Business Sense

The iPhone Economy

2012-01-22T09:31:00.001-08:00

With High-Tech IDs, Qantas Fliers Get a Fast, Practically Paperless Experience

2012-01-07T18:55:00.000-08:00

The Qantas system in domestic terminals is largely self service, so ground workers now roam the lobby to assist customers.

Sydney
Platinum-level business traveler Jake Coverdale breezed through the airport lobby, stopping momentarily at a Qantas Airways kiosk. In five seconds, he was checked in and on his way to the gate. When he has a bag to check, he just drops it on a belt. When it's time to board, he just walks on the plane.
Qantas has created practically paperless airports, rolling out new technology in 2010 at all of its domestic stations that eliminates many long lines and speeds passengers all the way to their seat. No paper itinerary. No sticky luggage tag. No boarding pass.
"It's bloody good, actually," Mr. Coverdale said of the Qantas system. "I go to America and Europe a lot and I think this is the best check-in in the world. It's incredibly efficient."

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Qantas

The system, built around radio-frequency ID cards (RFID), is similar to toll tags used on highways and bridges. Top-level frequent fliers get an ID card that is flashed at a kiosk in the ticketing area. In seconds, the system finds the reservation for that day, assigns a seat based on personal preferences if one wasn't pre-selected and checks the passenger in. When everything is good to go, a beacon illuminates.
To check luggage, the passenger goes to a baggage drop point, flashes the frequent-flier card in front of a reader and drops luggage on a baggage belt. The bag is weighed, and lasers measure its dimensions to make sure it complies with limits.
Top-level frequent fliers have heavy-duty RFID tags called "Q Bag Tags" for their bags that replace paper luggage tags. The technology reads the bag's "identity" as it moves from luggage belts to carts to airport tarmacs. This ensures luggage gets loaded on the same flight as its owner. Other travelers get a paper tag for their bag with an imbedded RFID chip.

Passengers without a Qantas ID card can get a printed boarding pass or scan their mobile phones.

Finally, the ID card is flashed at the gate—no boarding pass needed—and agents there hand the traveler a receipt with the seat number printed on it.
"It's reduced congestion and queuing. Check-in can be quite stressful for customers. They want to feel like they are in control and not stuck in line," said Tanya Bulkin, head of customer experience at Qantas.
RFID technology has been around for many years, and while it has revolutionized some forms of transportation and many areas of inventory-control for businesses, it has been slow to catch on with airlines. Carriers have sent representatives to Sydney to check out the futuristic setup, but none have announced plans to implement a similar system. One reason may be cost. For example, the cost of baggage tags has come down sharply from more than $1 apiece to less than 20 cents, but they're still more expensive than paper tags currently used by airlines.
Qantas won't disclose data on performance of the new technology, such as baggage-handling numbers or changes in average wait in airport check-in lines. The company said in a statement simply that customer feedback has been "overwhelmingly positive."
Development of the system began several years ago. Qantas was running out of room at its large domestic terminal in Sydney and needed to come up with something new to reduce frequent backups at counters. The airline studied customer habits and worked on finding ways to eliminate lines. The conclusion: eliminate the "pain points" in the airport, such as checking in, checking bags and lining up to board, Ms. Bulkin said.
The carrier decided to invest in technology rather than adding floor space. With kiosks positioned in four V-shaped patterns, it's almost impossible for travelers to bunch up in a long line. There's still an old-fashioned check-in counter, but most of the baggage drop points are self service.
The technology could reduce an airline's cost to reimburse passengers for lost and delayed luggage. Through October, U.S. airlines mishandled the bags of about 1.6 million passengers on domestic flights. That translates into one passenger out of every 287 on domestic flights who arrive without the luggage they checked.
The worst airline for baggage handling in the U.S. this year: American Eagle, the regional affiliate of AMR Corp.'s American Airlines. Both carriers are currently in bankruptcy reorganization.
A few other airports have limited RFID systems, absorbing the cost to improve service. Las Vegas and Hong Kong both have baggage systems in which paper bag tags have RFID chips imbedded in them, but the technology hasn't spread.
Now Qantas hopes to help drive change internationally. The airline is expanding its new system to its stations in New Zealand, which will be the first to incorporate passport information.
"International is much more complex. I think that's one reason why it hasn't caught on," said Ms. Bulkin.
Frequent fliers get free ID cards and Q Bag Tags, with bag tag colors denoting status level at the airline (black for platinum, gold, silver and bronze). The tags have become something of a status symbol among frequent fliers. Customers who don't have top-level status with the airline's frequent-flier program can buy a Q Bag Tag for about $51 at Qantas.com or from special vending machines in airports.
If they don't have a frequent-flier ID card, travelers check in online or at kiosks and get a bar code on a printed boarding pass or on a mobile phone, just like at other airlines. They also print their own baggage tags at the kiosks, speeding up the process at baggage drop points. When they get to the drop point, they just scan their bar code and place the already-tagged bag on the belt.
Qantas has been embroiled in a bitter labor dispute over pay cuts and job protections that resulted in the airline shutting down earlier this year. (Government officials ordered it back into service.) The year-old airport system required extensive retraining of staff, but didn't result in layoffs, which the union confirms. The system is largely self service for customers, so ground workers now roam the lobby to assist with things like directions and kiosk help.
"This wasn't about self-service at the expense of staff," said Gabriella D'Alessandro, Qantas's head of technology operations. "We wanted to improve the customer experience."
Sydney asset manager Kingsley Barker, who has gold Q Bag Tags on his luggage, said the new system hasn't failed him yet. "I think it's brilliant. There are no queues," he said.
While his wife, traveling with him on a recent flight to Dallas, thought the airline should have been using better technology long ago, Mr. Barker was just happy to have something better now.
"Qantas has so many other problems," he said. "Anything like this that improves service to customers is good."

Niche: Suits For Short Men

2011-11-11T20:55:00.001-08:00

First there was the big and tall, now there are options for the height challenged. Jimmy Au may have started out as an accidental entrepreneur, but now he provides suits to some of the biggest names in Hollywood.

“My professor was my first customer, and I made $400 with 40 orders, so I told myself I wasn’t going to go back and work at Dole pineapple cannery anymore,” he said of his job stacking cans. “I was working my way through college full time and studying full time, and after a year and a half, felt like I had to work so hard for $1 an hour.”
By the time he graduated, Au was making more money selling suits than his fellow graduates could expect to make at their first jobs, so the 5-foot-2 entrepreneur kept going, specializing in suits for short men like himself who had trouble finding clothes that fit. Most mainstream designers work with 5-foot-10 to 6-foot-tall models, shortening sleeves and pant legs for smaller sizes without adjusting for fit, meaning knees and elbows fall in the wrong place.
Today, Jimmy Au’s for Men 5’8 and Under is a well-known fixture in Hollywood, where the company’s clientele includes a lengthy roster of diminutive actors, including Martin Sheen, Al Pacino, Mark Wahlberg, Danny DeVito, Joe Pesci, Seth Green, Jason Alexander and David Spade. His suits are also worn by cast members in more than 30 television shows this season, from “True Blood” to “The Office,” “30 Rock” and “The Mentalist.”

Selling Designer Jeans Through Home Parties

2011-11-11T20:00:00.000-08:00

Companies find many different ways to market their product to consumers. A popular and effective way is through direct sales. That is the approach taken by Vault Jeans. Their passionate Fashion Consultants sell their product and have the opportunity to earn a little money, too.
I recently spoke with Shannon Misener one of their consultants about the company, and what inspired her to join.
Tell us a little about Vault Denim.

Vault Denim is set up like a party business but it’s a little different! We offer Brand name, top of the line, no knock offs, never been worn, ladies designer jeans at up to 50% off retail prices! It’s set up like a purse party where consultants bring about 130 pairs of jeans to the hostesses home. Jeans are laid out for her guests to try on, buy, and take home that night! It allows women to experience shopping with family/friends and receive honest feedback without a pushy sales clerk!! It’s a time for ladies to listen to music, catch up on the “who, what, where, and when”, drink some wine, and laugh!!
Our CEO, Douglas Brady, started this company with his sister in mind. She was in jeopardy of losing her home and needed a job that would allow her to keep her house and also take care of her autistic son. Unfortunately, when she went looking for work she was told she was too old/big to do anything but retail which doesn’t offer a whole lot in wages. So Doug and two of his friends founded Vault Denim in the hopes of providing women an opportunity to grow personally, professionally, and empower them financially!
This started as a family run business and after experiencing 5200% growth in its first year, it still operates like family and consultants are treated like family. It’s a company like no other!

What inspired you to join the company?

This question made me chuckle out loud a little bit! The truth is I wasn’t to gung ho to start right off the bat. My husband and I both were unhappy with our jobs at the time, Jason working night shifts, and myself working in a place with an uncertain future. After much discussion we decided that I would publish my resume out on the web and we’d also begin asking around about non-traditional ways to earn an income. My husband’s co-worker introduced us to a popular direct sales company that she was having a lot of success with so we decided to give it a go.
I would be the primary and my husband would sign up under me, however, we learned that only one person may sign up per address. We were extremely disappointed because we work as a team in just about everything we do, but we always put in 110% so I joined and we were moving forward anyway.
In the meantime I was offered a job I couldn’t refuse which allowed Jason an opportunity to really look at how his night job was impacting his health. He would wake up with bloody eyes, migraine headaches, and tendon cysts on the balls of his feet from working in the factory. Something had to give! As it happens another co-worker’s fiancé just signed up with Vault Denim and was having fun with it. She invited Jason to come to her launch party just to check it out. Now my new job is based out of Minneapolis, MN which is 1.5 hours away from us, thank goodness for telecommuting!! Her launch party was the same night I started my new job and I was scheduled to be In-the-office for several days. Jason was able to attend and he loved the concept!! He also made a risky decision to buy me a new pair of designer jeans….without me there….lucky for him they fit! We talked about the concept and to be honest I just didn’t want to take on anything more that was new, but I support him and we signed up with me as the primary and he under me.
At the end of May we did our own Vault Denim launch party and it was ok. I was there to help out but it wasn’t my primary focus, yet. In June we scored our first home party and I have to admit to be nervous but I’m so glad we went!!
We found the place easy enough and set out over 120 pair of jeans. The first thing I noticed was our hostess was very down on herself and I mean every five minutes we heard “do you have anything made by Awning the tent maker?”, or “do you carry size 56?” It really pulled at my heart strings so I think I looked at my husband and told him that I’d be getting her into a pair of jeans tonight!! I didn’t care how many we had to go through or how many didn’t work, but I was finding something that made her feel beautiful….period!!
I noticed that she would take a few upstairs, try them on, and come down saying they didn’t work because she was too big so I asked if she’d be willing to try on a pair so I could see what wasn’t working for her. She was agreeable and we took a pair upstairs and she put them on. I have to say I saw NOTHING wrong with these jeans, rather the issue was with how she saw herself in them. It took me about ten minutes to reassure her that the family and friends she had downstairs loved her and would never say anything hurtful. In fact, they would provide honest and caring advice regarding how she looked in these jeans. When she got to the bottom of the stairs I could hear the response – all positive! She looked great and I could physically see the transformation in her step, her face, and her body language. That was the defining moment for me!! I knew I had found something that allowed me to change how a women felt about herself if even for a moment in time. It was amazing!!

What are some of the products you offer?

We currently offer a wide selection of ladies designer jeans! Skinny, boot cut, flare, bell bottoms, capris, shorts, skirts etc. Our standard sizes range between 0 and 13 and our extended sizes range between 15 and 24. Whether ladies are looking for simple and classic designer jeans or boutique jeans with as much embellishment as any booty can handle, we have something for everyone!!
In addition to the designer jeans we also carry four exclusive lines only found with Vault Denim: Ten Denim, Project Denim, Rock Paper Sexy (RPS) and Emerson Edwards (premium). We cannot keep these jeans in our inventories because they sell as soon as we get them in! The fit, comfort, style and price of the jeans is amazing!!
Vault denim is brining on board mens, maternity, and tween jeans this fall!

Tell us a little about your opportunity.

Consultants offer men/women three opportunities:
Save money by purchasing designer denim at up to 50% retail prices;
Earn denim credit off a favorite pair of jeans by hosting a party; or
Join a team and start building a business.

What are the requirements?

Vault Denim offers FREE inventory, FREE personalized website, NO deliveries, NO monthly quota and a LOW start-up cost of $159.00!
Each new consultant receives a welcome kit with training materials, customer order forms, 100 personalized business cards, one 50% off coupon to get his/her first pair of jeans – after all our butt is our billboard, etc. Each kit will provide everything necessary to start a personal Vault Denim business that day!

What separates Vault Denim from the competition?

As far as product goes we have very little in the way of competition! Right now Vault Denim prices will undercut anything and everything sold in high-end retail outlets, specialized boutiques, and local malls!
From the business structure stand point we are highly competitive! We don’t require consultants to purchase his/her own inventory, we have a sound compensation structure, an investment team that believes money should be saved before it can be spent, and this is the only direct sales business where our product is sold for less than what you find it for out on the street!

What are some goals you’d like to accomplish over the next year or so?

Success doesn’t come with being selfish, therefore, my goals are simple: to share Vault Denim with as many people as possible! Whether they’re looking to save money by purchasing deeply discounted jeans, earning free denim credit by hosting a party, or to find financial security by building a business, whatever that goal might be, I’d like to help accomplish that.
In the past four months we‘ve built a team of over 30 consultants in 8 different states and I can’t think of anything more rewarding than to see and hear their success stories! Every one of them has something they are seeking to overcome, to build up, to push through, and not one of them has failed! We are dialed into a great network of corporate and local leaders – no one is left behind!
When everything is said and done I want to look back and smile! I want to know that I made a difference in someone’s life one pair of jeans at a time!

What are some lessons your business has taught you?

What most do not know about me is I’m exceedingly shy and the thought of intermingling with people that I don’t know is uncomfortable for me! However, with Vault Denim I’ve found that in the last four months I’ve learned to navigate through social situations and ‘appear’ confident, comfortable, and knowledgeable. Vault Denim has allowed me to approach men/women with an opportunity. It’s given me an automatic in because we already have something in common, jeans!

Do you have any advice you’d like to offer anyone considering an opportunity like this one?

I would encourage anyone who is interested in Vault Denim as a business opportunity to do their homework! Look at the designer jeans found in high-end stores and specialized boutiques and check with the Better Business Bureau and/or Google. We do not offer hype or promise rewards that are impossible to achieve. What we do offer is an opportunity to make a positive impact on someone’s life. Even if it’s just one night during a pants party.

How to Think Creatively

2011-11-10T21:17:00.000-08:00

People often associate innovation with a light bulb. Forget that. Creativity isn't an on/off switch or a sudden burst of light. It's a process, and you can learn to control it and master it.

Tom&Kwikki /Shutterstock
I grew up hungry to do something creative, to set myself apart. I also believed creativity was magical and genetically encoded. As early as the age of 8, I began sampling the arts, one after another, to see if I'd inherited some gift.
Eventually, I became a journalist. For many years, I told other people's stories. I was successful, but I rarely felt truly creative.
The first hint I might have sold myself short came in the mid-1990s. In the course of writing a book called What Really Matters, Searching for Wisdom in America, I took a five-day seminar on how to draw, led by Betty Edwards, author of Drawing on the Right Side of the Brain.
When Edwards peered down at the self-portrait I had drawn on the first day, she smiled. My artistic development, she told me gently, seemed to have been arrested somewhere around the age of six. This was, she hastened to add, no evidence of lack of ability, but rather of training.
From an early age, we're taught in school to develop the logical, language-based, rational capacities of the left hemisphere of our brain, which is goal oriented and impatient to reach conclusions.
The left hemisphere gives names to objects in order to reduce and simplify them. One nose is like another, for example, so when we're asked to draw one, we retrieve the symbol we have for "nose" from our memory, reproduce it and move on.
The right hemisphere, by contrast, is visual rather than verbal. It's capable of seeing more deeply and subtly than the left, immersing itself in what's actually there, in all its richness. Once you learn to do that, Edwards told us, drawing what you see is -- relatively speaking -- a breeze.
Sure enough, by the fifth and final day of the workshop, I was able to produce a self-portrait that was undeniably me, and surprisingly realistic. After several months of practice, I was able to draw myself with a significant degree of skill, and even expressiveness. I had effectively begun to learn a wholly new and non-verbal language.
But what did that have to do with creativity?
A little more than a decade ago, I switched careers, and began collaborating with a sports psychologist, to define what makes it possible for people to perform sustainably at their best. Over the years, working with other colleagues, I've turned these ideas and strategies into a curriculum that my company, The Energy Project, delivers today in corporations, government agencies, schools, hospitals and public workshops.
Our curriculum is grounded in a series of ancient and enduring universal principles and it's buttressed by the findings of modern science. But it's also been profoundly shaped by a series of insights and intuitive leaps I've had about how to work in ways that are more productive, sustainable and satisfying.
To nurture and sustain my own creativity, I've followed a systematic process and it's one I believe anyone can learn.
Over the past hundred years, researchers have reached a surprising degree of consensus about the predictable stages of creative thinking. It was Betty Edwards who first pointed out to me that the stages move back and forth between right and left hemisphere dominance:
1. Saturation: Once the problem or creative challenge has been defined, the next stage of creativity is a left hemisphere activity that paradoxically requires absorbing one's self in what's already known. Any creative breakthrough inevitably rests on the shoulders of all that came before it. For a painter, that might mean studying the masters. For me, it involves reading widely and deeply, and then sorting, evaluating, organizing, outlining, and prioritizing.
2. Incubation: The second stage of creativity begins when we walk away from a problem, typically because our left hemisphere can't seem to solve it. Incubation involves mulling over information, often unconsciously. Intense exercise can be a great way to shift into right hemisphere in order to access new ideas and solutions. After writing for 90 minutes, for example, the best thing I can do to jog my brain, is take a run.
3. Illumination: Ah-ha moments - spontaneous, intuitive, unbidden - characterize the third stage of creativity. Where are you when you get your best ideas? I'm guessing it's not when you're sitting at your desk, or consciously trying to think creatively. Rather it's when you've given your left hemisphere a rest, and you're doing something else, whether it's exercising, taking a shower, driving or even sleeping.
4. Verification: In the final stage of creativity, the left hemisphere reasserts its dominance. This stage is about challenging and testing the creative breakthrough you've had. Scientists do this in a laboratory. Painters do it on a canvas. Writers do it by translating a vision into words.
The first key to intentionally nurturing our creativity is to understand how it works. I've found the stages often unfold in unpredictable sequence, and wrap back on one another. Still, keeping them in mind lets me know where I am in the creative process, and how to get to where I need to go.
Ultimately, the highest creativity depends on making frequent waves - learning to engage the whole brain by moving flexibly and intentionally between the right and left hemisphere, activity and rest, effort and letting go. That's also a pretty good prescription for how to live.

Tony Schwartz - Tony Schwartz is the president and CEO of The Energy Project and the author of Be Excellent at Anything. Become a fan of The Energy Project on Facebook and connect with Tony at Twitter.com/TonySchwartz and Twitter.com/Energy_Project.

Men’s Clothing Firm Wants to Expand Into Online Sales

2011-11-10T14:58:00.000-08:00

J. Hilburn is a 50-employee luxury men’s clothing brand based in Dallas. Using a direct-sales and multilevel marketing model similar to that of Avon, J. Hilburn sells clothing that is custom fit using measurements taken by company sales representatives, known as style advisers, who make house calls and who share in the profits of other sales advisers that they recruit.
THE CHALLENGE To expand its business beyond direct sales without alienating the direct-sales representatives who helped build the company.
THE BACKGROUND Hil Davis and Veeral Rathod started J. Hilburn in 2007 after Mr. Davis had a midair epiphany. While flying to Los Angeles from Chicago, where he worked for a hedge fund, he was shocked to read in Robert G. Hagstrom’s “The Warren Buffett Way” that Mr. Buffett considered his investment in the direct-sales cooking products company Pampered Chef one of his best — despite the dodgy reputation of direct sales and multilevel marketing.
“Here’s one of the smartest investors of all time and he’s long direct sales while other investors are like, ‘Why would you touch that?’ ” Mr. Davis said.
Mr. Davis, 39, who lived in Dallas, joined Mr. Rathod, 32, a fellow banker based in Dallas who had been looking for a change, and the two settled on men’s custom clothing.
Men do not like to shop for clothes in stores, they reasoned. A network of representatives who make house calls would solve that problem and also allow the pair to cut costs: without brick-and-mortar stores or tailor shops, they could offer custom-fit clothing for something like rack prices.
“We sell a value proposition, personalized fit and luxury products,” Mr. Davis said. “We can sell everything for half the price of Nordstrom and Neiman Marcus or for 85 percent of the price at Brooks Brothers.”
Still, Mr. Davis and Mr. Rathod knew nothing about the clothing industry. Armed with $650,000 from friends and family, the two opened with the help of four direct-sales representatives whom Mr. Davis’s wife had known. While the first representatives found customers, the inexperience of the founders showed.
They chose their first factory, in China, because it had produced two high-quality samples and assured them it could produce more. But after J. Hilburn started ordering in quantity, things did not go so well, a problem worsened by time and language differences.
“We let two shirts be the proof of concept when one of us should have been over there,” Mr. Davis said. “Our first 400 shirts came back wrong because we were the idiots who didn’t get on a plane to watch over the factory.”
They did visit their second factory before selecting it, only to have it fall behind on complicated orders. Each day, they later learned, the needle workers put the most difficult shirts back on the bottom of their pile, delaying delivery. After the partners announced that customers would get a free shirt for every four days an order was late, they received a standing ovation one day in a Dallas restaurant from customers who called them the “free-shirt guys.”
They had fabric-buying problems as well; Italian mills were not accustomed to selling quantities as small as of 100 meters.
Mr. Rathod and Mr. Davis had to retrain their entire supply chain in an industry they did not know. Had they known then what they know now, Mr. Davis said, “we could have started this business for 40 cents on the dollar.”
But they learned. Sales rose from $1 million in 2008 to $3.25 million in 2009 and $8 million in 2010, a year in which they sold 60,000 shirts (which start at $89). And they built their squad of style advisers to about 1,000 today from the original four.
J. Hilburn representatives make a 15 to 30 percent commission on sales, plus 2 to 4 percent on what is sold by the style advisers they have recruited (and those recruited by their recruits). J. Hilburn limits each rep to five recruits, something that, according to Mr. Davis, has kept annual turnover around 14 percent, compared with the industry norm of 56 percent.
“Most direct-sales companies fail their reps by telling them to ask everyone they can to join teams and we’ll see what sticks,” Mr. Davis said. “But most people are not prepared to be business owners. That’s why direct sales has such a bad reputation.”
Most of J. Hilburn’s representatives are college-educated, stay-at-home mothers, from their mid-30s to mid-50s, Mr. Rathod said. While the top three earn more than $200,000 a year, the average style adviser works three or four hours a week and makes $7,500 a year.
As they built J. Hilburn, Mr. Rathod and Mr. Davis started considering how to expand the business online.
“Retail is about customer transactions,” Mr. Davis said. “It should be platform agnostic.” But there was a problem: They did not want to alienate their representatives, some of whom worried that the company was trying to use the Internet to do an end-run around them.
THE OPTIONS When Mr. Davis and Mr. Rathod went looking for venture capital, they realized how hard it would be to find investors who agreed with their vision for a company that would blend direct and online sales. For one thing, that blend did not have the sizzle of a pure Internet strategy.
“One of the challenges is that VCs have specific likes and specialties,” Mr. Rathod said. “And we didn’t fit into anyone’s box. We weren’t technology. We weren’t e-commerce.”
As they built their business in the middle of what Mr. Rathod calls “one of the worst consumer environments we’ve had,” the two founders had a choice to make: Would they position their company more as an Internet play to attract investors? Or would they stick to their direct-sales plan?
WHAT OTHERS SAY Paul Hurley, founder and chief executive of Ideeli, a New York company that offers flash sales of designer clothing: “Never position the company to get investors; only focus on what customers want, and investors will come. Map the value created by the advisers — customer benefits, new leads, market intelligence — and determine whether it’s really worth the margin dollars. This is critical. If they aren’t generating significant value over a Web alternative, competitors will eat your lunch.”
Marla Gottschalk, chief executive of The Pampered Chef, which is based in Addison, Ill.: “J. Hilburn should provide style advisers with the opportunity to sell online and empower them with the e-tools needed to market their businesses and maintain relationships with their customers. Sales representatives will likely support the company’s plan to incorporate online sales if they see that their personal businesses will continue to grow along with the company.”
Doug Fleener, president and managing partner of the Dynamic Experiences Group, a retail consulting firm based in Lexington, Mass.: “What differentiates J. Hilburn from the competition is the value the style advisers add to the customer’s purchase. At the same time, J. Hilburn is missing the customer that wants to buy online without scheduling a fitting. The new sales site should highly recommend the customer see a local style adviser since that ensures the best possible experience, but the customer can still choose to buy online from J. Hilburn. The key is to compensate the style advisers who are in that particular customer’s market for the sale.”
THE RESULTS Offer your thoughts on J. Hilburn’s decision on the You’re the Boss blog at nytimes.com/boss. Next week, on the blog and in this space, we will give an update on what the company is doing.

Mr. Davis and Mr. Rathod solved part of their problem when they met Battery Ventures, a venture capital firm that seemed to understand their vision. Battery sent representatives to Dallas to spend time with J. Hilburn’s sales force — known internally as style advisers — and in August 2008, Mr. Davis and Mr. Rathod raised a $1 million round of funding with money from Battery. They subsequently raised three more rounds, largely from Battery, for a grand total of almost $13 million in financing.
These investments gave them enough money to build inventory and pay for an Internet channel to handle re-orders from existing customers. But having the money to build a Web channel and doing it right proved to be two different things. The first Web roll-out in 2009 — an attempt to adapt an existing e-commerce platform to J. Hilburn’s unusual needs — flopped. A customer-to-customer Internet referral ended up sending out gibberish e-mails. The decision to include all 200 fabrics online, instead of putting up a limited set and allowing the style advisers to explain the full set, baffled customers. And, worse, the process hurt morale by raising and then dashing the hopes of the sales representatives.
So the company went back to the drawing board and custom-developed a new site, a process that took almost two years. Introduced in June, this new site improved the referral program, and it gave sales reps access to more online options than the customers, which meant they could walk their clients through the online shopping process. The sales reps are paid full commission on Web sales, even ones in which they do not participate directly.
So far, the strategy seems to be working. A September online referral promotion — in which the referring customer and the new customer both get a $50 coupon — resulted in about 8,000 e-mails being sent in a month, of which 30 percent were clicked through. Some 63 percent of those click-throughs turned into sales. With an average sale of more than $300, the program is expected to bring in some $500,000 in new sales. Aided by its 1,100 style advisers, J. Hilburn expects its revenue to hit $20 million in 2011 and between $50 million and $80 million next year. Per-customer annual sales have risen from $212 in 2008 to more than $600 today, and average style adviser sales have grown from $7,500 in 2008 to $20,000 over the same period.
Mr. Davis and Mr. Rathod discussed their recent results in a brief interview.
Q: Why were you so adamant about paying your sales representatives full commission on Web sales?
Hil Davis: We felt that they do a lot of upfront work acquiring the customer, and we also want them to be compassionate and caring about customer service, so we decided to keep the full rate commissions where they are and pay them outright.
Veeral Rathod: The style adviser does the brand introduction and can make it more of a tactile experience with fabric swatches, measuring and fitting. And then, the Web site gives them an easy channel to reorder.
Q. Will the style advisers always get full commissions on online sales?
Mr. Davis: I think over time there will be a customer service score associated with online commissions. So if a partner has a high or low customer service score, the commission will reflect that. If they have high customer service scores we’ll pay full boat. And if they don’t, it will give them the incentive to raise their customer service levels. That’s the next evolution — that’s probably 12 months away.
Q: How will you measure that? How do you know how often style advisers should be interacting with customers?
Mr. Rathod: We ran a customer survey in May and June and a partner survey in August, and the customers said they wanted to know and hear about what was new once a month. They may shop once a quarter, but they want to hear more often. When we talked to the partners about how often they felt they should contact the customer that frequency was a lot less, maybe once or twice a year. They didn’t want the customer to feel that they were nagging him.
Q: One reader commented that it might be interesting for you to try charging more for style adviser visits. Perhaps that would move more orders online, thus making sales more efficient.
Mr. Rathod: That’s not in the plans. Because to get the fitting correct, as well as to set the tone, you have to have a person-to-person meeting. The last thing we want to do is to encourage a customer to save money by entering measurements online or shopping online only. If they enter online, they’re going to get a shirt whose fit they’re not happy about. Plus all of our order size metrics go up when we get a style adviser in front of a customer.
Q: Another reader suggested you should try to make all your clothing in the United States, which would be a marketing coup and might get you some tax or investment savings from communities eager to rebuild their manufacturing base.
Mr. Davis: We did try to do as much as we could in the U.S. Ultimately, we found there wasn’t enough skilled labor available to do it. The biggest custom shirt manufacturer in the U.S. can do 5,000 shirts per month. Next year we’ll be doing 20,000 shirts per month. Where we can, we do. Our ties and cufflinks and belts are made in the U.S. We’re working with a U.S. company to resell their shoes. And we do jeans that are made in the U.S. It’s just a lost trade in the U.S.

Selling on Value Rather Than Price- 5 Ways to Be Known as a Groundbreaking Thinker

2011-11-10T14:45:00.000-08:00

Everyone has ideas; it's how you execute them that will get you noticed. Adopting these five principles will help.

Would you like to be seen as a groundbreaker and a visionary? Want to be the Seth Godin of your field or the Malcolm Gladwell (possibly with a different hairstyle) of your industry?
You can—but it’s not easy. And it takes a lot more than sitting at a computer while the children are nestled all snug in their beds and visions of thought leadership dance in your head.
How do I know? Some of my clients are truly visionaries and leaders in their fields. I know what they’ve done to set themselves apart. In a few cases I’ve helped, but mostly I’ve marveled at their approach, energy, and most importantly persistence.
To be seen as a groundbreaking thinker, here are a few principles you must embrace:
You must start with show, not tell. Everyone has ideas. Ideas are cheap. Talk is even cheaper. We listen to leading thinkers because their ideas have been validated by success. Think about it: Would anyone consider Tony Hsieh to be a leading thinker in customer service and employee engagement if Zappos hadn’t experienced tremendous growth? Sure, occasionally a Chris Anderson will popularize a concept like the Long Tail, but he had already built a platform at Wired where he could share his ideas. (A visionary without a platform is a tree that falls in the forest and makes no sound.) When you prove your vision is valid, gaining recognition for visionary thinking is much easier.
If everyone agrees, you’re preaching to the choir. Most of us follow basic business principles. How we apply those principles may be (slightly) different because each of us is unique… but not really. To be a groundbreaker you must take a very different approach, and that means many people will disagree with your thinking even after you’ve proven you’re right. See push back as a sign you may really be on to something. But also make sure you’re prepared to take the heat when others attack—because they will.
You have to start small. Cobbling together a platform and building a following is incredibly hard. The Wall Street Journal won’t take your calls, but trade publications, local papers, radio stations, and moderately influential bloggers may, especially when you have something different to say and a story that proves your point. In some cases smaller mainstream media outlets not only don’t mind when you reach out, they want you to reach out, because many are starved for content. Be humble and speak and write for just about anyone who will have you. If you’re only willing to start at the top, you’ll never get started.
For a while no one will listen. And that’s okay. Groundbreakers not only have great ideas, they effectively communicate those ideas. You must be able to write and speak extremely well. Unless you have the resources to hire a ghostwriter to write articles, books, speeches, etc., it’s all on you. That’s another reason starting small is important; not only do you get to refine your message but you also get lots of practice writing and speaking.
And most importantly…
You must be sure the effort is worth it. If you’re a consultant or an author, being seen as a groundbreaking thinker can have a direct payoff. Heightened credibility and increased visibility can create broader opportunities, drive higher fees, and boost revenues. But in many cases the only boost you can receive is to your ego. Building a platform and an audience for your ideas is really, really hard. You’ll invest countless hours writing, speaking, promoting, and networking, possibly for very little return. Take a hard look at the tangible benefits you expect to receive. If you can’t quantify the return, put your time into other activities that will produce a real return.
If it’s just about your ego, you’ll never succeed, and in fact probably shouldn’t—because groundbreaking thinkers place all the emphasis on their ideas, not on themselves.

Apple's Supply-Chain Secret? Hoard Lasers

2011-11-08T20:34:00.001-08:00

The iPhone maker spends lavishly on all stages of the manufacturing process, giving it a huge operations advantage

By Adam Satariano and Peter Burrows

About five years ago, Apple (AAPL) design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be nearly invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter. Apple needed lasers, and lots of them. The team of experts found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads, and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. “Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, the former supply-chain chief at Hewlett-Packard (HPQ) and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Piper Jaffray analyst Gene Munster. And if the latest rumors are to be believed, Apple’s operational expertise is likely part of what gives the company enough confidence to enter the notoriously cutthroat television market by 2013 with a TV set that would tightly integrate with existing Apple software like iTunes. The widespread skepticism over Apple’s ability to compete in such a price-sensitive market, where margins are often in the single digits, is “exactly what people said when Apple got into cell phones,” says Munster.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Steve Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights. The move handicapped rivals such as Compaq that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When an HP staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh s—’ moment,” recalls Fawkes.
That mentality—spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run—is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For new designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment. The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage. “They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner (IT) who has ranked Apple as the world’s best supply chain for the last four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to nearly double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple—and sometimes limits the options for everyone else. Before the release of the iPhone 4 in June 2010, rivals such as HTC couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes but painful because of the strings attached. When Apple asks for a price quote for parts such as touchscreens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit. Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and would not speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Cupertino’s products. The executive familiar with these talks, who asked not to be named because the discussions were not public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple—and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone, and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices. To track efficiency and ensure pre-launch secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point—loading dock, airport, truck depot, and distribution center—to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits—its gross margins were 40 percent last quarter, compared with 10 to 20 percent for most other hardware companies—are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business. According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
The bottom line: Apple plans to double spending on its supply chain, to $7.1 billion, continuing its focus on streamlining and controlling manufacturing.

What's behind the bargains at T.J. Maxx?

2011-10-30T14:57:00.000-07:00

Shelly Levy could be T.J. Maxx and Marshalls' dream customer.
The Houston legal assistant shops at the stores once or twice a week, lured by the chance of getting buys like the Nanette Lepore dress she had seen a year earlier at Neiman Marcus, designer jeans by Seven and Joe's and an Isabella Fiore handbag at Marshalls that all her friends were envious of.
"Treasure hunting" attracts many to the off-price retailers, according to TJX, which owns both stores, along with the home furnishings chain HomeGoods. Off-price stores sell name-brand clothing, jewelry, luggage and other items found in other stores, but at prices that are often far lower. They can do this, in part, because they sell merchandise from a previous year or season that a store or brand couldn't sell and unloaded for pennies on the dollar to a liquidator. Or so the thinking goes.
In a rare interview, TJX CEO Carol Meyrowitz explained how conventional wisdom is wrong when it comes to T.J. Maxx and Marshalls. Meyrowitz, 57, has been with TJX for almost 30 years, rising from a buyer in 1983 to CEO in 2007. During that time, the chain has turned into a retail powerhouse, with more than 1,700 stores -- nearly as many as Target. She says 85% of what the stores sell is from the same season and same year it was designed for, and 85% is purchased directly from manufacturers. Much is identical to what the brands sell in department stores, she insists. Less than 5%is irregular.
These distinctions are more significant than ever for consumers looking for a "good buy" in a sea of deals.
TJX's sales were down only once in the last 34 years -- 1995 -- but the competition for bargain-hunting shoppers is coming from an increasing number of sources. Outlet stores now occupy 68 million square feet of retail space, up from 56 million in 2006, according to Value Retail News. Outlet stores typically only sell one retailer or manufacturer's brand, but that difference is fast getting muddled, too. When you add Web-only off-price stores such as O.co (formerly Overstock.com) and sites with short-term deals known as "flash sales," you have a consumer bombarded with purported bargains and a demand for discounted goods that couldn't possibly be satisfied with last year's leftovers and manufacturers' mistakes.
"For brands, the discount segment represents a huge revenue channel," says retail strategist Alison Jatlow Levy of consulting firm Kurt Salmon. "The challenge for brands is how to manage it without negatively impacting their image."
The source -- and quality -- of all this marked-down merchandise can be confusing to shoppers. Outlets, like off-price retailers, sell at least some products that were "never intended to ever touch the doors" of traditional retailers, says retail brand expert Ken Nisch.
"Consumers are taken by brand names and styles, and quality, I think, comes in second," says Lisa Lee Freeman, editor-in-chief of ShopSmart, a magazine published by Consumer Reports. "Gone are the days when people bought shoes and other clothing and hung onto them for years and years and repaired them to keep them in top shape."
How it works
Meyrowitz says TJX typically deals directly with brands -- not with liquidators.
But there is an interesting sort of denial associated with these brand/off-price relationships.
Coach spokeswoman Andrea Resnick referred to T.J. Maxx and Marshalls as the "disposition channel," and says the brand does not design or manufacture for it. She acknowledges that the company's licensees, which make products including shoes and wallets, sometimes sell to off-price stores but that it's only "excess discontinued inventory."
Others may prefer to fib.
"We're absolutely fine with every vendor saying they don't do business with us," Meyrowitz says. "It's a very important part of our relationship."
Spokespeople for Ralph Lauren, Michael Kors, Anne Klein, Jones of New York and Nanette Lepore -- all brands sold in T.J. Maxx and Marshalls -- did not respond to requests for comment on whether they sell to the stores.
Indeed, there's a fair amount of throat clearing in the world of discounted designer apparel.
Steven Davis, president of the designer flash sale site Rue La La, says he's "never known a brand to deny" doing business with the site. He says brands featured on Rue La La -- which include Kate Spade and Cullen -- think of it as just another boutique they do business with.
Meyrowitz, who never mentions any of the company's brands by name, says manufacturers like doing business with her company because "we're not fair-weather friends. When we buy it, we own it." TJX is there to help when stores buy too much and return unsold merchandise to manufacturers, but also when manufacturers and designers want to lower their per-item cost by making extra for the company's stores.
"There's a degree of wink, wink," says Nisch, chairman of the retail branding and design company JGA. "Manufacturers need off-price in order to survive, but they can make too much and destroy the value balance between supply and demand."
TJX has 700 buyers around the world that are part of what Meyrowitz calls a "supplying machine." The company works with different factories and agents and maintains offices in countries including Italy, India and China, she says. Buyers work with about 14,000 vendors in "a million different ways," says Meyrowitz, who calls it "opportunistic buying."
T.J. Maxx and Marshalls customers have an average household income of $40,000 a year, but some make "several million dollars a year," Meyrowitz says.
"There are very few retailers that get that breadth of shoppers," she says.
When it comes to shopping at her favorite stores, Shelly Levy, 48, says, "It doesn't matter to me that it's last year's or not.
"I don't think people that shop there all the time worry about what season or year it is, especially now when fashion is all over the place and the prices are so incredible" at T.J. Maxx, she says.
But it matters to Meyrowitz that shoppers realize less than 15(PERCENT) of the merchandise is last season. The company changed its marketing to emphasize details like this because it realized its old strategy was talking to existing customers, when it really wanted to attract new ones.
Price tags say "past season" if it is.
What TJX shoppers new and old share is enthusiasm for their deals.
Lynn Richardson of Windsor Mill, Md., says she recently got Coach boots at Marshalls for $125 that she says sold at Coach for about $250. She also bought Ralph Lauren jeans that were reduced from $99 to $29 and shops regularly for Polo Ralph Lauren shirts at the stores.
"Marshalls has more Polo than any other retail store," she says, in a comment that would surely make Ralph shudder.
The quality question
Even if brands matter most to many consumers, TJX knows quality counts. And the company is working hard to shake any lingering doubts about the stores being filled what used to be known as "seconds."
"It's all about the quality, and the quality vs. a department and a specialty store," Meyrowitz says. "It's the same, and I hope it's better."
Still, even some T.J. Maxx and Marshalls customers say they're starting to find as good, if not better, deals at department stores. Donna DeShields, 47, of Cary, N.C., says she finds something almost every time she goes to T.J. Maxx or Marshalls, but gets similar savings and finds a more reliable selection at department stores. A receipt from Macy's shows she recently spent $9 for $142 worth of merchandise after all the markdowns, discounts and a $25 loyalty coupon.
"With their ongoing sales -- there seems to be a sale of some sort every weekend -- and their customer-loyalty coupons, I can get really great bargains every time I am in the store," says DeShields, who says she has similar luck at the department store Belk.
Easier to shop?
Indeed, off-price stores can be a lot less appealing than department stores for some manufacturers and shoppers. Members of USA TODAY's shopper panel who count TJX's stores among their favorites say they go for the low prices, not the ambiance. But like any talk of irregular merchandise, suggestions that its stores are run down appear to be a sore spot for Meyrowitz.
The company is remodeling more than 350 stores a year and is on a "mission to make the in-store experience better and better," Meyrowitz says.
Retail stock analyst Howard Tubin, who follows the company, says TJX's store sales go up after they are remodeled, though he says the company won't say by how much. The company is well positioned to compete with all the other deal-filled stores and sites, he says, because it consistently gets name-brand merchandise that it sells for up to 60% off.
"It is one of the most consistent performers in retail and has a long track record of generating both sales and earnings growth in good times and bad," says Tubin of RBC Capital Markets.
Meyrowitz says the most important thing is shoppers largely approve of the way they do business.
"The majority of the customers who try us, whether recession or not a recession, do come back," says Meyrowitz. "It's almost the 'aha.' They think, 'Why would I buy at this price when I can buy at a lot less?'"

Grade-School Entrepreneurs

2010-02-20T00:30:00.001-08:00

Christopher Steiner, 04.22.09, 10:00 AM ET
At the tender age of 17, Bill Gates had laid the foundation of what would become the most storied technology firm ever. But the man behind Microsoft got a late start compared with some entrepreneurial sprouts.
These days, precocious youngsters have a handle on the laws of supply and demand--not to mention other concepts, like inventory and marketing--by the time they crack double digits. Their cherubic appeal comes in handy, too.
"It's a beautiful thing when you have a child who understands entrepreneurship and markets," says Steve J. Mariotti, founder of the National Foundation for Teaching Entrepreneurship, a nonprofit organization that aims to educate kids from low-income communities. "They should be recognized and congratulated."
We're not just talking paper routes and lemonade stands--many of today's grade-school entrepreneurs are all about the Web. "This is the first time in human history when children are an authority to many of us on something really important," says Don Tapscott, author of Grown Up Digital.

Leanna Archer, 13, of Central Islip, N.Y., is well on her entrepreneurial way. Archer sells natural hair care products, from shampoo to detangling hair mist. She moves most of the merchandise online--about 350 orders per week. The most popular product from her comany, Leanna's Inc., is homemade pomade made from avocado oil, hibiscus oil, almond oil and quinine (the recipe came from Leanna's Haitian grandmother). Four ounces goes for $15; an 8-ounce jar fetches $25.
"The kitchen at my house turns into an assembly line," says Archer. "It's kind of funny."
Archer has some serious vision for a 13-year-old. She socks away half her earnings for college--Harvard for undergrad and law school, natch. "I don't look at this only as a business," she says, "it's also a learning experience."
Nonsense, says 10-year-old Samantha Senechal of Ocala, Fla., who makes and sells Sammy's Dog Treats. Her favorite part about running a business: "The cash--I like making money," she avers. "Real money."
Senechal found a book on how to make dog treats at the library. She tried her early creations on Lucky, her Boston terrier. After a little tweaking of the recipe, she now moves 200 to 300 4-ounce bags, each containing 20 treats and retailing for $5, every month. (She also offers an 8-ounce bag for $9, and a one-pounder for $13.)
For now, Senechal makes the treats in her parents' kitchen. But Stephanie and Robert Senechal are doubling down on their daughter's enterprise: They're building a structure behind their new home that will house a giant batter mixer ($12,000), a machine that will shape the treats ($47,000) and two giant ovens ($29,000 apiece) to cook them. Asked where she sees all of this leading, Samantha offers one word: "Wal-Mart."
Haley Schmidt, 9, of Charleston, S.C., turned her flair for design into a thriving T-shirt business. It all started one morning in 2007 at breakfast when Haley's mother, Aimee, saw her daughter doodle "a funky set of roses" on the back of the paper menu. Soon after, the family registered the Web address shophaleybop.com and posted a shirt with that design for sale. Things hit critical mass in November 2008, when Haley landed on Ryan Seacrest's syndicated radio show.
This is high-margin work. Schmidt orders plain shirts from American Apparel's wholesale branch for $3 each; printing the designs costs another $5 or so, depending on the size of the order. Schmidt now sells around 75 shirts a month (her monthly record is 124), ranging from $28 to $32 apiece.
"It's gotten way bigger than I expected," she gushes. "I had no idea it would be this exciting." Watch out, Nicole Miller!

A Sales Force Built Around Cold Calling

2010-02-15T00:10:00.000-08:00

To thrive in a recession, the sales force at iCore Networks focuses on cold calling

The Hiring Process

1. An executive recruiter prescreens candidates to find reps with a few years' experience outside the telecom industry.
2. A first interview with sales manager Anthony Chapa. Only 10 percent of candidates advance beyond this stage.
3. Next, a candidate spends a full day with a rep door-to-door cold-calling. "We've had people leave halfway through, because the pace was too much for them," Chapa says.
4. An interview with Michael Bertamini, VP of sales
5. An interview with founder and CEO Stephen Canton

Compensation

Base salary + commission
Average first-year income: $92,000
Average second-year income: $121,000
Average third-year income: $150,000

The Sales Philosophy

"Without a brand name and without market share, the only way to close deals is through activity -- that means feet on the street and knocking on doors." -- Stephen Canton, iCore's founder and CEO

The Employee Handbook

1. Be willing to be coached and managed. Don't be set in your ways.
2. Be on time for the 8 a.m. meeting, and return in the afternoon to plan for the following day.
3. Be interested in a career track. The plan is to expand geographically, with account executives becoming managers and opening up new territories, starting with Philadelphia.

When Calling On Customers

1. On a scheduled introductory call, the goal is to discern whether iCore's system would be useful for a prospective customer.
2. After that appointment, cold-call every other tenant in the same building or office park.
3. If you get no further than the outer office, make sure you size up the age of the phone on the receptionist's desk.

The Expectations

Quotas are set by the number of "seats" the reps sell, which corresponds to the number of individual phones using the system.
Companywide quota: 8,000 seats a year
Experienced rep's quota: 1,500 seats a year
New hire's quota: 75 seats per month

The Results

Total revenue, 2008: $17,025,510
Revenue per salesperson: $1,418,793
Revenue versus quota, 2008: +25 percent
Revenue growth, 2007–08: +45 percent

The Typical Workday

7:30 a.m. One or two new reps meet with their manager for individual coaching. "We use this time to help a rep who is poor in a particular area, like learning how to talk about the technology or how to set a realistic forecast," Bertamini says.
8 a.m. Reps gather to discuss successes and failures from the day before and to role-play how to overcome objections.
9 a.m. An hour of intense telemarketing (20 to 25 calls per rep) to cultivate companies that reps can call on later that day.
10 a.m. → 4 p.m. Reps head into the field for cold-calling.
4:30 p.m. → 6 p.m. Reps return to the office to enter the information they've gathered into iCore's contacts database and Salesforce.com CRM software and to research the prospects and places they intend to visit the following day.

Comments:
The discipline, focus, and persistence of the iCore team is impressive. The fact is though that many companies do not have the structure in place or the internal resources necessary to implement such a process. Full disclosure, I work for an outsourced cold calling and B2B appointment setting company - and if cold calling were easy or less time intensive, we wouldn't be in business. But it's absolutely effective. In fact, there's so much online and social media concentration right now that it seems that people are making fewer calls and I'd argue there's less competition than there was just 10 years ago.

Ron Davis
www.virtualappoint.com

As an iCore customer with 18 lines of service I can tell you that they did get our business through a cold call!!!

Cold calling works when you know how to do it the right way. Though pounding pavement is an effective technique, you need to also use the phone to get access to the decision maker at the company where you sized up the old phones at the reception desk. As an example, to massively increase the number of people you actually talk to, try getting the direct lines of the executives during the day, then phone stalking them after hours once the admins are gone for the day.

One has to respect the discipline instilled by sales management in order to perpetuate this sales methodology. At the same time, it strikes me as exhausting to iCore's people, time and money. What's needed is a marketing program that regularly communicates with the lead database developed by the calls and site visits. Constant lead nurturing, followed up by professional telesales to follow-up on long-term opportunities and maintain visibility, is required. I am a Sales Activation Specialist, and this is the process we use at www.salesactivationco.com. Our philosophy is based on the fact that timing is everything and all leads are not created equal.

10 Small Business Lessons From Zappos

2010-02-04T09:56:00.001-08:00

Stories of Zappos, the online shoe retailer, and how they have pioneered a new way of doing customer service, using social media, and selling products online are now all over the business and trade media. From their policies such as paying new recruits to quit within their first 60 days (arguing it costs less in the long run) to having a manifesto of ten principles that guide their customer service team, Zappos has a model that many are trying right now to replicate.

Whether or not you think that the Zappos model may work for your business, there are definitely some lessons you can take away from their 10 guiding principles. Here they are along with some thoughts on how you might be able to apply them to your small business:

1. Deliver WOW Through Service. This is all about doing more than the expected. Solving a customer's need is the baseline and of course you always want to try and do that through customer service. Delivering a "WOW" is open to interpretation, but certainly means doing more than the basics.

2. Embrace and Drive Change. In many businesses, people are afraid of change. Change means more work. Change means you might do something wrong and potentially lose your job. Embracing change, however, is about adapting to your circumstances and not being afraid. Innovation comes from embracing and driving change.

3. Create Fun and A Little Weirdness. Nothing is as empowering for employees as encouraging them to have fun and do things in a different way. Fun and wierd are not two words you typically see in any sort of customer service group - yet for Zappos it is a strong part of why they have such a fiercely loyal workforce.

4. Be Adventurous, Creative, and Open-Minded. Encouraging creativity is something that can often be frowned upon because you are trying to enforce rules - but this flexibility is also a big part of making employees feel empowered to do their job and think outside of what their job tells them to do.

5. Pursue Growth and Learning. The most successful organizations are ones that allow their people to grow their knowledge in order to do their job better. Making education, training and knowledge building a priority in your business sends a message that you care about working smarter and are willing to support your employees who try to find ways to do that.

6. Build Open and Honest Relationships With Communication. Honesty is the key word here, as it is easy to think it is better to keep specifics of your business to yourself and not share them with your employees. Being honest about the state of the business can help you to get more commitment from your employees to do what needs to be done to make it better.

7. Build a Positive Team and Family Spirit. Most people would agree that a team should be like a family, but in practice they don’t act that way. A family spirit means a level of trust and dedication that should be your goal at your business. Positivity is something that comes with that.

8. Do More With Less. Too often, it is easier for employees to rely on resources being provided by “the company” in order to get their jobs done. Encourage them to think about how they can do more with less, and then reward them for it. Those dollars they end up saving the company can really add up.

9. Be Passionate and Determined. There really is no substitute for passion when it comes to getting things done. Sometimes you can inspire that passion with employees, but the best way to get it is to hire people who are passionate themselves about what they do and about what you do.

10. Be Humble. Humility is attractive for employees and for customers. It means that success doesn’t go to your head and that you can maintain a real perspective on what is truly important. This is also one of those qualities that comes from the top, so to inspire humility in your company means that you need to live up to that lesson yourself.

12 Practical Business Lessons From Social Psychology

2010-02-04T07:35:00.001-08:00

It’s been said many times that business is all about people. That being the case, perhaps we should stop reading management books for advice and start looking at social psychology. Very simply, social psychologists study how people interact with others – their families, friends, and yes, business partners. Smart marketers and executives have been using the findings of this growing field for decades to close sales, hold effective meetings and get their way in negotiations. But rather than putting you through an academic psychology lesson, we condensed the most useful concepts into one article.

The Foot in the Door Phenomenon

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The Concept: If you’re wondering how to convince superiors, employees or customers to do what you ask, try using the foot in the door phenomenon. This refers to the tendency of people to do something huge if they have already agreed to something much smaller. Your friend should be much more open to helping you decorate your entire house for a dinner party if, for example, he already helped you pick out decorations.
How You Can Use It: This handy principle has countless applications in the business world. Hand lotion and beauty supply kiosks at the mall use it all the time. If you can get a person to talk to you for a couple of minutes and rub some lotion on their hands, you’ve got your foot in the door, and they are much more likely to buy from you than if you had just screamed a sales pitch at them.

The Door in the Face Phenomenon

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The Concept: Another classic persuasion tactic is known as the “Door in the Face Phenomenon.” Using this approach, you make your actual request look reasonable by first making an outrageous request that the person will unquestionably turn down. When they turn you down, you then ask for what you really want, which now looks trivial in light of what you asked for a moment earlier.
How You Can Use It: Let’s say you want your company to approve funding for a team of five marketers to research a new advertising campaign. Rather than simply asking for this funding and risking being shot down, use the door in the face principle. Ask your company for twice the amount of funding for a team twice as big as what you need. This will almost certainly be disapproved, but don’t fret; you didn’t need that amount in the first place. Act like you’re really going to work hard on cutting the funding down to the bone and reworking your proposal. In a few days, come back and propose the funding request you wanted all along. It will look as though you found a way to accomplish the same tasks for half the price with half the personnel. Social psychology research states that you are much more likely to get what you want by doing this.

The Serial Position Effect

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The Concept: A truly sharp marketer should understand how our brains process information. The “Serial Position Effect” (developed by Hermann Ebbinghaus) assists by explaining how we remember items we see or hear in lists. Ebbunghaus discovered that things shown at the beginning of a list and at the end of a list are remembered best. This was later titled the “Primacy Effect,” and the “Recency Effect.”
How You Can Use It: This powerful concept can affect what the millions of people seeing your advertisements, listening to your radio promotion, or reading your sales letter, remember about your product. If you have five benefits that your product provides over the competition, think long and hard about which ones you want to stick deep into your audience’s memory. Place those items at the beginning and end of your pitch. This way, prospects will remember these benefits when they see your product on a shelf or think about the commercial they just saw.

Attitudes Follow Behavior: Resolving Cognitive Dissonance

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The Concept: Cognitive dissonance is a fancy term for when people have opinions, behave contrary to them, and change their opinion to fit how they acted. For example, if you normally despise handguns, but join your buddy at the shooting range one day, you might leave thinking about how “guns aren’t really that bad if you use them safely.” Simply by holding and shooting one yourself, your brain begins thinking positive thoughts about it. Similarly, a “boring” task might later be remembered as “not being all that bad” or even being “fun” because, after all, you did it.
How You Can Use It: What this means to you is that if you can get your customer to perform a small task, such as a little game or survey online, the customer may begin making some positive assumptions about what you sell. This especially works for businesses operating in controversial markets, such as gambling, tobacco or other vice-related products. If you can find a harmless and fun way for potential customers to get involved with your products and services they will be more likely to become loyal buyers down the line.

Two Routes to Persuasion

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The Concept: Not everyone processes information (including product demos and advertisements) the same way. Generally speaking, there are two types of audiences, depending on your product/service. Your audience is either attentively thinking about your message, or they are distracted. These two audiences take two different routes to understanding your message. The involved group takes what is known as the “Central Route,” meaning that they focus on what you are saying closely, develop counterarguments and respond based on what they eventually decide your product is all about. If your ad or pitch was strong and convincing, these people will probably buy. If it was weak or not convincing enough, there’s little hope of them buying.
How You Can Use It: The distracted audience takes a very different route to understanding your pitch known as the “Peripheral Route.” These people focus on irrelevant parts of the pitch that randomly interest them. The speaker’s good looks, for example might interest them more than the information in the pitch. Simple language is also important for this kind of audience. For example, if you’re selling a market research service, classic adages such as “look before you leap” will probably work better than “perform proper market research before investing.”

Perceived Expertise

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The Concept: Let’s face it – most of us give more weight to what “experts” say than average Joes off the street. Most people would sooner listen to a warning about the health hazards of eating fast food, for instance, if it came from a renowned nutritionist than from a self-righteous teenager.
How You Can Use It: What makes someone appear to be an expert? One tactic that has been used by marketers (and politicians) is to begin your pitch with something the audience already agrees with. This makes the speaker seem intelligent and makes the audience eager to believe more of what he or she has to say.
Of course, being introduced as an expert never hurt either. A comment about an approaching asteroid from “Dr. Robert Kimmel, Chair of Astrophysics at Harvard University” will surely be taken more seriously than, “Robbie Kimmel, local guitarist and college student.”
Finally, social scientists find that speaking confidently greatly improves believability. A study performed by Bonnie Erikson in 1978 proved this by having college students rate the credibility of two supposed “witnesses” to an accident. One spoke very clearly and confidently and the other one hesitated and stumbled over his words a bit. One by one, each student said the confident speaker was much more credible. Perhaps it’s time to buy your TV or radio guy a course in effective speaking!

Perceived Trustworthiness

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The Concept: Trustworthiness of the speaker is another factor critical to any kind of visual marketing. No trust, no sale. Fortunately, how trustworthy you look can be controlled almost entirely by you.
How You Can Use It: Our outward behaviors have a lot to do with whether trust us or not. One behavior that seems to carry a lot of weight is eye contact. Researchers have found that if video-taped witnesses in court looked their questioner straight in the eye rather than down or around, they were seen as more trustworthy.
You can also appear more trustworthy by seeming like you’re not trying to influence an audience. “Hidden camera” TV commercials utilize this tactic all the time. Social psychology experiments have found that people who don’t think they’re being watched are comfortable being completely honest.
People also find others trustworthy when they argue against their own interest. Thus, a message about risks of cigarette smoking seems much more sincere coming from the tobacco companies than it would if were given by an anti-smoking politician up for re-election. People might link the politician’s anti-smoking speeches to his political agenda, whereas they cannot do this with the tobacco companies and are much more likely to absorb the message as true.

The Mere-Exposure Effect

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The Concept: Sometimes repetition alone can make a message more believable. Social research has found that people tend to eventually believe things they’ve been told many times, simply because they’ve repeatedly heard it. Studies show that people rate false statements such as “Mercury has a higher boiling point than copper” as true if they were made to read them a week before.
How You Can Use It: This concept is why companies run the same advertisement three times during a one-hour television show. The first time the audience sees the ad they might just ignore it. However, a week later they may have seen the ad 20 times, and by that point they have begun to accept its message and view favorably the product it advertises.

Distraction Disarms Counter-arguing

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The Concept: Audio and visual messages are much more effective when the audience can be somewhat distracted by background clutter just long enough to inhibit counter-arguing. Mild distraction often preoccupies the brain just long enough to stop it from inventing a reason to say “no.”
How You Can Use It: Many radio commercials utilize this tactic. The words promote the product being sold while background music or intermittent comedy distracts us from thinking too deeply about the words. Be careful not to distract so much that ad is not processed, however. Extremely violent or incredibly sexual advertisements are often ineffective because the audience is simply too distracted by what they’re viewing to pay attention to the message. They key is to strike a balance such that your message is understood, but not deeply analyzed or argued by the audience.

The Self- Reference Effect

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The Concept: Remember – a marketer’s job making sure the audience understands and remembers the sales pitch. One handy way to achieve this is known as the “Self-Reference Effect.” The Self Reference Effect refers to the tendency of people to effectively recall information about themselves. Most people are primary concerned with themselves. Thus, memories pertaining to what we think about the most, (ourselves), are held longer and recalled easier. Studies have shown that, when asked to compare ourselves to a short-story character, we remember that character better than if we compared them to someone else.
How You Can Use It: When planning a new marketing campaign or presentation to the board, it is important to keep this principle in mind, as it can greatly influence what your audience walks away remembering. Try focusing on the basic lifestyle and personality traits of your audience. Once you have these squared away, design your new message to match these traits. This makes your message personally meaningful to them and boosts their chance of remembering what you said.

Priming

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The Concept: Priming is when various stimuli (sights, tastes, smells) automatically trigger thoughts of similar stimuli. The smell of crisp fall air, for example, might trigger thoughts about the holiday. As a result, simply smelling the fall air might make you crave pumpkin pie or apple cider, even though no food is in front of you.
How You Can Use It: Priming is a classic sales tactic that has been used for decades, and you can put it to use for your business immediately. The key is to find some kind of neutral stimulus that is clearly related to your product. A perfect example of this can be found at any movie theater. As soon as you walk through the door your nostrils are overcome with the smell of buttery popcorn. Without even seeing the popcorn or being asked to buy it, you find yourself making your way to the concession stand because you suddenly feel like the movie wouldn’t be the same without the snacks. This is classic priming, and all five senses are susceptible to priming by intelligent marketers and businesspeople.

Prevent Employee Social Loafing

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The Concept: Have you ever noticed, perhaps in college or around the office, that when groups are assembled to complete a task, it always ends up that a couple of members do most of the work while the majority of members do almost none of the work? This is a social psychological phenomenon known as “Social Loafing,” and it happens everywhere and in absolutely every profession. Social loafing is defined as the tendency for people to put less effort into a task when they are in a group than when they are alone.
How You Can Use It: Social loafing can seriously drain a team’s performance. The good news is that the causes of social loafing are known and consistent. Social loafing happens when no one is personally accountable. When the group is judged as a whole no matter what its individual members do, loafing is almost sure to occur. The sure-fire way to make sure that all of your employees are contributing equally to the task at hand is to assign them to groups, but assure them that they will be personally monitored and evaluated on their contributions to the group. The more someone thinks they will be judged personally, the less social loafing you have. This allows you to make the most of the talent you have on staff and almost always produces stronger results than the vague “group evaluation” does.

The most convenient baby changing table on the market!

2010-02-04T06:22:00.000-08:00

The phrase “necessity is the mother of invention” is especially true in the case of Rose Marie Iskowitz.
A one-time marketing and sales representative, Iskowitz had just given birth to her second child when the idea for a specially designed diaper changing station dubbed the Dipe N’ Go began to take shape,

The Dipe N' Go portable changing mat has been specially designed to hold everything a parent on the go needs to take care of their child's diaper changing needs! This all in one "changing station" is made of soft, machine washable fabric which has multiple pockets for everything from spare diapers to powder and wipes. Everything you need is right there in one convenient place! The Dipe N' Go has the space and capacity to store it all! Simply unroll the Dipe nÕ Go with just one hand and gently lie your baby down and make a quick diaper change!
The Dipe N' Go includes:
Compact size when closed: 15.5" x 12.5"
Ample space to change a baby when open: 15.5" x 35"
Light weight and easy to carry: Under 1lb when empty
Plenty of Storage space: 2 Large pockets and one small pocket to hold diaper changing supplies

How does a company go about building trust in its advertisements?

2010-02-04T06:08:00.000-08:00

The most important aspect of any advertising campaign is whether or not it builds trust. Consumers are naturally skeptical about any form of advertising as it is paid for and thus biased. Hence, even if you go on about your product’s features and how great of a deal consumers are getting, these claims are often counteracted by the fact that consumers know the commercial is biased and thus have no trust in the information presented. This is especially true for small businesses that have no well-known brand name to back them up.
Here are a few sources consumers believe in and should be integrated into every ad campaign.
Testimonials
These are especially helpful if the person you are trying to reach knows the person offering the testimonial. While this many not be possible in mass media advertising, for more personalized ad campaigns, get customers to make a list of people thy know who may be interested in the product and run an e-mail or direct mail campaign saying “Your friend [Insert Name Here] thought you might be interested in our product.” This can be kick started by offering customers any sort of incentive to want to refer their friends and family.
Independent Organizations
Consumers know YOU think your company is amazing, but who else does? Providing outside credibility from independent organizations, whether it be a glowing review in a major newspaper for a movie commercial or statistics from an industry study conducted by an independent research organization, is a great way to build trust.
Endorsements
People trust people they know. One way to apply this to advertising is through the testimonials tactic explained above. Unfortunately, this model doesn’t scale for mass media advertising. Instead, for mass media advertising your company needs to be recommended from someone that everyone knows through an endorsement. The first words to come to mind when thinking of “an endorsement” are celebrities and million dollar contracts.
While this may be the most well-known form of endorsement advertising, it is well out of the reach of many small business owners. Instead, small business owners need to forget about getting an endorser with universal appeal, and instead focus on getting one who appeals only to their audience. For a local restaurant, this could be a local celebrity or rising star only well known in the area. For a marketing agency, it could be a well known professional in the industry.
These endorsements may not catch the attention of mainstream media, but if targeted correctly will be of interest to the people you are trying to reach.

Wrist Device Rewards Kids For Exercising

2010-02-04T06:01:00.001-08:00

February 3, 2010 by Rich Whittle | 4 Comments

New Jersey-based Switch2Health now offers the S2H REPLAY, a fun and innovative wrist-worn device aimed at tweens and teens that allows them to quantify their level of physical activity, according to trendspotter Springwise.
In addition to displaying the date and time, the device also tracks and registers continuous, moderate-intensity activity, subdividing each hour into 20 three-minute segments. When users complete a full 60 minutes of physical activity over time, the device generates a reward code that can be uploaded and converted into points on the company’s website.
Those points are redeemable for items such as gift cards or free months of membership at sponsors including Barnes & Noble, GameStop, Best Buy, Webkinz and Club Penguin. Consumers can also set each other specific challenges and reward them for success using S2H REPLAY.
No cables or software are required, nor is there any need to recharge the device’s battery. Available online, S2H REPLAY is water-resistant and available in three sizes. The device comes with a blue silicone band, but alternate colours are available. A fully brandable device is also available for use in corporate promotions.

33 Highly Useful Presentation Tools

2010-02-01T09:41:00.000-08:00

After the terrific market response to 11 Highly Useful Presentation Tools for Sales and Marketing ^[1], we knew that a follow-on post was mandatory to help readers sell and market successfully online (and off). Here is a list of 33 more presentation tools we hope you’ll find helpful.
SlideRocket ^[2] is a presentation creation and management service that I didn’t include in 11 Presentation Tools and I wish I had. They offer useful tools to build presentations and cool analytics tools. The service starts at free and goes up to $20/user/month.

PhotoPeach ^[3] is a photo site with a twist. It allows you to import your photos from Facebook or Picasa (no others at this time) and create a slide show, adding words, audio, and music. You can host it there or embed it in your site or blog. Free.
Amazon Slideshow Widget ^[4] is for those who have an Amazon presence at all, this widget is a way to display Amazon products on your store or alongside your profile. You can choose images out of the entire Amazon catalog.
Adam ^[5] is unlike any multimedia presentation tool I’ve seen on the web. I’m sure that expensive programs do this, but I’ve not seen it. The exciting piece of this is you can a “hotspot” to a PDF or Image file. Essentially, when someone scrolls over a particular area of a document, a popup (of sorts) opens and you can embed a video, text, music, or hyperlink. Free. Click on the “View Samples” link.
Blow Up ^[6] is a downloadable tool that works with Flickr. It is totally free. It imports/loads your photosets into a fullscreen display. You can deeplink into the photos you want and run it on your own site or blog.
VoiceThread ^[7] is a collaborative, multimedia slide show web-based service (holding all sorts of documents like most of these other services). Ranges from Free to $30/month. Allows people to leave comments five different ways.
IgniteCAST ^[8] is a media sharing web service where users can create, upload, view and share structured video clips, interactive presentations, PowerPoint, software demonstrations, surveys, quizzes and more. Free.
Presentation Assistant ^[9] provides various tools to bring the audience’s attention to a specific spot, and allows you to zoom in and annotate the screen. It also enables you to open documents or programs quickly, and play background musics conveniently during the presentation. You can do a free trial or buy it for $23.95.
MyJugaad.in ^[10] is the tool if you need to quickly put together a presentation of a bunch of websites, bookmarks, or your blog posts. MyJugaad.in is a slideshow for webpages, which are sourced either from popular websites such as del.icio.us (for best webpages), digg, google news, flickr, youtube, etc. or from a list provided by you or from your RSS feed(s). This image shows their tour where they explain – just type in a search term and as the results come in, you can turn it straight into a slideshow.

I don’t know how long this little app will remain online, but if you dig in a little bit and want to learn what these two entrepreneurs are doing, read how they built this slideshow web app in six days ^[11]…
WebSlides by Diigo ^[12] is the same concept as myjugaad, however, theirs only appears to work with your bookmarks and lists from within Diigo. It promises to work from any RSS feed, but I couldn’t get it to work. Once I joined, I could create some bookmarks and then move them into a Diigo List, then the WebSlides widget worked. Here’s my result testing two of my own sites as bookmarks ^[13].
FormatPixel ^[14] is an online publishing application that appears quite robust. It allows you to create ‘page’ based presentations; anything from magazines to fanzines, brochures to catalogues and even portfolios.
Free for one project with less than 512k in size. Next package is about $30/year.
Slidestory ^[15] allows you to create audio slideshows and podcasts. It is a free tool and you have to download a small application for your desktop. From there, you can drag and drop images, record your presentation, and upload it to the Slidestory host.
Slidesix ^[16] is another multimedia presentation sharing site, however, they allow you to upload a presentation and record audio, video or embed it directly from their web app. It is a free app and I found that it was quick to load and use. The management console kept things organized and their SlideLabs section had a presentation analytics component.
Prezentit ^[17] is a web-based slideshow presentation tool that also lets your team simultaneously collaborate with you. Not all of the other services allow that. The slides become webpages, so you can edit the code manually if you chose.
Webinaria ^[18] is a screen recording application that is similar to Jing Project. It allows you to create a flash presentation (FLV or AVI files) as you click through a series of screens, web pages, or whatever you are demonstrating online. Free.
Zentation ^[19] is a tool for combining video and slides. On one side you’ll have your full motion video and on the other your material in the form of a slide presentation.
Present.io ^[20] is a service of Drop.io, which is a real-time file sharing and collaboration service. Small file “drops” are free, but then you can select a plan starting at $19/month. Once you drop a file into the Drop.io service, it is immediately accessible publicly or privately. You can present information to everyone in this shared area or simply leave the files in one location. Drop.io tries to convert every file you send into a web-friendly format so that anyone, on any browser, can see it and interact with the file. There are too many features to list here, but it is worth 20 minutes to see if it can work for your company or project.
Animoto ^[21] is a service to turn photos into hip videos. I do not use the word ‘hip’ lightly. This is another of my favorites from our presentation explorations to find ways for other small biz owners to find new and innovative ways to present and sell. Click on the link right below the featured video (right now it is two small dogs on the screen) that says “Watch the 60-Sec. learn more video” in small print. They need to make this larger and more obvious, but don’t let that comment deter you.

SpotMixer ^[22] is a web-based video advertising service that makes it easy and affordable for small- to mid-sized businesses to reach new customers with online video ads and TV ads without hiring videographers or ad agencies. This is not a free service, but an affordable one if you want to explore online video advertising.
Vuvox ^[23] is fun to explain. It takes your slides and puts them into a moving collage (not a video). You can bring your Flickr, Picasa, an RSS feed into the service and have it display your work. Within it, like other services we’ve mentioned, you can create “hotspots” where you have a popup within your presentation and a link. Some of these services are simply meant to be experienced or seen.
Freepath ^[24] is a playlist application that helps you mix and play your rich media assets such as video, photos and music together with your traditional desktop files like PowerPoint, PDFs and Word without having to convert files, embed links or import files. They say in their About Us section to “Think of us as an iTunes-like playlist where you can organize, arrange and play all your stuff.” Again, the tour is in order. There is a free trial and it is only $50/year for a single-user license.

As I review all these sites, with some of them, I see a simple place to create or host a presentation. But with some of them (like Vuvox, Animoto, and Freepath to name just a few), what I find happening is marketing ideas I’ve had for years are now taking shape because they have created a way for me to take my ideas to the web in such an easy way that I can’t help but experiment. You may find yourself thinking and coming up with new ways to reach a customer.
InstantPresenter ^[25] is in here because it is a new type of web conferencing tool that allows you to have multiple participants, via voice and/or webcams to be part of an online presentation. Has all of the collaborative tools you’d expect from whiteboards to chat. You can upload your slide presentation and have it available from their servers. Free trial, then $39/month.
Spicynodes ^[26] is an interactive mind mapping sort of tool. With it, you can guide visitors on a tour. Because it is a new way of visually showing and moving people through information, it can be confusing at first, but it may be just what you need to help people understand your service or product. Instead of a traditional navigation menu, you would offer a series of “nodes” or perhaps we could call them waypoints, where as a viewer clicks through this new map, other options display. If you’ve ever seen Google’s new Wonder Wheel search tool, that will help this makes sense. It is a free service and it lets you sign up with your Google, Yahoo, or OpenID account. They have a terrific gallery of examples.

^[27]

Sometimes you just have to draw out what you want to say. Gliffy ^[28] is your tool. Actually, you don’t even need to draw. They have tons of shapes and flowcharts and images you can use to diagram out whatever you’re thinking. Straightforward, with easy-to-use features. I quickly dragged and dropped various images and shapes onto a palette. The new file could be saved in my Gliffy account or exported to a variety of file format. Free trial and then $5/month.
Creately ^[29] is a diagramming service that lets you create flowcharts, diagrams, website maps where the links are clickable (as in site navigation, not geographic maps), and ready made templates for many common team projects. You can link diagrams together as well. Currently in beta, free for public diagrams. Private access is about to launch.
Mindmeister ^[30] is a mind mapping and diagramming tool. There are those times when you need to create a visual that represents part of what you or your team are thinking and discussing. A whiteboard type of discussion where you are connecting the dots. Mindmeister is great at that, plus you can then share it to the web, with links.
Cooliris ^[31] is a 3D photo/video wall. It is a browser plug-in, however, it also gives you a specific URL (webpage) where others can view your 3D wall of images. It visually appears to pop off the page. Very engaging. It works with many photo and social networking sites including Flickr, Picasa, and Facebook and pulls your images into the Cooliris wall. Free.

Moonk ^[32] lets you create a slideshow or video show from your files. If you have wanted to put video on your site, but haven’t wanted the public aspect of YouTube, Moonk might be the answer. You can then integrate or embed this “player” into your website or blog. Free.
Toufee ^[33] allows you to create flash files (without the programming experience or expensive applications) that can be loaded to YouTube or your site. Free trial and then $60/year.
Viewbook ^[34], at first glance, is an online portfolio for photographers and photo-oriented businesses. But if you have a visual product or service, it may work for you as a way to build a visually rich website or promotional page. Free trial and $19/month for professional package.
Stupeflix ^[35] lets you turn your photos, videos, presentations and text into professional looking videos. It is a fast and full video editor with features you only find in desktop applications. Free for small videos, with Stupeflix brand. Premium options are a low-cost per video.
Skrbl ^[36] is a whiteboard tool and collaboration service. You can have up to five people join you in a collaborative space and work on the same document drawing out your ideas and uploading pictures, if you need to. Free for single user, $10/month for five users.
Twiddla ^[37] is an online whiteboard, plus a co-browsing web meeting service. You can mark up web pages, share files, and chat while you work together. They have a free trial, with no signup to get started, and then, its still free. After 30 days, they expect you to register. Who wouldn’t register for such a great tool?

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Now, with 44 Highly Useful Presentation Tools (33 today plus 11 last time), we all need to get busy creating professional presentations that help educate our customers and generate new sales. Keep us posted about which tools you use and like. We’ll be busy here at Small Business Trends playing and experimenting with this new batch of presentation tools.

Article printed from Small Business Trends: http://smallbiztrends.com
URL to article: http://smallbiztrends.com/2009/09/33-useful-presentation-tools.html
URLs in this post:

[1] 11 Highly Useful Presentation Tools for Sales and Marketing: http://smallbiztrends.com/2009/08/11-presentation-tools-sales-marketing.html

[2] SlideRocket: http://www.sliderocket.com/product/pricing.html

[3] PhotoPeach: http://photopeach.com/

[4] Amazon Slideshow Widget: https://widgets.amazon.com/Amazon-Slideshow-Widget/?fromLoginPage=1

[5] Adam: http://adamsapp.com/forum/topic.php?id=7

[6] Blow Up: http://blowup.bondartsciencefair.com/

[7] VoiceThread: http://voicethread.com/about/

[8] IgniteCAST: http://www.ignitecast.com/

[9] Presentation Assistant: http://www.goldgingko.com/presentation-assistant/index.htm

[10] MyJugaad.in: http://myjugaad.in/

[11] read how they built this slideshow web app in six days: http://www.paraschopra.com/blog/personal/how-i-built-a-webapp-in-six-days-for-rs-350-8-usd-only.htm

[12] WebSlides by Diigo: http://slides.diigo.com/

[13] my result testing two of my own sites as bookmarks: http://slides.diigo.com/list/q4sales/web_slides-test-by-tj-mc_cue?mode=full&sid=24193

[14] FormatPixel: http://www.formatpixel.com/go/en/index.php

[15] Slidestory: http://www.slidestory.com/

[16] Slidesix: http://slidesix.com/

[17] Prezentit: http://prezentit.com/

[18] Webinaria: http://www.webinaria.com/

[19] Zentation: http://zentation.com/index.php

[20] Present.io: http://drop.io/home/present

[21] Animoto: http://animoto.com/

[22] SpotMixer: http://www.spotmixer.com/create_video/public_home

[23] Vuvox: http://www.vuvox.com/

[24] Freepath: http://www.freepath.com/Home/Tour

[25] InstantPresenter: http://smallbiztrends.com http://www.instantpresenter.com/Web-Conferencing-Pricing.aspx

[26] Spicynodes: http://smallbiztrends.com http://www.spicynodes.org/

[27] Image: http://smallbiztrends.com/wp-content/uploads/2009/09/listpost_33pres_spicynodes-how-it-works1.png

[28] Gliffy: http://smallbiztrends.com http://www.gliffy.com/

[29] Creately: http://creately.com/

[30] Mindmeister: http://www.mindmeister.com

[31] Cooliris: http://smallbiztrends.com http://www.cooliris.com/

[32] Moonk: http://smallbiztrends.com http://www.moonk.com/

[33] Toufee: http://smallbiztrends.com http://www.toufee.com/

[34] Viewbook: http://www.viewbook.com/

[35] Stupeflix: http://www.stupeflix.com/

[36] Skrbl: http://www.skrbl.com/index.aspx

[37] Twiddla: http://www.twiddla.com/

30 Useful Small Business Email Marketing Apps

2010-02-01T09:38:00.001-08:00

Email marketing is one of the dominant ways that a small business reaches out to customers and prospects. Email marketing is about relationships — and successful relationship marketing involves a lot more thought than simply firing off a newsletter via email. According to MarketingSherpa’s 2010 Email Marketing Benchmark Report (free PDF excerpt here ^[1]), email marketing is one of two marketing budget items that saw an increase in 2009. The other is social media.
But where many have claimed that “email is dead,” MarketingSherpa has proven otherwise in its studies. In fact, they show that email is quite social. A recent survey asked users how they share information they find on the internet: 78% responded that email is how they do it. 22% use social media sites.
Here are 30 small business email marketing applications to grow customer relationships — and your business (in no particular order):
Emma ^[2]
Emma is a Web-based service that combines do-it-yourself with free personal assistance when you need it (custom email design comes at an additional charge). They have strong tracking and analytics components that allow you to learn what works, or doesn’t, with your audience.
Constant Contact ^[3]
They offer a free 60-day trial. They have been around a long time and have a strong arsenal of email marketing tools from HTML newsletter templates to personal coaching on how to get your email campaigns done right. They have added event management so you can handle online registration, as well as online survey tools to gather info from customers and prospects.
AWeber ^[4]
AWeber grew very popular because it focused on auto-response emails. They made it very simple and elegant to create a form a prospect would fill out. The service then auto-responded to that information with whatever message you had set up. They offer a robust set of tools including email newsletters, emails to RSS, and, of course, autoresponders. First month is $1, and then pay-as-you-go based on subscriber count. You don’t pay per email with them.
MailChimp ^[5]
MailChimp was one of the first email marketing providers to offer a “forever free” plan. Small business users I know love this plan as it gives you up to 500 subscribers and 3,000 emails for free each month. After that, it has pay-as-you-go pricing. On top of the email newsletter and database list management, they offer an integration with online event registrations and ticket sales via Eventbrite.
iContact ^[6]
iContact offers all of the same features as the others, but they focus attention on their deliverability rates – often talked about as whitelist agreements. While it may not seem like a big deal at first glance, if your email provider isn’t doing things right, your email may not get through. iContact partners with a third party, Pivotal Veracity, to score emails to help improve how many get through to recipients. They offer a free trial, no credit card to get started, and a good educational resource section.
Vertical Response ^[7]
In addition to email, Vertical Response is probably one of the more integrated services out there, with integration to Intuit and Salesforce. They offer postal mail options, too, so you can send a postcard to a prospect or customer to add another touch beyond email. Great educational materials also.
EmailBrain
I liked that they had a “no credit card” free trial signup. More importantly, I really appreciated that they offer an industry-focus approach with 20+ industry examples and case studies. You could dig in and see what someone else like you was doing — a good way to get a jumpstart on your email marketing.
eConnect ^[8]
eConnect Email’s claim to fame is their the first provider to offer a tagging system for email. Look at it as a meta-organizing system where you can see what your customers and prospects find interesting and are clicking on. You can tag items in a specific email, in a campaign, and across multiple campaigns. That information is then available on a subscriber level, so you can see the top five tags your customer is interested in.
FuseMail ^[9]
FuseMail offers email hosting as well as campaign management. They have a 14-day free trial. The big area that stood out for me was they have an SMTP Direct service (which is an email gateway) where you can use your existing email newsletter program and gain the advantages of their email servers. The advantage of this is that you don’t have to get everyone on your existing mail list to “opt-in” to your newsletter again, which is almost always a requirement when signing on with a new service. FuseMail doesn’t have this requirement with their SMTP Direct service. Pretty unique.
SimplyCast ^[10]
SimplyCast, owned by Mailworkz (offers 300 emails a month “free forever” account, similar to MailChimp). Some of the key features that SimplyCast offers are worth considering:   Image hosting (so you can easily have your image render properly), easy to include attachments, forward-to-a-friend options from within the email (great for viral stuff), and dozens of template categories.
JangoMail ^[11]
Many providers tag your emails with “Powered by ABC Email…” and you probably don’t particularly want to see this sort of branding on your email messages to customers. JangoMail promises “your emails are your emails, not ours.” Even though they are a web-based email provider, they allow for you to manage your messaging through Outlook or Thunderbird, and other web-based apps like Gmail and Yahoo, too. Free trial allows for 50 test emails.
GetResponse ^[12]
GetResponse appears to be very social media savvy. They offer video email and social media tools. Your email subscribers, for example, can easily receive your Twitter updates via the GetResponse service.   They also have a split-testing feature so that you can test one email against another to see which one pulls better results.
Contact29 ^[13]
Contact29 is an email marketing provider focused primarily on the real estate and mortgage industries. If you are in those industries, they are worth a look.
SendLabs ^[14]
SendLabs has created a tool to help you see what your email will look like in the recipients inbox. With a single click, this feature within the SendLabs Summer ‘09 release will send a copy of your email to all of the major email programs (Outlook, Lotus Notes, Yahoo!, Gmail, etc.) and provide a screen shot report on how well your email will render for everybody.
Campaigner ^[15]
Campaigner offers a nifty workflow tool that allows you to determine when and what actions trigger an email to be sent to your customer or prospect. It is similar to an autoresponder (which sends an email when a customer fills in a form on a website usually), but a bit more advanced. With their workflow tool, you can trigger a specific response based on what a customer does within the email. If they click a certain link, for example, they might receive an email 1 hour later. Free trial, of course.
EasyContact ^[16]
I liked the very simple 3-step plan that EasyContact presents to first time visitors. You get a clear sense that they have thought about how to make it as easy as possible.   They also offer a free forever plan and low-cost pay-as-you-go options.
Big Response ^[17]
The other services may have similar offers, but Big Response has a couple of things worth mentioning: First, they highlight that you can collect an unlimited number of subscribers – meaning you don’t pay to store contacts and only pay for emails sent.   Second, that you get unlimited phone and email support from their experts. I didn’t see that one mentioned elsewhere, so that made me think about doing a trial.
Benchmark Email ^[18]
Their competitor comparison chart reveals a lot about what they offer that others don’t. You can tie into your Google Analytics account. You can view all of your subscriber opens within a map within the reporting feature. You can segment out all of your email lists easily – which is handy as you get to know your customers better.
StreamSend ^[19]
The big differentiator for StreamSend is they offer every customer a private IP address, which helps you keep your reputation intact. You are not judged by the email provider you use, but by your email quality.
myNewsletterBuilder ^[20]
myNewsletterBuilder stands out in the crowd of email marketers by providing pre-written content that you can use in your newsletters and emails, by industry segment. They also partnered with eVoiceSpot, which is a multimedia rich presentation service that you can embed into your email or newsletter.
YesMail ^[21]
YesMail has one major awards and recognition for its platform and service. They have a specific small business offering called YesMail Direct. This link goes direct to that page. They are connected to InfoUSA, so if you need to build a mailing list you can do it all under one roof.
Mad Mimi ^[22]
Mad Mimi is a simple email marketing system. One of the nice features is it comes with free design assistance. It also has a limited edition that is completely free and includes good sharing functions like Forward to a Friend, among many other standard features.
PoMMo ^[23]
PoMMo is a free open-source program that bills itself as “mass mailing” software. It is a no-frills program. It’s is 100% free. However, like many open source apps, remember there’s always a cost — it costs you time. You are pretty much on your own when it comes to installing it and troubleshooting issues. There is no customer support to call.
CRM EMAIL
Many companies don’t like their email efforts separated from their customer data. Keeping it all together is a lot of work. Customer relationship management software companies have listened, but these five web-based offerings are aimed at the small business owner. If you want to enable customized emails to your customers, with full tracking and opportunities to create new campaigns from your customer data, then you should look closely at these companies:
Infusionsoft ^[24]
Infusionsoft is a popular CRM solution with automated email marketing as a central concept. As you make contact with customers via email, or via interactions on your website or online shopping cart, Infusionsoft tracks those contact points. You can then use those interactions to send targeted and relevant communications. Your salespeople can access this info and understand what communications the customer has seen, or where they’ve gone on your site, and have a more intelligent conversation. (Note: Infusionsoft is a sponsor of this site’s Internet radio show.)
ZohoCRM
Zoho is an online application suite like OpenOffice or Google Documents, but with a lot more applications and options for managing your business. Their ZohoCRM tool recently introduced the email within CRM option. The email add-on is $5 a month additional.
Highrise HQ ^[25]
Highrise HQ is a web-based CRM from 37 Signals (owner of Basecamp, a popular project management tool). Like most CRM solutions, they allow you to track who you talk to and so forth, but the ability to see all of your email efforts and dialogue with a customer on one page is fairly useful.
Leopard CRM ^[26]
Integrating your email into your CRM efforts always looks daunting, but Leopard CRM simply says — call our support team and we’ll walk you through it.
SalesBoom
SalesBoom is an online CRM application that offers an email campaign management tool. With it, a user can capture leads via a simple web form and then send individual emails, or manage entire drip marketing campaigns ^[27] where you email customers or prospects a series of emails over a period of time.
SalesJunction ^[28]
SalesJunction offers one of the lowest monthly costs for a web-based CRM that I’ve found. The basic edition has a 15 day trial.
Lyris HQ ^[29]
Lyris HQ used to be known as Email Labs. It integrates with Salesforce.com, which is the industry-leading online CRM solution, so that’s a plus for the many business owners using Salesforce. I could not find pricing on their website, which is a downside in my opinion. Small business owners are too busy to talk to sales reps or sit through web demos just to discover pricing.
SOCIAL EMAIL
There’s loads of proof that social networks have changed how we communicate. They increase transparency, build trust, and give people (customers and prospects) the choice to opt-in to our messages.
With social media you can communicate directly to your customers without the traditional email hurdles and miss the inbox altogether. For example, your company can send messages to people in a Facebook or LinkedIn Group today. Twitter does not offer a group feature where you can message a group of people privately, but a third party app called Tweetworks ^[30] does. You could accomplish something similar by addressing a group with a hashtag — although it wouldn’t remain private. The goal with a private message is to avoid bothering others that would not be interested in the offer or message.

Small Business Accounting Software: 17 Targeted Choices

2010-02-01T09:36:00.001-08:00

Are you still keeping your books using a spreadsheet — or worse, a time-consuming paper accounting ledger? Make 2010 the year you get your books organized and in tip-top shape. Let technology help make it easy.
Here are 17 small business accounting software applications or bookkeeping apps that can help you manage company finances with more predictability — and do it with less labor and at a reasonable cost. I’ve focused on apps with a North American (mainly U.S.) focus, in alphabetical order:
Accounting ASAP ^[1]
Accounting ASAP takes the approach that you need invoicing most for your small business and that’s how they let you begin using the application. In under two minutes, you go from sign-up, into creating an invoice. Plans start at $0/month which includes up to 10 transactions a month. $10/month will get you up to 500 transactions. Offers 30-day free trial.
Big4Books ^[2]
Big4Books offers a free version to its online accounting software for small business. Support is limited for the free version, which includes an advertising sponsor message within the app. However, the $9.95/month Silver subscription comes with more support and no sponsor ads.
BionicBooks ^[3]
Many new web-based accounting applications are focused on making it easy for small businesses, startups, and contractors. Bionic Books offers a completely free subscription and the only limitation is you cannot print invoices and free includes only one user. The premium version is only £5.50/month.
Clarity Accounting ^[4]
Clarity is aimed at small businesses, freelancers, and independent professionals. They have a 30-day free trial and then $10/month or $100/year if you pay for the entire year. Offers a terrific click-through demo sample, with no signup information required, which shows you how simple it is to use.
Clearbooks ^[5]
Clearbooks prices their solution based on the number of transactions which is handy for small businesses that have a limited customer list. They offer a completely free option and the unlimited plan is £15.00/month. Free trial for 30 days on all plans.
Cobalt ^[6]
Cobalt is a new product and project-based accounting system made for small businesses. They take a project-focused approach and tie invoicing, customer data, and reporting together. They offer only one plan at $11.25/month, which includes unlimited users. Offers a 60-day free trial.
FreeAgent Central ^[7]
Free Agent Central is aimed at the freelancer market, which includes many small businesses. They include a time tracking module and a project management function, too. $20/month with 30-day free trial.
IAC-EZ ^[8]
IAC-EZ offers an online bookkeeping application for small business owners. In their feature list, they have a claim that others don’t – that there is an “accountant on call.” It also estimates your taxes for you (US only). They offer one plan at $19.95/month with a free two-week trial.
Intuit QuickBooks ^[9]
Just about every small business owner has heard of QuickBooks. It frequently ranks in the top lists of small business financial software packages. They offer desktop and web-based versions. Offers a month-to-month, pay-as-you-go contract as the web-based version. Starts at $9.95/month. I reviewed QuickBooks 2010 here ^[10].
Ledgerble ^[11]
Ledgerble works hard to make accounting easy. They have focused on the user experience and reducing the number of clicks to record transactions. Then memorizes the products and services you sell, and to whom, so creating invoices is fast, too. They offer one plan for only $14/month with a 30-day free trial (which does not require a credit card, just your email and a password).
LessAccounting ^[12]
LessAccounting encourages customers to stop trying to learn Quickbooks and use their import tool. They were one of the first to offer an iPhone app. From their free option up to $24/month, all plans include a 30-day free trial where you can test out all the features.
Merchants Mirror ^[13]
Merchants Mirror has a one-stop dashboard where a user can get a complete snapshot of the company’s financial picture. In that same view, they offer a good view of customer and vendor data for accounts receivable and payable. Offers a 30-day free trial and then $15.95/month.
NetService Books ^[14]
We included this niche offering in this review post because there are many contractor businesses out there that might find this solution to be perfect. It handles dispatching, scheduling, invoicing, and synchronizes with QuickBooks. Net Service Books specializes in the HVAC and Plumbing industries. The platinum version offers a full-fledged general ledger. Lite version sells for $25/month.
Outright ^[15]
Income, expenses, taxes, and reports are the four main tabs in Outright’s dashboard navigation. Then, they ask two questions: Would you like to start with money coming in? Or money going out? They designed the service for sole proprietors and single member LLCs and it is completely free, forever. As new features roll out, they plan to offer a premium version, but it is robust at the free level. My review of Outright ^[16] from a few months ago.
Pulse ^[17]
Pulse approaches accounting from a cash flow perspective first. They believe that cash flow is the heartbeat of a company and that viewpoint will allow you to manage income and expenses better than traditional accounting approaches. Their plans start at $9/month up to $24/month and each includes a free 30-day trial.
WorkingPoint ^[18]
A web-based package that includes double-entry bookkeeping, online invoicing, bill and expense tracking. They offer a free and paid version. Free allows two users and invoicing for up to five customers, which can be great for part-time freelancers. After that, the premium version is only $10/month for unlimited users and customers, but it also has more robust reporting. Read my review of WorkingPoint ^[19].
Xero ^[20]
Xero is an online accounting system designed for small businesses and their advisors. They offer a free trial with a “pay nothing until you’re ready” clause. Plans start at $19/month up to $39/month. The $19/month plan limits you to five accounts receivable and five accounts payable invoices per month and only 20 reconciled bank statement lines per month.

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These are the accounting apps priced for small businesses that we think you might want to check out. Please note: details about the small business accounting software apps are believed to be accurate as of the time of publication, but features and offerings may change over time. Always check the vendor’s website for up-to-date details. Special thanks to Smartsheet for help in compiling this list for us with their Crowdsourcing ^[21]service.

30 Online Invoicing Apps for Small Businesses

2010-02-01T09:32:00.001-08:00

Posted By TJ McCue On January 18, 2010 @ 7:16 pm In Product Reviews |

Do you struggle with sending out invoices or estimates to your customers each week or month? Make 2010 the year you get your invoices online and done with less hassle by using Web-based technology.
Here are 30 small business online invoicing software applications to help you manage sending your customer bills out — and do it with less labor and at a reasonable cost. I’ve focused on apps with a North American (mainly U.S.) focus, in alphabetical order:
AcceptPay ^[1] is a new electronic invoicing service from American Express. It offers a free option for one user called AcceptPay Lite that allows you to email 10 invoices per month and maintain an unlimited number of customers in your account. The full version AcceptPay is $20/month and integrates with QuickBooks, accepts online payments, ACH, and eChecks. I was impressed to see American Express entering this marketplace and putting some of their muscle into an online invoicing and billing solution. (Note: American Express is a sponsor of this site.)
Ballpark ^[2] is an online invoicing service that believes the key component of any customer relationship revolves around communication. So, their dashboard tracks the back and forth dialogue between you, your customer, and your team. They offer a free personal plan and the small biz plans start at $6/month.
BambooInvoice ^[3] is a free open source invoicing software for small business and independent contractor types. You load it on your own servers; it is not hosted like most of the others listed here. It offers a good online support forum as well. This is the only open source application I’ve seen in this space and it is one to watch for that reason.
BillingBoss ^[4] is a completely free online invoicing tool aimed at both freelancers and small business. It is owned and sponsored by Sage Software (owner of SageCRM, Peachtree and many other apps) and is both an outreach by them to serve the small biz owner and a very soft plug for their other products (which doesn’t diminish its functionality and value, in my book). A really cool thing is you can use your existing merchant account with their Payment Plus option for $5/month. Again, the main invoicing tool is free.
BillingOrchard ^[5] offers a highly recommended Auto-Invoicing feature that customers often talk about, so their solution is ideal for those with recurring billing needs. They offer a 15-day free trial and then a lite version at $9.95/month and $14.95 for standard. When you use the auto-invoice features, there is an additional cost per month, by number of transactions.
Blinksale ^[6] targets small businesses and creative professionals who want to send well-formatted invoices easily. Their lowest price plan starts at $6 for 6 invoices a month, but you can have as many customers in the system as you want. It offers a free 30 day trial and integrates with Basecamp (the well known project management service).
CannyBill ^[7] is a web-based billing and invoicing solution aimed at web designers or professionals, although it certainly has the features that most small business owners will want. It offers a fully functional free account with up to 10 invoices per month. Pricing ranges up to $48/month at the enterprise level.
Cashboard ^[8] is a free financial time tracking service that lets you invoice, send estimates and accept payments online. They were quick to create desktop widgets for Mac and Windows as well as the iPhone so that you are not tied to a browser to manage your information. I found their pricing options just a bit confusing because most of the others listed here offer unlimited usage when you buy the paid version. With their “Dynamic” $10/month plan, you pay a bit extra for usage by employee and invoices. They offer a free for life plan, too.
CurdBee ^[9] is online billing software for small business and freelancers. It offers a robust free level with unlimited invoicing and customers. It allows you to accept Paypal and Google Checkout, too. However, the free level invoices include a Curdbee logo, which seems fairly low key. Curdbee Premium level is only $5 a month and lets you remove the Curdbee logo from emails and invoices. The development team clearly thought about the customer with a demo that lets you take an in-depth look at the online invoicing service without even a trial. I give them a thumbs up for making it painless to learn more and for keeping it fast to make a decision.
Endeve ^[10] positions itself as an invoice management service. It offers a forever free plan with an unlimited number of invoices and customers. The Professional Plan is $20/month and allows you to create Pay Now buttons with Paypal, customize your invoice layouts, and manage your expenses.
Enliven Software ^[11] is for the larger small businesses out there. It is integrated with Microsoft Dynamics GP, Peachtree, and QuickBooks and automates accounts receivable and accounts payable processes for vendors and for customers. There was no pricing information available.
Freelance Total ^[12] is online invoicing meets project management. Their web-based software allows you to take a client-centric approach to invoices as you manage the project. Plans start at $4.95 a month. It doesn’t say how long a free trial is, but it doesn’t collect billing information at signup.
Freshbooks ^[13] is considered by many to be the market leader in Web-based online invoicing. It offers the standard features you’d expect, plus time tracking and the ability to manage subcontractors who are also working on your project. They integrate with other accounting and project management systems such as QuickBooks and Basecamp. They offer a fully free plan (some limitations) up to $149/month. I have personally used Freshbooks and have found their service was elegant and easy to use. They have thought (for a long time) about their customers’ needs.
Invoice Journal ^[14] is completely free. It doesn’t offer any pricing info and suggests it will be free forever.
The Invoice Machine ^[15] is an elegant application. You can do all the standard online invoicing functions, but in the tour, I was impressed with the flexibility. You can add line items in your invoice manually or from the project time tracking tool with a few clicks. You can create an HTML email invoice or attach one as a PDF. They offer an always free plan up to $48/month.
InvoiceMore ^[16] is an online billing and invoicing solution for freelancers, entrepreneurs, and businesses. It offers multiple features so that you can create, download, store, backup, print, and email PDF invoices to clients. You can track overdue balances. They offer a free plan all the way up to $99/month.
InvoicePlace ^[17] is an easy online invoicing service. One of the things that caught my eye was the simple offer of showing a completed sample invoice, in what looks like a Microsoft Word document. The tour explains the many features well. Free plan up to $20/month.
Invoicera ^[18] offers invoices, estimates, and client reporting that you can use to track by specific product or service. You can add team members to a client and track their invoicing as well. Free plans, up to $149/month.
Invoices Made Easy ^[19] offers an online invoicing service exclusively for small service-oriented trades. From landscapers to consultants, they offer the standard online invoicing options, but they also have an “EasyMail” service which will send your invoice via postal mail. Free 30 day trial, then $9.95/month.
Invotrak ^[20] is both an online invoicing and timesheet tracker. They offer good reporting tools as well as iPhone and iPod Touch apps. They have a limited Free plan up to an Unlimited plan at $45/month. It integrates with Basecamp.
LiteAccounting ^[21] offers four simple plans from free up to $18/month. The dashboard shows three boxes front and center to keep you focused: Products/Services, Customers, and Invoices. They have a nice demo which answers most questions so you can decide without all the signup hassles.
Nett30 ^[22] provides an online service for small businesses and contractors who need to make invoicing quick and user friendly. You can view real-time account summaries at any time. Send invoices as PDF, e-mail or have clients access them online. They have four plans: All unlimited. Free includes 5 clients up to Business Pro for $ 39 per month.
PaySimple ^[23] is another market leader and focused on recurring online payments, including invoicing. They come at online payments with a Merchant Account background, so their service is oriented at credit card payments, ACH, eChecks, and online payment forms. They have a free setup (usually $129) and $34.95/month, then transaction fees. If you need the combination of merchant account and all the other pieces that you’ve read about here, they are worth a look.
Ronin ^[24] is simple online invoicing product for freelancers all the way up to larger small businesses. Clients can log in to get their invoices or you can email them. You can try it out free without any worries of a time limit, but the free version is branded as powered by Ronin. After Free, plans range from $15/month up to $48/month.
SantexQ ^[25] is a project management and time tracking tool that also lets you bill clients directly from the service. It offers web-based reporting, but also lets you export to Excel for customizing reports as you like. For a single user it is free, but limited, then only $9.95 per month for unlimited users.
Sbzone.com ^[26] is a comprehensive online application suite combining sales, customer management, and accounting functions in one place. It offers a 30 day free trial and two plans: Limited Free plan and a $39.99/month.
Simplybill ^[27] offers a clean interface and design to make the online invoicing process easy. The dashboard offers three tabs: Invoices, Quotes, and Clients. They offer the ability to keep in contact with your customers via reminders and thank you notes. There is the standard 30-day free trial, then $5/month up to $25/month. They have received excellent reviews and are worth a look.
Simplifythis ^[28] is more than an online invoicing application. It starts with helping you book your appointments online and ties that data into the billing tool. It offers two services that start at $9/month: EasyBill and EasyBook. No credit card required for free 30 day trial. What I liked most about this service was that they have captured the attention of busy small biz owners who know something about technology or were not at all computer-savvy and still love the service. They have done of good job of making it useful for a range of skillsets and that’s not easy to do.
Simply Invoices ^[29] follows their own name in concept for explaining what they do; they keep it simple. You can wrap your head around how they do things with a five step screenshot tour they offer, on one page. They offer a completely free plan up to $25/month.
Winkbill ^[30] offers a robust online invoicing app at the free level all the way up to their platinum plan for $39.95/month. You can put your own logo on invoices with the free plan, but you can’t send them as a PDF. Loads of eye-catching templates you can use, too.

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Growing Drivers for Rural Indian Opportunity

2010-01-28T00:17:00.001-08:00

RISING INCOMES: Due to a number of factors such as microfinance products, exemption from income tax, NREGA, mass media penetration, investment in rural infrastructure and the increased production of higher-value crops, disposable incomes in rural households are increasing, thus creating a positive scope for retail opportunity in rural India.

COMPARABLE GROWTH: The spending patterns of rural consumers are now comparable to their urban counterparts. The rural middle class is growing at 12 per cent as against the urban middle class growing at 13 per cent.
SECTOR-WIDE GROWTH: Various sectors have witnessed growth in the last few years. For instance, the FMCG market has grown by 23 per cent and the telecom industry by 31 per cent in rural India.
RISING DEMAND: Media penetration has increased awareness among rural consumers. This has increased their willingness to spend, creating demand for modernised products in place of locally available items. The demand for premium brands has also risen in rural households

How Korean consumer durable majors knocked out rivals

2010-01-28T00:16:00.000-08:00

How Korean consumer durable majors LG and Samsung knocked out rivals in the fight for market share and brand recall.

Some time in the middle of 1994, the Dhoots of Videocon put their brightest man, Ravinder Zutshi, on a special project. They had been approached by Samsung which was keen to sell its consumer electronics in India. The Korean company had proposed a joint venture which could source products from Videocon’s factories at Aurangabad in Maharashtra. Zutshi was asked to study the possibilities.
Quantitative research threw up no surprises. Unaided awareness about Samsung was close to zero, aided awareness was slightly better at 7 per cent. People thought the Japanese were the masters of all technology, and the Koreans were at best imitators. But when he dug deeper, Zutshi found deep dissatisfaction amongst consumers from multinational (Sony, Sanyo, National, Philips and others) as well as Indian (Videocon, Onida, BPL et al) brands. The consumers’ aspiration and awareness were high, but the technology made available to them was low. And there was no indication that any of them would invest in the latest technology. After-sale service existed only on paper.

LEADING THE PACK Combined market share of LG and Samsung
TVs	45%
LCD TVs	63%
Refrigerators	43%
Washing machines	41%
ACs	42%
Microwave ovens	48%
Source: Industry

Zutshi’s report said there was a big gap that could be exploited. With better technology, contemporary products and a customer-friendly disposition, Samsung stood a fair chance in the market. The Dhoots trusted Zutshi. If Samsung did well, they argued, their factories at Aurangabad would run at full capacity, and whenever the foreign investment rules were further liberalised, they could sell their stake to the Korean chaebol and make a neat pile of money. Quickly, they formed a 49:51 company with Samsung. It was 1995.
Around the same time, LG (it was at that time known as Lucky Goldstar) sent a large and high-powered team to India. The odds were stacked against the company — low awareness of its brand, poor perception of Korean technology and so on. But the team saw that the Japanese were not too interested in India; Europe and the US were their primary focus. This had made Indian brands complacent, and they lacked the financial wherewithal to come out with cutting-edge technology.
LG also found out that education was very high on the agenda of Indians. The team members knew that it was education that had transformed South Korea from a poor agrarian country into a developed industrial powerhouse in a matter of decades. The same would happen in India, the team reported to its bosses back home. The LG brass was convinced and made up its mind to enter India. As rules did not allow a fully-owned subsidiary, it first tried its luck with Bestavision and then with Chandra Kant Birla. Finally, in 1997, when the foreign ownership rules were relaxed, it came on its own.
Cut to the present. In most product categories of the consumer electronics market, LG and Samsung lord it over a market share of over 40 per cent — television, refrigerators, air-conditioners, washing machines and microwave ovens. Outside South Korea, this has not happened in any other large market. In certain categories, their products sell at prices similar to Japanese rivals — a clear indication that the perception of the Koreans being poor cousins of the Japanese is history. Their brand recall is universal. Indian brands, with the exception of Videocon, which has now hired ex-LG honcho Kwang Ro Kim as chief executive, are on oxygen. LG did business of $2.8 billion in 2009. India accounts for about 6 per cent of LG’s worldwide turnover. “We want to raise it to at least 10 per cent by 2012,” says LG India Managing Director Moon Bum Shin. “By 2015, India will become the second largest contributor to LG’s revenue after the US and ahead of (South) Korea,” he adds. Samsung crossed the $2-billion mark in 2009 — India is around 2 per cent of its global turnover. How did the Koreans get the better of rivals in India?
Strong foundation
Both LG and Samsung knew that half measures wouldn’t work in India. Thus, LG has invested $300 million and Samsung $200 million in two production facilities each. “It wasn’t a global factory that also supplied to India. We didn’t want to make the customers wait,” says Rajeev Karwal, who drove sales and marketing at LG from 1997 to 2003, then headed Philips and Electrolux in India, and now runs a consultancy for small-scale enterprises called Milagrow. Apart from Videocon, no rival of the Koreans has put up large production facilities. “In terms of investments and technology, no other Indian company apart from Videocon had the might to rival them,” says Videocon Chairman Venugopal Dhoot.
LG and Samsung brought the latest products, customised them to Indian conditions (Samsung, for instance, reduced the size of the freezer in its fridges because Indians didn’t want it; LG cut out all frills that were not required in India) and began to give quick after-sale service. Samsung, says Zutshi, now deputy managing director, Samsung India (the Dhoots exited the venture in tranches by 2002; it had broken even by 1998), was the first in the industry to give uniform training to all technicians. “When pagers came in July 1995, we gave one to all technicians across metros,” says he. Also crucial were the Korean price tags. LG as well as Samsung prices were up to 20 per cent below Sony, but around 10 per cent higher than Indian rivals. The brands were positioned as value for money.
They spent large sums of money on brand promotion. Both LG and Samsung now earmark 4 to 5 per cent of their turnover for brand development, above- as well as below-the-line. This translates to ad spends of at least Rs 400-500 crore from each. In the initial days, when they were yet to build scale, help poured in from their Korean parents in liberal measures. The Koreans knew little about cricket but were quick to join the bandwagon in India.
But how did they address the quality perception? For the first three months, Samsung campaigns focused on its technological achievements. It was, after all, the world leader in colour picture tubes and semiconductors. “If you don’t want the best, go to Sony, National and Philips, we said in our advertisements,” says Zutshi. Karwal says he was able to convince the LG brass that it should build on its Korean heritage and not hide it. “The company wanted to play on the Goldstar brand because it had some recall. But I argued that it had failed in India so why harp on it? We went ahead with LG. I said let’s not pretend to be what we are not.”
“Where they have scored,” says the top functionary of a rival, “is that they treated India differently than other Asian markets.” And they ambushed rivals whenever they could. Karwal says when he came to know that Sony was ready to launch its flat-screen television, he rushed to Seoul and managed a consignment of 500 flat-screen televisions to launch first.
“I also got to know that Sony had booked the centrespread of a publication. So, I bought the wrap-around which said ours was the flattest thing on earth.”
The Japan factor
Still, LG and Samsung owe a debt to their neighbours across the sea — they were quick to adopt the best manufacturing practices of Japanese companies. Samsung, for instance, uses the just-in-time supply principal with its vendors — they need supply only when the factory demands. Its vendor development exercises could be straight out of the Japanese management textbook. “They (the Koreans) combine American marketing with Japanese manufacturing,” says Karwal.
So, where did the Japanese go wrong? An industry veteran, who for long worked with the Japanese, says they tested the waters in India for too long, and thereby lost the first-mover’s advantage to the Koreans. Panasonic India CEO Daizo Ito admits that the company has ratcheted up its focus only in the last one year. “Panasonic has been in the Indian market for long but, as a part of strategy, the focus has been increased exponentially since last year or so.” The Japanese also went after the premium slots in the market, and thereby missed the volumes. “LCD television is the only segment where we compete (with the Koreans) but here too our and their key target segments are different. We are focused on households with an annual income above Rs 5 lakh, unlike the Koreans,” says Sony India Managing Director Masaru Tamagawa.
The question is, have the Koreans taken an unassailable lead over the Japanese? The Japanese take heart from their large market share in automobiles, cameras, cordless phones, small appliances and LCD televisions. Panasonic, for one, is aiming for growth of over 100 per cent in each of the next two years, and double-digit market share in LCD television. “Coming from the Japanese domain, the quality and reliability of products is our strength. The challenge is to make this strength reach the consumer,” says Ito. “The retail experience is also the key. Therefore, we have continuously expanded our brand shops and presence at other retail counters.” But this is the game the Koreans seem to have perfected.
Trade relations
When the Koreans first came to India, the consumer electronics trade was archaic and in disarray. All producers had appointed distributors who then sold to the dealers. There was thus little direct contact between the dealer and the company. No company had a full portfolio of products, so the dealer had to deal with several producers and their distributors. Companies that did have more than one product had separate divisions for each line, which often didn’t talk to each other. This only compounded the dealer’s headache. Companies encouraged multiple dealers in every location — the rivalry kept the trade margins low.
“The first thing we did,” says Zutshi, “was that we cut out the distributor.” This, at one stroke, improved the profit margins of the dealers. More important, it improved their bankability. And dealers, who were reluctant to invest at the behest of the distributors, began to jazz up their showrooms. Of course, they began to push the Samsung brand with gusto, though its price tags were higher than those of Indian brands.
LG too took a new approach. Instead of going to all, it identified the best dealer in every locality, the one with maximum footfalls. It made sure that the dealer did not face competition from others in the vicinity. As a result, the dealer, who earlier got no more than 5 to 6 per cent commission on sale, now began to get as much as 12 per cent. This was unprecedented in the history of Indian consumer electronics. The goodwill helped LG and Samsung expand quickly to the heartland. And that was the key to its success. Ever since, dealership for a Korean brand has been more profitable than others.
This is a point even rivals do not dispute. Onida Vice-president (sales, service and marketing) Sriram K says that the Koreans invested upfront and got the rewards later. “At one point, LG was even known as a credit brand because of how flexible it had become in trade circles,” says he. “It realised that doing business in India needed flexibility and therefore extended credit to dealers unlike a lot of other multinationals. Now that it has strong relations with the trade, it has tightened the terms. But the initial flexibility helped it garner volumes.” That’s the learning.
Additional contribution with Amit Ranjan Rai & Sayantani Kar

SCORING BIG WITH SMALL

The Korean challenge in automobile is led by Hyundai. With 23 per cent of the car market, it is second in the pecking order after Maruti Suzuki. It has a factory that can make up to 600,000 cars in a year, wants to set up a diesel engine plant and has close to 300 dealers across 230 cities and towns. In 2009, almost 18 per cent of Hyundai’s worldwide sales happened in India. It’s good but not the same as in consumer electronics. That is perhaps because the Korean car industry has gone through consolidation: Hyundai acquired Kia, and bankrupt Daewoo was bought by General Motors.

Daewoo, in fact, was the first serious challenge to Maruti Suzuki. It had started out with the Cielo sedan. Daewoo had tasted success in China with big cars and saw no reason why Indian consumers should not move en masse to large cars. It put up a factory near Delhi that could make 60,000 Cielos in a year. But India remained a small car market. Daewoo then changed course and began to focus on the Matiz, a small car. But then the parent went belly up and Daewoo’s operations in India came to a grinding halt. Some Daewoo cars have now reappeared under the Chevrolet brand — the Optra, Spark et al.

That was the time when Suzuki was fighting a pitched battle with the Indian government over control of Maruti Suzuki. Between 1996 and 1998, as the two partners fought, Maruti Suzuki was paralysed and could not introduce new models. It had turned into a soft target. Trouble back home kept Daewoo from drawing maximum mileage out of the situation. The challenge was taken up by Hyundai. It set up a plant in Tamil Nadu — the bastion of the late Murasoli Maran who had led the government in its fight against Suzuki.

By 2002, the government and Suzuki had settled the row. This helped Maruti Suzuki shift gears and flood the market with new models. It became a company on a mission — Japanese executives even agreed to stay in a hostel close to the factory near Delhi. It still sits on over 52 per cent of the market. “Suzuki’s commitment to India in the auto sector has been whole-hearted, which reflects in the way the company operates here. Look at our management. Unlike Japanese companies in other segments, we have had a completely Indian management,” says Maruti Suzuki Chairman RC Bhargava.

Jagdish Khattar, who was the managing director of Maruti Suzuki from 1999 to 2007 and now runs a car-service venture called Carnation, says Maruti Suzuki has the upper hand in India as Suzuki’s core strength lies in small cars. That is because Japan is a small-car market. Korea, though it offers tax sops for small cars, is a large-car market.

But Hyundai has grown rapidly in India. “We have consistently outperformed the market,” says Hyundai Motor India Senior Vice-president (marketing & sales) Arvind Saxena. “This means our market share has grown consistently.” The company benchmarks itself against Toyota in quality, and has made India the hub for small cars. It has begun work on a new car that will be smaller than the Santro. It is lobbying hard against the Indo-Thai Free Trade Agreement which helps Japanese companies to source cheap components from Thailand. The Korean aggression is unmistakable. In comparison, Toyota and Honda, after spending almost a decade in the country, have only now begun to talk of a small car.

Nestle, Glaxo focus on rural-specific products

2010-01-28T00:12:00.001-08:00

Seema Sindhu / Mumbai January 28, 2010, 0:30 IST

India Inc’s rural focus is undergoing a key shift. So far, the strategy was to only introduce smaller packs of their flagship brands at lower price points.
Companies like Nestle and GlaxoSmithkline Consumer Healthcare (GSK) are now taking a different route and launching products specifically for rural markets. GSK (maker of Horlicks), for instance, has launched Asha -- a low-cost variant (40 per cent cheaper than Horlicks) for rural markets only. Asha tastes slightly different and is priced at Rs 85 for a 500-gram pouch pack -– close to half the price of the original.
Nestle, too, recently launched Rs 2 and Rs 4 products -- Maggi Masala-ae-Magic and Maggi Rasile Chow, products which be first marketed in areas with low purchasing power. Maggie Rasile Chow has been developed especially for the rural/semi urban markets to provide low-cost, light meal fortified with iron. Masala-ae-Magic is a taste enhancer containing iron, iodine and vitamin A. Shivani Hegde, general manager (foods), Nestle India, says these products were developed to address the widespread concern about micro-nutrient malnutrition in India.
Anand Ramanathan, sector analyst from KPMG, confirms the shift in approach. “Till recently, most FMCG companies used to treat rural markets as adjuncts to their urban strongholds and rural consumers as a homogeneous mass without segmenting them into target markets and positioning brands appropriately. However, it is beyond doubt that the rural markets are not dumping grounds for low-end products basically designed for an urban audience. The winning strategy instead is to focus on their core competency such as technological expertise to design specific products for the rural economy.”
In the past, Britannia (with Tiger Iron Zor), Coca-Cola (with Vitingo) have distributed micro-nutrient enriched products for low-income group through partnerships with NGOs as CSR activities. But these were not-for-profit ventures.
Analysts believe these products have a bright chance of doing well in the rural markets. “Access to rural markets is through three routes -– firstly addressing the right need, secondly availability and thirdly being affordability. Consider Asha, there is a definitive need for giving something extra to the child (in terms of nutrition) that is currently being fulfilled through home-grown methods of providing wholesome food to the kid. Asha, an affordable health drink additive, is surely well placed to be a winner if the company can distribute the product well and reach out the rural masses,” believes Naimish Dave, Director, OC&C Strategy Consultants.
Analysts are hopeful of the success of such products as rural markets have tremendous potential. The purchasing power in rural India is on a steady rise and the market has been growing at 3-4 per cent per annum adding more than one million new consumers every year. It now accounts for close to half of volume consumption for FMCG companies.
Moreover, India is now seeing a dramatic shift towards prosperity in rural households. A National Council for Applied Economic Research (NCAER) study reveals there are as many ‘middle income and above’ households in the rural areas as there are in the urban areas. There are almost twice as many ‘lower middle income’ households in rural areas as in the urban areas.
Further, the proportion of the rural population that is dependent on agriculture has declined from 75 per cent in 1994 to less than 67 per cent and the share of agriculture in rural GDP has declined to 48 per cent from 60 per cent in 1994. In rural areas, people have been shifting away from agriculture to areas such as trade, construction, transport and communication. Those employed in the non-agricultural sector have around 2-2.5 times earnings of those in the agricultural sector. Given the potential, rural market-specific products ware bound to work for these companies, experts say.

Buddy, Can You E-Mail Me 100 Bucks? The Next Big Thing in U.S. banking may be mobile person-to-person money transfers

2009-11-13T21:29:00.001-08:00

What if you could send money to that friend who loaned you $20 last week by using your mobile phone rather than having to go through the trouble of trekking to the ATM or mailing a check? All you'd need would be your buddy's e-mail address or cell number—and presto.

Folks in Japan and Europe can already do that. Soon Americans will, too. Studies show that U.S. consumers, particularly the younger set, have embraced the convenience of online shopping and e-banking and are now ready to move to the next frontier: person-to-person mobile payments. A recent poll by Mercatus, a financial consulting firm, showed that the proportion of people ages 26 to 34 who had used a cell phone to buy goods or pay for a product or service had doubled, to 14%, in the past year. "We are at the tipping point," says Mercatus managing partner Robert Hedges.

That's why a host of banks and financial companies are gearing up to add person-to-person payments to their existing mobile and online banking platforms. PNC Financial Services (PNC), Bank of the West, and the Boeing Employees' Credit Union have teamed up with CashEdge, an outfit that already processes more than $50 billion a year in transactions among financial institutions, with plans to launch services in early 2010. Fiserv (FISV), a technology company that handles bill payments for 3,100 financial institutions, is marketing a similar service. MasterCard (MA) is working with Obopay, a mobile payment startup with funding from Nokia (NOK), while Visa (V) has been testing a service with U.S. Bancorp (USB). "Payment habits change pretty slowly, but Generation Y expects this," says Thomas S. Kunz, director of payments and e-business at PNC Financial.

While the banks are only now waking to the potential of person-to-person payments, PayPal (EBAY) has built its business on them. The company, acquired by eBay in 2002, boasts more than 78 million active account holders worldwide and introduced a service earlier this year that allows users to make transfers over a cell phone. Now it is teaming up with banks to offer the same service. FIS (FIS), a tech outfit that counts 14,000 financial institutions as clients, announced on Nov. 3 that it plans to integrate PayPal's technology into its online banking platform. "We found out that [banks] want to collaborate more than ever," says PayPal President Scott Thompson.

HACKER HEAVEN?

Here's how these digital cash transfers work. Sign up for a service through your bank or another provider. Enter an e-mail address or phone number to send money to anyone you know. Your bank's person-to-person payment system will be integrated with your regular online banking, and the funds will be debited from your account. At the other end, the recipient may get the cash deposited directly into an account or have it posted to an existing credit card or a prepaid card. Mostly likely, banks will make money by charging senders a nominal fee (25 cents, say, for a domestic transfer).

What about security, you ask? "Banking on the mobile phone is relatively safe," says Robert Vamosi, an analyst on security, risk, and fraud at Javelin Strategy & Research. In fact, says Vamosi, mobile banking is currently more secure than online banking because cellular networks are tough to hack into.

With many of these new offers set to launch next year, the big question is who will gain critical mass quickly. Says Jim Bruene, editor of trade publication Online Banking Report: "Whoever can make mobile payments as simple as sending a text message is going to win."

Bet Your Bottom Dollar on 99 Cents

2009-02-24T04:34:00.001-08:00

By TIM ARANGO

In one of the many smoky scenes in “Mad Men,” the critically loved cable show about Madison Avenue in the era of martinis and misogyny, a founder of the celluloid advertising firm Rogers & Sterling describes marketing glory.

“I’ll tell you what brilliance in advertising is,” says the actor John Slattery in the character of Roger Sterling. “99 cents.”

It may be just the insight the nation’s retailers are looking for as they struggle to stimulate consumer spending in this trying time: If you can’t sell something for 99 cents, you should at least tack on .99 to the price.

Steven P. Jobs, the chief executive of Apple Computer, tried the 99-cent approach and arguably saved the music industry from oblivion.

In picking that one standard price for each song for sale on iTunes, Mr. Jobs built a commercially viable digital delivery business for music. Before the start of iTunes in 2003, it was an iffy proposition that people would ever pay for music online when they could steal it from any number of peer-to-peer networks.

Dave Gold also tried it. In the 1960s, he and his wife owned a liquor store in Southern California where they sold wine at various prices: 79 cents, 89 cents, 99 cents and $1.49.

“We always noticed that the 99 cents sold much better,” he recalled in an interview.

They priced all their wine at 99 cents, and overall sales improved.

“The 79 cents sold better at 99, the 89 cents sold better at 99, and of course the $1.49 sold better at 99,” he said.

Mr. Gold’s experience might suggest caution as iTunes prepares to sell songs in April at varying prices — a move that some academics say could complicate matters for consumers and cut into sales.

“It adds a level of complexity to the purchase of music,” said John T. Gourville, a professor at Harvard Business School who has studied what is known as psychological pricing. “Research has shown that when you add complexity to decision making, some people opt not to choose anything,” he said.

Mr. Gold and his wife eventually took the concept to the extreme and in 1982 started a chain of 99 Cents Only stores. They took it public in 1996, and today the company has 282 stores and is worth more than half a billion dollars. In the last quarter, sales were up 8 percent; profits, 31 percent.

Mr. Gold wasn’t the first to strike on 99 cents as a lucrative marketing gimmick, but he may have done the most with it. No one quite knows who came up with the concept.

It could have been Rowland H. Macy, who in this newspaper in 1880 advertised 100 pieces of “reliable black silk” for 99 cents. That’s the first instance of a newspaper advertisement featuring a price of 99 cents — at least the first one that one academic who did some digging on the subject could find.

Then there is this explanation: that the advent of the cash register, invented in 1879 by a Dayton bar owner (according to the Museum of American Heritage), allowed merchants to thwart pilfering clerks by charging a penny less then a full dollar amount, thereby forcing cashiers to open the register to give change to a customer.

Regardless, the marketplace power of .99 seems undeniable. But why?

Academics have offered a variety of psychological explanations. One study, by Robert M. Schindler, a professor of marketing at the Rutgers School of Business, found that consumers “perceive a 9-ending price as a round-number price with a small amount given back.” Researchers have also found that prices ending in .99 communicate “low price” to consumers.

At the University of Chicago, for instance, researchers found that when the price of margarine dropped from 89 cents to 71 cents at a local grocery chain, sales improved 65 percent, but that when the price fell to 69 cents, sales rose 222 percent, according to Kenneth Wisniewski, an author of the study.

And Professor Schindler, in a study at a women’s clothing retailer, found that the one-penny difference between prices ending in .99 and .00 had “a considerable effect on sales,” according to his study, with items whose prices ended at .99 outselling those ending at .00.

All of those findings may help explain why the new prices that iTunes plans to charge all end in nine: 69 cents for less popular songs, and $1.29 for current hits.

So when retailers price their wares with a figure ending in 9, the reason is simple, Professor Schindler said.

“It’s to make the price seem like it’s less.”

Designing products: One design does not fit all

2009-02-01T10:31:00.001-08:00

One Design Does Not Fit All
Ellen Glassman
General manager of brand design and strategy
Sony Electronics USA
Park Ridge, New Jersey
At Sony, we believe What customers really want is choice. How we deliver that is a collaborative process between designers, engineers, and marketers. What we've found is that consumers have very different needs that can't be fulfilled by a one-size-fits-all approach. So we believe in offering a breadth of designs, price points, and features: In March, we introduced nine flash-based players to the Network Walkman lineup, which includes last year's 20-gigabyte HD3.
Competing in this space? Honestly, it's all about customers first. We accomplish that by having our designers watch for emerging trends and technologies and then marry them to the needs of the customer. Our designers must have an extra sense of what will come. We send them all over the world to different kinds of exhibits, such as the Milan furniture fair. We have designer exchange programs, where someone from, say, Tokyo will work in the States for a while. Senior management realized very early on how important it is for designers to understand different cultures. It's a way for them to keep their minds open to possibilities.
We believe we're in a unique position as an entertainment company. As digital technologies converge, we're evolving to combine portable audio and entertainment. If someone wants to play games, listen to music, or watch a movie, we offer that in one device. If they want to make a call, take a photo, and listen to music, we do that too. So we're going to continue to pursue what we've always pursued: identifying consumer lifestyles and making products that work for them. In the end, we're really competing with ourselves to make the products better.
Ellen Glassman, 40, was formerly director of the Sony Design Center. Early reviews of Sony's newest set of flash-based players say it's a strong contender to take on the iPod shuffle.
Let the Customer Drive Design
Steve Gluskoter
Codirector, Industrial Design and Usability
Product Group, Dell
Round Rock, Texas
Sometimes, something that looks cool or neat is of no value to the customer. By the time we entered the market for MP3 players in 2003 with the Dell DJ, there had been a lot of products out there, and we studied the vast majority, including the iPod. There were positives and negatives for every player, and we tracked them. But we didn't want to focus on what everyone else did.
At Dell, we don't make design decisions based on style alone. Customer input is a huge driver, which is why we talk to our customers directly through our in-house usability lab. This is where we test our concepts alongside our competitors'. Then we watch and learn. That's how we realized the importance of volume control, which has a dedicated button on the Pocket DJ. It's something people want to adjust constantly but was often buried or difficult to find on other players.
We also do our own trend watching. Honesty of materials was one trend that factored into the design. People want to know that the cold feel of metal in your hand is the real thing, so we chose to go with anodized aluminum, which gave us the strength and rigidity we needed. Also, our surface is fingerprint resistant. In the labs, we saw that people were incredibly annoyed by that with the iPod.
There's a sign in the lab that says two things: listen to the customer and you're not the customer. We bring in people across a broad demographic, from target customers to owners of our competitors' players, from teenagers to corporate executives. It's hard to do the wrong thing if you're talking to enough people and listening to what the masses are telling you.
Steve Gluskoter, 41, joined Dell in 1993 as its first industrial designer. The Pocket DJ, released last October, was named one of Oprah's Favorite Things in 2004.
Put Design First
Young Se Kim
CEO and founder, Innodesign Inc.
Palo Alto, California
In the first 15 years of my career as a designer, many clients would come in with an idea already set and then ask me to make it pretty. The trouble is, their ideas were based on research from competitors' products or trends. It's very difficult to make a completely different product that way. You'll end up with more of the same.
That's what happened with iRiver's first hard-drive player. It was based on an engineering spec, and we didn't have as much freedom with the design. So with the H10, its successor, I felt we had to start from scratch. We obviously couldn't ignore our biggest competitor, the Apple iPod, whose design is so popular. But we wanted to do something different. With the iPod's click wheel, I noticed lots of people using only one-quarter of the turn with the thumb. So I thought, if that's all they need, why not make it just go straight up and down? That idea -- that a vertical touch pad might make more sense -- came from just watching people at coffee shops.
Industrial design has become one of the few cards manufacturers can play these days. It's especially true for MP3 players, because the technology processes have become commoditized. At the end of the day, users will buy what they feel attached to, what they're happy with, what they can show off as part of their identity. Design is no longer an easy process that comes at the end. It's a matter of life and death, so it should come first.
Young Se Kim, 54, founded Innodesign in 1986. This past January, Bill Gates showed off the H10 during his keynote address at the International Consumer Electronics Show in Las Vegas.
It's the Inside that Counts
Henri Crohas
Founder and CEO, Archos
Paris, France
I do not share the opinion that Apple's design for the iPod is any good. That's because I define great design in terms of fantastic machinery. And if you look inside the iPod's technology, it's quite common and unimpressive. It isn't anything special. What Apple has done well isn't the iPod, but iTunes. It has been the first to pull together all of these music editors and convince them that they have to open a big store online. But there's a second phase coming. Like the cell phone, the technology to integrate photos and videos is now available. Microsoft has been working on this for years. Its Windows Media Center is well advanced and does everything iTunes does, plus more.
We got into the MP3 business in 1999, with our first hard-drive player, the Jukebox 6000. That was a year and a half before the first iPod. When Apple hit it big in 2003, we were no longer interested in the music-only category. For the past five years, we've been focusing on what's coming next: the portable audio-video player. Our 20-gigabyte Gmini 400, which we released last September, has been very successful. It's the size of an iPod, costs the same as an iPod mini, but comes with 20 gigabytes and a larger LCD screen to play back video. And this video can be any type of video, from your computer or from TiVo. We think that the first source of media content is still TV. What we've done is make that content portable.
The way we design products is very much driven by the technology inside, whether it be combining video, audio, and music, or making our products wireless. Archos wants to continuously ride the wave of technology, so that means we tend to go away from the low end of the mass market. That's why we no longer make flash players. In order to do it now, you simply buy a reference design for the technology and then build a new interface. You can argue that you can differentiate with the design of the interface, but it's all the same, including Apple's. Archos is not competing in the same arena. Creative, Rio, iRiver... certainly those companies fight against Apple, because they want to reach the same target. But we are after something different. Apple may have won a battle when it comes to music, but it remains to be seen whether it will win the war against Microsoft.
Henri Crohas, 54, founded Archos in 1988. The Gmini 400, launched last September, has outsold the Apple iPod in the 20-GB category in Europe.
Outcool the Competition
Sim Wong Hoo
Founder and CEO, Creative Technology Ltd.
Singapore
When all anyone could talk about was the iPod, we were already thinking about how to outcool it. That was the design charter for the Zen Micro, which we released late last year, and we wanted to win in every aspect. We started off with the name, looking into the whole concept of Zen, then decided that it was a good direction and made it the basis for the design. It's not about the religion but the lifestyle: Zen is something simple yet powerful. Our player, the Zen Micro, is cool and clean, and we have it in 10 contrasting, electrified colors, so we can catch people's eye. Its curve fits into your hand, it has a mesmerizing blue glow, and there's top-injection molding. All of these are very Zen-like and give people a very warm and good feeling.
I am very passionate about design. Even though I can't design myself, I think I have a good eye for details. As the CEO, my job involves a lot of artist coaching, showing designers the right direction, how to look at the market, and what to go after. I have to keep them fresh, energized, and motivated. But at the same time, I can't let them run wild. If I did, I'd be left with crazy designs that only appeal to niche markets. I learned that lesson with the second-generation Nomad, which I let my designers talk me into releasing even though I personally didn't like it.
Of course, Creative's main competitor is Apple. It's always good to focus on the toughest guy, the top-tier guy out there. That way, we can at least be a strong number two. But I think the main reason why Apple is so popular is because of its blanket marketing. They've got billions of dollars I don't have. The market is exploding right now, and it's a crucial one we have to capture. So I have dedicated around $100 million in marketing this year. It's still a lot smaller compared to what Apple has spent, but I think it's especially important to give our MP3 players our number-one attention.
Unlike Apple, however, we are not going to spend our money trying to convince people that we are good. We are going to spend our money telling people what we offer. At Creative, more is better. Our products are packed with more features -- an FM tuner and voice recorder, for example -- and we're able to deliver this at a lower price. That's where we can win.
Sim Wong Hoo, 49, an engineer by training, founded Creative in 1981. It comes second only to Apple in total market share for MP3 players

What makes a great brand

2009-02-01T10:27:00.000-08:00

A new-age fable says that you can leave behind your brands' five-year plans in the business class seat of your aircraft, your competitor, sitting two rows behind can pick it up and take it to his office, and you can still beat your competitor if you implement and execute your plans.

Most plans do not get executed. And it is not difficult to guess what your competitor's plans are over the next five years. But the million-dollar question is, will they be able to execute the plan? To this is the corollary, how will they adapt their execution to the changes in the market environment?

The premium soap Liril was originally test marketed in early 70s as a blue colour soap cake. Finally, it got launched as a green soap, based on customer feedback. Interestingly, in 2002, Liril was relaunched as an 'icy blue' soap.

Sundrop cooking oil was launched in a 1 litre PET bottle and economy packs came only three years after launch. The company was worried that a pouch pack would dilute the premium appeal of the brand.

Dettol Soap was launched in 1981 as a light yellow soap, positioned as a 'love and care soap'. After the poor response, the company took a few years to regroup and relaunch the brand in a green wrapper, as a germicidal soap on the '100% bath' platform.

Brand execution is about constantly keeping an eye on the various parameters that make up the brand offering:

Is the product quality just right? Can it be improved? Global FMCG major P&G launches a new product only if it scores 51% on blind product test over its nearest rival.

Is the pricing competitive? Should it be lower? Higher?
Indian consumers look for value even in prestige products. The brand has to rationalise the price premium through emotional or experiential means .

Is the place right for the brand? Should new distribution avenues be explored?
Eureka Forbes created a unique direct selling model to market vacuum cleaners in India. Cease Fire appliances tried emulating this model in the late 90s but after a few years could not sustain the momentum.

Is the 'promotion' mix right?
Not all performance problems can be fixed with a new advertising-promotion campaign. But as Santoor discovered, a new campaign (focusing on skin care benefit) turned the fortunes of the brand in late 80s, early 90s .

Is the packaging right? Are there other options?
Frooti from Parle, exploited the tetrapak packaging medium to create a new space in the soft drink market. Cadbury's Appela, launched five years earlier may have had a better chance if it had used a different packaging form, instead of returnable glass bottles.

Is the profit plan in place? Should it be modified?
India is a large market with a large consumption appetite. But MNCs have discovered that it is not a cakewalk. While most companies plan for a two to five year gestation period for a brand, how valid are these assumptions in a changing-growing market? ...

What 'people' or 'service' support does the brand need?
While the seven factors listed under brand execution are not exhaustive, these form a key framework for the brand offer.

They are also not mutually exclusive parameters. As an old adage goes, the Indian consumer will want everything 'Sasta, Sundar, and Tikau' (economical, beautiful and long lasting). Marketers have to balance this S-S-T needs of the consumer with the organisation's obligation to the stakeholders and shareholders.

Brand execution elements will change in importance as one moves from an FMCG to a durable to a service. While the product/service offer, price, distribution, location/place, and promotion will continue to be important, the service or people component will become paramount for a service brand like a hotel or a department store. Durable brands too are becoming more and more service driven.

Product offer

Brands depending on the product/service category will have to offer features that are de rigueur (point of parity) of the category, while they have differences in the offering (point of difference). Sometimes the PODs are in the price, or place. But most successful brands offer a POD in the product offer as well:

Ayurvedic soap Chandrika, is made through a special 'cold-press' method

Liril was the first soap to offer a marble texture

Lifebuoy hand-wash was the first liquid soap

Hyundai Santro was the first small car to offer a Multi Point Fuel Injection (MPFI) petrol engine

Kinetic Honda was the first modern age scooter with a button start

Onida was the first colour TV with a sleek looking vertical format.
The examples are numerous, and often it is the easiest solution to go with a me-too product. Or at times, launch a brand with a product difference that is too small to be noticed, JNND (Just not noticeable difference). The danger in these approaches is that the brand starts with no real difference in product offer terms. The onus of creating a difference now vests on the other legs, a more difficult task.

Price offer

The brand price offer can also be played using different packaging forms:

Chik and Velvette shampoos used the pouch pack to build brand attraction at a low price point of 50 paise.

Anchor white toothpaste has large packs at attractive prices to gain brand loyalty. The pricing strategy for a brand can also be driven by the gaps in the market:

Nirma Beauty Soap was priced at Rs. 7 per 100 gmsa price point below Lux but above 150 gms Lifebuoy on a gram per gram basis. ....
Price is the single most important dimension in the value driven Indian market. Brands have met with sudden deaths with ill timed price increases:

In the 80s Chiclets Chewing Gum moved its price from lOp (for 2) to 25p. As against an anticipated drop of 50% in sales volume, the brand sales dropped by 90%.

In a replay of sorts, Halls in the 90s moved its price from 50p to 75p to meet with a similar fate.
The rapid growth of motorcycles in the late 90s were contributed to by the narrowing price difference between scooters and entry level motor cycles.

Quartz watches' sales benefitted with launch of Titan and its price value offer, backed by the Tata guarantee. In spite of the initial fear that the Indian consumer will be loath to buying batteries every year, the company's pioneering effort to ensure affordable batteries paid off in a revolution on Indian wrists.

Place offer

How will the brand reach the consumer's hands? How many hands will it pass through? Where will it be retailed?

How is the brand presented at the dealer outlet?

Does the place add to the brand value?

Tata Motors when they made their play for the growing Indian small car market consciously set up an entirely new dealer network, distinct from the Tata truck dealers. The company re-organised that while utility vehicles like Tata Sumo could be sold through commercial vehicle dealers, a passenger car buying family man will be very hesitant to enter a truck showroom.

Raymond's secret strength is their 250+ authorised dealers. Each is a handpicked dealer offering a 'Raymond' buying experience including tailoring and readymade apparel. Park Avenue and Parx (and Color Plus which was acquired in 2002) are the readymade brands from Raymonds enjoying the tremendous advantage of instant distribution presence across the country. ...

So retail outlets may not just be selling points but can be a big vehicle for carrying forward the brand message.

Promotion offer

How will the brands be promoted? How will the brands message reach the prospects?... A new brand will need to attract trial. That calls for free sampling or trial offers. Once the brand gains momentum, free trials can be reduced.

When Johnson &Johnson was trying to sell sanitary napkins in India in the mid-70s, they found the only way to discuss such a sensitive topic was on a woman to woman basis. So they put together a large team of sales promoters who went door-to-door.

This gave the brand Stayfree a toehold and the product category, the initial user base. The programme has now been dropped, as the core user base has been created. The company may still want to run 'educational' programmes at girls' schools and colleges.

Buy Water, Help Children

2009-02-01T10:26:00.001-08:00

That's the idea behind Ethos bottled water, say its founders. And since Starbucks purchased the brand, the audience for that message is huge

"We think what we're doing this week will be the largest mobilization of people ever for World Water Day," says Jonathan Greenblatt excitedly. "There will be happenings in 11 cities across the U.S." Greenblatt and his partner, Peter Thum, have reason to be excited.

In roughly four years, Ethos Water, the company they co-founded, has grown from a local bottled water company selling its goods through yoga studios and health-food stores in Southern California, to a nationally recognized brand. Last year, the company was sold to Starbucks (SBUX ) for $8 million, giving it a new distribution channel and substantially greater reach.

That new market reach translated to more than just sales. It helps Ethos realize its underlying mission: to help children around the world get clean water. For every bottle that Ethos sells, Starbucks donates five cents toward solving the world water crisis, with the goal of donating $10 million by 2010.

In a crowded marketplace -- there are more than 800 different brands of bottled water -- Ethos sets itself apart through its social mission. BusinessWeek Online's Jessie Scanlon spoke with the founders about water, branding, and selling activism in a bottle. Edited excerpts of their conversation follow:

Bottled water is still water. It doesn't really vary that much from brand to brand. How did you set Ethos apart?
Thum: The Ethos brand came out of work that I was doing at McKinsey & Co. in South Africa. I spent a lot of time around people who didn't have access to clean drinking water. Following that, I consulted on a project in the bottled-water industry, and I realized that there was an opportunity to create a brand that people really cared about. The Ethos brand has an element of activism. Every buyer is opting into the community by the simple act of purchasing the product.

As a small company entering a crowded marketplace dominated by big companies like Nestle and Danone (DA ), what was your initial brand strategy?
Greenblatt: When we launched the brand, we realized that it had to be more than a product with a cause. It had to be a great product. Our water comes from natural sustainable springs.

Next, we worked hard to develop a great package that would allow us to sell effectively against brands like Evian and Fiji. Finally, it had to be a platform for raising awareness. We looked to Newman's Own as a model. Newman's Own has been incredibly successful and given hundreds of millions of dollars away to charities. But people don't think about camps for sick children when they buy the chunky tomato sauce.

There were established conventions in bottled-water branding. Source and packaging were incredibly important to consumers. Peter and I took a very different approach. It's based on a very simple idea: Buy water, help children get water. From the beginning, we saw the brand as a platform for creating a community and spreading information about the world water crisis.

How did you approach marketing?
Thum: First what we did was think carefully about where we were going to distribute our products. We first sold the water in cafes, health-food stores, and yoga studios in Southern California. We tried to find places that had developed relationships with their customers already, so that we could borrow that equity. We were also influenced by [Malcolm Gladwell's book] The Tipping Point.

We launched the product at the high-end fashion retailer Fred Segal. We went to the Academy Awards and partnered with the company driving celebrities to the ceremony and stocked their cars with water. So Leonardo DiCaprio and Cameron Diaz walked into the awards carrying Ethos water. These associations helped us make the brand seem much larger than it really was.

How has that marketing strategy evolved as the Ethos brand has become established?
Thum: A few years ago, when Coca-Cola (KO ) and Pepsi (PEP ) got into the water business, you started to see serious money being poured into marketing. That hadn't happened before. Ethos depends on word of mouth.

That's one of the reasons that the Starbucks relationship made sense. There are 80,000 Starbucks employees who are essentially building that word of mouth campaign every day.

You saw Ethos as not just a product, but as a platform to build an activist community. How has that worked?
Thum: In the very beginning, we went and invested our own money in water projects around the world. We wanted to build relationships with those groups, and we wanted people to see the kinds of groups we were working with. Also, as we continue to build this community, that network will give people that want to get more involved good options for giving money or volunteering.

In 2005, Starbucks bought Ethos. How has that affected your brand strategy?
Thum: Now we have a real marketing budget and the resources to do some of the things that we always wanted to do. And Starbucks has significantly increased our ability to build this community. It was hard to do that when our distribution was limited to health-food stores in Southern California. Through Starbucks we have the ability to reach more than 40 million consumers a week.

Greenblatt: One of the biggest advantages of the relationship has been our ability to scale our work. Soon after we closed the deal, we announced a $250,000 grant to fund water-related projects in Ethiopia.

Does the close alignment of the brand with the world's water crisis limit your options for future brand extensions?
Greenblatt: Our brand is predicated on a idea, "Buy water, help children get water." It's that link between consumption and cause that has animated the brand. We think we've got our hands full focused on this problem today. In the future, I'm not sure. That link between the consumption and cause may lead to other exciting opportunities.

Critics of the bottled-water industry point out that much of the water being sold is no healthier than tap water, that the bottles themselves are made of toxic chemicals, and that the energy required to distribute the water is immense. As a company founded on a social mission, how does Ethos respond to these critics?
Thum: I don't think that we can answer for the entire bottled-water industry. What we're trying to do is make the American public aware of this problem [lack of access to clean water] -- a problem that kills more people than AIDS.

The bottled-water industry may not be perfect, but if you can take a sliver of the industry and turn it towards something positive, that's a good thing. The most important thing is to start a dialogue and to get people in the U.S. to start thinking about the world water crisis not just as something that affects people far away, but as a problem that we will face soon as well.

How many brands of bottled water can the market sustain?
Greenblatt: When we launched the business, there were more than 700 brands. Now there are more than 800. With the entry of Coca-Cola and Pepsi into the market, scale certainly matters, so we might see some small brands disappear. But there's always the opportunity for niche brands that have a high value proposition.

India has drama in store

2008-12-30T09:20:00.000-08:00

India has drama in store

By Amy Yee

Published: December 29 2008 22:06 | Last updated: December 29 2008 22:06

When Kishore Biyani tried a “clean Italian look” of glass and minimalist lines in one of his Big Bazaar stores, he was surprised by the effect on his customers – it drove them away. The sleek section of the store remained empty while the rest of the shop bustled.

Mr Biyani, head of the Future Group, India’s largest retailer, realised the decor was intimidating and alienating the middle-class Indian consumers who were more used to crowded bazaars and shops.

“You need hustle and bustle,” says Mr Biyani. “The Indian model of shopping is theatrical. There is buzz and haggling. If you have wide aisles you have a problem.”

Why crowded neighbourhood shops still enjoy the upper hand
Big, modern stores are not guaranteed victory in India’s retail revolution. Tiny, crowded hole-in-the-wall neighbourhood shops do have advantages over their “organised retail” counterparts. Small shopkeepers often know their customer personally, offer free home delivery, let customers order by phone and keep a tab.
“I had a grocer in Mumbai. I never saw him but the service was fabulous,” says Anirudha Mukhedkar, chief executive of Restore Solutions, a retail consultancy in Bangalore. “I ordered over the phone and I would pay him at the end of the month. He didn’t have to have a large store.”
Indian customers traditionally favour personal service and “not a cold-blooded transaction”. Retailers in India should think about “how to personalise and bring a degree of warmth to the transaction”, says Mr Mukhedkar. “If retail wants to get its act right, it needs to go back to basics.”
Kishore Biyani, chief executive of Future Group, India’s largest retailer, also retains some of the basics of shopping in India. Mr Biyani is known for creating the atmosphere of an open-air bazaar in his sprawling hypermarkets. His Big Bazaar stores have narrow aisles, overflowing bins and loud music.
“In India, theatre is always there in selling,” says Mr Biyani.

Mr Biyani’s Big Bazaar “hypermarket” stores, which are India’s closest equivalent to Wal-Mart, are clean, air-conditioned and well lit. But they have deliberately narrow aisles and overflowing display bins that simulate the feel of open-air markets common in India.

Drama and theatre are important elements in Mr Biyani’s stores, which also include the Pantaloons and Food Bazaar chains. At one store in a Mumbai shopping mall, dance music popular in Indian nightclubs blasts from loudspeakers while customers jostle to reach the best goods.

Modern retail stores are relatively new to India, so Mr Biyani and other retailers are having to adapt to the evolving shopping habits of Indians. The biggest mistake that retailers make is thinking that “just because you have set something up people will come”, says Anirudha Mukhedkar, chief executive of Restore Solutions, a retail consultancy in Bangalore.

Shopping in so-called organised stores accounts for only 4 per cent of India’s $322bn (€229bn, £218bn) retail industry but this share is expected to grow to 22 per cent of $427bn by 2010, according to the Federation of Indian Chambers of Commerce and Industry.

Unlike their struggling counterparts in the west, India’s retailers are looking at an attractive growth market. But getting it right will be tricky, given the country’s diverse population and distinct regional cultures.

Understanding India’s wide diversity – socio-economic, religious, regional and linguistic – is key to that strategy. “When you say Indian consumers, there are at least 10 Indias,” says Mr Mukhedkar.

Cultural preferences vary widely between regions. For example, types of rice and how people buy it differs in the north and south, says Harminder Sahni, managing director of Technopak, a retail consultancy based in Delhi.

In the north, rice might be sold in open sacks so consumers can inspect the goods. But in some parts of the south, rice is a common staple sold in sealed packets.

Store lay-outs will also vary according to region. In big groceries in Kolkata, eastern India, and other coastal cities, fish is a staple sold in the vegetable section, whereas it is categorised with meat in inland areas.

Because of these distinct regional tastes, retailers “don’t look at India as India”, says Mr Sahni. “They pick a region or market or city...The first two years might be in one city.” He says that most do not have ambitions to open pan-Indian stores: “Many start in one part of India and just stick to that.”

The Future Group has found another way of capitalising on regional variations: it has 72 annual promotions linked to local festivals. The company says the Big Bazaar store in Bhubaneswar, capital of the backwater eastern state of Orissa, took the group record for a single day’s turnover after promoting a sale linked to a festival.

William Bissell, managing director of Fabindia, a chain of upscale boutiques that sells clothing and housewares, says “every store has to offer a different mix. That’s why retailing in India is so complicated”.

Mr Bissell notes that Fabindia, founded in 1960, has an inventory of 200,000 items to cater to consumer tastes that vary dramatically across regions. “Any retailer will say that is crazy,” says Mr Bissell. To manage its enormous inventory, Fabindia has installed an IT system to track the flow of goods at nearly 100 stores in India.

Capacious western-style malls are also cropping up, especially for luxury goods. But when catering to the mass consumer, “it makes sense to have smaller stores with more workers”, says Mr Mukhedkar of Restore Solutions.

He points out that India’s cities command some of the highest real estate prices in the world but labour costs are among the lowest. Packed shelves are also preferable to give the consumer a sense of abundance and choice. “If a shelf can take 50 things, try to fit in 75,” Mr Mukhedkar advises. “Density per square foot has to be as high as possible.”

For practical reasons, Mr Bissell favours smaller stores. He dismisses the notion of a 100,000 sq ft Ikea-style store in India, except where “enormous” volumes might justify high maintenance costs. “At 40 to 44 degrees in the summer I’m going to have to air-condition the whole thing. That would be an environmental disaster.” And it would be too expensive, he adds, in a country where electricity rates are high, and power cuts force many businesses to buy costly diesel-run generators.

The biggest misunderstanding about retail in India, says Mr Bissell, is that Indians consume as copiously as westerners. Instead, Indians are more selective, value-conscious and price-sensitive. Mr Sahni of Technopak agrees. In a grocery store, an Indian consumer will not fill up a trolley as is common practice in the west. “Indians will shop with a basket. Below a certain income level, people won’t want to spend so much with each transaction.” Smaller refrigerators and limited storage space at home are also factors. “People will buy more frequently and in smaller packets,” says Mr Sahni.

But some aspects of retail in India are more abstract. To stay attuned to India’s pulse, Mr Biyani has a special unit devoted to tracking the country’s social trends to incubate ideas for new store brands and strategies.

The “Future Ideas” group includes sociologists, interior designers, graphic designers and other cultural experts. One of their biggest tasks is analysing the changing tastes of Indian youth.

With more than half of India’s population under the age of 25, understanding their consuming habits and aspirations is a priority for the Future Group. “India is still family-centred, and young people influence purchases,” says Mr Biyani. But by far his biggest challenge as a retailer is managing the speed of change in India.

“How do you make an organisation that is not permanent in thought, structure or design?” asks Mr Biyani. “Retail in the next five years will be different. Nothing is permanent.”

Sony Chases Apple's Magic

2008-12-24T15:57:00.001-08:00

Even with a former Steve Jobs lieutenant driving innovation, Sony still hasn't captured its rival's cool

By Cliff Edwards, Kenji Hall and Ronald Grover

Sony Chief Executive Howard Stringer bristles every time he gets the question: Why can't the Japanese electronics giant be more like Apple? The maker of the iPod, iPhone, and Mac computers consistently delivers supercool gadgets that are easy to use, while Sony sells music players, TVs, and cameras that get mixed reviews and often don't even work well with other Sony (SNE) products. "Sony is a very big company," Stringer says by way of explanation. "Our toughest competitors are niche organizations."

Stringer is quick to admit, though, that Sony may face a troubled future if it can't rival Apple (AAPL) in creating simple software that makes its gadgets fun and in giving consumers easy access to music and videos. Apple's iTunes store has long made filling iPods a cinch, but Sony's consumer electronics and PlayStation divisions have only recently started to integrate their offerings with those of the company's movie studio and music label. That's one likely reason why Sony's products earn profit margins of 10% or so, compared with the 30% margins that Apple's devices command.

So Stringer went straight to the source. Three years ago, he hired Tim Schaaff, a top lieutenant of Apple CEO Steve Jobs, and created the title of senior vice-president for software development for him. Although Schaaff was expected to spend most of his time in California, he's so integral to Stringer's plan to remake Sony that he has a direct reporting line to the CEO. Schaaff's role has grown quickly, and today he also has a hand in product design, licensing, planning, and engineering. "When we brought Tim on board, it was a recognition that we needed someone whose experience crosses multiple borders," Stringer says.

A KNACK FOR KILLER PRODUCTS

Schaaff doesn't come across as an agent of change. The 48-year-old Dartmouth grad studiously avoids the press. When he speaks, he does so slowly and deliberately, giving the impression that he is reading from index cards inside his head. But at Apple, Schaaff showed a knack for translating geeky ideas into killer products. The self-taught software engineer oversaw development of Apple's QuickTime video-streaming format, which serves as the foundation of iTunes, the iPod, and the iPhone.

Stringer is clearly hoping Schaaff can seed Sony with Apple's Silicon Valley entrepreneurial culture. When the Welsh-born Stringer became Sony's first non-Japanese CEO in early 2005, he pledged to make the company "cool again." While Schaaff has made important strides toward that goal, Sony clearly needs to inject some zing into its products. On Oct. 29 the company said net earnings for the quarter ended Sept. 30 were off by 72% from the year-earlier period. The report came on the heels of a warning that profits for the year would fall by more than half, due to the strengthening yen and lackluster sales of TVs and digital cameras.

It was more evidence that after a three-year makeover, Sony is still struggling to get its groove back. Now, as consumers rein in spending, they're even less likely to buy the expensive gizmos Sony plans to unveil over the coming months. That would be a major setback for "Sony United," Stringer's program to turn the company's fractured family of products and services into a model of integration. The goal is to sell Bravia televisions that connect to the Web and download the latest Spider-Man movie, Walkman phones that offer tunes from Sony artists such as Beyoncé, and e-book devices that ask if you want to purchase that new John Grisham thriller.

Stringer has given Schaaff unprecedented freedom to conquer resistance and boost cooperation among Sony's myriad—and often warring—units. Schaaff has also served as something akin to secretary of state, working with other companies to help make Sony products more appealing. Last summer, for instance, he led a high-stakes effort to persuade Hollywood to allow downloads of films and TV shows via Sony's PlayStation 3 game console. Sony wanted to introduce the service at the annual E3 video game convention in Los Angeles in July to highlight the versatility of the PS3, which includes a Blu-ray disk player and a hard drive that can store hundreds of movies. With just six months to rally the studios, Schaaff's days became a blur of airplane lounges and conference rooms as he shuttled from Hollywood to Sony offices in California and Tokyo. But the studios held off, waiting to see whether rivals would sign up. "Nobody wants to be the only guy licensing content," Schaaff says.

"THE DOORS ARE MORE OPEN"

Finally, as workers were installing giant flat-panel televisions at Los Angeles' Shrine Auditorium for Sony's news conference, Schaaff's team started to make some real headway. Promising to include technology that would prevent users from sharing films over the Internet, Schaaff managed to convince studio executives that the PS3 network could provide a new outlet for their movies—and serve as a counterweight to Apple's growing clout in the market for downloads. At its launch on July 15, the PlayStation Network offered both rentals and purchases from six of the seven largest movie studios. To many at Sony, the deal signaled increasing cooperation among the PlayStation team in Northern California, Schaaff's group, and Sony's film division. "Today there's much closer integration between hardware and software," says Peter Dille, the Sony executive responsible for the PlayStation Network. "The doors are more open, and people are finally realizing that their phones can connect to other offices."

The result of the growing spirit of cooperation? Sony in January partnered with retailer Amazon.com (AMZN) on an online music store, called MyPlay, that lets consumers download tracks from various record labels without copy restrictions. After years of criticizing the quality of Microsoft's programs for phones and handheld devices, Sony last fall astounded the industry by scrapping its own software and online store and embracing the software giant's Windows technology for its Walkman portable media players. Then in February, it chose the Windows Mobile operating system for a new line of phones called Xperia. And since July consumers have been able to bypass Sony's online store and download content for its e-book device, the Reader, from rival Web sites. Schaaff "knows how to speak the same language as both the entertainment and technology folks," says Sony Pictures Television President Steve Mosko. "And he knows what a 16-year-old wants as well."

Despite Schaaff's successes, there's still plenty of resistance to his efforts. Some colleagues praise him for his quiet thoughtfulness, but others say he has accomplished little in his three years at the company. "He came in lecturing everybody, saying 'Well, we did it this way and this way at Apple,'" says one executive in Sony's consumer electronics division. Others grouse that Schaaff has demonstrated little of Jobs' take-charge attitude. "To expect a storm-the-castle, everyone-pulls-in-the-same direction attitude, forget it," says another executive who has worked with Schaaff.

SERIOUS ABOUT CHANGE

Sensing the opposition to his new hire, Stringer has worked to shore up Schaaff's position. At a 2006 management meeting, Stringer asked young software engineers to sit in the front. That forced some senior executives to the back, sending the message that the CEO was serious about change. And in May 2007, Stringer put Schaaff in charge of the United Service Steering Committee, a group of 30 top executives that meets monthly to air grievances and come up with ideas to boost profits.

When veterans such as PlayStation chief Ken Kutaragi balked at sharing power, Stringer didn't budge. Kutaragi was moved into a new advisory role, and he eventually resigned. Since then, Stringer has tapped executives once based in the U.S.—whom he has worked with over the years—to head up key divisions: mobile phones, PlayStation, and the fledgling digital books unit, which sells the Sony Reader. While those new faces are more willing to work with Schaaff, "Tim [still] has to do things very gently," says longtime friend Ty Roberts, a former Apple executive who is now chief technology officer at Sony subsidiary Gracenote, which maintains a database of information about virtually every music CD ever made. "Sony is not like Apple. You can't just tell people to do something. It's all about building consensus here."

It's easy to see that Stringer and Schaaff, at least, have come to a consensus on Sony's future. Sitting side by side during a breakfast meeting at Tokyo's Westin Hotel in late September—Schaaff's first press interview—the two often complete each other's sentences. "There are a lot of people who were waiting for this...," Stringer says. "To fail," Schaaff and Stringer say in unison. "Exactly," adds Schaaff.

Sometimes roadblocks have even come up on Stringer's pet projects. Early in Schaaff's tenure, Stringer started trumpeting the Reader as proof that Sony could out-Apple Apple. Meeting with engineers at Sony's sprawling U.S. consumer electronics campus nestled in the canyons near San Diego, Schaaff discovered the e-book device was hung up by infighting among rival camps. The dispute confirmed the silo mentality he had detected in his first few weeks on the job. "I was hearing, 'Sony doesn't do this and Sony doesn't do that,'" says Schaaff. "I was a little suspicious."

One group wanted to make the gadget compatible with Mac computers, but designers balked at that idea. Sony had never bothered with Apple software, they said, and there was no reason to start now. And the online bookstore remained in such a muddle that even technically savvy users were having problems finding and purchasing the titles they wanted. The Reader launched in October 2006 to a lukewarm reception with those issues unresolved.

Although the Reader won points for design, the limelight has been stolen by the Kindle, a rival device released last year by Amazon. The Kindle has been widely derided for its blocky look and feel, but analysts say it has been selling far better than Sony's Reader. A key reason is that Amazon made it simpler to download content by including a free wireless connection to its online store, while the Reader must be attached to a PC to load new books. Sony on Oct. 2 released a third-generation Reader that still lacks wireless downloads. Steve Haber, president of the e-books division, concedes the company could be nimbler but says changes are under way. "We've got a lot of good things coming," he says.

You hear the same thing from executives across the company. But will the good things come soon enough to help Stringer meet his goal of transforming Sony by 2011? While Stringer and Schaaff say they'll get there, some former Sony executives wonder when Schaaff might help the company develop anything as iconic as the iPod or iPhone. "Apple is the Sony of the 21st century," says one. "In the past two years, Sony has had plenty of time to come up with an iPhone. Why hasn't it?"

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic network

Plugged in for the Holidays

Despite the current economic turmoil, Christmas may not be a total bust for gadget makers. Consumer Electronics Assn. predicts that fourth-quarter sales of TVs, stereos, and the like will grow by 3.5%, even as overall holiday spending drops by 14%, Twice magazine reports.

To read the Twice article, go to http://bx.businessweek.com/Sony

Dell Bets Splashy Design Will Sell Its New Laptops

2008-12-24T15:55:00.000-08:00

Dell Design Chief Ed Boyd is transforming those once-stodgy PCs with art and color. Can made-to-order laptops revitalize the computer maker?

By Reena Jana

Hanging on a wall at Dell's (DELL) consumer design lab in Austin, Tex., are neat rows of what look like abstract paintings. There's a splashy watercolor in turquoise, black, and green, and a mosaic pattern of white and red dots and geometric shapes. Another is covered with hand-drawn sketches of olives in green, purple, and orange. These aren't works of art, though. They're dozens of prototypes for future laptops. Look closely and you see the Dell logo on each one.

The man behind this effort is Ed Boyd, one of Dell's most unusual hires in recent years. Boyd is an industrial designer who used to dream up new sunglasses and shoes for Nike (NKE). Now the 43-year-old is trying to make design an integral part of Dell, the personal computer maker long known for cranking out boring gray boxes. "I was skeptical it could be cool," says Boyd, who joined the company last year. "I took the job when I heard the design lab would function like a startup for consumer [products]."

LET THE BUYER DESIGN

Dell plans to roll out the first three laptops with these colorful designs on Nov. 11, in time for the holiday season. Customers will pay an extra $75 for the designs, on top of the basic $699 price tag for the company's budget-line portables. The designs are from Nigerian painter Joseph Amédokpo, South African graphic artist Siobhan Gunning, and Canadian designer Bruce Mau.

For Boyd, this is just a start, though. Next year, Dell will let buyers customize laptops in a dizzying number of ways, mixing scores of colors, patterns, and textures. The options will go far beyond the handful of choices available from most of its rivals. In essence, Boyd is taking the Nike approach of letting people design their own sneakers, and trying to apply it to the world of computers. "We're pushing the idea of [made-to-order computers] to the next level," says Boyd.

Dell could certainly use a change in fortune. The once-mighty PC maker has stumbled in recent years: Its stock is off by more than 60% since 2005. Even after founder Michael S. Dell returned as chief executive in 2007, the company continued to lose ground to Apple (AAPL) and the resurgent Hewlett-Packard (HPQ). "We had higher expectations for Dell's turnaround by now," says Clay Sumner, senior analyst at FBR Research (FBR). Dell's market capitalization is now $24 billion, compared with $93 billion for Apple and HP's $87 billion. The net cash on Apple's balance sheet is about the same as Dell's market cap.

Michael Dell contends that the company is making progress. He says Boyd's efforts have helped Dell get back on track, particularly with consumers. "We've got the most exciting new products ever from Dell coming in the second half of this year," Dell said during a speech in June. "That's fundamentally what brings new customers in."

RISKS AND REWARDS

Still, Dell's timing is awful. With the economy headed into recession and consumers cutting back, it will be difficult to charge any sort of premium for cool design. Analysts say that's especially true for companies such as Dell that don't have an established reputation for design. "Price will be more important for consumers because of the economic deterioration," says Mika Kitagawa, an analyst with the market research firm Gartner (IT).

Boyd is used to taking risks. Last year he hired an obscure graffiti artist named Mike Ming to create images for Dell products, a move that worried some of Dell's straitlaced staff. He also signed off on an undersized keyboard for Dell's first mini-notebook PC, a decision the company's founder clearly disagreed with. "Michael Dell wanted the full keyboard experience," says John Thode, Dell's vice-president for small consumer devices.

Then the sales figures for these products started coming in. A limited edition laptop designed by Ming and the mini-notebook, released in recent months, both exceeded expectations, company executives say. "I got an e-mail from Michael saying: 'Keep going, going, going,'" Boyd says.

Boyd's design staff has now grown to 120 people scattered from Austin to Miami to Singapore. There are a dozen PhDs in the group, whose degrees include engineering, computer science, and cognitive psychology. Besides new products, they're working on such cost-saving packaging as an inflatable cushion made from recycled plastic. They're also trying to overhaul the online shopping experience at Dell.com by, among other things, moving to replace choppy point-and-click navigation with more fluid scrolling through images. "Design isn't just cosmetic," Boyd says.

Last year, Dell tried offering consumers the choice of a dozen different colors for their laptops, but the company couldn't deliver the computers as speedily as promised. The delays angered customers and sparked numerous critical blog postings and news reports. Boyd says Dell will be prepared this time as it tries to deliver an even more complicated mix of designs and colors.

Rivals will be tempting consumers with their own new designs. Apple has just unveiled a line of sleek laptops, made from a single piece of aluminum. The toughest competition may come from HP, which has been investing in design much longer than Dell and used that edge to surpass Dell as the world's No. 1 personal computer maker two years ago. This fall, HP is bringing out a touchscreen PC, the thinnest laptop on the market, and a $700 mini-notebook with a red-and-purple peony design from fashion designer Vivienne Tam.

These sorts of products may be a tough sell this holiday season. But if Boyd and Dell keep investing in design, they may ultimately find a more receptive audience. "People want gadgets that look cool on campus or in a café," says Gartner's Kitagawa. "Customization will be more and more important. In the long run, it's the way to go."

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How Apple Does It

While Dell (DELL) is newly focused on design, Apple (AAPL) has set the standard for the computer industry for years. In Do You Matter? How Great Design Will Make People Love Your Company (FT Press, 2008), Robert Brunner, Apple's former director of industrial design, provides an inside look at how the company approaches design. There's advice from Apple's current design chief, Jonathan Ive, as well as four lessons from Brunner's years leading the effort: support design at senior levels; design for more than decoration; be original; and launch products quickly and often.

To read a review of Brunner's book, go to http://bx.businessweek.com/product-design/reference/

Advertisers Adjust to Market Luxury in a Recession

2008-12-24T15:53:00.001-08:00

When marketing a Lexus, high-end appliance, or luxe cosmetic, advertisers are promising bargains to the cash-strapped rich

By Burt Helm

Nowadays, even affluent Americans are thinking twice before hitting the mall. A recent Gallup survey showed that 49% of people making $90,000 or more a year rated economic conditions as "poor," a 23-point increase since early September.

That has companies scrambling to tweak their marketing messages. Forget the usual talk of indulgent luxury. Instead, companies from General Electric (GE) to Lexus (TM) are employing sober, left-brain pitches—special deals, useful features, long-term savings. "There are plenty of high-end brands that sell themselves on the 'I-buy-it-because-I-can' idea," says Hayes Roth of brand consultant Landor. "They'll have to temper that."

Imagine trying to sell half an ounce of anti-aging eye cream for $145 a pop. That's the challenge facing La Prairie, the luxury Swiss skin-care company. Paul Wilmot, who handles public relations for La Prairie and other tony brands, has been pitching the editors of fashion and beauty magazines in the hopes of working the luxe potion into the gift guides that appear in December issues. His spin: The cream contains ingredients usually available only in pricey prescription ointments. "No one wants to look like an idiot who just bought something because it's expensive," says Wilmot. "So La Prairie makes an intellectual case."

Last month, GE began selling its new Profile washer-and-dryer set, which costs a very plush $3,500. The ads feature the stylish machines in eye-catching cherry red, an appeal to what GE marketer Paul Klein calls the style-conscious "iPhone (AAPL) consumer." But the ads focus more on down-to-earth practicality—specifically, technology that doles out the optimal amount of soap and water per load. "We know electricity costs are going up," says Klein. "And we know water scarcity is a problem." GE is also encouraging retailers to explain how the machines will save customers money by being gentle on their clothes, extending the life of their garments.

"TIME TO BE MORE RATIONAL"

For years, Toyota Motor's (TM) luxury brand has run pre-Christmas "December to Remember" commercials featuring a loving spouse giving his or her significant other a new Lexus wrapped in a big red bow. The company assumes there are still enough people out there with sufficient loot to put such pricey baubles under the tree, so you will see those ads this year, too. But Lexus is also hedging its bets. In mid- September it began running ads with the tagline "Lowest Cost of Ownership." That's a reference to Lexus' decent fuel economy, durability, and resale value. "It's definitely a time to be more rational," says Dave Nordstrom, Lexus' North American marketing chief.

A couple of years ago, discount brands got into the luxury game, too. Even Hyundai Motor, Korean king of the econo box, aspired to move upscale. Now the automaker is trying to sell entry-level luxury in the worst car-selling environment in memory.

Hyundai's response: Depict more snooty rivals as over-priced. In its ads, Hyundai is taking pains to note that its new Genesis sedan ($33,000) has the same sound system as a Rolls-Royce Phantom ($300,000-plus). "If you'd rather have money than a hood ornament," goes the ad, the Genesis may "look even better than a Rolls-Royce."

Generics Are Gaining on Name Brands

2008-12-24T15:51:00.001-08:00

Recessionary forces are prompting shoppers to trade down from name brands, while off-brands are shedding their cheap-knockoff reputation

By Matthew Boyle

Whether they sell cookies or cough syrup, makers of generic products are profiting in perilous times. U.S. sales of private-label goods rose 10% in the year ending June 28, according to Nielsen, compared with a meager 4% gain for national brands.

Turning cheap in tough times isn't the surprise. What's different is that the rising quality of private labels may keep customers coming back. Products from manufacturers such as Perrigo (PRGO), TreeHouse Foods (THS), Home Diagnostics (HDIX), and Ralcorp Holdings (RAH) have evolved to name-brand quality and are starting to adopt similar strategies in marketing and innovation. "Today, store brands have a much more sophisticated offering," says Wendy Liebmann, CEO of New York marketing consultancy WSL Strategic Retail.

Several factors are behind this heyday for generics. In a homogeneous retail world, stores are looking to private-label offerings to distinguish themselves from rivals. Anyone can sell Cheerios, but Safeway's (SWY) O Organics line is so successful that it now licenses the name to other retailers such as France's Carrefour. With no ad costs, store brands also deliver higher profit margins.

Much of that money is being plowed back into the business. Home Diagnostics, which makes diabetics' blood glucose monitoring systems for retailers including CVS and Walgreens, invested $15 million to make its new product easier to use at a price that's roughly 35% below national brands. "We get pigeonholed as a private-label player," says CEO J. Richard Damron Jr., "but we spend a significant amount on R&D." Meanwhile, Perrigo, with $1.8 billion in annual sales of over-the-counter medications, just broke ground on a $25 million plant expansion in Allegan, Mich., and is acquiring companies abroad. "We're in a good spot now," says Perrigo CEO Joseph Papa.

The generics boom has also extended to TreeHouse and Ralcorp, which make private-label food such as salad dressings, soup, and hot cereal. "Not only are consumers trading down to lower-priced products, we believe that grocery retailers are stepping up their private-label focus to take advantage of that consumer migration," says SunTrust Robinson Humphrey (STI) analyst William Chappell. One sign that the balance of power may be shifting: Ralcorp recently paid $2.6 billion to buy Post cereal from Kraft Foods (KFT).

Stores Count Seconds to Trim Labor Costs

2008-11-18T03:11:00.000-08:00

By VANESSA O'CONNELL

SHELBY TOWNSHIP, Mich. -- Daniel A. Gunther has good reason to keep his checkout line moving at the Meijer Inc. store north of Detroit. A clock starts ticking the instant he scans a customer's first item, and it doesn't shut off until his register spits out a receipt.

To assess his efficiency, the store's computer takes into account everything from the kinds of merchandise he's bagging to how his customers are paying. Each week, he gets scored. If he falls below 95% of the baseline score too many times, the 185-store megastore chain, based in Walker, Mich., is likely to bounce him to a lower-paying job, or fire him.

Fabrizio Costantini for the Wall Street Journal

Daniel Gunther, who works at a Meijer megastore north of Detroit, says he has been told 'get people in and out' of the checkout line to improve efficiency.

American retailers have come under tremendous financial pressure as beleaguered consumers curtail their spending. At least 14 major chains have sought bankruptcy protection over the past 12 months, and many others are struggling. With nearly all of them under the gun to cut costs and improve profit margins, "labor-waste elimination" systems like the one used by Meijer are sweeping the industry.

The brains behind Meijer's system is a consulting and software company known for decades as H.B. Maynard & Co., which last year became the Operations Workforce Optimization unit of Accenture Ltd. Borrowing from time-motion concepts first developed for U.S. steel mills and factory floors, it breaks down tasks such as working a cash register into quantifiable units and devises standard times to complete them, called "engineered labor standards." Then it writes software to help clients keep watch over their work forces.

The client list of OWO, as it is now known, has included more than five dozen retail chains, including Gap Inc., TJX Cos., Limited Brands Inc., Office Depot Inc., Nike Inc., and Toys "R" Us Inc. A host of other "work force management" companies also offer to help retailers improve worker productivity.

Cutting Down the Chatter

Interviews with cashiers at 16 Meijer stores suggest that its system has spurred many to hurry up -- and has dialed up stress levels along the way. Mr. Gunther, who is 22 years old, says he recently told a longtime customer that he couldn't chat with her anymore during checkout because he was being timed. "I was told to get people in and out," he says. Other cashiers say they avoid eye contact with shoppers and generally hurry along older or infirm customers who might take longer to unload carts and count money.

Reactions from customers at Michigan stores vary. "Sometimes you like to get in and get out right away," says Barb Bush, who shops at Meijer stores in DeWitt and Owosso and says she likes the current system. "A lot of [the cashiers] like to stop and chat, and I don't really have the time for it."

Linda Long, 58, who shops at the Okemos store weekly, says of the cashiers: "Everybody is under stress. They are not as friendly. I know elderly people have a hard time making change because you lose your ability to feel. They're so rushed at checkout that they don't want to come here."

Meijer spokesman Frank J. Guglielmi said in an email that "as the retail landscape became more crowded and competitive, Meijer has focused more intently on maximizing efficiencies." The engineered standards, he said, take into account all types of customers, including the elderly. The system, he said, has enabled Meijer to staff stores more efficiently, and has increased customer-service ratings. Meijer, a family-owned chain with more than 60,000 employees in five states, doesn't disclose its finances.

Mr. Guglielmi says Meijer "expects employees to be at 100% performance to the standards, but we do not begin any formal counseling process until the performance falls below 95%." If a cashier is "challenged in their position," he says, the company provides "training and counseling to help improve their performance. If this doesn't help them, there are various alternatives." He declined to elaborate.

Customers at several Michigan stores said managers appeared to be opening fewer checkout lines than before, relying on faster-moving cashiers and self-checkout systems to pick up the slack. "I do notice that the cashiers go a little faster, but it doesn't necessarily matter because there aren't that many cashiers," says Melissa Shoe, 20, a regular shopper at the Lansing store. Before Meijer installed its system a couple of years ago, OWO, then still known as H.B. Maynard, helped devise engineered labor standards for everything from greeting shoppers to scanning items too big to remove from a shopping cart. By calculating a standard time for each task, a retailer can more closely monitor worker performance and figure out how and where to reduce labor, the single biggest controllable expense in retail. OWO says its methods can often cut labor costs by 5% to 15%.

The approach is rooted in the time-motion theories of Frederick Taylor from the early 20th century, which were used to break down tasks into units to determine the maximum work a person could do. Harold B. Maynard, the company's founder, began his career in 1924 as a time-study engineer at Westinghouse, then formed his own company. For 70 years, that company worked primarily for manufacturers.

In 2000, after demand from manufacturing industries declined, the company shifted into retail. These days, about 80% of its $20 million in annual revenue comes from retail.

"As manufacturing gets shipped overseas, many people thought that would be the end of engineered standards," says John Lund, a professor of industrial engineering at an extension program for workers at the University of Wisconsin. "In fact, we are not seeing that at all. We are seeing a renaissance of engineered standards in the retail industry."

Hannaford Bros., a subsidiary of the Belgian Delhaize Group, says OWO helped it reduce labor costs at more than 150 supermarkets in New York and New England. Just adding presliced pickles to sandwiches, rather than having deli workers slice pickles themselves, saved Hannaford $60,000 in labor costs, according to Mike Farago, a former process-improvement specialist at Hannaford.

At Bob's Stores, a Northeastern clothing and footwear chain, the software revealed that shaving one extra second from the checkout process for each shopper would produce $15,000 in annual labor savings across its 34 stores, according to Kevin Campbell, assistant vice president for store operations. He says Bob's used the software to determine how many workers to schedule at any given time. The methods enabled it to lower its labor budget by 8%, he says.

Engineering Meets Service

Unlike factory workers, most retail clerks deal face-to-face with customers, which raises questions about how such labor standards can affect customer relations.

"If it is the type of job where you can lay out every element of the job, then you might get more output per hour" using such a system, says Barry Hirsch, a labor professor in the economics department at Georgia State University. "But if it is a job that requires things that can't be quantified -- special effort for a customer, or just being friendly -- then delineating things too carefully for how employees behave can decrease productivity, because you're just so focused on working to precise guidelines."

OWO says retailers can, and should, adjust time standards to take into account customer service and other variables such as store layout or sales volume, which can affect how long it takes employees to perform certain tasks. In a study late last year for a large clothing chain, for example, OWO determined that for every customer buying something in a high-traffic urban store, 2.63 items were "disturbed" and required straightening or reorganizing. That compared to 1.98 items in quieter suburban stores.

Meijer says it pioneered supercenters in the early 1960s. Each store stocks around 150,000 products, including groceries, apparel, sporting goods, home furnishings and pet supplies.

In recent years, it has faced mounting competition from discount supercenters owned by Wal-Mart Stores Inc., which often offered lower prices on general merchandise. Meijer adopted the new labor standards for cashiers to boost productivity. It added fingerprint readers to cash registers so cashiers can sign in for work directly at their registers, not at a time clock, "saving minutes of wasted time," says Roy Smith Jr., the former director of Meijer's Benton Harbor, Mich., store. The chain also installed a system to monitor how many cases per hour stock workers were loading onto shelves.

In the late 1990s, the typical high-traffic Meijer store employed about 700 workers and nearly 50 managers, says Mr. Smith, who worked at nine Meijer stores over 15 years before quitting in September. Between late 2003 and late 2007, he says, Meijer's "selling, general and administrative" expenses, which includes labor, fell about 4%. The company spokesman declined to comment on those numbers, but said that most Meijer stores now employ between 250 and 400 workers.

In spring 2007, Meijer began disciplining cashiers who couldn't keep up with its baseline standards, according to Mr. Smith and several longtime cashiers. Hitting the baseline was "like a C-minus" grade, says Mr. Smith. Those who fell below 95% of the baseline -- a score of 95 -- faced penalties or weeding out. Meijer posted weekly "cashier productivity" notices in employee-only areas.

Store managers used the scores to decide whether new cashiers still in the 90-day probationary period should be transferred, or fired. Longtime employees also were scrutinized. In a given week, up to one-fifth of the scores posted were below 95, current and former cashiers say.

Before the scoring system, "nobody knew who was good," says Mr. Smith. Afterwards, managers knew "this person isn't as strong as that person. It becomes really obvious, and you're able to put a number to that." Cashiers were counseled for as many as seven weeks on improving performance; those who didn't lost their jobs, he says.

Employees with scores below 95 are told: "Get your percentage up, and we'll have a manager watch you to see what you should do differently," says Nastassia Gauna, who worked as a cashier at the Adrian, Mich., Meijer store before quitting, she says, in August.

The X Factors

The computer scores, Ms. Gauna says, don't "take into consideration the many things that can go wrong at a register to kill your time" -- a customer who doesn't have enough cash and is "digging through a purse," a credit card that doesn't swipe through the charge, or an item with no price or item number on it. Some customers ask for cigarettes located in another part of the store, and the cashier has to get them. Others forget items and retreat to the aisles to find them.

Buying Time

Operations Workforce Optimization, a unit of Accenture, breaks down tasks into quantifiable units, devises standard times to complete them, then writes software to help clients keep watch over their workforces. Here are some ways it trimmed time from common tasks at an unnamed grocery retailer.

Produce

Bananas, a top-selling item, are stocked by grasping inverted bunches by the tips. Flipping the box over prior to stocking allows the employee to grasp multiple bunches at once by the stems.

Projected savings: $100,000 per year*

Bakery

Some breads and rolls are packaged in plastic bags and closed with twist ties. Innoseal or bag clips reduce the manual motions required.

Projected savings: $200,000 per year*

During packaging of some goods, employees are walking to the work rather than bringing the work to them, often traveling several steps for each tray rather than bringing the rack to the workstation.

Projected savings: $20,000 per year*

(* Savings generally vary according to the number of stores in a chain.)

"Recovering" Items

At clothing retailers, OWO defines "recovery" as collecting an item that has been left behind or disturbed by a shopper. Tasks vary, depending on the scenario -- re-hanging a garment that's on the ground versus one that's not on the ground -- and the store. Handling an item and looking for a tag should take about 1.8 seconds. Buttoning or zipping a garment should take about 2.4 seconds.

To help a large clothing chain figure out efficient staffing, OWO's analysis found that in high-traffic stores, for every 100 customers purchasing something, 50 pieces of clothing need to get rehung and replaced back out on the sales floor. It takes more than 11 seconds per shopper to recover an item.

In low-traffic (often suburban) stores, 15 items need to be returned to the floor, for every 100 customers who buy something, and it takes about six seconds per shopper to recover an item.

This kind of behavior, of course, tends to tick off other shoppers waiting in line, but some of them sympathize with the cashiers. "I am 84, and I get behind some old person and I can't stand it," says one shopper at the Owosso store. "They go into their purse and they are counting out a penny, and I am thinking that poor clerk, and people are lining up. But it's not the clerk's fault."

Kristine E. Barry, a cashier at the DeWitt store, says she began to see cashiers hurry along elderly customers by telling them to put their items on the belt more quickly because they were being timed. "When you have a situation where you are dealing with an elderly customer who's not as speedy, you're under pressure," says Ms. Barry, who has been a Meijer cashier for 22 years.

Jacqueline Sue Hanning, 25, took a job as a cashier in the Adrian, Mich., store for $7.15 an hour, in July 2007. She says she was "written up" three or four times last spring for scores below 95. She was told she would have to move to another department, at lower pay, if her score didn't improve, she says. "Make sure you're just scanning, grabbing, bagging," she recalls being told. She quit after nearly one year on the job.

Two shoppers interviewed in front of the Okemos store said they were told by cashiers that they were being timed. "There was one particular cashier that was in so much of a hurry," recalls Ms. Long, the regular customer at that store. "And he was saying, 'When you're afraid you're going to lose your job, you're going to make more mistakes.' "

The United Food and Commercial Workers Union, which covers about 27,000 Meijer employees in Michigan, including 3,000 cashiers, has filed a grievance against the company in connection with the cashier-performance system, saying it has found flaws in it. The union says the matter is headed for arbitration. The Meijer spokesman declined to comment.

Ms. Barry, the DeWitt cashier, who says her weekly score usually hits or exceeds the baseline, admits to using a few tricks to improve her times. She makes heavy use of the register's "suspend button," which stops the clock. The system detects when remote scanning guns are used, automatically allowing slightly more time to scan big items that stay in the cart. Ms. Barry sometimes uses the remote scanner for nonbulky merchandise.

"It is pretty much survival," she says. "You have to learn the tricks of the trade."

Lessons from Virgin's U.S. Brand Builder

2008-07-12T10:36:00.001-07:00

For Frances Farrow, the central trick is to see the business from the customer's perspective and respond to the customer's needs

The Executive: Frances Farrow, 44

Background: Farrow, an executive member of the board of Virgin Atlantic Airways since 1993, arrived in New York eight years ago to help build Virgin USA, the headquarters of the Virgin Group in North America, where she is currently chief executive. Virgin is already a household name in Europe, with more than 200 companies run by charismatic entrepreneur Sir Richard Branson. Farrow's job is to expand the Virgin brand in North America.

The Company: Virgin USA was established in 2001 and currently consists of about 15 different brands (BusinessWeek.com, 7/8/08). This year, the company launched Virgin America, a domestic airline service based in San Francisco.

Revenues: $23 billion (Virgin Group global revenue)

Her Story: Everyone's got something to say about Virgin. With an unusual brand name and a mold-breaking leader in Richard Branson, that's hardly surprising. From praise of his business acumen and curiosity about his home on Necker Island in the British Virgin Islands to head-shaking at our outrageous company stunts, I have heard them all. But the ones I appreciate most are comments about the brand's elasticity and its unique ability to succeed in diverse markets: "I fly your airlines, my kid uses your cell phones, we rock out at the music festival, and we're excited for Richard to invent alternative energy options."

It is a reminder of Virgin's infinite opportunities, but also of the risks of letting the brand stray off course.

My job is to help start new Virgin companies in North America while making sure the global brand remains strong. The mission is pretty clear: Our brand values have been the same since 30 years ago, when Richard went from running a student magazine to running a record company and then an airline. And even as we are expanding the global brand, including here in the States, with much higher stakes, the approach is still the same.

Virgin Innovations

First of all, the customer viewpoint remains the heart of our companies' origins: We spot gaps in the market where consumers have needs, and we try to fill them. Richard himself was a frustrated consumer who found a better way. Stranded at an airport, he chartered a plane and got himself and his fellow passengers home. That experience inspired him to start an airline that he himself would want to fly. Virgin Atlantic introduced the seatback entertainment system and an onboard bar, and it taught cabin crews to make friendliness a priority, to name a few innovative firsts.

How does our startup process work? Even as a global enterprise, Virgin Group starts companies with the same alacrity and speed as when Richard first began to build the brand. Consistent with Virgin's entrepreneurial genesis, the process is not complicated, and we keep pace with market changes. Our corporate development team has experience with private equity, investment banking, and entrepreneurial activities. Together with the brand team, it looks for sectors currently experiencing consumer "headaches," which to us are opportunities. The teams work together to make sure these opportunities fit our brand values and offer something better and fresher in their sectors. Partners and other investors come to us with all sorts of ideas, to which my teams ask and answer the following questions: Are we meeting a gap where there is a need? Does it offer consumers a better deal? Is it the right fit for our brand? Can we offer both substance and a unique Virgin flair across many consumer touchpoints?

The better consumers know us, the more they love us. That's what our brand studies have found, and I think it's in no small part due to how we go about deciding what companies to start. We don't ask ourselves, "What do we want to bring to market?" but rather: "What do consumers want?" We look at the world from the point of view of the consumer. The result of that kind of criteria is loyalty.

Maintaining Freshness

In spite of our track record in Britain, U.S. consumers were not so familiar with the Virgin brand when we started out here. This gave us the opportunity to enter U.S. markets with the same entrepreneurial passion that breathed life into Virgin's first British companies. But the brand is fresh and innovative, not only because of what we do but how we do it. Let me give you a few examples.

In the early 2000s, we recognized that both the young and the budget-conscious had limited cell-phone options. So we partnered with Sprint (S) and started Virgin Mobile USA (VM) as the first mobile virtual network operator in the U.S. to offer affordable but quality handsets and wireless service with excellent customer care and mobile data services. Six years later, its customer base exceeds 5 million consumers. It's a crowded marketplace—to cut through, one of the things Virgin is known for is its irreverent attitude when it comes to advertising. We started Virgin Mobile with holiday advertising, such as Chrismahanukwanzah and SugarMama, a revenue-generating program where users were rewarded with free minutes for watching online content.

It's not just about marketing. One of the ways we've continually stood out is by finding a niche, differentiating our product among existing ones, and improving customer service. For instance, when we launched Virgin America, as an affordable option to a sector in need of a makeover, we offered such features as seatbacks with a functioning PC run off Linux that houses on-demand movies, video games, and a first-of-its-kind seatback food ordering system. We're tickled that people are blogging about other extras, such as seat-to-seat texting, the mood lighting, and even the safety video.

Humane Lending

The financial-services industry is another pain point in the U.S. We recently watched a small company called CircleLending build a steady customer base and expertise in family-and-friends lending programs. Because we liked what they did and felt it could go even bigger and bolder with the Virgin brand, we invested in it and rebranded it Virgin Money. We saw the power of the brand immediately: Six months after rebranding, revenues jumped more than 50%. The brand has given the business permission to communicate in a fun and more human way. We now have advertising about friends, family, and loans with characters asking with a wink, "Anyone up for a threesome?"

We've also taken some knocks, however. One unique hazard in building on a known global brand is making the assumption that a product or service that works in one market will work here. In the late 1990s, we launched Virgin Cola in the U.S. with hype and fanfare. Richard drove a tank into Times Square and knocked down cola cans. Despite success in Britain and other countries, U.S. consumers didn't want another cola, and we retreated. It offered us a valuable lesson: One size doesn't fit all.

Virgin got its start as a true upstart. Richard launched a student magazine that led the way to a record company, and so forth. We are fortunate that instead of constantly reinventing ourselves 30 years later, we can stay true to our authentic roots, our rock-and-roll spirit, and the challenge laid down every day by our founder, who seems always to be one step ahead of everyone else in gauging the next big thing. But the entrepreneurial Web 2.0 world we live in means there are fewer Goliaths to slay and plenty of upstart Davids. We certainly don't rest on our laurels, because there is always room for better options of style and substance. That's what gets the folks at Virgin USA out of bed every day (and Richard out of his island hammock).

Copyediting? Ship the Work Out to India

2008-07-12T10:31:00.000-07:00

Not far from New Delhi, Mindworks now has eight overseas clients, and it's mounting a big effort to go after more U.S. publications

by Nandini Lakshman

In a squat, gray building in Noida, a leading outsourcing destination 15 miles from New Delhi, is the headquarters of Mindworks Global Media. Here, 90 young men and women peer into their computers, editing copy, designing and laying out pages, and even reporting over the phone. Mindworks isn't a new publication. It's a company to which media groups in Asia, Europe, and the U.S.—including the Miami Herald and South China Morning Post—outsource work that journalists and copyeditors usually do. The Mindworks staff works two to three shifts a day, seven days a week. Tony Joseph, 46, an editor-turned-entrepreneur, is Mindworks' founder and chief executive. He sometimes drops by at 6 a.m. to see his employees, just when U.S. clients are putting their papers to bed.

Mindworks has been handling outsourcing assignments from non-Indian publishers for four years. It expects plenty more business as the cost-cutting in U.S. and European print media grinds on. Some Western publishers do their outsourcing in-house—Thomson Reuters (TRI), for instance, has moved basic Wall Street reporting on U.S., European, and Gulf equities to a new bureau in Bangalore. But other media companies prefer to outsource to the Indians directly. On June 24, Mindworks made global headlines when the Associated Press reported that the company had taken on copyediting and layout work for a couple of publications owned by the California media publishing group Orange County Register Communications.

Mindworks' Joseph, who was born and bred in Kerala, has spent most of his working career in New Delhi in senior editing positions at such leading India papers and magazines as Economic Times, Business Standard, and BusinessWorld. Now he lives in New York to be close to his clients and travels to India every quarter. He wouldn't divulge names or details about his clients, but he says Mindworks has eight from the publishing industry in all. The Orange County Register is the latest. A deputy editor at the Register says that Orange County's outsourcing to Mindworks "will be a one-month trial" for the service of laying out pages for one of its community papers and of copyediting stories for the flagship Register.

Markets in Flux

The U.S. is a new market for Mindworks, which got its first American client last year. "The U.S. is the world's biggest media market, and the business there is changing rapidly," says Joseph. "For us, the greatest opportunity for creativity and growth is in markets where there's a lot of flux and everything is open for reconfiguration." Indeed, U.S. publications have been plagued by declining print readership and advertising as readers keep switching to online media. Outsourcing work to India helps keep publications in business. "It helps them improve efficiencies in editorial packaging and reallocate resources to reporting and writing," Joseph says. Mindworks claims that it helps publications cut costs 35% to 40%.

Mindworks didn't start out with foreign clients. It began locally, publishing magazines for such companies as Bharti Airtel (BRTI.BO), India's largest telecom provider. At the height of the technology outsourcing boom in 2004, Mindworks got an assignment from a British airline magazine. The job: Do a story on this question: If you had 2 million pounds to spare, what's the best seaside property you'd buy in Europe? Sitting 5,900 miles away from London, Joseph and his team made international calls and delivered the article in eight days. It was a one-off job, but it encouraged Joseph to relaunch Mindworks as a global media outsourcing company in 2005. After mulling which aspect of journalism would make the most business sense—writing, reporting, or editing—Joseph concluded that copyediting was where Mindworks could most excel. "Tony's track record in journalism and India's labor arbitrage are a big value-add and cost saver for clients," says Ranjan Kapur, who heads the India arm of Martin Sorrell's WPP Group (WPPGY) and personally was an original angel investor in Mindworks Global.

Mindworks' other investors nudged it to explore the U.S. market. In 2007, Helion Venture Partners, a venture capital fund registered on the island of Mauritius, came aboard, buying out the initial investors—WPP's Kapur and the Kolkata-based media house Ananda Bazar Patrika, owner of BusinessWorld, which Joseph once edited. "We felt that media content outsourcing was underutilized but had great potential,— says Sanjeev Agarwal, managing director of Helion. Agarwal has an excellent record—he founded Daksh, India's most successful business-process outsourcing company. Agarwal made a fortune when Daksh was acquired by IBM (IBM) in 2004.

New U.S. Thrust

Joseph and his editorial team honed their global outsourcing skills on publications from Southeast Asia (South China Morning Post) and the Middle East(Gulf News), for which they edited copy and laid out pages. Mindworks now has a dedicated editorial and design team, ranging from 5 to 15 people, for each of its eight global clients.

The staffer logs into a foreign publication's general desk basket, where the client's raw stories are parked for editing. Each team member is assigned a few stories, which are checked for grammar, style, and accuracy. In case there are inconsistencies or inaccuracies, the copy editor at Mindworks gets in touch with the news editor of the foreign publication. If the team is handling a particular section of the publication like Sports or Lifestyle, then the contact person in the U.S. is the section head. The reporter is never contacted.

Every deal goes through a two-month transition, when the client and the customer try to understand each other's needs. Either the publication's representative comes to India, or a senior Mindworks team member is posted overseas, for a fortnight to a month, to familiarize himself with the client's style requirements and work culture. "It helps minimize errors," says Joseph. Mindworks plans to increase its staff from 100 to 1,500 people by 2013. Joseph has just hired a new head in the U.S. for new business development and plans to build a five-member U.S. operations team to help market Mindworks'services.

Today, Mindworks may have an early-mover advantage in global media outsourcing, but others are bound to follow. Helion's Agarwal says media outsourcing could be a $2 billion opportunity for India. For the past four years, Gurgaon-based Express KCS has been designing restaurant and product ads for a host of Northern California papers, including Contra Costa Times, The Oakland Tribune, The Argus in Fremont, and Tri-Valley Herald. A year ago, Express KCS ventured into copyediting and layout for London's Property News. More media outsourcing business will flow to India—and to Mindworks. "The issue is, how quickly can they scale up?" says Agarwal. Joseph is confident he can stay ahead. "Our processes are not easy to replicate," he says.

Herman Miller's Clinical Trials

2008-06-08T15:09:00.001-07:00

Herman Miller took the office by storm with an ergonomically correct chair. Now it's trying to build up its hospital business

by Reena Jana

It seems fitting that Herman Miller (MLHR) is remaking its Aeron chair—once a $1,000 status symbol that allowed Web moguls of the '90s to sit coolly and comfortably while navigating the Internet—as hospital furniture. Just as the leaders of the dot-com boom are themselves graying, the office-furnishings giant hopes to cash in on one of this era's megatrends: the graying of America.

The Aeron's ergonomics have now inspired the Nala, which has an easy-to-adjust seat designed, in theory, to help people recovering from surgery. Herman Miller's first patient-oriented product for the clinical market, the Nala makes its debut on June 9 at Chicago's NeoCon World's Trade Fair, a furnishings industry show, and will go on sale to hospitals in the fall for a list price of $1,800—pretty costly for patient chairs.

The timing could be right. With many companies downsizing or freezing new hires, demand for office furniture—even the still-popular Aeron, which now sells for $750—is expected to decline. Although the Zeeland (Mich.) company's revenue rose 10.5% last year, to nearly $2 billion, growth is slowing from 14.6% a year earlier. Herman Miller already has a growing business supplying hospitals and doctors' offices with furniture, including desks, chairs, pharmacy shelves, and steel carts. While the company doesn't break out unit sales, it says health-care furniture revenue has grown at an annual clip of 15% for the past five years. Now its designers are taking a closer look.

Moving into hospitals makes sense for designers of office furniture. "The need for more ergonomic hospital furniture follows naturally the trend that has happened in the office in the last 20 years or so," says Pascal Malassigné, a research scientist at the Veterans Administration Medical Center in Milwaukee and an industrial design professor at Milwaukee Institute of Art & Design. Because many hospitals need to upgrade outdated facilities, now is a smart time to develop innovative clinical furniture, he adds.

Why not, then, Herman Miller designers wondered, do for patients what's been done for those confined to hours of desk labor—make the seat as comfortable and functional as possible.

Using the existing design and engineering intellectual property that allows the Aeron and other chairs to tilt smoothly had another plus: Herman Miller could avoid making a costly new research and development investment. "We didn't want to go out and reinvent," says Tom Granzow, senior program manager for Herman Miller for Healthcare, who ran product planning and strategy on the Nala project. The company saved a year of R&D time.

Still, Granzow's team needed to determine whether such a design could apply in the realm of clinical furniture. Beginning in 2005, it conducted research in nine hospitals around the country. Designers and engineers visited patient rooms and met with nearly 200 nurses and doctors. The company also enlisted Boston-based innovation firm Continuum, known for its work in health-care-device design, to conduct research and advise on aesthetic concepts.

The study revealed how difficult it is for patients to get up from traditional stationary chairs found in most hospitals. That work clarified Herman Miller's goal: to create a transitional piece of furniture that can help a patient sit up with ease after being confined to a hospital bed for days or weeks, and to do so without using full muscle control or a caregiver's help.

Nurses and physicians also advised on several crucial details, such as making sure an intravenous-medication line wouldn't catch on the chair's arms and the need to find antimicrobial upholstery that could be cleaned if blood or other fluids get trapped in the seams.

Beyond such practical concerns, both design teams wanted to create a visually pleasing chair that would serve as a brand symbol, as the Aeron has for the past 14 years. The aim was to make an inviting piece of furniture that looked anything but clinical while serving clinical purposes.

It's such user-centered research that could give Herman Miller an advantage over established clinical-furniture makers, says Roger Martin, dean of the Rotman School of Management at the University of Toronto, who consulted with Herman Miller in the early '90s but was not involved with the Nala's development. "We're seeing the beginning of a revolution in health care around people thinking of the user's experience," he says.

Already, rival Steelcase, (SCS) which leads the office-furniture segment with $3.4 billion in annual sales, has had a successful run with its Nurture by Steelcase line of hospital furniture, which offers patient chairs and also is based on user-centered design. (Steelcase doesn't break out sales figures.)

But Herman Miller is taking a different approach. While Steelcase chairs are designed for patients recovering from specific procedures, the Nala is meant to be bought in bulk by hospitals and used by a variety of patients.

With its identity as a patient chair, the Nala most likely isn't destined to become the status symbol the Aeron once was. But its debut could help the furniture maker in a healthy—and increasingly competitive—market.

One Laptop Meets Big Business

2008-06-08T15:03:00.000-07:00

The big idea of giving PCs to poor children has been challenged by educators and business. Here, follow the misadventures of One Laptop per Child

by Steve Hamm and Geri Smith

One by one, the children ran into the school yard, lining up in a grassy field next to a low-slung building of classrooms topped by a rusty steel roof. Most of these children in Luquia, a tiny, impoverished town 13,200 feet above sea level in the Peruvian Andes, wore ragged navy-blue uniforms, and many had not bathed in days. Their small adobe homes have dirt floors, no running water, and no bathrooms. They share sleeping space with dozens of squeaking guinea pigs, which scamper underfoot before becoming the family's rare meal of meat. The children, then, were understandably giddy with excitement in May as principal Pedro Santana handed them the most valuable thing they had ever owned: a small green-and-white laptop computer.

These children are among the first in Peru to receive laptops from a trove of 140,000 the government plans to distribute to poor rural students this year in a bold bid to revolutionize the country's dismal educational system. Yet even as the students enjoyed one of the biggest thrills of their lives, the organization behind the computers, One Laptop per Child, was in danger of cracking.

The outfit begun by former MIT Media Lab director Nicholas Negroponte had been thrown into turmoil by the stress of trying to achieve the audacious goal of transforming learning by supplying millions of the world's poor children with laptops. Six weeks earlier, OLPC President Walter Bender, who helped launch the Peruvian deployment, quit abruptly in a dispute with Negroponte, the group's chairman. Software security leader Ivan Krstic left, too. Those departures followed a messy breakup with chip giant Intel (INTC) in January. Cambridge (Mass.)-based OLPC's travails seemed to signal that a group that had promised to rescue the world's poor children from ignorance was itself in need of a lifeline.

The fate of OLPC is uncertain, and it's too early to judge the effectiveness of the computers. Still, it's possible to draw lessons about the difficulties of such grand-scale social innovation. The group's struggles show how hard it is for a nonprofit made up largely of academics to operate like a business and compete with powerful companies. They also show what happens when differing philosophies of education and beliefs in how software should be created go head-to-head. Values the group has promoted have met resistance in the marketplace, government bureaucracies, and classrooms. That Negroponte and his colleagues took on way more tasks than they could handle only complicates the situation further.

Since its launch three years ago, OLPC has fallen woefully short of Negroponte's initial goal of supplying Third World children with 150 million laptops by the end of 2008. Development of the XO laptop and software took longer than expected; the price came in at $188 each rather than the $100 first targeted; countries including Libya and Thailand reneged on initial pledges to buy large quantities; and competition from tech titans like Intel slowed momentum. Although pilot programs began in 2006 on test laptops, the final version wasn't ready until late last year. Now pilots are running in 20 countries, distribution has begun in two, and about 370,000 laptops have been shipped.

The group seems to have backed away from the brink in recent days. On May 15 it announced a tie-up with Microsoft (MSFT) to run the Windows operating system on the XO laptop, gaining credibility with a number of governments. And other backers like Google (GOOG) and Advanced Micro Devices (AMD) are holding firm. During the week of May 18, Negroponte ran a four-day conference in Cambridge that brought together education and tech leaders from 44 countries. About 500,000 orders were placed, bringing the total to 750,000 outstanding orders.

A chastened Negroponte no longer predicts mass adoption in short order, but he remains confident that OLPC can have a major impact. He sees it playing the role in computer-aided learning that Muhammad Yunus' Grameen Bank has had in the global spread of microcredit. Grameen started something that many others now practice. "We're not building an empire. We're building a movement," Negroponte says.

Now, as the initial tech development phase has wound down, the organization faces a more daunting challenge: deploying and integrating millions of laptops in schools and communities. If something goes awry, the fragile credibility it has stitched together in recent weeks could rip apart. "This is the moment of truth," says Chuck Kane, a longtime software industry executive who became OLPC's president on May 2. "One unsuccessful deployment and it might mean the end of the project."

SEARCHING FOR THE INTERNET

Spending time in villages where the laptops have been distributed shows both OLPC's promise and immense challenges. In Luquia, Justo Miguel Común, a fifth-grader who is the youngest of seven children of subsistence farmers, was delighted to get his laptop in late April. "I like the math games, and I love the camera," he said two weeks later. On a chilly evening, his mother, Alejandra, who quit school after first grade, watched proudly as her 11-year-old son sat at a small table outside their adobe house with his face illuminated by the light from the screen. "This computer is going to be a very good thing for learning," she said.

Yet when BusinessWeek asked her son detailed questions, it became clear he didn't fully understand the computer's capabilities. His teacher had told the class to search the Internet for information on the environment, but the boy was stumped. "I was trying, but I couldn't find anything," he explained. He seemed to think the Net was something contained within the machine.

Such are the challenges of introducing not just a strange new machine but an alien world to a child brought up in isolation from outside culture. The leaders of OLPC believe the laptops must be much more than electronic substitutes for textbooks if they are to profoundly effect learning. The group, an offshoot of MIT's Media Lab, which Negroponte launched 23 years ago, has based its educational philosophy on the theories of Seymour Papert, a Media Lab professor who pioneered the use of computers in elementary education in 1967. Papert, now retired, developed a theory called Constructionism, which posits that young children learn best by doing rather than by being lectured to. So to create a tool that could deliver more than rote lessons and e-books, OLPC designed the machine and its software to enable collaboration, exploration, and experimentation. "We're hoping that these countries won't just make up ground but they'll jump into a new educational environment," says David Cavallo, OLPC's chief education architect.

CULTURAL IMPERIALISM?

While this philosophy is essential to the mission of OLPC, it's also a source of tension. Current educational leaders in Peru embrace Constructionism, but most countries base their education systems on the idea that teachers pass their knowledge to receptive students. That was a problem for OLPC in China as well as India. India's education department, for instance, calls the idea of giving each child a laptop "pedagogically suspect," and, when asked about it recently, Education Secretary Arun Kumar Rath barked: "Our primary-school children need reading and writing habits, not expensive laptops."

Some observers accuse OLPC of cultural imperialism. "It's arrogant of them. You can't just stampede into a country's education system and say, Here's the way to do it,'" says William Easterly, a professor at New York University and author of The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.

In fact, though OLPCers still have faith in Constructionism, they don't force the approach. Nor do they still insist on open-source software, a change that has caused some of the deepest rifts within the group. Originally, rather than using Microsoft's pricey Windows and ready-made commercial applications, they chose the Linux open-source operating system and created a new user interface and applications designed specifically to aid in learning by doing. A key reason to support open source: It allows students to tinker directly with software. However, some countries, such as Libya, which initially agreed to buy more than 1 million laptops, backed out and chose a Windows-based alternative from Intel. One attraction: Microsoft cut the price of a software package for poor schools from $150 to $3.

So when Negroponte chose to do business with Microsoft, turmoil erupted within the organization. After an Apr. 1 meeting during which the board agreed to break bread with Microsoft, Bender resigned. For weeks, OLPC's online message forums lit up with an angry debate. The anti-Microsoft side believes software shouldn't be owned but shared freely. To Negroponte, the choice was simple—and necessary—pragmatism. "It's like Greenpeace cutting a deal with Exxon. You're sleeping with the enemy, but you do it," he says.

Negroponte has had to fend off critics from the start. Early on, Intel and Microsoft executives, confronted by this charismatic rabble-rouser with his promise of affordable computing for the masses, called the XO a toy. They rushed out alternatives. Suddenly, Negroponte and his band were up against two of the most powerful tech giants in the world. And the giants played rough. Even after Intel joined with OLPC last year to help design a version of the XO powered with its chips, some of its people belittled the XO to governments who had agreed to buy it. Negroponte accused Intel of undermining his cause. Intel complained he was pressuring it to stop selling its Classmate PC for poor students. Negroponte now says he wishes he had been able to hold his temper and avoid a split.

He also faults himself for not managing his organization more effectively. "I'm a visionary, not a manager," he says. He ran the organization like a science project rather than a business. People had overlapping responsibilities. The staff of 23 regular employees and 26 consultants lacks the resources to support the needs of the pilot programs and deployments now under way—much less massive expansion. Negroponte, who travels incessantly to visit heads of state and education ministers, was spread too thin. So was Bender. Kane, who joined the organization as a part-time chief financial officer last year, is now running day-to-day operations. Already, the operational chaos has diminished. Now he's busy closing deals with countries and lining up business partners to help produce the technology for the next-generation XO. "We're moving from academic brainstorming mode to execution mode," Kane says.

DEBATABLE USEFULNESS

OLPC might not be in such turmoil if Kane had been promoted earlier. Nigeria had agreed to buy 1 million XOs, but after a competition among three alternatives, the country chose Intel's Classmate PC instead. Why did OLPC lose out? Intel provided more support, writes Isa Muhammad Ari, director of administration for Nigeria's Federal Capital Territory, in an e-mail.

With OLPC, most of the weight of training is carried by local education officials. In Peru, the Education Ministry is racing to prepare teachers. It gives them a 40-hour course that includes an introduction to the learning programs, instruction on basic repairs, and tips on how to use the laptops to enhance their lessons. Teachers BusinessWeek spoke to in two villages where the machines have been distributed seemed excited about them. One recent morning, teacher Ananias Richard Inga played a catchy song programmed in Spanish into the laptops to teach his first- and second-graders how to write and pronounce vowels. When seven-year-old Idelma Huarocc, her brown cheeks burned and peeling from the sun, typed "Idelma ama a mamá" (Idelma loves mama), she wiggled with pleasure as the computer's voice read her sentence. "This really motivates them, and it makes it easier for kids to advance at their own pace," says Inga. Teachers at another school where the laptops were tested in a pilot project that began a year ago report their students' reading comprehension has improved significantly, the drop-out rate is down, and students who once said they expected to be farmers like their parents are now dreaming of becoming lawyers, accountants, or engineers.

Even with these results, the Unified Union of Education Workers of Peru, representing some 320,000 public school teachers, is skeptical. "These laptops aren't part of a comprehensive educational, pedagogical project, and their usefulness is debatable," says Luís Muñoz Alvarado, the union's general secretary. Muñoz never had a chance to explore the laptops, though. In what seems an easily avoidable blunder, the Education Ministry has not explained the program to the union.

Recognizing the need to integrate the laptops into communities, OLPC is scrambling to develop guidelines for deployment based on the experiences in Uruguay and Peru, the two countries with the largest distribution so far. The group is also bringing in consultants to advise countries on how to integrate the PCs. One, Edith Ackermann, a visiting scientist at MIT, says OLPC should have involved more educational experts in creating and testing the applications. Instead, she says, "The hackers took over." The result is some programs are too complex for many children to use. "Now we have to deal with this. I don't know if it's too late," says Ackermann.

While some critics have called on OLPC to hire aggressively so it can provide on-the-ground support for dozens of countries at a time, Negroponte and Kane plan instead to rely even more on outsiders. They'll forge alliances with local tech companies and nongovernment organizations that will provide deployment support.

Although each country has a different situation, they can learn from common experiences. OLPC plans on using Haiti, the poorest country in the Western Hemisphere, to test ideas about how to best integrate the computers with society and to create a template for other countries.

Just getting started in Haiti will be a challenge. The group's second trip there was delayed by riots over food shortages in April. The first shipment of laptops was held up in customs for weeks. Donors are paying for some laptops, but not all. Asked how Haiti can afford to pay for PCs when its citizens are starving, Guy Serge Pompi, the Haitian educator coordinating the project, answers: "You can't just focus on the present. The starving is the present. The future is education. We need to train our students for better jobs and a better future."

The desire to educate students for a better future was shared by officials from Rwanda, Colombia, Afghanistan, Senegal, and other countries. Although large-scale studies have not been done to show whether the laptops improve learning, initial successes in Uruguay and Peru have emboldened others to make the effort. In Peru itself, the laptops are gaining momentum. Regional governors have asked the Education Ministry to order a total of more than 500,000 additional laptops. "We aren't so overly optimistic to believe that distributing laptops is going to resolve the social demands of people who have been marginalized and submerged in extreme poverty for decades, but we believe it is a great step forward," says Education Minister José Antonio Chang.

Food Is Gold, So Billions Invested in Farming

2008-06-05T10:38:00.001-07:00

By DIANA B. HENRIQUES

Huge investment funds have already poured hundreds of billions of dollars into booming financial markets for commodities like wheat, corn and soybeans.

But a few big private investors are starting to make bolder and longer-term bets that the world’s need for food will greatly increase — by buying farmland, fertilizer, grain elevators and shipping equipment.

One has bought several ethanol plants, Canadian farmland and enough storage space in the Midwest to hold millions of bushels of grain.

Another is buying more than five dozen grain elevators, nearly that many fertilizer distribution outlets and a fleet of barges and ships.

And three institutional investors, including the giant BlackRock fund group in New York, are separately planning to invest hundreds of millions of dollars in agriculture, chiefly farmland, from sub-Saharan Africa to the English countryside.

“It’s going on big time,” said Brad Cole, president of Cole Partners Asset Management in Chicago, which runs a fund of hedge funds focused on natural resources. “There is considerable interest in what we call ‘owning structure’ — like United States farmland, Argentine farmland, English farmland — wherever the profit picture is improving.”

These new bets by big investors could bolster food production at a time when the world needs more of it.

The investors plan to consolidate small plots of land into more productive large ones, to introduce new technology and to provide capital to modernize and maintain grain elevators and fertilizer supply depots.

But the long-term implications are less clear. Some traditional players in the farm economy, and others who study and shape agriculture policy, say they are concerned these newcomers will focus on profits above all else, and not share the industry’s commitment to farming through good times and bad.

“Farmland can be a bubble just like Florida real estate,” said Jeffrey Hainline, president of Advance Trading, a 28-year-old commodity brokerage firm and consulting service in Bloomington, Ill. “The cycle of getting in and out would be very volatile and disruptive.”

By owning land and other parts of the agricultural business, these new investors are freed from rules aimed at curbing the number of speculative bets that they and other financial investors can make in commodity markets. “I just wonder if they need some sheep’s clothing to put on,” Mr. Hainline said.

Mark Lapolla, an adviser to institutional investors, is also a bit wary of the potential disruption this new money could cause. “It is important to ask whether these financial investors want to actually operate the means of production — or simply want to have a direct link into the physical supply of commodities and thereby reduce the risk of their speculation,” he said.

Grain elevators, especially, could give these investors new ways to make money, because they can buy or sell the actual bushels of corn or soybeans, rather than buying and selling financial derivatives that are linked to those commodities.

When crop prices are climbing, holding inventory for future sale can yield higher profits than selling to meet current demand, for example. Or if prices diverge in different parts of the world, inventory can be shipped to the more profitable market.

“It’s a huge disadvantage to not be able to trade the physical commodity,” said Andrew J. Redleaf, founder of Whitebox Advisors, a hedge fund management firm in Minneapolis.

Mr. Redleaf bought several large grain elevator complexes from ConAgra and Cargill last year for a long-term stake in what he sees as a high-growth business. The elevators can store 36 million bushels of grain.

“We discovered that our lease customers, major food company types, are really happy to see us, because they are apt to see Cargill and ConAgra as competitors,” he said.

The executives making such bets say that fears about their new role are unfounded, and that their investments will be a plus for farming and, ultimately, for consumers.

“The world is asking for more food, more energy. You see a huge demand,” said Axel Hinsch, chief executive of Calyx Agro, a division of the giant Louis Dreyfus Commodities, which is buying tens of thousands of acres of cropland in Brazil with the backing of big institutional investors, including AIG Investments.

“What this new investment will buy is more technology,” Mr. Hinsch said. “We will be helping to accelerate the development of infrastructure, and the consumer will benefit because there will be more supply.”

Financial investors also can provide grain elevator operators the money they need to weather today’s more volatile commodity markets. When wild swings in prices become common, as they are now, elevator operators have to put up more cash to lock in future prices. John Duryea, co-portfolio manager of the Ospraie Special Opportunity Fund, is buying 66 grain elevators with a total capacity of 110 million bushels from ConAgra for $2.1 billion. The deal, expected to close by the end of June, also will give Ospraie a stake in 57 fertilizer distribution centers and the barges and ships necessary to keep them supplied with low-cost imports.

Maintaining these essential services “helps bring costs down to the farmers,” Mr. Duryea said. “That has to help mitigate the price increases for crops.”

Mr. Duryea of the Ospraie fund dismissed the idea that financial investors, with obligations to suppliers and customers of their elevators and fertilizer services, would put their thumb on the supply-demand scale by holding back inventory to move prices artificially.

“It is not in our best interests for anyone to be negatively affected by what we do,” he said.

Perhaps the most ambitious plans are those of Susan Payne, founder and chief executive of Emergent Asset Management, based near London.

Emergent is raising $450 million to $750 million to invest in farmland in sub-Saharan Africa, where it plans to consolidate small plots into more productive holdings and introduce better equipment. Emergent also plans to provide clinics and schools for local labor.

One crop and a source of fuel for farming operations will be jatropha, an oil-seed plant useful for biofuels that is grown in sandy soil unsuitable for food production, Ms. Payne said.

“We are getting strong response from institutional investors — pensions, insurance companies, endowments, some sovereign wealth funds,” she said.

The fund chose Africa because “land values are very, very inexpensive, compared to other agriculture-based economies,” she said. “Its microclimates are enticing, allowing a range of different crops. There’s accessible labor. And there’s good logistics — wide open roads, good truck transport, sea transport.”

The Emergent fund is one of a growing roster of farmland investment funds based in Britain.

Last October, the London branch of BlackRock introduced the BlackRock Agriculture Fund, aiming to raise $200 million to invest in fertilizer production, timberland and biofuels. The fund currently stands at more than $450 million.

Braemar Group, near Manchester, is investing exclusively in Britain. “Britain is a nice, stable northwestern European economy with the same climate and quality of soil as northwestern Europe,” said Marc Duschenes, Braemar’s chief executive. “But our land is at a 50 percent discount to Ireland and Denmark. We just haven’t caught up yet.“

Europe, like the United States, is facing mandated increases in biofuel production, he said, and cropland near new ethanol facilities in the northeast of England will be the first source of supply. “No one is going to put a ton of grain on a boat in Latin America and ship it to the northeast of England to turn it into bioethanol,” he said.

For Gary R. Blumenthal, chief executive of World Perspectives, an agriculture consulting firm in Washington, the new investments by big financial players, if sustained, could be just what global agriculture needs — “where you can bring small, fragmented pieces together to boost the production side of agriculture.”

He added: “Investment funds are seeing that this consolidation brings value to them. But I’m saying this brings value to everyone.”

The strategic marketing process

2008-05-26T10:42:00.000-07:00

Introduction
The strategic marketing process involves three crucial phases. These phases include: planning, implementation and control. Although the planning phase is often referred to as the most important, each of the steps is equally responsible for the success of a firm's marketing strategy.

Planning
The planning phase is the most crucial stage in a firm's strategic planning process. The first step is to perform a thorough SWOT analysis. It will help the organization determine its own situation in relation to the market. This analysis is key in fully understanding the internal and external factors that are favorable or unfavorable to the organization's activities. This is done through analyzing a firm's strengths, weaknesses, threats and opportunities. The results from this analysis should directly help in the formation of a firm's strategy which will aim to minimize threats while maximizing on opportunities as well as reveal new product and market opportunities. This information will also be the basis for setting a firm's marketing mix or plan as well as setting realistic and attainable goals and objectives.

The second step in the planning phase takes a market-product approach and involves goal and objective setting (Kerin-Hartley-Rudelius, 2007). This begins with understanding the consumer's wants and needs and involves conducting market research. From a strategic marketing perspective it is important to identify critical issues and attitudes related to the product amongst other things. The specific information to be gathered in the research process must reflect the individual needs of the product, and the external and internal competencies of the organization (article). This will include and analysis of the organizations special capabilities, points of difference, skills and technologies that set it apart from its competitors (Kerin et al, 2007). Once collected, this data can also be used to set measurable objectives and goals for the marketing plan which can later be used as benchmarks for comparison in the control phase and will help in the development of goals and objectives. A business portfolio analysis would be a good tool to use in order to determine whether a new product or SBU would be advantageous or not, and also to evaluate market share and growth potential. The results yielded will provide performance measures and growth targets for an SBU. This data is invaluable when an organization is trying how to allocate its resources. Also during the planning phase you must identify the target market of the product or service. This involves identifying the segment of consumers who will potentially purchase your product, or those who the strategic marketing process will be aimed at. Another good tool that would be useful would be a market product analysis which would yield results with regards to the attractiveness of the potential product and the market in which it would exist. This would tell a firm which direction is has to go as in such areas as market and product development as well as market penetration and diversification. This will also help to decide on the positioning of your product or service. This is the process of deciding how to position your product in the minds of your primary and secondary audience (how they will perceive it). This will take careful analysis of how the public views your product or idea.
(McFarland, 2001). The planning phase is crucial for gathering data to set benchmarks which can later be measured against in the following stages.

The third and final phase of planning would be to decide on the marketing process. In this step the marketing mix will also have to be set. This step involves deciding on strategies the product, price, place and promotion (4 p's). The end result of the planning phase is to set measurable and attainable goals which can be measured in the control phase. The market research completed earlier in the planning phase will provide the necessary data to organize the marketing mix. Strategies need to be analyzed and combines to properly set the marketing mix. The product is very important and must be desirable to the market segment specified during the planning stage. Price, promotion and placement must also be worked out bases on the data supplied through the planning phase.

Implementation
The next step would be the implementation phase in which all the planning begins to turn into action. Here the firm obtains resources and designs the market organization which is then put into action. Schedules are developed and the marketing programs are executed (strategy and tactics). The product or service will now be available to the public, at the places and prices decided upon in the planning stage. The implementation phase also requires close monitoring to make sure necessary changes occur if internal or external contingencies are affected (McFarland, 2001).

Control
The control phase involves comparing results against the goals and benchmarks set in the planning phase. This is where the organization evaluates its process, outcomes and consumer satisfaction (McFarland, 2001). This will allow the firm to view the planning gap to see where the results deviated from the plan. The organization can then act on the data to exploit positive deviations while correcting the negative. This analysis and is necessary for a firm to ensure that their marketing plan is moving in the directions set out in the planning phase and critical for success in measuring whether objectives were met.

At Best Buy, Marketing Goes Micro

2008-05-24T15:45:00.001-07:00

Returning military? Polish speakers? No niche is too small for local stores to identify and target

by Jena McGregor

Best Buy (BBY) store No. 952 is in Baytown, Tex., set amid the cul-de-sac subdivisions and big-box strip malls of Houston's metropolitan sprawl. In Best Buy's nomenclature, Baytown is a "Middle America" location, tailoring its pitch to value-conscious family folks.

Lately, however, the employees at this store have noticed a different stripe of shopper: Eastern European workers from cargo ships or oil tankers, temporarily docked at Baytown's busy port, are spending their precious shore hours scouring the store's aisles. They take a 15-minute cab or shuttle ride to stock up on iPods and Apple (AAPL) laptops priced cheaper than back home. To speed their shopping, the Baytown Best Buy has moved the iPods from the back corner of the store to the front, paired them with overseas power converters, and simplified the signage. Since the changes were made over the holidays, cash register receipts for the boat workers have ballooned by 67%.

As the economy slows, Best Buy is encouraging its outlets to go off script. Sure, European boat workers are a microscopic niche. But when multiplied by Best Buy's more than 900 stores, the retailer believes such bottom-up insights could have an outsize impact on sales growth. In a sense, the national chain is trying to go hyperlocal, asking on-the-ground employees to spot fresh customer groups—North Carolina retiree clubs, newly returned soldiers in Georgia—that would otherwise pass far below the radar at Best Buy's headquarters in Minneapolis.

The move is the latest step in Best Buy's four-year-old "customer centricity" strategy, which assigned each store to one or more categories such as home theater geeks, soccer moms, and average-Joe electronics shoppers. Each store was asked to woo these often overly broad groups with tailored product mixes and services. "In some cases, we were right," says Shari Ballard, the executive vice-president in charge of U.S. stores, "and in others we were totally wrong."

Local ingenuity and insight is contributing to a relatively rosy forecast from Best Buy, considering so many consumers are on the ropes. At a time when a full tank of gas costs more than some DVD players, executives still project a growth rate of 1% to 3% at stores that have been open at least 14 months. Many local managers, they say, predict even greater growth.

Wall Street has been raining on this picture. "Welcome to Sunny Minneapolis," wrote one dubious analyst. "An Outlook that Would Make Mao Proud," wrote another, harking back to the over-optimistic steel production targets in Mao Zedong-era China. Several question how much faith should be put in forecasts from store managers who are also being prodded by executives to achieve better numbers. Retail analysts generally applaud Best Buy's "centricity" strategy, which has helped separate it from rival Circuit City (CC), currently an acquisition target of Blockbuster (BBI). Yet some doubt the local efforts will go far enough. Big worries about consumer spending, says Morgan Stanley (MS) analyst Gregory Melich, aren't going to be offset by putting more Polish-music CDs in a particular store—as one Chicago Best Buy recently did—"because you find out 25% of the people there are native Polish speakers."
COMPLEX MATH

Analysts also worry about the outlook for new must-have gadgets. With the exception of video games, most of this year's new devices are "evolutionary and not revolutionary," says David Schick, an analyst at brokerage Stifel Nicolaus. Of particular concern are big-screen TVs. Melich believes TV sales and related warranty and equipment purchases, which he estimates made up 40% of Best Buy's $2.2 billion operating profits last year, could drop for the first time in seven years. Best Buy declined to comment.

Taking much of the heat from Wall Street is Ballard, who has run Best Buy's U.S. stores since September. She's trying to give local managers more leeway to set sales strategies, inventory levels, and product mixes. That may sound like Retailing 101: Give customers what they want. But it demands complex math from a big-box retail chain built on standard operating procedures, negotiated shelf-space deals, and headquarters-generated "planagrams," or floor plans. Big companies "make strategy creation this elitist space," says Ballard, 41, who started with Best Buy as an assistant manager in a Flint (Mich.) store.

The latest moves are just starting to upend Best Buy's rigid, top-down planning. Early this year, Savannah (Ga.) store manager Richard Gamble learned that more than 10,000 soldiers from two nearby Army bases were due to return home by September. He quickly assigned a team of employees with armed-forces family members to plan for the troops' arrival; the group selected seven product categories, such as Nintendo (NTDOY) Wiis and flat-screen TVs, that had either launched or fallen in price since the soldiers deployed. Gamble asked Minneapolis to increase his inventories of those goods by 40%. It complied, and he is expecting a sales lift from the bigger stock.

Local store managers are even influencing Best Buy's merchandising tactics. After getting numerous requests from troops set to redeploy, Gamble's military team placed an order for Panasonic (MC) Toughbooks, rugged laptops not usually carried at Best Buy stores. While he couldn't stock them for sale, he persuaded HQ to send him a few for display so soldiers could try them before ordering online from Best Buy. Such a request would have been "virtually impossible" two years ago, says Gamble. Even with a new store opening nearby, he expects the military push to help raise his sales this year by 7%.

The chain's shift in mindset requires a delicate balance: Adjustments spurred by local insight can boost sales, but they also can add risk and expense to operations. Of course, Minneapolis continues to roll out its national plans, but to fortify local insights the retailer is handing out financial modeling software so store managers can try "what-if" scenarios. Still, some changes have flopped. Relocating GPS devices to a different spot in a New York store did nothing to boost the products' sales. And local changes to "endcaps"—the display at one end of an aisle—have risked angering suppliers that paid for specific shelf space.

Some local novelties entail a lot less pressure. After the chairman of a local retiree club called the Golden Boys bought a high-def TV at the Mooresville (N.C.) Best Buy, store manager Walt Goney invited the club's members to come by at 8 a.m., two hours before opening time. Eighty-five members showed up for a hand-holding session on switching to digital television. They bought $350,000 worth of TVs and equipment that morning. The cost to Goney? Just $99 in labor, plus coffee and doughnuts.

Picking Up Lunch Money

2008-05-24T15:29:00.001-07:00

With fast food under fire for fueling obesity, why would a giant U.S. school district pick a quick-serve chain as a hot-lunch supplier? Two reasons, says Kern Halls, a senior food manager for Florida’s Orange County Public Schools, which invited Asian Chao to serve its 174,000 pupils. First, the chain, owned by Food Systems Unlimited in suburban Orlando, meets USDA nutrition criteria. Second, students voted Asian Chao’s $2.50 meal of tangerine chicken, fried rice, and stir-fried veggies No. 1 in their taste test. Chains like Taco Bell and Subway were in lunchrooms in the 1990s but largely disappeared as USDA nutrition standards tightened and costs rose faster than federal subsidies. With 73 outlets in 14 states, Food Systems wants to bring fast food back to school, with bids out in North Carolina, Pennsylvania, and Minnesota.

Shortage of Laborers Plagues India Skills Gap Drags

2008-05-24T12:13:00.001-07:00

By ERIC BELLMAN and JACKIE RANGE

India, a nation of 1.1 billion, has a chronic labor shortage, in the area where it needs workers most.

As it grows rapidly -- tilting from a stagnant, rural economy to a developing, urban one -- India is building thousands of new homes, offices, malls, airports, roads, ports, power plants and industrial parks.
LABOR WOES

• The Issue: India, which is trying is to improve its infrastructure, has a shortage of skilled and semiskilled construction labor.
• The Background: Spending on major infrastructure is projected at more than $60 billion annually for the next six years.
• The Bottom Line: The labor shortage is causing delays in projects and may slow India's economic growth.

So many projects are now under way in India that the pool of workers with even the most basic skills is running dangerously dry. The shortage of bricklayers, rod benders, welders, wall painters and other skilled and semiskilled laborers is threatening to slow the construction of projects that are key to the nation's economic growth.

Improving its decrepit infrastructure is one of the most pressing issues India faces. It is crucial for unclogging chokepoints that are stoking inflation, which is rising fast. And it will determine whether India can keep growing at a pace that will allow it to fulfill its aspirations of becoming a commercial superpower to rival China.

"The shortage of labor is hurting everyone," says Deepak Parekh, chairman of Housing Development Finance Corp., India's largest housing lender, and Infrastructure Development Finance Company Ltd., a government-owned infrastructure financing company. "It's hitting the construction companies, the road projects and it's slowing down the infrastructure. The repercussions are a longer time to complete projects and slower [gross domestic product] growth."

Spending on major infrastructure such as ports, power plants and roads is projected at more than $60 billion annually for the next six years, and will require 92 million man years of labor. Even before taking into account a concurrent boom in industrial, residential and retail building, that's around 33% more labor than the market can provide today, according to India's Construction Industry Development Council, a think tank.
[See more photos]1

"We are not getting enough people in the civil-construction sector, not enough skilled labor," Finance Minister P. Chidambaram said in a recent interview. "An economy growing at over 8% requires far more skilled labor than the supply is."

Labor bottlenecks are popping up, in differing degrees, in other fast-growing countries. China has plenty of labor overall, but in the Pearl River Delta, the nation's manufacturing hub, wages have been rising fast enough to prompt some factories to move elsewhere. Expanding economies in Central and Eastern Europe, such as Poland and Slovakia, have begun to suffer manpower shortages since many residents emigrated to Western Europe for better pay.

In the Persian Gulf, a building boom triggered by soaring oil prices has construction firms scrambling for building material, contractors and skilled and unskilled workers. The region imports most of its labor, offering relatively high wages for foreign workers, especially from Pakistan and India.

The construction industry in India already employs 33 million, the second-largest employer after agriculture. But many of those do unskilled manual work and moved into construction to flee similar jobs in the stagnant agricultural industry. Many skilled workers have left for the Persian Gulf or Singapore, where wages are higher.

Construction sites have few machines to replace muscle. Developers depend on men, and many women, to carry loads of bricks on their heads, dig ditches and holes with shovels, cut steel bars with mallets and move sand with spades.

Workers typically are trained on the job because India's education system offers limited vocational training. Many construction workers have little schooling of any sort; most are illiterate. Rajesh Gerard Joseph, who runs a company that trains construction workers in Bangalore, says his organization has to teach new recruits not only how to use a ruler, lay bricks, paint walls and mix cement, but also how to use an elevator and even a toilet.

After growing at almost 9% annually in recent years, India's economy is slowing, with many economists predicting growth of around 7% this year. A lack of decent infrastructure is one of the reasons. More than 40% of the 657 large government infrastructure projects under way that have a scheduled completion date are running late, according to the Ministry of Statistics and Program Implementation.

Slow Progress

The delays vary from one month to 10 years, and cost overruns from those projects already total more than $6 billion, the ministry says. "Slow progress" from building contractors is cited on more than 100 projects as a top reason. A 90-mile stretch of highway in the eastern state of Orissa, for example, was delayed by more than three years due to "inadequate deployment of qualified staff by contractors," according to the ministry's most recent status report.

It took developer West Pioneer Properties Ltd. six months longer than it expected to hire all the workers it needed to build a new mall north of Mumbai. The mall opened in April, but the food court and multiplex cinema aren't finished yet.

Amit Jatia, chairman of West Pioneer Properties, says the lack of experienced workers meant that a lot of the final touches at the mall had to be redone. The painting was often blotchy, the tiles uneven and the railings along the upper floors were built with gaps that children could fall through. The glitches were fixed before the mall opened, the company says. "We did face problems of getting qualified labor to build the mall," says Mr. Jatia. "A lot of rework had to be done."
[Speed Bumps]

The surging demand for labor can be seen at the morning "Naka," or labor market, of Vashi, a growing Mumbai suburb. More than 2,000 construction workers crowd onto the same corner each morning at 8:30. Skilled workers stand behind the tools of their trade: pipes for plumbers, brushes for painters, long leveling boards for concrete and bricklayers. The nomad women from Rajasthan, marked by their mirrored skirts, are usually tapped for tiling.

Contractors, recognizable from their gold rings and cellphones, dive into the crowds and place orders for skilled and unskilled workers. Those interested swarm around the contractors, negotiate a daily wage and then leave for building sites. Most of the workers are gone before 11 a.m.

There are hundreds of Nakas across Mumbai, and there have been for decades. But recently, there's been a sharp rise in pay and expectations. Wages for some skilled laborers have more than doubled in the past two years to more than $10 a day. Unskilled laborers are making around $2.50 a day, about 50% more than before.

Workers have become pickier, says contractor Mantesh Jamadar, who comes to the Vashi Naka every morning. Many skilled workers don't even show up at the morning market any more, he says. Instead, they have cellphones, and contractors make appointments to see them. "They used to go anywhere for work but now they refuse to travel," Mr. Jamadar says.

More than 80% of the people in the construction industry today are unskilled workers, usually working as day laborers or migrant laborers in tiny crews. But there has been a sharp rise in the number of huge, complex engineering and construction projects undertaken by large Indian companies. To get the workers they need, these companies are embarking on mass training programs.

When Reliance Industries Ltd., India's largest private company by market value, started building a giant new oil refinery two years ago, it was around 20,000 workers short of the 70,000 it needed. In the past two years, Reliance has ramped up recruiting and trained close to 10,000 carpenters, welders, pipe fitters, riggers and grinders to stay on schedule.

Trainees in Gujarat

At the industrial site in the western state of Gujarat -- a site so large it has its own highways -- Reliance trainees sit in one of 100 practice booths, slicing 1-inch segments off of thick steel pipes. After two months of training, they are tested. The company needs to keep the program running because Reliance-certified workers are so in demand that it loses hundreds each month to competitors, mostly in the Gulf.
[Indian laborers work on a high-rise building in Siliguri last year. Wages for some skilled workers have doubled amid a construction boom.]
Indian laborers work on a high-rise building in Siliguri last year. Wages for some skilled workers have doubled amid a construction boom.

Ten years ago, when Reliance launched an identical project, 500 people would show up looking for work just on rumors that the company was hiring, says Yogesh Patel, vice president of human resources at the refinery.

Today, he will advertise and fewer than 100 will show up to apply. "I have to do it again, two, three, four or five times," he says. He scours the country for big projects that are about to end and sends recruiters to competitors' gates looking for skilled workers. He even asks suppliers to get names and numbers of the competitors' managers so Reliance can try to poach them.

Migrants usually live on the job in bleak accommodations. In the fast-growing New Delhi suburb of Gurgaon, 22-year-old construction worker Sheetal, who goes only by one name, loads sand and bricks on and off trucks. He and four colleagues live in a makeshift tent made from bits of old tarpaulin weighed down with bricks, which has been home for six months. In front, there is a small fireplace with a frying pan. There is constant drilling, banging and clanging from the nearby construction site that blends with the steady snarl of traffic from a nearby multilane highway.

"Water is a big problem," says Sheetal. "Even if the water is dirty, I don't mind drinking it because there is no other option. We have fallen ill several times; that's what life is."

He earns about $1.50 a day. For toilets, Sheetal gestures to an open field behind the workers' tents. The crew has no electricity and relies on the floodlights on a large crane nearby to provide light at night.

But for some construction workers, the shortage of labor has started to make a difference, not just to their wages but also to their standard of living. Just across the fence from their camp, is a site run by DLF Laing O'Rourke, a joint venture between India's largest property-development company, DLF Ltd., and British construction firm Laing O'Rourke PLC.

The 37-acre site, which will house a multistory office complex, teems with cranes, cement mixers, and men bending steel rods and molding concrete.

To attract and retain skilled laborers, the nearby workers' living space has a sewage-treatment plant and 24-hour power, something not available in even some of Delhi's neighborhoods.

The site, which houses 5,500 workers, has prefabricated accommodation blocks with dorm rooms where, one recent balmy evening, workers lay on bunk beds under whirring fans. Others made fires in communal cooking areas. Strains of Bollywood hip-hop pulsated through the camp. The camp has bathroom facilities, a day-care center, and a first-aid station with a medical worker on duty.

At another DLF housing site in the area, Angoori Vishwakarma, 27, is playing with her baby, Ritu. Her husband works for DLF as a foreman. She prefers the place to her village in the northern state of Uttar Pradesh, she says, because the facilities are better and there's a constant supply of water and electricity, unlike in the village.

With such living standards, DLF has been able to hire back workers from overseas, even though wages, on average, are about 10% to 15% lower than those in the Middle East. "We are now starting a reverse brain drain at the bottom of the pyramid," says Rajeev Talwar, group executive director of DLF.

Karuna Kant, a 29-year-old senior foreman for DLF Laing O'Rourke in Gurgaon, says he came back from the Gulf because he wants to get married, and it's easier to arrange that here. "This company is a very good opportunity for the safety and the salary," he said.

Dietary Change in China's Cities

2008-05-24T11:53:00.000-07:00

Over the last two decades, urban Chinese consumers have dramatically increased their consumption of meat, other livestock products, and fruits and have decreased consumption of grain-based foods. China's per capita grain consumption declined from 145 kilograms in 1981 to 78 kilograms in 2004 in urban areas, whereas the per capita consumption of meats, eggs, and aquatic products increased respectively from 20, 5, and 7 kilograms in 1981 to 29, 10, and 12 kilograms in 2004. As significant changes in food consumption patterns in urban China are noted, it is natural to ask: Are consumer responses to price changes and income growth entirely responsible for the transformation in food consumption in urban China, or have consumers in urban China changed their preferences for foods? Our recent CARD study examined the empirical evidence for structural change in urban diets in China. The study's findings may be good news for U.S. food industries seeking entry into the Chinese market.

Changes in China's Food Marketing System

Since 1978, a series of reforms of China's administrative system, agricultural policy, state-owned enterprises, investment regulations, fiscal and taxation policies, and financial system have fueled the growth of China's economy. Among these changes, at least three major developments have significantly affected the food marketing chain in China in ways that may have prompted consumers to change their preferences for various food products.

First, privatization of food production, procurement, and marketing dramatically increased the quantity and availability of food in urban China, creating new consumption opportunities. A watershed shift in agricultural policy occurred in 1981, when China's government adopted a decentralized agricultural production system based on household units called the household responsibility system (HRS), which dramatically increased the amount of money a household could keep for themselves from expanded production. Following the adoption of the HRS, China's agricultural production boomed, and the availability of agricultural produce and food greatly increased.

Second, the elimination of food rationing in urban areas allowed food prices to adjust to market supply and demand conditions. Allowing prices to clear markets in 1985 reduced the role of state procurement and sales of agricultural products, especially for non-staple foods. Within three years, rationing of the 15 non-staple foods in urban areas was totally eliminated. Rationing of grains and edible oils continued until 1993.

Third, the opening of China's food processing and retailing sector to foreign direct investment (FDI) has facilitated the rapid modernization of China's food processing and distribution systems and created an environment that fosters food product innovation. From 1990 to 1997, annual FDI flows into China grew tenfold. Substantial FDI has been targeted at the retail food sector, and the 1990s saw supermarkets rise to become a leading retail format for food products in urban areas. As foreign firms penetrated Chinese food markets, domestic firms responded by emulating and adapting foreign product designs, quality standards, and marketing strategies to better fit the tastes of Chinese consumers. The result has been an abundance of new food products offered in modern retail formats, which has facilitated significant changes in consumer shopping behaviors.

Study Findings

The results of tests applied to urban food consumption data for the period 1981 to 2004 provide a reasonably clear picture of changing food consumption in China's cities. First, the tests indicated that the early 1980s and mid- to late 1990s were periods of structural change in food consumption in urban China. The first of these periods corresponds to the elimination of rationing for non-staple foods and the introduction of the HRS. From 1980 to 1985, the output of fruits and freshwater aquaculture products in China increased by 71 and 130 percent, respectively. Statistical tests show that during this same period, preferences shifted in favor of fruits and aquaculture products, increasing per capita consumption of each product by roughly 2 kilograms. These results suggest that policy changes associated with the abolition of food rationing and development of free markets were the most important agents of structural change in Chinese diets in the 1980s and early 1990s.

Second, foods that have long played a major role in urban Chinese diets did not show strong evidence of preference change. In particular, changes in grain, pork, and vegetable consumption can be largely explained by normal price and income effects. In contrast, fruits, fish, beef, and poultry products, while not absent from traditional Chinese diets, play a less important role in daily food consumption and were frequently identified in the tests as showing evidence of structural change. The increasing consumption of these foods may be evidence that local and regional diets are broadening to include goods that are part of a more diverse national diet. An important observation supporting this notion is the fact that structural change associated with these products occurs in the latter half of the 1990s. This period coincides with the rapid development of private retail food chains and the creation of more regional and national food markets.

Third, the analysis indicates that the greatest changes in preferences occurred in consumers' responses to price changes. In particular, consumer demands became less responsive to price changes. As incomes have risen, food choices have increased and consumers' food preparation and shopping behaviors have begun to change. Consequently, product attributes other than prices, such as quality, convenience, and food safety, may be playing a greater role in consumption decisions.

Implications for U.S. Food Industries

From the perspective of U.S. food industries, China's food product markets have been limited by low consumer incomes and tastes for locally produced products. Our study suggests that these constraints are loosening, and prospects for U.S. food products are improving. The growing sophistication of Chinese consumers, greater openness to new products, and the declining responsiveness to prices may suggest that U.S. beef, pork, and poultry industries will see greater opportunities to expand sales of higher-valued products than in the previous decade. The continued improvements in China's cold chain, especially with the growing distribution networks of large supermarket chains, increase the capacity for U.S. meat products to retain their quality until they reach consumers. Moreover, greater numbers of households are willing and able to pay for the quality, convenience, and safety of U.S. products. China still has a long way to go in its transition from a market for low-value cuts and variety meats to a market for high-value cuts, but the stage is set for change.

China has experienced tremendous foreign direct investment and rapid dietary changes facilitated by an evolution in its food marketing system. These adjustments point to the importance of discovering and targeting the product characteristics most valued by Chinese consumers. As in Japan and Korea, Chinese consumers are becoming increasingly sensitive to food safety and consistent quality. Nevertheless, the ability for products to adapt to the traditional Chinese cuisine is still important. U.S. food companies that are able to successfully target the food product attributes desired by urban Chinese consumers will tap into a huge and growing market. While this is certainly a tall order, the observed changes in Chinese consumer preferences indicate that the barriers to entry are declining.

How Google Fuels Its Idea Factory

2008-05-11T09:40:00.001-07:00

CEO Eric Schmidt describes the simple principles driving the company's steady stream of innovations

Leading up to Google's first-quarter earnings report on Apr. 17, investors couldn't have been more bearish. They had knocked the stock down 35% since the start of the year, concerned that a weak economy would finally hurt the search giant's advertising business. But Google (GOOG) defied skeptics—and the economic downturn—with a surprisingly strong showing that sent the stock soaring 20% the next day. More than anything, Google's continued prosperity is a testament to its ability to keep innovating, both in search and advertising operations and in new lines such as online office-productivity software.

Many companies, says Chief Executive Eric Schmidt, can skirt downturns entirely by coming up with innovations that change the game in their industries—or create new ones. (When asked if Google's strategy would change as the economy heads into a likely recession, he replied: "What recession?") In a recent interview in a tiny meeting room next to his Mountain View (Calif.) office, Schmidt told BusinessWeek Silicon Valley Bureau Chief Robert D. Hof how Google manages the tricky process of innovation.

Do companies have to manage innovation differently in a downturn?

Innovation has nothing to do with downturns. A hot product will sell just as well in a recession as it will in a nonrecession. Let's imagine that we invented a better advertising product for television. What would our revenue growth be for that? Well, you're into a $50 billion market, so it will be driven not by whether there's a television ad recession but by what degree we can get people to substitute [our product] for the other. The strong companies understand this, and during a recession, they invest.

Can other companies emulate Google's famous model of letting engineers spend about 20% of their time on projects outside their main job?

The story of innovation has not changed. It has always been a small team of people who have a new idea, typically not understood by people around them and their executives. [This is] a systematic way of making sure a middle manager does not eliminate that innovation. If you're the employee and I'm the manager, and I sit down and say, "Our product's late, and you screwed up, and you gotta work on this really hard," you can legally say to me, "I will give you everything I've got, 80% of [my time]."

It means the managers can't screw around with the employees beyond some limit. I believe that this innovation escape-valve model is applicable to essentially every business that has technology as a component.

Why aren't many other companies doing this, too?

I think it's cultural. You have to have the culture, and you have to get it right.

What obstacles does Google face in continuing to innovate?

A problem that we face now is that we have people in multiple sites. It's a problem that everybody faces, but we're going to face it bad. We have, like, 50 locations.

So you still need that face-to-face contact?

The best programming team is a "telephone call," which is two people, you and I, programming together. The second-best programming team is, everybody fits into a single room. All other variants are bad.

Google has a reputation for doing a lot of R&D in-house, as well as buying companies to bring in other technologies. Are you shifting that toward getting outside talent to contribute in a bigger way than they have?

I don't know yet. The biggest acquisition we did was DoubleClick. We'll see how successful that is. We really like the small-team company acquisition model. My guess is, with the alleged recession happening, there will be a lot of good targets.

So we're likely to see even more acquisitions by Google?

I would think so. But small. The likelihood of us doing big things is pretty low because we'd have to assimilate the culture. Nobody works the way we do. The Google culture makes sense if you're in it, and no sense if you're not in it.

Does this mean it's tough for people to adjust, and will that limit the number of companies you can comfortably buy?

First, it is a fact that they adjust. Second, there is selection bias. Usually, people want to [be acquired by Google]. It's always very friendly. Because they have choices, and they choose us.

How does Google make sure it's producing innovations that change the game enough to create big new markets but also continue to appeal to its main customers, who might not want so much disruption?

We make an explicit decision to favor the end-user. [We] do not say, "Newspapers should be happy. Advertisers should be happy. Telcos should be happy. Competitors should be happy." Those are fine if we can do it. But it's all about end-users.

How do you make sure all these Google engineering projects actually turn into useful services?

The No. 1 thing we do require is: You can do whatever you want as long as you track it. We have very sophisticated measurement systems at every stage of launch. We have what is called trusted testers. Then beta test, which is forever. We do these 1% launches where we float something out and measure that. We can dice and slice in any way you can possibly fathom.

What's more important than the absolute number is the relative growth rate. High growth solves virtually all problems. If the growth rate is low, or negative, you've got a serious problem.

How much of a concern is it that Google has seen both executives and engineers depart for other companies or startups?

Let's do some math. We have 18,000 people. What is 1% turnover [per month]? 180. Do you think 1% turnover is reasonable? In this area, it's quite low. Ours is some small percent, 1, 2, 3%.

What bothers me is that some people write: "So-and-so left the company." Well, they don't also write that we hired 120 people that week, five of whom have Nobel prizes, three of whom have PhDs, and so on, who are beginning their career here now.

Can innovation really be managed, or is it a case where you have to keep the company and its managers out of the way?

I disagree with the word "managed." You have to have a set of necessary conditions for innovation to occur. To start with, you have to listen to people.

Pretty basic, no?

But not often practiced. Innovation comes from places that you don't expect.

China's Li Ning Toe-to-Toe Against Nike and Adidas

2008-05-11T09:37:00.000-07:00

Chinese athletic wear maker Li Ning is raising its international profile to win over shoppers at home

by Frederik Balfour

China's top athletic wear maker, Li Ning, has quite a lineup of sponsorships for the Beijing Olympics. There's the U.S. ping-pong squad (the men are ranked 44th globally and the women are 12th), Sudan's track and field athletes (none of whom has ever won an Olympic medal), and Sweden's Olympic delegation (but the athletes won't wear Li Ning during competition, only for ceremonies).

Why would a shoe and clothing manufacturer that does 99% of its business in China bother with athletes from far-flung locales where its products aren't sold? It has to do with Li Ning's unusual position in the Chinese market. The 18-year-old company once ruled China's sneaker business, but today it lags behind giants Nike (NKE) and Adidas (ADDDY) even at home. And a big part of the appeal of those powerful rivals is their profile on the global stage. "We don't have as strong a brand" as Nike and Adidas, says Abel Wu, who oversees Li Ning's footwear division. "Our thinking is that as a local brand, we need to have an international image."

Call it paper-tiger marketing. Li Ning tries to create the illusion of being a global player despite its near-total reliance on its home market. In addition to the international sponsorships, the company is running an ad campaign called "One Team, One Belief" featuring European, African, South American—and Chinese—athletes standing in a stadium with their hands across their hearts. And Li Ning has teamed up with the National Basketball Assn. as a sponsor of the "NBA Jam Van Tour." The event, which rolls through dozens of Chinese cities, includes a basketball court that can be assembled at every stop. Local kids are invited to participate in competitions such as the "Li Ning Slam Dunk Contest."

To be fair, Nike and Adidas also back athletes who have little chance of winning medals. And Li Ning's marketing isn't based entirely on third-stringers from abroad. Its chairman and eponymous founder brought home three gold medals in gymnastics from the Los Angeles games in 1984. Basketball star Shaquille O'Neal is an endorser (but only in China; in the U.S. he wears shoes made for him by Li Ning, though they don't bear the company logo). And Li Ning is sponsoring China's ping-pong players, divers, gymnasts, and sharpshooters at the Beijing Games—all strong medal contenders, but not events where high-tech footwear plays much of a role.

Li Ning makes no bones about admiring its bigger rivals. Its gleaming corporate campus near Beijing, complete with indoor swimming pool, basketball courts, and a climbing wall, seems like a page out of Nike's playbook. Ads feature the slogan "Anything is Possible" (which the company launched before Adidas came out with "Impossible is Nothing," but long after Nike's "Just Do It"). And its logo is strikingly similar to the Nike Swoosh. "They just dusted off a Nike marketing plan, took bits and pieces, and said, "Voilà!'" says Terry Rhoads, a former Nike China executive who runs Shanghai sports consultancy Zou Marketing.

Some branding experts say the paper-tiger strategy is paying off. The deal with the U.S. table tennis team cost a fraction of the $80 million that Adidas is paying as an official Olympic sponsor in China. Similarly, getting Shaq to endorse the brand in China clearly cost far less than persuading the Phoenix Suns star to wear Li Ning shoes in the U.S.—though the company declined to say how much it's spending on any of its sponsorship deals. "They are the most efficient marketer for the Olympics in terms of spend vs. return," says Greg Paull, a partner at market researcher R3 in Beijing. Last year, Li Ning's profits jumped 61%, to $66 million, as sales climbed 37%, to $603 million, giving it 9.3% of the Chinese market, according to JPMorgan (JPM).

STILL PROVINCIAL

With sportswear sales in China growing at 30% per year, there's plenty of room yet for Li Ning to expand. It now rolls out about 600 different shoe styles a year. And in 2004 it hired Ned Frederick, a former research director at Nike, and Portsmouth (N.H.)-based Daniel Richard Design, which has worked with Converse (NKE) and Saucony, to come up with a technology that could compete with the Nike Air lineup. Their answer was the Basketball Bow, which tops Li Ning's product range at $140—about $20 less than the Nike Air Jordan. But most of Li Ning's business is in models selling for $30 to $70 a pair. And Li Ning's strength is in smaller cities where the big rivals haven't yet focused much effort. So it still has to prove it can face off against Nike and Adidas in Beijing and Shanghai—let alone the U.S., where Li Ning in January opened a small design office in Nike's backyard, Portland, Ore.

To compete with the big names either at home or abroad, Li Ning may need to decide what it wants to be. Today, it's difficult to say whether it's a trendy brand for urban teenagers or a bona fide performance shoemaker, and simply creating an image of global reach won't clear that up, says Tom Doctoroff, chief executive officer for China at ad agency JWT (WPPGY). While Nike may now be both, it established its name as a maker of serious athletic footwear before it was ever cool. "The challenge is to link to a brand idea that is the basis for enduring loyalty," Doctoroff says. Li Ning's "helter-skelter messaging is probably not an effective way of establishing that."

To Discriminate You Need to Separate

2008-05-08T09:49:00.001-07:00

By Daniel Hamermesh

Price discrimination — charging different prices for the same product or service — requires preventing people who pay a high price for an item from being able to buy it at a low price.

This is done by separating the markets — linking the price to different times when the item is bought, such as day or night, weekday or weekend; or different ages of customers; or other ways.

Another market separation gimmick is underscored by a squib in the latest Consumer Reports. Dr. Leonard’s catalog sells the Barber Magic hair trimmer for $12.99, but in the same catalog offers the identical product, called the Trim-a-Pet, for $7.99.

Dr. Leonard’s

Other than the names on the packages and a bit of different description, the products are identical; and even the styles of the packages are identical.

Putting advertisements for both packages in the same catalog is a poor way of creating market separation: If I had hair and needed to cut it, I would simply buy the Trim-a-Pet for my personal use and save the $5.

This attempt at market separation might work if done in stores — pet stores could sell the Trim-a-Pet at lower prices than drug or hair-care shops sell the Barber Magic — but without some kind of geographic separation, successful price discrimination can’t occur.

Can You Become a Creature of New Habits?

2008-05-05T12:34:00.001-07:00

By JANET RAE-DUPREE

HABITS are a funny thing. We reach for them mindlessly, setting our brains on auto-pilot and relaxing into the unconscious comfort of familiar routine. “Not choice, but habit rules the unreflecting herd,” William Wordsworth said in the 19th century. In the ever-changing 21st century, even the word “habit” carries a negative connotation.

So it seems antithetical to talk about habits in the same context as creativity and innovation. But brain researchers have discovered that when we consciously develop new habits, we create parallel synaptic paths, and even entirely new brain cells, that can jump our trains of thought onto new, innovative tracks.

Rather than dismissing ourselves as unchangeable creatures of habit, we can instead direct our own change by consciously developing new habits. In fact, the more new things we try — the more we step outside our comfort zone — the more inherently creative we become, both in the workplace and in our personal lives.

But don’t bother trying to kill off old habits; once those ruts of procedure are worn into the hippocampus, they’re there to stay. Instead, the new habits we deliberately ingrain into ourselves create parallel pathways that can bypass those old roads.

“The first thing needed for innovation is a fascination with wonder,” says Dawna Markova, author of “The Open Mind” and an executive change consultant for Professional Thinking Partners. “But we are taught instead to ‘decide,’ just as our president calls himself ‘the Decider.’ ” She adds, however, that “to decide is to kill off all possibilities but one. A good innovational thinker is always exploring the many other possibilities.”

All of us work through problems in ways of which we’re unaware, she says. Researchers in the late 1960s discovered that humans are born with the capacity to approach challenges in four primary ways: analytically, procedurally, relationally (or collaboratively) and innovatively. At puberty, however, the brain shuts down half of that capacity, preserving only those modes of thought that have seemed most valuable during the first decade or so of life.

The current emphasis on standardized testing highlights analysis and procedure, meaning that few of us inherently use our innovative and collaborative modes of thought. “This breaks the major rule in the American belief system — that anyone can do anything,” explains M. J. Ryan, author of the 2006 book “This Year I Will...” and Ms. Markova’s business partner. “That’s a lie that we have perpetuated, and it fosters mediocrity. Knowing what you’re good at and doing even more of it creates excellence.”

This is where developing new habits comes in. If you’re an analytical or procedural thinker, you learn in different ways than someone who is inherently innovative or collaborative. Figure out what has worked for you when you’ve learned in the past, and you can draw your own map for developing additional skills and behaviors for the future.

“I apprentice myself to someone when I want to learn something new or develop a new habit,” Ms. Ryan says. “Other people read a book about it or take a course. If you have a pathway to learning, use it because that’s going to be easier than creating an entirely new pathway in your brain.”

Ms. Ryan and Ms. Markova have found what they call three zones of existence: comfort, stretch and stress. Comfort is the realm of existing habit. Stress occurs when a challenge is so far beyond current experience as to be overwhelming. It’s that stretch zone in the middle — activities that feel a bit awkward and unfamiliar — where true change occurs.

“Getting into the stretch zone is good for you,” Ms. Ryan says in “This Year I Will... .” “It helps keep your brain healthy. It turns out that unless we continue to learn new things, which challenges our brains to create new pathways, they literally begin to atrophy, which may result in dementia, Alzheimer’s and other brain diseases. Continuously stretching ourselves will even help us lose weight, according to one study. Researchers who asked folks to do something different every day — listen to a new radio station, for instance — found that they lost and kept off weight. No one is sure why, but scientists speculate that getting out of routines makes us more aware in general.”

She recommends practicing a Japanese technique called kaizen, which calls for tiny, continuous improvements.

“Whenever we initiate change, even a positive one, we activate fear in our emotional brain,” Ms. Ryan notes in her book. “If the fear is big enough, the fight-or-flight response will go off and we’ll run from what we’re trying to do. The small steps in kaizen don’t set off fight or flight, but rather keep us in the thinking brain, where we have access to our creativity and playfulness.”

Simultaneously, take a look at how colleagues approach challenges, Ms. Markova suggests. We tend to believe that those who think the way we do are smarter than those who don’t. That can be fatal in business, particularly for executives who surround themselves with like-thinkers. If seniority and promotion are based on similarity to those at the top, chances are strong that the company lacks intellectual diversity.

“Try lacing your hands together,” Ms. Markova says. “You habitually do it one way. Now try doing it with the other thumb on top. Feels awkward, doesn’t it? That’s the valuable moment we call confusion, when we fuse the old with the new.”

AFTER the churn of confusion, she says, the brain begins organizing the new input, ultimately creating new synaptic connections if the process is repeated enough.

But if, during creation of that new habit, the “Great Decider” steps in to protest against taking the unfamiliar path, “you get convergence and we keep doing the same thing over and over again,” she says.

“You cannot have innovation,” she adds, “unless you are willing and able to move through the unknown and go from curiosity to wonder.”

Good-Bye, Cheap Oil. So Long, Suburbia?

2008-05-03T06:38:00.001-07:00

Author James Kunstler says the Automotive Age is almost history and deconstructs McMansion living

by Mara Der Hovanesian

The suburban landscape has been marred by foreclosures and half-built communities abandoned in the subprime aftermath. But James Howard Kunstler, author of a dozen books, including The Geography of Nowhere: The Rise and Decline of America's Man-Made Landscape, thinks there's a bigger threat to those far-flung neighborhoods: the scarcity of oil. As Kunstler sees it, oil wells are running dry and the era of cheap fuel is over. Given the supply constraints, he says the U.S. will have to rethink suburban sprawl, bringing an end to strip malls, big-box stores, and other trappings of the automotive era. Kunstler, 59, predicts a return to towns and cities centered around a retail hub—not unlike his hometown of Saratoga Springs, N.Y. But the shift to this new paradigm, he says, will be painful. (Kunstler could be off the mark; he predicted technological Armageddon after Y2K.) BusinessWeek writer Mara Der Hovanesian spoke with Kunstler about suburbia, which he calls "the greatest misallocation of resources the world has ever known."

Why has suburban life flourished?
The suburbs were largely products of industrialism. We had a huge supply of oil and cheap undeveloped land, and we decided to become a happy, motoring utopia. It had many practical benefits. The trouble is after a while it became a cartoon of country living.

Why is suburbia now threatened?
Cheap oil is what made suburbia possible. But we'll run into problems with spot shortages. As we get into trouble with these supplies, our economy will suffer. Major instabilities in the system will present themselves much sooner than we are led to believe. And by that I mean the way we produce food, the way we conduct commerce, and the way we move around.

When will all that happen?
The rise and fall of oil production is asymmetrical. In other words, it'll be a steeper, rockier tumble down than the steady increase going up. My own sense of things is that we will be in very serious trouble inside of five years.

Won't it help to cut back on gas?
I get people who come up to the podium after a speaking engagement to tell me they've just gotten a Prius, expecting brownie points. It's not that we're driving the wrong cars. It's that we're driving cars of any size, incessantly.

What about biofuels?
We will use all of them, probably. But we will be greatly disappointed by what they can do for us. We certainly aren't going to run Wal-Mart (WMT), Disney World (DIS), and the highway system on any combination of solar, wind, nuclear, ethanol, biodiesel, or used french-fry oil.

Isn't it a bit radical to declare game over for Wal-Mart?
It is part and parcel of the suburban predicament. How long can they maintain their warehouse-on-wheels as the price of motor fuels goes up?

How will the U.S. have to adapt?
Virtually anything organized on a grand scale is liable to fall into trouble—government, finance, corporate enterprise, agribusiness, schools. Our gigantic metroplex cities will prove to be inconsistent with the energy diet of our future. I think our smaller cities and towns will be reactivated. We are going to be a far less affluent society.

Does your lifestyle reflect all this?
I live in a classic Main Street town. I've always had a garden. It certainly doesn't provide for all my needs, but for all of my salad and salsa fresca needs, in season. I'm not a survival nut. I'm not squirreling away wheat berries in plastic tubs in the basement. I don't have an arsenal of firearms. I lead a pretty normal American small-town life. Of course, I'm a self-employed author and don't have to commute to work.

Links

Down on the Minifarm

Small vegetable and herb farms are sprouting in suburbia, reported The Wall Street Journal on Apr. 22. A one-eighth acre plot costs $5,500 to start plus $2,000 more each year, but it can yield $10,000 to $20,000 in annual sales. Environmentalists applaud the practice, which cuts the carbon cost of bringing food to consumers. But some neighbors of minifarms are complaining about bad smells from manure, the article notes.