In 1988 Havaianas was at a crossroads. The brand had only one style and one colour. It was “A commodity that had no emotional appeal” as Carla puts it. New manufacturers came into the market, eroding Havaianas’ market share, and sales started to decline.
Since Havaianas emerged from its reinvention strategy in 1994, sales have been growing by a steady 8 percent each year. In 2008 the company sold 184 million pairs of its now famous rubber sandal, 25 million of which were sold outside Brazil. Inside Brazil, the company has achieved the amazing brand penetration rate of 850 pairs sold per 1000 inhabitants.
Our brand is fundamental for our expansion strategy…
Havaianas have a good product but it is their brand proposition what forms its DNA. “Our brand and the emotional and intangible aspects of it are fundamental in exploring new markets. This is what makes our product so seductive not only in Brazil but also abroad”.
The interesting thing about Havaianas’ success is that the success of their brand abroad has a positive impact in the local market. ”The more successful the product was outside the more proud the Brazilians were of the product in Brazil”.
Life is full of contradictions and good brands could provide a platform to resolve them. The beauty of Havaianas is that by expressing universal themes – some of them associated to Brazil and its people: optimism, freedom, joy and energy – it resolves some of the country’s innumerable contradictions. Havaianas are simple and sophisticated, for the poor and the rich, traditional and modern, fashionable and casual. “a brand of improbable combinations”.
The organisations has a clear understanding of what a brand is and what isn’t. For Havaianas the brand transcends the visual realm, is more than the logo. “For us our brand is the personality and character of the product”. Understand the brand internally
The challenge for Havaianas is to grow without losing its edge. New ideas come from establishing a network of inspiring collaborations with people and companies. For example, the creative director of BBDO Brasil – Marcello Serpa, one of the most prestigious advertising men in Brazil – was crucial in repositioning the brand. He has helped to evolve the brand’s communications by adding edge and originality to its advertising. He acts like, and virtually is, the creative director of the brand.
As a way to raise its profile globally, the brand has joint distribution and product development efforts with brands like Celine, HStern, The Gap and Swarovski.
For Havaianas, measuring all the different variables of the brand’s health is part of their success. More specifically they measure: brand perception, brand tracking studies in all the countries, awareness, trial, personality traits, advertising effectiveness, etc.
Their ambition is to be bigger both inside and outside Brazil. The potential outside Brazil is enormous given the very high penetration in Brazil: 150 million sandals are sold in a country of 190 million inhabitants.
- Pay close attention to customers: understand and observe how they use the product
- Be true to the brand essence and to what you stand for.
- Avoid making quick profits based on decisions that could erode your brand equity. Think in the longer term.
- Every touch point reflects the brand essence; make sure you answer the phone in a way that reflects your brand.
- Reinforce the brand message internally.
The war changed everything. Women were forced to wear the trousers while their men were away. The experience challenged and toughened them. After the war, women embodied a more forceful character in every way they expressed themselves, including their fragrances. But then couturier Gabrielle “Coco” Chanel broke the rules by revolutionizing and democratizing fashion in its various forms—from clothing to accessories, including perfume.The Chanel No. 5 Juice
“I want to give women…a scent that smells like a woman, not like a flower,” Chanel said.
In 1921, Coco commissioned Russian perfumer Ernest Beaux to create what would become the ultimate Chanel masterpiece and greatest classic perfume of all time—an abstract floral overdosed and overpowered with sparkling yet heavy synthetic chemicals called aldehydes.
Chanel No. 5 was ahead of its time as a composition. It was impactful, long lasting, unique and libertarian in its essence. The juice’s signature hasn’t changed since its creation, yet its attributes have evolved to become aspirational in a more classic and feminine way as opposed to being the edgy, abstract rule breaker it was in its early years.
For decades, Chanel No. 5 has remained a bestseller around the globe. Interestingly, the juice doesn’t test well blind, but when women experience it within the context of the Chanel brand, a certain je ne sais quoi happens just like magic, and women just embrace it.
The Chanel No. 5 Experience
Its flacon is a simple square bottle with a rectangular top. It has been altered only minimally since first designed by Coco Chanel. Black and white colors and straight lines convey simplicity and purity. The black is not just black; it is the blackest possibly attainable. The famous double-C logo created in the early 1920s embodies all elements Chanel and remains strategically unchanged. The glass feels heavy, conveying quality. The simple style of the overall package holds classic stylistic codes that have become intrinsic to the brand’s DNA over the years.
The Chanel No. 5 experience is highly regarded, and the brand pays a great deal of attention to detail, juice quality and components durability. The label, colors and coatings must be durable so the consumer can keep the flacon impeccably intact for years, even when it is empty. Branding the experience is quite important for Chanel. Repeated consumer interactions with the product are meant to result in an accumulation of pleasant multi-sensorial moments that ultimately reaffirm Chanel’s quality and render awareness, recognition and loyalty to the brand.
