Tuesday, March 25, 2008

Magic in Retail: The Restaurant Business

Two things drive the restaurant business.
The first is Word of Mouth. The second is reviews in newspapers, magazines, and broadcast media.
In the case of new restaurants, the speed of getting up to speed is critical, because a new restaurant is
living off its investment, which can be rapidly depleted if enough covers don't materialize quickly.
In the case of a long-established restaurant, it is absolutely necessary to fill the leaky bucket – loyal customers are constantly being lost to relocation, boredom, even death. Attrition is inevitable. Obviously, it takes a lot of new, first-time customers to replace a single regular. And word of mouth and restaurant reviews are less likely for an established restaurant. A new restaurant is news. An old one is old news.
The Greek philosopher Heraclitus said it is impossible to step into the same stream twice. Nowhere is this more true than in the restaurant business. Thus, it becomes necessary to recruit new customers to your restaurant by creating news, creating awareness, and communicating the restaurant's uniqueness, its menu, and its very existence. It's been said that the three most important things in retail are location, location, location.
If a restaurant is in an out-of-the-way location, it becomes even more imperative to actively promote it.
The best promotion involves a narrative. After all, the function of a restaurant is far more than providing a nutritious, tasty meal. A restaurant is an experience; it is as much entertainment as food. This is especially true if the restaurant is on the expensive side. It then becomes a "special" place for special events. The risk is that there are not enough special events per customer. No restaurant can survive, much less prosper, on special event business.
This creates the need for a much broader customer base, which, in turn, can result in a much broader loyal repeat customer base.
The other problem for a restaurant is if it appears not to be popular. This can devolve into a self-fulfilling prophecy. Something must be wrong with an almost empty restaurant, the customer reasons.
This was the case with Cafe Between the Bread, a really fine Manhattan, New York City restaurant in what had been an extremely desirable location within a block of City Center and Carnegie Hall.
The disaster occurred when Carnegie Hall was closed down for extensive renovations (which were to take 18 months) and City Center closed down for a couple months. Customers dried up.
Suddenly, the restaurant was all-but-forgotten. Staff outnumbered customers by five to one. Clearly, this situation could not be allowed to continue. Fine restaurants have excellent staff, and very perishable foodstuffs. I was referred to the owner.
After a thorough briefing, I took my wife to the restaurant for dinner. We were the only customers in the place. It was eerie. But in a way, it was very romantic. Candles on the table, and we had the whole place to ourselves, with captain and waiters falling over themselves to cater to our whims. For the owner, it was a lot less romantic.
One rule of life is, when fate sends you lemons, make lemon souffle.
We created two full-page ads positioning the place as the most romantic restaurant in New York City. Great food, great wine, great service, and a truly romantic ambience.
The phones started ringing, and on the day the first ad ran, the restaurant was booked solid. By the second ad, some customers began to complain. The place was too crowded to be romantic!
The Manhattan Ocean Club had a completely different problem. It was owned by the most successful restauranteur on the planet: the owner of Smith & Wollensky, the Post House, and several other big moneymakers. The Manhattan Ocean Club had been in the same location for several years, it was two blocks from Broadway, and a block from the Essex House and St. Moritz. It was across the street from a very popular restaurant frequented by many execs of CBS, which was right down the block.
The restaurant's problem was, ironically, its name. I'd passed it hundreds of times, and thought it was a littoral society, a club for seafarers, sailors, shell collectors, or fishermen. I was truly surprised when the owner told me it was a restaurant. And a really fine one.
I advised this extremely knowledgeable restauranteur to add the word "restaurant" to his marquee.
And we ran a full-page ad in the NY Times Magazine section. The headline read: The Manhattan Ocean Club is a misnomer. That got their attention. The restaurant filled up in no time. And stayed filled, because it was a great restaurant. Elegant, beautiful, lots of fresh flowers, great seafood, fantastic desserts, superb staff.
All it needed was appropriate identification. Who'd of thunk it!

The Role of Stealth Marketing in Closing the Sale. Now it can be told.

Money talks.  Which is why, all things being equal, big companies win more than their fair share of business.
Nixdorf Computer was the largest computer company in Germany (now Siemens Nixdorf) and one of the largest in Europe, where it had made huge inroads into a number of industries, especially retail.  Nixdorf computer systems could be found in department stores, hotels, automotive companies, heavy industry, &c.
In the U.S., Nixdorf USA was a Johnny-come-lately, and had to prove itself in direct competition with much larger, older, and well-established competitors, several of which were household names here in the states. 
Nixdorf's greatest strength was in retail, here as well as across the pond.
So, it was only natural that after a lot of hard work, it found itself in the final round of competition for the Nordstrom's computer system, including smart terminals at every cash register in every store.
The two other contenders were household names, and outspent Nixdorf USA ten to twenty to one in advertising and public relations.
Now, toe to toe with these giants, the Nixdorf people were confident that they offered by far the best system – hardware, software, communications, and the best service.
They were well aware that customer service was embedded in the DNA of the family-owned Nordstrom's operation.  Other department store chains might compete on the basis of price, product, location, or snob appeal.  For Nordstrom's, it was service.  Customer service had built the company, and a reputation for customer service kept it in business.
A good retail computer system can improve inventory control, reduce shrinkage (a euphemism for theft) put the right items in the right store, and reduce the necessity for markdowns.  But perhaps most of all, it can improve and personalize customer service.
The problem is, service, like competence, is notoriously difficult to quantify.  Everyone claims it, and everyone provides it.  More or less.
The Nixdorf IT department had taken the bidding process to the final level.  Now the decision on this multi-million-dollar installation would be made behind closed doors, by members of the Nordstrom family.
There was a condition, and a deal-breaker caveat.  Under no circumstances might a vendor approach any member of the family with a sales pitch, under pain of disqualification and forfeiture.
The Nixdorf team had  no way of knowing whether one of the competition had an "in" with the family; in fact, it was not deemed unlikely.  So matters stood, and the final decision was only a few weeks away.
With an air of resignation, the director of sales asked me if there were anything at all that could be done to stealthily influence the decision of seven people in a closed room.  
Well, we could put up an outdoor billboard outside the flagship store (we had done that once before, successfully, in another bidding situation with another company in a different field) but that would be too obvious in this case, and might disqualify us.  Direct mail was obviously out of the question.
If we'd had a huge ad budget, we could have blanketed a hundred major markets plus the Wall Street Journal, with advertising, and make a giant splash.  But we could only dream of such a budget.
Then, an idea occurred to me.  We didn't need to reach 100 major markets.  Our decision makers were ensconced in an office in Seattle, Washington.  For under ten thousand dollars, we could buy a full page, two color ad in both the Seattle Times and the Seattle Post-Intelligencer on the same day.  And blanket our audience of seven.
Handled properly, and with luck, the ad might appear to be part of a nationwide campaign.  But what to say?  The obvious topic, was, of course, service.
So, a week later, the ad appeared in both papers, under the headline:
The ad told the story of how a Nixdorf computer system, which had been installed for the Montgomery Ward chain, had been at the epicenter of a California earthquake, and how the Nixdorf quick-response service team had rushed to the site – even before checking on their own homes – and got the entire system up and running within 48 hours.
When the sales director was invited to the inner sanctum of the Nordstrom corporate offices to be informed that he had won the business, he was gratified to see his ad posted on the conference room wall.
Sufficient time has passed, that there's no harm in telling the story now.  But the lesson is clear.  Anyone can look like the biggest kid on the block for five minutes.  Provided you concentrate your dollars, co-ordinate your efforts, and tell a relevant, powerful story truthfully and straightforwardly.
Sometimes, even the best man can win.  

