Tripping: YVR Rides High as #1

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You need to fly somewhere. You want to get there quickly, efficiently and in a cost-effective fashion. Upon arrival at your destination, you grab your luggage and get a cab. Do you care which airport you fly into?

And airports are essential. All air passengers have to use them, like it or not. So do airports need to market themselves?

The answer to both questions is yes. It’s not something most of us think about, but airports do need to market themselves—vigorously—and the Vancouver International Airport Authority is particularly good at.

The Vancouver International Airport Authority (VIAA) is a 230-employee, not-for-profit, locally-controlled corporation to which, in 1992, Transport Canada passed the Vancouver airport’s management and operation. While the VIAA has taken flack for being secretive, it has done a tremendous job of managing, and selling, the Vancouver International Airport (YVR).

When it took over, the VIAA’s first order of business was to position YVR as a gateway airport—not necessarily a destination terminal. It doesn’t appear so on a flat map, but Vancouver is the closest North American city to Asia. Travelers can save an hour by flying into Vancouver from, say, Beijing, to which it’s 800 miles closer than is Los Angeles. So YVR positioned itself as offering one-stop access to North America from Asia. It wants Asian travelers flying to the US, the rest of Canada, Latin America and Europe, to fly into, and transfer from, Vancouver.

The other target was, and remains, the cruise industry. One million cruise ship passengers pass through Vancouver every summer. And they have a choice—they can fly into Seattle and drive up.

YVR had to meet the arrival and departure requirements of all these international travelers, in addition to the needs of notoriously picky Canadians. The task was to create a facility that was efficient, comfortable and accommodating to everyone.

In 1996, the International Terminal Building opened as the first terminal of its kind in North America. It was designed especially for international connecting passengers, with state-of-the-art technology for ticketing, baggage handling and customs/immigration inspection.

By 1996, $250 million had been spent on constructing the International Terminal, installing a third runway, renovating the Domestic Terminal, adding a new parkade and creating 109,000 square feet of retail space. Work continues. In 1999, $90 million was invested in infrastructure, renovation and expansion of facilities. Also that year, work began on the $40 million Airport Connector Project, which involves road improvements and a new three-lane bridge. The YVR South Terminal, which services domestic commuter, small regional and charter airline traffic, was also upgraded. (The cost of all of this has been helped along by the much-loathed Airport Improvement Fee: $5, $10 or $15, depending on destination, payable by all departing passengers.)

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YVR’s location is, for an airport, incongruous. It’s only 20 minutes from downtown Vancouver but it’s on Sea Island, which is an environmentally-sensitive area. And it’s beside Richmond, a heavily-populated bedroom community. The VIAA pays rent ($64 m/yr) to the federal government, which owns the land, but it’s the caretaker of Sea Island and has to try to keep both environmentalists and Richmond residents happy.

YVR was one of the first airports to introduce a de-icing system which eliminates the pollutant urea from its ice control program. It maintains water, air quality and noise monitoring systems. It uses electric vehicles. It has a mobile, 20-unit environmental emergency response team. Its waste management program annually handles 470 tons of paper and 127 tons of compostable food waste. Construction projects are monitored for environmental compliance. It uses dogs to prevent bird strikes and negate the need for pyrotechnics—although YVR is located in the avian Pacific Flyway, its bird strike rate is less than half of that at other Canadian airports. From the PR perspective, all of this works—a 1999 survey found that 75% of locals had a favourable impression of this corporate citizen.

Most passengers don’t think about this sort of thing. They’re more likely to notice the airport’s amenities. Such as the 72 shops in the departure lounge. The concierge service, chapel, business centre, family rooms, nursery. The loads of inexpensive long-term parking and constant free connector shuttles. The art collection, natural light and mountain views. The dozens of multi-lingual volunteers. Cruise ship passengers have their own baggage belts and carousels. Fairmont Hotels attached a 392-room inn to the airport, which it bills as the world’s most luxurious airport accommodations. It offers day rooms, gym use, in-room airline check-in and satellite check-in. YVR’s positioning statement ‘Above & Beyond’ is something its management sticks to—and it’s true that a common reaction from arriving passengers is: “Whoa, nice airport.”

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Then there’s cargo. YVR has positioned itself as the global distribution centre for cargo between the world’s major trading blocs, particularly Asia-Pacific and North America. It’s a 30-minute drive from the US border, and from the Port of Vancouver, which is served by most international shipping lines, four railways and 400 motor carriers. The central Cargo Village houses 130 transportation companies, forwarders, brokers and other related businesses. The VIAA’s positive relationship with Canada Customs, and a pre-arrival review system, allow for international shipments to be released within 45 minutes. YVR also offers pre-clearance of US-destined cargo through Free Trade Zones (Export Distribution Centres), a 25% discount on landing fees for international all-cargo flights, a fuel tax exemption on international air cargo and 24-hour operations, all of which makes for a vast reduction in air cargo costs. Obviously, cost reductions make an airport attractive.

The pay-off of this investment and overlook-nothing organization is that, in 1999, 290,000 tons of cargo passed through YVR. That’s a 14% increase over 1998, far in excess of both forecasts and growth at other west coast airports. The International Terminal Building was meant to accommodate 8 million passengers; in 1999, 16 million passengers used YVR, allowing it to surpass San Francisco as the second-largest airport on the North American west coast. In 1994, airport revenue was $128 million, concession revenue $28 million. In 1999, airport revenue was $245 million, concession revenue $61 million. Today, YVR is one of BC’s most important economic engines, generating $4 billion in annual revenues. It supports 400 off-shoot businesses and 26,000 employees—more than the province’s mining and fishing industries combined.

In the International Air Transport Association survey of leading airports, YVR was ranked #1 in North America; #4 internationally (behind Singapore, Copenhagen and Helsinki). Business Traveler Asia-Pacific magazine named YVR its airport of choice, Conde Nast Traveler placed it among the world’s top ten. It has become a management model for airports around the world.

yvr5The VIAA subsidiary, Vancouver Airport Services (VAS), markets its expertise, operating philosophies and leading-edge systems to governments all over the world, which are rapidly dumping airport operation and financing on the private sector. VAS may take over whole airports, or perform specific services. It recently took over management of four airports in the Dominican Republic, as well as airports in Uruguay and Chile. It completed, for example, the business plan at St. Maartens, the reconstruction of the runway and apron at Moncton, the new retail plan at Wellington.

It’s easy to see that an efficient, beautiful, fully-outfitted airport is going to be attractive to those who have to use it. But VIAA has to work as hard to sell YVR to everyone who needs an airport.

Janice Antonson, the VIAA Manager of Aviation Marketing, explains: “A lot of people don’t think of airport management as a competitive business, but it is. Airlines and passengers have a choice of which airports to use. Back when Open Skies lifted restrictions on who could fly into Canada, we had a lot of new carriers flying into Vancouver and we had to compete with other west coast airports—LA, San Francisco and, to some extent, Portland. And we had to fill this new terminal.

“We work with the carriers that fly into Vancouver and are the liaison between the tourism industry and the aviation industry. Once a route is brought into Vancouver, we help market that route. Our job is to ensure that all airlines that fly in, as well as travel agents and tour operators, are aware of the connections available through the airport, and the facilities and services we offer.

“Education is a big part of the job of this marketing department. For example, to help Philippine Airlines establish the Manila-Vancouver route, I would go to the Philippines and meet with their employees, most of whom probably haven’t been here and don’t know the airport. I give a PowerPoint presentation on the airport and its location. I explain about Vancouver’s Transit Without Visa program, which means that most travelers connecting to the US, depending on where they come from, don’t need a Canadian visa. You come in on a flight from Hong Kong, you go immediately to US Customs, so you aren’t technically in Canada at all.

“When you explain this, people realize that they and their customers can save an hour in the air, and another hour by by-passing Canada Customs. When you shave off that two hours, YVR becomes the logical choice. And for business travelers, time is everything. The new airport in Seoul, for example, is over a hour from the city—YVR is 20 minutes from downtown Vancouver. That makes a big difference. And what a great stop-over city. On an overnight stay, you can go skiing, shopping, golfing—whatever, and make a short trip back for your flight out. These things are very important to passengers and airline employees. And once they know all of this, they choose Vancouver.”

Antonson also works closely with the cruise ship companies, through the VIAA membership (along with Tourism Vancouver, Tourism BC and the Port Authority) in the Pacific Rim Cruise Association.

“We have to work with both the cruise ship companies, and with the airlines that feed the cruise business,” she explains. “Despite the cruise passenger traffic we already have, we actually suffer in the summer because we don’t have enough seats coming into Vancouver. Sometimes we lose up to 11 busloads a day to Seattle because all the flights coming into Vancouver are full. So we work very hard to encourage the airlines to put on a bigger aircraft and more flights.

“We have the capacity for the traffic, but the airlines don’t have the aircraft on this route in the summer—their aircraft could be heavily directed at Europe in the summer. And cruising is seasonal. So it’s a big challenge for us to keep the carriers bringing in their service year-round. The airlines have to make sure that the yield from the seat price is right, and that it’s good enough to pull a plane off another route. And they have to know that the plane bringing in those cruise passengers will leave full. It costs a fortune to leave a plane sitting on the tarmac—planes have to keep busy, so we have to present airlines with positive passenger flow numbers.”

Antonson has found that airline economics leaves little room for patience. “Once we get a flight coming into YVR, we need time to market that flight. For example, American Airlines was flying non-stop Vancouver-Miami, which was excellent, but that route was pulled after four months because the flights weren’t full. But four months isn’t enough time to fully market a route and make travel agents aware of it. It takes a lot of time and effort to make a flight successful. But the airlines have to put their aircraft where they’ll make money.”

Antonson, who would not state her marketing budget, makes sales calls to travel professionals and, for travel agents and tour operators, she produces numerous brochures, maps and booklets—everything they need to know about the airport, its facilities, its connections, and what happens to passengers upon their arrival. For others, annual reports, Skytalk Magazine and the annual Airport Business Report, are helpful. Then there’s the hard-core process of convincing the airlines to book their routes into Vancouver. All of that goes on in boardrooms during months of negotiations.

“Our Air Service Development people are in charge of negotiating with the airlines,” continues Antonson. “Some airlines approach us, we approach some. It’s an extremely complicated business and most people have no idea of what goes on behind the scenes. We can’t have carriers landing here unless they can feed into the rest of the network—they have to be able to pick up traffic elsewhere, they have to have the right aircraft and the capacity to service the route. During negotiations, they discuss everything from who the ground handlers will be, to slot times, to catering, to aircraft size, frequency of flights, destinations, where their airport offices will be.

“The airlines have to be sure that the route will be profitable, because anything relating to the operation of the aircraft is their responsibility and cost. They become YVR tenants. They have to pay landing fees, fuel taxes, airport taxes. They have their own employees, including mechanics, on the ground. It’s a significant dollar investment for them, so we show them the traffic numbers; they see how active we are at marketing the routes. It’s not something anyone takes lightly—every landing of an Air Canada 747 from Hong Kong, for example, generates 86% of a person-year of direct employment.”

