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    Published on: May 12, 2009

    by Michael Sansolo

    Why is that hardly a week goes by without something happening that has us all scratching our heads? In fact, it’s sometimes hard to pick just one item. For instance, in the last week in the midst of strange debates throughout the business and political world how is it possible that KFC managed to issue an “exclusive” coupon through the Oprah show without having any sense that a whole lot of people were going to find it. And find it they did.

    The question is: how do things go so badly off the tracks so often? Is it bad planning, bad strategy, bad execution or simply bad people? Or is it simply that companies forget to think like shoppers?

    These incidents never fail to amaze me. Consider one we heard from a relative recently. Our niece got a product recall for the crib she uses for her 18-month-old, which is never a good thing. Apparently, toddlers found a way to break the slots on the crib so the recall was merited. The method, however, was as sturdy as the slats.

    In order to get the recall, customers have to wait a week for the “recall kit.” Then they were to take the crib apart and send back the critical parts. At this point, they were advised to wait another one or two weeks to get vouchers entitling them to buy new cribs.

    Emily, our niece, put this simply: “What does my kid sleep in after I take the crib apart? For that matter, what does he sleep in right now while I wait for my recall kit to come?” For concerned parents everywhere, the company’s plan probably looked like a really bad joke.

    (As Emily pointed out, a toddler is in that wonderful phase where a bed won’t hold him and a portable crib is a momentary hurdle. Emily decided the only option was to buy another crib prior to getting her voucher, but she admits she was lucky. She could afford to lay out the money, which many other consumers cannot do, and her local Babies R Us store told her they would refund her money once the voucher came in.)

    So here’s the question. How is it that the Jardine crib company, which is making its third recall of the last 12 months, got into this situation considering a key product they sell? After all, Jardine is dealing with a very concerned shopper and people like Emily are certainly going to be willing to share their story through every means possible, including their posts on Facebook.

    It makes you wonder why a company like Jardine doesn’t have someone in house whose job it is to think like Emily. Supermarkets started doing this in the 1960s with the formidable Esther Petersen at Giant Foods and any thought of eliminating those positions should be fought forever. A consumer advocate or ombudsman whose job it is to ask the tough but sensible questions should be essential to every company today, starting with Jardine and KFC, but certainly not stopping there.

    At the same time, let’s remember the power of unexpectedly good customer service and how quickly those stories are also shared in today’s interconnected environment. My good friend Joy Nicholas encountered this when a recent flight ended with an emergency landing. It seems a hairspray can exploded in the luggage hold and since airborne explosions are never taken lightly, Joy’s plane landed at an Air Force base in Florida.

    There, quick thinking and caring individuals made all the difference. While the passengers waited for a new plane to fly in, the base commander treated his 105 sudden guests to a special dinner at the officer’s club. And within 24 hours after getting the passengers to their final destinations, the carrier, Southwest Airlines, provided each one with a $100 voucher. As Joy said, “A great experience of Southwest’s (and the military’s) amazing customer service. There wasn’t one complaint, one scream and not one bad word was said about SWA at any time.”

    In other words, someone was thinking.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .

    KC's View:

    Published on: May 12, 2009

    The New York Times reports this morning that hospitals like the Mayo Clinic and the Cleveland Clinic are getting into the in-store medical clinic game as a way of “fighting back” against the walk-in clinics that they see as a threat to their business models. Ironically, they are forging relationships with some of the same retailers that they see as the enemy, including Walmart and CVS.

    “Many primary-care doctors still denigrate the retail clinics as cheap, unworthy competitors,” the Times writes. “But hospitals see the clinics as a way to reach more patients and expand their business. And they argue that as President Obama and Congress warn of a shortage of primary-care physicians, the hospital-linked retail clinics are filling a vital public need.”

    The Times notes that “the idea of retail clinics took root about four years ago, and more than 1,000 are now operating around the country in drugstores, supermarkets and big-box discounters. But in the early going, few were linked to hospitals or medical centers. Now, though, about 1 in 10 has a hospital connection, according to Merchant Medicine News, an online newsletter for the clinic industry. And many more are planned … According to a recent survey by Harris Interactive, 11 percent of adults said they or someone in their immediate family had used a store clinic in the last 10 months, up from 7 percent a year earlier.”

