someone else seems to be doing so. Lopping off a legitimate price is easy. Doing a sweet and convincing job of advertising is harder. Is that the reason? Let us consider some of the price and profit conditions which every retailer in radio is up against. The Dealer's Problem Here is what they face, dealer's discount about 40 per cent. —overhead, sales cost, and so on from 30 to 35 per cent, and rarely less. It takes an exceptional financier to reduce costs below that and maintain a business which gives the impres- sion of self respect and wholesome prosperity. Let us figure on an average 8 per cent, profit—the man who beats that and also makes his business grow, does very well indeed. The man who gives away materials, does wiring free, carries heavy unpaid customer balances without interest charge, gives away more than a sound business man can afford to. He is pretty sure to run way below 8 per cent, profit on his turnover unless he starves his advertising and sales work and charges up his extra service against his advertising account. It is a costly habit to charge against advertising any item which might help build good will, because in this way many a man has had a heavy account charged to "advertis- ing" without having had any advertising. The good will to be obtained by gifts of expensive service and disproportionate allowances can be overestimated very easily. It may have some value—but a customer once sold can be profitable again only as he wants parts, repairs, and ultimately perhaps a new set, and if he has received more free than his due he is apt to be a " spoiled " customer. Sooner or later an intelligent dealer must learn the relative values to himself of straight advertising and so-called ad- vertising by generous concessions. He must learn which kind of customers pay him best, the "gimme" type of people or the people who pay for what they get and expect others to pay them for what they in turn give or do. Do the majority of people want "gimme" service or straight businesslike service? Is "gimme" service demoralizing to the business which advertises by gifts instead of with advertisements? Are sales which cost more than their gross returns the kind of sales which make it interesting to do business? Can the dealer who begrudges money spent in straight advertising build the business to success by letting his cus- tomers pull his leg with respect to the high-priced time of his expensive service force? Does it seem foolish to ask these questions? By no means, so long as many dealers are kidding themselves into losses instead of profits and unintentionally demoralizing the market for those dealers who are trying to do business in a businesslike way. Sooner or later we've got to come to a serious consideration of finance, either to be able to count our profits or to figure out what we've s;ot left for our creditors. Let us imagine this financial situation. A dealer has just sold $2000 worth of sets on installments. He has a book profit of $800 on these, but only $500 cash because he has disposed of them on a 25 per cent, down basis and is carrying $1500 on deferred payments. He can hardly carry that for less than 8 per cent, allowing for interest collections, de- faulted payments, deterioration on good returns, etc. If these payments run over a year's period, he must deduct 76 DECEM BER 1929