A consumer sales staff consisting of Vetras and two sales reps ought to be enough to sell what many agreed was the best stuff on the market, Narodick figured. One reviewer would dub Thinkin' Things "quite simply the finest children's software ever released." Who wouldn't clear a space on a shelf for that?
Having promised shareholders that Edmark would remain profitable even during its formative years as a consumer-software publisher, Narodick allocated only a nominal budget to promote Edmark's two new products. There was little money for trade advertisements, merchandising gimmicks, or promotions. "We thought that stuff was expensive fluff," says Vetras. "We were above all that."
While Narodick's prudence comforted shareholders, it struck retail buyers, who expected a little show business, as weakness. Four products, only two of them related, didn't make a complete line. And competitors, many with dozens of products and buckets of bucks, had launched aggressive promotions to persuade retailers to stock their lines. Without the marketing dollars or the promotional pizzazz to push products through, "we were fighting bitterly for shelf space," says Vetras. And losing.
"Our competitors were in those retailers' faces every day," says Narodick, "with buy-two-get-one-free giveaways, rebates, money-back offers. We didn't know it until it was too late, and we got elbowed out of the way." Adds Stanger: "Basically, we were too timid." And too tardy.
The buy-in season, when retailers were open to new titles, had passed before Vetras had come on board. Some of the retailers that did pick up the Edmark line couldn't always reorder when the inventory had been sold; they had maxed out their credit lines to stock products from Edmark's competitors. The company was facing stock-outs around the country. Board members and customers were calling to report that Edmark was absent from the shelves of key markets. No product in San Jose's Egghead? What was going on? The company had no way of knowing where or when product was sold out. The wasted opportunities were too many to count.
As the holiday season of 1993 drew near, Edmark claimed distribution in fewer than 2,000 outlets. Not a single superstore carried the entire line. "It was nothing but pain every day for half that quarter," says Vetras.
Disappointing sales -- only half what Narodick had projected -- left employees' spirits deflated. Revenues of $8.7 million that year netted only $125,000 in profit. The stock went nowhere. Bonuses were lean.
"Does this mean the doors are closed on us?" Narodick remembers thinking. "Are we left out of the game for good?"
* * *
A superior product -- even one that boasted bright little characters singing and dancing their way through the alphabet -- wasn't enough to make retail buyers fall in love. Edmark's precocious cat, its clever cow, and its irresistible orangutan had won the hearts, Vetras says, of "the tweed-jacketed, Volvo-driving 130-plus-IQ set" who shopped at specialty chains. Unfortunately, those buyers were a limited species.
Without wide distribution in the superstores and with mass-merchandisers dominating the retail trade, there was no way Edmark could build its brand. And without a brand identity, there was only a slim chance Edmark would survive the crazy reel of growth sweeping its $650-million industry. "This market would leave us in the dust," says Narodick.
A royal flush of products, properly promoted, would have to ensue before big retailers would cede shelf space. The company had to become as good at selling those products -- to the retailers who resold them -- as it was at making them.
"I always knew the retailer was my customer," says Narodick. But her intellectual acknowledgment didn't dissolve the distance between her and retailers: she still didn't identify "quite as intimately," she says, with the customers who stocked and sold the product as she did with those who took it home and used it. "After all, I'm one of them," says Narodick, a mother of two and a school trustee. "I go to PTA meetings. I use these programs with my kids. I understood what parents want, what kids need. I didn't know what retailers want, what they need.
"I didn't understand the theater of retail," she says. "That I had to learn."
And so Narodick, formerly a straight-A student voted girl most likely to succeed in Clinton (Massachusetts) High School's class of 1962, set out on a remedial course. Dan Vetras, a self-described "dumb offensive lineman" for the very same high school a decade later, would be her tutor. "Dammit," she told him, "we're going to do what it takes to play in this game. Just show me the drill."
"We had to recognize the power of the channel," says Vetras. "And stop thinking all we had to do was sell through it. We had to sell to it."
Maybe some buyers had a place in their hearts for wholesome, high-quality products that helped kids learn. Maybe others had a bigger place for splashy promotions and free drinks. In either case, they didn't have time to listen to every vendor regale them about the quality of its products, Narodick learned. "They wanted to know, Is it going to turn quickly? Will there be more products coming? Would we promote them? Could we generate excitement?" she says. Those were new questions that the old homework hadn't prepared her to ace. So she looked for extra help.
Doug Mackenzie, a fan of Edmark's products and a partner at the prestigious venture firm Kleiner Perkins Caufield & Byers, obliged by leading a round of equity investment that put $5.5 million into Edmark's coffers, paying the market price of $10 a share. Edmark could afford to merchandise in stores and to place ads in the trade press and in consumer magazines.
Narodick braced investors for the three quarters of losses Edmark would report to soup up its selling and add new products. Stanger staffed up in development and hit the fast-forward button. The company doubled its line to eight products in less than 12 months. It was "the most amazing team effort I've ever been a part of," says Stanger. Programmers, engineers, and animation artists worked into the dead of night for months. ("If anyone here thought this was just a job," says product manager Henry Shires, "they'd be in a world of hurt.") By summer the development staff had working demos of Sammy's Science House, the third in Edmark's early-learning line; Thinkin' Things 2, the second in its critical-thinking line for 4- to 8-year-olds; and the first two titles in a line called Imagination Express, a series of interactive story-writing programs for 6- to 12-year-olds.
