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ã 2003 Hopkins and Company, LLC
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Top of Mind and Tip of Tongue
Most Americans, when speaking about cleaning a
carpet, will say “vacuum.” Many Brits will say they “hoovered the floor.”
We’ve heard that the word for cell phone in some parts of China is
“Motorola.” While some companies work hard on the one hand to protect the
value of their name and brands through copyright protection, most are pleased
to have consumers achieve “top of mind awareness” about products. The
critical choice in Brooklyn forty years ago about beer was Reingold or
Schaefer. The slogan, “My beer is Reingold, the dry beer,” may have influenced
some; the ability to vote for Miss Reingold swayed others. Having selected
Reingold, we can’t remember what made Schaefer appealing to beer drinkers.
From time to time, business writers have forecast the death of brands,
especially following price drops by leading product companies. We’ve noted in
recent weeks that with increased price consciousness by consumers, instead of
forecasting the death of brands, companies are responding with private
brands, quick shifts in brand management tactics, and new types of affinity
marketing relationships. As you read this issue, think about the degree of
top of mind awareness your constituents have about your organization. Is your
organization always on the tip of the tongue of everyone you are looking to
serve? To what degree would your customers want to buy even more products
from your organization if you affiliated with other organizations?
Fifteen new books are
rated in this issue, beginning on page 5. We read three Clinton books in the
same month, awarding one, two and three star ratings. A memoir received four
stars, as did a book about science. Jump ahead to see what books we mean. You
can also visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html
and see the rating table explained as well as explore links to all 2003 book
reviews.
Independent Personality
Can you remember when grocery
store generic products had those ugly stenciled labels? Store brands and
private label products have become more appealing, according to Fortune
(8/11/03) (http://www.fortune.com/fortune/subs/print/0,15935,465867,00.html),
and represent a real threat to established product brands. In this article
titled, “Brand Killers,” Fortune describes the efforts of Costco,
Wal-Mart, Albertson’s, Federated, Rite-Aid, Target, Barnes & Noble
and others in presenting their own branded product alternatives. Consumers
like what’s being offered. One out of five items sold in the United States is
a store brand. In Europe, store brands account for 40% of sales. Whereas in
the past, the store brand alternative was chosen by a price conscious
shopper, today’s store brands may be of superior quality to the traditionally
branded alternative, and are marketed based on image, innovation and quality,
not just price. Brand loyalty may be
moving from the traditional brand to the store brand. Fortune quotes Merrill
Lynch analyst Mark Husson, “Get rid of the term ‘private label.’
They possess an independent personality. They are brands.” Companies that
fail to pay attention to this trend may be trampled, and strategies are
varied. Some branded manufacturers are the suppliers of the store brand
offerings. Campbell’s provides soup for retailers in Europe. Some
manufactures have cut back on their brands. Unilever has gone from 1,600 to
200 brands, following the advice that if you’re not one of the top three
brands, you should exit. Exiting can backfire. We read, “Occasionally
a castoff can return to haunt its parent. In the late 1990s, P&G dropped
its White Cloud toilet paper label to focus on the stronger Charmin. It made
good sense—until an entrepreneur named Tony Gelbart noticed that thanks to the
use-it-or-lose-it policy that governs trademarks, P&G's claim to the
White Cloud label had lapsed. Gelbart snapped it up for a song before
offering Wal-Mart the rights to the White Cloud label. Today Wal-Mart's
aisles are filled with White Cloud toilet tissue and even diapers—it's an
"undead" brand, as one observer puts it, that gives P&G the
unenviable distinction of having to compete against a label it created.” The mass marketing advantage of manufacturers has
eroded, especially since the shift in television viewing from three networks
to 500 channels. The big box retailers have the on-site marketing advantage,
and manufacturers are finding themselves held hostage by retailers. Believe
it or not, the current store brand trend can be traced to a former McKinsey
consultant, Dave Nichol, who developed the President’s Choice brand
when he headed Loblaw’s in Canada, and helped Wal-Mart with its store
brand strategy. Now you know who to thank or blame.
How secure is your position in the current distribution channel for the
products and services you offer to the markets you serve? Can certain
participants change their roles and make life harder for your organization?
