business news in context, analysis with attitude

Published on: February 26, 2013

by Michael Sansolo

No matter how good, careful or creative you are, your reputation gets written every day and frequently by events you can’t control. It’s why companies and individuals have to constantly strive for top performance and figure out how to repair damage as quickly as possible.

What caused that thought this week was the Daytona 500, a sporting event I rarely watch. But because of something that happened in Daytona a year ago, I thought the sport provided an incredible example of crisis management. Then, to demonstrate how quickly things change ... a horrible accident marred the very end of the Saturday preliminary race. No doubt you saw the pictures: a car taking flight, puncturing the protective fence and injuring some 30 spectators.

Within hours of the crash questions were being raised about safety at the track. Yet just two days earlier, the exact same officials were being praised for their incredible quick thinking in averting all manner of disaster from a crash in 2012, which was to be the subject of this week's column. As you read it, I think you'll agree with me that it illustrates the challenges of crisis management and constant vigilance.

Remember, you’re only as good as the latest problem...

Occasionally there are sports stories that deserve retelling because they speak to reactions, decision-making and creativity in ways that any business can understand. So in this, the week of the Daytona 500, we need to reflect on an incredible lesson in reacting to crisis that came from that same race just one year ago.

It’s a lesson all about preparation, good insight, good knowledge and the ability to make calm decisions under tremendous pressure. I’m betting that these are challenges all of us might face every now and again, though without the same level of scrutiny. So read on and think about how well trained you and your staff might be for those incredibly unthinkable events. And consider what you might have to do to match this level of decision making.

The story comes from the 2012 Daytona 500. Unless you are a rabid NASCAR fan you probably don’t remember the winner, yet you might remember the event: a freak accident that ignited a fireball. Dan Wetzel of Yahoo! Sports penned a great reflection of the incident in advance of the 2013 event.

The 2012 fire took place 80% through the race when a car malfunctioned and slammed into a truck-mounted jet dryer used to clear debris off the track. Crashes are fairly normal at NASCAR, but those don’t involve vehicles loaded with 200 gallons of jet fuel. Officials quickly realized they had an unusually explosive situation on their hands.

The damaged race car skidded to the infield where the driver emerged relatively unhurt. Likewise, crews were able to quickly free the truck driver and help him escape severe injury. Then the enormity of the problem became clear: the jet fuel could burn hot enough to melt a roadway and end the race. In order to fight the fire, save the track, repair it in an environmentally safe method and maintain a television audience, NASCAR, as Wetzel wrote, had to get creative. Strange and daring decisions had to be made. And they were.

Before the fire even started one official understood what was about to happen and ordered fire crews to the scene, even though there were no flames. That pro-active decision resulted in the crews being in just the right place when the flames erupted.

Then, instead of trying to put out the fire on the truck—a long shot at best—officials targeted their efforts at the surface around the truck in hopes of keeping it cool enough to withstand the heat. Once again, the unconventional decision worked and the track managed to survive. Not surprisingly, television ratings for the event went up as the news story changed from the race to the fireball.

Once the fire was extinguished, the next problem was the debris. It couldn’t be simply swept away. The track needed repairs and the toxic debris required careful handling. The crews did such a good job, in fact, that a subsequent inspection from the Environmental Protection Agency praised NASCAR.

Incredibly, the cause of that easy clean up came from a basic supermarket item: Tide. Officials say laundry detergent is the single best way to cleanse tracks after the various spills that accompany any race, so a pallet load is always kept on hand.

One last creative call: usually NASCAR prohibits drivers from carrying cell phones during a race because texting at 200 mph is definitely out. But during the delay, one driver whipped out a phone and kept up a steady stream of Tweets. Rather than punish him, NASCAR understood this special moment required some special handling. Besides, the driver picked up 135,000 followers and his Tweets helped fill the 100-minute delay in racing.

And just like that, the track was saved, the race finished, the television audience grew and even the EPA was satisfied. That seems like a winning effort to me.

That was until the crash one year later. When it comes to reputations, every day matters and without question, NASCAR’s will rest on how well they react this time.


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: February 26, 2013

by Kevin Coupe

Interesting piece in the New York Times this morning about how rank-and-file, often minimum wage Weight Watchers employees, frustrated that they are paid so poorly while the company throws millions of dollars at celebrity endorsers such as Jennifer Hudson and Jessica Simpson, are making their complaints public.

Here's how the Times describes the scenario:

"This frustration reflects a growing discontent among low-wage workers, as seen in the recent protests at dozens of Walmarts, at high-end retailers in Chicago and at fast-food restaurants in New York. Low-wage workers have become more assertive out of dismay that while corporate profits have rebounded to record levels since the recession, wages have floundered.

"Many also feel trapped as the gap between haves and have-nots has widened. Some employees at Weight Watchers expressed irritation at being paid the minimum wage while the company lavishes millions of dollars on celebrities like Jessica Simpson and Jennifer Hudson to advertise its weight-loss program.

"Executives at Weight Watchers say they are paying attention to their employees’ concerns, and have hinted they will increase compensation."

It is a complicated story, owing to Weight Watchers' unique business plan, and you can read the whole thing here. But the basic premise strikes me as similar to a discussion that we've been having here on MNB over the past few weeks - the tendency of some companies and senior executives to create compensation programs that put enormous distance between the folks at headquarters and those on the front lines, a distance that often creates the impression that the folks at the top get all the rewards while the front line personnel take all the hits. (It isn't just an impression. In many cases, it is reality.)

I continue to believe that this is something that businesses need to think about, talk about, and address in a reasonable and sustainable manner.

And the Weight Watchers story is just another illustration of a trend that may be hurting business in the long term.

Published on: February 26, 2013

Last week, MNB took note of a piece in Sunday's New York Times Magazine, available online now, which we described as "an extraordinary story about how certain kinds of food are engineered to be addictive by companies that know that their success depends on their continued and growing sales."

Michael Moss, author of the piece (which was an excerpt from a book entitled "Salt Sugar Fat: Howe The Food Giants Hooked Us"), wrote:

"The public and the food companies have known for decades now — or at the very least since this meeting — that sugary, salty, fatty foods are not good for us in the quantities that we consume them. So why are the diabetes and obesity and hypertension numbers still spiraling out of control? It’s not just a matter of poor willpower on the part of the consumer and a give-the-people-what-they-want attitude on the part of the food manufacturers. What I found, over four years of research and reporting, was a conscious effort — taking place in labs and marketing meetings and grocery-store aisles — to get people hooked on foods that are convenient and inexpensive."

Yesterday, Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association (GMA), released the following statement in response:

"Obesity is a serious problem in the United States and globally, and Michael Moss’s work misrepresents the strong commitment America’s food and beverage companies have to providing consumers with the products, tools and information they need to achieve and maintain a healthy diet and active lifestyle.
 
“The food industry’s track record on health & wellbeing speaks for itself:

• Since 2002, we have introduced more than 20,000 new product choices with fewer calories, reduced fat, sodium and sugar, and more whole grains.

• Through the Healthy Weight Commitment Foundation, we have pledged to remove 1.5 trillion calories from the food supply by 2015.

• Working through the Children’s Food and Beverage Advertising Initiative (CFBAI), we have voluntarily adopted strict advertising criteria so that 100 percent of CFBAI members’ ads seen on children’s programming now promote healthier diet choices and better-for-you products.

• We launched Facts Up Front, a landmark voluntary front-of-pack nutrition labeling system designed to help busy consumers – especially parents – make informed decisions when they shop.

• Food and beverage companies contribute more than $130 million per year in grants to nutrition and health-related programs in hundreds of communities across the United States.

• GMA’s member companies are also committed to providing children with healthier meals in schools, supporting U.S. Department of Agriculture’s (USDA) recently revised nutrition standards for the National School Lunch and School Breakfast Programs.

• Full-calorie soft drinks have been removed from schools and total calories available from beverages in schools have been cut by 90%.
“The root causes of obesity are well known.  Too many calories consumed from any source, combined with a sedentary lifestyle are the main risk factors for obesity.  As such, public policy proposals to ban, tax or restrict consumer access to certain foods or beverages will not solve the obesity problem.
 
“To achieve and maintain a healthy diet and lifestyle, consumers must learn to balance calories consumed through food and beverages with the appropriate amount of physical activity as recommended by the federal government’s Dietary Guidelines for Americans, including eating a variety of foods in moderation, combined with at least 60 minutes of daily physical activity (www.choosemyplate.gov).
 
“GMA and its member companies strongly support First Lady Michelle Obama’s goal of solving childhood obesity within a generation.  If we are going to meet that goal, everyone – industry, government, parents, schools, communities and healthcare providers – must do their part.
 
“The food and beverage industry is proud of its successful track record and the role we play in helping to combat obesity both in the United States and around the world, and we look forward to continuing our ongoing commitment to help consumers live healthy and active lifestyles.”

Published on: February 26, 2013

The American Customer Satisfaction Index (ACSI) is out with its fourth quarter report, suggesting modest improvements in how shoppers perceive the retail companies with which they are doing business.

Some excerpts:

Supermarkets...

"Customer satisfaction with supermarkets improves by 1.3% to an ACSI score of 77. Following a 6.0% spike in food prices in 2011, the cost of food prepared at home rose only 1.3% in 2012, slightly less than the overall increase in the Consumer Price Index. Grocery chains continue to offset rising prices with improved quality of service, expanded merchandise selections, and better store layouts. Judging from the increase in customer satisfaction, they have been quite successful.

"Among supermarket chains, Publix reigns when it comes to customer satisfaction, just as it has done in every year since the American Customer Satisfaction Index’s inception in 1994. In 2012, Publix gains 2% to a score of 86, thereby widening the gap to Whole Foods, which has leveled off at 80 following four straight years of gains. Several other chains cluster closely behind Whole Foods. Kroger is unchanged at 79, followed by Winn-Dixie, up 4% to 78 to tie the aggregate of all smaller chains, which slips 1%.

"The drop-off to the rest of the supermarket industry suggests that even in a strapped economy, focusing primarily on discounting is not sufficient to create high levels of customer satisfaction. Supervalu gains 3% to 76 as the company tries to reduce costs in order to be competitive after years of lackluster sales. Low prices can create short-term gains in customer satisfaction as consumers look for the best deals, but for the strategy to work over the long term, any business that tries it should make certain that it has the cost advantages to pull it off. If not, and it is not clear that Supervalu has such advantages, either profit margins will be squeezed or prices need to be raised. Safeway is unchanged at 75, while discount giant Wal-Mart is in last place despite a 4% gain to an ACSI score of 72."

Internet commerce...

"Two years after a fall in customer satisfaction, online retail is back on track. The category shows a small gain for the second consecutive year, up 1.2% to an ACSI score of 82. While this score is still short of the category’s all-time high, the Internet, by and large, remains a more amiable means of shopping for a variety of merchandise compared with traditional retail. Still, there are exceptions to this rule. The very best of traditional retailers—such as Publix, Nordstrom, Office Depot, and Costco—outperform the average for Internet retail. Among the individual online retailers, Amazon retains its lead despite a 1% drop to an ACSI score of 85. The company remains the highest scoring in the ACSI among Internet, department, discount, or specialty retailers. Close behind Amazon, Newegg scores 84 after a 1% slip, while eBay gains 2% to an ACSI benchmark of 83.

"The aggregate of smaller websites improves 2% to match the online retail average at 82, followed closely by Overstock, down 2% to 81. Among online retailers, only Netflix falls well below the category average, inching up 1% to 75. In 2011, customer satisfaction with Netflix plunged 14%, one of the largest-ever single-year drops in ACSI history, as a result of hefty price increases. Now, the price shock has settled and customer satisfaction remains about where it was after the price hike."

Department & Discount Stores...

"Customer satisfaction with department and discount stores rises slightly, increasing 1.3% to 77. The juxtaposition of higher-priced department stores that offer better service and higher quality merchandise and discount chains that offer lower prices creates a mixed picture of highs and lows across the industry. Department store Nordstrom leads the way, unchanged at an ACSI score of 84, while discounter Wal-Mart is last, inching up 1% to 71. While quality trumps price with respect to customer satisfaction, pricing pressure remains a challenge for all retailers amid sluggish consumer spending. Even the high-end department stores have resorted to more price promotions to boost sales, particularly during the holiday shopping season ... Well below the field are Sears, down 1% to 75, and Wal-Mart at 71. Sears continues to struggle following its acquisition by Kmart, while Wal-Mart continues to offer the same mixture of lower quality and lower prices that has kept sales strong and customer satisfaction weak for several years. A big part of Wal-Mart’s challenge is that the chain is no longer the only game in town when it comes to discounting. Twenty years ago, Wal-Mart was able to beat the industry average for customer satisfaction, not because quality was better, but because it had the low-price market essentially to itself. That is no longer true."

Published on: February 26, 2013

It made some ripples in the digital world this week when Yahoo's new CEO, Marissa Mayer, engineered a move to abolish the company's work-at-home policy, and require everyone to come into the office.

According to the New York Times story, "A memo explaining the policy change, from the company’s human resources department, says face-to-face interaction among employees fosters a more collaborative culture — a hallmark of Google’s approach to its business.

"In trying to get back on track, Yahoo is taking on one of the country’s biggest workplace issues: whether the ability to work from home, and other flexible arrangements, leads to greater productivity or inhibits innovation and collaboration."

And, the story goes on:

"Yahoo’s policy change has unleashed a storm of criticism from advocates for workplace flexibility who say it is a retrograde approach, particularly for those who care for young children or aging parents outside of work. Their dismay is heightened by the fact that they hoped Ms. Mayer, who became chief executive at 37 while pregnant with her first child, would make the business world more hospitable for working parents."

There are a couple of different tensions at work here.

There remains among many employers concern that people who work from home are less productive than those who go to the office each day; at home, it is feared, they will be distracted from their work by children/dogs/aging parents/Sports Center/video games.

However, as the Times notes, there have been studies suggesting that people who work at home actually are more productive ... though often less innovative.

The Yahoo memo explains the rationale behind the decision this way: "Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings. Speed and quality are often sacrificed when we work from home."

Published on: February 26, 2013

Reuters reports that Mastercard yesterday "unveiled its bid to dominate the mobile payments market ... with a 'virtual wallet' allowing customers to keep personal payment details in their phone and avoid checkouts by scanning bar codes in-store to pay ... Mastercard said its MasterPass service, effectively an app, would let customers pay for their goods without approaching a cashier by instead scanning a bar code and creating a digital receipt on their phone or tablet that can be shown as they exit the store.

"It can also be used for easier online payments, allowing customers a 'one click' way to pay without the hassle of having to input their credit or debit card details each time."

The system is being rolled out in Canada and Australia, with plans to bring it to the US later this spring. It signifies Mastercard's desire - similar to that at places like Google and eBay - "to capitalize on the prevalence of consumers' sophisticated phones by providing programs that house credit and debit cards, coupons and store loyalty program details virtually," Reuters writes.

Published on: February 26, 2013

• ClickZ.com reports on a new comScore study saying that "Online retail spending, which has steadily made double-digit gains since 2009, jumped 15 percent from a year ago to $186 billion last year, while online travel spending increased 9 percent to $103 billion.

"Overall, e-commerce sales combined for a 14 percent spike in year-over-year growth, reaching $289 billion in 2012. Over the course of eight years, e-commerce grew from 5 to 10 percent of all U.S. consumer spending with mobile now also accounting for one in every 10 e-commerce dollars spent."

Published on: February 26, 2013

• ABC News reports that "Sprouts Farmers Market is encouraging customers to check their bank accounts for unusual activity in the last month. The chain learned that illegal software targeted customers' information at 19 of its 151 stores between Jan. 25 and Jan. 29, 2013.

"Thirteen stores in Arizona and six Southern California stores were affected," though Sprouts also says that it believes that "fewer than 2 percent of its card transactions in January were possibly compromised."

• The Kansas City Star reports that the new Hy-Vee in Overland Park - scheduled to open today - "in addition to having a restaurant, will serve beer and wine in its second-floor bar. It will be just the second Hy-Vee to have those offerings."

According to the story, "The bar at the Overland Park store, which has a license as a drinking establishment, has floor-to-ceiling windows on two sides, cozy booths, tables and chairs, and bar seating. It will have 17 wines by the glass or bottle, 25 bottled beers to choose from and eight on tap."

Published on: February 26, 2013

• Linda Hefner Filler, executive vice president./CMO for Walmart's Sam's Club division, has been named president of Claire's North America, the jewelry and accessories retailer.

Published on: February 26, 2013

• C. Everett Koop, the former Surgeon General of the united States who trained his department's spotlight on AIDS education/prevention and the public health perils of smoking (including second hand smoke), giving those issues and others unprecedented attention from a previously underutilized bully pulpit, has passed away. He was 96.

Published on: February 26, 2013

Yesterday, MNB took note of an Advertising Age report that Safeway CEO Steve Burd, in a conference call with analysts, suggested that the company's digital Just for U online loyalty program could help it get out of the print advertising game.

"As people become more digital, there's an opportunity, which we're working hard at, [to] actually get out of the paper ads and make the ad itself personalized for every household," Burd said.

According to the story, Just for U now accounts for "5.4 million U.S. households, or 45% of Safeway's sales base. That number could reach 55% by year's end and ultimately max out at about 65%."

Ironically, Ad Age has another story about CPG companies, and suggested that the trend seems to be toward more targeted ad spends, with a focus on promotions and continued shifts into online and social media, as a way of being both more efficient and effective.

In my commentary, I referred back to the recent statement by Gary Hawkins, of Hawkins Strategic, about the "weaponizing of data."

And I wrote:

Think about Kroger, which is sending out personalized promotional pieces to 10 million shoppers on a quarterly/seasonal basis, and is getting a 66 percent response rate.

Traditional print media ain't dead yet. FSI's ain't dead yet. But at best, they are on life support.

One MNB user responded:

While Kroger and Safeway are big players and are likely to at least reduce the amount of print media they include in their marketing mix,  I remain skeptical about the death of the FSI and the print circular.  Only when brands are convinced they can get both the case sales response and the brand equity they currently enjoy with the current mass media vehicles with targeted digital will you see more than a few retailers and brands abandon their weekly mass adds and FSIs.  The stark fact remains that most retailers are not equipped to offer a large enough targeted, digital alternative to paper. The death of mass print media has been prophesied many times before, only to find that there still are no viable alternatives that effectively reach critical mass.   For now I will remain "from Missouri" on this one.  I agree that some paper vehicles and pages will go away, but until many more retailers beyond Safeway and Kroger crack the code on providing their brand partners a viable alternative to traditional circulars and paper coupons, the presses will continue to roll.

I'm not saying this is all going to happen tomorrow. Or even next week. But it won't be that long before newspapers simply will not be reaching the people that stores and brands want to reach ... people will think of much of the crap that shows up in their mailboxes as, well, crap ... and the best competitors will be the ones who have figured out how to collect and utilize shopper data.

From another reader:

I saw the article from Steve Burd crowing about the new “Just For U” program and its success. A few weeks prior to reading the article, I signed up for the Safeway program because I saw specials that were only offered through “Just For U” and I wanted to see how it worked.

Not impressed. I accessed the specials on my laptop, and then on my smartphone while in the store to guide my purchases. I was challenged by the presentation of the information as well as finding what I needed. And, it did a poor job of “marrying” the specials in their ads with the “Just For U” specials. And as I paid for my purchases, my nightmare came true. The discount was not passed on to my loyalty card and the clerk was powerless to fix.

I may be prejudiced to print where I can see the ads more easily while the electronic version may be better for searching/sorting. Maybe it’s a preference thing where I still like to read a book vs. peruse an electronic book. BUT, I believe that the conversion rate for the “Just For U” program is a bit disingenuous and more driven by Safeway’s desire to lower costs and push customers into electronic information distribution vs. understand the customer’s need. I see their plan for data mining, etc. to try to attain 1-to1 marketing, but this program is not customer-centric.

BTW, something that drives me nuts…..as everyone turns up the “green dial” to save the planet while heading towards an electronic economy (like Safeway), how do these companies justify the massive # of coupons and lengthy receipts that printout at checkout? (Drug stores are the worst!)




And finally, on another subject, MNB user Mark Boyer wrote:

Based on reading your take on "House of Cards," I subscribed to Netflix myself and have watched now 12 of the 13 episodes. Clearly some of the best TV ever produced. (I struggle with the TV part because I view it on my iPad and doubt it will ever run on a traditional or cable network. If it hasn’t already been done, someone is going to need to coin a phrase for television-like content created solely for the web.)
 
Thanks for the recommendation. Spacey is fabulously evil, as are most of those surrounding him.

My pleasure.