A Product Marketing Executive at Apple Drives $600 Million More in Sales by Convincing Apple'e CEO to Let the Customer Decide about the Future of his Product

Intro: 0:01

You're in the marketing world and you're looking for inspiration, or you're a business leader who wants to understand what good marketing looks like. You're busy. You don't have time to sit around listening to a rambling 3 hour podcast. We get it. This is the Remarkable Marketing Podcast, where we celebrate the marketing rock stars that deliver truly remarkable marketing, when you'll hear short interviews with marketing execs who share stories about the best marketing they've ever done, how it delivered a huge impact and how they overcame all the challenges to make it happen. If you aspire to be remarkable, you'll walk away with ideas on how to do truly epic marketing. Getting right to the content of what you need for busy professionals, this is the Remarkable Marketing Podcast. Now your host, eric Eden.

Eric Eden: 0:56

All right, all right. All right. Welcome to the podcast. Our guest today is David Freiden. David is a classically trained product manager. He started his career at HP and was recruited later by Apple, and he's going to share a story with us about that today. He's also the author of several great books, including Building Insanely Great Products, and we'll link in the episode to all of his books. He has a number of them and he also has a number of course he teaches on product management and product marketing, which we'll also link to so people can check this out. Welcome to the show, david.

David Fradin: 1:35

Glad to be with you.

Eric Eden: 1:36

Appreciate you making the time to talk with us today. I understand that your background in product management and product marketing is always a part of marketing that I think is often not focused on enough by marketers, and so I thought it'd be great for you to join us today and tell a story about some of the best product marketing that you've ever done.

David Fradin: 1:58

It'd be happy to. Well, I was recruited by Apple from HP because I was an HP product manager and product managers at HP perform both roles of product management and product marketing, and the people at Apple are always called product marketing, even though they did frequently product management. So everyone was confused. And if you go back to the history of product management and product marketing, it dates back to brand management at Procter Gamble in 1932. It was adopted by HP when the company was started in 1938. But one thing that changed, however, is that a brand manager had budgetary management and control over the product or the product line. But in the product marketing definition of HP and later Apple and all the other companies that have adopted product management and product marketing worldwide, the budgetary authority was taken away. So Apple recruited me to join the company to break the first hard disk drive to market on a PC. It was a fantastic product. It could handle five megabytes of data and it was very cheap, was only $3,500. Most people couldn't understand what they could ever do with five megabytes of space, which seems kind of ludicrous today where we have terabytes for $50. And they noticed in the personal computer systems division that I knew how to manage. So they asked me to come over to that division to be the group product manager for the Apple 3 product line, taking over for what Steve Jobs had done three years prior and what Trip Hawkins had done about two years higher previously. And Trip went on to found electronic arts and About three weeks into the job I got a call from one of my Product marketing managers that worked for me as a group manager and he said the product line has just been canceled. That's the. What are you talking about? And he wasn't sure and my division manager, paul Daly, didn't know anything about it because we're an off-campus planning retreat at the time. About a week later I was walking out of the corporate headquarters so the Marriotti building of the ads of Boulevard and Cupertino, california, and I had a coal round out and grabbed me and she was the marketing manager for the personal computer systems division and she says John wants to talk to you and I said John who? They said John Scully and the president's. Oh yeah, I'm a couple of times. So they took me in a little conference room and John was sitting at the end of the table looking at a super-visical spreadsheet and I had a coal sat down across from me, del Yocum was Angles from me. He later became president of Apple. What the time he was the VP of manufacturing, joe Graziano was the chief financial officer and he sat next to me. He went on to be in the CFO at some micro systems and then came back to Apple. So John says I'm looking at this spreadsheet and it looks like we got about 20 or 30 million dollars in piece parts for the Apple 3 spread in our Manufacturing facilities in Cork, ireland, dallas, texas and in Singapore. What should we do about it? Now, in today's terms that would be about three or four hundred million dollars in inventory. The company sales at the time was just a little over a billion. So we're in bed. A huge hit on the stock price, as John Scully stock options if we didn't do something Appropriate about it. So he was very concerned. It says so what should we do about it? I said first, the spreadsheet you're looking at that tells you the inventory One's on an Apple 3 and you just canceled the product line. Second, what do you mean? We pale face. And he didn't get the joke, so I had to explain it to him. I said back in the 50s and 60s there was a good guy, white man, called the low ranger, and he galloped around in the desert wearing a Mask and had one silver bullet and he had an Indian sidekick by the name of taco. Now, when I tell the story to Indian Indians from India or in India, act to say it. He had an American Indian sidekick and they, surrounded by 10,000 yelling, screaming Indians, american Indians and lower-aged or turns the cocktails as what should we do? And Potsaw says what do you mean? We pale face, using the explanation of what the Indians used to call white man. So I said look, I tried to put together a promotion for the Apple 3 and I took it to the Promotions marketing group in my division. Who, in turn, takes it to the promotions marketing group at Corporate marketing, who, in turn, takes it to retail marketing. Who, in turn, takes it to the sales force, who, in turns, takes the promotion to the, the principles of the manufacturing rep firms that we had and distributors around the world. Who, in turn, takes it to the sales people in those rep firms. Who, in turn, take it to the principal and each of our dealers and we had 1800 dealers worldwide who then take it to the salesperson that meets the customer on the floor I said I'm eight levels removed from having impact on any sale and I took a part-time job when I joined Apple at my local computer dealer as a Apple salesperson, just to know for what was happening at the other end of this loop. And I said you know what it's like pushing a wet noodle. And he laughs and he says what should we do about it? I said well, I don't have the authority over the budget of advertising and marketing and PR that I should have in order to run these promotions and run the marketing campaign the way you're holding me 100% responsible for it. So if you give me the authority, convince her with the responsibility, we'll get out there and get the job done. So he said make me a proposal. And I got together. About 80 people in the company gather up data and a core group of seven to 12 of us pulled together a business plan. It was 80 pages long, covered every aspect of sales, marketing and engineering. We left manufacturing up to Dell Yolkham and on July 15, 1983, a date that will live in infamy, at least in my mind I presented the results of the business plan in a series of overhead transparencies that we call a PowerPoint slides today. These days we ended up winning a PowerPoint back then Shorting the balance sheet impacts and P&L impacts of five different options, and Maxine Graham, who was my marketing communications manager at the time, suggests we also compare the decision against these options, against Apple values. And some of Apple's values is empathy for the customer, another one is good management, aggressiveness and things like that. And it was an understanding that if you're not loyal to your customer in the same way your customer is loyal to you and a cancellation of the product line would be a demonstration of disloyalty to the 50,000 people. And it's that on average about $7,510,000 from their Apple threes. In today's day numbers that'd be more like $25,000 to $30,000 in terms of the small business investment in a small business computer. So if you read the book the Soul of a New Machine about a mini computer from I think it was Alpha General or something like that they couldn't get it built in their corporate headquarters in Boston, so they took it down to Raleigh Durham, north Carolina. Ibm couldn't get their IBM PC developed in their headquarters it's connected in New York because the IBM salespeople thought it would compete with IBM Mailframes and reduce their commissions. So they moved the PC development to Boca Raton, florida, about as far as way they can get from New York but stay in the United States and stay in the same time zone. And then I told them about my friend, kelly Johnson, that ran the Stone Quarks for Lockheed and he could come out with a high-tech airplane like the B2 bomber, the X-15, and the XR-71, and those kinds of things in 18 bucks, while the rest of the bureaucratic Lockheed would take seven years. I said if you give me the authority, that's what with responsibility, we'll get the job done. And he says I agree with you about having Independent business unit that has full authority. And they told me the story that when he was president of Pepsi USA he had a cannon personal copier on his desk and one of his neighbors in New York was the president of Xerox. And he asked the president of Xerox at a cocktail party hot cobs Xerox, which pretty much invented copying, why did they have a personal copier? And the president is there accent. We put a hundred of our best engineers on it. We're a year away from shipping. Canada put ten of their best engineers on it and they're shipping now. So I made the presentation of the different options on July 15th 1983 and one of the options was cancel the product line right now, the way in the executive committee had decided three weeks earlier. Another option was let the market decide, and I keep advocating that the market is a lot smarter than any of us and In my case there are a lot smarter than all the NBA graduates that Apple had hired at the time, because at the time they couldn't should see that there was a market for a business computer. They couldn't deceive of the small office, home office, a small business, of markets which were later identified by data quest and other market research firms about five years later. So Floyd Kwame, who was there he was a VP of sales and marketing Later on would not to be a venture capitalist. The client, or Perkins, and in the back of the room was Ed Bowers, who was married, I didn't know it at the time the Bob noise of Intel. She was our HR director at Apple and also the HR director at Intel it. Intel had adopted a set of values and and had gotten Apple to develop and adopt the set of values a couple, three years earlier. And so I compared a vaccine grab suggestion, the different options like the two I just mentioned, against Apple values. And Floyd said to me if I got a call from a dealer and they picked the option to kill it or we picked the option to let the market decide, what would you say? I said if you pick the option to let the market decide, then I will tell the dealer that we will support its service and continue to enhance Development and sell it and market it. But if you decide to kill the product line, I'll give the dealer your phone number. And Everybody in the room laughed because they realized how ridiculous the canceling of the product line was at that particular point of time. It was the cash cow from the Apple 3. So they gave me 17 people for marketing, sales, sales support and engineering. I invented what later became. It was the Apple bulletin board and the internal Apple email system and that same code was used later for America online. And I know that because the engineer, pete Burnight and I had hired to develop the Bolton board for the Apple 3 and I could communicate with one-third of all the Apple 3 orders worldwide through that bulletin board, sort of the preview to the web, the internet today. He was also hired by Ed Case at AOL to write the first AOL browser and I said you know what? I first saw that look awfully familiar because I worked on the user experience, user interface to that with you for the Apple 3 bullets and boardies. And then you look, started his lap and he says yeah, it was the same code. So I had that four million dollar budget. I was independent of the marketing and advertising department. I fired the PR agency that had been used for other Apple products, regis McKenna, who is very, very famous for his PR efforts for Steve Jobs and Apple, and I hired a market advertising agency in the Richardson, texas Called the Richards Group, and they put together an ad campaign. This is the Apple 3 means business. We had software for business that the IBM PCXT did not have and as a result, we sold 22,000 Apple 3s, generated about 600 million dollars in profit, kept about a thousand to 1500 highly paid Apple people on the payroll and then, when the company wouldn't support us anymore and we had a lot of Internal opposition to having the Apple 3 out there, including Steve Jobs, who felt that the Apple III was occupying a place in the market that his beloved, still not ship Macintosh was going to be. At that time he believed that you do not catalyze your own products. You don't understand that the Mac could over time catalyze the profit center, the cash cow of the Apple III. So in April of 1984, I canceled the product line. I decided to make the announcement to the dealers and to the media on the same day that the Apple II seed was introduced. The result was that the Apple stock did not go down, it was just a discontinuation of an now obsolete product line. The comparator traced that to about six to nine months later, when Steve took over the Lisa product line in addition to the Macintosh, and he wanted to kill Lisa. He killed Lisa and the stock price dropped precipitously. He got into trouble a few months later with the board because in January 1985, macintosh sales dropped to four units. The company had to lay off about 1,000 to 1,500 people. One of the people who got laid off was Steve Jobs. He was able to go on after that and learn from Dave Packard and I talk about this in my book Building in Sandler Great Products. Then it's okay to cannibalize your own products. In fact, if you don't, somebody else will. When he came back to Apple at the late 90s, he then did things like bring out the iPhone, which cannibalized the iPod throughout his very successful career in the second coming of Steve Jobs.

Eric Eden: 16:42

That's a pretty amazing story on a number of levels, but I really love letting the market decide. It sounds like what the market decided was, with $600 million to sales, is they wanted the Apple 3 and all of those millions of dollars of inventory were used? You solved the problem that Scalia had brought up to you in the conference room. I think that's one of actually the biggest things about product management, and product marketing is do you have authority and P&L responsibility? If you're going to be held accountable, you need to be able to not have eight levels of people in between that block you from doing what you need to do.

David Fradin: 17:21

Right, One way you can look at it in terms of what does a product marketing manager do? First, you take a look at what the product manager does. They are predominantly responsible for the product market strategy, which there's about 32 parts of that. It includes understanding what it is that your customer does not, their needs and not their wants, because if you ask somebody what they want, they can't tell you because they have to understand what the problem is and then they have to understand what the solution is. The key is to understand what it is that your customer wants to do, why they want to do it, when they want to do it, where they want to do it, how they want to do it, what's standing in their way, how important is getting that thing done, and then who's the competitors, what's the alternative ways of getting it done? That, combined with your target customer personas, your competitive research, your market research, ends up with giving you your total available market and the market segments that you can attack, what your value proposition is and how you should position your product in the market. With that in mind, you bring to bear innovation, which is nothing more than figuring out how to do something faster or quicker or with better quality or with style. That then gives you the product's features, advantages and benefits, your pricing strategy, your budget for the development, your product roadmap and your product portfolio. Then, with all that done, you throw it over the wall to engineering so they know who they are actually building the product for and it's very clearly laid out in terms of the personas and the product positioning and hopefully they'll do a good job of doing that. And then it's handed off to the product marketing manager and that's the person who puts together the marketing budget, the schedule. They understand the customer's journey through the process of considering the purchase and use of the product, the market differences, so they can differentiate the product and from that they derive the messaging. They put together the promotions, the packaging and the bundling. They select the media and the mix and the intensity. They help put together the distribution strategy, the content plan for social media, the social media plan, the advertising plan, the public relations plan, the sales plan. They develop and deploy the sales tools for the sales people used in the sales environment and they put together the training for sales, service and support. So if the product marketing manager doesn't have a product manager, that's putting the other things like the value proposition and positioning. Then they're in a position like many times they get hired as a consultant and they say, okay, here's the product, find me some customers. And that basic work of the product market strategy has not been done and that has to be all done first before you can really go out and start marketing the product.

Eric Eden: 20:23

So you worked in product management and product marketing for decades and in companies that I've been at, product management and product marketing it's a team sport, like you're saying, but it's confusing because there are so many dimensions to it. I think one day I was looking at a list and product marketing tasks and there was sort of 80 different things that could be labeled as types of product marketing you were doing and we were trying to figure out who does product management and who does product marketing, and so I think it's a very difficult topic for companies both large and small, because it is important to do it for all the reasons you share, but I think it's tough for people to get their arms around. So one question I had for you was what would you say is one of the best pieces of advice for product marketers in this environment, where there's a lot of dimensions, it's very confusing. What advice would you give product marketers to be really successful?

David Fradin: 21:27

Nail your messaging based upon the product positioning coming out of the product manager and make sure the executive committee and the company and the senior management of sales and marketing agreeing with those messaging messages. Sometimes what happens is they all go off and they write whatever they think the product is for and write their own messaging. Then it gets convoluted and when it gets out into the marketplace the prospective customer is completely confused as to what is the product and what does the product do.

Eric Eden: 22:00

Yeah, that makes a lot of sense, I think, being able to have a great description of what your product is, what it does, why it's different and better. I think that's where the rubber meets the road right, exactly.

David Fradin: 22:15

That's what some people talk about in terms of the product market fit. That comes after all the other things that I just described. By the way, on my website at spacecaddlescom, I have the product management lifecycle framework of which I'm talking about here. It's a diagram that you can download. Also, I discuss it a bit in my book Building a Sale and Break Products, then also in the widely published book called Foundations in Product Design and Successful Management of Products. Both of those books are on Amazon. You can just look up my name on Amazon as an author and they'll pop right up. That second book is a little powerful. It's only 796 pages long. It goes into each of these areas in detail, including job descriptions for product managers and product marketing managers. In order to keep things straight, I have a Cappadia book organizing and managing and Sale and Break Products. That's good for CXO level People that are having to put together a department of product management and product marketing.

Eric Eden: 23:23

You also have an offer for listeners. You have some new courses on Udemy right.

David Fradin: 23:29

Yeah, udemy. All the courses are listed on my website, spacecaddlescom, with links to the Udemy courses. I have them on product market strategy, on product management, on product marketing, building and sale and break products all those different topics. If anybody that's listening or viewing this is interested in taking any of those courses, send me an email. My email address, again, it's on my website. Send me an email and I'll send you back a coupon for 50% off the cost of the course.

Eric Eden: 24:07

Awesome. Thank you very much, David, for sharing these ideas and this great story, this timeless story on product marketing, with us For everyone listening. Please share this story with your friends. If you don't mind, rate, review and subscribe. That really helps us out in bringing these great stories to you. Thank you, David, for spending time with us today.

David Fradin: 24:27

Thanks for being with you.

Intro: 24:32

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