Can you change your own role to generate increased earnings? Are your
customers loyal to you or to your distributor? Is it your products or
services that encourage buying, or is it the presentation of those products
and services by others?
Disney Wireless
Affinity credit cards are so
yesterday. What’s tomorrow? How about getting your wireless telephone service
from Disney instead of Verizon or Sprint? While we’ve
been bombarded for years with affinity credit card offers, we paid no
attention to the emerging opportunities for affinity phone services. We read
in The Wall Street Journal (7/28) (http://online.wsj.com/article/0,,SB105914875491582800,00.html) that Sprint and Virgin Group put together
a joint venture last year called Virgin Mobile USA which targeted the
youth market, and has acquired 500,000 customers. Virgin did a deal in Europe
with T-Mobile in 1999 and now has 3 million customers. According to
the Journal, Disney is talking to telecommunications companies about
delivering complete wireless services under different brand names it owns,
including ESPN. Sprint and Qwest are considering an arrangement where
Qwest would deliver wireless services using the Sprint network. “A
Qwest-Sprint accord could prompt other players to make similar resale deals.
Robert Gensler, portfolio manager of T. Rowe Price Media &
Telecommunications Fund, which has been reducing its position in Qwest, said
the deal would highlight a worry for the industry: As it becomes increasingly
cheap for carriers to operate their networks, it could become more and more
attractive for them to resell some of their capacity. ‘If it was a really
tight market, maybe no one would cut the deal. “Why would I help a
competitor?” But because there are six players, it's “Why not load my
network? If I don't do it, someone else will.”’”
Is your brand name more or less valuable than competitors? Is your
capacity greater or lesser than your current or potential competitors? Will
your customers buy a non-traditional product from you?
Glazed
The office where we publish Executive Times is located at a point
equidistant from two Dunkin Donuts locations. Within five minutes, we
could get to either location. We’ve never been inside the location to the
southwest of us. The last time we entered the one to the northeast was around
1982. On an occasional Saturday morning during the summer, we’ll sample a few
cinnamon donuts made fresh at the local Farmers’ Market. Our fat-free future
is now threatened by the emergence of a new purveyor, located four minutes
away: Krispy Kreme. While those glazed delights have been available at
the grocery store for the past year or so, we’ve indulged only once or twice.
But now: our very own store. We thought about this when we ready Andy
Serwer’s article, “The Hole Story,” in Fortune’s July 7 issue (http://www.fortune.com/fortune/investing/articles/0,15114,460119,00.html),
which begins, “They begin lining up in the cold darkness, hours before
the store opens. Some come wearing pajamas, some lug couches and TVs, others
bring beer. And when dawn finally creaks and the ribbon is cut, the rabid
customers bolt through the doors. Many of them, in what must be an
anticipatory sugar rush, scream at the top of their lungs: ‘Krispy Kreme
doughnuts, youweee!’ Last year it happened in Fargo and Philadelphia and
Amarillo and dozens of other cities in North America. This year it will
happen in Boston, Sydney, and elsewhere. All for a simple doughnut. Consider
that for a moment: With so many companies today desperate for customers, here
is a business – remember, we’re talking doughnuts – that has shrieking
fanatics lining up around the block in the middle of the night to buy its
product.” Perhaps with good reason, Fortune
called Krispy Kreme “America’s Hottest Brand.” We won’t be lined up the night
before the opening. We have willpower. Yes we do. We do.
How excited do your customers get about your
organization’s products and services? Does your organization have fans? Why
do customers select your offerings over those of your competitors? Do you
think of your products as commodities? What differentiates your offerings?
Tidal Change
”P&G should do only what it
does best, nothing more.” That’s the key business strategy of Proctor
& Gamble’s CEO, A. G. Lafley, according to the cover story of Business
Week’s July 7 issue (http://www.businessweek.com:/print/magazine/content/03_27/b3840001_mz001.htm?mz),
titled, “The P&G Revolution.” That strategy explains why P&G
outsourced soap manufacturing to a Canadian company and information
technology to Hewlett-Packard. “When Lafley describes the
P&G of the future, he says: ‘We’re in the business of creating and
building brands.’ Notice, as P&Gers certainly have, that he makes no
mention of manufacturing. While Lafley shies away from saying just how much
of the company’s factory and back-office operations he may hand over to
someone else, he does admit that facing up to the realities of the
marketplace ‘won’t always be fun.’ Of P&G’s 102,000 employees, nearly
one-half work in its plants.” Within
the core business of creating and building brands, Lafley is also making
major changes. For example, a cheaper version of Crest was created for the
China market, while at the same time Crest moved into electric toothbrushes.