Most airports don’t even have marketing departments—just communications offices. But as YVR was the first Canadian airport to privatize, the VIAA may have felt pressure to succeed, or saw it as an opportunity to do something very well. Either way, very little has not been done well.

“YVR is not just a pretty building in a pretty city,” says Antonson. “And our mandate is to market YVR as the Pacific Gateway of choice. We’re in a competitive business and have to work to get the airlines to come here and stay here. So we’re aggressive about it—we create and try new programs first, and now we’re the leader in airport marketing. YVR is a great success.”

Blitz Magazine, July 2001

Case Study: 1-800-GOT-JUNK? Becomes a Successfully Crappy Brand

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Blitz Magazine, March 2000

A freak storm hits. As you watch hail bounce off your Jaguar, you wish you had a garage.

Oh, wait. You remember that you do, in fact, have a garage. It’s just full of. Of…you can’t remember what it’s full of.

Determined to reclaim your garage, you call a charity, which says it’ll send a truck Monday, between 8:00 and 5:00. You spend your week-end sorting through mounds of old furniture, sports gear and broken gardening equipment. On Monday morning, you lug it all down to the bottom of your driveway and head to work, thoroughly pleased with yourself.

But when you get home from work, the heap is still there. You leave a message for the charity. No one calls back.

‘Next morning, you look in the phone book under ‘Trash Removal Services’. You call Guy With Truck, who says he’ll be there Saturday at 10:00 a.m. He can’t quote a price until he sees what needs to be removed. Your junk sits and waits; the city garbage men come on Wednesday, but ignore the silent plea for help.

Saturday, 4:00 p.m., Guy With Truck appears. His truck is filthy and so is he. He has one arm and one eye. Your neighbours call their dogs inside and lock their doors.

You have neglected to hide your Jag in your now-empty garage. Guy With Truck sees the Jag, sizes up your house and quotes you $600. You don’t care; you want your junk gone. You write him a cheque and watch him take two hours to load the stuff before chugging off in a cloud of exhaust.

This is not an exaggerated scenario. It happens all the time. But Vancouver entrepreneur Brian Scudamore has taken this unhappy situation and turned it into a multi-million-dollar enterprise.

In 1989, the 18 year-old Scudamore was working toward a commerce degree. At the end of his first year, he needed a summer job but couldn’t find one. Then he spotted Guy With Truck and thought ‘Hey…’.

He paid $700 for an old truck; $100 to have fliers and business cards printed. He didn’t want people to think he was a one-man operation, so he called himself ‘The Rubbish Boys’, and came up with the slogan ‘We’ll Stash Your Trash in a Flash!”. While his little brother stuffed mailboxes with fliers, Scudamore drove the lanes of the city’s west side. When he found an over-flowing garage, he knocked on the door and offered to remove the junk. By the time he returned to school, he’d made a $1700 profit.

Scudamore kept working at the business. By 1993, it was so successful, he decided to make junk removal his life. He incorporated, hired student drivers and invested in more trucks, all bearing the slogan and ‘Rubbish Boys: 738-JUNK.’ Between word of mouth and these mobile billboards, business took off. By 1995, revenues were $100,000.

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This success had much to do with how Scudamore differentiated himself from Guy With Truck. He offered same-day service and promised to remove everything except toxic substances. Rather than charging a rate based on his perception of a client’s income, he provided a printed, pre-set pricing structure (from $35 for a mattress, to $339 for a full truckload).

Not only did the Rubbish Boys not show up late, they called 30 minutes before to confirm the appointment. Their trucks were spotless. They were clean-cut, polite university students wearing snappy blue and green uniforms. They cheerfully removed your junk, and then cleaned up after themselves, sweeping garages and driveways and/or raking the grass. They provided proper receipts and, a few days later, called to make sure you were happy with your service.

junk6By 1997, Rubbish Boys had 16 trucks, 45 high-season employees and revenues of $1 million. Scudamore was nominated Entrepreneur of the Year by Ernst & Young and the Business Development Bank of Canada. He was one of 11 BC firms to make Profit Magazine’s list of 100 Fastest-Growing Companies in Canada—its five-year growth rate of 1,169% put it at #74.

There were contributing factors to this success. In Greater Vancouver, residents are allowed just two bags of garbage per week. And practically every city block hosts renovating yuppies, most of whom don’t know where the nearest dump is, let alone have the requisite vehicle.

Another factor is that charities are increasingly selective about what they take. They get way too much junk and don’t get a break from the dump—some charities spend $20,000 a year on dumping fees. You may think you’re doing someone a favour when you give an old couch to the Salvation Army, but if it’s torn or broken or water-damaged, it’s going to the dump at a pricey $65/ton (the average truckload weighs 1.1 ton).

In addition, Vancouver has many commercials and residential buildings belonging to absentee owners. These buildings are operated by property management firms—professional organizations that don’t want Guy With Truck anywhere near their clients’ properties. Also, while dumpster rental is cheaper than Scudamore’s service, construction companies often find it more efficient to hire him. Now, half of his business is residential, half commercial.

Then there’s the staffing aspect. Junk removal is an April to October business—that’s when everyone cleans up. With commercial contracts, Scudamore still has work in the off-season, but his business is largely seasonal. Seasonal business can’t afford to hire guys who need salaries; they need to be staffed by people who want to work only from June to September.

“For the first three years, Rubbish Boys was a student-run operation—you had to be a student to be hired,” recalls Scudamore. “But by 1998, I realized that, while students were professional, clean-cut and polite, they had no business experience. We were growing and we needed people who knew about building a business.”

junk5Not wanting to abandon his students, Scudamore instituted STEP, the Student Training in Entrepreneurship Program. He recruited students, and then helped them create mini-franchises. They were fronted the requisite cash and provided with a partner, a truck and a route. They received a base wage and a share of the profits; they had to do their own sales and media relations. The most profitable students in each territory received scholarships of $500 to $1000. To date, 180 students have participated.

There was more method to this: Scudamore wanted proof that his operating system could be franchised. Rubbish Boys’ 1998 earnings were $1.3 million; Scudamore saw that there was no barrier to his company’s becoming the Federal Express of junk removal. He had built his brand, it was time to franchise.

The company name became 1-800-Got-Junk? (inspired by the ‘Got Milk?’ campaign). The owner of the 1-800-Got-Junk? telephone number was persuaded to relinquish it. A $30,000, 12-line call centre was installed. Scudamore invested $500,000 in consultants and technology, and perfected a franchise system that easily allowed expansion. Information packages were produced, ads were placed in franchising magazines, the word spread, people started to call. Now there are franchises in Seattle, Portland, Edmonton, Calgary and Toronto. Scudamore’s goal is to have franchises in 30 North American markets by 2003.

junk3The 1-800-Got-Junk? system is simple. Scudamore selects two or three candidates per territory, depending on its size. Successful candidates have to know their markets and have strong sales skills. They must pay $20,000 to the company then invest another $30,000 on leasing, staffing and out-fitting an office; and on acquiring, painting, insuring and staffing trucks. Scudamore does not want franchise owners driving their own trucks.

“We want people working on the business, not in it,” he says. “These franchises are about starting from scratch and using our system to build the business. As people see the trucks and get to know about the brand, they’ll call. In the meantime, we want our franchisees knocking on doors, making presentations to property management companies and staying focused on growth.”

In addition to training, promotional materials and business plans, franchisees receive their phone systems as part of the package.

Regardless of where customers are, when they dial 1-800-Got-Junk?, they get the Vancouver call centre. The centre takes all bookings, organizes drivers’ routes and e-mails the orders to the appropriate franchisee, who re-confirms pick-ups and takes it from there.

junk4Franchise owners also receive the company’s proprietary management system—Junkware, a software package that handles all areas of operations, from scheduling to accounting to marketing.

“All of this is done on our server, but we’re not playing Big Brother,” points out Scudamore. “Junkware is a coaching tool—we want our people to succeed.”

Franchisees pay an 8% royalty, plus another 7% for call centre services. Their gross profit should be 40%, their net 20%. Fixed costs vary by market but, for a $50,000 investment, franchisees enjoy minimal risk in a lucrative, seasonal cash business. And it’s worth it. The Toronto franchisee became the largest junk removal service in that megalopolis after four months of operation. His 1999 sales were $250,000 with two trucks; this year, he has six trucks, 20 employees and sales should exceed $1 million.

 All of this without anything resembling a sophisticated marketing or media program. While Scudamore plans to actively advertise one day, he has always preferred the inexpensive, face-to-face approach.

“Paid advertising has never given us the same return as the face-to-face sales,” he explains. “We’ve tried radio—it wasn’t worth it. We had a little more success with newspaper advertising, but it’s too expensive. We do decals and t-shirts; we’ll take part in home and garden trade shows, construction and renovation trade shows. We just stay out there and keep reaffirming the brand. For us, the most effective way of communicating is via our trucks, our fliers, word-of-mouth and media attention.”

Scudamore has received loads of media attention. He coaches franchisees on how to garner it, and he gets involved in community events. For example, when the community of White Rock was devastated by rain and mud last year, Scudamore’s staff went there to clean up. Scudamore also invented a program called PRIDE: People Removing I-Sores Dumped Everywhere, through which 1-800-Got-Junk? works with community volunteers to clean up littered areas.

Last year, the company posted a website (www.1800gotjunk.com or www.rubbishboys.com). The site gets about 1,000 hits a week, but few people book on-line, preferring to call.

The slogan ‘We’ll Stash Your Trash in a Flash!” slogan is long gone. Now, trucks carry the new phone number and the website address. Liberal distribution of bright, die-cut fliers and $10 or $20 TrashCash coupons remain a mainstay, as does old-fashioned cold-calling.

So Scudamore has taken the most simple of businesses and given it an efficient franchising system and an easily-remembered call-to-action phone number. To date, he and his staff have delivered 15 million pounds of junk to dumps and recycling depots. He has 20 full-time employees and 75 seasonal employees. Sales for 2000 should hit $4 million. And he has no competition. Or….?

“I do have competition,” he says. “The guy with the truck.”

 

Case Study: It’s Onward & Upward for Uniglobe Travel

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The airlines have slashed travel agent commissions; we’re supposedly in recession. ‘Tough times for travel agents? Not if they’re with Uniglobe Travel.

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You may recognize the name of U. Gary Charlwood, Chairman of the massively successful Century 21 Canada. The business philosophy of Mr. Charlwood (as everyone calls him), in a nutshell, and as his entrepreneurial history suggests, is ‘Sell, Sell, Sell, Service, Service, Service and Be Very Very Well-Organized.’ He also believes that, once you articulate your vision and give your staff the tools with which to carry it out, you should leave everyone alone to do their jobs.

