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Word-of-Mouth Marketing
If credibility in the marketplace is one of a company's primary concerns, then advertising in and of itself -- even in-house advertising -- may not be the answer. You may need to enlist the support or endorsement of enthusiastic but independent users in order to persuade prospective customers to try your product or service. That was the challenge facing Magellan Systems Corp., founded in 1987 in West Covina, Calif., to exploit a star-wars technology called GPS (global positioning by satellite). GPS can pinpoint a person's location and altitude anyplace on earth, using radio signals from orbiting satellites that are translated back on earth. Processors that use this technology come at a relatively modest price from companies like Magellan, whose sole product, a hand-held receiver/computer called NAV 1000, retails for around $2,000.
Though it was a typical consumer-electronics start-up, Magellan faced more than the typical problems of product acceptance. On a low budget, it had to earn credibility: not only did it have to prove it was capable of contending with established competitors; it also had to prove the uncanny abilities of the novel instrument it was about to manufacture. Magellan identified three market slices: sailors, surveyors (in oil, gas, mining, and forestry), and the military.
Magellan assigned boat owners top priority. But to blanket them with advertising would involve buying space in perhaps a dozen modest-circulation specialty magazines -- one for motorboaters, one for racing sailors, one for casual sailors, one for yacht-club members, and so on -- at an average cost of perhaps $12,000 per page. And for all that, readers probably wouldn't trust a little box that looks more like a toddler's toy than a potentially lifesaving precision instrument.
Magellan had to foster faith, but not via a high-priced rollout. One way to do that was to seed the market by placing units with key hobbyists, professionals, and journalists -- "people who could grasp the technology quickly and somehow be able to promote it for us," Magellan's marketing vice-president, Richard Sill, describes them. Six units dispensed to such presumably talkative people would equal the cost of one magazine ad. And the payoff would be greater.
Such was the thinking, anyway, of Sill, a veteran marketer from an earlier stint at Bausch & Lomb. His first success came on February 23, 1989, when Magellan's just-off-the-line product made its public debut. Sill had just given one to the editor of a boating magazine. As the editor strolled with it in hand, the contrivance magically tracked his exact position. Shortly thereafter, an enthusiastic article appeared.
Following a basic seed-scattering dictate -- find someone who's doing something that's bound to hit the press -- Magellan put a receiver in the hands of a South African adventurer attempting to set a world record by circumnavigating the planet in a tiny, open boat. Another went to an individual attempting the first-ever crossing of the Atlantic in a solar-powered vessel. After a Magellan sales rep spoke at the Explorers Club in Manhattan, he was approached by the president of the New York Botanical Garden, which was supervising a project in the jungles of Brazil. The project involved plucking leaves from potentially curative plants and shipping them to medical researchers in the States. The problem was how to return to a given plant, the botanist explained. GPS seemed to be just the ticket, but the nonprofit society didn't have funds to buy a NAV 1000 outright.
What did Magellan expect to get from donating a NAV 1000? Free mention. The botanical garden's chief is often asked to appear on TV, and he sometimes mentions brand names of donated products. Furthermore, botanists are a tightly knit international community through which word of mouth would rapidly spread. In addition, donations to nonprofits are, at least for tax-deduction purposes, considered charity, driving the dollar cost of seeding even lower.
A hidden benefit of calculated giveaways is that people from other market sectors call up and identify themselves. Promising user sectors that subsequently tapped Magellan's largess included a treasure hunter searching for the remains of Columbus's ships, a biologist tracking land tortoises in Arizona, the director of research for the Appalachian Mountain Club, and a mapper of the Grand Canyon.
No matter the total expense (undisclosed, but it's no doubt a pittance: let's say 100 units at maybe $800 wholesale each, plus shipping), the seeding concept clearly is paying handsome dividends. In 1989, Magellan's first (but incomplete) fiscal year, sales were $1 million; in 1990, $7.3 million; in 1991, $22.4 million, a sum that includes $7.5 million worth personally bought by Desert Storm soldiers as insurance against getting lost.
The trick to seeding a market is to find the fewest people who can do you the most good. And the technique isn't only for ambitious high-tech companies. On a culinary lark in the summer of 1987, Chris Schlesinger, chef and co-owner of the East Coast Grill, in Cambridge, Mass., bottled up some hot sauce under the unlikely name of Inner Beauty Real Hot Sauce. Ideas for marketing Inner Beauty to the world beyond the grill, a humble establishment in a down-at-the-heels neighborhood, fell to Boone Pendergrast, a transplant from Memphis. The restaurant had hired him to computerize the operation and perform sundry administrative tasks.
With no formal background in sales, marketing, or public relations, his first stop was the Boston Public Library, where he did a database search of articles on peppers written in the last three years. That cost nothing and took an hour. The search yielded a list of about 85 food writers and editors around the country. Pendergrast mailed each a bottle of Inner Beauty and a one-page homegrown press release that began, "Inner Beauty Hot Sauce, hottest sauce in North America, unleashed on general public . . ." That first mailing cost about $200.