Lafley has broken other corporate taboos. The company worked with competitor
Clorox on a food-wrap technology, something that would have been unheard of
in the recent past. Lafley faces significant challenges, starting with
earnings growth. There’s also the problem of reliance on retailers. Wal-Mart
might account for one-third of P&G’s global sales by the end of this
decade. How Lafley handles these challenges will determine whether he remains
CEO, and whether his changes represent a revolution, or if the strong P&G
culture revolts against him.
How do you go about deciding what your
organization should not do? What are you doing now that someone else does
better? Why are you still doing it? Are there changes that your organization
needs to make that could revolutionize what you do and how you do it? What’s
preventing you from making those changes? How can you make those changes effectively?
Follow-up
Here are selected updates
on stories covered in prior issues of Executive Times:
Ø In the August 1999
issue of Executive
Times, we noted that cycling team sponsor Cofidis
dropped Lance Armstrong from its team roster when he was diagnosed
with cancer. Five years later, Armstrong has won the fifth consecutive Tour
de France for the United States Postal Service team, which took a chance
on the cancer survivor. Who was the top rider for team Cofidis this year?
Fewer than 1% of Executive Times
would recognize the name of 15th place rider Massimiliano Lelli.
For USPS, while there are some critics of the money-losing enterprise spending
$40 million a year to sponsor a cycling team, its confidence in Armstrong has
reaped the tangible reward of significant free advertising.
Ø When we commented in the May 2003 issue
of Executive
Times that Marriott
was being sued by some New Orleans hotel owners over conflict of interest, we
overlooked another lawsuit that was settled recently. We read in all the
business press in late July that a West Virginia hotel owner sued Marriott
claiming that the company was overcharging it for its management services.
Just prior to trial, Marriott settled, agreeing to fund hotel renovations and
invest in another deal with the owner. Other suits involving self-dealing and
lack of transparency are still pending. Executives providing services may pay
attention to these cases to ensure that conflicts of interest and potential
self dealing in agreements are either disclosed or avoided.
Legacy
Planting Seeds
Many talented executives succeed because
they observe something others fail to see, and then gather facts to do
something that will produce results. We thought about that skill when we read
a page one feature in The Wall Street Journal on July 17 (http://online.wsj.com/article/0,,SB105839298579720900,00.html) about Gary Comer, who sold the company he
founded, Lands’ End, to Sears last year, netting himself about
$1 billion. Comer founded the mail order company following his personal
observation as a sailor that the market lacked a reliable supplier of quality
sails and clothing. Within a short time, the company moved away from the
narrow competitive sailing niche into middle market clothing, where Comer
produced amazing success. According to the Journal, when Comer sailed his
yacht into the Artic as just the 94th ship to cross the Northwest
Passage from the Atlantic to the Pacific, the ice conditions were so mild,
the passage was much easier than expected. Comer wondered why. He began to
investigate and found the scientific community divided on whether there is
more or less ice than in the past, and whether global warming is leading to
cataclysm, or if normal weather cycles are occurring. The whole field of
abrupt climate change needed more research, especially to determine if human
activity is creating a climate problem. Comer has spurred research with
research grants of almost $7 million to 23 entities to try to gather facts.
Comer recognizes that government support will also be needed, and his role is
to seed the research, not “carrying it across the finish line.” Comer’s
observation and curiosity may lead to greater understanding of abrupt climate
change. For all executives, the same skills that brought success in business
can be used in philanthropy and in public policy development.
Latest Books Read and Reviewed:
(Note: readers of the web version of Executive Times can click on
the book covers to order copies directly from amazon.com. When you order through these links,
Hopkins & Company receives a small payment from amazon.com. Click on the title to read the review or
visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).
