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    Published on: April 19, 2007

    During the next few weeks, MNB will present a series of previews looking at some of the cutting edge topics and speakers who are on the agenda for the 2007 Food Marketing Institute (FMI) Show, scheduled for May 6-8 in Chicago, Illinois.

    It long has been a truism in the retailing business that a store’s ultimate goal isn’t just to sell as much merchandise as possible, but to create a store experience compelling enough that the shopper becomes an active ambassador for the retailer, recommending it to other consumers.

    How to transform a store into an experience that meets this challenge is the subject of the Super Session scheduled for the annual FMI Show in Chicago on Monday, May 7, from 3:45-5:00 pm. Fred Reichheld, author of “The Ultimate Question: Driving Good Profits and True Growth” and co-author with Thomas Teal of “The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value,” will look to provide what he calls “the missing link” to achieving real and sustainable loyalty – elevating customer metrics to the same level of importance as financial and operation metrics.

    To get an exclusive preview of what he’ll offer FMI audiences, MNB engaged Reichheld in this exclusive e-interview:

    MNB: Are people who are loyal to a store necessarily the same people who will recommend a store to friends and colleagues?

    Fred Reichheld: On average, 80% to 90% of referrals come from your loyal promoters. One of the most reliable indicators of whether a customer is truly loyal is the extent to which they invest in a relationship with your store--and making recommendations to friends and neighbors is an investment of personal reputation (one that few people take lightly).

    MNB: Is being recommendation-worthy a matter of creating big ideas, or having lots of little ideas that work?

    Fred Reichheld: Earning customer loyalty results from consistently delivering an outstanding experience--which is composed of big and small ideas. The most important component of the customer experience, and the one most difficult for competitors to copy, is to ensure superior service through front line employees who listen, learn, and respond in a caring manner.

    MNB: Isn’t part of the reason that customers don’t deem stores to be recommendation-worthy that retailers are more focused on their own operational needs than on both tangible and intangible shopper desires?

    Fred Reichheld: Many retailers seem to believe that the job of store personnel is to deliver operational excellence. That is necessary, but not sufficient for earning loyalty. Real loyalty is based on relationships that are based on the Golden Rule (treat others the way you would want to be treated if you were in their shoes) and that rule requires thoughtful, honest service--from trustworthy employees. Costco's success stems from not only its operational efficiency, but from the trust it earns from customers who know they will be treated fairly (no manipulative or predatory pricing for example).

    MNB: We’ve read where you’ve said that one of the ways a store generates consumer fealty is to not extract maximum value at the expense of the customer...which would seem to be contrary to the normal policy, which is to get the customer to spend as much as possible all the time. How do we get retailers to change their mindset in this regard?

    Fred Reichheld: Retailers who grow profitably are the ones who generate the highest Net Promoter Scores (NPS)--in other words, they turn more customers into promoters and fewer into detractors. Creating promoters (customers who come back for more and bring their friends) is the primary driver of growth.

    Retailers will change their mindset when they measure NPS and examine the economic behaviors of promoters and detractors. These facts will convince them to revise their priorities. It will also identify which departments and which stores are doing the best job in driving growth (those with the highest NPS).

    MNB: We’ve long maintained that one of the reasons that retailers are unable to generate customer enthusiasm is that they’ve misinterpreted the essence of what a good loyalty marketing program should be – rather than trying to make the consumer loyal to the store, the store should be working to prove its loyalty to the consumer. Do you think this is a valid construct?

    Fred Reichheld: Absolutely, yes--loyalty is a two-way street. Stores will earn customer loyalty when they are loyal to their customers (that is, they treat them according to the Golden Rule and act in the customers' best interests).

    MNB: Can you give an example of a store/chain that is recommendation-worthy and why? And one that is not?

    Fred Reichheld: Some of the highest Net Promoter Scores in retailing are being earned by Apple retail stores, Costco, and Target. They are all growing faster than their competitors because they are dedicated to turning customers into promoters.
    KC's View:
    Once again, this reminder about the annual MNB Wine Party scheduled for FMI…

    On Sunday, May 6, from 6-7:30 pm, we will once again be hanging out at the Bin 36 bar…and if any members of the MNB community would like to stop by, say hello, and chat for a bit…well, the first couple of bottles of wine will be on us. It’ll be a great opportunity for all of us to put faces and voices with the names and words that appear on MNB plus an excuse to drink good wine. (Not that we need an excuse…)

    And there will be a special guest appearance this year – for the first time, Mrs. Content Guy will be joining us!

    Bin 36 is located at 339 N Dearborn on the west side of Marina City, between the river and Kinzie.

    See you in Chicago.

    Published on: April 19, 2007

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las

    Or, to simply read the commentary in text form, continue below…


    Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, brought to you by Webstop, experts in the art of retail website design.

    I was interested to see this week that Coca-Cola has launched a competition to design the ultimate vending machine…and that it is doing so not by going to the usual cadre of vending technology experts, but going to the next generation of consumers via websites such as SecondLife.com, MySpace.com, and YouTube.com.

    Now, when the winner is selected, it will not exist in the terrestrial world. Rather, it will be found on SecondLife, a site that exists as a kind of alternative universe for people and companies that want to explore virtual realities. Coke says that the winning concept also could find its way into other kinds of media and communication platforms. And, depending on how things go, the machine could even find a physical existence…Coke plans to use the virtual world as a source of inspiration for what futuristic vending machines may look like.

    Coke doesn’t expect to change the world right away. In fact, the media coverage of the virtual launch of the competition stressed that it was small in scale, with limited immediate interest…but the company expects it to build slowly and organically.

    It’s interesting that this story pops up at the same time as the trade papers are lambasting Anheuser-Busch for its Bud.TV experiment, which is designed to be an online television network with content for Budweiser’s target demographic. Participation and traffic aren’t anywhere near expectations, and conventional wisdom seems to be that Anheuser should cut its losses.

    That’s the conventional way of looking at things. But I hope that Anheuser decides to be patient with this new way of creating community, just as I hope that Coke is a raging success with its competition.

    The Internet, properly used, is a wonderful place for creating community. Trust me on this one…I’ve been lucky enough for the past five and a half years to be part of the MorningNewsBeat community, which more than a few people have informed me via email has less to do with me and more to do with the quality of people who share their opinions and passions each day. Ultimately, that’s what both Anheuser-Busch and Coke ought to be seeking – the seeding of communities that will grow and evolve naturally.

    They shouldn’t think of their communities as being the virtual version of housing projects that are just plunked down on a piece of land, looking like they are just occupying space rather than being part of the land. If they expect that kind of immediate return and enthusiasm, they may well be disappointed. But to be able to have the time and the patience and the money to let these communities find their own shape and size and texture…that’s a rare opportunity.

    I hope it is one they embrace. And that other companies – manufacturers and retailers alike – will do the same.

    It’s not a cost. It’s an investment.

    For MorningNewsBeat Radio, I’m Kevin Coupe.
    KC's View:

    Published on: April 19, 2007

    The Chicago Tribune reports that the Illinois State Board of Investment, which owns $22 million worth of Wal-Mart stock – is requesting a federal investigation of Wal-Mart’s security and surveillance efforts, including those used to target shareholder groups that it identified as being dissidents.

    New York City Comptroller William Thompson Jr., who oversees a pension fund that owns nearly $400 million in Wal-Mart stock, has made a similar call.

    Both Thompson and William Atwood, executive director of the Illinois board, are reported by the Tribune as being part of “a group of large shareholders urging Wal-Mart to approve an independent review of its business practices. Atwood said the group is concerned that Wal-Mart's stock and reputation will suffer from allegations it has violated labor laws in an attempt to create a cheaper, more flexible workforce.”

    Wal-Mart’s extensive surveillance activities came to light after the company fired a security employee for illegally taping phone calls between its staff and a New York Times reporter. Once fired, that employee then told the Wall Street Journal about some of the other activities in which he was involved – including monitoring the private discussions of the board of directors after CEO Lee Scott was asked to leave the room.

    Atwood describes these activities as evidence of "corporate paranoia" and said that they raise “concerns that it may have violated company policies and justifies the need for an independent review that Wal-Mart's board has consistently rejected.”

    Wal-Mart has not discussed its corporate espionage tactics and strategies, but has denied that it has behaved inappropriately.
    KC's View:
    We’re guessing at this point that some sort of independent probe and/or Congressional hearings are inevitable. It just sounds bad, just sounds paranoid, and reinforces so many of the negative feelings that some people have about Wal-Mart.

    At this point, we’d suggest that Wal-Mart cooperate and not resist. It’s never the crime…or even the alleged crime…that gets you. It’s always the cover-up….or even the perceived cover-up.

    Published on: April 19, 2007

    The Courier-Journal reports this morning that some 700 employees at a Kroger distribution center in Jefferson County, Kentucky, walked off the job as contract negotiations between the chain and the Teamsters union broke down. According to the story, “ It was not clear what impact, if any, the strike will have on the grocer’s ability to make deliveries to area stores.”

    The distribution center’s management was transferred by Kroger to a pair of outsourcing companies – Transervice Logistics and Zenith Logistics – and that the transfer required a new labor contract.
    KC's View:

    Published on: April 19, 2007

    • In the UK, The Grocer reports that Wal-Mart’s Asda Group is following in the footsteps of its parent company by using a packaging scorecard to evaluate the environmentally friendly efforts made by its suppliers. Asda reportedly also is asking consumers to provide examples of “over-packaging,” and will use shopper feedback to apply pressure to manufacturers.
    KC's View:

    Published on: April 19, 2007

    FastCasual.com reports that when fast food chain Chipotle decided to use naturally raised pork in its carnitas burritos, it meant that the chain had to increase the price by a buck…which was seen as something of a risk.

    "Ethically that was a very easy decision for us to make," Jim Adams, Chipotle's marketing executive director, tells FastCasual.com. "But financially it was a difficult decision for us to make."

    Chipotle needn’t have worried. After the change was made, sales quadrupled.

    "What that said to us is that people will pay for quality and they will pay to eat food that is raised in a humane way” Adams says.
    KC's View:
    Chipotle makes a wonderful product, and our kids now rank it as their favorite fast food. (Actually our daughter puts it at number two, after Walter’s hot dogs in Mamaroneck, NY.) And we’re glad to see that its ethical decision paid off.

    Published on: April 19, 2007

    The Produce for Better Health Foundation (PBH) announced the launch of its new Campaign for Children’s Health, which it describes as “a landmark five -year program that will encourage the nation’s children through moms to eat more fruits and vegetables for better health.”

    PBH said in a prepared statement that its goal for the Campaign for Children’s Health is “to raise $3 million in funding to be used for programs to provide know-how, resources, and motivation that will make increased fruit and vegetable consumption a reality among our children today.” According to Gregg Storey, Ph.D., chair of the campaign, “Other organizations and campaigns are already addressing key topics like increasing physical education in schools and making sure children have health insurance. The missing link was a concerted effort to improve the diet of our nation’s children through fruits and vegetables. Now the Campaign for Children’s Health will work to fill that gap.”

    PBH said it is about halfway to its $3 million fundraising goal.

    National statistics showing that one-third of children and teens in the U.S. are overweight or obese, due to a lack of exercise and a diet high in fat, sugar and calories, are identified by PBH as the inspiration for the campaign. “These children suffer from low self-esteem, sleep apnea, early onset diabetes, and heart attacks as well as other diseases at younger and younger ages,” the foundation said. “Scientists recognize that children today may be the first generation in history who has a shorter life-span than their parents.”
    KC's View:

    Published on: April 19, 2007

    • Tesco reportedly has opened a headquarters in the South China city of Guangzhou, which it hopes to use to build its presence and sales in the region. Tesco already has three stores in South China, and 47 in total in the whole country.
    KC's View:

    Published on: April 19, 2007

    USA Today reports this morning that the US Food and Drug Administration (FDA) has confirmed that it has found “melamine in imported rice protein concentrate from China,” and that this protein probably was responsible for the recall this week of venison-based foods sold by Natural Balance.

    Wilbur-Ellis, the importer that brought the protein in from China, has recalled it.

    The Australian reports that scientists Down Under have developed what they are calling “a potential new super grain” that they believe could be used to make breads and cereals and that could conceivably reduce intestinal diseases, cancers and diabetes.
    KC's View:

    Published on: April 19, 2007

    • Kraft Foods reported first quarter earnings of 702 million,, down 30 percent from the year-ago quarter's net of $1.01 billion. Revenues, however, climbed 5.7 percent to $8.59 billion from $8.12 billion.
    KC's View:

    Published on: April 19, 2007

    • Nash Finch Company announced today that it named Howard Befort, a three-decade veteran of Safeway, to the position of Senior Vice President, Merchandising.
    KC's View:

    Published on: April 19, 2007

    IGA announced yesterday that former IGA President William E. Olsen passed away Monday, April 16.

    Olsen became president of IGA in 1973 and remained in the job for 14 years.
    KC's View:

    Published on: April 19, 2007

    …will return.
    KC's View: