Tag Archives: Business and Economy

June 19, 2015 · 8:15 am

The Hole Truth

This Foodie Friday, let’s delve into the world of food mysteries.  I hadn’t really noticed but apparently the holes in swiss cheese have been shrinking and no one quite knew why.  A cynical commentator (who me?) might speculate that the opposite ought to be true, as margins rise when you’re selling empty space.  Be that as it may, it was really a problem and scientists did some investigating.  The answer is instructive for anyone in business.

You know that cheese is made by the interplay of bacteria and milk.  The bacteria is added and the differences in the milk (sheep, cow, goat, etc.) and the strain of bacteria are what make different cheeses.  Swiss cheese is cow’s milk and three unpronounceable strains of bacteria, none of which had been changed;  yet over the last hundred years, and very much over the last fifteen, the holes have been shrinking.  Why?

Turns out it had to do with improved cleanliness.  Better sanitation resulted in a safer product but also removed microscopic bits of hay from the milk.  Those hay bits were critical in the formation of the holes.  That solves our mystery but also raises the business point.

We’re all familiar with the law of unintended consequences but how many of us take the time with our team to think through the effects that law might bring with every new action?  Product changes, a new marketing plan, or any other change has the potential to bring about changes that aren’t readily foreseen unless we spend the extra time to think about them.  It’s nice to tie executive compensation to our stock price but maybe that has the unintended consequence of focusing on the short-term or good financial results at the expense of better customer service.  Maybe we cut the price to get a deal but then realize we’re losing money.  Maybe we reduce quality to save on costs and watch as a competitor steals share.

Making the milk cleaner was a great idea – who wants customers getting sick and dying?  The unintended consequence was a big change to one of the product’s signature features.  After all, without the holes, Swiss Cheese is just Emmental and Appenzell.  That mystery took 100 years to solve – hopefully the mysteries inherent in your business won’t take that long.

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June 17, 2015 · 10:37 am

Getting Chosen

You probably have been spending a lot more time interacting with your mobile device over the last year.  You’re not alone, and much of that interaction takes place through apps.  I don’t know about you but I have a lot of apps installed (and even more that I’ve used and uninstalled over the years).  I just checked my phone and there are 131 app icons.  Putting aside that there’s probably a dozen or so that are pre-installed crapware from my carrier and the handset manufacturer (I ranted about that previously – you get a reprieve today), that’s still a large number of apps competing for my attention.  There are hundreds of thousands more in the app store too.

My reality, and I’m guessing yours too, is that I only use a couple of dozen of them on any sort of regular basis.  Turns out we’re not alone, at least according to the good folks at Nielsen:

Despite the increase in choices, the number of apps used is staying the same. A recent Nielsen analysis found that on average, U.S. smartphone users accessed 26.7 apps per month in the fourth quarter of 2014—a number that has remained relatively flat over the last two years. And consider this: Over 70% of the total usage is coming from the top 200 apps.

However, while there appears to be a consumer threshold to the total number of apps people are willing and/or able to actively use during the month, the time they spend engaging on those apps has increased. In fact, the monthly time spent per person has increased from 23 hours and two minutes in fourth-quarter 2012 to 37 hours and 28 minutes in fourth-quarter 2014—a 63% rise in two years! So the reward for being one of the chosen apps is heavy engagement by the user.

It appears our app usage mirrors our TV usage.  While we might have access to hundred of TV channels, most of us only watch 21.  As has happened with TV, the engagement deepens with the chosen few.  The challenge for any business is to become one of those two dozen.  The means making the potential user base aware that you are the best solution to their problem, whether it’s how to amuse one’s self or how to get to a place you’ve never been or how to get clothes that are reasonably priced and fit well.  It means avoiding the dreaded “uninstall” – that action that takes place whether you’re an app or not when a customer moves on since you didn’t deliver on the promise made.  Maybe you were boring.  Maybe you were bloated with ads.  Maybe you tried to sneak in a lot of extra charges.  Those things aren’t limited to apps but they’ll lose you the “chosen” status much of the time.

What are you doing to be chosen today?

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June 12, 2015 · 8:41 am

Watching Out For Cannibals

It’s Foodie Friday, and this week our topic is an announcement made by Whole Foods the other day.  If you’ve ever shopped there you know that the “Whole Paycheck” nickname the chain has acquired is accurate.  The products there are generally first-rate and are priced as such.  With the growth of lower cost competitors such as Trader Joe’s that offer an almost equal level of quality at more reasonable prices, Whole Foods decided to fight back:

“Today, we are excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace,” said Walter Robb, co-chief executive officer of Whole Foods Market. “Offering our industry leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.”

I guess he never heard of Trader Joe’s but let’s put that aside.  The store will be called 365 by Whole Foods which is their store-branded line.  This move raises the question (not a food question!) of cannibalization.  You see, according to the folks at Harvard, history shows us that most of these lower-cost brands are created explicitly to win back customers that have switched to a low-price rival. Unfortunately, once deployed, many have an annoying tendency to also acquire customers from a company’s own premium offering. To prevent cannibalization, a company must deliberately lessen the value, appeal, and accessibility of its lower-cost brand to its premium brand’s target segments.  That means you’re knowingly offering an inferior product, and in my mind that always bears the risk of tainting the premium product.

Whole Foods isn’t going to put Trader Joe’s out of business.  I’m willing to bet that they’re going to take some serious losses (new stores aren’t cheap) as they start up and if all customers are doing to going to the new place to buy the same goods they would have bought (along with some of the higher-priced stuff), you’ve reduced margins even if you’ve maintained sales.

I guess the lesson in my mind is one I’ve put out there before.  Be who you are as a brand.  Embrace those who love you and create new fans every day by explaining cost and value aren’t the same and why you’re the best solution to a customer’s problem.  It’s worked for a lot of high-end brands.  Why not Whole Foods?

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