Chapter 11
Marketing
I’ve always been a salesman.
Like many ambitious boys of my generation, I started out peddling the Saturday Evening Post door to door. Later it was stamps and, in high school, women’s shoes. I told all my customers they looked good, which sent them home happy—even if the shoes pinched.
During college I moved on to selling garbage disposals. Each morning, I would drive to an address chosen by my bosses, haul the disposal out of my trunk, and carry it from house to house in my rumpled suit and tie. I was usually drenched in sweat by the time some kind housewife invited me inside to demonstrate my product. I would recite a prepared speech about sanitation and the strength of our disposals and point out that a “dishmaster” came free with every purchase. (The dishmaster was a water-powered brush that connected to a sink’s faucet with a flexible rubber tube. It was a popular accessory in those pre-dishwasher days.) While my pitch was in progress, I dropped glass marbles into the disposal, which crushed them. The marble gimmick always impressed customers because they didn’t realize any disposal could effortlessly break a marble.
From that job I learned to project a lot of confidence. Nothing teaches perseverance like forcing yourself to knock on another door after one slams into your nose. Your confidence can make whatever you’re trying to sell—whether it’s a business plan to investors, an idea to your boss, or a product to a customer—sound irresistible.
I also learned that confidence may get you one sale, but overconfidence can lead you to forget to ask yourself: What do customers want and need? That’s the key to marketing. It was the first thing we considered at Kaufman and Broad, and I continued to ask it throughout my business career. The answer we came up with—and this is always the answer—is value. No matter how much money your customers have, they still want value.
Know Your Customers and What Moves Them
At Kaufman and Broad, we focused on the first-time homebuyer. These customers were always simpler to work with. You never had to wait for them to sell their existing house. Their preferences were less complicated than those of wealthier families or buyers of second homes, who often wanted customized features that would have ratcheted up the price of our homes and disrupted our manufacturing schedule. Our rivals were better at providing higher-end homes than we, as a start-up, could have been. And frankly, I believed that there was more opportunity for growth in targeting first-time buyers—a quick look at the Census data told me there were more of them.
Once you know your customers, you can start to figure out what value you can provide them. In the early years of Kaufman and Broad, there was no way we could offer a customized house with a lot of frills because our customers couldn’t afford one and we couldn’t build one. But we could offer a great first home for a low price. Our defining goal would be to provide our customers the best product they could afford. That should be the guiding principle for most any company.
Many great companies have screwed this up. Steve Jobs’s infamous Lisa computer cost too much to attract the business patrons Apple was trying to grab from other personal computer makers. In another failed product named for a relative, Ford’s Edsel cars were priced so that they competed with Ford’s existing products, confusing Ford customers and keeping others away from the brand. Always try to keep clearly in mind what your customers want and what you can offer. And, I suppose, don’t name things after your family members. You’ll never be able to look at the product with a clear head.
To figure out what our customers could afford, we just had to look at their rent. When Kaufman and Broad started, owning a home meant being part of a neighborhood, establishing some stability, improving your credit, and achieving part of the American dream. No one was in the game of buying and selling homes quickly—what’s called flipping today. Although a lot of people wanted to own a home, they generally weren’t willing to overextend themselves to make the payments. (That came later, when bubbles deluded people into thinking real estate never goes down in value.) We decided to price our houses so that the mortgage payments would be less than the average monthly rent on an apartment. For many Americans, that remains the only way to make buying a home appealing, particularly after a market crash.
Focus on Value Because Your Customers Will
Value is one thing you never can afford to sacrifice.
Sometimes you have to go to extremes to reassure your customers that what you’re selling really is worth what you’re asking them to pay. Kaufman and Broad became the talk of the housing industry by doing just that when we hit our first major slowdown in the 1960s. The California housing market, one of our strongest through the middle of that decade, began contracting. Rather than lower our prices, we sold our customers a secure investment along with a place to live, demonstrating our confidence in our product, our company, and the economy.
In full-page newspaper ads, we made our customers an unprecedented (and, our competitors thought, quite unreasonable) offer: We guaranteed a roughly 7 percent increase in home value in the first year and offered to refund the difference to anyone who wanted to sell at the one-year mark. We promised to cover the mortgage payments for anyone who got laid off or was otherwise incapacitated. In other words, we reassured our customers that the new home they wanted really was a safe investment. And we made sure to assess our risk and to purchase insurance for ourselves beforehand in case our calculations were off.
Fortunately, they weren’t. Buyers flocked to us, we never once had to make a mortgage payment, and our homes appreciated more than 7 percent. The downturn wasn’t deep, it was just some jitters, as we had predicted through our research.
Market Like a Major Player, but Don’t Spend Like One
SunAmerica was a tougher sell than Kaufman and Broad in several ways. Financial products were far more complicated than houses. Our market was national and our potential customers had a wider range of ages and incomes. Our competitors were enormous companies like Metropolitan, Prudential, and Hartford, which had a lot of customers, major name recognition, and ads with recognizable logos—the Peanuts characters, the Rock of Gibraltar, and the stag, respectively. Their marketing budgets were at least five times ours.
It seemed to us, though, that what mattered wasn’t how much we spent but rather what sort of impact we made for our dollars. We leveraged what relatively little marketing money we had to make ourselves look as big as the big guys. We struck up a clever deal with NBC to brand a “SunAmerica NBC Sports Desk.” Our logo and name would appear onscreen whenever the network’s popular sports broadcasters were talking about world-class events such as Wimbledon and the Olympics. We maximized our screen time without having to pay for more than a few minutes of advertising. We thought of it as cost-effective vertical advertising.
Branding a sports desk is fairly typical now, but we were one of the first to do it. To have our name on the desk—on TV all the time and said aloud by respected and well-liked sportscasters—made us look like a much larger company. Our follow-up research with consumers showed that their recognition of our name had gone way up.
This sort of marketing—getting more for your money, looking bigger than you are—is great for a company that’s just starting out. Frankly, you don’t have much of a choice. But it’s just as useful to keep in mind for a larger company. SunAmerica was at the height of its success in 1998, when we again leveraged our marketing budget.
We decided to advertise during the 1998 Super Bowl. We could have shelled out millions of dollars for one of those lavishly produced game time spots that have become the big advertising agencies’ version of the Cannes Film Festival. Instead, we decided to advertise immediately before kickoff and immediately after the end of the game—times we knew that everyone would be watching. As far as customers could tell, we were Super Bowl advertisers, especially because our postgame ad aired before the trophy presentation. But we would spend a fraction of the money. In those days, a game time ad cost about $1.3 million; we got our spots for $250,000 each.
It turned out to be one of our smartest decisions for another reason. That year’s Super Bowl was the famous contest between the Denver Broncos and the Green Bay Packers. Green Bay was the odds-on favorite to win, but with 2 minutes left in the game, the Broncos, led by their great quarterback, John Elway, scored and pulled into the lead. Those last 2 minutes leading into our commercial were the most watched of the game. We got more attention than we would have spending the extra million dollars to buy just one spot during the game. Packers fans were too shocked to touch the remote, and Denver backers were waiting for the replays. We reached them all.
Make What You’re Selling Matter—From the Name and Slogan on Down
Associating our product with sports worked because we were part of something our customers prized: their leisure. Starting with our first model home—the Award Winner—our company’s sales pitch always appealed to our customers’ basic yearning for a comfortable lifestyle. In Arizona we promised them that buying our sunny, low-priced homes with pools would let them “live like a movie star.” We didn’t exaggerate what our homes were—we didn’t advertise mansions but build two-bedroom bungalows. We did, however, help our customers imagine what sort of life they could live in our homes: happy and fulfilling ones. We were selling a backdrop for the good life.
To give anyone a clear sense of how successful we were and how fast we moved, I came up with a great way to pitch our company. I made a calculation, based on how many houses we sold each year, and came up with the line that somebody bought a Kaufman and Broad home every 30 minutes of every working day. That thrilled shareholders, and customers knew they were buying from a strong company, not a fly-by-night operation. I repeated that line—as I do all my good lines—over and over until it caught on, until my employees said it, the press said it, and my investors said it. The line stuck not merely because it was catchy, but because it was true.
With our insurance business, we needed more than a slogan. Frankly, whoever decided to call it life insurance instead of death benefits was a marketing genius. But we wanted to move away from insurance altogether—it couldn’t be part of our name or the way we thought of our company. We had to reimagine and retool our reason for being.
At first we hired a fancy corporate identity consultant to come up with a name for our new financial services company. After weeks of research, they informed us that the hot new trend was made-up company names with an x in them because customers thought the x seemed progressive. They came up with Abraxas. Exciting as it may have seemed to them, my head of marketing, Jana Greer, had the good sense to research the name and figure out it was also the title of a Carlos Santana album. (Imagine the licensing fees on that one.)
After all that fuss, it was Jana who finally came up with SunAmerica. I thought it was perfect. It dropped the word insurance from our title—because that wasn’t all or even most of our business. We kept “Sun” for brand recognition and added “America” to give a sense of our nationwide scope.
With the name set, we devised our slogan. We researched and market-tested what gave people confidence in our skills and what showed our company’s focus on its new mission. Then, we dubbed ourselves “The Retirement Specialist.” Finally, we explained to our employees, our investors, and the press why we were going to be such a successful company. We were riding a major demographic wave by selling to baby boomers, the biggest and longest-living generation in American history, the products they would need for a happy and secure retirement.
It was far easier to sell our retirement savings products once we honed in on that segment of the industry. Because baby boomers were generally spenders and not savers, we rejected the typical ads with scenes of retirees playing golf, traveling, or relaxing with grandkids. Our most effective tagline, created with the number one ad agency at the time, Deutsch Inc., was “How will you spend your retirement?” Our ads featured luxury items like cars and diamond jewelry. We showed what those items cost and what a potential buyer would have in retirement savings if they invested the same amount in SunAmerica products—enough to ultimately buy the car and diamonds and to live comfortably in retirement. It was totally distinct from everyone else’s advertising.
Selling a Cause Requires More Than Conviction
Anytime someone is selling a cause, they often sit back and think they can sell on the merits alone. When I was raising money for the Museum of Contemporary Art and the Walt Disney Concert Hall, for instance, everyone thought that donors would simply see the value in having a museum and a new concert hall. But that wasn’t enough.
To sell a cause, you have to rely on the same tactics as you would to sell a product—and the most important of these is a persuasive story that paints the big picture.
Selling Los Angeles is one of my favorite causes, and one of my hardest sells involved convincing the Democratic National Committee (DNC) to bring its 2000 convention to L.A.
The city’s reputation had been steadily declining. The 1990s were a period marred by riots, fires, earthquakes, and the dispiriting O.J. Simpson trial—not to mention the dramatic decline of our local defense industry and the departure of many corporate headquarters in fields from banking to retailing. But we made the DNC understand that Los Angeles was on the rise and poised to be the city of the twenty-first century: a diverse metropolis embracing the emerging markets of Asia and Latin America and a place where new technologies were flourishing.
Even better, we promised to fund the convention almost entirely with private money. For decades, conventions had relied on taxpayer money, along with some individual donations. Ours would be the first to flip that equation. Unlike donations to political parties, donations to a convention would be tax deductible, which would help bring people on board. And we were sure that Democrats would take pride in saying their convention cost taxpayers very little money.
We also made sure the Democrats understood we were proposing a convention that would employ only union labor and whose volunteers would reflect the ethnic and gender diversity promoted by the party’s values.
We got the convention.