Computer Friendly Stuff grapples with trying to break into the US market at the large retail chain level.

As a student, I never bothered reading introductory material ("is it going to be on the test?") But trust us here. These cases will only make sense if you take a minute to read the background information on Computer Friendly Stuff. Plus it's on the test. Just kidding.

By the middle of May 1996, it was pretty clear that I would be quitting my job and heading out on my own. I saw a market need I believed I could fill: to make people's jobs more fun by creating computer toys that made their boring, beige, impersonal computers more attractive. The Original Computer Bug(tm) Computer Toy and Screen Savers were about to be born. I had tentative financing lined up, but I had to survive until then. Luckily, I had a couple of ideas. First, I remembered that Spike Lee had financed his first movie entirely on his credit cards. Second, I remembered that my sister Susie had credit cards.

After begging and promising stock options, I finally got my sister to move out to Chicago and join me. We brainstormed our first night together, and Susie immediately pointed out that we might want to have alternative sources of financing other than her Visa and MasterCard. "You're absolutely right," I said, reaching for her American Express. Actually, our financing came through fairly quickly. I decided early on to approach friends who were successful entrepreneurs. This was quicker and it allowed me to work with people I trusted. In exchange for 50% of the company, I raised $70,000. In retrospect, it was not enough and the early days were pretty lean but I did get a brief understanding of what it feels like to be Bill Gates. Sue and I celebrated with our first brand name canned food in six weeks. The investors' money meant that we could afford to pay for the expensive molds required for making Computer Bug prototypes.

The prototypes took a long time to prepare, but finally we were ready to go to market. We didn't have a sales force. But we did have a marketing plan. It was one sentence long - a title. We called it "Starting at the Top." That meant we had to do most of the legwork at first. I remember walking home triumphantly from the Post Office after mailing out 18 samples to the 18 largest Toy, Gift, and Computer retailers in the US, including Toys R Us, CompUSA, and Wal-Mart. Confident that our product would sell itself, we sat back and waited for the first six or seven million computer bug orders to roll in. We were busy picking out interior leather from a BMW brochure one day when Susie brought up the fact that we hadn't heard back from any of the retailers. Not to worry, I told her. Chicago mail is notoriously slow.

It was during this period that one of the investors, Bill Martens, quit his job, too, and joined CFS full time. Despite our slow start, Bill thought that our company had enormous potential and was attracted to its creative nature. Actually, I can honestly credit Bill with making us a company. He started by buying a filing cabinet. At about the same time, another friend from New York, Chris Rubeo, joined us. In addition to his amazing "character voice" talent, Chris was an excellent carpenter, so he built us a shelf. We rewarded him by promoting him to bookkeeper. He had zero experience in accounting, but we took heart in the fact that Barnes and Noble has comfortable chairs in the small business self-help section.

Since the large retailers weren't breaking down our door, we decided to change our focus for Christmas '97. We made cold calls in person, but mostly on the telephone using a "Yellow Pages" CD-ROM to single store retailers across the country. Responses to the product concept were encouraging. I had been a sales rep for a large corporation and I had never seen so many small retailers respond so well to a new product. We were in 50 stores by Christmas, but even that was not enough. In fact, it barely kept us afloat. So we decided to bypass retail stores and sell directly to consumers by renting a kiosk at a local mall. We also sold directly at large Christmas Fairs in Indiana, Wisconsin, and Michigan.

Our schedule that Christmas was backbreaking, but we survived financially and we learned an important lesson: selling Bugs one at a time stinks. No, I'm kidding. We learned that when we marketed directly to our customer, the product sold off the shelf. For example, at a Christmas show in Wisconsin, we averaged one sale every 3 1/2 minutes for over ten hours! It was this type of customer response that kept us going during the rough times. But what we found even more invaluable was that we were getting to know our customer, up front and personal. We were meeting our market face-to-face.

During this period, we had been trying to rent space at The International Toy Fair, the largest and most important toy show in the world. Booths for new companies had been sold out two years in advance. However, just before Christmas, we found an older company willing to sublet space in their showroom. With just six weeks to prepare, we swung into action. If those mass retailers weren't going to write us back, we would go to them.

We didn't have a lot of money, which is what people say when they don't have any money. We decided to go the guerilla route and focus on promotion. We spent $1000 and built our own seven-foot Computer Bug costume. Rubeo volunteered to wear it. We also had 10,000 catalogue sheets printed up. We were set to barnstorm the Toy Fair and take no prisoners.

But in order to take no prisoners, you have to actually meet the enemy. We got to the Toy Fair and discovered that our sublet was an eight-foot space with imitation wood veneer, located in the back of a decrepit model train company. The few customers that made it back our way had no interest in computer toys. We weren't having much luck with the costume either. According to show rules, Rubeo was limited to standing in our space or standing outside the building entrance on 5th Avenue with about 25 other mascots in the freezing cold. Despite his noble efforts to throw his costumed body at anyone who was wearing a buyer's badge, we were getting nowhere. All the buyers were too eager to get inside where it was warm.

With just two days left at the Toy Fair and little to show for our time and money, we opted for an emergency strategy session. Susie pointed out that it was the day before Valentine's Day. She suggested we hand out chocolate. Pure genius. I ran to a store across the street, bought out their supply of chocolate hearts. Armed with catalog sheets and chocolate, we began walking the floors of the Toy Fair Building behind Rubeo, who was in costume, being sure to stay one step ahead of building security. Whenever we ran into a security guard, Rubeo would loudly proclaim to everyone in the immediate area, "Welcome to the 1997 International Toy Fair!" and they assumed that we were working for the show itself. At least people were paying attention to us. But we still weren't close to getting a meeting with a large US retail chain buyer.

Finally, we hit paydirt. A nice couple that talked like extras in a Crocodile Dundee movie approached us and told us they were toy distributors from New Zealand. They covered over 150 computer, toy, and gift stores and were interested in a $15,000 order. Playing it cool, we sat down and discussed details with them. As soon as they left, the high fives started flying. The Toy Fair was a success! By the next Christmas, they had upped the order to over $20,000, and we had cemented a solid relationship. The bugs were a hit down under! They even commissioned us to build a mascot costume for them to promote the bug. The best part was the terms. Being an overseas distributor, they paid upon our shipping the product rather than after they received the product, meaning that we got crucial income up front. Suddenly, we were an international company. The bugs were selling well, and little kids all over New Zealand were e-sending us fan mail.

As it turned out, by Christmas, New Zealand wasn't our only foreign distributor, although it remained the largest. We had recreated our success story - and became global -- with companies from England, the Middle East, and Asia. Foreign sales seemed so simple. One distributor, money up front, and no returns. It was almost too good to be true. And in a way, it was. In the American market, we were still limited to renting stalls in flea markets next to bikers selling leather Harley Christmas stockings.

We had to come up with a plan to sell in America or we were doomed. I knew that as much as we all believed in Computer Friendly Stuff, the company couldn't stand another flea market Christmas Season. We took stock of what we had learned:

1. The first step is to find a need and fill it. We had accomplished that.

Armed with that knowledge, we looked forward to 1998 and breaking into the much larger US retail market.

1. What concepts from Chapters 1-4 apply to this case?
   
   
2. What is meant by "good marketing makes good luck"? Do you think CFS made its own luck at the New York Toy Fair?
   
   
3. How would CFS's strategy change if the international sales had not occurred? What makes their product desirable to an international market?
   
   
4. English, in many ways, is the language of the Internet. What makes the Original Computer Bug a good product to sell online, especially in a global market? What are the pros and cons of selling this type of product over the Internet?
   
   

Refer to the Sample Marketing Plan in Appendix B as you answer the following questions about developing and modifying a marketing plan for CFS.

For this year's marketing plan, how would you define CFS's distinctive competency, which is one of its key strengths and a critical component of its competitive strategy?

Looking ahead to next year's marketing plan, what additional information about global markets should CFS be gathering as it gets ready to expand distribution to more countries?