Consumer Packaged Goods (CPG)

The Dangerous Games People Play: Price Negotiations

Share Button

Price is one of the most deadly weapons in the marketing mix.

One of  the “4 P’s” of marketing, and one that creates some of  the most pressure packed situations in business.

  • It determines 50% of a company’s profit margin.

  • Depending on your market share and/or industry, it is also the most controllable decision someone can make to influence their outcome of profit/loss.

  • It is the most easily compared element of the marketing mix against a competitor.  Evaluating $499 vs. $549 is easier than comparing product reviews, technical features or “quality” (perceived or real)

  • Could be the most “emotional” element in business.

Why?

Let’s say you are quoting on a business, and it’s somewhat of a “bid” process, meaning you are quoting against different competitors selling products that have SOME differentiation, but generally viewed as a commodity.  So Price is a MAJOR factor, but like all competitive situations, everything influences the outcome:

  • Quality and service track record

  • Terms, flexibility

  • Relationship:  How will your bid affect the relationship?  Does that matter?

  • Risk of loss:  If you lose, how does your business look?  Better or worse?

All situations have a different ranking.  If I were bidding, here’s what I’d be looking at:

*  How many different factors influence a buying decision?
*  Rank them from high to low.
*  Know where you score at all times with your customer.  How?  ASK THEM!

Also?[Continue Reading…]

Share Button

Branding Case Study: The Prize of Emotional Connection

Share Button
Starbucks vs. Dunkin Donuts

image credit: http://emilycontois.files.wordpress.com/2013/01/coffee-scale.png

I’ve always been a Starbucks addict.  The brand has been part of my daily routine for about 15 years and I bet I’ve been the first ring at 5:30am more than 100x’s in over 4 locations in 3 states.  In short, I’d consider myself a loyalist.  The routine stopped in March 2014 when I moved to NJ to acquire LM Foods and there just isn’t one between Pt. A (Gym) and Pt B (company).  The experience has let me learn a few things as my Venti Black Dark Roast went bye bye…..

I’ve become what marketers call an “experimenter.”  Open to new experiences.  A coffee Swinger if you will.  In general, Dunkin Donuts probably gets 75% of my coffee $’s, but that is probably falling to 1/3 fast.  For me, they are not Starbucks for a variety of reasons:

  • They simply haven’t figured out the “Third Place Concept” and the vibe that goes with relaxation.  I think I’ve taken advantage of the Starbucks leather seats <10% of the time.  But the vibe, even if I only feel it for 90 seconds matters.  Life is hectic, and escapism matters.  
  • Dunkin can’t seem to understand that selling 2 day old bagels is not smart.  And they make this mistake often, and when you tweet them about it?  Black hole, no response. Why bother having a Social presence if you fail to engage?  
  • Dunkin is one of the great franchises in America.  But you simply never know what kind of experience you will get when your greeted by your Dunkinista (is that a word?). When I’m one of the first customers showing up when its still dark outside, and am on trip #30, shouldn’t you know who am?  

There’s a funny thing that happens when a Brand does not earn an EMOTIONAL connection with its consumers:  They start to wander.[Continue Reading…]

Share Button

The Small Business “Sorry” Dilemma

Share Button

I root very hard for the success of the small, locally owned small business.  A thriving small business community is a cornerstone to a great OVERALL community.

But I can’t help but scratch my head at a recent experience.

The Scene?

  • A local deli in an industrial area of NJ.  Opens at 6am, serves typical breakfast food, coffee, etc.
Local coffee shop

Image Credit: WSJ

I asked the owner “how’s business been?”

“Extremely slow, never seen it this bad.  We’ll see?”

Sounded ominous.  And to be honest, a bit de-flating.  Maybe because we were chatting about a Jets loss on Monday Night football.  Starting the day off with negativity < Optimism!

He proceeded to make the sandwich, I poured a cup of coffee.  Sandwich was good and better than the local chains.

But something I took for granted as I finished and topped off my coffee before leaving:

“We charge for re-fills, I’m sorry, that will be $1.65!”

“No problem!”  I paid, left and as always, re-played that event and how a small business chooses to compete, or not.

Every business owner has the privilege of making whatever decisions they think are right for their business, it’s one of the beauties of a free economy.

But their WAS one word in this exchange I found a bit telling:

“I’m sorry.”

Apologies in business are somewhat rare.  When done with sincerity they are a great customer service building gesture.

However…..

Why apologize for your OWN decisions related to how you run your business?

I had some thoughts what prompted his appology….

  • Maybe it’s a new policy?
  • Many customers take a self service station as a license for granted (admittedly presumptuos))?
  • He sees perplexed looks on your customers faces?
  • He really is sorry for charging for a re-fill….

How about a new tool:

The Sorry Meter:

If you find yourself compelled to apoligize for business decision, maybe you should think about an alternative to avoid the Sorry to begin with?

 

There are plenty of alternatives to the dilemma:

Post a humorous sign by the station:

  • “Crappy coffee is cheap and free re-fills work.  Great coffee costs money, so we proudly charge for a second cup.  Because Life is too short to endure crappy coffee”

Sales Pricing/Promotion 101.

  • Give Free Re-fills for higher ticket transactions.  Make it a reward for valuable customers.
  • Just Increase the price of cup #1 and offer free re-fills.  Yes, the single cup customers subsidize the multi cup customers, but most would rather have the experience “built in” to the price.
  • Interestingly, this small business had ZERO internet presence.  No web page, social media engagement, etc.  No Yelp reviews, etc.  Maybe his audience is not active, but I doubt it.

How about creating a “Customer Manifesto” that outlines the principles of service and the pricing charged for that service?

How about some direct engagement trying to understand the person walking in the door, what they are about, do they work in an office (or Manufacturing plant) with many people that could be potential customers?

Hustle takes the shape of many forms.

Not recovering costs in business (and then a profit) is a surefire way to bankruptcy, so I would never advocate giving away anything that does not look to generate profit.

All businesses struggle with the need to generate profit TODAY, vs the LONG-Term health of the business.  Sustainaability is driven by, loyal customers.  Loyalty drives Lifetime value, and it’s always preceded by a relationship.  

The Challenge?

We are in a hyper-competitive world with so many choices.  One decision can either INCREASE trips or $ ring, or DECREASE it.  The battle is the transaction.  The WAR is the lifetime value of the customer.

It’s possible to win both, but like most great things in life, it won’t happen by accident.

Share Button

Simple Innovation That Works…..Coca-Cola Summer of Sharing

Share Button

Innovation does not need to be a massive technology breakthrough.  Sometimes its as simple as a tweak to packaging that gets people talking.

In the past 2 hours, Coke has broken through in my life.  I get a text message from a friend with a diet coke can.  Then my daughter runs up to me with a big smile and says “DADDY!” pointing to the can.

IMG_0495

 

Then my son runs to the refrigerator looking for more cans with different words.

Then a facebook post from a friend, copying 2 other friends with the word “Buddy” on the can.

This is Coca-Cola, the company with Millions (if not billions) in annual media spending.  And what did they do?  They tweaked the packaging.  And multiple people are buzzing, sharing and smiling.

What’s the cost of this tactic vs a Superbowl ad?  Which is more memorable.

Striking the emotional chord and getting people to talk positively about a brand or service will always beat the pricey “throw money at it approach.”

Kudo’s to the Coca-Cola company.  The “Summer of Sharing” campaign is a winner, at least in this household.

http://www.coca-colacompany.com/press-center/press-releases/coca-cola-celebrates-a-summer-of-sharing

Share Button

HUSTLE or BUST: Not Just a Blog Name Anymore!

Share Button

Sometimes the walk up to the starting line takes a while….4+ months that started with a series of exploratory conversations with some accomplished pro’s turned into an acquisition of a Food Company.

Buying a business is a bit like training for a marathon.  Lots of preparation, long runs, and the lead up to a massive test of endurance.  Not an easy process, and one that requires skill, and like most things in business, a great team is critical.  

I have been privileged to work with a great Private Equity team that worked tirelessly on the deal and will continue to add value over the years ahead.  In life, who you surround yourself with is one of the life’s greatest difference makers, and the team I worked with are nothing short of life’s A-Players.  Can’t say enough good things about my partners at Salt Creek Capital.

With this acquisition comes a series of life events

  • Moving back home to NJ after 8+ great years in Memphis
  • A transition of company and roles:  From CMO of Monogram Foods, to the new role of President/CEO for a niche manufacturing company.
    • More to follow on specifics and how this business will continue to do great things and new things in months ahead….

What else comes with acquiring a business and assuming the top role?

RISK.  Putting your name and every financial resource you have on the line.  The banks call it a Personal Guarantee (of the debt).

Over a year ago I started Hustle or Bust.  I loved the name, and it came to me quickly.  

If forced to describe my career, and maybe life in ONE word, HUSTLE would be that word.

Hustle is 100% controllable, it’s a choice.  I’ve always believed that you either Hustle, or BUST.  Unless you’re an absolute genius, lucky, or born with a silver spoon, Hustle is mandatory.

Now for the BUST part:  Back to guaranteeing debt, RISK.

First, RISK is present in everyday life whether you sign your name to it or not.  It’s why we have emergency funds.

What’s the worst thing that can happen to someone in a job?  You get fired.

That’s risk, you just didn’t sign your name to it.  It happens to very talented people, sometimes without cause.

Is risk scary?  Yes.  Is it manageable?  Usually.  

Becoming an entrepreneur is not for everyone.  When you sign personal guarantees you are basically saying that you are comfortable with the worst possible financial outcome.  Not many can stomach that kind of risk.

Life and careers are about a series of choices.  Weighing the scales of what is important, understanding risk, and how that risk compares to reward.  And a host of intangibles always factor into the process.

Today marks a turning point in this blog.  When a life event or transition happens, it fundamentally changes your point of view, outlook and perspective on things.  Having the good fortune to lead a company, the responsibility, risk and opportunity to build something great……I would say that qualifies as a defining “life event” that is sure to change my outlook and view on the world.  

I hope you join me on this journey and share your insights and comments as well.

Here’s wishing all of you success on YOUR journey.

Life is short.  May you always live each day with HUSTLE…..or Bust.

Share Button

“Why is Everything Made In China?”

Share Button

My son has a fascination and knack for discovering where things are made, studying the fine print on every product he sees.  And lately, he’s become agitated with his agitated outcry:Outsource to China

Why is everything made in Chiiiiiiinnnnnnaaaa???

His parents give him the standard, simple answer:  “Cheap Labor.  That means cheap prices.”

There is some truth here for sure, but it really over-simplifies the off-shoring dilemma.

The fact is, depending on the type of product your manufacturing, labor is certainly a cost to manufacture a product, but it’s not the ENTIRE cost of goods.  If you’re dealing with a food product, labor may be less than 1/3 of the total cost.  The balance?

  • Overhead
  • Packaging
  • Materials

Then the cost to the end consumer is made up of a couple of other major components:

Variable Selling Expenses:

  • Transportation – To get the product to the customer (distributor, retailer)
  • Sales Commisions – To third party selling agents

The last major variable, and the biggest variable

  • A manufacturer’s expected profit Margin

Yet another variable, the retailers profit margin….

The China “labor factor” is certainly relevant.  But I would argue that the final consumer will see the end retail price move 5-15% (MAX) due to an off-shore model vs manufacturing in the good ‘ol USA.  And 15% is pushing it….

So why do manufacturers make the decision to move production off-shore?  Usually 2 reasons.

  1. Competitive pressure:  Their competitors are already there, so if they DON’T go off-sure they are at a disadvantage
  2. Customer Pressure: They value “made in the USA” but not enough to pay a premium to make it in the states.

Those are 2 valid reasons.  But at the underlying core is the following:

  • The products are not differentiated enough, so cost comparisons become a driving force on decision making
  • Since the products are not differentiated, the small %’s in cost difference are monumental to the business model.  Margins are tight, can’t absorb increases.  Margin is one of the critical metrics in business.  
  • The brands to not command an “emotional connection” with the end users.

In consumer products, Cost structures and Brand Value matter.  The brands that have both, an emotional connection and a lean cost structure tend to write their own ticket.  They have pricing power when costs move on them.  Their margins tend to be substantially stronger than competition.  As a result, they are not prisoners to the off-shoring pressure.

Lean cost structure + a Brand with an emotional connection to the consumer = a stable, sustainable margin.

It’s the holy grail of business.

 

An interesting read, geeky but data based study….

http://www.asiafloorwage.org/documents/Resources-onwages/Background_reading/onwage/The%20Impact%20of%20Substantial%20Labor%20Cost%20Increases.pdf

 

 

 

Share Button

A Brand Immersion Experience Gone Wrong

Share Button

All sorts of marketing learning can occur on vacation.  Between the dinners out, exploring new neighborhoods, and maybe more than anything……entertainment for the family (primarily kids), can provide a lab for real life execution of business.

Sometimes it’s easier to evaluate other businesses when you are away from the daily grind.

Our city vacation in Atlanta started with Legoland Discovery Center.  My 6 year old son lives for Lego’s.  I loved them too growing up, much more than video games, and being a business geek I was anxious to see them pull this off.

  • Housed in an up-scale mall in the Buckhead section of Atlanta.  It didn’t hit me at first, but this was a “sign” for that was a bit odd.
  • Admission (purchased on line) was $11 per person, $15 live.  A tad on the pricey side I thought, but I guess it’s all relative to other “entertainment” options like a zoo or museum.
  • Plenty of decorations, a small section of carnival rides, play mats, a jungle gym and a small movie theatre.  And an over-priced rip me off snack bar, of course!
Legoland Atlanta

Image Credit: Buckhead.patch.com

Take-away?

  • First, the kids loved it.  I guess we can end it there, since that what matters right?  They spent 2 hours playing on the jungle gyms, running around, shooting the Lego cars up and down the ramps.
  • Parent’s, not so much.  Our take-away was that it’s a step up from the play center you’ll find at Mcdonald’s, just better branding and some neat displays.  And the obligatory “gift shop” at the end.  Certainly not the first spend of $’s we’ve experienced that under-delivered, and it won’t be the last.

Lesson?

There are very few brands that can pull off a standalone “experience” aside from their core product.  This is what Lego is trying to do, create a stand-alone entertainment option, generate some $’s (assume they are aspiring to at least break even) and create another point of interaction with their brand.

This could be one of the most ambitious feats in business.  There is a reason very few try it.  Because it is HARD, it’s not the core business and it raises expectations significantly, and that creates a danger zone.

I couldn’t help but think what the CEO or CMO of Lego would think if they wandered through Legoland Atlanta the day I did.  I am sure they would be asking themselves some basic questions….driven from the choices that were made before they built the center….

  • Does this represent our brand well?

  • Are we “wowing” are customers and providing excellent value?

  • Are we LISTENING to what customers are saying about their experience?  (social media has given plenty of real feedback!)

  • Are we better off with it or without it?

Brands need to be careful thinking they are bigger than what they really are.  Very few brands can approach a risky venture with high expectations with a “passive” approach.  It requires, in short, a massive dose of HUSTLE.

On the same trip, we experienced the exact opposite of Legoland, an up-lifting, unforgettable experience I’m happy to recomend and return too: World-of-Coca-Cola.

http://www.worldofcoca-cola.com/

Is it fair to compare Legoland with Coca Cola’s version?  On the surface, it’s fair to assume Coca-Cola has the financial resources to outdo almost any brand.  But that’s just on the surface……I believe the outcome would have been the same if both brands were given an identical budget and told to “go build it.”

Have you ever been to a local town bakery that has a line a block long, while your big box national supermarket bakery doesn’t seem to have been shopped for 2 days?  Who has more financial backing?  $’s are sometime a lazy way to attribute success.

Creating experiences that BUILD a brand, not erode it, first begins with choices.  Than the real work begins.

 

 

Share Button

Understanding Innovation: Learn From What “Wows” You!

Share Button

Innovation is easy to learn from real life experience.  How?  Find products you consume that simply “wow” you, make you talk and make you want to learn more.  Experience them, research them, and reverse engineer to YOUR business model if there is something worthy of “borrowing.”

The process is simple:

  • Find a product you use that makes you talk about, brag, say “try this!”

  • Study the packaging, one of the most critical elements of branding

  • Do some basic research:  Check out the social channels, website, basic Google news/buzz

  • Write down what’s working for the product, ultimately what can be “borrowed.”

Innovation does not need to be a R&D break-through to work.  It also does not need to be driven by costly third party agencies that have a knack for mystifying the process.

But it does need to be special to matter.  More importantly, all the elements of the marketing mix must come together to create a brand loyalist.  Here’s one that nails the equation.

My wife brought the following home:  Popcorn Indiana, “Black & White Kettle corn.”  It was so good the devil must have made it.

Popcorn Indiana Black & White Popcorn

We are not big popcorn eaters, but we are always hunting for the new & different.  This hit the mark.  The combination of chocolate and salt is out of this world.  Guess what else is?

  • The packaging – There are so many health & “quality” claims I’m almost convinced I’m eating a banana.
  • The social media call-outs.  Even better?  Their social media engagement.  They get that social without being “social” is useless. They clearly have standards in place on response time, engagement, and are clearly having fun.  And why not, this is popcorn right?
  • Their website and product line-up – Flavors and unique combinations is what they do; now I want to try the others.  Multimedia, clean images, they simple messaging very well.
  • The founder of the company is somewhat of a serial entrepreneur…..you can learn a ton by learning about a founder.

I don’t know specifics about the Popcorn category, but it’s fair to assume since it’s a salty snack that it is dominated by big players like Frito Lay.  Low cost producers with massive distribution networks and marketing spending.  Can’t out-spend or “out-muscle” the big boys.

But you can always build a winnable plan that doesn’t confront them head to head.

Innovation should be at the top of the list for differentiating a business.  Being different and unique always serves a simple purpose:  It makes direct comparisons difficult.

When that happens, price is less of a factor…

Share Button

The Importance of Customer Segmentation

Share Button

It’s been on the horizon for TN. liquor stores for many years, law changes that allow Grocery Stores to sell Wine.  I’ve detailed out the business drama in the Case study:  Local Liquor stores fighting the sea change.

I argued that 100% of the Liquor Store owner’s energy should NOT be fighting the inevitable, but for preparing for this reality (fight or flight).

“If I owned a Liquor store I would put ZERO energy in fighting this legislation. ZERO.  I would put 100% of my energy preparing for the inevitable day when I have a 75,000 square foot store selling the same category I’ve been insulated on.  And if I couldn’t build a winnable plan, I’d be preparing for an exit.”

So the million dollar question is:  “HOW?”

Well, it starts with your biggest risk when massive competition comes your way:  Customer migration.

Said another way, fewer visits from existing customers, and fewer “new customer drop-ins” as more distribution options compete for your customer visits.

In Short, nothing matters more than customers.

  • Customers are the conduit to revenue.  Revenue is the conduit to margin.  Margin is what pays the bills.  
  • Enough quality customers + a sound business model = profit.  Not always, but usually.
  • Quality customers are meaningful, loyal and are your lifeline.
  • Have indifferent customers and who knows how many will leave you.  But you WILL have some losses.  The question is, will your business be OK as a result?

The question that keeps coming through my head is:  Do the stores even know their level of risk?

First Principle:  All Customers are not created equal.  

The “80/20” rule applies to all facets of life, where a very small % of customers create a large % of revenue.  It is amazing how consistent this rule is, and consumer analytics almost always proves this to be true.  

If the Grocery industry’s frequent shopper card bought us clutter to our key chains, it DID re-enforce this truth in marketing as the data proved category by category.  Given that, here’s the implications for liquor store owners, and all those in the Marketing Biz…

Know thy customers

image credit:  ideawall.com

Customer Segmentation

  • Is the business model broken down all the way to the “customer level?”.
    • How many customers drive the total revenue?
    • How many trips per year per customer?
    • $’s spent per customer trip?
    • Trips per customer * $’s/trip = Annual total customer $ value
  • Are they segmenting customers from “high to low” (based on some measure of lifetime value, such as ANNUAL expenditures)?
  • Are they modeling what the future could look like when competitive landscape changes?
  • Does the new landscape affect all customer segments equally?
  • What does that likely scenario mean to the businesses bottom line?

At first blush, many marketers or store owners may think:  “How can I possibly get that data without expensive CRM systems?  Natural Reaction.  But if you don’t have expensive systems, you only need a couple variables to get close, which all businesses should have:

Steps For Modeling Your Customer Segmentation Value Grid[Continue Reading…]

Share Button

Manufacturing: A Pillar of the USA, & Media Ugly Duckling

Share Button

Manufacturing is a sector of the economy that always comes under scrutiny, and much of the business media focuses on negative aspects.  If there were a media “sentiment” index, I would bet Manufacturing stories are 75% “negative twist” vs. an optimistic bent.  It flat annoys me.

What I often hear usually falls into a few themes:

  • Costs are unsustainable:  Either legacy costs of old world pension plans or unions driving unsustainable bargains…
  • Quality declines are real…
  • “Just not relevant” anymore, we are a technology driven services economy….
  • Jobs are being sent over seas, and all the negative aspects associated with it (lost jobs, suspect working conditions, etc.)…

I will admit that I’m a bit sensitive however with a career that is centered around manufacturing with the Consumer Packaged Goods (CPG) industry, a little old $2.1 TRILLION slice of our economy.  When it comes to $’s, Billions are huge.  Trillions are staggering.

But why would the media fixate on $ relevancy of a major sector?

Monogram Martinsvill Manufacturing Plant

When I work at our manufacturing facilities, here’s what I see:

  • Yes, the basics of transforming “raw material to a finished goods”…..so I see physical assets like equipment, I see raw materials coming from hundreds of suppliers

Most important?  I see PEOPLE involved in every step of the process.

Monogram Production Facility Chandler, MN

  • Hard-working people, many of who drive 30+ miles to put a hard day’s work in.  Physical work, on your feet for 8+ hours
  • I see start-up of shifts and the energy/buzz with firing up a production line to meet the day’s needs
  • I see things going wrong like equipment failure, and people coming together to trying to get back on track
  • I see breaks where people come together in the common areas and unwind, talk about life and take a breather
  • I see 4 people in the corner of the break-room, with 4 cupcakes, and 3 co-workers, singing happy birthday to the 4th co-worker

Monogram Production Line

 The end result?

I see pallets among pallets of our product in a warehouse, waiting to be shipped to our customers, who pay us a fair price that covers all that cost to make it, and then, if all works as planned, a profit results.

In capitalism, profit is final measure, and the pursuit of it and all the moving parts is a fantastically challenging game.  

In any one of our manufacturing facilities, 200+ people come to work each day to try and make a life for themselves and their families, and in  the process, work to achieve the goals of our company.

It happens in every manufacturing plant in the country.

Every single time I leave one of our manufacturing facilities, I leave humbled, and energized at the same time.

The media doesn’t celebrate Manufacturing like it does the sexy technology sector.  That’s OK.

But I can’t help but wonder:  Have they ever walked through a Manufacturing facility to begin with?  They should…

If I were a principle at the local elementary school, a field trip to the town’s manufacturing facility is tops on my list.

Old School values are alive and well in the USA.  And there’s no better example than some of the nation’s plants.

Share Button
Follow

Get every new post delivered to your Inbox

Join other followers: