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    Published on: September 17, 2009

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

    United Airlines this week announced that it has created a program that allows fliers to purchase the same priority options that until now have been available only to its frequent fliers.

    According to the company, it now will allow people to pay for the ability to not just get roomier economy seats, but also get access to faster security lines, earlier boarding, the Red Carpet Club, and even free checked luggage…though I guess it isn’t really free if you have to pay for it, but the argument is that by buying the package you aren’t getting nickel and dimed to death.

    At some level, this makes sense. It allows customers to pay for better treatment, and it gives United a new revenue stream…and if you’re in the airline business, I guess, any revenue stream is a good revenue stream.

    Except that I think it can be argued that United is making a mistake, and in fact could be eroding the very value of its frequent flier program.

    It has always been a truism that airline frequent shopper programs were effective because they encouraged people to stick to one airline – or at least, to airlines within a specific alliance – because as miles accrue, rewards become available and treatment is better. Contrast this to the supermarket industry, where in most cases the people who spend the most money tend to get no better treatment…and in fact, don't even get treated as well as people who buy just a few items and get to use the express lane.

    But now, you don't have to be loyal. You just have to have a few bucks in your pocket. I have no scientific evidence of this, but it stands to reason that at least some people will be less loyal to United because they don't need to be…they can just buy the level of attention and speed that they want.

    It may be that this new program will generate more revenue than it will lose, but I wouldn’t bet on it. And at the very least, it makes the case to United’s traditional loyal fliers that they don't need to be loyal anymore…and that, in fact, United won’t be as loyal to them because it needs to make a buck.

    The argument here always has been that true loyalty programs demonstrate how loyal the business is to the shopper…as opposed to just offering financial incentives to come shop at a particular place at a particular time…which really is renting loyalty, not earning it.

    It seems to me that United is making a short term, tactical decision as opposed to thinking long term and strategically. Again, it is too early to prove this…but I suspect to at least some customers, United’s skies just got a little less friendly…and the playing field between United and its competitors just got a little flatter and more even. Some of the differential advantages that were implicit in its frequent flier program are gone…and this is a mistake that no business – not an airline, not a retailer – ever wants to make.

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

    Published on: September 17, 2009

    The Wall Street Journal reports that the US Food and Drug Administration (FDA) has approved the use of a vaccine to battle the spread of the H1N1 influenza virus, which will allow the government to begin a broad scale vaccination campaign beginning in mid-October.

    According to the story, “Initially, the H1N1 vaccine will be reserved for health-care workers, pregnant women, children and young adults, who have been disproportionately affected by the new virus.

    “So far, the new flu strain hasn't sickened very many Americans age 60 and older possibly because they have immunity from similar viruses that caused past influenza pandemics. The U.S. has seen additional cases of H1N1 influenza as schools resumed classes in recent weeks … it is likely that just one dose of the vaccine will be needed to protect adults against the virus, based on preliminary study results of some of the vaccines released last week.”

    Up to 50 million vaccine doses are expected to be available next month, with more available as additional doses are produced.
    KC's View:
    There are a lot of retailers out there, I gather, that will be offering H1N1 flu shots in their stores, and that’s a good thing. But I hope that even more retailers will be making arrangements to allow and encourage their employees to get flu shots … since so many of them are in contact with both food and people on a consistent basis.

    In fact, I have no idea if this is possible, but wouldn’t it be nice if the Food Marketing Institute (FMI), which is having its Future Connect conference in Dallas from October 11-14, figured out a way of having a flu shot station on location for people to access … especially since it was concerns about H1N1 flu that got the conference postponed from May to next month to begin with.

    Now, there may be all sorts of reasons that this does not make sense, or is even possible. It’s just an idea…and I think the message would be a good one.

    Published on: September 17, 2009

    The New York Times reports on the continuing debate over a proposed tax on sugary soft drinks, which is seen as one way to battle obesity and raise money to reform the nation’s health care system.

    According to the Times, “A team of prominent doctors, scientists and policy makers says it could be a powerful weapon in efforts to reduce obesity, in the same way that cigarette taxes have helped curb smoking.

    “The group, which includes the New York City health commissioner, Thomas Farley, and Joseph W. Thompson, Arkansas surgeon general, estimates that a tax of a penny an ounce on sugary beverages would raise $14.9 billion in its first year, which could be spent on health care initiatives. The tax would apply to soft drinks, energy drinks, sports beverages and many juices and iced teas — but not sugar-free diet drinks.”

    The group has written a paper for the New England Journal of Medicine, concluding “that a beverage tax might not only raise revenue but have significant health effects, lowering consumption of soda and other sweet drinks enough to lead to a small weight loss and reduced health risks among many Americans. The study cited research on price elasticity for soft drinks that has shown that for every 10 percent rise in price, consumption declines 8 to 10 percent.”

    As the Times writes, President Barack Obama has said that the idea is worth considering, though he has not endorsed it. He told Men’s Health that “there’s no doubt that our kids drink way too much soda. And every study that’s been done about obesity shows that there is as high a correlation between increased soda consumption and obesity as just about anything else.”

    Coca-Cola CEO Muhtar Kent, on the other hand, has labeled it “outrageous.”
    KC's View:
    See “Your Views,” below, for some comments on Kent’s statement.

    They make the point that this would hardly be the first time that the government used taxation to influence consumer habits – and that sometimes it works, as in tobacco, which is a good thing.

    But I remain queasy about a sugary soft drink tax – and not because I drink them, which I don't. It’s just that there’s a point at which you can’t help people who don't want to help themselves, and there’s a point at which there is simply too much intrusion into how people live. We’re getting perilously close to that point, I fear.

    Published on: September 17, 2009

    The Washington Post reports on the dramatic price declines that consumers are seeing in the supermarket, “as the global downturn drives down the cost of staples such as wheat, corn and milk and grocers fight for the wallets of penny-pinching consumers … The price of corn, for example, is down 56 percent since July 2008 on the Chicago Board of Trade. Such drops have helped drive down the grocery consumer price index, which measures what shoppers pay at stores, about 2.5 percent since its peak in November, according to new data released Wednesday by the Bureau of Labor Statistics.”

    These decreases, the Post notes, have helped to create price wars in some markets….such as Washington, DC: “Locally, Safeway stores have slashed prices on thousands of products by as much as 25 percent over the past month. Giant Food said three weeks ago that it has doubled the number of items on sale and papered its shelves with signs highlighting savings. And Wal-Mart, long feared by rivals for its aggressive pricing, plans to open its first area store with a full-service supermarket in Manassas in October.”
    KC's View:
    We’re seeing a lot of this, including in places like Southern California, where there are price wars taking place among the major retailers there. And while there is no evidence that this is going to change anytime soon – in part because even if the recession technically is coming to a close, employment numbers are almost certainly going to lag, creating a wake of price-sensitivity that is going to last a long time – let me make a few observations about this.

    1. To some extent, this could all change if, say, energy prices started to increase. If the cost of petroleum goes up, that could create a domino effect that will affect a lot of prices, which could do more damage to the economy.

    2. I tend to have a cynical streak, and as I watch the stock market held slowly but surely toward 10,000, I have this sinking feeling that as soon as it hits the magic number – more than half way back from where it dropped to a year ago – it all could collapse again. Hope it doesn’t happen, but it could. And that could certainly have a broad impact on prices and behavior.

    3. I also believe that retailers need to continue focusing on their other differential advantages - beyond pricing - as they create their value propositions. Pricing is important, but there also has to be something else going for you (especially if fighting Walmart, which tends to have the perception advantage in this area). While some say that people will carry the scars of this recession the same way a lot of our parents carried the scars of the Great Depression with them for their entire lives, I remain dubious. After all, there still are a lot more iPhone and iPod lines than there are bread lines.

    Published on: September 17, 2009

    • Tesco’s US division, Fresh & Easy Neighborhood Markets, announced that it has relaunched its Shop for Schools fundraising program. According to the company,, “Registered schools are eligible to receive a $1 cash donation for every $20 spent at a Fresh & Easy store. At the end of the program, Fresh & Easy will award the top fundraising school in each state with a $5,000 bonus.”

    And, Fresh & easy said that it has made several enhancements to the program, “by increasing the length of this year’s program, providing more marketing materials for parents and teachers to use, and introducing a fundraising shopping night for registered schools. On these special shopping nights, the brainchild of a Las Vegas store employee, Fresh & Easy will donate five percent of a store’s sales from 4 pm to 8 pm to local schools.”
    KC's View:

    Published on: September 17, 2009

    The Washington Post reports that the battle continues over credit card interchange fees – The US Congress is considering legislation to regulate them, the Obama administration has commissioned a study of them by the Government Accountability Office (GAO), merchants all over the country are trying to generate consumer support for regulation of fees that they say are excessive, and credit card companies are playing defense, saying they are just providing a product and service that people want.
    KC's View:
    I could be wrong about this, but it seems to me that there is no way that the credit card companies get out of this without some sort of regulation that limits their ability to charge usurious fees, and requires them to be a lot more transparent about their business practices.

    Published on: September 17, 2009

    Interesting piece in the New York Times, which reports that makers of household cleaners – including Procter & Gamble and Colgate-Palmolive – are faced with a conundrum.

    On the one hand, they want to be consumer-friendly and environmentally sensitive by being transparent about the chemicals in their products. On the other hand, “companies do not want to give competitors and makers of cheap knock-offs all the details of what goes into Pine-Sol, for instance, or Windex.”

    And so, the Times writes, manufacturers “have been working with consumer groups to devise a plan that could satisfy both sides. Come January, the industry has said it will voluntarily start to disclose much of what is in its cleaning products, which now represent a $14 billion-a-year business. Consumers will be able to call an 800 number, look at a Web site or, in some cases, simply check the product label to find the ingredients.”

    While some consumer groups are pleased by the voluntary actions, others are less impressed, and want mandatory and complete disclosure – even though at the moment, federal law requires “only that ingredients posing an immediate danger be reported on product labels.”
    KC's View:
    Might as well be transparent, since that is what consumers demand in this age of information immersion (some would say information overload).

    Transparency is a key value in 21st century marketing.

    Published on: September 17, 2009

    • A new Retail Advertising and Marketing Association survey conducted by BIGresearch indicates that women with children at home are bigger users of social media than the average adult American … and therefore, this is an important method that marketers can use to engage with these prime shoppers.

    The survey says that “women with children at home are more likely to use Facebook (60.3%), MySpace (42.4%) and Twitter (16.5%) than average adults (50.2%, 34.4%, 15.0%, respectively) … Additionally, 15.3 percent maintain their own blog.”

    If such social media serve as a kind of electronic back fence for consumers, there also is evidence that there is a lot of conversation going back and forth across it. The study says that “moms frequently share experiences and information, and say other peoples’ opinions influence their purchases. Nine out of ten (93.6%) mothers regularly or occasionally seek the advice of others before buying a service or product … A staggering 97.2 percent said they give advice to others about those products or services they purchased.”
    KC's View:

    Published on: September 17, 2009

    • Penn Traffic, parent company to P&C Foods, said that it lost $7 million during the just-completed second quarter, more than double the $2.9 million loss during the same period a year ago. Q2 sales were also down, to $208.8 million from $228.3 million a year ago, with same-store sales down almost seven percent.
    KC's View:

    Published on: September 17, 2009

    • Mel Simon, one of the nation’s foremost shopping center developers and the man who helped create the Mall of America, died yesterday at age 82.

    • Mary Travers, of Peter, Paul & Mary fame, died yesterday at age 72 after a long battle with leukemia.

    • Henry Gibson, who perhaps was best known for his offbeat poetry readings on “Laugh-In,” but who also was a character actor of note with performances in movies such as “The Long Goodbye, “Nashville,” “The Wedding Crashers” and the “Boston Legal” TV series, died yesterday at age 73 after a bout with cancer.
    KC's View:
    Two quick notes here…

    Mrs. Content Guy is an enormous Peter, Paul & Mary fan, and over the years we’ve attended a number of their concerts. Not only were their voices unique and synchronous when singing such songs as ‘Puff The Magic Dragon,” ‘Leaving On A Jet Plane,” “If I Had A Hammer,” and ‘Blowing In The Wind,” but much of their power and impact came from the fact that long after the sixties were over, they continued to believe.

    As I’ve said here before, I believe that the world is split into two camps – people who believe that the sixties and early seventies were a good and ultimately positive time, and those who feel that it was a horrible period for America. Peter, Paul and Mary were part of the former…and I have to admit that I agree with them. And even in these dissonant times, we still have their music…

    As for Mel Simon, I would only point out that he made a brief foray into the movie business. His most successful movie was “Porky’s,” but he also produced an awful little movie called ‘Somebody Killed Her Husband,” which starred Jeff Bridges and Farrah Fawcett…and that’s the film on which I got to work as Farrah’s bodyguard.

    Go figure.

    Published on: September 17, 2009

    Got a number of emails yesterday responding to Coke CEO Muhtar Kent’s statement that a tax of sugary soft drinks would be “outrageous,” and that such taxes almost never affect consumption: “I have never seen it work where a government tells people what to eat and what to drink,” he said.

    Among them…

    One MNB user wrote:

    Has Mr. Kent not heard of taxes on beer, wine and liquor which people drink. Most states have a sales tax on food purchased in restaurants (some on grocery as well) another ingestion tax. Taxes and tax breaks have been used to encourage and discourage for quite a while now. People can certainly be healthy with or without soda pop. If the soda pop abusers abuse less then it will be a “good tax”, if not then it will still be a good tax since it will create a ton of money and keep something else from being taxed.

    Another MNB user wrote:

    Mr. Kent must not be a smoker, nor does he look at all the overweight people in Atlanta. Someone needs to point out the rise in diabetes and that Coke Zero is the only item selling for them at the expense of DIET coke and regular. I get he needs to say something , but please...




    Regarding Fed Chairman Ben Bernanke’s statement that the recession probably is over, one MNB user wrote:

    I personally know seven friends either out of work or under-employed to the extent they cannot meet their bills. Unemployment is reportedly at 10%? I do not have seventy friends. Hard to believe a recession is over with so many seeking employment. It’s certainly not close to over for my seven friends. Outrageous declarations have a tendency to stick in folks’ minds.

    And, addressing one of the effects of the recession, MNB user Al Kober wrote:

    As you stated, many companies use this time to cut their payroll. There may be another reason why. During good times, many companies do not exercise enough discipline or perform proper reviews, which allow underperforming employees to remain on the payroll. Many supervisors who perform employee reviews are not comfortable telling underperforming employees that they need to improve or be dismissed. Then during a down turn, they can hide behind their own inefficiencies and use the economy as the reason for the underperforming employee to be dismissed. We all like to tell an employee they are doing really great and that they will get a raise, that is the fun part, but having to be honest at review time and tell underperforming employees “shape up or ship out”, come as a more difficult job and many supervisors will try anything else but to be up front and forthright with their employees.




    We had a story the other day about Whole Foods’ use of renewable energy credits, which led one MNB user to write:

    The renewable energy credit scheme is an interesting proposition. Whole Foods sat down and figured out how many kilowatt-hours of electricity it used in a year. They then went to the wind farm and paid their estimated consumption in advance. The wind farm issued credits to Whole Foods that can be used to pay the bills as they arrive. The wind farm gets a shot in the arm, Whole Foods gets great PR and the total pushes renewable energy to viability. The downside for Whole Foods? Having to pay the whole bill in advance in exchange for all of this positive "stuff". Seems pretty good to me.

    Me, too. I’m glad you explained it.




    Finally, regarding labor issues in Denver, we wrote the other day that “possibly the biggest point of difference is a change in pension plans that would allow workers to retire no earlier than age 55 instead of letting them leave when their age and years of service combine to reach 80.”

    Which led MNB user Geoff Harper to observe:

    Isn't that a lot like going from 37 hours a week to 40? If they strike, I hope that's not the only reason.

    Careful. Suggest that maybe people have to work harder and you get accused of exploiting the working class.

    Not that the working class doesn’t sometimes get exploited. It does, and shouldn't be. But sometimes clear heads should prevail, and everybody needs to have skin in the game…and get rewarded when hard work pays off.
    KC's View: