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Turning Around a Business Failure

This lesson is a part of an audio course Unconventional Crisis Management by Paul Andrew Smith

Pringles was first launched in September 1968 in Evansville, Indiana, and began shipping it to grocery stores across the United States in 1971. It was an instant success. By 1975, it had become a household name, had a 15 percent market share, and more than 10 million cases a year were being sold. A year later, however, sales dropped 20 percent—enough to send any brand manager into panic mode. The following year, sales dropped another 10 percent. That’s probably when speculation began that the owners would sell the company.

Another year went by, and another 10 percent of sales vanished. Can you imagine how hard it must have been to recruit employees to accept an assignment to work on Pringles with sales plummeting and rumors of a sale looming? By 1979, the brand was in free fall. Sales dropped over 30 percent, and we’re now down to 4 million cases a year—a 60 percent decline in four years! That’s when a line was drawn in the sand. The company executives declared they would either fix the brand or sell it, in five years.

Over the next 18 months, management put several major changes in place. It commissioned new research to develop a ground-up understanding of the consumer. Product improvements gave Pringles a better taste and more variety. New advertising touted the unique benefits of the saddle-shaped chips. A price reduction made Pringles more competitive with traditional potato chips. And a major cost savings project helped the brand afford the price reductions and product improvements.

Sales continued to decline, but at a much slower rate. In 1980, sales were down about half a million cases, to 3.4 million. And in 1981, they bottomed out at 3 million. A total of a 70% decline from its peak.

But the next year, sales started to grow—slowly at first, and then faster. By 1984, Pringles sales were 5 million cases. In 1986, they were up to 7 million. By 1989, sales were back to their 1975 peak of 10 million cases. And by the end of the 1990s, sales of Pringles were over 50 million cases.

In December of 1984, just after the turnaround started, a company executive gave a speech to a group of employees, shareholders, and members of the press. In it, he shared five key lessons the company learned from the experience. In hindsight, the first three shouldn’t be too surprising: (1) know what your consumer wants, (2) develop a product and marketing messages to meet those expectations, and (3) organize a strong team to deliver results.

The fourth lesson was a little more interesting: Set realistic goals. Notice they adopted a five-year plan, not a one-year plan. They realized the magnitude of the changes they needed to make were too ambitious to accomplish in a matter of months. Despite that, they succeeded two years ahead of schedule.

The final lesson, however, is the most telling of all, and the key point I want to make. He summarized it in two simple words: “Don’t stop.” Don’t give up too soon. Imagine how easy it would have been for management to give up on the Pringles brand. And how many times had they probably considered it in the late 1970s? Instead, they persevered. They pushed on through six years of nerve-wracking sales declines and fixed the business.

Now, compare this to today’s quarterly-profit-obsessed CEOs who flinch at the earliest signs of trouble and kowtow to Wall Street with promises of a quick exit.

And as a result of that perseverance, Pringles became one of the most iconic brands in the snack industry, with a rich history of perseverance and courage.

Thomas Edison summarized the wisdom of perseverance in a single sentence when he observed, “Many of life’s failures are people who didn’t realize how close they were to success when they gave up.” My advice: don’t be one of them.

Okay, in the next lesson, we’ll learn how to learn your way out of a crisis.

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Written by

Paul Andrew Smith