Wednesday, January 23, 2008

Branding in the flat world of commodities

"They copied all they could follow, but they couldn't copy my mind,
And I left 'em sweating and stealing a year and a half behind.
Rudyard Kipling,  The "Mary Gloster"

Commoditization can take several forms.  
In the first instance, your product may be one of dozens in the marketplace, all of which appear to be identical. The differentiator then has to be price, or service, or the added value of expertise, which can be sold along with the product.  Since you presumably know more about your own product than the end user does, you are in a position to advise him on how to use it most efficiently, how to use it in other applications, how to substitute it for similar products (simplifying inventory), how to use it creatively, and how to purchase the optimum form of the product for the intended use.
This, of course, involves understanding the customer's business and his specific needs, and gaining trust based on the value of your expertise, which acts as a profit multiplier – for you and the customer.  But once you gain this trust, having demonstrated the value of your input, your product has ceased to be a commodity.  You've become part of the customer's valued team, and price is no longer the key criterion in purchase – and re-purchase – decisions.  You've leveraged customer service to a new, more powerful level. This approach, aptly named "Consultative Selling" by Mack Hanan, (in his seminal book of the same title, published by the American Management Association) works especially well with industrial and commercial customers, where such expertise can be a make-or-break factor.
The challenge then becomes communicating this critical added value to potential customers around Tom Friedman's newly flattened globe.  This requires an understanding and expanding of the consultative selling process, as well as a high degree of strategic, tactical, and communications creativity.
Another kind of commoditization takes place when someone deliberately clones your product, and sells it in direct competition with you.  Your product's uniqueness suddenly evaporates.  Patent law was designed to protect against this, but there are ways around patents. In any case, many of the things that make a product unique are not patentable.
When Tic-Tacs were introduced by the Ferraro Candy Company of Italy, they owned just such a non-patentable uniqueness.  A breath mint the size of a pignoli nut delivered a mouth-filling blast of refreshment that was startling.  The TV campaign urged the consumer to "Put a Tic-Tac in your mouth, and get a blast out of life."   The graphics were explosive, and the accompanying music was loud to the point of raucous. The communication was complete.  Trial went through the roof, and the television budget soared above ten million dollars.  (You can make a nice buck selling an ounce of sugar at Tic Tac prices.) Then, inexplicably, sales hit a wall, and experienced a steep slide, despite the fact that hordes of new customers were coming aboard daily.
At first, it appeared that the company had identified the culprit.  Warner Lambert, which sits astride the breath market like a colossus, with a wide range of products from mouthwash to chewing gum, had introduced a Tic-Tac clone, right down to the size and shape of the pill, and the handy purse-or-pocket-sized plastic dispenser.  The only difference was that Dynamints (note how the name cleverly captured the unique feature of the product) came in an extremely hot cinnamon burst, reminiscent of the old Red Hots candy. Otherwise, the mouth feel and experience were identical.  Dynamints were cannibalizing Ferrero's mints.
Then, a strange thing happened. SAMI reports showed that Dynamints were experiencing a delayed, but parallel plummeting sales curve.  The problem, whatever it was, was common to both brands.  Ferrero hastened to run some focus groups.  They found that the brand delivered on its initial promise – in spades.   The tablets turned out to be too hot for consumer taste, so initial trial did not translate into repurchase.  At the price point of candy mints, that was the kiss of death. The bucket was leaking faster than it could possibly be refilled.
No problem.  Ferraro reformulated its Tic-Tacs, reducing the minty blast.  Back to focus groups, where they were informed that the product now failed to deliver on its promise.  Its ballyhooed explosive mouth feel was gone, and the product had become the boring equivalent of a quarter of a Life Saver.  Intent to purchase was zip.
The company faced a conundrum.  They couldn't spice the product up, and couldn't spice it down. They certainly couldn't leave it as it was. The product's very reason for being had vanished.  That's when they came to us.  In the middle of our initial meeting, after they had related all of the foregoing, one of my partners had launched into the credentials part of our presentation. Having heard it all before, I began to (apparently) absentmindedly pour some Tic Tacs into my coffee spoon.  One of the Italian marketing people interrupted the flow of the presentation, exclaiming, "Mr. Jackson, that's not how we use the product."
"I'm well aware of that," I responded.  "But it appears to me that you need a new place to stand. Your flavor story is shot. The equity you had it that claim is down the drain.  However, I just got a dozen of these Tic Tacs to fit in my teaspoon.  I think I remember that sugar has about sixteen calories per teaspoon.  The product is mostly sugar, right?"  
"Yes, sugar, peppermint flavor, and a carnauba wax coating."
"Well, I realize that this is not a regulation teaspoon, but it appears that these Tic Tacs have roughly two calories each."
"Why does that matter?"
"Mints are about breath.  Breath is part of appearance.  So is weight.  Your heavy-user category has to be concerned about the consequences of consuming all that sugar. I believe we've found our place to stand."
They phoned Italy from our office.  Within two days, the factory responded.  A single Tic Tac, it turned out, contained a bit less that one-and-a-half calories.  We rounded the decimal up, and a slogan was born:  The 1 1/2 calorie mint.  (See my website, dickjackson.com.)
Warner Lambert, which doubtless had analyzed their sales plunge with equal alacrity, discontinued Dynamints, leaving the field to Ferraro.  Tic Tac's new positioning worked a miracle.  The sales curve reversed, and soon surpassed its previous highs.  The company introduced flanker flavors, including spearmint, citrus flavors, and yes, cinnamon.  The hot spiciness of all of these was drastically reduced, but it no longer mattered.  The customer had a better reason to purchase the product than simple novelty.  This claim had staying power. More important, it had frequency-of-use power, and all-important repurchase power.
The phoenix had risen from the ashes, stronger than before.
What would have happened if Dynamints hadn't forfeited?  Difficult to predict, but we can venture a guess.  Tic Tac would likely have maintained its loyal base.  Its flankers would have protected its position.  The 1 1/2 calorie claim, once made, belonged to them.  Though not unique, it was uniquely claimed, and had become what Rosser Reeves, in his Reality in Advertising, (Alfred Knopf, New York, 1968) revealed as a U.S.P.: unique selling proposition  "If the product cannot be changed, and remains identical, it is possible to tell the public something about that product which has never been revealed before.  This is not a uniqueness of the product, but it assumes uniqueness, and cloaks itself in uniqueness, as a claim."
No one has said it better, before or since.

Saturday, January 19, 2008

Branding & positioning the commodity product in a flat world

How can you rescue a brand that's being hammered by look-alikes, or sliding into commodity status?
The twin forces of globalization and rapidly accelerating technology are driving what has been called a global imitation cycle.  The consequence is the increasing commoditization of a wide range of products.  Where price, and price alone, becomes the differentiator.
What follows is the inevitable erosion of margins, further exacerbated by cheap labor in many parts of the used-t0-be undeveloped world. 
To some extent, outsourcing and offshore production have temporarily leveled the playing field, slowing the process. But almost everyone has caught on; we've entered the phase of rapidly diminishing returns.  The playing field - the world - to quote Tom Friedman, has become flat. Producers anywhere can now take advantage of cheap labor, while none can avoid the growing scarcity of energy and raw materials.
Further accelerating commoditization.
For some manufacturers, this has led to the lowering of standards, laxity in quality-control inspections, and an alarming decline in product safety -- with devastating consequences in the marketplace.  Even China, the world's production powerhouse, has seen its national reputation plummet in exports from toys to frozen seafood.  Suddenly, "Made in China" has rendered entire categories of products suspect, becoming a marketing liability not easily overcome, even by below-cost goods.  (It's also clear that China's remarkable growth is unsustainable in the face of air, water, and soil pollution, the cascading degradation of the environment, and the inexorable price pressure on energy and raw materials.  The price advantage will diminish with time, but not enough to resolve the commoditization problem.
So, how is a marketer to cope?
Fortunately, there are options.  In an age of differentiation, the product defines the company.  A brand with a demonstrable or perceived uniqueness can lift its company's reputation, and with it, the perceived value of its other products.  
In an age of commoditization, the company defines its products.  This used to be called "reputation."  In the old days, people used to say, "No one ever got fired for buying IBM."  The company's name and logo were a built-in uniqueness, which could not be copied or imitated, except by guys who sell Ronex watches on street corners. 
Today, when virtually everything can be reverse engineered, imitated, designed along different lines, or flat-out copied, uniqueness is difficult to maintain for very long.  But the uniqueness imparted by a company name, or that is inherent in the brand itself, can't be copied. Barring catastrophe, or willful malfeasance, that kind of uniqueness, once established, takes a very long time to erode.
There are uniquenesses that inhere in the product itself, which can't be imitated or reverse-engineered.  They can be created, or they can be discovered where they have long remained dormant, or unrecognized.
Some years ago, a small soda company in New York was threatened with having to discontinue an 108-year old brand because its natural consumers had become geographically dispersed, devastating its "on premise," or deli-restaurant, business. The brand was also sold in mom and pop grocery stores, but these, too, were an endangered species.  The result was that sales were down to 100,000 cases, which is about what Pepsi sells in the time it takes to read this sentence.  Worse, the brand's flagship flavor was Dr. Brown's Cel-Ray, a celery-flavored beverage which is a decidedly acquired taste.  Price pressure from store "brands" of commodity soda put an even greater strain on the parent company's other lines, so it lacked the resources for aggressive promotion.
The brand managers, who'd been with the company for several decades, had tried to distribute the brand in supermarkets, but were unceremoniously shut out.  What to do?
It was evident to me that nothing would help the on-premise situation.  The deli restaurants, in decline, were already selling all they could, to fiercely loyal customers, one bottle at a time.  Ditto for the mom & pops. The only possible solution was to crack the supermarket barrier.  
"Forget it," said the sales manager, "You don't understand the soda water business, kid.  We can't even break into Waldbaum's, and we've been pounding on their doors for thirty years."
New York City is a notoriously difficult market to crack.  Even cash under the table doesn't work any more.
So we tried a unique approach.  Many of Dr. Brown's former customers had relocated to Westchester County, which all by itself is a respectable market.  In addition, it's an inexpensive media market, if you exclude TV, which serves the entire megalopolis.  (Our annual budget was $1 a case, or a meager $100,000, which is about what Pepsi spends in the time it takes to read this sentence. )  So we prepared a test market introduction, using the Ganett chain of newspapers, and local radio.  We built this ad campaign into a distribution program which, in this case, was the ball game.
Yes, we offered standard stocking fees to the supermarkets.  But that had never worked in the past.  What did persuade them was an argument that went as follows: "At present, your supermarket competes on price, and since you all sell the same goods, your margins suck.  In addition, because prices inevitably converge, your customers follow the specials around town.  If you stock our brand, it won't account for much all by itself.  But this brand has loyal customers who miss it, and who will go out of their way to find it.  Once in your store, they'll buy a six pack of soda, and a hundred bucks worth of meat.  How will they know you carry Dr. Brown's?  We'll give you big, four-color posters to hang on your windows, announcing the availability.  The posters will not mention price."
That sales pitch got us 86% penetration into Westchester County supermarkets.  Which sold several flavors, in six packs, and 827 ml bottles.
The initial poster featured a mouthwatering photo of an overstuffed pastrami sandwich on seeded rye, with a dewy soda-fountain glass of sparkling Cel-Ray, and a pot of mustard and dill pickles framing the soda bottle with its newly-designed label.  The legend proclaimed: For prompt, temporary relief of the minor pain of nostalgia.  That was the magic, unique, un-copy-able ingredient: the nostalgia of loyal customers who loved the brand, missed it terribly, and were willing to go to great lengths to get their hands on some.  (The poster can be found on my website,  dickjackson.com.  
Sales skyrocketed. For starters, we had automatically upgraded single-serving sales to six pack sales. Second, New York City supermarkets regularly talk to their Westchester County counterparts, and so on.  Within eleven months, the brand was selling 750,000 cases in the New York metro area.  Now we could afford some modest TV in the tri-state arena.  (See two ten-second TV spots on my website.) Today, Dr. Brown's is available in supermarkets around the country, from Maine to Los Angeles to Miami, and across the Midwest.
Dr. Brown's, a consumer brand, is an example of a single product that lifted the product lines of an entire company, and the fortunes of that company.  (The phenomenal success attracted the attention of a much larger competitor, who, after making an offer the company couldn't resist, purchased the whole shebang, in order to get its hands on the brand that had been about to be terminated by its owners.)
The principle of positioning a brand, repositioning a brand, or fashioning a brand out of a commodity, holds true as well for high-tech products, where uniqueness can have the half-life of a ripe banana.  And for industrial products which have long ago lost their uniqueness, if indeed they ever had any.
Commoditization is a challenge.  Just not an insurmountable one.

Dick Jackson
See my website http://www.dickjackson.com