In this episode, we have our guest Mark Jaffe from Strategic Growth Consulting, who discusses how macroeconomic trends impact consumer behaviors. He also shares his insights on what business owners might do to combat uncertainty associated with macroeconomic factors by understanding customer behavior better and shifting the mindset from cost-saving to opportunistic organization. He also shares several stories of companies that faced macroeconomic uncertainty but ended up growing instead.
Chapter Markers
- [0:23] Intro
- [2:47] Personal journey and current focus
- [5:04] Perspective on growth
- [18:50] The role of marketing
- [8:25] Macroeconomic factors driven consumer behaviors
- [13:06] How to take advantage of macroeconomic conditions?
- [22:31] How to instill marketing mindset?
- [26:05] The motivation of decision-makers
- [27:43] Closing thoughts
- [28:31] Outro
Key Takeaways
- An inflection point is usually between decision or no-decision. And oftentimes, the mistake that people make when running companies is they elect to make no decision because they don’t realize they’re at an inflection point.
- When you are siloed in an organization as a CFO or as a marketing professional. You oftentimes focus on “what is” you don’t focus on “what should be”.
- Companies often silo their core value proposition to those audiences that they’re most familiar with or that it was originally intended, when oftentimes, even more, valuable targeting can occur with two completely different target audiences.
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About Mark
With over 40 years of experience, Mark Jaffe grew Walt Disney Records from a $30M company to a $120M company while he was President. He has also grown topline revenues for over 100 clients in the last fourteen years with a cosmetic company achieving a revenue jump from $2M to over $60M in five years and many client companies doubling in size in less than two year’s time.
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Full Transcript
Mark Jaffe 0:00
And again having an entertainment experience that not only could be experienced by children alone but shared with their parents, once again, not fighting the lack of traffic in the in these resort destinations, but expanding the definition and the execution of the core value proposition to where the customer is going now.
Intro 0:23
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations are finance leaders looking to learn growth strategies from your peers and competitors. You’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.
Sam Gupta 1:00
Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at digital transformation consulting firm ElevatIQ.
No one appreciates uncertainty. It is even more frustrating when the uncertainty may not be in your control. And if you’re an executive of a company, navigating through difficult times has a toll on everything. The uncertainty could be related to macroeconomic trends such as recession, trade tensions, or merely changing consumer behaviors. These macroeconomic factors directly impact not only the top line but also the bottom line. What would you do if your job was to help a company navigate through difficult times?
In today’s episode, we have our guest Mark Jaffe from strategic growth consulting, who discusses how macroeconomic trends impact consumer behaviors. He also shares his insights on what these owners might do to combat uncertainty associated with macroeconomic factors by understanding consumer behaviors better and shifting the mindset from cost saving to an opportunistic organization. He also shares several stories of companies that faced macroeconomic uncertainty but ended up doing well instead.
Let me introduce Mark to you.
With over 40 years of experience, Mark Jaffe grew Walt Disney records from a $30 million company to a $120 million dollar company while he was president. He has also grown top-line revenues for over 100 clients in the last 14 years, with a cosmetic company achieving a revenue jump from $2 million to over $60 million in five years and many client companies doubling in size in less than two years time. With that, let’s get to the conversation.
Sam Gupta 2:42
Hey, Mark, welcome to the show.
Mark Jaffe 2:44
Oh, thank you so much. I’m really glad to be here.
Sam Gupta 2:47
Okay. It’s my pleasure, Mark. And I’m super excited to dig into your experience. But before we do that, just to kick things off, do you want to start with your personal story and your current focus?
Mark Jaffe 2:55
Yeah, I would love to do that. Sam, thank you. So it’s interesting when we all think about our careers, you know, they’re the people that have it all planned out at 25. I’ll do this at 35. I’ll make triple my age at 45. That was never, ever my approach. I was always the guy who just wanted to do things I was passionate about. I mean, it sounds like a crazy career path. But it really does work. And the one thing I’ve always been passionate about is really figuring out what the other person needs, and how, as a company, I can give it to them, not for free, but give it to them, how can I satisfy their needs.
And I remember my first job. My first job was with A&M Records, which, as you might remember, was this massive pop label with all sorts of hits from the police to Janet Jackson. And, you know, all I mean, there, Peter Frampton, I mean, all these great hits of the 70s, 80s, and 90s. And they said, how about if you start a children’s label, and I said, I’m willing to do that, as long as we do it differently than it’s ever been done before, because back then The Walt Disney Company at all this music out for $1.99 for cassettes, and I said, That’s not what parents want. The macroeconomic trend for parenting in the 80s. And 90s was not to lock your kid in the room with the music and say, come out when you’re done because I can’t stand it.