Consistency, Consistency, ConsistencyCatherine Deneuve, Ali MacGraw, Carole Bouquet and Nicole Kidman—to mention a few—all embodied qualities the brand wanted to portray to characterize the quintessential No. 5 woman. Aggressive advertising campaigns over the years have been critical for the brand to stay current and keep its image young and fresh.
Perhaps consistency is the main reason Chanel No. 5 remains successful, aside from being true to its heritage. From Marilyn Monroe accidentally endorsing Chanel No. 5 in the 1950s to Audrey Tautou and all her “Frenchness” as the new face of the fragrance, the brand has been consistently linking popular cinematic figures to appeal to a younger generation with every passing decade.
Many attributes of Coco’s unconventional personality are incorporated into her brand, as is evidenced in an upcoming biopic film, Coco avant Chanel, featuring Audrey Tautou as Mlle Chanel.
In 2008 brand Chanel decided—for the first time, after decades of careful brand strategy—to take a bold step by launching Chanel No. 5 Eau Première—a lighter, more modern version of the original No. 5 with a quieter sillage. Chanel in-house perfumer Jacques Polge stated: “Eau Première is for all those women who came to me and said, ‘No. 5 is fantastic but it’s not for me.’ Eau Première is lighter, more transparent, but, in essence, it is still No. 5.”
According to the NPD Group, a research firm, Chanel revenues increased by 14.5 percent after Eau Première was introduced.
Chanel No. 5 stays young by embracing a classy, ladylike attitude that could go just about anywhere, day or night. Chanel’s quality is uncompromised, distinctive and has an engaging history—from its avant-garde and socially progressive beginnings, to the traditional, luxurious and classic status that it has perpetuated throughout the decades.
A case in point is a brand experience where real and virtual worlds intersect, called The Grid. A mobile social network that allows users to chat with friends, locate them on a map and share media, The Grid is a first for the African continent. Part Facebook, part Flickr, and a dash of Twitter combined with a GPS-type navigation system, The Grid allows customers to share their lives in a mobile location-based matrix with all of their friends.
The application is all about socializing on the go. If users want to have a cup of coffee with a friend, all they need do is log into The Grid to see which friends are nearby and tag the location of a nearby coffee shop. Then they send a coffee invitation with directions to tempt their mate to pop on over. If the coffee drinking duo wants more friends to join them, they can log in again and type up a blog, message or record a quick video and invite everyone who’s free and happens to be nearby.
Because The Grid displays the user’s approximate position on a street map, everyone can easily see where friends are and what they are doing where. Users from any network can join in because the independent and network-neutral application was developed to showcase innovative new technologies to all South Africans.
“There are several areas where users get significant value when interacting with The Grid,” says Vincent Maher, portfolio manager for social media at Vodacom. “The service enables low-cost and real-time conversations, as well as an opportunity to meet new people and interact with them via mobile phones. Then users can create the mobile equivalent of a blog by combining multimedia elements and maps to show where the content was created. The Grid is a highly social environment, and what we are seeing is that people love to share their experiences and contribute to creating a social map of their experiences across all walks of life in South Africa.”
The Grid is offered as a free or value-added service to users, who only pay for the data usage from their mobile phone to access the service. “Right now people are using The Grid to meet and interact with friends and new people, and to share their experiences through photos and stories about the things they do in their day-to-day lives. The service is busy most of the day, but usage peaks in the evenings when people are home from work and relaxing,” Maher says.
The winner of the New Telecommunications Service at the Comms MEA Awards—held to recognize outstanding performance in the Middle East and African telecommunications sector—The Grid’s branding plays a significant role in promoting the larger Vodacom brand as a technological mover and shaker. Not only does it underscore innovation as a key brand value, but it does so in a way that is completely experiential. What’s more, it is changing the way marketing is delivered by offering a new paradigm for brand messaging.
“The Grid demonstrates how the physical and digital can be meshed to create a more compelling and relevant marketing message,” Maher says. “By tying location to the delivery of messages it means small businesses finally have a viable digital platform to advertise on, and this means that bigger brands can leverage multiple locations simultaneously to interact with their customers in an interesting, innovative way. There are a lot of very interesting ways that brands can leverage The Grid to integrate digital and mobile campaigns with the physical world. The revenue model has been developed in such a way that deeper integration can be done to encourage users to go to specific places as part of a promotion. Another element of the model is the ability to deliver location-targeted advertising, which makes the content of the ads more relevant.