After building his real estate operation into the force that it is, Mr. Charlwood knew that his philosophy, coupled with his co-operative consumer marketing methods, could be applied to other service industries; and he believed that an internationally-recognized consumer travel organization could succeed through strength in numbers of locations, and high sales volume. In 1980, he founded Uniglobe Travel International.

Today, Uniglobe is the world’s largest travel franchise company, with 1997 sales of $2.7 billion. It employs 6,000 people at 1,000 offices in 20 countries, with head office in Vancouver. It owns Uniglobe CruiseShip Centres and San Diego-based convention organizer Uniglobe Main Events. It was the only travel company recommended as a franchise buy by The Wall Street Journal’s 1998 National Business Employment Weekly Annual Listing and, in the travel industry, only American Express has higher unaided brand identification. Its first Middle East markets opened last year; it will next expand into Central and South America, the Far East, and Africa.

The reasons for Uniglobe’s success are varied, but basic.

First, it filled a niche. Any travel agency, of any size, is built on a core base of business accounts, and it used to be that only large corporations had access to the complete range of travel perks and services. Uniglobe specialized in providing big company services to small and mid-sized businesses (with 5-50 travelers). It now holds 100,000 corporate accounts; 70% of its business is corporate, but its goal is to increase its leisure business and bring the mix to 50-50.

uniglobe2Next, Uniglobe offers a superior franchisee support system. To be successful in this ultra-competitive field, travel agents need strong brand identification, technological support, access to professional training and development, back-office management controls, effective marketing plans, solid relationship with preferred suppliers and access to promotional initiatives. Uniglobe delivers it all, right down to free office automation. The high brand awareness is a big draw for potential franchisees, and Uniglobe spends $20 million annually on international brand identity, advertising, promotions, public relations and direct sales programs.

Another key to Uniglobe’s success is its commitment to a high level of customer service. Its research shows that consumers expect a professional agency to address four service categories: Cost Containment & Control, Experience & Expertise, Accessibility & Advanced Communications, and Reliability & Responsiveness. So Uniglobe gives people what they want. It guarantees the best possible value in all fares and constantly evaluates cost-management strategies, savings opportunities and spending patterns. Experience & Expertise are handled by Uniglobe’s franchise recruitment and selection process.

“We’re so well-known as a leader in both travel and franchising, that people looking at franchising automatically come across Uniglobe,” says Laurie Radloff, President of Uniglobe Travel Western Canada. “And when we’re looking at new markets, we’re careful in our recruitment. A lot of people today are dissatisfied with what they’re doing. We know that there’s great personal satisfaction in owning your own business, and we know that Uniglobe agents love what they do, so we do print and radio campaigns with the theme ‘Do What You Love’. We talk to the banks and chambers of commerce to see who’s successful in their areas; we look at existing agencies to see if there are people who we feel can represent our name. We never place a franchise for the sake of having an outlet—we want to make sure that our name and brand are handled properly and that we have the right cultural fit. There’s a very high level of trust among those using our name, so we have to have the right people.”

Who have to have money. “They do have to be properly capitalized, although we don’t cause them to buy any products,” continues Radloff. “They pay Uniglobe a royalty, starting at 10% for every dollar they earn in commission. As sales rise, that percentage declines. That royalty could be a little high, but that’s because Mr. Charlwood knows what level of support franchisees require. We often hear about franchisees of other companies who are unhappy with the level of support they’re getting from their franchisor but that’s because, financially, the franchisor can’t do more.”

Uniglobe provides professional training in sales, customer service, marketing and operations, as well as on-going support in business administration, sales development, financial controls, market research, strategic planning and supplier relations. All of this translates into better customer service, and the level of experience and expertise that customers want.

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Consumers want accessibility? No problem. The Uniglobe Customer Commitments promise that phone calls will be answered by the third ring, that callers never hold longer than 30 seconds, and that every call is returned within the hour. You find yourself trying to tell the customs officer/janitor in Novosibirsk that you’re supposed to be in Newark? Uniglobe has a 140-language interpretation service. ‘Course, that shouldn’t happen anyway, because Uniglobe guarantees error-free reservations and 100% accuracy in documentation. There is a Lost Luggage Control System, a 24-hour Rescue Line and the promise that service complaints will be resolved within 48 hours, supplier complaints within 15 business days.

Technology is another important component at Uniglobe, which has its own software: Travel Manager, and Software for Agency Management. Also, Uniglobe Net News, an extensive agent Intranet, piggy-backs Uniglobe Travel On-Line, an Internet booking and information system which was launched three years ago.

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With Uniglobe Travel On-Line, consumers can book car rentals, hotels and flights, choose seat assignments, order special meals, obtain street maps, book cruises and tours, research destinations and find restaurants, currency information, last-minute promotions and weather reports.

“The Internet travel segment is growing very quickly,” says Radloff. “Booking travel this way is a big leap of faith at first, and there’s no question that a well-trained travel consultant is the best value. But if a client’s on a plane at 2:00 a.m., and wants to make a reservation on his laptop for a 10:00 a.m. connecting flight, we have to be able to provide that service.”

Uniglobe is careful to see that this system does not exclude its agents. An income-splitting formula pays franchisees a referral fee, 10% of online revenue is distributed through a group fund, and another 10% goes into an advertising fund.

“The site is good for our agents too,” continues Radloff. “At 2:00 a.m., that client’s only other option is to call the airline to book that flight. This way, the agency gets a little commission and gets the data on the booking and can follow up with the client. The site gives clients 24-hour access; it gives agents a 24-hour office. Plus, you don’t have to be an existing Uniglobe client to use the online service, so agents gain access to new clients.”

Uniglobe Travel On-Line is a separate public company and its stock hasn’t done that well, but the site is coming along, with a booking-to-looking ratio of 1:74 and sales of $5 million to November 1998, as opposed to $1 million for all of 1997. And it’s a great system. But so is Microsoft’s Expedia, one of the web’s most popular travel sites. So, in November, Uniglobe entered into a joint-marketing agreement with Expedia. This accomplished two things—a tough competitor is now a partner, and Uniglobe has access to Expedia’s three million customers and is closer to attaining the aforementioned goal of a 50-50 leisure-business mix. (In the travel business today, leisure is the hot market—no matter how tight the economy is, seniors and Boomers will keep traveling.)

Cyber-competition is only one challenge facing travel agents. There are also increasingly complex bulk-purchasing and fare packages, frequent flyer programs and the ubiquitous fly-by-night operations which muddy the waters for reputable companies. Consumers now have so many choices that a successful travel agency has to give customers special reasons to come to it, and stay with it. Those reasons have to be brand loyalty and value-added products and services. Which have to be communicated through marketing, advertising and public relations.

The Uniglobe marketing plan is written following consultation with franchisees. Preferred supplier recommendations are then collected, and listened to. All travel agencies have preferred-supplier relationships; Radloff says that Uniglobe takes its relationships more seriously than does its competition. And these relationships are crucial to stretching the Uniglobe advertising budget. Uniglobe spends $1 million annually on straight advertising, but that budget is extended by as much as 40%, due to the fact that 75% of advertising is co-op (and most visuals are provided by suppliers).

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The plan includes four main marketing pushes per year; one or more could be on cruises, one could be the Caribbean in January, another on Europe in June—it depends on supplier input and on what key interest areas have been identified among travelers. The international quarterly campaigns come out of California; they are supplemented with regional, then local, campaigns. Most advertising is print; outdoor and telemarketing are not used. There are six to eight weeks of television each year, radio use is rising and direct mail is a constant, with 100,000 pieces mailed quarterly.

The non-Canadian markets handle their own advertising. Radloff says that, in Canada, the advertising focus is on offering holidays at destinations where the Canadian dollar will go the farthest.

“We sell on value, not on price. For example, people frequently say they want an inexpensive holiday and that they don’t care about their hotel, but that hotel becomes important when they get there. We can provide a nice hotel at a price they can afford because we use our clout and buying power to deliver quality products in a cost-effective manner. We also provide products like Rescue Line, Travel Manager and a preferred-rate hotel program called Key Cities—this is all extra value at no extra cost to the consumer.”

Uniglobe’s strategy for 1999 is to position itself as ‘The Navigator of Options’, with the goal of convincing consumers that Uniglobe agencies can best help them wade through the sea of travel options. Uniglobe’s corporate marketing uses the Uniglobe Travel Plan, a travel purchasing system which incorporates Uniglobe Travel On-Line and the Uniglobe Cruise Program. From the client’s perspective, it is a travel management and purchasing system; from the agent’s point of view, it is a sales kit with corporate proposal templates and a PowerPoint presentation.

“Our corporate marketing is mostly face-to-face,” says Radloff. “We have a professional, well-trained sales force and our salespeople are out knocking on doors, calling on clients, making presentations. No one at Uniglobe waits for the phone to ring—they’re out closing sales and getting the business.”

One very important aspect of Uniglobe’s communications activities is positioning. Not positioning as in ‘We’re A Really Good Travel Service,’ but as in ‘We’re A Really Good Travel Service and We’re On Your Side!’.

“Since its inception, our focus has been on building the Uniglobe name into the most widely-recognized name in travel—to be to travel what Campbell’s is to soup,” explains Radloff. “So while the competition advertises price, we talk about other things. People like to spend their money locally, so we talk about the fact that Uniglobe’s agencies are local but have global clout. But, to take that name recognition further, and to inspire confidence, we’ve positioned ourselves as problem-solvers and as the advocate for the traveling consumer.”

Two years ago, when Canadian Airlines had its near-death experience, Uniglobe was the only travel company that leapt into the fray, with Radloff appearing on Canada AM and various radio programs to talk about how having only one Canadian airline would not be in the best interest of consumers because of the negative impact on service, pricing and availability. While we assume that there’s no point in going to Hawaii because of the exchange rate, Uniglobe is out telling the media that the Asian market for Hawaii has withered, hoteliers are under tremendous pressure, air space has tripled and fares are down from $600 to $99. Every time a travel scam pops up, so does someone from Uniglobe, educating consumers about what to watch for. And, thought his may be stretching things a bit, after the recent Carnival Cruises on-board fire, Uniglobe became the exclusive dealer of Evacuate, a smoke-hood-in-a-can which provides 20 minutes of clean air. 

All of this is advocacy, it is brand-building, it is confidence-inspiring PR. And PR is a huge component of marketing at Uniglobe, where every message sent to the public is, quite literally, identical. This is achieved through the Agency News Media Program, a PR-Program-In-A-Box created by Uniglobe’s PR firm, Vancouver’s Verus Group.

“Uniglobe is one of the more enlightened corporations I’ve worked with, in that Mr. Charlwood has always instinctively understood that marketing and PR should be inextricably linked,” says Verus Group president Wayne Hartrick. “In some organizations, the PR and marketing functions are clearly delineated, which is a shame because there should be a coordinated strategy between them so that every dollar and every employee hour spent is leveraging their combined impact.”