Mark Jaffe 4:16
It was participatory involvement with kids. So I said, we can’t do it the way it’s always been done. Let’s do it differently. And I discovered this guy in Canada named Rafi and grew the A&M children’s entertainment group from zero to $15 million dollars in five years as a result of understanding this coordinate for parents to bond and be with their children and giving them the products that enabled them to do that.
Similarly, right after that, when the Disney Company recruited me to run Walt Disney records, I grew that division from $30 to $120 million dollars over a five year period, not only by releasing soundtracks like the Little Mermaid, Beating the Beast in the Lion King but developing products that allowed parents to equally enjoy the music and enjoy their work. At the same time, children were enjoying the music.
So in essence, what we were able to do was to truly understand what those consumers of media needed at the moment, and how we can give them products that satisfy their current needs, as opposed to what many companies still do, which is say, here’s what we got. Here’s why you’ll like it. And that never really works. And they don’t even have the statistics to back it up.
Sam Gupta 5:04
So those are some compelling stories that we want to dig deeper into. But there is one standard question that we ask all of our guests, and that is going to be your perspective on growth. What does growth mean to you, Mark? For me, growth is when revenue is increasing at an increasing rate, oftentimes was in a sustainable and replicable way. It’s important to add that because we’re not going to increase revenue in a way that’s not sustainable, replicable, or profitable.
But what I often find is that many CFOs, CEOs miss the moment of inflection. A lot of people think an inflection point is when you go right or left, you’re at a fork in the road. But most of the time, that is not the case.
Mark Jaffe 6:17
If you’re on the road, and you don’t realize it’s time to make a decision. So it’s not between decision A or decision B. An inflection point is usually between decision or no-decision. And oftentimes, the mistake that people make when running companies is they elect to make no decision because they don’t realize they’re at an inflection point.
How do you know that this is the moment for you to consider your an inflection point to do an examination of your business to understand the next horizon of growth you need to be on it could be either because your revenues are increasing at a decreasing rate because your marketing spend becoming increasingly inefficient. And as we know, in digital marketing now, there are so many measurements that could help you figure that out or that your operating income is dropping for reasons that you don’t understand.
Mark Jaffe 7:11
Now, these horizons of growth are really interesting because when you consider the average growth curve, as you add curves up at an increasing rate and then slowly starts to flatten, one might think the time to consider the inflection point is at the moment you start to see it start to flatten, I would suggest it’s before that because what you’re doing is creating a new growth curve that sits on top of the old-growth curve.
I remember I had a company that developed makeup application devices. We completely altered their core value proposition to reflect the fact that women had different needs than they had originally thought. And as a result, they were on an exponential growth curve. I came to them and said, You’re at an inflection point. They looked at me like I was crazy. They were increasing at an increasing rate.
Nevertheless, we embarked on a very exhaustive strategic analysis and realized that there was another growth curve that was possible by venturing into an adjacent space. I mean, this is a company that’s grown from $2 million to over $60 million in five years as a result of aggressively challenging its current business model at the right time and acting appropriately.
Sam Gupta 8:25
Okay, amazing. So when we talk about understanding the customer needs, truly, if I actually did the study with a lot of companies, I mean, they probably all are going to claim that they really understand their customers, right? But growing something from, let’s say, $30 to $120 million dollars is a big deal.
And you like to emphasize a lot on the macroeconomic factors to be able to understand these consumer behaviors, and that I find fascinating. So do you have any stories that you would like to share regarding these macroeconomic trends? How were you able to capitalize on them, and how were you able to grow these companies?
Mark Jaffe 9:03
Well, yes, I do. As a matter of fact, one of my favorite stories involves a B2B supplier of production materials to entertainment studios and television production companies. As you might remember, a number of years ago, there were threats. Ultimately, those threats were realized that China was going to raise tariffs on aluminum and steel materials, which was a large majority of the raw materials that went into the production of these products.
The companies heard from customers, and they have petrified themselves that they were about to engage in a huge drop in sales as a result of the price increases that would be imposed upon them and their customer’s inability to pay, and we went into a meeting to try to talk about how we could say reduce production time how we could save expenses, and in that meeting, I realized that was not the answer. In essence, we were fighting the macroeconomic trend, and for any of you who are horseback riders, what it’s like to fight the horse when it’s ready to go back to the barn.
