'Just Tell Me What You Want'

A small manufacturer struggling toward profitability found success when it followed the advice of some unlikely consultants: its customers.

It is an enigma as old as commerce itself: How do you turn a money-losing enterprise into a profitable concern? For a small Canadian manufacturer called Priva Inc., the answer to that question came in the mail. In 1994, after Priva had compiled substantial losses in its first three years of operation, president and CEO David Horowitz hit upon a strategy that he believed would grow his sales measurably, expand his market beyond the purely domestic, and help his company to achieve profitability. He decided to try a method that was both wildly radical and quaintly old-fashioned -- an expedient that was challenging, yet at the same time as easy as pie. The results of Horowitz's experiment would prove encouraging, to put it mildly. Over the remainder of the ensuing decade, Priva would be ranked five times among Profit magazine's annual list of the top 300 growth companies in Canada. It would move beyond a purely domestic sales focus to export approximately 70% of its production -- to the U.S., the UK, Europe, the Middle East, Australia, and New Zealand. It would finally achieve profitability. And along the way, it would earn almost fanatical customer loyalty. What was the strategy that the 39-year-old Horowitz employed to propel his company forward? Quite simply, he asked consumers to tell him what they wanted. "I went back to Marketing 101," Horowitz recalls. "If you want to know what people need, ask them. So we used the old method of putting postage-paid questionnaires into every product package. As a result, we've built a one-to-one relationship with the consumer -- a relationship that actually drives our company." Priva's market could in one sense be called mature, because its products are intended primarily for older individuals. The company designs, manufactures, and distributes textile-based, reusable, waterproof, and absorbent protectors for beds, furniture, and clothing -- a full range of items intended for people suffering from adult incontinence. Headquartered in Anjou, Que., a suburb of Montreal, Priva was born in 1991 as a division of Med-I-Pant Inc., which sold adult diapers and sheet protectors solely to hospitals, nursing homes, and similar facilities in the institutional market. Horowitz convinced Med-I-Pant chairman Jerry Friedman that home health care was a rapidly growing phenomenon, and that the company could profit from pursuing retail sales aggressively. Horowitz reasoned that the market for disposable products already was well covered by such dominant players as Procter & Gamble Co. and Kimberly-Clark Corp. He also believed that the main advantage of reusables had never been fully exploited. "In a word, it's cost," he says. "The normal cost of disposables is about C$2,000 a year, while reusables are only about $700 a year. In the senior market, many people are on fixed incomes, and that sort of cost savings is important." Armed with his research, as well as an M.B.A. from McGill University and five years of experience selling other products to retailers, Horowitz convinced Med-I-Pant to create Priva, first as a wholly owned division, and then in 1993 as a separate spinoff company with Med-I-Pant as its majority investor. Horowitz quickly signed up his first large customer. Sears Canada Inc. would take just one product from the Priva line -- a simple sheet protector -- but that would contribute substantially to first-year total sales of C$200,000. Yet Horowitz quickly discovered that despite his seeming success with Sears and a handful of smaller retailers, Priva already was beginning to hemorrhage money. "I made the classic entrepreneur's mistake," he recalls. "To establish a viable business takes twice as long and costs three times as much as you think it will. " 'Stealth' Market Priva's biggest challenge -- the one that Horowitz now says "hit me like a ton of bricks" -- derived from the very nature of the company's primary market. Many adult incontinence sufferers are embarrassed by their condition and try to keep it a secret from family, from friends, sometimes even from their physicians. Consequently, Priva's potential customers constituted a "stealth" market that rarely showed up on anyone's radar screen. "We needed to discover who these people were, what they required, and exactly how we could tailor our products to meet their needs," says Horowitz. "That was when I thought of using the old method of putting postage-paid questionnaires into every package." Priva's one-size-fits-all questionnaire asks consumers to give the name of the product they purchased, how they became aware of it, the store at which it was bought, and whether this was a first-time purchase of a Priva product. It also asks, among other things, the consumer's age, whether the purchaser consulted a physician about his or her medical situation, why the consumer chose a reusable product rather than a disposable one, and how the consumer rated the product's performance on a scale of one to 10. But the three questions that would have the most profound effect on Priva's fortunes were not the standard marketing queries. First, Horowitz asked end users why they had bought the product; that is, he asked them to describe the specific use to which the product would be put. Next, he asked consumers if they would like to recommend any improvements to the product. Finally, he asked them what other products Priva should offer -- in effect, allowing them to dream up products that they would like to see in the marketplace. Before long, completed questionnaires started pouring in by the hundreds. "The information that the respondents included often was more detailed than we ever imagined we'd get," says Horowitz. "They'd add pages to the questionnaire, so they could go into even more detail. And about 85% of them included their names, addresses, and telephone numbers, even though the form explicitly states that they don't have to if they don't want to." Why was the response so great? Horowitz believes the answer is simple: No one had ever before asked these people for their opinions. "We gave them an outlet to talk to someone," he says. "How often have you purchased a product, used it, liked it, but thought, 'If only the manufacturer also did this, or that, or whatever'? Well, wouldn't you like to write to a company and tell them your idea? And wouldn't it be great if the company actually listened?" Horowitz listened, and as a result Priva began to prosper. For one thing, he found that consumer responses helped him to define more precisely his market and focus his marketing and advertising efforts. Even more important, however, he discovered that he had inadvertently tapped into a priceless resource: a totally free R&D department. By 1996, Priva's questionnaire program had proved its value as a gold mine of information. But another "stealth" aspect of the company's adult market still needed to be explored. Horowitz's research showed that buying decisions often were being made not by the people using his products, but by caregivers in the home. If end users themselves had been hard to identify, how could he find and address an even less visible market? In the Aug. 1, 1996, issue of Inc. magazine, Horowitz saw an article about Deborah Mersino, founder of Paragon Public Relations in Evanston, Ill. The article noted Mersino's success in raising awareness of Paragon by running a contest designed to honor entrepreneurship. Horowitz went to Evanston and outlined his problem to Mersino. Her solution: the Caregiver of the Year award, a promotion launched in some 80 small-town U.S. newspapers. The award was intended to accomplish two goals: give recognition to individual caregivers, the unsung heroes and heroines of home health care, and boost awareness of Priva among the very group that would be most likely to have need of the company's products. The caregiver award program proved a remarkable success and continues to this day. In its first year the program generated more than 5,000 nominees and helped to grow Priva's revenues by almost 20%. By 1998 sales had nearly doubled from their 1996 level, rising to C$3.7 million. The relationship Priva has built with consumers continues to pay dividends. The company routinely receives thank-you cards from customers, as well as a stream of suggestions for improvements to products and ideas for new items. Indeed, Priva has used consumer input so successfully that some 20% of the company's current products were developed because consumers asked for them.

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