At the heart of The Grid is the digital marketing “holy grail”—the viral effect. “Usage is driven partly by viral growth as users invite their friends to join and partly by innovative media integrations,” Maher says. The more friends users have on The Grid, the more they can get out of the service and the more they can do with it.
“The stickiness is directly connected to how many friends a user has and the quality of conversations. The ability to meet new people without revealing your mobile number is also very appealing and, as users become more advanced, they start to use the features like the street maps and content uploads,” he says.
To launch the new service, Vodacom commissioned the world’s first geo-tagged documentary for mobile phones, which centered on the issue of youth culture in South Africa’s biggest urban township, Soweto. Called Mobikasi (literally translated this meansmobile township), the mobile documentary utilizes The Grid’s location-based service capabilities to tag real-life physical locations and link them to relevant content in the movie.
When users look at the film, they can explore Sowetan youth culture on their mobile phones from anywhere in South Africa through The Grid’s map interface, or by physically touring the famous township and watching documentary clips on their phones at the locations where they were shot.
Mobikasi features people, music, fashion, social issues and places of interest and is unique in that it is not linear in nature. Rather, Mobikasi splits the content up into 25 one-minute inserts, and each is geo-tagged to the location where it was shot. This means that viewers can now explore Soweto’s vibrant youth culture by virtually “traveling” through a mobile street map of the township and stopping off at points of interest to enjoy the short video clips about each destination.
The mobile documentary has proved so successful that a second season of Mobikasi is on its way and will take place in other townships around South Africa.
In short, The Grid is a smart social networking solution with a branding strategy and message that targets a continent where mobile connections are more pervasive than television, the radio or the Internet.
BIC is the number-one ballpoint pen manufacturer in the world, the number-one branded pocket lighter manufacturer in the world and number two in the world in one-piece shavers. As a maker of primarily disposable products, BIC is a French powerhouse worth almost 1.5 billion euros in annual sales—not bad for a company that specializes in throwaways.
BIC clicks with most of the world’s population, though its penetration is largely in Western countries. About 40 percent of BIC’s sales come from North America and 30 percent from Europe. Latin America accounts for over 20 percent, while the Middle East, Africa and Asia contribute about 5 percent. Currently, Latin America is the fastest-growing geographic area for BIC.
Pens and other stationery items make up about 40 percent of the company’s sales, lighters about 30 percent and shavers about 20 percent, with the remainder spread across other products.
The company’s name derives from founder Marcel Bich’s last name—he shortened it to make BIC more memorable when he introduced his ballpoint pen in Europe in 1950. By 1958, Bich had recognized the enormous potential for growth in the US market. He not only brought his pen to the United States, he also bought the renowned Waterman Pen Company and established a BIC headquarters in Connecticut.
The 1970s were years of significant expansion as BIC leveraged the low-price, high-value model from pens to lighters and then one-piece shavers. BIC also continued to make acquisitions that led it into other, mostly related, markets. In 1992, BIC acquired the Wite-Out brand, and in 1997, the company purchased Sheaffer, a brand known for premium writing instruments.
Some of its other business interests may be driven more by serendipity than strategy, however. In 1979, for example, BIC acquired a boat manufacturer, which eventually became BIC Sport. The reason was simple: Marcel Bich loved the sea and was taken with windsurfing. His fancy paid off: Today BIC Sport is the world leader in surfboards and also manufactures wind surfboards and kayaks. The BIC Longboard World Challenge is the first worldwide monotype surf competition, and BIC Sport team members have won two World Champion titles.
One venture that did not succeed was the ill-fated Parfum BIC. In 1988, BIC produced four French perfumes that were intended to combine quality with affordability. After three years of marketing the perfume primarily in Europe and North America, Parfum BIC was disposed of.
An occasional stumble has not prevented BIC from exploring new markets and stretching beyond its roots. In August 2008, BIC, in collaboration with telecommunications firm Orange, introduced the BIC phone. Targeting the youth market, the BIC phone was available in either citrus orange or lime green, came with 60 free minutes, and included a refillable “pay as you go” card. It was sold in supermarkets and convenience stores only in France. The company was careful to point out that the BIC phone was not a “disposable” phone. BIC used 11,000 billboards and posters, along with banner ads on websites, to launch the new product.
In all three of its key markets, BIC faces fierce competition. That’s why BIC is always looking for ways to differentiate its brand. For example, to separate its disposable shavers from those of Gillette and Schick, the company’s two major competitors, BIC introduced “BIC ecolutions” in early 2009. BIC ecolutions features an innovative bioplastic handle, green colorants of vegetable origin, and lightweight packaging with 100 percent recycled cardboard and ink of vegetable origin.
BIC has taken advantage of the online world to promote its brand in novel ways. A viral campaign called “Les perles du Bac” was introduced in 2006 and has been updated each year. This collection of mini-films with clever sayings won numerous awards in France and was adapted for use in Italy.
