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Principled Profit Spotlight
Frugal Marketing Tips
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)
As a long time âGreen evangelist,â Iâve always been a big fan of clearinghouses that reduce waste and let people share resources. Itâs better for the planet, better for the pocketbook, and better for building community.
This month, Iâm going to share two such initiatives from opposite ends of the country.
A single tree can sometimes produce hundreds of fruits or nuts. Itâs 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 whoâd love more fresh, local produce. Scavengers pay a small fee; farmers earn credits that they can redeem for fruit, and can decide if theyâll pick and bag, or let their âcustomersâ 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.
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, heâs 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:
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, thereâs plenty of information in these pages about the worldâs 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)âŠreducing povertyâŠcreating economic support systems that lift up not only the middle class but also the very poorestâand 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, theyâre not embroiled in costly lawsuits, and theyâve 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 worldânot 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 toâand are starting toâshift (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 âthe love economyâ (work done for free, in the home or as volunteers).
In short, despite the mess weâre 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.
How to Cold-Pitch a Reporter: Frugal Marketing Tip, April â09
If you ask journalists their biggest peeves with PR people, and especially with people trying to do their own PR, the most frequent response youâre like to get is âthey waste my time with off-topic pitches.â If you think the rest of us have crowded inboxesâŠtriple 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 donât do give them any! Only contact journalists who cover your beat, and let them know right from the top that youâre 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. Weâll say itâs a furnace add-on that lowers fuel consumption 15 percent, and itâs called the Furn-i-Soar. (Iâve 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 outletâs webform). So the first thing you need is a subject line that lets the reporter or editor or producer know that youâve got something fresh in the area they already coverâand that youâre 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, itâs a bit long; some e-mail systems may truncate or eliminate the word âpayback.â But thatâs 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 headlineâŠ
If the word âpaybackâ were essential, instead of starting âPitch:â, we could end the subject line with (Pitch)âor simply sharpen the headline until it was 55 characters or less
Letâs 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.
Youâve just established yourself as a âplayer.â 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 publicationâs website is all you need to make that differenceâor to discover that a reporter youâre targeting isnât the right reporter after all. Oh, and obviously, substitute âlistenersâ or âviewersâ for âreadersâ if youâre pitching radio or TV. And spell the reporterâs name right!
Right from the start, you let the reporter know your company is in the media outletâs territory. If itâs not such a tight fit, e.g., youâre based in Springfield, Massachusetts but the reporter is 90 miles away in Boston, you might say âMassachusetts-based.â
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. Sheâs going to want to visit your website.
Another story angleâinternational cooperation. Plus itâs both new to market and well-tested. One of those should âstickâ in the reporterâs mind.
Wow! Youâre making it sooooo easy for a reporter to do a story! You obviously know what youâre doing, know what reporters need, and are going to be helpful. This one will be a joy to write.
Youâve made yourself extremely accessible. If the reporter has questions, she wonât have to struggle to track you down.
The thing that shocked me about both the conferences where I spoke in
By and large, they mumbled, stayed in a monotone, and made little
1. Be animated?with your voice, your body language. Don’t be afraid
2. Just forget about the number of people watching you. Imagine that
3. Try for personal rapport. If there’s a break, mingle and notice
4. Keep brief. Don’t try to cover a book’s worth of knowledge. Pick a
5. If there have been other speakers ahead of you on the program, or