Mark Jaffe 10:05
That is not a strategy. So I said, how do we ride the horse in the direction it’s going? How do we use this macroeconomic trend to our advantage so that we can increase our top-line revenues at a reasonable cost? And we realized that as afraid as we were for these tariffs to impact our sales, because of the dramatically increased costs, so afraid, where our customers and what we did is we have relatively simple ideas, some greatest ideas tend to be that way, we instituted a pre-tariff sale at full price for our customers to not only order in advance but scheduled delivery in advance of all of these products, without any tariff increase.
And we were able to do that because we ordered all the raw materials in advance at the pre-tariff prices. As a result, their sales on that pre-tariff sale, which wasn’t really a sale, because it was a full price, was 200% higher than any other sale or promotion they had ever put together. And it’s all because we took advantage rather than fight the macroeconomic trend of macroeconomic conditions that we were facing at that moment.
Mark Jaffe 11:23
Another one that comes up, and I just think it’s so fascinating, involves the response to the pandemic. There’s been so much written on how everything is changing as a result of the pandemic. I think what it does is it creates a construct where we’re doing things we might have considered even sooner necessity becoming the mother of invention.
This particular company is a B2C company that sells products at retail in resort destination areas. These products are customizable toys. What they noticed was that their customers’ overall toy sales have decreased dramatically as a result of the lack of visitors during the pandemic. And they’re like, what can we do. So we decided to engage again, in a reexamination of what their customer needs, and why their customer is going, and patronizing their store. And we quickly realized that it was not to buy a customizable toy. They were customers that were going to an entertainment destination in search of entertainment.
Mark Jaffe 12:25
So, we were actually more of a location-based entertainment environment that made money not by charging admission fees but by selling customizable toys. And so what we’re doing currently This is a current client is we are transferring that entertainment experience to an online environment where people are very accustomed to having entertainment.
Again, having an entertainment experience that not only can be experienced by children alone but shared with their parents, again, once again, not fighting the lack of traffic the in these resort destinations. But they are expanding the definition and the execution of the core value proposition to where the customer is actually going now, which is online.
Sam Gupta 13:06
Okay, so obviously, these stories are extremely exciting. And as a manufacturing executive, if I think about it, obviously, who doesn’t want growth, but getting from point A to point B is always sort of difficult. So what I would like you to touch is an order of operations here. Let’s say if I would like to explore some of these macroeconomic either conditions or levers in my organization, and I want to take advantage of them.
So what will be the process of number one studying and number two, taking advantage of them. Now, you can talk about this from the perspective of the existing examples that you have already provided. So it could be breaking down these stories one level down, or it could be you could take a hypothetical example in creating this process in understanding how we can go from point A to point B.
Mark Jaffe 14:09
Just for fun, I’ll bring up a new story if you don’t mind. So the more, the merrier. I love telling stories. Who doesn’t? So it’s a client that is a furniture manufacturer that came to me right after the recession and said,
Now what I mean, in essence, sales are dropping dramatically. How can we increase our sales in a period of recession? And what we did is we did an exhaustive examination of the conditions at retail to understand what the buyer wanted. It’s so interesting. You would think, oh, furniture, a B2C customer, let’s understand what the consumer wanted.
But in this case, and this is where it’s applicable to B2B sales. In this case, the issue was not what the consumer wanted. The issue was what the buyer wanted. And what the buyer wanted was a way to have dramatically increased sales with dramatically decreased access to inventory because they’re buying less inventory and assistance of unfair salespeople because they’re firing on poor salespeople.
Mark Jaffe 15:09
So we realized that what this customer was was a brand-centric furniture manufacturer. And for any of you look around the furniture in your home, you don’t really know who makes it. So how could you be brand-centric? How could you be fashion-forward brand-centric because there is a real way that they put together furniture that resonated with these target consumers?
So how did we satisfy the buyers’ concerns? We basically realized that in that environment, when there’s no backup on-site or off-site inventory that is easily accessible, and the long lead times to selling in furniture, that when a furniture group of three, or five or six pieces were taken away by someone buying two or three off the floor, you now had three orphans that were taking up more space and not producing sales.
Mark Jaffe 15:58
And we realized that the first way to solve that was to create a larger group of inventory across a number of different styles that people can mix and match together. So we took our top five best-selling models, adjusted the colors, adjusted some of the finishing touches on how they were designed so that they all work together, and then encouraged each of the retailers to not buy a grouping of five but by three groupings of five.
Now you’d naturally say, well, that’s not going to work, because they don’t want to buy the first five, why would then buy three groups of five? Well, a number of months earlier, I was strolling through the warehouse, which by the way, I think every executive, no matter how you’re consulting, a company should stroll through the warehouse and the manufacturing facility.