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Title
(Link to Review)
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Author
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Rating
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Review
Summary
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Purchase
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Best
Friends
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Berger, Thomas
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•••
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Ambiguous. Psychological novel of two long-time friends reaching
middle age, feeling different about themselves and each other. Finely
written.
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The
Clinton Wars
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Blumenthal, SIdney
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•••
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Soldier. Recent history written by Clinton top aide who weaves his
personal story into the context of events. Well written by talented
journalist, the 800 pages may be more than some readers want to absorb.
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Drop
City
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Boyle, T.C.
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•••
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Acidic. If you can dig a return to the 1960s and can dig a communal,
rural back-to basics-life, you’ll find this book totally cool. Boyle writes
masterfully and captures dialogue, drugs, and places with precision.
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A
Short History of Nearly Everything
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Bryson, Bill
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••••
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Connections. Bryson’s wit and basic questions grab our attention and
hold it as the answers lead to more questions about astronomy, geology,
chemistry, biology, and physics.
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Living
History
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Clinton, Hillary Rodham
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••
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Lifeless. Political junkies may enjoy this 534 page memoir, but most
readers will find the writing detached and revealing little about the
author. Sometimes it reads like a travelogue; other times like a policy
essay.
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Swimming
Across: A Memoir
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Grove, Andrew S.
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•••
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Immigration and Naturalization. The charming story of the early life
of Intel CEO Andy Grove with life lessons for all readers. From his birth
through his arrival in America following the Hungarian Revolution.
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Invented
Eden: The Elusive, Disputed History of the Tasaday
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Hemley, Robin
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••
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Exploitation. Were the Tasaday fakes, or really a primitive,
unspoiled tribe at the time news stories about them were spread worldwide?
Were those who called this a scam the real liars? If you care about these
questions, this is the book for you.
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The
Power of Full Engagement: Managing Energy, Not Time Is the Key to High
Performance and Personal Renewal
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Loehr, Jim and Tony Schwartz
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•••
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Energizing. Most executives have managed the stress part of personal
energy management, but often falter in finding the right methods for
recovery to regain energy. This book tells stories about what has worked
for clients, including athletes.
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Hallowed
Ground: A Walk at Gettysburg
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McPherson, James M.
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•••
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Pulitzer Docent. A well-informed compact guide to what happened and
where during the battle of Gettysburg. Ideal for pleasure readers.
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Leap of
Faith: Memoirs of an Unexpected Life
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Noor, Queen
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••••
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Personal. If there’s only one memoir you read this year, make it this
one. Noor describes her relationship with King Hussein, family life, and
politics with an articulate voice helping you learn more than you may
expect about the Middle East and about personal, loving relationships.
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The
Majesty of the Law: Reflections of a Supreme Court Justice
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O’Connor, Sandra Day
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•••
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Pedagogic. O’Connor shares her love of the law but reveals little
about the inner workings of the court, and tells nothing that would reveal
her approach to issues coming before the court.
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Dereliction
of Duty: The Eyewitness Account of How Bill Clinton Compromised America’s
National Security
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Patterson, Robert
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•
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Punt. Air Force officer who carried nuclear “football” for two years
in Clinton White House delivers poorly written screed based on personal
observations, especially one incident on a golf course in September 1996.
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Harry
Potter and the Order of the Phoenix
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Rowling, J.K.
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•••
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Growing Up. Finest installment in the series so far. Adolescent
Harry behaves erratically, and even Dumbledore appears vulnerable. The new
Defense Against the Dark Arts teacher brings bureaucracy to Hogwarts.
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The
Older the Fiddle, the Better the Tune: The Joys of Reaching a Certain Age
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Scott, Willard
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•
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Yada. Occasionally pithy, sometimes inspirational, but usually vapid
and monotonous comments from old people, some famous, some not. Read it and
come away older, not necessarily wiser.
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Bronzeville:
Black Chicago in Pictures, 1941-1943
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Stange, Maven
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Compelling. Rarely seen photos document the impact of rural
migration to Chicago, and the creation of “the black capital of America” on
the South Side.
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