How To Waste $12 Million

I-Point Inc. threw away that much money because they thought their product would sell itself.

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In a March of 1979, the small staff of I-Point Inc., in Reston, Va., put the finishing touches on a mailing to 5,000 prospective customers and sat back to await the results. The letter, sent to the presidents and vice-presidents of frozen-food companies all over the United States, described how the firm's product could monitor temperature changes that could result in spoilage.

Twelve million dollars worth of research and development had been spent by the firm's Swedish parent company, Kockums Chemicals, to perfect the I-Point -- a tiny biochemical device that, affixed to a package, would change color if temperatures went too high for too long. The mailing, however, resulted in only a handful of sales. Even when a sale was made, representatives rarely visited the customers to check if they were using the product properly and if they were satisfied with it. Robert Rose, a microbiologist who spent seven years with I-Point, points out that at times only one person in the country was responsible for sales and follow-up.

John W. Farquhar, vice-president of education and technology for the Food Marketing Institute, a trade association representing supermarkets, has been a long-time supporter of time-temperature monitors. He asserts that a fragmented campaign directed to the wrong market was the I-Point's "kiss of death." Says Farquhar, "There's probably a better market in nonfoods: pharmaceuticals, film, and blood." Rose agrees: "It was a mistake concentrating on frozen foods. Drugs and refrigerated foods, which have much shorter shelf lives and greater sensitivity to temperature shifts, would be better markets."

Directing the message to presidents and vice-presidents, Rose adds, was also a mistake. "These are busy people," he says, "who probably just shipped the mailing to their quality control people who have no decision-making authority and weren't that interested anyway." Furthermore, he notes, I-Point focused on the technical aspects of the product, not on how it would benefit the customer. They had ignored one of the tried-and-true maxims of marketing: Don't sell a 3/8-inch drill, sell the expectation of a 3/8-inch hole.

Farquhar agrees that the firm erred by using a negative approach. "They stressed the danger of spoilage but didn't point out how the device could increase sales among quality conscious consumers."

Although Kockums Chemicals has gone out of business, the I-Point is still alive. Last August, a group of American investors formed I-Point Technologies Ltd. in Washington, D.C., and bought the remaining inventory and production equipment in Sweden. Robert Rose is the new firm's vice-president and director of product development. Last summer, he lamented, "The I-Point was a beautiful plum to pick off the tree. If only we'd had enough money for marketing." Marketing expenditures had totaled only about $30,000, a fraction of the money spent on R&D.

That issue, at least, has been resolved. The firm has budgeted $35,000 over the next 12 months. "We're proceeding on the basis of learning from earlier mistakes," says Arthur J. Gajarsa, chairman and chief executive officer. "One of the things we're going to do," he adds, "is talk directly to the marketing people at corporations."

The company will also engage the services of a professional marketing firm and do extensive research before launching its campaign. Instead of Kockums's scattershot approach, it will first concentrate on convincing one or two corporations in several targeted industries of the I-Point's merits, thus creating models for industrywide use. I-Point will initially focus on pharmaceutical companies and processors that ship refrigerated goods.

Gajarsa is well aware that Kockums failed to create a demand for its product -- either by potential customers or by consumers. Consequently, he says, much of the marketing effort will be educational. To prospects, the firm will stress how they can increase profits by reducing spoilage. Gajarsa admits it will be an uphill battle changing the attitudes of some old-timers, who've been processing food for years without the I-Point's help, but he thinks the time is ripe. "Now that food costs are so much higher," he notes, "processors just can't afford to have profits going down the drain." To creae consumer demand, the group will place ads in newspapers and periodicals, pointing out that the I-Point, attached to containers of milk or fish, for example, guarantees freshness.

I-Point Technologies Ltd., which currently employs six people, plans to get its marketing program rolling by the first of the year. Says Gajarsa, "We're optimistic. We believe we have developed a better mousetrap, and that with proper arketing techniques, it can be sold."