Coach has been on a real tear lately. From a stodgy brand that I used to buy in the bow-tie, Annie Hall 80's, they have reinvented the brand, making it a must-have for the fashion conscious. But I recently ran across a story that highlights just how smart they've been.
Turns out that Coach not only knows how to appeal to the fashionistas in its City locations, but is also making a killing at the factory outlet. Cleverly, though, it manages the brand to avoid any confusion -- the outlet stores handle only older merchandise or stuff that is made specifically for them. They are located at least 60 miles away from the regular stores. And the buyers, while still loyal to the brand, are looking for different things. The latest and trendiest in the regular stores, good value and design in the outlet stores. And here's the piece of data that blew me away - while full price shoppers spend an average of $1,100 on Coach items, the discount shoppers still spend a whopping $770 a year (according to Business Week Nov 7 2005 p. 60).
The lesson: Smart segmentatation can pay off.
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This comment was in response to a reporter's inquiry about Gillette and the 5-bladed razor
The blade madness in my opinion has to do with the longstanding competition between the major players in the industry. For years, BIC (a French company specializing in cheap, plastic stuff) has been trying to persuade men that shaving is a commodity and that 19 and a half cents should just about do it, while Gillette has poured millions, if not billions, into persuading guys that more blades are better.
I mean if 2 blades are better than 1 blade, and 3 blades are better than 2 blades then 4 blades must be better than 3. Imagine the shock on the part of Gillette when they were beaten to the market by typical also-ran Schick who were able to offer a Four (count em, Four) bladed product ahead of Gillettes launch. It had an interesting effect of turning Gillettes own branding and advertising investments against them.
Gillette responded by pushing their own 4 blader to market ahead of schedule and then racing forward with a five-bladed offering. They also consented to be acquired by Proctor and Gamble, which to me signals that they kind of hit the end of that particular strategy.
Where will this end? I dunno. I imagine we will someday have tiny little tanks crawling across gents faces. Actually, a more realistic disruption in shaving will come from new materials. Imagine a blade made out of super tough ceramics that you never need to replace, or hair dissolving shaving cream that means you can shave quickly without any blades at all, and only a couple of times a week.
As to guys being better off? Shaving is still shaving, and for most men it is not fun, no matter how you modify the experience.
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The more I read, the more I am coming to believe that those who can master simplicity are going to get a major edge over those who force their customers to struggle with their offerings. A recent
Fast Company story on Google also features other companies - Intuit and Phillips among them, who have started to get simplicity right.
As I reflect on it, dozens of ordinary things could use the simplicity treatment - cell phones, TV remotes, and most software would be tops on my list. It is fascinating, too, to watch the companies I work with (such as Nokia and Microsoft) struggle to get an authentic experience of the way their products drive their customers crazy. After all, most of the people designing those products are so technically talented that they DO seem simple.
I'm taking the simplicity plunge in another area myself - I just ordered a copy of Intuit's "Simple start" accounting software. Ironically, I spent over $500 on Intuit's Quickbooks, a more complicated version of the product and am finding it is just too complex for what I need - and I'm too impatient to bother fighting with the thing. Maybe Simple Start will do the trick - just enough to free me from spreadsheets and keep the tax people happy, and that's all I want.
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How is this for making money out of a nuisance? Like many of you, I am really bugged by junk faxes that arrive in my office all hours of the day and night. Experts estimate that an average fax costs the recipient between 7 and 12 cents a piece, once you factor in consumables and paper. I probably get 20 of them a week - and I'm probably not a major victim. Junk faxing is illegal, and when prosecuted can result in a fine
The dilemma is that to bring the people who send junk faxes to account, one has to undergo a complex legal process and for a single individual it isn't worth it.
Fascinatingly, though, an entire cottage industry has now sprung up around helping individuals combat junk faxes. One service,
http://www.faxrecoverysystems.com aggregates junk faxes from individuals to identify the biggest generators of junk. It then goes after them through legal channels for fee penalties. If you provide a fax that results in a collection, they send you $100 (although the award could be much more than that). They keep everything over the hundred in compensation for their time and effort. It offers benefits for the recipients of junk faxes, in that their volume of junk is often reduced (and they sometimes get a nice check). More importantly for me, it provides an easy, legal way to fight back against these parasites selling $199 trips to Bermuda, mortgages and hot stock tips.
As I checked out this service, I found a number of other services that do something similar, betting on the fact that the law underlying junk fax issues is hard for individuals to enforce. And the 'do not call' registry seems to have no effect on junk faxers.
And a tip -- don't call back the fax people with a request to remove your fax number. Apparently all they do is rejoice at having found an actual fax machine, and sell the number to other junk faxers.
It just drives me crazy that someone can use my equipment, time, ink and paper to send me ads without my permission. So I signed up right away. Will let you know how this goes.
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I was recently asked by a reporter how grocery stores could compete with Wal-Mart. Here are some ideas.
To compete against the 'everyday low price' theme of Wal-Mart, supermarkets have to find some way of differentiating themselves -- they can't rely on the old approach of luring in customers by price promotions or loyalty cards. Stores that can't figure this out -- with Albertson's decision to seek to be acquired being a recent example -- will find they have no choice but to sell out or shut their doors.
One approach is to offer products that appeal to customers with a different sensibility than your typical Wal-Mart shopper. Costco, for instance, has deliberately targeted small business owners as its key segment - people who might be open to buying a bottle of champagne, but appreciate getting it for a good price. They've kept Wal-Mart's Sam's Club at bay for years with this strategy.
Trader Vic's is another example of a store that has differentiated on the basis of fun and interesting products. OOps - as a comment points out, I meant Trader Joe's, not trader Vic's (which I believe is a beloved bar at the old Plaza Hotel in New York).
The Dollar Store can actually offer even lower prices than Wal-Mart, by starting with low-priced selloff goods and not stocking anything that is acquired through first-run channels.
Some supermarkets have started to differentiate on the basis of the quality of what they stock, rather than a commodity item for a low price. One of the fastest growing grocery segments is that for organic foods. Whole Foods Market has taken tremendous advantage of this approach by appealing to customers who wouldn't dream of buying mass-produced beef or veggies at a gigantic Wal-Mart store.
There will always be customers who just plain don't like the Wal-Mart shopping experience - the crowds, the lines and the mess. By creating clean, nice spaces, a market can compete.
Some groceries also compete effectively by really understanding their clients. One of my contacts in the business found that his clients behaved differently according to the time of the week! Monday to Friday, they were all about in and out, convenience, and no fuss. Come Friday night, all of a sudden they turn into galloping gourmets who need 47 flavors of vinegar and fresh lemon grass for their weekend culinary creations. What he used to do was re-set two aisles of his store every Friday afternoon (dubbing it the 'gourmet experience' section) and set them back again on Sunday night. That kind of tailoring is hard for a Wal-Mart to pull off.
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