Despite the global economy, BIC shows no signs of slowing down, whether it’s new product introductions or acquisitions. This year, BIC joined forces with the famous Formula 1 racing team, ING Renault F1, to launch a limited series of BIC lighters. In March 2009, the company announced the acquisition of 40 percent of Cello Pens, India’s leading writing instrument brand.
In May 2009, BIC Consumer Products USA announced that its Comfort 3 Advance brand shavers will hook up with Major League Gaming, the professional video game league, in a deal that will integrate the shaver into MLG’s programming as well as put MLG’s logo on over 250,000 shaver packs distributed in the United States. By redeeming the unique code found inside these specially marked packages, consumers will receive 20 free credits on MLG’s GameBattles site, where they can compete against gamers from around the world in thousands of online tournaments.
Clearly, BIC is aiming to make a mark on both the virtual and the real world.
Twenty years ago, a 17-year-old youngster worked with his family as an apparel sales representative. Inspired by his mother’s sense of entrepreneurship, young Alexandre Tadeu da Costa decided to start working on his own as a sales representative—but one selling chocolate. Full of youthful energy, he took to the streets with his catalogs in hand and sold two thousand units of a 50-gram chocolate egg, motivated by the Brazilian custom of exchanging chocolate at Easter. However—in a tribute to his lack of experience—Alexandre never checked whether the chocolate manufacturer would be able to meet such a large order.
Instead of canceling the orders and disappointing his clients on their very first purchase, Alexandre borrowed US$ 500 from his uncle, bought some chocolate bars, molds and wrapping paper, and, together with a woman who made artisanal chocolate, produced all two thousand chocolate eggs himself. After paying the bills and the loan he was left with US$ 500 of profit and the valuable realization that he did, indeed, have a business in his hands.
From an order that was not met by a third party, a business was born that is expected to close year 2009 with revenues of US$ 121 million. The Cacau Show franchise system already has 680 stores (as of April 2009, with more on the way) and by the end of the year will probably be the largest food chain in the Brazilian market. Cacau Show was born in a desirable demographic. According to the Brazilian Association of Chocolate, Cocoa, Peanut, Candy, and Derivatives Industries (ABICAB), Brazilian production for 2009 is estimated to reach 340,000 tons, which makes Brazil the second largest chocolate producer in the world, second only to England. With an average consumption of 2.5 kg/year per inhabitant, consumption in Brazil ranks second only to the US, Germany and the United Kingdom.
The initial 50-gram egg was his inspiration. Today Cacau Show manufactures 200 different products, with a total of 10,000 tons per year and a 7 percent market share at Easter—the category’s “holiday season.” Despite its broad portfolio and Easter’s relevance for the business, the main stars of Cacau Show’s sales are the 20 types of truffles sold at a mere US$ 0.57.
Long before the advent of Low Cost Society, still in the early years of his business, Alexandre noticed there were no brands offering luxury to the masses. The concept of a large class of people that desires the best but doesn’t have the means to pay for it was introduced by Massimo Gaggi, the New York correspondent of the Italian newspaperCorriere della Serra, and his partner Edoardo Narduzzi, in the book La Fine del Ceto Medio e la Nascita della Società Low Cost (The End of the Middle Classes and the Birth of Low Cost Society). Other companies riding the same wave are H&M, Zara, Wal-Mart and Ryanair, which have succeeded in interpreting people’s appetite to consume more and better while paying less and less.
The economic force of 86 million Class C consumers in Brazil today is easily recognized: 20 million people have joined this segment between 2006 and 2008, driven by the economic growth experienced by the country during this time.
Since its inception, the Cacau Show business had a very lean operation model, with low costs, aggressive pricing, high-quality products and creative marketing. There was nothing similar on the Brazilian market. High-class consumers had several alternatives for artisanal or imported chocolates, while, on the other end, industrialized chocolate brands were sold to all social classes through supermarket chains and food sections at department stores. The middle lane was free. But not any more: Cacau Show has already attracted followers who are now trying to copy its market positioning of providing high-quality chocolate at accessible prices.
Though the product offered superior quality, an important aspect was missing in the brand’s attractiveness: the buying experience. In its early years, Cacau Show distributed its products via door-to-door sales but eventually opted for a sales format that used bakeries and small supermarkets. With the expansion of the factory, Cacau Show began using major supermarket chains and large department stores, but the narrow profit margins of this format, combined with the bankruptcy of some relevant and important players, drove the search for alternative distribution channels elsewhere. Today the distribution format is through franchises, a key part of the equation’s success. The store was the missing link for turning the brand’s magic into a tangible asset.
To remain competitive, Cacau Show has had to be creative in order to maintain growth and appeal. The company keeps up a frantic production schedule to ensure expansion driven by a Brazilian market that still offers significant unrealized potential and an international market with even more promise. The brand now operates from a 36,000-square-meter fantastic chocolate factory on the outskirts of São Paulo.
One of those iconic brands is Polaroid. Inextricably linked with instant photography, “a Polaroid” can be thought of as both instant camera and instant film. The Polaroid brand was born in 1948 and quickly became a symbol of a generation that craved instant gratification. They got it with Polaroid, first through a photo that emerged from a secretive sandwich that needed to be pulled apart and waved (almost like a magic wand) until the photo mysteriously appeared. Later, with product improvements, the photo simply emerged from the camera and began developing right before the consumer’s eyes.
Polaroid was a genuine American technology success story. Physicist-inventor Dr. Edwin Land conceived the one-step process for developing and printing photos that became known as instant photography. Rob Walker of The New York Times calls Land “a Harvard dropout who attained a Steve Jobsian cultural status as an innovator-businessman. By the time his company began selling its first instant-photo camera in 1948, Land had already applied his discoveries in the realm of light polarization to a variety of products, including sunglasses, film and lighting” (“Consumed: Photo Finish,” March 16, 2008).
Polaroid was a strident protector of both its trademark and its patents. The company won a patent suit against Kodak in 1985 and effectively put Kodak out of the instant photography business, virtually guaranteeing a Polaroid monopoly. Polaroid’s instant-photo technology was so good that it went far beyond the consumer market. The film became valuable to artists, graphic designers and in medical imaging applications.
But in February 2008, Polaroid as a film technology succumbed to an inevitable fate. The company shut down its film manufacturing operations and effectively closed the door on Polaroid instant photography. The reason, of course, was the advent of a whole different kind of “instant”—digital photography. Not surprisingly, digital photography has wreaked havoc on other traditional camera and film makers such as Kodak (another iconic brand that has become a shell of its previous self).
Now here’s the interesting part of the Polaroid brand story: The brand simply refuses to die.
Polaroid is attempting to reinvent itself as a digital company. After going bankrupt and being acquired by Petters Group Worldwide, a company that itself is involved in a messy bankruptcy, Polaroid still managed to introduce the Polaroid PoGo in early 2009. The PoGo is the first digital camera with a built-in printer. It allows the user to preview digital photos and then print out selected ones instantly. Ironically, the printer uses another company’s technology (ZINK Imaging) to print the photos on a special paper embedded with color, so no inks are required. The product is scheduled for Spring 2009 availability.
But that’s only part of Polaroid’s reinvention. When Polaroid announced it was discontinuing its instant film, Save Polaroid, a grassroots group, began an effort to keep the film in production. Remarkably, in January 2009, an Austrian businessman, Florian Kaps, started “The Impossible Project” to make a Polaroid-like film available once again to people who still own Polaroid cameras. The name for Kaps’ risky project comes from something Polaroid inventor Edwin Land once said: “Don’t undertake a project unless it is manifestly important and nearly impossible.”
Kaps seems to have the passion to make the impossible possible. He founded Polanoid.net, a web-based gallery of Polaroid photography that is the world’s largest, and he has hired former Polaroid employees to create the magic all over again. Here is how Kaps describes the plan on his website:
Impossible b.v. has been founded with the concrete aim to re-invent and re-start production of analog INTEGRAL FILM for vintage Polaroid cameras…
The Impossible mission is NOT to re-build Polaroid Integral film but (with the help of strategic partners) to develop a new product with new characteristics, consisting of new optimised components, produced with a streamlined modern setup. An innovative and fresh analog material, sold under a new brand name that perfectly will match the global re-positioning of Integral Films.
It’s essentially Polaroid film, without the Polaroid name.
To make matters even more intriguing, in late January 2009, a Luxembourg-based private equity firm bid US$ 42 million for the assets of Polaroid. (Polaroid was acquired by Petters Group Worldwide in 2005 for US$ 426 million.) The connection? The private equity firm also invests in ZINK Imaging, the company that makes the paper used in the Polaroid PoGo referenced earlier.
But in April 2009, the intellectual property and brand name of Polaroid were acquired by a US-Canadian joint venture for US$ 86 million. This is the same group that has acquired other bankrupt brands, including Linens ’N Things and Sharper Image. The group plans to market and license the Polaroid brand name globally.
So now an iconic American brand, or what’s left of it, will be reinvented as…who knows what? It’s anybody’s guess if the new Polaroid brand will be an instant success.
California's fast-food chain In-N-Out Burger is an exception, with a famously devoted customer base that inspires envy throughout the industry—and brand recognition well beyond its geographic reach. But instead of pouring hundreds of millions of dollars into ad campaigns like rivals Burger King (BKC) and McDonald's (MCD), In-N-Out relies mainly on its carefully located stores, billboards, bumper stickers, T-shirts, and its own rabid fans to broadcast its message.
In this excerpt from her new book, In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules BusinessWeek writer Stacy Perman shows how the chain's marketing strategy works.
This excerpt tracks how Rich Snyder, son of founders Esther and Harry Snyder, expanded the chain, focusing closely on the quality of the food—and the staff—before he was killed in a plane crash in 1993.
Rich Snyder was 24 when he became president of In-N-Out Burger after his father, Harry, died in 1976. He shared Harry's belief that running a successful fast-food business wasn't about cutting corners or using the right equipment. What it boiled down to was the people on the front lines.
Where the two differed, however, was that Harry had hoped his "associates," as he and Esther insisted on calling employees, would work hard, save money, and leave. Rich had another idea: "Why let good people move on when you can use them to help your company grow?" Rich also wanted to establish a much bigger footprint for In-N-Out Burger.
There was another difference between father and son: Rich was a born-again Christian. In the 1980s he began printing biblical references on cups and burger wrappers, and then he went further, commissioning a Christmastime radio commercial that asked listeners to let Jesus into their lives, alongside In-N-Out's jingle. Many stations refused to run the ads, and Californians showered the company with complaints. Rich essentially shrugged off the reaction. The Bible chapter-and-verse references remain to this day, and radio ads commingled with evangelism still crop up.
But on issues of quality, Rich remained his father's son. In 1984, in Baldwin Park, Calif., he set up In-N-Out University, a training facility, with the aim of filling the pipeline with qualified managers and reinforcing the company's focus on quality, cleanliness, and service. About 80% of In-N-Out's store managers started at the very bottom, picking up trash before rising through the ranks. Rich realized that if he wanted to expand, he needed to put a system in place that would professionalize management.
To attend In-N-Out University, an associate usually had to have worked full-time at a store for a year. In that time, she had to demonstrate initiative, strong decision-making ability, and impressive people skills. A cornerstone of In-N-Out's limited growth strategy was to expand only as quickly as the management roster would allow. At the university Rich came up with a number of ideas to hone the training process. For instance, a team of field specialists was deployed to motivate and instruct associates. Inspired by pro sports teams, Rich began producing a series of training films and videotaped trainees to critique their performance.
Although the work could be dreary—imagine a four-hour shift spent cleaning up spilled milk shakes—associates were made to feel part of an important enterprise and given opportunities to advance. On-the-job training was wedged in between mealtime rushes, and everyone was given large helpings of feedback. Rich wanted each associate to understand his job and how he could do it better. The result was that many part-timers came for a summer job and stayed for a career.
Despite some flickers of media attention since its founding in 1948, nothing gave press-shy In-N-Out more publicity than its own longtime customers. Staying simple and remaining focused on its core values had allowed In-N-Out to stay true to its loyal fan base. And it was precisely those customers who often did the heavy lifting, frequently boasting about their zealous affection for the chain to everybody else. Regulars engaged in an ongoing contest, trying to outdo each other on how many hamburgers they could eat at any one time. Some regulars also assumed the responsibility of bringing in a constant stream of new devotees, an act generally referred to as "the conversion."
Rich thought of his job as the point at the bottom of an inverted triangle. He was there to support everyone in the company. When talking to store managers, he was always careful to refer to the shops as "your stores," hoping this would help instill a sense of ownership.
At one point when Rich was planning the expansion drive, he sought the advice of a food industry consultant. The expert told Rich that if he slashed salaries, In-N-Out could save a "ton of money." This infuriated Rich. Recounting the story, he said it was exactly the kind of advice one would expect "from a guy who wears a suit and who thinks you don't pay a guy who cooks hamburgers that much money."
From its start, In-N-Out paid employees more than the going rate. (Associates always made at least $2 to $3 above minimum wage.) As of February 2008, In-N-Out was paying new part-time associates $10 an hour—just 51 cents less than full-time workers at Wal-Mart (WMT), whose $375 billion in annual sales is about 1,000 times greater than In-N-Out's. Store managers at In-N-Out make at least $100,000 a year and are eligible for monthly bonuses tied to store sales.
Rich also established an expansive set of benefits, including 401(k) plans, paid vacation for part-timers, and health, dental, and vision plans for full-time workers. Each year, he put on companywide picnics and a gala dinner. Managers who met their goals were sent on trips with their spouses, often to Europe in first-class seats. For a Christmas outing to a performance of The Nutcracker, Rich insisted that his managers wear tuxedos. He thought they stood shoulder to shoulder with any blue-chip manager and wanted them to feel that way, too.
The upshot of treating its employees with special care is that In-N-Out boasts one of the lowest turnover rates in the business. Industrywide, only about half of all fast-food workers stay beyond a year. And the numbers plummet to just 25% at two years and 12% at three. In In-N-Out's case, managers' typical tenure is 14 years, while part-time associates remain, on average, for two.
To this day, the corporate culture inspired by Harry and Esther and carved in stone by Rich stands in stark contrast to rivals' systems of low-paid burger flippers and cashiers who don their disposable hats for what society has deemed McJobs. And it never drove up prices or pushed down quality.
A Double-Double, Twice
At the same time, without corporate solicitation, a roster of celebrity names regularly endorsed the chain. "When I first joined the band, we must have eaten there at least three days a week," recalled rocker Sammy Hagar, who signed up as the front man for Van Halen in 1985. "We were in the studio recording 5150, and we'd send someone to go get food, and we'd talk about sushi or pizza and always end up with In-N-Out." Gordon Ramsay, the British celebrity chef with 12 Michelin stars, global fame, and profanity-laced rants, once admitted to sitting down for a Double-Double and then "minutes later I drove back 'round and got the same thing again to take away." PGA golf champ Phil Mickelson mentioned the chain so often that whenever he fell into a losing streak, sportswriters began suggesting that he cut back on the Double-Doubles.
Before long, tourists got wind of In-N-Out Burger and began making their own pilgrimages to what was considered the quintessential Southern California attraction. Fans passed the "secret menu" on to one another and described the sublime pleasures of tucking into an Animal Style cheeseburger. Vegetarians talked up the chain's off-menu Grilled Cheese. Expatriate Californians pined for their favorite burger, and In-N-Out T-shirts were the epitome of cool. Analysts spoke of In-N-Out's "uncopyable advantage," while everybody else talked about its unparalleled cult following. According to William Martin, who devised the training curriculum for In-N-Out University, the Snyders and the rest of the chain's highest echelon were definitely conscious of the mystique that had developed around In-N-Out. "They were all aware of it, and they loved it," he said. "But they had no explanation for it." That didn't mean, however, that they didn't know how use it.
Website : http://www.in-n-out.com/
The Story of Search: How Google beat Overture and Yahoo by backing the long tail
Gary Flake, Microsoft technical fellow and director of Microsoft Live Labs, first became renowned for failure.
In 2003, he joined Overture as chief science officer. At the time, as he reminded an audience at the 2009 Advertising Research Foundation's 2009 Annual "Re:think" conference, the search-engine business largely was a duopoly. In fact, a year later, Overture had a 55-percent market share, Google 35 percent, and a variety of other providers shared the remaining 10-percent.
"Google's dominance almost didn't happen," Flake told the ARF audience. And, the drivers were as much Overture's failure to understand the market dynamics as they were Google's successful understanding of the search value proposition. From a personal perspective, he added, such a momentous change in just a half-decade led to two questions: " 'WTF?' or 'How did I lose so badly - with greatness in my grasp - and snatch defeat from the jaws of victory?'"
*Customers: "They only want what they want."
In the case of paid search, a customer types in a query; advertisers, in advance, bid on a click because they presume a click translates to interest; and, with each click, publishers presumably make money. "If the interests of all three partiers are aligned, new value is created to all parties. It's something all three want: Something is exchanged at a pricing that's market-determined."
When GoTo.com - the original name of Overture - was founded in 1988, "There were valid questions about the model", Flake said. Would users actually be willing to pay up on a sponsored search result? Up to that point, search had been almost entirely non-commercial. Would destinations show these server-sponsored ads, when so much emphasis had been placed on preserving an editorial voice on search-engine pages? Would advertisers be willing to take the risk of a new medium that was completely new with no demonstrated return on investment?
The hesitation all added up to "a serious cold-start problem." The solution, Flake offered, was to make paid search completely transparent.
Overture tried to engender confidence with three strategic platforms: Exact search meant that users would get exactly what they wanted. Type in "Flowers" and you'd get flowers. Type in "Flowers" and "Mother's Day" and you'd get a list of sites that specifically matched those criteria. "But if you typed in, 'Where can I buy flowers for my beautiful mother in San Jose,' - and, I kid you not, we received long verbose proposals like that - you'd likely not get anything."
The reasoning, Flake explained, was that "we felt that the thoughtful advertiser wanted to know precisely what they were getting." Three other Overture features that reinforced the concept of transparency: A "human" editorial filter that reviewed every ad, "high-touch relationships with advertisers through all parts of the workflow," and partnerships with such premium destinations as MSN, AOL, Yahoo, and Microsoft.
- The Long Tail
- The Innovator's Dilemma
- Network Effects
From day 1, Google defaulted to the approximate match. "'Where can I buy flowers for my beautiful mother in San Jose" generated a bunch of responses - florists in the specific market, 1-800 order-by-phone services, even grocery stores that offered plants as a sideline ordering. There were no specific matches (the head), but scores of approximate matches (the tail) that better served the needs of the consumer.
Similarly, Google used automated click-through rates (CTR) instead of staff people to determine whether a search was relevant to a query. If a search seemed to work, it was kept. If not, it was rejected from the system.
A CTR filter also served as a proxy for the relevancy that the destination partners had provided for Overture.
The pattern was not an isolated one. Flake pointed to other instances of head/tail distinctions that have become more common as the model has become better understood: mainstream media (head) and news aggregators/citizen journalism (tail); network TV (head) and "stupid YouTube videos (tail); radio (head) and podcasts (tail); RIAA (head) and unsigned artists (tail); shrink-wrap software (head) and software mashups (tail).
The Innovator's Dilemma
"The first companies in an industry (the innovators) must be willing to eventually destroy their own business to create something new," Flake told the ARF assembly. "They must destroy their business before someone else does."
Flake's career began in the hardware industry, "where the epitome was to program on a supercomputer." Although "it took decades to unfold," priorities for hardware moved from supercomputers to main frames to scientific workstations to personal computers to laptops to handhelds and to cell phones…. Comsumerization of that market actually drove innovation and drove the bigger things out of business."
"Innovators start off by doing something very natural," Flake said. "They focus on a small number of large, high-margin customers. They want to make money, they want to prove the model works as soon as possible. And they want to maximize their own ROI."
Late arrivals, by contrast, are left to focus on lower-margin customers - again, a common-sense strategy: Why go head-to-head with the market leader when there's a whole pool of customers for whom they don't have to compete?
"Meanwhile, through competition, margins begin to shrink," Flake continued. "Both the original innovator and the newcomer invade each other's space, looking for more business."
The difference in their histories, however, begins to reveal different strengths: The older companies - the original innovators - have not had to learn to grow up looking for more efficient ways to do business. The younger companies have a heritage of going head-to-head with competitors, of scaling up, on learning new ways to operate more efficiently. "And the late arrivals win because they can take the lessons of optimization" they've learned working on the tail and apply them to the head, Flake said.
In the paid-search business, the cycle of evolution took just 18 months to unwind. And, the change happened as - naturally enough - the principal players tried to move from their position of strength to the areas where they still could grow. As paid search matured, he added, the industry survivors naturally try to capture a fuller market share by moving to the opposite end of the long tail. Yahoo, which had purchased Overture in 2002, tried to expand its market from the head to the tail; Google attempted to move from the tail to the head.
But, as Yahoo discovered, it was much easier to move from the tail to the head than from the head to the tail.
"If you're the only person in the world with a telephone, it doesn't have much use to you," Flake told the ARF audience. "If everyone else in the world has a telephone, it has great use to you because potentially you can call anyone."
Any kind of network that has more participants simply provides both greater individual value and greater aggregate value, Flake continued. And, as networks grow, "virtual cycles emerge."
In an eBay network, he explained, the more buyers there are, the more opportunities there are to sell. And the more sellers who participate, the more opportunities there are to buy. It's a model that's replicated in operating systems (developers and users), file formats (writers and readers) and search engines (authors and searchers), marketing (advertisers and consumers), and payments (payers and payees).
"In the virtuous cycle of paid search," the director of Microsoft's Live Labs added, "You need advertisers. The more advertisers you have, the more bids you have. The more bids you have, the more traffic you have. The more traffic you have, the more money you get per search. And, with the more money you get, the more syndication you get. And, as you get more syndication, you get more traffic. And it's traffic inventory that pulls in the advertisers and the process begins to snowball."
Overture - and, in time, Yahoo - operated independently and allowing the cycle to develop "organically," said Flake. Google, by contrast, "primed the pump with a destination site that could effectively make them as powerful as any affiliate on the network. And, in doing so, they were able to bootstrap their own network in a way that was quite stunning."
Overture, he explained, "did not understand that one network could prime another…. We were constrained by our own idea, by our focus on the head [of the long tail]. We didn't understand how it all could play out so rapidly."
The future plays out with "an even longer tail" and as "tools become simpler, more powerful and more prevalent, the pools of creators will increase dramatically." Everyday examples include desktop publishing, digital photography, garage bands, Songsmith, podcasting, and blogging. "What does it take to make an online business?" Flake asked. "Ten years ago, you needed a substantial amount of money. Today, it's $5 or for free…. The barriers to entry are dropping to zero."
And, as the opportunities proliferate, so will the occasions grow that enable additional long-tail partnerships - pools of intelligence that can overlap with (and reinforce) one another.
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