    KC's View:
    I’m hardly an expert on health care, but it seems to me that one basic truth is that competition ought to be good for the consumer. It is a good thing for patients if hospitals decide that they need to change their business model to compete with and/or join with the in-store clinics that are being opened. And while a lot of doctors are decrying the growth of the clinics, their position will be undercut by the hospitals’ decision…and they’ll end up having to be more competitive, too.

    This isn’t just the best way to improve health care…it is the way to improve virtually every business. You embrace change and innovation instead of fighting it, and you make customers the center of your universe rather than forcing consumers to put you at the center of theirs.

    Published on: May 12, 2009

    The Wall Street Journal reports this morning that Target, under attack for being out of synch with consumer needs, has decided to put a greater emphasis on fresh foods and groceries as a way of finding its way through tough times. The retailer plans to transform “a corner of its discount department stores into a grocery store,” expanding its use of food as a differentiating strategy beyond the 245 supercenters that it operates around the country.

    According to the Journal, the new concept will be tested in 100 stores, and if successful will be rolled out to most of Target’s, 1,300 discount stores.

    “The minigrocery carries a narrow selection of products from 90% of the food categories found in a larger grocery store,” the paper writes. “To speed up check out, Target has removed the need to weigh or bag produce. Even individual potatoes come wrapped in plastic and stamped with a bar code.”

    Meanwhile, the Minneapolis/St. Paul Business Journal reports that Target has begun testing a price-matching program in the Twin Cities, and will “match the prices in a competitor’s ad on identical items during the dates that the ad is in effect. Shoppers must bring the competitor’s entire print ad with them to the customer-service desk to request a price match.”

    The Target program is seen as a “counterpunch” to Walmart’s consistent “always low prices” strategy, which has allowed it to outperform Target during the recession.

    The new initiatives by Target take place as it moves toward an end-of-the-month shareholder vote on the makeup of the company’s board of directors; an alternative slate has been nominated by a dissident shareholder – and interestingly, one of the members of that slate is Jim Donald, who because of his career in senior executive positions at Walmart, Safeway, Pathmark and Starbucks is seen as one of the more compelling options by some analysts.

    KC's View:
    It seems to me that one of the problems that Target’s current management has is that it seems to be playing a lot of defense. Sure, it’s matching prices…but only in some stores, and only because it has been forced to by competition and circumstances. Sure, it is putting in more food…but that is sort of throwing stuff against the wall to see what sticks. (Maybe I’m wrong on this, but I don't think that wrapping individual potatoes in plastic is the kind of approach that gains fresh food credibility … which is what Target seems to be seeking.)

    Furthermore, there is a comment from Target CEO Greg Steinhafel that caught my attention. He tells the WSJ that “he has no wish to try to be like Wal-Mart, which he characterizes as ‘a grocer that happens to also sell general merchandise’.”

    That seems like a fundamental misstatement and misunderstanding about what Walmart is and does. And doesn’t give me a lot of confidence in Target’s ability to strategize and implement in a way that makes sense.

    Published on: May 12, 2009

    The Wall Street Journal has an interesting essay by Richard Braddock, chairman/CEO of the FreshDirect Internet grocery service in New York City, in which he talks about the customer’s strategy:

    “At FreshDirect, our core mission is to change our customers' lives by giving them a superior on-line shopping experience. Our 'secret sauce' is our customer database, and the company's growing ability to use it to enhance our customers' experience. For as long as people have shopped with FreshDirect (which has been operating more than five years in the New York metro areas and is achieving real growth even today), the company knows the details of each time a customer has shopped on the site, every unit bought during those visits, and all service interactions. The company also knows exactly who its customers are when they enter the online store for a new shopping visit – a loyal customer, a new customer, or a lapsed customer who has been away for awhile and needs to be welcomed back.

    “When you know your customer so well, you have the opportunity to change your whole managerial approach and really make the customer the king in your plans. This leads to what I call managing with intense customer focus.”

    Braddock goes on:

    “I believe real Internet marketing is still in its infancy. Too much attention has been given to digital advertising, and not enough to the creation of loyal customer relationships, which are especially valuable in the ‘one-click’ purchasing environment. The focus on digital advertising has led to a proliferation of clicks and visitors (and declining conversion rates to boot), but has failed to capture the transformative power of the Internet. The true power of Internet marketing is the ability to interact to develop superior customer knowledge and real-time rhythm to significantly build one's business.”

    KC's View:
    The question I would ask every retailer is, how much do you know about your individual customers?

    FreshDirect and every Internet grocery operation have a real advantage over brick-and-mortar retailers that may still subscribe to a “if we build it they will come” approach to business.

    What is your secret sauce?

    Published on: May 12, 2009

    Poultry supplier Foster Farms announced a "Say No to Plumping" public information campaign yesterday, saying that it wants “to raise awareness of saltwater-injected chicken … According to USDA labeling laws, brands injecting poultry with saltwater solution can label their chicken ‘100% Natural’ or ‘All-Natural.’

    Foster charges that “injecting raw chicken with saltwater is employed by many chicken companies, which costs consumers money and contributes to serious health issues.” The company says that roughly two-thirds of consumers are unaware of the practice of “plumping,” and that even more have health concerns – about issues such as sodium - that could be compromised by the use of saltwater.

    KC's View:
    This is a call for transparency and truth in labeling. It also suggests that federal guidelines are not what they should be. I agree with both positions.

    Published on: May 12, 2009

    The St. Petersburg Times reports that a federal appeals court in Florida has allowed a Tampa class action suit to go forward, ruling that Florida residents can sue Delhaize-owned Sweetbay Supermarkets there over the data breach that hit the company in late 2007 and early 2008.

    That breach hit 4.2 million credit card numbers held by shoppers at Sweetbay and its sister chain, Maine-based Hannaford Bros.

    While the Florida case initially was bundled into a federal class action that included customers of both chains, the Florida decision “peeled off one case and sent it back to be heard on its own in a state court in Tampa,” the Times writes. “The panel ruled Florida residents would have more options in the case since it was filed against a Florida company in the home state of all parties.”

    KC's View:

    Published on: May 12, 2009

    Supervalu announced the creation of a new Stockman & Dakota brand of premium USDA Choice Angus beef that is said to be “part of the company’s comprehensive new beef program designed to position its stores as the unparalleled destination for fresh, quality beef.”

    The new brand is available nationwide at Supervalu’s family of stores, including Acme, Albertsons, bigg’s, Cub Foods, Hornbacher’s, Jewel-Osco, Shaw’s/Star Market, Shop ‘n Save and Shoppers Food & Pharmacy.

    The company said that “in addition to Stockman & Dakota brand products, the company’s beef program will include a new store-branded beef line that provides improved quality over existing offerings at a good value. In total, the program will encompass 60 different cuts of beef and feature improved merchandising, new signage and enhanced service in the meat department. Consumers will now find useful information, tips and tools both in-store and online to help them make better sense of beef.”

    KC's View:

    Published on: May 12, 2009

    Interesting piece in the Wall Street Journal> this morning suggesting that “frustrated by the response in Washington to the recent spate of food-borne illnesses, state and local politicians are adopting tougher safety laws independent of federal rules. The worry, say some critics, is that a patchwork of regulations will emerge, creating costly and unnecessary hassles for food makers and distributors.”

    "It's a good thing states are trying to raise the bar and improve food safety, but it needs to be looked at carefully," Robert Brackett, chief science officer of the Grocery Manufacturers Association (GMA), tells the WSJ. "It should really lead to a national system."
    KC's View:

    Published on: May 12, 2009

    CBC News reports that Canada Safeway has begun offering an online grocery ordering and delivery service to the remote areas of the Kivalliq region of Nunavut and northern Manitoba. According to the story, “The site allows customers to order from more than 40,000 different products, including perishable goods such as produce, dairy, bread and meat. Safeway will ship orders from Winnipeg once a week to Rankin Inlet, and twice a week to other Kivalliq communities. It will also ship daily to northern Manitoba communities.”
    KC's View:

    Published on: May 12, 2009

    • There is a new study out of Australia’s Deakin University saying that American children are obese not because they don't exercise, but because they overeat – and that physical activity cannot compensate for the stuff that they are putting into their mouths.

    USA Today reports this morning that PepsiCo-owned Frito-Lay has a new marketing strategy – emphasizing that its chips are made from “local” farms in 27 states, and providing a website tool that allows people to find out where the chips they are eating are actually from.

    • The Boston Herald reports that “a U.S. District Court in New York has preliminarily approved a proposed settlement of a class-action suit over Costco’s annual membership renewal practices. The suit claims the company unlawfully shortchanged millions of consumers who renewed after their Costco memberships had expired by not resetting the renewal date … As part of the settlement, Costco would agree to provide between one to three months’ free membership, valued at between $4.17 and $25. The action would apply to present and former members, and to all types of memberships, which cost $50 or $100 annually.”

    KC's View:

    Published on: May 12, 2009

    • Winn-Dixie Stores reports that its third quarter sales grew slightly to $1.73 billion for the quarter from $1.72 billion, on same-store sales that were up 0.2 percent. Q3 profit was up 10 percent to $16.6 million, from $15 million during the same period a year ago.
    KC's View:

    Published on: May 12, 2009

    We had a long piece yesterday about the corporate intrigue taking place at Target, which prompted a number of emails.

    MNB user Craig Espelien wrote:

    I have been involved with Target on a variety of levels over the years and, while I admire them as a company and feel their “brand” is the right one the concept of speed and cutting edge thinking are no longer part of who they are. Everything is handled by committee (at least as far as I can tell) with consensus being the goal. As most folks will know, consensus takes a LONG time – especially in larger companies with more levels of management. From their internal brand structure to their execution at the stores, they appear more and more to be a conglomeration of small business units that have forgotten they are part of whole.

    In their private brand space they have struggled with their brand position and their product quality (as an example, they hire such young buyers that there is little or not thought given to quality during a bid – only after the quality goes wrong do they realize that they need to have specifications figured out prior to a bid). Their Archer Farms brand is intended to be the “Expect More” of their Expect More. Pay Less. Positioning but I am not sure they have told the customer that or celebrated what the in-store expectations should be. The Market Pantry brand is the Pay Less piece of the puzzle – but again, no clear direction to the consumer on what they should expect. Finally, the lines between the two brands tend to blur (Target has had very little governance of where the quality and brand breaks should be – at least as it manifests to the consumer).

    Great company. Almost too big for the processes they are using. Walmart stays current by hiring talented folks and allowing them to work inside a rigorous process that produces decent product (they continue to struggle with innovation).

    If Target want to regain their edge, they need to make sure that internally and externally EVERYONE understand their brand and what value stands for.


    MNB user Richard Lowe wrote:

    Just like our own government there should be term limits on all governing boards and yes, Target is ripe for some changes.

    As a supplier on the out side trying to get in with a revolutionary new product. Target's purchasing department was impossible to communicate with and always seem to have their head in the sand. They also have the idea that it is their way or the highway! Salesmen should always be welcome, as their ideas can be the life blood of an organization. Especially in the fast changing world of retail!

    I believe many of our corporations could stand some new governance and hope it all comes to be!


    MNB user Michael F. Parker wrote:

    I was a Target employee during its turnaround starting in 1975. I have always admired Target’s and its predecessor, Dayton Hudson, for its social commitment and community involvement. I believe that Target has been impacted most by the destruction of the upper middle class created by Wall Street greed and corruption. It has been my experience that any time financial people control retail it is the beginning of the end.

    I truly understand finance 101 and that return on shareholder investment control’s all actions. This may be why we have the meltdown we are encountering in retail. I believe that Jim Donald tried to do the right things at Starbucks but was cut off at the knees by financial interest.

    Walmart is successful because it has no social conscience and I believe that Sam is doing cartwheels in his grave to see how his child is abusing, employee’s, vendors and competitors, all in the name of Finance 101. Is there no end to corporate greed?


    KC's View: