PROF.

FAUSTINOS SPEECH:

THE FIFTH P OF MARKETING

First it seemed the three sales engineers were suffering from an attack of marketing
hubris, namely the state of mind of being insolently confident they would outsell the
competitor with the superior product. The three sales engineers committed to their new
and skeptical boss that they would:
a) outsell the No.1 competitor who had the best product in the market;
b) surpass their sales and profit targets for the year.
But the three did exactly as they proclaimed, consistently outselling the best product in
the market by at least three to one and surpassing what the boss thought to be challenging
sales and profit goals.
The three engineers taught me a good lesson because I was their skeptical boss. No
longer skeptical and instead very appreciative, I determined to find out why this
crackerjack team was so effective. It did not take long to learn their secret, namely:
a) They could sell our product, and electronic intensive care unit, to hospitals.
Selling our product was so simple task because it was inferior to the best
product in the market, sold by a competitor, like us a distributor. So, the first
element of their secret was superior selling skills.
b) After selling the medical instrument the three would quickly assemble and
install the product in the ICU room. They would then train the nurses only
how to use the product but more importantly to use it in a way that would
ensure virtually worry-free operation. So, the second part of their secret was
excellent product knowledge.
c) The third part of their secret was the key element in getting the best and most
inexpensive advertising for our product, that is, a free testimonial or referral
form a satisfied customer. Whenever our product broke down or was not
operating satisfactorily, our engineers would immediately respond and get the
ICU operating again within the same day. Our competitor with the superior
product developed the sorry reputation of frequently making the hospital wait
for weeks, often months, to get their product operating successfully. This third
element was superior customer service before, during and after the sale.
d) The fourth element you can glean from the foregoing three, that is, my
engineers operated as a disciplined and dedicated team. They helped each
other in making the sale, in training the nurses, in getting equipment operating
again, even in planning their marketing strategy and their annual budget.
e) You may ask at this point : who or what developed this crackerjack team, who
could sell an inferior product so consistently? This factor was the easiest for
me to discover, because it was a person, the sales supervisor among the three

engineers. This supervisor was truly super, operating with skilled and
inspirational leadership.
You may be wondering what was my contribution as the boss of this crackerjack team. At
the risk of being facetious, I would like to say that my first important contribution to the
team was nothing. Yes, nothing. I kid you not but let me explain.
I concluded after analyzing the success of this department that the best and immediate
action I could do right away as their new boss was nothing. So, I kept out of their way
and enjoyed my good fortune in having such an effective team.
However, my state of nothingness could not last too long. This was when I started to
contribute to their continuing success. Instead of getting operationally involved, which is
really getting in the way, I occupied myself with the task of motivating the team to
continue their excellent work and to perceive that management appreciated and rewarded
their work.
I did this by keeping them challenged. I would ask the head office to look for better
quality equipment, which however must be related to the market my engineers were
already serving. I wanted them to concentrate in achieving their sales and profit targets
instead of excessively worrying about their product line. I thought also that it was
important to reinforce and reward the superior performance of the team. I would try as
much as possible to reward them as a team. My efforts may appear niggardly and
unappreciated to you because I did not spend much more than was already built into their
compensation system.
Whenever the team surpassed their team goals, I would take them out to lunch in a
restaurant of their choice. It was typical of them not to pick an outlandishly expensive
restaurant to implement this gesture of appreciation. Not once did they want to dine at the
Nielsen Tower or the Champagne Room. Why did I let them choose the restaurant?
Probably because my relationship with the team eventually became built on the best of all
foundations, TRUST, Yes, that is the five-letter word which I used a lot in my
management style and which I tried consistently to serve as an example.
I trusted this team to plan their work, to budget their own expenses, to work their own
plan and to monitor their own performance. I made it my business to know not only what
they were doing but also how well they were doing. My primary objective in being on top
of their performance was not to look over their shoulder or to police their effort. Not in
the least. I wanted to know how they were performing so I could praise, reinforce and
reward their fine effort and results as soon as possible.
Sometimes I would manifest my appreciation with a good word, the veritable and simple
pat on the back followed by the equally simple but sincere, keep up the good work.
Sometimes I would host a meal as I already described. But often the reinforcement of
their good deeds took the form of supporting their requests for action, for funds to
entertain key clients and to sponsor medical events. I perceived my job as cheerleader,

facilitator and resource provider for this department. The engineers responded with
superlative performance.
I had other departments to supervise in this company. There was another department
bigger but certainly not functioning like the well-oiled team of engineers in scientific
equipment team. The optical department had two equal section heads, one in charge of
the optical products sales force and the other supervising the lens-processing lab and the
optical frame production line. These two female managers were equal in ranking and had
significant overlap in their job functions.
It did not take too long for the simmering conflict between these two ladies to emerge and
hinder the progress of work. I certainly had to use a different management style when
supervising this department. Conflict resolution was a skill I had to learn and rely on in
the time I managed this company. I saw how much energy was wasted on internecine
battles and turf protection schemes.
To this day I have thought that although I gave the optical products department the same
support as the other departments, it never optimized its full potential. The simple reason
was that teamwork was not consistent, at times inexistent. The leadership was likewise
inconsistent and tended to concentrate on defending individual turf instead of developing
company wide interests.
I was not able to correct this situation because my overseas boss liked the second
managers business (i.e., optical frame manufacturing) and would not consider
terminating either the business or the manager. It was evident that organizational surgery
was called for but I was prevented from wielding my scalpel.
The Critical Contribution of the Fifth P
These true-to-life corporate incidents emphasize the critical contribution of the fifth P to
the marketing mix and the performance of the brand or product.
Let us move the illustration to a bigger stage, to the reigning king of discount chains in
the US, if not the world. We are talking of WALMART, the most successful and most
profitable discount department store chain in the US. In the last ten (10) years when great
names like Sears Roebuck and Kmart were struggling to keep P&Ls above red ink, WalMart kept steady progress, growing from out of the poorest state in the union, Arkansas,
to a true national chain that has consistently outperformed the big chains in the ratios that
count, namely, growth and profitability.
How have the Fifth P contributed to the success of Wal-Mart so that the chain now has
nearly 5,000 stores and over $100 billion in sales?
First the company had the fortune to be led by an unusual P, a person humbled yet
confident, low key in manner yet dramatic in decision making, a true visionary yet also a
good listener. This man was Sam Walton, who passed away in 1992 at 74. Sam Walton

built and shaped his chain to be one of the biggest, yet avoided the pitfalls that made
bureaucracies out of GM and Sears Roebuck.
There is no great mystique or high technology in running a retail discount business for
general merchandise. It is fairly straightforward business of giving target customers the
best value for their customers. How then has Wal-Mart persuaded their target market, the
urban middle class (perhaps the non-Yuppie bottom half of the middle class) to patronize
their stores habitually and loyally through the years? It is really quite simple on one hand,
and complicated even challenging on the other hand. Let me explain point by point.
Point One: Wal-Marts People Culture
Wal-Mart culture has a bias for action and renewal, that characteristic featured in the
book In Search of Excellence which describes an organization where taking action is so
encouraged that managers who take action even under uncertain circumstances are
praised and promoted. At Wal-Mart, a manager who decides, takes action and fails is not
penalized.
In fact, managers are expected to change and innovate daily. At any time, Wal-Mart has
250 experiments going on in its stores, many in secret. Failure in experiment is not
penalized but failure to experiment is. Thus, through the years, Sam Walton and his top
management team have encouraged, goaded, threatened, invited Wal-Mart people to push
the outer limits of customer service to higher and higher levels. Other older, bigger chains
have sent their managers to study Wal-Mart but their efforts to imitate Wal-Mart success
have fallen short. Why? That is the simple part: discover Wal-Mart people are different
from their people. The hard part is: How do the other chains mold their people the same
way?
Point Two: Focus on Simple Action Principles
These people principles at Wal-Mart are so simple and so familiar many would call them
trite.
1. THE CUSTOMER IS THE BOSS. Many organizations pay service to this wellbannered principle but most do not support beyond lip service. For W-M,
everything it does, buys, changes have to go through that screen. And who passes
it through that screen? The W-M people themselves at the lowest levels. Certainly
the customers king but who gets involved in analyzing it, designing it, planning
and implementing it? At W-M, the people at store level.
2. EMPOWER THE PEOPLE, YES, BUT VEST THEM WITH THE RIGHT
CLOTHING. W-M does not call its people employees; they are perceived and
called ASSOCIATES. Suppliers are treated with the respect and involvement of
true PARTNERS. Result: both associates and partners are stakeholders not only
financially but also systematically and psychologically. These partners believe in

that stake, role and contribution, so it is not difficult to understand why they
always give 100%, not the more typical 50 to 70%.
3. MANAGERS ARE SERVANTS. W-M managers report to a head office that
would make Sears oldest warehouse look like a palace. Honestly, Sam Walton
designed it so head office managers would go out and call on the stores and not be
tempted to stay home all the time. When they are visiting, head office managers
would observe, praise, ask how they could support the store in reaching its targets,
making innovations succeed.
4. KEEP COSTS DOWN AND PASS SAVINGS ON THE CUSTOMERS. You do
not hear of outlandish salaries and perks for W-M executives, yet few would leave
for troubled chains in spite of greater money. No other retail had the same culture
and self-actualizing career conditions. The emphasis was to keep costs down from
the start and keep it down so you would not have to cut when conditions were
tough. But when there were savings, the customer enjoyed the better price
immediately.
5. REWARD THE ASSOCIATES, ALL OF THEM. Down to the lowest level of
associate, W-M pays 5-6% of each basic pay as profit sharing. Most of all, it
rewards associates by providing an exciting place to work, where they had a sense
of achievement, growth and recognition.
6. CONVERT INFORMATION INTO ACTION AS QUICKLY AS POSSIBLE.
This is most difficult for big company bureaucracies to accomplish. First
information goes up at crawl speed, then decisions go down even slower because
of turf protection, excessive layers and procedures. W-M converts information
into action quicker than any chain. Result: W-M beats them to the punch every
time.
In closing, I want to pose to you this question, this challenge. Are you empowering your
people to function effectively as the fifth P in your marketing mix? Or have you
surrounded it with a bureaucracy that is in turn surrounded it with a bureaucracy that is in
turn surrounded by land mines for those who innovate and initiate?
Have you created and developed a people culture that makes it possible for your people
to give their very best contribution, instead of the fraction that most employees give?
Your fifth P in marketing is probably your best and lowest-cost source of additional sales,
profit and market share.
Remember, the fifth P is your People. Only after you have optimized them van you enjoy
your sixth P. and of course that is your Profit.
Thank you.