Now that they had slashed the overhead and refinanced the business to the tune of $800,000. Thompson and Hall took their reorganization plan to the judge in June 1980 and got his approval to come out of bankruptcy. They had already begun to prove that cutting out the bureaucracy and giving bottom-line responsibility to their managers could turn Smokenders around.
Then they got advertising costs under control. Rogers had been accustomed to using an avalanche of radio and print advertising in one market at a time. Smokenders had been going into a market like New York and spending $60,000 to $250,000 in two weeks. From their days at Evelyn Wood, Thompson and Hall had learned that it was more effective to spend less money but to stay in one area for a long time -- more like spending $250,000 in 10 weeks.
Rogers's cost per registrant had shot up to 60% -- she was spending $200 in advertising for every registrant who paid $295 for the course. "That figure was just way out of sight," says Hall. "In this direct response business, we have to motivate somebody to get off his fanny and go downtown to the Holiday Inn to do something he may not really want to do. That's tough. But the real challenge is to get that fanny into a seat at the cheapest possible cost." Hall used his own advertising firm, Doug Hall and Associates, which he had started while at Evelyn Wood. Seventy-five percent of the advertising budget at Evelyn Wood had gone to TV, because the partners had found it to be more effective than radio or print advertising. So Doug Hall and Associates started turning out Smokenders' commercials for television -- low-budget, almost hokey commercials that cost $2,000 to produce. Rogers's New York ad agency had charged her $600,000 for an advertising campaign that included three slick commercials.
As Hall had proved at Evelyn Wood, commercials loaded with testimonials from people who had taken the course attracted more people.When they took the campaign to New York, they spent only $35,000 in a week and ended up being profitable. They signed up enough new participants at $295 to keep their costs down to $100 per registrant, half of Rogers's cost-per-registrant.
"When it comes to advertising campaigns," says Thompson, "Doug Hall is as great a general as Robert E. Lee." Thompson doesn't make such a bad general himself. He lowered the ratio still further by raising the price of the seminar, something Rogers hadn't done because her moderators -- many of whom had taken the course when it cost less than $100 -- put up a fuss.
Thompson and Hall, though, weren't so worried about what their moderators might think about the price as what their customers might think. Says Thompson, "We took $20 to $40 jumps on the price, looking for resistance, but couldn't find any." The standard price for the Smokenders course is now $395, $100 higher than Rogers charged. But Hall doesn't think they should apologize for that price. "If you smoke two packs a day," he says, "you'll save twice the tuition in less than a year."
Smokenders is now on its way to sales of $12 million this year with a profit of $2 million.In August, Tommy Thompson announced that Manufacturers Hanover had paid $1.5 million to buy 15% of the company. "That's going to give us the working capital we need to continue expanding the business," Thompson says happily.
As chairperson and third largest stockholder, Rogers is still a force in the privately held company. But now, instead of worrying about finances and operational problems, she's doing what she does best -- developing new programs (her latest idea is something called "DietEnders") and controlling the quality of the Smokenders program. "Tommy and Doug have taken such a load off my shoulders," she says. "And fortunately, we're in harmony, because they respect the program."
Not only do Thompson and Hall respect Rogers's program, they also respect Jackie Rogers for the hard work and energy she put into promoting Smokenders and getting it on its feet. "It's a quality program," says Doug Hall, "and Jackie never sacrificed that quality no matter what kind of financial troubles she was having."
With the promise of a second profitable year and a major investor in the bag, Tommy Thompson gets a glint in his eye when he talks about the future: Smokenders is going international, it's spinning off companies of its own, it may go public... And what of the past? Thompson thinks the reason for the turnaround is clear. "Ninety percent of Jackie's problem was overhead and advertising," he says. But Fay Fehd's emergence as the manager of the most profitable region suggests another reason: By clearing up the bureaucratic and financial problems, Hall and Thompson gave their managers a new lease on life.
"Before Doug and Tommy came in," says Fehd, "the morale was low in the field -- the advertising wasn't getting enough people in the door and I hated working with the management we had. Now my biggest problem is getting my staff adjusted to leading seminars that have twice the number of participants we used to have."
