College marketing courses usually include case histories of classic marketing errors to point out approaches that should be avoided when marketing a new product. Two outstanding cases are the Edsel, where the wrong product was introduced at the wrong time, and New Coca Cola, where an old established product was tampered with. Both of these resulted in significant losses to their companies. One case seldom studied concerns a marketing decision made by the International Radio Company of Ann Arbor, Michigan in the late 1930s. They introduced a product customers wanted, at a price much lower than the competition, with good advertising, reasonable performance, adequate supply, right timing, and the product was profitable for the company. Yet within a year after its introduction the company lost the significant market lead it previously held and nearly went out of business. What went wrong?

In the early 1930s two basic table radio designs evolved. One was the four tube, tuned radio frequency circuit (TRF) of limited performance and the other was the five tube superhet, a design which became a standard until solid state electronics took over. On some designs the tube complement was increased by the use of a plug in resistor called a ballast tube which was included to fill in the tube heater string. This also had the effect of making the customer think he was getting a better radio because it had an extra tube. This image was an important sales gimmick since at this time it was believed that the more tubes theradio had the better it was. International Kadette, however, pushed the use of ballast tubes to the limit.

In 1938 International Kadette introduced a 10 tube table radio priced at $19.95! This was a sensation in the industry since at that time 4 and 5 tube radios were generally priced between $10 and $35. In order to get a 10 tube radio you had to pay over $100! (Incidentally, to get a better feeling for the price of radios at this time, you should multiply all of these prices by 10 to arrive at today's equivalent prices). The Kadette radios had attractive wood cabinets with ornate dials and reasonably good tone. The RF performance, however, was equivalent to that of a typical five tube radio.

The fact that the RF performance was the same as a typical five tube radio was not surprising when you look at the circuit. Models 1019 and 1023 are good examples of this series. The radio was in fact a standard five tube superhet with two additional tubes which performed essentially useless functions. To this tube complement was added three ballast tubes. To further the image that the radio was a high quality item, the tube heaters, which could have easily been wired into a single string, were wired into two parallel strings in order to double the receiver current drain. This higher power usage obviously meant that this was indeed a better radio. Since Kadette's principal markets were the large metropolitan areas of the Midwest, the average RF performance of the set was not much of an issue. There were some sensitivity complaints but not enough to affect sales.

At this point a word or two should be said about radio retailing in the 1930s. During this time fair trade laws were in effect which meant that manufacturers could specify a sales price for a product which would apply to all dealers large and small. This meant that prices could not discounted as they are today. As a result most radio sets were sold through local independent dealers inasmuch as there was no price advantage in going to a large store. Also, if you bought from a neighborhood dealer you could get better service. To gain some price advantage large stores often marketed their own house brands. Typical of these were Sears (Silvertone), Montgomery Wards (Airline), Walgreen Drug (Aetna), Goodyear (Mantola), and others. Usually an average dealer would carry one premium brand such as Philco, RCA, Zenith, or Westinghouse, and two or three lower price brands such as Howard, Sonora, Continental, Colonial, Emerson, or Kadette. Kadette was very popular in the Midwest for reasons mentioned above.

When the 10 tube Kadette was first introduced, dealers were pleased with the rapid turnover they had. After a few months, however, things changed. During this time profit margins on radios ranged from about 12% to as much as 35%. The lower priced radios carried margins ranging from about 12 to 15%, including the 10 tube model. Dealers soon found themselves looking at the dust collecting on their premium sets with the large margins while the Kadettes were selling well. One would have to sell as many as 12 of the 10 tube radios to achieve the profit of one moderately expensive Zenith. Also, since the 10 tube radio was selling so well, International began forcing dealers to take a number of other Kadette radios along with each 10 tube hot-seller they ordered. In order to get rid of the other slower selling Kadette sets, dealers had to offer under-the-counter discounts. This meant that their aggregate profit on Kadette radios would often drop to 5 or 6%.

One by one dealers began to drop the Kadette line. Over a few month period International lost a significant part of its dealer network. When they discontinued the 10 tube series and revised their selling approach it was too late to recover since by this time dealers found that there were other good sources of lower priced radios which carried better profit margins. International never fully recovered from this debacle and ceased being a significant radio manufacturer.

CHRS
PO Box 31659
San Francisco, CA 94131