Monday, February 23, 2009

Icon for a Down Economy

My friend and marketing guru, Carol Phillips, says that brands become icons by speaking to the issues that are relevant to culture, becoming part of the conversation society is having with itself. The conversation today is all about prosperity lost…that we and our children may be the first generations of Americans to be less well off than our parents. When a former colleague asked me recently which retail financial services brands are doing a good job relating to customers these days, I realized I see an icon in the making.

Last summer, I thought the “Talk to Chuck” campaign was a winner – while the rest of the industry spent money on typical, hype-based advertising, Charles Schwab promoted it’s plain talk approach, straight from the CEO. The signature look and feel of the continuing campaign eavesdrops on “regular” people talking about the issues they’re facing in their financial personal lives.

But the latest ads have broader appeal than ever, given how the market nosedive has rocked the financial security of whole generations. And they tap the raw emotions currently being voiced at dinner tables across the country, and around the world. These ads speak to the right issues, in the right tone, at the right time.

The answer is surely not as simple as talking to Chuck - but that may be beside the point. Schwab is in the conversation, and continues to earn customer and market respect as well as new business. According to a Reuters story from Feb 19, “The company attracted $12.1 billion in new assets last month (in January), up 32 percent from December.”

Though the whole financial sector is out of favor right now, Schwab is poised to see its market share and valuation rise as time goes by and rivals fall by the wayside.

What other brands are doing the job and earning iconic status now? Stay tuned.

Monday, February 16, 2009

New Habits of the Formerly Upper Middle Class

People are eager to report all the ways they’re saving money these days. Whether they’re well-off or not, everyone has a story about spending less. Some people are substituting private labels for brands. Others are simply buying less. Then there are those who are behaving differently and buying accordingly.

The Chicago Tribune ran a story recently about how home cooking, familiar brands are gaining in popularity during the recession. A recent Google search on “money-saving tips” returned 598 results spread across 60 pages! From articles, to focus groups, to informal polls of friends, to noticing what's going on in my own family, here are ten new food-related habits of the potentially formerly upper middle class:

10. Having friends over for dinner more often instead of going out

9. Buying fresh fruits and vegetables in bulk

8. Shopping at Walmart

7. Using coupons more and shopping the sales

6. Checking the “market” price on eBay before going shopping

5. Making more from scratch

4. Getting more of our protein from beans

3. Buying fewer prepared foods

2. Serving and eating less

1. Eating comfort foods that remind us of better times

Which brands stand to benefit most from these new habits? According to the Chicago Tribune’s Recession Survival Guide, “Walmart, Gold Medal Flour … Kraft's Velveeta cheese or Hormel's canned chili. Hormel's chili and its Dinty Moore brand stews posted double-digit sales growth during its most recent quarter. Ditto for Kraft's Velveeta, despite a run-up in cheese prices.”

As consumers have gotten choosier about what we put in our shopping carts (and our mouths), upscale grocer Whole Foods has taken a beating. The stock is down nearly 80% from its year-ago level, while Kroger and Safeway are down less than 20% and 40%, respectively. To be fair, this difference is not entirely due to Whole Foods’ higher prices. As the WSJ reported recently, the company’s acquisition of Wild Oats is compounding its problems. "Instead of concentrating on our business," Whole Foods Chairman John Mackey laments, "we are forced to focus on dealing with regulators in Washington at a time when (our) business is declining."

An unexpected beneficiary of these trends (except the comfort foods one)? Try Weight Watchers. Competitors like Jenny Craig and NutriSystem sell pre-made meals to participants as part of the program, which is more expensive than making it yourself. In contrast, many of the new habits are fully in sync with the Weight Watchers program – no pre-made meals, more from scratch, eating less meat, and making and eating less overall are all fundamental aspects of the Weight Watchers plan. So, with the program more simpatico with the times than ever, people should be seeing more success on the scale. And that means more good buzz, which should drive up membership. Note to Weight Watchers, Inc. – take advantage of the trends in your favor!

A silver lining to the recession? Maybe we’ll actually get healthier while we’re learning how to live on less.

Friday, February 13, 2009

We Are Where We Prefer to Eat

McDonald’s was an important part of our lives when our kids were young. We have the entire Disney collection of toys served with Happy Meals – in fact, the toy was the whole reason my kids ate lunch some days.

But it’s been years since we’ve gone to McDonald’s. Whether we’re on a roadtrip or closer to home, we shifted our allegiance years ago. I do see (and use) Starbucks as the Third Place, after home and work. So, a recent PEW Research Center report on their Social & Demographic Trends survey results caught my eye. They asked people whether they would prefer to live in a place with more Starbucks or more McDonald’s. While some of the differences are intuitive, some surprised me.

For example, I pretty much knew or suspected that the preference for McDonald’s goes up as income and level of education go down. And I was not surprised to see that Starbucks lovers are more likely to live in the West and to say they’re liberal.

What I did find surprising was that:
  • In total, people would strongly prefer to have more McDonald’s around them than Starbucks
  • Blacks and Whites have a clear preference for McDonald’s while Hispanics are nearly evenly split between the two brands
  • 18-29 year olds strongly prefer Starbucks while all other age groups prefer McDonald’s
  • Men strongly prefer McDonald’s and women are split evenly between the two
Besides suggesting that I have an outdated image of the McDonald’s customer, what else do PEW’s findings mean? Here are a few specific thoughts:
  1. Hispanics: Starbucks has an opportunity to capitalize on its apparent strength with Hispanics. Are they doing anything about that? McDonald’s is surely trying to win them over.
  2. Millennials: Taco Bell and Burger King may resonate more with millennials than McDonald’s. As a result, McDonalds’ weakness with 18-29 year olds may be because this group voted against them rather than actually voting for Starbucks.
  3. Men: Starbucks has some shoring up to do with men. Do they know what men find lacking in the Starbucks experience? Does McDonald’s know why men prefer them to Starbucks by a 16-point margin?
More generally, it’s possible these results say more about which company’s stores people think would make a good neighbor than about where people would rather eat. While being a good neighbor doesn’t immediately generate revenue, it does build good will. And that can translate into revenue or a higher stock price over time.

Viewed in this way, the results say there is greater regard for what McDonald’s contributes to the communities it serves. Mickey D’s has been around longer, is known for its employee training, spreads the wealth through franchising opportunities, and has been more visible in the community through, for example, Ronald McDonald House. Taken together, these factors may explain why overall people would rather have more Golden Arches than Third Places in the neighborhood.

Monday, February 9, 2009

Tone Deaf Bankers

Like most people, I am furious about the stories pouring out of the bailed-out banks themselves reporting how they have (ab)used the funds they received from taxpayers via the federal government. At the same time, I’m mystified at how clueless they seem. How can all those smart people be acting in such dumb ways?

If you read my post about the Customer Empathy Gap you know I’m not a huge fan of Wells Fargo Bank. I know their reputation for being well-run, but I don’t like the way they do it: I end up feeling they nickel and dime me on every interaction. That said, alone among bail-out recipients in any industry, Fortune magazine reported recently that Wells Fargo has actually paid the US Treasury $371 million “on the preferred shares the bank issued to the government in last fall's banking industry rescue.” The company also reported that it has been lending money aggressively even as the economy sputters.

Before we cheer Wells Fargo as the paragon of responsiblity in this mess, CNNMoney reported last week that this type of reporting is actually required by Paulson’s version of TARP. So, why did Wells beat BofA or Citi to the punch? And why, in the next breath, did Wells announce its upcoming employee or customer "thank you" party, or whatever it was in Las Vegas. Are bank leaders completely tone deaf?

A recent Boston Consulting Group survey shows that consumers want - even welcome - communications from their banks these days. Financial services companies of all stripes would be smart to talk to their customers about what and how they’re doing, reassure customers of their own financial viability as many households worry about theirs, and remind customers that their loyalty is valued.

Meanwhile, their own (mis)behavior is forcing banks into the brave new world of transparency – reporting on the amount of new and refinanced mortgages extended since receiving TARP funds, explaining and perhaps justifying to the public their decisions about expenses for corporate jets, customer retreats, sports and other forms of sponsorships, and more.

Over the past six months, the whole banking category’s stock performance has declined, but a quick comparison chart on Yahoo Finance shows that Wells Fargo's stock has dropped far less than Citigroup's or Bank of America's. As we come out of this recession, I’m guessing we’ll see an increase in the correlation between regard for brand and stock price.

Big banks better get busy repairing the damage they've inflicted on themselves. And with the cranky mood consumers are in, they'd better not spend much money doing it!

Friday, February 6, 2009

Walgreens Doubles Down on Health

My far-flung family has a reunion ever year between Christmas and New Years. This year, I put my pictures of everyone on Flickr for all to enjoy. When a cousin from North Carolina called asking how to get prints, I went straight to the Walgreens website. I uploaded the pics she wanted and ordered them to be printed at the Wilmington, NC location nearest her home. Next day, she picked them up – easy as pie. In fact, picking up prints has been the main reason I go to Walgreens.

For several years, drug stores have been adding categories and items in an effort to address consumers’ need for convenience and find add-on sales. Processed food, photo finishing, and office supplies arguably dilute these stores’ focus on health.

As the Chicago Sun Times reported last month, Walgreens seems to be going in a different direction. Two important moves the company made in 2007 to begin the company's shift to more clearly meeting the health needs of the communities it serves accelerated in 2008: the Prescription Savings Club and Take Care Health Systems convenient care clinics.

In late 2007, the company launched its Prescription Savings Club program to attract U.S. consumers seeking cheaper medicines. The program includes smart moves like offering to print out for consumers the price comparison on their specific prescriptions for conditions like asthma, high blood pressure, or diabetes, and calculating the monthly savings in black and white.

Enrollment in the Prescription Savings Club costs $20 a year for an individual or $35 a year for families. The program appears to be a powerful tool for customer acquisition and retention. In 2008, Walgreens signed 1.5 million members to its prescription savings club program, about 30% of whom are new customers.

Walgreens’ acquisition of Take Care is another example of doubling down on health care for growth. The in-store clinics accept Medicaid and most insurance, and charge $60 to $80 in a typical visit to people with no insurance. Walgreens also is expanding its clinics that operate at company workplaces, like Disney World in Orlando and Harrah’s in Las Vegas. The company plans to add another 120 clinics by the end of August, bringing the combined total to 800.

To make room for more clinic and prescription services, like back-to-school physicals and vaccinations against shingles for seniors, the company is looking closely at its current assortment and dropping less health-related items like pliers and duct tape. As a result, we can expect Walgreens to clean up some of the scrambled merchandising that has become commonplace in drugstore aisles. And that will be a welcome relief.

Selfishly, I hope the photo processing services pencil out, too.

Wednesday, February 4, 2009

Why “Buy Local” Should Replace “Buy American”

In the ‘80s, I knew a lot of people who insisted on only buying American-made cars. Nowadays, though, it’s tricky to figure out what qualifies as “Made in America.” Honda, Toyota, and Nissan all have US-based plants. Nike, Patagonia, Gap and Wal-mart, are just a few of the brands that have most of their merchandise made offshore. We import food from all over the world, and sell most of it in US-owned stores staffed with US employees.

With jobs being slashed in industry after industry, people are increasingly aware of the connection between what they buy and where that money goes. The House-passed fiscal stimulus bill makes it clear that protectionism is on the rise - not out of patriotism, but out of economic self-interest.

Can consumers hoping to support their domestic economy buy Nike, Wal-mart, Toyota or the others and stay true to their conscience? Should we consider the “domestic content” of what we consume, and assume the higher the better? How would consumers figure it out? It’s time to let go old notions of protectionism and adopt a “Buy Local” mindset.

