Star Tribune from Minneapolis, Minnesota • Page 34

20 MondaySeptember 131993Star Tribune Business viewpoint Advertising and marketing Martin Williams says break Third time is the charm as Funco chief succeeds after 2 business failures with Marigold was not a firing 1 IV MartinWilliams Advertising created several ads for Marigold Foods over the past eight years built around the theme, "It's the cows." TV ads and billboards showed cows of various colors producing ice cream of the same hues. Perhaps its most memorable ad was a TV spot featuring bovines singing that their "style and grace" were responsible for the taste of Kemps Premium Ice Cream. Well, MartinWilliams and Marigold, which markets Kemps, parted company recently, a separation that had neither style nor grace. The two are at odds over whether MartinWilliams resigned or was fired. The flap began when Martin Williams announced publicly that it had resigned the account, worth an estimated $1 million a year in billings.

To say that Robert Schiesel, vice president of marketing for Marigold, disagrees with the agency's version is putting it mildly. "I thought of 'It's the Schiesel said. "I think right now it's the bull." Schiesel claims Marigold fired MW after rejecting the agency's proposal that it be paid $200,000 plus a 15 percent commission for media placement for the year starting Sept. I. He said MW got $200,000 in fees plus a 6 percent media commission during the past year.

"The nub of it all is, why would you give us a fee proposal if you were going to resign? We talked to them in late July and said, 'That's just not in our wardrobe of options, said Schiesel, himself a former MW vice president and management supervisor on the Marigold account Marigold contends the agency's announcement was made in violation of a gentlemen's agreement to share any public statement before its release. Agencies typically don't go out of their way to report such things to the media. Most who do refer to it as an "amicable parting" after consulting with the client. Dave Floren, MW chairman, replied that he told Schiesel in person that MW had resigned the account. "We had to make a reluctant decision to resign," said Floren, who noted billings had declined from between $1.5 million and $2 million to less than $1 million during the time MW handled the account.

Dick Younsblood ventories, the fallout could be damaging: either disappearing margins or hordes of dissatisfied customers. Moreover, video-game technology is changing rapidly, and the impact is uncertain. Take, tor example, the new video-game TV channel planned by Sega, a major producer of video games: While many retailers believe the new Sega Channel will increase public interest in video games, and thus boost retail sales, there are those who predict that the availability of the latest video games on TV for a nominal fee will reduce in-store sales of both new and used games. Thanks to the painful lessons learned in his earlier failures, however, Pomije has labored to avoid his previous blunders and position the company to withstand potential shocks. For one thing, despite the fact that it costs about $55,000 to build and stock each store, he's resisted using debt to fuel the company's feverish growth rate.

Translation: Funco has no long-term debt. And he was willing to absorb a 1992 loss to be sure that adequate information systems and financial controls were installed "well ahead of the growth curve." He did it with several key hires: Stan Bodine, former senior vice president of Pillsbury's HSagen-Dazs subsidiary, as executive vice president; Mike Hinnenkamp, former head of information systems at B. Dalton, as MIS director, and Bob Hiben, former director of financial planning at Wilsons The Leather Experts (nee Berman Buckskin), as controller. Given his track record, you can't blame Pomije for seeking heavyweight help. A gent who is blessed or cursed, depending on your viewpoint with the ability to spot business opportunities in unlikely places, he dropped out of college a few months short of graduation in 1980 to launch a travel club that specialized in golfing trips to prominent country clubs around the country.

It took him 18 months to put the business together and less than a year to blow through the $100,000 he'd borrowed from friends and family before closing the doors in 1983. Two years later, he was into his next venture, a mail-order company he started to market a passel of Commo- Deb Geigcr Rachel Kyllo, Marigold's marketing director for national brands, sided with Schiesel: "I sat in the room with three sad faces when it was said: 'We just can't continue with this next "The whole thing just demonstrated to me how superficial the advertising business is," Kyllo said. Marigold does not intend to hire another ad agency of record for the time being. Sietsema's Pride is hurt Earlier this year, Minneapolis ad agency acquired Pride Barber Whaley, adding five employees, $5 million in billings and a lawn and garden specialty to Pride Barber clients Ringer Corp. and Ariens Co.

represented the core of lawn and garden efforts. Former President John Whaley joined as vice president and group account director overseeing former clients. However, Ringer's subsequent defection to Minneapolis shop Bozell Inc. and Ariens' recent shift to Jackson, agency Davidson Chandler Advertising greatly reduced billings from clients that were touted in a news release detailing the March acquisition. The departures of Eden Prairie-based Ringer Corp.

and Aliens a Bril-lion, manufacturer of lawn and garden equipment, stirred talk among industry observers that received little from what it paid for Pride Barber. But "there's no doom and gloom at our place," countered Doug Siet-sema, president and chief executive officer of Aliens had advised that it would change agencies before the purchase and was not part of the acquisition, Sietsema said. handled work for Aliens after the purchase, Sietsema said, but those projects represented a "wrap-up stage" before the $1 million-plus account switched agencies. "I don't want it construed that the fSIk-althPartncrs I Dave Pomije dore computers that were being liquidated at a bargain price by the manufacturer. Frorn computers he.

moved on to an eclectic nay, totally unfocused array of consumer goods ranging from pellet rifles and Rambo knives to radar detectors and binoculars with built in radios. The thing is, this time he seemed to be onto something: Sales climbed from $2 million the first year to $7 million the second, which inspired him to buy an expensive car and a house with an indoor swimming pool. Alas, personal extravagance wasn't his only mistake. Even worse was the lack of financial, operational and inventory controls. And as losses mounted, his response was typical of the inexperienced entrepreneur "I kept pushing for more sales, which meant 1 was just losing money faster." With liabilities exceeding assets by more than $1 million, a Chapter 11 reorganization quickly descended into a Chapter 7 liquidation in 1988.

Ah, but even in defeat there was the germ of the current business. Included in his leftover inventory were 1,100 Nintendo games, which he proceeded to lease to video stores. To update the inventory, he began buying used games from mail-order dealers around the country until he was treated rudely by a couple of those dealers and got to thinking he could do it better himself. He began advertising his offer to buy and sell used games in industry magazines and the result was so much business during the 1989 Christmas season that he had to install four telephone lines in his home. The following year, after moving to a New Hope warehouse, he opened an informal little retail shop next to his office for the folks who showed up to peddle their used games.

When sales at the store hit $50,000 one month, Pomije decided to test a couple of retail outlets during the coming Christmas season. The result: Without even sitting down to think about such niceties as product mix, marketing strategy or employee training, Funco's Christmas retail business grossed more than $260,000. Despite the ensuing growth, however, "I still don't feel successful," Pomije said. The reason: his failure to earn that college degree. Given his history, however, I figure he's already earned a couple of advanced degrees say, a master's in the art of losing money and a doctorate in relentless entrepreneurism.

Motorola DPC 550 ft 1 3U I I low 5t Brno -ff It 7, 8 8m, Ooiw a ta End j. It took two business failures, including a -million-dollar bankruptcy five years ago, but it appears that Dave Pomije might just have this entre-preneuring thing figured out at last. You are free to interpret that observation as an understatement. Pomije (pronounced POM-uh-jay) is president of Funco proprietor of a rapidly growing chain of FuncoLand retail stores that buy and sell used uh; me, previously played video games. Little more than three years ago, Funco was strictly a mail-order outfit with annual revenues of less than $300,000.

But by the end of fiscal 1993 in April, the company had 56 retail stores with annual revenues of $20.5 million. i. And by the end of the current fiscal year next April, Funco figures to have 1 10 stores with sales in the ritzy neighborhood of $45 million. Think of it: A $45 million business built on the likes of an Italian plumber, named Mario! Only in America. Funco's hyper-growth did not come without a price tag, however It lost $520,000 last year, a hit that Pomije chooses to view as a positive thing.

The reason: The deficit mostly involved the cost of adding solid management and the control systems needed to guide the expansion matters that Pomije tended to ignore in his previous business disasters. The bottom line: With revenues this year starting to catch up with the size of the management and control structure, securities analysts are projecting net earnings of nearly $900,000, or 15 cents a share in fiscal 1994. The street apparently buys the projection: Funco's stock, which went on the market at $5 a share in an initial public offering in 1992, and at $1 1 in a secondary offering earlier this year, closed Friday at bid. That put the value of Pomije's 2.7 million shares about half of the company's outstanding stock at a tidy $40 million. Considering that it was just five years ago that bankruptcy forced him to sell his home and move his family into an apartment overlooking a cemetery, you will recognize all this as substantial progress.

How long he retains his multi-millionaire status is another question, of course. Despite its early success in the business of peddling bargain-priced used video games, Funco's clearly is a parlous business. And I'm not just talking about how the willingness to spend $5 to $50 on a used video game might be affected by economic vicissitudes. For one thing, the market is dominated by notional young customers whose unpredictable tastes could eas ily lead to expensive misjudgments about the potential popularity of certain video games. Whether the result is overstocked or understocked in- Motorola 9000 I nil We'll new call beep like wV AND GET YOUR FAriensl account was on board and then left the agency," said Sietsema who acknowledged that the parting with Ringer was not foreseen during purchase negotiations.

Rather, he said, including Aliens in the press release was meant to con vey the type of accounts that Wha ley's group technically had at the time or could handle. still intends to promote its lawn and garden experience, Sietsema said, but to prospective clients that could replace the departed accounts. Other former clients remaining at are consumer and business-to-business ad projects for Pillsbury, retail center Riverplace SAF Instant Yeast and ParaBody Can we (team to) talk? Bloomington PR firm Tunheim San-trizos Co. tomorrow debuts its execu" tive communications training servic to help smooth out clients' public speaking performances. Former KSTP-TV reporter Pat Milan; has been promoted to vice president of Tunheim Santrizos to lead the four-employee service, which is ex-' pected to become a stand-alone division as part of an upcoming reorganization of the 35-empIoyee firm.

Mona Meyer McGrath Gavin PR and Aronson Ward, both of Bloom-' ington, offer similar services. Typi-' cally, executive communications' training involves on-camera inter views that allow execs to react td news conference situations or communicate effectively with other employees and improve their perfor1 mances. "We found people asking for more and more and more of it," said Mi lan, who joined Tunheim Santrizos. last August. Milan and other staffers' involved in the effort have ample media and communications experience to help the nine existing clients' that already have used the service.

Other contributing staffers and their previous media-related experience are TSC President Kathy Tunheim, assistant press secretary to former Minnesota Gov. and U.S. Sen. Wendell Anderson; Vice President John Blackshaw, chief of staff for U.S. Sen.

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