Mark Jaffe 16:46
Because if you don’t understand where the battle is fought, you will never win the war. And off in the corner, I remember seeing this massive mound of I don’t know was dusted the what it was? And I said to the CEO, I said, What is that massive two-story mound of stuff. He said, For the last 40 years, we’ve been throwing away all of our scraps of material, and we really need to get rid of it. It’s a fire hazard. I know we’re gonna get cited.
And I said, Now, don’t get rid of that. Those are assets. Those are millions of dollars and written-off assets. And we can make pillows, and not only will we make pillows, but we will solve our problem of getting the buyers to buy our extra inventory by giving them away because that fabric which is a beautiful, fashion-forward fabric that you’ve been using on your furniture can make beautiful pillows and pillows, as you know have very high-profit margins.
Mark Jaffe 17:42
So we took a lot of leftover lumber, created beautiful furniture, what pillow walls, stocked them with furniture, and said to the buyers, they’re free, they’re absolutely free. And the buyer would say, well, these are 1000s of dollars worth of inventory you’re giving us for free. What do we have to do?
And we said buy three groups of five pieces of furniture and allow us to have our self-directed sign telling people how to play and use the furniture since we know you don’t have any salespeople. The result? I found out three years later. It was even greater than I had thought they invited me out to dinner to tell me that their $55 million company three years later had gone over $100 million.
And I said to them, what else have you been doing besides those strategies? They said nothing else. That’s all we need to do. We wrote up this recession and nearly doubled our company’s revenue as a result of the strategies that you talked about virtually no cost of goods sold on the pillows, and minor design and manufacturing tooling costs on the changing the furniture.
Sam Gupta 18:50
Okay, so. It’s a very fascinating and interesting story. In fact, I mean, I remember my conversation today, and I appeared on a podcast as well. And we were talking about why everybody either should have the marketing mindset in the company or marketers should be involved beyond sales as well. Marketers should not be just limited to three tails. And that’s how the majority of the organizations operate, that they are limiting their monitors only before the peace process.
Sam Gupta 19:19
So this is what we did. We were discussing that when CFOs or CEOs look at anything, their perspective is very different because their perspective is going to be slightly more efficiency-driven, the cost-driven what when marketers look at the same problem be looked at from a very different perspective, they look at it from the opportunity perspective, and you could have a lot more innovation just by changing the messaging or just by changing the packaging, and you could create an additional product line, you can create additional revenue. So this story sounds similar. What would be your thoughts on that? Mark?
Mark Jaffe 19:52
Absolutely. And I would add one other thing when you were siloed in an organization as a CFO or as a market being professional. You oftentimes focus on what is you don’t focus on what should be. You focus on what is, and you’re doing incremental steps to change what is. I want to give you a great example of a company that was decided that they were not going to do that.
It was a company that I worked with extensively a number of years ago, back when there were tremendous financial irregularities in financial reporting. This company’s value proposition was to assess accuracy in corporate financial reporting and to report that to individual investors so they can make better investment decisions.
The head of the company was troubled by the fact that they were getting high turnover high churn with this B2B or B2C service. And I said it’s the wrong way to go. They are not the big consumers of that information to make important and valuable decisions.
Mark Jaffe 20:59
There are B2B companies that need to know whether or not the financial reporting to the SEC is correct. And those are your bigger customers; they have those needs; what would be great examples of that DNO insurance companies are getting sued right and left as a result of the fact that the actual reporting was incorrect that investors relied upon it.
And they went to the Board of Directors as a result of allowing that incorrect reporting to occur. They were our biggest companies. I spent so much time in Bermuda talking to these insurance companies and signing them up. As a result, you’re not going to believe this one. But the SEC was a big customer. Why? Because as the head of corporate enforcement told me, you do the first 80% of our work, not only do you identify every single one of the metrics that could conceivably be out aligned, but you tell us exactly where we do the next 20% in identifying the specifics and the kind of corporate enforcement work that we do to identify companies that may be incorrectly reporting.
So what I find particularly interesting is that companies often silo their core value proposition to those audiences that they’re most familiar with or that it was originally intended, when oftentimes, even more, valuable targeting can occur two completely different target audiences. And this is a great example of really bridging that divide, abandoning the B2C approach, knowing that more fertile pastures are in B2B sales.
Sam Gupta 22:31
Amazing. So very interesting story again, and now I’m actually going to ask you for some advice, right. And that advice is going to be for the executives. So, Mark, you have been president, yourself of a company, and then you will have a significant marketing background.
