Half of Ferrari's Profit Isn't From Cars, A Drink Made For Sick Toddlers Is Used In Unusual Ways, and Elvis Sold Merchandise to an Unlikely Market: Why It Always Pays to Pay Attention
The 3-Word Quote: “Attention Before Action”
1.
The cars they produce are sleek and powerful.
When people think of the brand, words like racing, speed, passion, and Italy come to mind.
And maybe, if they are motorsports fans, they think of 'Rosso Corsa', which translates as 'racing red' - the car maker's signature color.
But when people hear the word Ferrari, luxury is certainly a word that might top the list.
Most Ferrari models sell for between $250,000 and $400,000, but the price can quickly increase.
And to keep Ferrari a luxury brand, the car manufacturer sells very few cars. They limit the number of vehicles they sell. In fact, there were only 13,221 Ferraris sold in 2022.
In the same year, Ford sold about 4.2 million cars and trucks to dealers and distributors.
13,221 compared to 4.2 million.
But Ferrari is highly profitable despite selling just over 13,000 cars yearly. Estimates are that Ferrari made four billion dollars in revenue last year.
But what's unusual is that only half of the four billion came from selling cars.
The other two billion dollars of Ferrari's profits come from an unusual source.
2.
If you have younger kids, odds are they've been ill at some point.
Maybe they have been hit with the flu or had a stomach bug that has invaded their system.
And to combat the illnesses, you might have visited the drug store and purchased one of the most common over-the-counter remedies for dehydration for kids.
Pedialyte.
If you're unfamiliar with Pedialyte, it is a fifty-year-old electrolyte-infused drink explicitly created for infants and kids experiencing dehydration.
The drink has been a massive hit helping kids feel better over the decades.
But just about ten years ago, Abbott Laboratories, Pedialyte's maker, began to see an unexpected increase in sales.
At first, the company couldn't figure out what was causing this spike in sales.
The company was not advertising more, and there was no abnormal increase in illnesses.
Abbott finally realized the increase in sales came from consumers who were buying and using Pedialyte differently than the company intended.
Two groups were driving these new sales - and neither group was sick kids.
3.
Elvis Presley.
The 'King of Rock and Roll.'
In the mid-1950s and the early 1960s, the 'King' dominated radio airplay with countless hits that earned him legions of fans.
Early in his career, before the legions of fans, Presley signed a management contract with Colonel Tom Parker.
Parker, an ex-carnival promoter, could see Presley's impending superstardom. Parker signed a deal with a merchandiser to plaster Elvis' image everywhere to generate money.
Fans could listen to his hits and watch him in the movies at the local theater.
With the merchandise contract, fans could now buy Elvis memorabilia - things like candy, cards, make-up, bracelets, plates, and perfume - all with Elvis Presley's name and face.
This type of merchandise deal is relatively common now, but in the 1950s, Elvis was one of the first entertainers to create and sell his 'brand.'
And people opened their wallets and purchased the products.
Parker's share of the millions made off Elvis merchandise was estimated to be 50% - an enormous percentage.
But one group of people weren't buying any of the Elvis paraphernalia. They vowed never to spend a penny on Elvis merchandise.
But Col. Parker set out to change that.
The Takeaway:
So what do a luxury car maker, a drink made for sick kids, and Elvis Presley's manager have in common?
All are examples of how companies or people can benefit when they pay attention to things that might often escape their attention.
Ferrari makes four billion dollars in revenue. Yet only half comes from selling cars.
The Ferrari brand is strong and synonymous with luxury. In fact, in 2014, the company was named the most powerful brand in the world.
But, purchasing a Ferrari is out of reach for most people.
So where does the other two billion dollars of Ferrari revenue come from?
The company makes the other two billion dollars from clothes - roughly the same amount they make from their cars.
Because the brand is strong, many fans desire to be associated with It. They are willing to pay high prices for Ferrari shirts, and Ferrari jackets, and even Ferrari sunglasses and umbrellas - all emblazoned with the car maker's coveted logo.
They may not be able to drive a Ferrari car, but many people are willing to pay to look like they do.
Ferrari's profits from clothing and related merchandise are so large that some consider it more of a clothing company than a car company.
To put this in perspective, if Ferrari revenue was measured using only clothing and merchandise, it would rank above clothing brands such as Calvin Klein, Gap, and Old Navy and just behind Macy and Armani.
Ferrari understands the power of their brand and listens to what their customers want.
Most Ferrari fans won't zoom around in one of the sports cars, but they can travel wearing Ferrari clothes.
And like Ferrari, Pedialyte paid attention to their users, too.
But Pedialyte didn't listen to their traditional users; they paid attention to their new users who weren't sick toddlers.
From about 2012 to 2014, Pedialyte noticed that the number of adults drinking Pedialyte grew by 60%.
This increase in use was interesting, considering the drink is for kids.
So why were adults suddenly gulping down the drink in such large numbers?
Two groups of adults seemed to have discovered the benefits of Pedialyte - people who drank too much and athletes.
The top use for Pedialyte is for its intended use - as a fluid replacement for ill children.
However, the second most popular use of the drink is adults who use it as a 'hangover cure.'
Adults who had too much to drink discovered that Pedialyte seemed to help them recover faster after a night of drinking.
Christina Hays, Senior Director of Pediatric specialty Nutrition at Abbott, is quoted in a 2015 article saying, "For mild dehydration, it is as effective as an IV."
Adults found this new use. And word spread.
Adult use of Pedialyte comprised a third of its total sales in 2015.
A second group also discovered the power of Pedialyte around the same time - athletes.
Athletes, especially runners, were roaming into the children's medicine aisle in drug stores and purchasing large quantities of the drink.
Athletes were bypassing products like Gatorade in search of Pedialyte.
They, too, wanted the electrolyte replacement and benefits of the low-sugar liquid designed for kids.
Not only did Pedialyte notice these new uses, but they also began to market toward these new users.
Abbott began handing out samples of Pedialyte at music festivals and gatherings where there might be drinking. They actively promoted their drink designed for kids as a 'hangover cure.'
New flavors were created to meet adult demand. And new products, too.
A new Pedialyte Sports drink now sits on shelves next to Gatorade.
Pedialyte, like Ferrari, paid attention and responded.
Business increased.
And it was business and money that Col. Tom Parker was focused on when he targeted another market for Elvis gear.
Remember, many people were purchasing Elvis perfume, Elvis clothes, and hundreds of other items.
Parker wanted everyone to buy Elvis merchandise, but there was one group who wasn't.
Despite the King's many fans, some people disliked Elvis and actively hated him.
And Parker wondered how he could get those Elvis haters to buy Elvis products.
So he made and marketed an Elvis product that even Elvis haters would buy - something that would literally show their hatred for Elvis.
Parker came up with buttons.
But these buttons targeted Elvis haters and had slogans such as "I Hate Elvis" and "Elvis is a Joke."
And the buttons sold.
Parker cared about money, so he likely didn't mind that the product knocked his client.
With these buttons, Parker found a way to get people who disliked the King to spend money.
The button buyers were probably unaware that the profits from their buttons went directly to Elvis and his manager.
So Ferrari, Pedialyte, and Elvis' manager all did what we can do even on a smaller scale - pay close attention to the people you serve.
Ask what they want, but observe what they do.
Whether you're a company owner, a manager, or in a service business, you can learn a lot by genuinely paying attention to how employees or consumers behave.
Before we can take positive action, we need to awaken our attention.
Because it pays to pay attention.
3 things before you go:
Listen: The Airborne Toxic Event, Sometime Around Midnight: a killer song; starts slightly sweet and ends raw and emotional; music and voice increase in intensity as song plays on; should remade and released by Olivia Rodrigo or Noah Cyrus
Watch: 3 minute TED talk- Derek Sivers, How To Start A Movement: short Ted Talk; quick advice; slightly humorous by the always interesting Derek Sivers.
Read: A Cut Too Far: the people who can’t give up paper by Chris Baraniuk: fascinating article about paper and industries still using it and those thinking of getting rid of their use of paper
See you in ten days. Thanks for reading.
-Jeff