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Positive Power Spotlight: Costco Proves a Deep Discounter Doesn’t Have to Cut Throats

The New York Times calls Costco “the anti-Wal-Mart” — and let’s look for a moment at why that’s important.

I consider Wal-Mart a predatory company. Its supplier policies (demanding 10 percent reductions in contract costs every year, as I understand it) are largely responsible for the wave of outsourcing that has cost thousands of Americans good jobs–and for the severely substandard working conditions that prevail in many of those foreign sweatshops. Its employees subsist on wages so low that many of them are also on government assistance–a quiet subsidy from the United States to the world’s largest retailer, despite it huge profits. When workers in the meat department of one store in Ontario, Canada formed a union, the company closed the entire store rather than recognize the bargaining unit. And the company’s steamroller tactics in bringing in new stores where they’re not wanted and then abandoning many of them after a few years do not make it a good neighbor, in my opinion.

But the mantra we hear from business analysts is that this kind of operation is the only way for a retail giant to be profitable.

–>It’s really refreshing, therefore, to read Steven Greenhouse’s article, “How Costco Became the Anti-Wal-Mart,” in the New York Times last month. Utterly and totally disproving the idea that you have to be a back-stabber to succeed with a retail warehouse concept.

For starters, Costco pays its workers–many of them unionized–enough to live on, averaging $17 per hour with a generous health plan and 401K retirement plan on top of that. And maintains high profitability with retail markups just 14 to 15 percent, in an industry where 25 percent markups are common. Oh yes, and when I was a member (I left because I moved out of convenient range), I always looked forward to the monthly newsletter: an informative and thorough business magazine, some 90 or 100 pages in newsprint format. it was the most useful houseorgan I’ve ever gotten from any company. Given all this, it’s not surprising that both employees and customers are fiercely loyal.

It all seems to be working. Costco’s per-store average across 457 stores in 6 countries is $121 million, while Wal-Mart-owned Sam’s Club brings in only 57 percent as much: just $70 million per store. Profits were a very healthy $882 million last year, on $47.1 billion in sales–up 22 percent from the previous year. And of that $882 million, a relative trickle–a mere $350,000–pays CEO Jim Sinegal’s salary (he did receive another $200K in bonuses last year).

Of course, these principles of true value, service to others, and leaving something on the table for the other stakeholders are among the points I discuss in Principled Profit: Marketing That Puts People First, my award-winning blueprint for ethical business success. Visit http://www.principledprofits.com to learn more.

(For the complete New York Times article, “How Costco Became the Anti-Wal-Mart,” ask your librarian for in the July 17, 2005 Sunday Business section, or purchase from the times archive at http://query.nytimes.com/search/abstract?res=F30D10FA3B540C748DDDAE0894DD404482&incamp=archive:search)




Positive Power Spotlight: Neighborhood Fruit/RideBuzz

As a long time “Green evangelist,” I’ve always been a big fan of clearinghouses that reduce waste and let people share resources. It’s better for the planet, better for the pocketbook, and better for building community.

This month, I’m going to share two such initiatives from opposite ends of the country.

Neighborhood Fruit

A single tree can sometimes produce hundreds of fruits or nuts. It’s overwhelming for a homeowner with multiple trees (especially if a whole bunch ripens at once), and much of the fruit goes to waste (making an unsightly and smelly mess in the process). California-based Neighborhood Fruit lets homeowners who are buried in the bounty from their fruit trees share the harvest with those who’d love more fresh, local produce. Scavengers pay a small fee; farmers earn credits that they can redeem for fruit, and can decide if they’ll pick and bag, or let their “customers” do it.

So far, 10,000 trees around the US are registered with the program. Oh yeah, you can also share zucchinis and other produce.

(My thanks to Steve Puma of Triple Pundit  for his article about this company)

Ride Buzz

Meanwhile, in Massachusetts, Jeff Brown formed Ride Buzz to do something similar with empty seats in cars: a clearinghouse of rides offered and needed, both ongoing and one-time. Jeff is quite the go-getter and not only went out and got 501(c)3 nonprofit tax exemption, he’s also formed numerous partnerships with area organizations (something I advocate very strongly in my award-winning sixth book, Principled Profit: Marketing That Puts People First).

Among the many partnerships:

  • Working with an area human service agency, Highland Valley Elder Services, to create more transportation opportunities for elderly people who can no longer drive but are able to remain at home if they can get around
  • Obtaining endorsements for setting up internal ride sharing networks for three municipalities, several colleges and universities, and a number of private businesses
  • Partnering with event organizers to promote ride sharing to events from folk festivals to conferences to retreats (including events as far away as Guam and as close as its hometown of Amherst
  • RideBuzz coffee, roasted by the organic fairtrade coffee company Dean’s Beans and promoted to reduce greenhouse gases and build sustainability, with all profits donated to RideBuzz
  • Organized a five-band concert to thank the town of Amherst, MA, the Amherst-Area Chamber of Commerce, and the University of Massachusetts Isenberg School of Management for their promotion of ridesharing (One UMass professor even integrated ride sharing into the curriculum, as a case study for students to communicate the social, environmental, and economic benefits of ridesharing to area residents.

Launched three years ago, the organization became a nonprofit corporation in September 2008, and received 501(c)3 status in June 2009.

While still heavily tilted toward its native region (the Connecticut River Valley in New England), the site is beginning to attract out-of-area users too. Brown says the infrastructure is able to be supported in 63 countries.

And how are you getting to your Thanksgiving dinner? Use RideBuzz and you may be able to share the cost and lower our collective carbon footprint by carpooling.


Another Recommended Book: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, Enabling Dignity and Choice Through Markets by C.K. Prahalad, Wahrton School Publishing, 2006.

With endorsements by Bill Gates, former U.S. Secretary of State Madeline Albright, the CEO of VISA Inernational, and One-Minute Manager co-author Ken Blanchard, this book sets up high expectations. And it meets them–with a dramatic and (dare I say) revolutionary approach to empowering the poorest of the poor around the word: not through handouts, but through a clever reinventing of capitalism. In other words, corporations can lift up the bottom through good old fashioned self-interest.

As much an economics text as one on marketing, this book has the potential to drastically change the entire world economy.

Among Prahalad’s key points:

* Poor people in developing countries crave the same lifestyle enhancements as the rest of us, and will spend money if they can demonstrate sufficient improvement in their condition

* Companies that understand and harness the cultures where they operate can make handsome profits serving this underserved sector–especially where they enable massive saving of time, productivity, travel, etc.

* When properly structured, offers to the bottom of the pyramid can actually be more secure, with lower default rates (especially when using self-help groups as in the well-known microlending model pioneered by Grameen Bank and others)

* The bottom of the economy is a fantastic proving ground for new processes and products that can then be “exported” up the economic ladder (as one example: a prosthetic technology that created a superior artificial foot that can be manufactured and installed for $30 or so, versus several thousand dollars in upper-class cultures)

* In many cases, the bottom can leapfrog some of the popular technology infrastructure in more developed locations and go to something better (e.g., skipping petroleum fuels and grid-based power lines and going directly to on-site solar, avoiding not only the significant infrastructure costs of rural electrification but also the issues of global warming and ongoing consumption cost)

While he’s a bit too rah-rah for my taste about the positive role multinational corporations can play in all this, and he’s willing to tolerate financing plans that would be usurious in a modern consumer society (though still far cheaper than dealing with unregulated local moneylenders), he shows over and over again, both in the technical/theoretical part of the book and in the much more readable case studies, that profit can provide a great incentive to improve the lives and facilitate empowered decision-making among the very poor.

As someone who has spent my entire life focused on improving the world, I find this very exciting, and would love to see this as a required text in every class on economics, marketing, and international policy.


Another Recommended Book: Ethical Markets by Hazel Henderson

So many books about the need for change are nothing but doom-and-gloom. Focusing on the successes, Ethical Markets: Growing the Green Economy by Hazel Henderson (with Simran Sethi) (Chelsea Green, 2006) is fundamentally about hope.

Mind, there’s plenty of information in these pages about the world’s problems and the consequences of doing nothing. And lots more about the way government and business collude to skew the system in favor of the traditional model (such as unsubsidized solar and wind energy having to compete against heavily subsidized oil, coal, and nuclear, and lifecycle costs such as disposal transferred from the manufacturer to the consumer). But the book profiles dozens of entrepreneurs in both the business and service sectors who have found a way to help humanity address that raft of problems. If the entire world adopted the solutions modeled and piloted by these visionaries, it would go a very long way toward reversing negative climate change (a/k/a global warming)…reducing poverty…creating economic support systems that lift up not only the middle class but also the very poorest–and do so without government handouts.

Henderson, whose many websites include EthicalMarkets.com, has been taking a leadership role in the environmental/activist/ethical investor sector for decades (I have a book of hers that was published in 1978; this book is based on a PBS TV series she produced.

The ultimate message is that we, not only as consumers but as citizens (yes, there is a difference!) can impact the world of business and shape it away from the rigid single-bottom-line, profit-at-all-costs model popularized by economists like Milton Friedman, in favor of a more humanistic triple-bottom-line approach that is shaped to benefit all stakeholders, not just those who happen to own stock.

Ironically, but perhaps not surprisingly, socially responsible companies tend to perform better. As I discuss in my own award-winning sixth book, Principled Profit: Marketing That Puts People First, and as Henderson points out over and over again, these companies are better managed, they’re not embroiled in costly lawsuits, and they’ve made strides to reduce their own environmental footprint in ways that actually lower costs.

And Henderson tracks probably hundreds of ways that this attitude has filtered from the hippie pioneers of the 60s and 70s into the mainstream business world–not only through the successes of companies that were built from their founding on social and environmental responsibility (e.g., Greyston Bakery, Grameen Bank), but also in how this ethic is slowly spreading into even the largest of traditional businesses, even to the likes of auto companies, oil companies, General Electric, Wal-Mart, and so forth.

The book is wide-ranging, with chapters covering not only the obvious (energy, environmental impact, fair trade) but also the pervasive areas of society that need to–and are starting to–shift (health and wellness, joy at work, investing). Henderson identifies four pillars of socially responsible investing (a field where she has had major influence through her work with Calvert and other organizations): social and environmental screens, community investing, shareholder activism, and socially responsible venture capital. She also wants us to place economic value on “the love economy” (work done for free, in the home or as volunteers).

In short, despite the mess we’re in, many, many trends are positive. She even finds support in the writings of those two writers whose works have often been used to justify the worst aspects of the corporate oligarchy: Adam Smith, 18th-century author of The Wealth of Nations, and Charles Darwin, 19th-century author of The Origin of Species.
A few specific examples of positive change among the many she cites:

  • Socially responsible investments in the U.S. and worldwide now total $2.3 and $5 trillion, respectively
  • Socially screened companies outperform the S&P 500 and similar indices around the world–and that may have something to do with why socially responsible mutual funds grew 156% in five years (to $32 billion) while that market as a whole grew only 22%
  • In Brazil, about 1/3 of the nation’s GDP is accounted for by companies that have joined an ethical-principles umbrella organization–and the country’s celulosic (i.e., not from diverted food sources such as corn) ethanol production has made it energy self-sufficient
  • Fair-trade coffee consumption in the UK multiplied 400% from 1998 to 2005
  • Green venture capital is growing at 36% per year; wind power is growing at 29% per year; solar grew by 63% from 2004 to 2005, and countries such as China are becoming major players (very hopeful for those of us who worry about the environmental disaster that would happen if China adopted traditional, polluting, resource-hogging technologies to achieve Western living standards)
  • At least some clothing companies have rejected sweatshops in favor of production that is certified under the Social Accountability 8000 standard (mentioned in a profile of one of those companies, Eileen Fisher)
  • Technology exists to supply all the power California currently generates with traditional powerplants, just by switching four percent of the state’s vehicles to fuel cell power
  • Shareholder activists have achieved numerous victories, from switching McDonald’s off polystyrene containers to getting Home Depot to carry sustainably-forested wood