But if we look at the state of manufacturing, especially in the SMB business, most of the SMB businesses start just because they are good at something, they have creators, they are not as sharp marketers. So let’s say if you have a President, I mean, who might not have a sharp marketing background, they would have got a bunch of customers, they would have succeeded, they would have survived.
But now, they want to instill this marketing mindset in every single employee that they have. So what would be the process for that? Is it going to be to hire a marketer and involve them in every single process, and some of those processes could be, for example, ERP implementation?
This is what we were talking about this morning that marketers are very rarely involved in the digital transformation initiatives or the ERP implementation. So as a president, let’s say if you don’t have any marketing background, what do you do to make sure that you are able to capitalize on these opportunities inside your organization?
Mark Jaffe 23:44
I really think that it is involved in utilizing each of the different departments to get their expertise in pursuit of a common goal. And perhaps the easiest common goal to go after is to try to understand what the catalyst is for a purchase decision. I remember I had a B2B company that sold UV lighting systems as a customer to create reduced air pollution and reduced bacterial involvement in air conditioning dogs because these UV lights using UVC light actually kill bacteria.
And they’re which was a wonderful value proposition who wouldn’t want cleaner air, but they didn’t understand. The CEO didn’t understand why marketing and sales couldn’t deliver more customers. And when we did the analysis with marketing and with sales and did a deep-dive interview with each and every one of them, we understood that the catalyst for driving a purchase decision was not air purification as valuable as that is or health benefits as valuable. It was really economical.
Mark Jaffe 24:55
These owners of office buildings, these owners of factories, these owners of hospitals, when you think hospitals would care more about health? Nope, they cared about economic. Why? Because they would have fewer maintenance costs, there’s less bacterial buildup on the airfoils in the ceiling. They would have a greater reduction in energy bills because with reduced bacterial goes up. There’s less airflow, less energy required to generate that airflow.
This all came as a result of having these types of in-depth conversations, having people not continue to work in the business but work on the business. And as a result of that, the insights that are actionable are incredible. And it’s a result of these types of conversations. We developed vertical marketing plans that isolated each of the economic benefits in the different vertical markets. And that became the focus for the increased sales that this company realized and ultimately was able to sell out.
Sam Gupta 25:55
Okay, amazing. So this is an amazing story. And you said that you know, you have so many stories. Mark, I want to give you one last chance. Do you have any other stories that you wanted to share but could not?
Mark Jaffe 26:05
Wow, I don’t know where to where to take that anymore when I think about the stories. But the most important message that I want to leave is understanding the motivation. Alright, fine. I’ll do one more story related to the motivation of the decision-maker; I remember there was one software company that I was working with that developed a solution that made the lives of workers easier, that made them more efficient, that made them better at what they do. And that gives that gave them higher enjoyment of their task and their responsibilities.
And naturally, you would think that these workers would be the ones who would bubble up to their bosses. The bosses would obviously recognize this and make a decision to purchase this enterprise software. But it didn’t. They didn’t. And what we realized is that the purchase motivation of the head of the company was not to make the head of this classification of companies, was not to make their workers’ lives easier.
Although that seems like it would be a very admirable motivation, it was actually to make them more informed by the data that was being assembled in a more effective way for them to make better decisions. And so we wound up adding a data analytics tier to this already very highly functioning software engine so that the decision-maker was able to realize a benefit that they personally wanted to realize, in addition to the benefits for those who reported to them.
Sam Gupta 27:43
Okay, amazing. So that’s a good remark we have any last-minute closing thoughts, by any chance?
Mark Jaffe 27:47
Well, I think I go back to what we said originally, which is, it’s a simple equation. But if you were to keep your eye on this ball, you’ll hit it out of the park every time you find out what your customer needs, and give it to them in a way that they know that you are the best and potentially only provider of that solution in that way that 100% satisfies their needs.
Sam Gupta 28:12
Okay, amazing. My personal takeaway from this conversation is going to be understanding your customer needs is a much deeper exercise than you would think. So make sure that you really understand your customer needs. So on that note, thank you so much for your time and insight, Mark.
Mark Jaffe 28:28
Well, thank you so much, Sam. I really enjoyed the conversation.
Sam Gupta 28:31
I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Mark, head over to MarkJaffe.com. He can help you create new revenue for your company. Links and more information will also be available in the show notes.
If anything in this podcast resonated with you and your business. You might want to check out the related episodes, including the interview with Jim Gitney from Group50, who shares his thoughts on each inflection point for companies and what they need to know to identify them and move to the next by making necessary changes. Also, the interview with Jeff White, who discusses why it’s so important to identify the ideal customer profile for your offerings to streamline your growth.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.
Outro 29:37
Thank you for listening to another episode of the WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.
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