Just what does “Local” mean? Local stores can be part of a chain. They can sell merchandise from elsewhere (including other countries). And they can hire or be owned by people from elsewhere, too. What makes stores local is that they’re nearby - they’re in the neighborhood.

My Top 5 reasons for supporting local businesses are that they:
  1. Provide jobs for the people who live nearby

  2. Contribute to the tax base of their communities, which makes better schools, roads, police, fire, sewage and other services available to residents

  3. Also contribute to a vibrant sense of community by supporting local charities and events

  4. Can best fulfill local preferences and needs because they know us better through interacting with us day in-day out

  5. Demonstrate that people we all know work hard and give back
It’s not realistic to think we can buy everything we need in our neighborhoods – stores in most residential neighborhoods simply don’t offer the selection or the pricing. And change is an incremental process, anyway. It starts by buying more locally than we have historically, making the 10+ mile trip to the mall a little less often and spending a little less at those stores when we do go.

Many retailers have deepened their connection to the local communities they serve lately. While some people don’t view chain stores as part of the local retail scene, I disagree. Here are a few examples that illustrate why:

  • Macy’s – is rolling out its successful MyMacys program across the chain to return merchandise decision making to local stores

I’m going to try the “Buy Local” argument the next time I’m with people who spout off about protectionism and buying American. Wish me luck!

Sunday, February 1, 2009

Beware the Customer Empathy Gap!

Back in the ‘80s, my husband and I did a lot of outdoors stuff – we went trekking in Bhutan, kayaking in Alaska. We wore Patagonia gear because it was the best, and we knew it would help us do better or more safely whatever it was that we set out to do.

After being a fan, I became an employee. I worked at Patagonia in Ventura in the early ‘90s. It was a company full of true believers who didn’t need to do customer research because they were the customer. They called themselves “dirtbags” – people who couldn’t afford to pay retail and were totally accomplished in the sport, whether it was fly fishing or surfing or mountain climbing. Dirtbags were the opinion leaders who set the tone for what was cool in their sport.

All that’s to say that a recent Saturday interview in the NY Times called "Companies from Mars, Customers from Venus" rang totally true for me. The interview with Dev Patnaik, CEO and Founder of Jump Associates in San Mateo, describes the Empathy Gap –the chasm between employees in organizations and the people they serve.

In my experience, the empathy gap is real. Many companies began as Patagonia did, with its employees' finger on the pulse of its customers, which ensured alignment between company and customer. However, as companies grow, the demands for staff often results in hiring smart, capable employees who may not be or understand users. If they’re not careful, these companies can easily fall into the Empathy Gap.

All of us can name brands that don’t “eat the dog food.” Here are four on my list:
  1. Stub Hub – this internet business has a lousy user interface and my own poor sell through experience suggests that though these guys may indeed be sports fans, they have never tried to sell anything on theirs vs. competing sites. I’ve never managed to sell ANYthing on Stub Hub!

  2. QVC – useless junk hawked by a few earnest people and a bunch of smarmy ones

  3. The Yankees – overpaid, cocky cry-baby players, overpriced tickets, nothing for regular folks who actually love the game and want to root for players they can call heroes.

  4. Wells Fargo – nickel and diming, tell you with a straight face that they have to charge you for having a savings account. Does anyone who works for Wells Fargo actually pay these fees? Doubtful. Most likely, they have special accounts and get special treatment.
Large companies aren't automatically in the Empathy Gap. Even though I’m not a fan of the world’s largest retailer, I have to admit Wal-Mart walks the talk. To my surprise, the company ditched its efforts to move up market, which risked alienating its core audience. And CEO Lee Scott has publicly committed the company that democratized consumption in the United States — enabling working-class families to buy former luxuries like inexpensive flat-screen televisions, down comforters and porterhouse steaks — to democratize environmental sustainability. Wal-mart knows that efficient operations use less energy and produce less waste, and they're going to get the rest of us to make similar changes - helping us align our own priorities and actions. Kudos to them.

For brand managers where the empathy gap exists, here’s a flash: Get to know your customers…fast. While you’re taking them for granted, someone else is trying to take them from you!