How to Cold-Pitch a Reporter: Frugal Marketing Tip, April ‘09

If you ask journalists their biggest peeves with PR people, and especially with people trying to do their own PR, the most frequent response you’re like to get is “they waste my time with off-topic pitches.” If you think the rest of us have crowded inboxes…triple it for journalists. They are looking for excuses to hit the delete button or drop your precious press kit in the recycle bin.

So be smart and don’t do give them any! Only contact journalists who cover your beat, and let them know right from the top that you’re on topic.

Lets say you have a company that makes a new product in the renewable energy arena, maybe something that is so energy efficient that it pays for itself in one year. We’ll say it’s a furnace add-on that lowers fuel consumption 15 percent, and it’s called the Furn-i-Soar. (I’ve got dinosaurs on the brain today, OK?)

Your first contact in many situations is going to be an e-mail (or a submission on the media outlet’s webform). So the first thing you need is a subject line that lets the reporter or editor or producer know that you’ve got something fresh in the area they already cover–and that you’re looking for coverage.

You might use a subject line like

Pitch: Green Furnace Add-On Recaptures 15% of Fuel, 1-Yr Payback

At 64 characters, it’s a bit long; some e-mail systems may truncate or eliminate the word “payback.” But that’s OK, since it can be guessed from context (and in some e-mail systems, will be repeated in full inside the e-mail). This strong headline…

  1. Announces that it’s a pitch
  2. In eight words, summarizes the key idea
  3. Uses the word “Green” to make it clear that this is an environmental story (since you’re pitching reporters on the enviro-technology beat)
  4. States the dramatic results in a very concrete, non-hypey way

If the word “payback” were essential, instead of starting “Pitch:”, we could end the subject line with (Pitch)–or simply sharpen the headline until it was 55 characters or less

Let’s move on to the body (my comments in italic and outdented). Notice how every paragraph advances your agenda, and most of them are crammed with talking points.

Dear Ms. Phelps,

You do such a great job of reporting on eco-technology! I particularly enjoyed your recent story on solar magnifiers and I thought this would be of interest to your readers.

You’ve just established yourself as a “player.” You read and enjoy and are familiar with her stuff, unlike 90 percent of the people who pitch her. Ten minutes with Google or the publication’s website is all you need to make that difference–or to discover that a reporter you’re targeting isn’t the right reporter after all. Oh, and obviously, substitute “listeners” or “viewers” for “readers” if you’re pitching radio or TV. And spell the reporter’s name right!

My Springfield-based company, Energy Efficiency Technologies, has just introduced a device that recaptures 15 percent more BTUs from fuel oil, by re-oxygenating the oil and cycling it back into the burn chamber. It’s energy-efficient, very Green, and usually pays for itself in one year or less. We call it the Furn-i-Soar, and yes, there’s a story behind that name.

Right from the start, you let the reporter know your company is in the media outlet’s territory. If it’s not such a tight fit, e.g., you’re based in Springfield, Massachusetts but the reporter is 90 miles away in Boston, you might say “Massachusetts-based.”

Next, a quick statement of the core benefits, the underlying technology, the nice, short payback period. Finally, that paragraph concludes with a teaser. Now the reporter is curious. She’s going to want to visit your website.

This is new technology that we developed in collaboration with our German partner, Furnace GmbH. Germany, as you know, is the world leader in renewable energy technology. It’s been used in Europe for the past year, but this is the first time it’s been rolled out to the US market.

Another story angle–international cooperation. Plus it’s both new to market and well-tested. One of those should “stick” in the reporter’s mind.

On the press page of our website, http://www.furn-i-soar.com/press , you’ll find:

  • Full product specifications of our three different models (residential, office, industrial)
  • Company history
  • The story of how we developed this product, working on both sides of the Atlantic–and why we named it Furn-i-Soar
  • Profiles of key executives and product developers, with high-res head shots and action shots
  • Price and ordering information
  • Color and black-and-white product photos, audio and b-roll that you’re welcome to use in your story

Wow! You’re making it sooooo easy for a reporter to do a story! You obviously know what you’re doing, know what reporters need, and are going to be helpful. This one will be a joy to write.

Because this is new and proprietary technology, I should warn you that the press page is open only to qualified journalists. You’ll need to enter your name and the name of the media outlet, but only the first time you visit.

Uh-oh! Reporters hate squeeze pages or anything else that puts a barrier between them and their research. But sometimes it can’t be helped. At least you’ve warned her, explained why the inconvenience is necessary, and you’ve also told her it’s only the first time she visits.

I’d be delighted to set up an interview or help with whatever else you need to get a great story.

Helpful and professional once more.

One more thing: If you’d like to test out the product, we’d be glad to install a unit in your home or office for the first three months of the heating season, and let you judge the savings, comfort, and performance for yourself. At the end of the trial period, we’ll uninstall at no cost to you (or give you the option to keep it at a discounted price).

Like everyone else, reporters love free trials. In fact, they’re used to getting all sorts of things for free. Your product costs a few hundred dollars and you can’t afford to give them out like candy. But you still have a way for the reporter to test it out in the real world, and you may even make a sale at the end of the trial. And if you get lucky, you may get a story now and another story after she’s lived with and enjoyed it for a while. (Note: depending on ethics rules for the journalism outlet, as well as ethics regulations within your particular industry, this offer may not be appropriate.)

Please let me know if there’s anything else I can do to make your life easier while you’re working on this story. My direct line is 413-555-1290, my cell is 413-555-9900, e-mail is jjames@furn-i-soar.com, and my Twitter is @furn-i-soar. Thank you for your help.

Sincerely,

John James, Product Manager

You’ve made yourself extremely accessible. If the reporter has questions, she won’t have to struggle to track you down.



Be An Effective Speaker

The thing that shocked me about both the conferences where I spoke in
March–one in Chicago, one in Marin County, California–was how few
of the other speakers had made any effort to create an approachable
presentation style.

By and large, they mumbled, stayed in a monotone, and made little
effort to interact with their audience. Maybe they really are too
terrified to make the audience feel valued?and you can stand head
and shoulders above the pack with a few simple techniques:

1. Be animated?with your voice, your body language. Don’t be afraid
to move your hands. Make eye contact. Act as if you’re excited about
your topic.

2. Just forget about the number of people watching you. Imagine that
you have two or three good friends in the audience; speak as if
you’re talking on the phone with them. You can even pick out a few
friendly faces in the crowd to make more than the usual amount of eye
contact?and pretend they’re your good buddies.

3. Try for personal rapport. If there’s a break, mingle and notice
name tags. Then, in the Q&A period, you can call these people by name.

4. Keep brief. Don’t try to cover a book’s worth of knowledge. Pick a
few areas to concentrate on, and stick to them?unless, like me, you
encourage open and wide-ranging questions, which can take you a bit
farther afield. Leave at least half the time for questions, but be
prepared to keep talking if you have a dead audience.

5. If there have been other speakers ahead of you on the program, or
if you’re going more than an hour, lead the audience in a stretch
break. Here’s one I use a lot: If speaking to business owners, I say,
“Reach for higher profits” (stretch arms to ceiling). “Expand your
horizons” (arms out to the sides). “Watch the bottom line” (arms to
floor). “Contract the budget” (hug yourself). If speaking to
community organizers, I change it to “higher objectives” and “down to
the grass roots.”

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