To that end, Uniglobe’s four annual marketing pushes are supported by PR pushes on the same subjects. If the company is marketing cruises, Verus writes releases on cruises. It then sends the releases to national publications, then to all franchisees, who send them to their local papers. If a local paper asks a franchisee to write an article, it’s ready to go—Verus has already written it; the franchisee just changes the by-line. Promotion may be the intention, but it doesn’t carry the aroma of advertorial; publications passing it on to their readers do so because it’s useful, helpful information.

“This method has helped our agents become known in their communities as experts in their field,” says Radloff. “It is an extremely cost-effective way of achieving our marketing objectives, because it’s exposure that brings with it a credibility that you won’t get if people know you’ve paid for it.”

As mentioned, Uniglobe’s Agency News Media Program is literally in a box. It is a kit which includes articles and news releases on the subjects determined by the marketing plan, plus a 30-minute video, and a workbook that teaches franchisees how to deal with journalists and earn credibility in their communities. New franchisees come to Vancouver for PR training, then Verus Group staffers coach agency owners over the phone, encouraging them to work the program, and motivating them to build their profiles in their locations. If that sounds like a pain for both sides, it evidently was, initially.

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“The program takes patience and commitment,” says Hartrick. “It’s a challenge to get everyone to do PR because people are busy and there’s always another priority. And they get discouraged—we’ll issue a release, the franchisee can’t find an interested reporter and gives up. We encourage them to try other things, show them how they can become regular columnists and how to make presentations to corporate and community groups. This program of encouragement is crucial. Eight years ago, we just distributed the kits and had a 10% implementation rate. Now, with daily contact, we have a 62% implementation rate, and it’s climbing.

“This is all about credibility. If you’re writing in the local paper, or being quoted by your local media, your other marketing activities are met with less resistance. Uniglobe’s combined programs are generating 400,000 impressions per day from print alone, and these impressions carry the extra impact of having grass-roots credibility.

“Our research shows that most consumers see travel as a problematic experience,” concludes Hartrick. “We make sure that Uniglobe gets its name in the media for the right reasons—because it’s solving problems for people and providing useful information as well as quality, high-value products. The whole principal behind this, after all, is to do something well and get credit for it.”

 

Blitz Magazine, January 1999

 

 

 

Case Study: Subway Wraps Up Its Region

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A lot of British Columbians think that Subway is a BC company. They see Subway outlets while vacationing in other countries and just assume that Subway is another BC firm that has done well.

But Subway is not a BC company. It was founded in Connecticut, in 1962. Today, there are 13,000 Subway restaurants in 68 countries—1,300 in Canada. It is the second-largest franchise in the world, next to McDonald’s, in front of 7-11 and Century 21; and it is the largest franchise in BC.

In 1987, Gerry Lev, then a Calgary franchise consultant, discovered the Subway concept at a trade show. There were 1,000 Subways worldwide, none in Western Canada. In 1988, Lev founded Subway Developments of BC, and the division celebrates its 10th anniversary with 218 stores. And, out of all Subway divisions, and in terms of sales, the BC division is at the top, leading by up to 25%. If that lead is narrowing, it’s because BC has become the model for divisions which are following its lead and catching up.

How can this be? There are only 3.9 million British Columbians. But they eat a lot of Subway sandwiches—400,000 a week, putting annual sales at $90 million.

The answer lies in a potent combination of organizational ease, corporate savvy and media communications, all boosted by the intrinsic qualities of the BC lifestyle.

In the first place, as Lev explains, Subway restaurants are easy to own. “When you buy a franchise, you buy an operating system which has been perfected over time. One of the hallmarks of our system, and our success, is KISS—Keep it Simple, Stupid. The recipes are simple, procedures and operations are simple. There’s no cooking involved, so we don’t need thousands of dollars worth of equipment. The cost to open a Subway franchise is $140,000—a McDonald’s franchise can run from $700,000 to $1 million.

Secondly, Subway has benefited from a lack of competition. “In 1988, there were no sandwich chains in BC,” continues Lev. “There were sandwich stores, in office buildings, closed in the evenings and on week-ends. There was no alternative to burgers, and Subway sandwiches quickly became the perfect alternative, but with the convenience and economy offered by fast food.”

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The price of a Subway sandwich begins at around a dollar and, although the corporation’s research shows that portability is not a major factor overall, it’s probably a bigger factor with BC consumers, who appreciate the fact that they can buy their lunch on their way to work or school, or stow one in a knapsack to eat at the beach or on the mountain.

 “Freshness is our biggest selling point, value is number two,” continues Lev. “But what brought Subway to the forefront is the fact that our sandwiches are not pre-made. People watch their meal being made—precisely to their instructions. The Subway bread is baked in front of customers, which is another selling point; and there’s our traditional ‘U-Gouge’, which is a way of cutting the bread so the contents of the sandwich won’t fall out.

“Variety is another selling point. We have something for everyone—meat, vegetarian, low-fat—and one of the best breakfast sandwiches in the industry. But, getting back to the KISS formula, we’re in the business of appealing to the masses. Some Subway stores offer soup and salads, and we have items like potato chips. But our business is selling sandwiches.”

The Subway benefits are not difficult to communicate to a receptive public—everybody loves a sandwich. The big challenge has always been budget. Subway collects advertising funds from franchisers, and that money is spent on ‘national’ (North American) advertising, care of Chicago agency Hal Riney & Partners. That agency works with a corporate board, and a franchise board, while keeping everyone moving in the same direction—no mean feat, considering the company’s growth: from 10 restaurants to 1,000 in the first 20 years, to 11,000 a decade later, to 13,000 six years after that.

In addition, each division has its own advertising agency. The marketing plan comes from head office in Connecticut, Riney develops is nationally, and the local agencies worth with their own franchisee boards to develop the plan locally. In BC, the agency that is i2i Advertising & Marketing, and its annual budget is $4.5 million. That’s not much for the ultra-aggressive fast food industry, but it’s way more than the franchise had in 1991, when i2i partners Stuart Ince and Cam Iverson began with Subway.

“Back then, Subway BC was 14 stores and the franchisees had just pooled enough money to hire professional help,” recalls Iverson. “That amount was below $100,000, so the account didn’t interest many agencies. But we knew the chain would take off here. It fit the west coast lifestyle, and it fit well in terms of competing against other fast food chains.”

The BC division took off in 1993, when the franchisees decided to go beyond the 2.5% of sales which they were contracted to put into advertising and begin an Additional Funds Program, becoming the first Subway division to do so.

The extra budget immediately shot up our presence—and sales,” says Iverson. “The sub sandwich is part of the eastern deli mentality. With the extra money, we were able to make the Subway sandwich a BC thing.”

Therein lies the key to Subway BC’s success. “We made ourselves a BC company, and part of the BC community,” Iverson continues. “This wasn’t strategy—our franchisees are BC people and they want to be part of their communities and do things they can be proud of. So, aside from spending advertising dollars wisely, we get involved in events and promotions at a very local level—and it’s that community involvement which explains why so many people think that Subway’s head office is here.”

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Subway BC is big on philanthropy. It raised $35,000 for Canuck Place (at the beginning, before the band-wagon effect kicked in). Ditto with AIDS Vancouver. Its Heroes for Hunger program gave a free sandwich to anyone who delivered a Food Bank donation. Every day, Subway feeds supporters of something: the Terry Fox Run, the Children’s Festival, the March of Dimes, Boy Scouts, the BC Boys Choir, Minor League hockey and Little League baseball. It supports scholarships, and it bought the ‘Shout No!” program, working with police and schools on child safety.

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These are, of course, promotions. But community involvement is Subway BC policy, and philanthropic promotions stretch advertising budgets. “We don’t do many things in a huge way, and we never pick causes for profile,” says Lev. “Most international companies don’t get involved with local figure skating clubs, and we don’t get the publicity that others get, but we reach thousands of people by doing a lot of little things.”

Subway has also been smart about advertising. This has not always been easy, considering the fact that half of its radio spots and all of its television ads are created in Chicago. It took a while for US creative teams to realize that Canadian and American sensibilities aren’t the same.

“It used to be a horrendous problem,” recalls Lev. “I spent a lot of time saying ‘No, not in Canada.’ I don’t have to do that anymore. Now, they know Canada well and we get Canadian versions of everything.”

Once i2i has the marketing plan, it can do what it likes—another success ingredient.

“The BC franchisees are left alone in terms of advertising and promotions,” says Iverson. “And they’ve been aggressive at putting together deals which build Subway’s presence far beyond the dollars they have to spend. We have to work harder to push media dollars into creating image, so we’ve become involved in loads of cross-promotions and have forged strong relationships with media partners. Those promotions have been a large factor in putting us ahead of other Subway divisions.”

Subway runs ten major promotions a year. Its biggest is the annual ‘Survive in Style Sweepstakes’. The concept was a small part of the national marketing plan, but i2i worked with Global Television to make it fit the BC culture, and it took off.

“The national promotion was about fast food survival tips,” says Iverson. “We made it about what you need to survive in BC. We have a true partnership with Global in that we plan it together and tie it in with Global’s Sports Page. Then we give away vehicles, scooters, mountain bikes, cellular phones, vacations–$100,000 worth of prizes. It’s now bigger than most of Subway’s national promotions.”

Another major promotion is the chance to win a trip to the Stanley Cup Finals—essential, of course, for the all-important 18-34 male demographic. “Sports are very important to us and we don’t have the money to participate in the TSN buy,” continues Iverson. “The Stanley Cup promotion lets us tie ourselves to hockey without becoming involved with a team. We’re perceived as being sports-related, even though, at the professional level, McDonald’s is much more invested. We’ve done a little guerrilla marketing…I guess we’ve stolen some thunder.”

(In that vein, one famous tactic is the use of the Subway plane. If Subway can’t afford to sponsor an event, it rents a plane, attaches a banner and repeated flies over the event. After seven years, this remains one of Subway BC’s most successful marketing tools.)

Another smart move was looking at the competition and going in the opposite direction.

“Corporately, our market is 18-49, and that is what our media buys target, but we stay very aware of the 12-17 customer,” says Iverson. “McDonald’s targets families. Teens don’t want to be where families are. So we’ve presented Subway as the cool place to go. We aligned ourselves with the younger radio stations; the Z95—Subway sticker prize campaign was extremely successful. And we created the Sub Dude and got involved with snowboarding at the beginning of snowboarding—there was a time when no self-respecting snowboarder would be caught without a Subway sticker on his board. Teens love us—not only is a Subway sandwich a cool food to eat, but their parents don’t mind. Now, it’s kind of a cult food.”

As far as Lev is concerned, the Subway market is anyone with teeth. “It’s anyone who can eat a sandwich. BC has the largest senior population in Canada and seniors are concerned about blood sugar, fat and cholesterol. And children are the grown-ups of tomorrow. But we don’t have the funds to go after individual markets.”

So individual markets are targeted quietly. “A child’s choice is the determining factor of where parents go, but kids want toys,” explains Lev. “If Dairy Queen advertises a toy promotion, it’ll get the families. We can’t advertise that way, so we have a Kids Pack program—a school lunch with a sandwich, drink, cookie and toy. As a result, we feed more BC elementary students than anyone else.”

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In BC, more than any another Subway region, women are a larger market: 50%. “Between 7:00 p.m. and 11:00 p.m., we get men; that’s when we sell the foot-longs with double meat and cheese,” says Iverson. “But at lunch, 60% of sales are to women. At the beginning, we had to focus on the 18-34s, then we built in the 12-17s, then we spread out to the 12-49s. Now, half of our customers are women. So we’ve broadened the net further. We run ads on female stations like KISS and QMFM, focusing on four-inch sandwiches, the lighter lunch, the sandwiches with six grams of fat or less.”

Subway heavily promotes the latter, but the low-fat aspect adds irony to any discussion involving the fast-food industry. “North Americans are fatter than ever, fries and chocolate are the top-selling foods, steakhouses are North America’s fastest-growing restaurant category and Wendy’s salads are gone,” says Lev. “So while it’s great that people see Subway sandwiches as an alternative to foods that they deem to be fattening, I’m not sure that they care about fat. People may think more about nutrition, but whether they act on it is a different matter. It’s just that the sandwich connotation is more positive.”

Connotation is another important point. “We’re careful to position ourselves in the sandwich category because of the submarine connotation,” says Iverson. “The submarine is rooted in the Northeastern US Italian-American community, where it’s a mainstay. In BC, before Subway came here, submarines were seen as something that fat men ate while they watched TV. Nobody had heard of a meatball sandwich. Or a foot-long steak-and-cheese with Marinara sauce. We communicated a different connotation for BC. Now, we sell a lot of those sandwiches.”

“Kentucky Fried Chicken is now KFC and McDonald’s calls its burgers ‘sandwiches’,” adds Lev. “Subway has never used the word ‘submarine’. As we’ve built our brand in BC, the focus has been on sandwiches, and the fast, inexpensive made-to-order meal. We’ve always promoted our 6” sandwiches—never our foot-longs. The 6” sandwiches fit with BC eating habits, and we won and R&D award when we devised 4” deli rounds, because we created a food that was appropriate for our market.”

All Subway restaurants sell 16 sandwiches—12 corporate, four local. The latter are created by franchisees, and this allowance is yet another reason for Subway’s success.

“The franchisees can choose what they sell, as long as it’s on Subway bread,” explains Lev. “And there’s no test kitchen, anywhere. We try things. If they work, great. If sandwiches don’t move, they come off the menu.”

i2i has used this flexibility for the highly-successful Sub of the Month promotion. “The freedom to create menu deviations has been a real bonus—and franchisees’ input is listened to,” says Iverson. “If head office were to introduce a sandwich which the franchisees knew no one in BC would eat, they could opt out. And we can push sandwiches which fit the BC culture. For example, we knew that chicken would work here, and that a Caesar salad would work here, so we helped develop the Kickin’ Chicken Savoury Caesar. It took off and became a national campaign. And the Sub of the Month program allows us to regularly present a different reason to come to Subway. It’s not rocket science, but it gives us product news and drives traffic.”

The two other Subway divisions which are catching up to BC are Alberta and Minnesota. They too have followed the formula of becoming part of their communities’ fabric, while staying with the national plan.

“A lot of other markets ran their own programs and, in the process, created too many Subway faces,” continues Iverson. “National ads would say one thing, local ads would say another, promotions would say something else. We create our own advertising and promotions, but we stay close to the national campaigns. So the advertising is different, but there’s always something that ties it together.”

Iverson says that the real credit goes, of course, to Gerry Lev and the Subway franchisees.

“Gerry’s progressive—he knew he needed to do more than just sell franchises. He’s a great communicator, he keeps everyone informed, brings in educational speakers. His franchisee support system has really helped the growth of this division. And the franchisees put a lot of energy into staying ahead of the pack. They’ve been willing to take risks and increase their spending. So we have BC people who have worked hard to put a BC face on an American corporation. And sales are way higher than in any other division. It’s an impressive accomplishment.”

Blitz Magazine, May 1998

 

 

 

Case Study: Toyota Turns Itself Around

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A new car, they say, is the second-largest purchase you’ll make in your lifetime. ‘They’ (the experts) also say that what you look for is quality, dependability and reliability, or ‘QDR’.

You want an attractive, safe, comfortable vehicle that won’t require much maintenance and will rarely break down. And unless you’re concerned about status and aren’t concerned with cash flow, you will look for a vehicle which offers a high QDR rating at the lowest possible price.

Until two years ago, Toyota was at a disadvantage on the latter point. While its QDR ratings have always been high and while, in BC, Toyota has always been the number-one selling import, Toyota vehicles were a little too pricey for many people.

Then, according to Garth Gilson, Toyota’s Manager of Vehicle Sales for BC, a number of things happened.

“Corporately, the company went through a transition. We re-engineered our way of thinking and we looked at our production and distribution systems to find efficiencies which we could translate into better pricing. We re-designed the Corolla and Camry, we introduced the RAV4 into the sport utility market and we re-introduced the Sienna into the van market. We’ve been able to put added value into our vehicles and offer new, high-value vehicles without an increase in price. That has made us more competitive with the domestics.”

Meanwhile, as Toyota became more efficient and improved quality while holding the line on pricing, the price of domestic vehicles went up. Now, the price spread between the high-quality Toyota imports and the comparable domestics is vastly reduced. As a result, for the first time, Toyota has the number-one selling intermediate car in North America (the Camry has displaced the Ford Taurus). In Canada, Toyota’s 1997 sales rose by 18%. In industry terms, that’s huge—anything over 10% is impressive. But in BC, the 1997 Toyota sales increase was a whopping 23%. This is due, in large part, to effective media communications.

“I’d like to think that the BC sales increase can be credited to communication and strategy,” says George Cruickshank, Account Director for Toyota BC Dealers at Glennie Stamnes Strategy, which has been the dealer association’s AOR for the past eight years. “With all of these developments taking place, we completely re-worked the advertising strategy. We said ‘we’ve now got a quite a horn to blow, so let’s really blow it. We’ve got a great new story for the consumer, terrific new vehicles, all these market advantages…we decided to let the vehicles do the talking and let the advantages dictate. We changed the way we looked at the business.”

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There are 33 Toyota dealers in BC and, when compared with other Toyota zones, the BC zone holds the largest market share within its zone. Toyota’s advertising operates at three levels—corporate, dealer and dealer association. The latter is a voluntary association, overseen by eight director/dealers who approve the association’s annual $4 million advertising expenditure. Gilson says that, while individual dealers are free to advertise whatever and however they like, they have found that the association campaigns are strong enough that it’s in their best interest to stay with the group.

“It makes more sense. It gives them a bigger voice and much more impact. All the players can tell the same story. It’s not an exact science—dealers have different opinions, approaches, budgets. But it’s a lot more effective when dealers work within the association campaigns.”

Dealer communication and participation is essential to the success of Toyota’s marketing efforts. You may think that this is an obvious point, but Gilson says that not all car companies are as conscientious as they could be in this area. At Toyota, paying attention to those who actually sell the vehicles makes good business sense. It makes for happier dealers, more profitable dealerships, and a stronger flow of information from customers.

“We need to know what consumers are saying. This market is very fluid and, as a manufacturer, we have to embrace change. And change is brought about by shifts in consumer tastes. Over the course of a year, consumer tastes in everything from vehicle styles to colours can change significantly. Equipment goes in and out of fashion very quickly. We conduct a lot of market research, but we depend on our dealers to keep us abreast of trends.”

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While Toyota stays in touch with its dealers, Cruickshank says that Glennie Stamnes focuses on the sales managers. “We’ve worked hard at building relationships with the sales managers. They’re at the front line of the business and have to be involved. We need to know what they’re hearing from customers. What consumers compare our vehicles against, what it is about our vehicles that stands out. So we meet with the managers regularly, hold focus groups with them and present creative to them before it goes out. We go to the dealerships to make sure that p.o.p. materials are placed properly—which is unusual because many dealer associations regularly put out campaigns with no dealership execution. This interaction makes a big difference. It also helps that this is the best dealer group I’ve worked with. They respect each other, they agree to a program, they get behind it, they execute it.”

A change in execution was a large part of the strategic shift made over the last two years. The traditional media mix of TV, radio and newspaper has been heavily augmented by outdoor buys—mainly exterior bus kings, which are now a key element of Toyota’s sales events.

Those sales events also last longer. “Traditionally, automobile advertising was done through one-month promotions,” says Cruickshank. “Last year, we drew our promotions to two and three months. With one-month promotions, by the time consumers heard about them, and then arrived to take advantage of them, the promotions were over. Consumers were getting fed up. Now, the media has time to kick in and consumers have time to get to the offer. From the acceptance stand-point, it’s better for the dealer and the consumer. There are also no breaks between sales events any more—Toyota doesn’t want to take a break from selling cars, why should there be time between financing and leasing offers?”

Two other consumer annoyances were dispensed with. Toyota buyers can now get 60-month financing on new vehicles—48 months used to be the limit. And Toyota BC Dealers now advertise only what they have on the ground, as opposed to advertising vehicles which are scheduled to come in.

“There are two reasons for this,” continues Cruickshank. “We have to help dealers move what they have on their lots. But it often happens that a car company launches a new car, it promotes it, customers come in to buy and the cars aren’t there yet. That makes people angry. There is no point in spending advertising dollars if you haven’t got the goods to sell and you’re going to tick off your customers.”

Glennie Stamnes also did away with another auto industry practice—the adherence to seasonality. “Traditionally, the belief was that no one bought cars in January, February or March, what with Christmas bills and tax time coming up. In fact, business may be slower during these months, but people are still buying cars. So we’ve advertising aggressively during those months, and that’s where we saw growth last year.”

Creatively, dealer testimonials were replaced by light humour mixed with an increase in the provision of factual information about pricing, quality and financing. And, for the first time, notes Cruickshank, all creative was adapted for the Asian community.

“BC has a large Asian population which is incredibly important to Toyota, which is the number-one name plate in that ethnic group. So all of our creative is reflected in the Asian community. We’ve become involved with the Chinese New Year celebrations and the International Dragon Boat Festival. We buy Asian media and tailor the creative for it. We also tailor the offers. The Asian community tends to buy cars—they’re less likely to lease. So where we’ll offer the general public a leasing program, we’ll offer the Asian community a purchase program.

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“The goal of all advertising over the last two years has been to build on QDR and wrap it up with value and affordability. Price has always been the biggest hurdle for us. But now we can find a better balance. Instead of trying to get people to buy an expensive product, we can now come out and say that, in addition to their excellent QDR ratings, Toyota vehicles are more affordable than ever. We’ve had a lot of information to communicate, but we’ve done it. And our sales increases are strong and our dealers are happy.”

And Toyota’s happy. In BC, its market share is 8%. Nationally, its share is 7% (as compared to Ford’s, which is 21.6%). But The Big Three is now The Big Five—General Motors, Ford, Toyota, Honda, Chrysler. In 1997, for the first time, Toyota sold over 100,000 cars in a calendar year (106,000, including Lexus). Demand is up. The company has taken an aggressive attitude, setting the goal of a 10% market share by the year 2000.

“Toyota already had a lot of loyal, satisfied customers,” concludes Cruickshank. “But with the new price points and new vehicles, it has opened itself to a whole new consumer segment. It has never been in a stronger position to make a serious impact on its marketplace.”

Gilson is a little more cautious. “The industry itself can only grow so big. In our effort to reach our 10% market share, we realize that we have to retain our existing customers, while looking at ‘conquest customers’—those who are driving something else. We’re dealing with educated consumers in a highly-competitive market and we can’t afford to get lost.

“But our advertising has been very effective. The strategy has worked, and I think our sales show that you can’t under-estimate the value of strong advertising.”

Blitz Magazine, March 1998

Jimmy Does Whistler: GMC Moves Up in the World

            Some people call them Environmental Assault Vehicles. Others can’t live without them. For General Motors Canada and Whistler/Blackcomb Resorts, they’re the perfect promotional vehicles.

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            They’re Sport Utility Vehicles, or SUVs. People love to complain about them–they block visibility, guzzle gas, take up two parking spaces. But British Columbians are active people. And in Vancouver, where people do golf and ski in the same day and kamikaze soccer moms run rampant, SUVs are must-haves.

            SUVs are the vehicles of the moment. Their 4×4 capability allows owners to go off-road (5% actually do; the rest go to the mall). They can handle different road and weather conditions, they’re flexible. SUVs are not cars–they’re trucks with car characteristics. And, in Vancouver, the sport utility market is 45% of the truck business; much higher than in other markets.

            Ten years ago, the sport utility vehicle market consisted pretty much of Range Rovers and Land Rovers, which were exclusive to the wealthy. Then there were the trucks and boxy 4x4s driven, in the main, by the blue collar crowd. Those who wanted more space drove station wagons. Then people tired of wagons and went to mini-vans. There’s nothing remotely cool about mini-vans; SUVs were the next logical step.

            The industry-wide transition–from van to SUV, from blue collar to white collar–began in 1993. It coincided with a rise in disposable income, an increase in the number of people having children and, in the case of BC, an increase in the number of vacations taken at home. At the same time, SUVs became more rounded and elegant in appearance. They were sold with embroidered or leather seats, state-of-the-art stereo systems, sun roofs, air conditioning, heated power windows, power steering, power brakes. They became large luxury cars.

            Despite ever-increasing awareness about environmental issues, sales of SUVs are booming–Ford now sells more trucks than cars. The small car market is still almost half the total car market and vans account for 30% of the truck market, but SUVs are taking over.

            However, by 1996, while everyone else’s SUVs were flying out of showrooms, sales of the GMC Jimmy had declined. It had an image problem.

            “At that time, the Jimmy design had been around for 18 months, which is a long time in a market that’s changing so rapidly,” explains Michelle Whelan, Account Supervisor at MacLaren McCann, General Motors’ long-time agency. “Maybe it was the design, maybe it was the blue collar image–for whatever reason, people didn’t see this truck as being what they wanted to buy. We wanted the Jimmy to be perceived as a high-end vehicle, increase awareness of its attributes and make it an aspirational brand.”

            So the Jimmy’s image needed a socioeconomic up-grade. What better way to achieve that than by tying it in with one of the world’s most socioeconomically exclusive activities–and one of BC’s most popular activities–skiing? Skiing, specifically, at Whistler/Blackcomb, North America’s top ski resort. To which, for the past ten years, GM has had the exclusive car manufacturer’s product placement rights.

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            The solution was stunningly simple. Beginning in September 1997, the ‘97 GMC Jimmy became available in a Whistler edition and a Blackcomb edition. Vehicle badging was created. The truck was outfitted with running boards, leather interiors, CD players and Thule ski racks. People who purchased the Jimmy received fleece jackets or vests with the Whistler/Blackcomb logo, as well as the Whistler/Blackcomb Express Card (for direct-lift, lower-cost skiing on a debit basis). As promotions go, it was not terrifically complicated, either to understand or execute, but it was a tremendous success.

            “It was very straightforward,” continues Whelan. “The SUV market is growing very quickly in BC, more so than in the rest of the country. The need was already there; it was just a matter of getting consumer attention and communicating the Jimmy’s benefits.”

            With a budget of $300,000., MacLaren conducted a province-wide newspaper campaign. In the Lower Mainland only, the promotion was advertised on radio and TV, plus on billboards and through traffic report sponsorship on Mountain FM. In addition, the agency obtained the Whistler/Blackcomb data base and a direct mail piece was sent to all Express Card and season ticket holders. The target market was the 30-50 age group with earnings of $35,000.-$40,000. And while this was going on, there were Jimmys parked at the base of Blackcomb and in Whistler village; every time someone walked by and triggered it, an automated tape touted the vehicle’s benefits.

            The promotion’s effectiveness was quickly apparent–sales of the Jimmy went up 38%, or just under two market share points. So last year, the promotion was repeated. But GM has other vehicles serving this market segment–the Yukon and the Suburban. So last September, the promo included the three vehicles and used the same strategy. Jimmy sales went up 40% in September, 69% in October, 43% in November and 149% in December. Yukon sales went up 15.3%, Suburban sales 47%; with respective share climbs of 3 and 4.8 points. The whole GMC target group has changed; the blue collar image is gone.

            Which is not to say that an entire market segment has been shut out. It’s true that SUVs are expensive and if you have to worry about the cost of fuel you can’t afford one. The hottest category of SUVs is the mid-size–the GMC Jimmy, Ford Explorer, Chrysler Grand Cherokee, Toyota 4Runner and the Nissan Pathfinder. Those run in the $44,000. range. The large size SUV is increasingly lucrative; this is where you find the GMC Yukon and Ford Expedition ($48,000.) and the GMC Suburban and GMC Tahoe ($52,000.). However, with $4,300. down, you can lease a Jimmy for $338. a month which, obviously, was a figure which appealed to British Columbians in various income groups. And the benefits of the Jimmy were communicated in such a way that it increased the purchase intent of those who, in a market already favourably disposed toward an SUV, were thinking of buying one.

            The decision to buy a vehicle involves a six-month purchase funnel. When a consumer decides to buy a new car, he will spend two months looking at different makes and deciding what type of vehicle he wants–a mid-sized car, an SUV etc. Over the next two months, he’ll narrow his choices; he knows what type of car he wants, now he has a short list. In the fifth month, he will further narrow his choices and decide on the style he needs; in the sixth, he makes his final decision based on price and options.

            For manufacturers, image advertising–particularly in print and television–captures the attention of the purchaser in the first five months of the funnel. It’s the promotions, packaging and pricing which catch the buyer in the last month–this is how the manufacturer moves up on the buyer’s list and affects purchase intent.

            The creative strategy for the Jimmy promotion was simply to create an aspirational vehicle image and move that image higher up on the purchase funnel. Experience and focus group testing showed that the best approach was the straightforward one–no dancing girls, no silly humour.

            “We just showed the vehicle in the mountain setting,” says Whelan. “The image told people that this vehicle offered a way to have the freedom to get out of the city on week-ends. It showed the truck in the mountain environment and created the outdoor connection in people’s minds. The copy provided the straight facts.”

            “We want our creative to be tasteful,” says Brian Webber, Zone Marketing Manager for GM BC. “We want to communicate specific information and we don’t want clutter. People who buy these vehicles are sophisticated; they know what they want and they want you to cut to the chase–state the features and benefits, the price, the lease payment, the down payment.

            “In our campaigns, we use outdoor extensively to show the look of the vehicle. Print advertising is the primary source of information–what it is, how much it is, where to go and get it. At the point where this promotion appeals to the consumer, he’s already going to buy an SUV and you just have to tell him why he should buy yours. He’s done his homework, you make him an offer.”

            The success of this promotion is clearly indicated by the fact that people are still asking for the Whistler and Blackcomb editions, even though last season’s advertising stopped in January. Not all Jimmys have the badging, but that hasn’t hurt sales. The attributes and image of the GM vehicles, and their association with the glamour and excitement of Whistler, have made such an impression on people that they’re buying them anyway.

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            “The image of Whistler/Blackcomb means different things to different people,” says Mark Woodburn, General Manager of Business Development for Whistler/Blackcomb Mountain Resorts. “People in BC are proud that the leading ski resort on the continent is in their back yards. Some feel a sense of ownership. Others want to communicate that they’re alpine enthusiasts and part of mountain culture. In some people’s minds, there’s a certain stature associated with that. That’s part of our brand equity and GM’s use of that equity altered how their vehicle was perceived. It helped stimulate test drives and sales, significantly affect its market share and exceed sales targets. We’re glad that we helped a partner and enhanced our own brand awareness at the same time.”

            Woodburn couldn’t be happier with the GM promotion–for the price of the give-away merchandise, Whistler/Blackcomb has been able to expand its relationship with GM outside of the resort and, in the process, advertise itself.

            “It’s always a struggle for us, as we go through the winter, to remind people in the Lower Mainland that Whistler/Blackcomb does not suffer the same rainfall that the Lower Mainland does. We need to get in people’s faces as often as we can and this way a great way to do that. The fact that our logo was on the back of a high-quality 4×4 vehicle communicates the nature of Whistler and continues with the culture that people enjoy here. The displays in show rooms, the direct mail campaigns, the advertising–it all helped us. But the greatest value to us was having the logo on the back of the vehicles. Someone’s sitting at a red light staring at our logo on the vehicle in front of him, he thinks of his experience here, it elicits fond memories and stimulates another visit.

            “This was a unique opportunity because it’s not very often that you get to put your name on a product manufactured by someone else–especially one with such a high profile. GM used our brand to strengthen its business, we used its vehicles to strengthen our brand. It’s a classic example of partners borrowing equity from each other. And its simplicity is the reason for its success. Obviously, GM makes great vehicles and they’re attractive to anybody looking for something in that category. But being able to tie the vehicles’ connection with this place and its activities, and to the emotional connection that British Columbians have with Whistler, gives GM an edge which its competitors don’t have. It is a win-win situation all around.”

Blitz Magazine, September 1999

Mad for Silk, In Love With Lace: The Quest for the Best Makes Christine Morton #1

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Great things happen in basements. You’ve heard about many businesses that began in the founders’ basement and grew to be mighty successes. The difference with Christine Morton is the commodity—her big thing was, of all things, antique lace.

Although she’d had one year of design training, Morton had no intention of becoming a fashion designer—she just loved lace. She had a huge collection of it because, when she was growing up, people didn’t realize the value of it and sold it at rummage sales. She decided to put her collection to work. She’d been working in fabric stores and knew her way around the business. So she quit her job and started making garments.

First, it was camisoles and blouses. Then dresses, then wedding gowns. She soon had a large and loyal following of people who know, and can pay, the value of custom work.

That was 25 years ago. Today, Morton is the top lingerie designer in North America; her pieces are among the most sought-after in the world.

If you’re thinking: ‘What about Victoria’s Secret?’, you’re thinking of the wrong league. Whether they’re made of cotton, linen or the fabulous silks she’s known for, Morton’s pieces are luxurious works of art. Women (and men) who appreciate the finer things in life walk into Holt Renfrew, Nieman Marcus, Saks 5th Avenue or the 130-odd boutiques that carry her line, and by-pass the racks of polyester dainties. Morton’s collection is found hanging alone, with the stores’ private collections or with those competitors she does have—like English designer Daniel Hanson, who produces a cashmere and linen line.

“People come to us for very high-end lingerie,” says Morton. “There are a lot of people already in the synthetic market and in the last few years, every major designer has launched a lingerie line—Ralph Lauren, Donna Karan. They all see that it’s an area of growth. But we’re still above them.

silk1“I’ve actually tried to go the other way, but every time I’ve gone from trying to create something of beauty to creating something synthetic, or something that’s cheaper, I’ve lost it. I put the best into each piece, so every piece is something of beauty and comfort and luxury and makes the woman who wears it feel wonderful. There’s a quality about our product that’s unique, and maintaining that is what’s important to me. People recognize what is Christine, so everything has to have the same look and feeling.

“This is an extremely competitive business and it says something that I’m still here, and that what started as a home business is now an international company. Through the 80s especially, a lot of companies came and went. In the last five years, I’ve seen this company really emerge to a place where we’re seeing major growth.”

Morton no longer does custom work, nor does she do bridal. She’s strictly wholesale, and she develops private label lines for Nieman Marcus, Saks and Holt Renfrew. From her West Vancouver studio, Morton also produces four collections a year. Each collection is 100 pieces: panties, thongs, tap pants, pyjamas, penoir sets, loungewear, robes and sarongs. Her camisoles start at $75, pyjamas $250. Robes run from $350—Saks Christmas catalogue this year featured one for $800 (US); others sell for up to $1500 (US). And people have no problem spending that—her sales are sitting at around $2 million.

One of the keys to Morton’s success is her unique fabrics. For inspiration, she travels to Paris, where she scours the flea markets looking for old fabrics, old laces. She develops her own prints and fabrics from there (today, about 1/3 of her items carry lace). She used to have a ‘lace man’ whose job was to scour North America for quality lace; now she designs her own and has it made in France and Switzerland. Her ribbons come from Japan, her prints are made and dyed in Korea and China, and everything is made in Vancouver.

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“If the fabrics weren’t unique, I wouldn’t be here,” she explains. “That’s what people want—silk sewn over with pieces of chiffon, or heavy brocade, or layers of iridescent silk. It doesn’t matter what it costs; each piece has to be fresh and new but remain true to itself. That’s why development is so important, and I think one of the big keys to my success is being fashion-forward—the development of new colours, new silk textures, new styles.”

There are practical reasons for this development. There are many women out there with closets full of Morton’s pieces—they own everything she’s made, her stuff doesn’t wear out and she has to give them something new. She also has to stay ahead of the competition, which constantly copies her.

“I can’t keep people from imitating me. The important thing is that I did it first and the competition can’t get it out until next season. You make the most of it when it’s new and it has your name on it. Because you know that someone like Victoria’s Secret will have it out next season, only in polyester, made in Hong Kong and retailing for $45. It’s unavoidable. I’ve learned to see it as flattery.”

Another key to success in the fashion business is knowing one’s customer. Morton’s demographic is broad—women age 25-75. The difference is not who they are but what they want. These people want the best of everything. They’re often wealthy, but there are secretaries out there wearing Morton’s lingerie under their suits. They don’t earn a lot of money, but they’d rather pay $250 for a Christine camisole and some tap pants than get a new winter coat. The lingerie always wins.

“Our customer is the woman who loves beautiful things,” explains Morton. “Many women wear our camisoles as outer garments, under suit jackets. Our loungewear is worn on cruise ships, around pools, on beaches—we do sarongs and drawstring linen pants. Women also wear our things at home, while entertaining—we do a lot of silk velvet lounge pieces.

silk2“I think the explosion in lingerie sales has got to do with people spending more time at home, having fewer large parties and more casual dinner parties, and with the desire to not flaunt their wealth. Also, as the baby boomers age, they want to look good, feel good and be comfortable, but they still want the best. Also, there’s a certain obsession about lingerie. And we have a large male following—men want to see their women in fabulous things.”

In the last five years, Morton’s company has experienced 20% growth annually. This is because, in the mid-’90s, she made a strong commitment to advertising, public relations and promotions.

“Because I’d always been making unusual things, I’ve always had a strong press following—members of the fashion media just go crazy when they see my things, so I’ve never had trouble getting editorial. I decided to take that a step further. I like working with my stores so I didn’t want an agent per se, but I needed a full-time presence in New York.”

Morton retained New York press agent Randall Rutledge. The arrangement has made a huge difference to her business.

“I have my collection there, I can send buyers to him, stylists from magazines, films and TV shows go in there, members of the media go there. He has the right connections, he stays on top of things and takes care of my press releases and media kits. He gives me guidance with marketing and when I’m in New York, I use his show room and do some of my business there. And he organizes events for me, such as a recent fashion show at the Canadian Consulate. I’ve been very pleased with the arrangement. I’m being seen a lot more in the media, and people call from everywhere to find out where they can buy.”

Morton’s relationship with her press agent has brought vastly increased media attention: in the last year, her pieces have appeared on Winona Ryder in the film Autumn in New York, in the hit movie Traffic, on Buffy the Vampire Slayer and, for photo shoots, on the bodies of Gwyneth Paltrow, Madonna, Jodie Foster, Sharon Stone, Courtney Cox and Lauren Bacall. She’s also had spreads in Cosmopolitan, Glamour, Mademoiselle, Flare, Style and Victoria. (The magazine—not the Victoria’s Secret catalogue, although Morton notes: “I had several pages in there—I just didn’t make any of the pieces.”)

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“That kind of publicity grows a company. The film and TV work is great and we have stylists coming in all the time but, from the marketing perspective, the big thing is media attention. We do four shows a year in New York, but the media attention draws the buyers. And it helps our agents—we have one in Canada and one in California. The appeal for the media is that it’s lingerie, it’s beautiful, it’s unique and it’s fashion.”

Morton travels to New York four times a year, to launch each line, so she organizes shows around those launches and advertises the shows in trade magazines. The rest of her exposure comes from co-op ads—she does about 20 a year, including participation in the Holt Renfrew, Saks and Nieman Marcus catalogues. Co-op advertising works well for her—it’s always booked against an order, and her 3% contribution is simply deducted from her sales at that store.

In addition, since 1997, she has been given grants from the Matinee Fashion Foundation. The foundation offers funds for specific projects—Morton recently up-graded her logo, for example, and changed the label name from ‘Christine & Company’, to ‘Christine Vancouver’. The foundation focuses on its chosen designers, hosts an annual fashion show, and features its designers’ photographs on billboards and in advertising spreads in major magazines.

There was a website, and there will be one again this year. In the mid-’90s, she posted an award-winning site which got thousands of hits from all over the world, but it was ahead of its time and the e-commerce thing didn’t work. The new site is under construction; it will carry items not sold by her stores—they will be priced for younger people and will be meant to make men of all ages comfortable with shopping on-line.

silk9Morton has no plans to go directly into retail. In the past, she has successfully competed in Europe, against the high-end European lines, but says that it became financially unfeasible. Her market is strictly Canada, the U.S. and Saudi Arabia (it’s her clothing that Saudi princesses wear under their black abayah, and they buy a lot of it).

So there appears to be no reason for Morton to expect that her 20% annual growth with drop off. People will always insist on the best, the wealthy are increasingly discreet about how they spend their money, women will always want to feel beautiful, and men will always want to buy lingerie for the women in their lives.  Because, as Morton puts it: “Lingerie is much more than underwear.”

Blitz Magazine, March 2001

Keeping Up With the Jonesers

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Two North American CEOs have their logos tattooed on their bodies: Nike’s Phil Knight and Urban Juice & Soda’s Peter van Stolk.

The van Stolk story is more fun.

van Stolk began his sales career in elementary school–he bought bubble gum in the USA and sold it, at a profit, to his Edmonton classmates.

He began his adult career as a professional ski instructor and team coach. But ski-industry employees have three months paid vacation each year, and van Stolk is not the kind of guy to just hang around. In 1986, it occurred to him that, if people bought ice cream from street vendors, they might buy fresh fruit from street vendors. So, with a church basement as Head Office, van Stolk started Fruit for Thought, which sold fresh fruit kebabs and fruit salads from sidewalk carts. It was a great idea, van Stolk got lots of press and the business did well.

Then someone suggested that he look at Just Pick’d Juices, a Florida company which was producing flash-frozen orange juice. van Stolk did some research and found that 51% of the $356 million Canadian juice market lay in orange juice. He sold his car, lived on orange juice for a year and made a whopping $12,600. (He does not remember that year fondly.)

But he’d found his métier. He moved to Vancouver and, before long, BC boasted the highest per-capita consumption of orange juice in North America, Western Canada represented 10% of Just Pick’d’s sales and van Stolk’s sales hit $1 million. By 1990, though, he was starting to sour on orange juice.

“I’d come from the ski industry, which is all about fashion and sex. Clearly Canadian was starting to go through the roof, Koala and New York Seltzer were still big. They had sex appeal. I was selling orange juice, which has no sex appeal. And I was a one-product company.”

van Stolk founded The Urban Juice & Soda Company and negotiated the right to import, bottle and distribute Washington State’s Thomas Kemper micro-brewed sodas. He bought two BC distribution companies and proceeded to obtain his degree in beverage distribution, learning about importing concentrate, buying glass, manufacturing, bottling. By 1993, he was the Western Canadian distributor for Arizona Iced Tea, West End Soda, Odwalla and Snapple and his sales had risen to $6.4 million. But he was tired of distributing other companies’ products.

“When you’re a Canadian distributor of American products, you’re treated like the poor cousin. Arizona was competing against Snapple, which is manufactured in Vancouver. Arizona felt that its Toronto facility was enough for Canada. The Americans said: ‘Why can’t you do things the way we do them in New York?’ I said: ‘There are eight million people in New York. There are maybe eight million people in all of Western Canada, which constitutes two-thirds of the territorial space of the USA. Hello? There’s a bit of a shipping issue here!’”

With distribution becoming an increasingly frustrating, not-for-profit venture, van Stolk decided to start producing his own soda. In the cut-throat, $115 billion North American beverage industry, launching a brand is an extremely risky venture. So van Stolk looked at what everyone else was doing and did everything differently.

“When most companies create a brand, they first look at the consumer, then production, then distribution. We put the distributor at the top of the equation. The greatest beverage in the world is useless if distributors don’t want it and consumers can’t find it. Back then, everyone was selling non-carbonated drinks. We knew that if we went to distributors and said ‘Please sell our iced tea’, they’d say ‘Why?’. Distributors needed a different type of beverage–a carbonated beverage which would capture people’s attention.

“Our next step was to look at production. And this is the most important aspect of the success of Jones Soda. Instead of creating a proprietary package, we took a stock package and made it proprietary–this is very very important. We chose the Corona bottle. It’s a stock bottle and you can get it anywhere, which means you can negotiate your price. Clearly Canadian, for example, had to invest in design, the creation of the mold and manufacturing. They use pressure-sensitive labels which are applied at the manufacturing stage, so each product has a different package. So if they have a run on peach soda, they can’t just make more and put it in cherry bottles–they have to make more peach packages. My labels are applied by the bottler, and my orange soda is in the same bottle as my grape soda, which is in the same bottle as my green apple soda. If I have a run on grape, I just change the labels. The labels are the lowest-cost item in the whole process. Aside from the fact that I didn’t have to make that huge up-front investment, when you’re talking operations, this simplicity is critical. It is crucial to the company’s growth and profitability.”

(Urban Juice & Soda is also the only beverage company in history to win top honours for package design in two categories in the same year: its Wazu Natural Spring Water bottle won six International Bottled Water Association awards, knocking Perrier out of the top spot. The Jones bottle edged Coors’ to win the Glass Packaging Institute’s 1998 Carbonated Beverage Clear Choice Award, the glass container industry’s highest honour. van Stolk also notes that the total pre-market cost of Jones Soda was $41,000. and the total pre-market cost of Wazu was $20,000.–an unheard-of feat in the beverage industry.)

Once he had his production and distribution parameters in place, van Stolk looked at the consumer. He was playing in the New Age beverage market (fruit beverages, bottled waters and iced teas). This segment, which grew wildly through the late ‘80s and early ‘90s, now averages US $6 billion in annual sales. But van Stolk felt that beverage marketing lacked creativity and that his competitors were not looking properly at their consumers.

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The target market for the New Age beverage business is the 14-24 age group–that’s 25 million fashion-conscious North Americans. It is growing twice as fast as any other population segment, it spends US $90 billion annually and influences the expenditure of twice that amount. But van Stolk identified an additional market: the 14-24 year-old wannabes–the 10-13 year-olds who want to be 14, and the 25-28 year-olds trying to hang on to their 24 year-old identities. van Stolk’s thinking, therefore, expanded his market from 10-28. When you factor in that increased current and future disposable income potential, more opportunities present themselves.

These consumers are the trend-setters, not the trend followers. van Stolk saw large corporations spending millions on market research when they should have been out on the streets–not only watching what members of their market were currently doing, but trying to figure out what they were going to be doing in the future.

Looking for emerging trends, van Stolk scoured magazines like GQ, Details, Esquire–even House & Garden. He hung out on the streets of Vancouver (Yaletown) and New York (Soho). He saw the re-emergence of Day-Glo colours, three-button suits, Hush Puppies, lava lamps. This was 1995 and the old was newly new, the square newly hip. Hence the Jones brand.

What elements does it have that attracts these people? Bright, bright, jewel-like colours seen through the clear glass of slim, casually-elegant bottles. And a playful, uncomplicated name: Jones–retro-hip, Cold War conventional with a dash of heroin chic.

(These consumers also had to like the taste of Jones, of course.  Consequently, some of its flavours are much sweeter than other beverages. While Canadians choose sweet-ish beverages, Americans–especially in the 10-28 group–like their sugar.)

“The ingredients are the most expensive element and your product has to look good and deliver on taste and refreshment, otherwise you don’t have a brand,” says van Stolk. “With taste, you have to strike a delicate balance between science and guess-work. When we launched Jones in 1996, we had a quality issue; our flavour company supplied us with a product which was not up to par. My flavours didn’t maintain their shelf life over a long enough period–they tasted great off the line, awful 90 days later. But we fought our way through that and it was part of the learning curve.”

Jones now has a reliable, quality flavour supplier (in a secret US location), and five North American facilities producing three Slim Jones flavours, 3 Natural Jones flavours and 12 Jones Soda flavours (the New York Times rated Jones grape and cream soda as the best on the market). In Canada, it sells for up to $1.49; in the US, the average is $1.29 (although the bar at the Four Seasons in New York sells it for $5.00).

So there’s the Jones brand. Now you just set a marketing budget and bombard consumers with clever advertising, right?

Wrong. van Stolk has never undertaken paid advertising.

“We don’t play the Big-League game,” says van Stolk. “The Big League players give consumers what they think they want and ram it down their throats with advertising. When people are bombarded with messages, their instinct is to turn away. So we said, ‘Instead of marketing this product to people, how can we ground it with them? How can we let the brand grow naturally among the core audience, as opposed to force-feeding it to them?’

It’s the natural versus the artificial approach–it’s difficult, challenging and time-consuming, but it’s better than blowing oodles of money on telling people you’re something.

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“Jones is about discovery. It’s fun and exciting to discover something. We said, ‘Here are our customers. What can we do for them? And when we’ve done it for them, let’s make it available to them in places where they love to be and let them discover it.’

“When you go into a convenience store, you stay for 3.5 minutes and you have 690 beverage brands to choose from. Jones can’t be in that environment. We have to take the confusion out of the game and make the Jones choice automatic. So Jones goes where no soda has gone before– bowling halls, record stores, piercing parlours, shoe stores, used clothing stores, sex shops, tattoo parlours, beauty salons, raves, CD-listening bars–anywhere where no one else sells soda. People go into these places and there it is. They’ve discovered it.”

Discovery is helped along by the Jones Blitz Team, a group of very high-energy guys from California (because Canadians are too reserved). These are the Jones Street Fighters–full-time employees who drive around the streets of selected markets in a 34’ RV, painted orange with black flames and topped with a surf board. Dressed in neon orange Jones jumpsuits, they burst out of the vehicle, often on skateboards and carrying musical instruments, passing out CDs, bottles of Jones, bits of Jones Stuff. Depending on your viewpoint, they’re obnoxious or hilarious. Either way, Jones gets the desired attention.

Perhaps the greatest Jones innovation lies in how it communicates with its customers–its customers being Internet fiends with short spans of attention and no patience with Big Business.

“My consumers want to care about the companies they deal with, and they want to feel involved,” says van Stolk. “They’re not going to pay attention to something if they don’t care about it and are not involved. And we only had the label to work with.”

If you look at the back of a Jones bottle, you’ll read this: ‘Ya gotta make a living somehow; we chose the beverage world. Good old soda with a twist. No hidden meanings, no billion dollar ad campaigns. At Jones we want you to buy a lot of soda and recycle the bottles.’

Corny and patronizing, sure. But, to young adults, it presents van Stolk as the underdog. Customers want him to succeed. (van Stolk is also generous in donating to causes which matter to his customers.)

But how do you involve your customers? You make your product inter-active. For starters, by getting your customers to supply your product’s graphics.

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From the out-set, Jones asked customers to send in their own photos for use on the Jones labels. Photographs flooded in–in 1998, 22,000 photos were received. The photos–colour, sepia-tone, black and white–are scanned and reproduced in four-colour process. Jones produces 50,000 cases of soda a day; each of the 36 bottles in each case has a different label. Each label is numbered and carries the name of the photographer and the name of his or her home town. In the last two years, countless North American community newspapers have run feature articles on locals who have had their photos Jonesed.

van Stolk won’t say how much this extra effort costs, only that he spends about 30% more on labeling than does his competition. And it is a coordination nightmare. But it’s worth it–no amount of money could buy the kind of brand loyalty that this inter-activity inspires.

The labels themselves receive a lot of attention. One nut-bar lambasted Jones for running a photo of salt and pepper shakers, claiming that Jones was encouraging inter-racial commingling. A label bearing a photo of the ‘Walk’ traffic sign received complaints about encouraging violence (because it looks like the outline of a body.) Kids like to make adults mad so, for them, this kind of reaction is terrific. And, for kids and teens, Jones is not a beverage–it’s a lifestyle. Their parents now order custom-labeled cases of Jones for birthday parties and bar mitzvahs. Children lug bottles of Jones to school–not to drink it, but to trade the bottles, with the goal of having as many consecutively-numbered labels as possible (it would not be Jones-worthy to steam the labels off the bottles).

Jones was also one of the first beverage companies to have its own web site, a site which made the 1997 Top 10 lists of both Netscape and Yahoo. “Our goal is to have the best site in North America,” says van Stolk. “We constantly work to improve it. It’s what allows me to communicate with my customers and listen to what they have to say. I don’t care what they’re drinking. I want to know what music they’re listening to, what shoes they’re wearing, what they’re eating, what they’re thinking.”

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The Jones site (www.jonessoda.com), receives 1,000 hits and 400 visits daily. For every two people who visit the site, one leaves a name, address and comment. Site visitors can ask questions, look for labels, talk about a Jones experience or ask ‘Soda Slut’ for life advice. There’s a recipe page, a music page, a place to suggest new flavours or flavour names. Visitors can download free web rings and screen savers or order Jones caps, T-shirts, posters and stickers. In addition, van Stolk’s employees (the company has grown to 28) respond to 1,800 e-mail messages a week.

Jones Soda also has its own lexicon. To buy is ‘To Jones’. To drink is to be a ‘Joneser’. The official ‘AdrenoJones’ sports are rollerblading, surfing, wakeboarding, snowboarding, net-surfing and cross-dressing. Today, Jones is taste-tested by California high school students, and it is the exclusive soda in 45 Ontario high schools. The Jones vocabulary is so entrenched in North American schools that a Spokane principal, evidently forgetting that she was alive in the 60s but that her students were not, called van Stolk to complain that his revival of the ‘60s heroin-addict’s phrase for craving a Jones–‘I’m Jonesing’–encouraged drug use. (van Stolk asked her if her school sold Coke and she hung up on him.)

van Stolk enjoys poking fun at his competition. Although, when he declared that ‘Image Is Nothing, Cash & Sex Are Everything’, he did hear from lawyers representing Coca Cola (which uses a similar, but opposite-meaning, phrase). He didn’t fight back, he just stopped using the phrase. But that only turned the posters and T-shirts bearing the offending phrase into collectors’ items now eagerly sought by members of the dozens of Jones fan clubs.

It should be noted that van Stolk actually believes that image is everything. “Quality is obviously very important, but beverages are all about image. There are four areas which create image–music, fashion, sport and entertainment. If you understand how image is created, you can work within those four areas to keep your brand successful.”

van Stolk has contracted arrangements with the top guys in the snowboarding and skateboarding worlds (there will soon be a new line of labels featuring them) and he has forged an alliance with North America’s third-largest music company, BMG. You’ll find Jones all over BMG’s heavily-visited web site, and Jones was the only soda served at BMG’s Grammy Awards party at Barney’s New York last year.

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For older teens and 20-somethings, Jones is less a beverage than a fashion accessory. So, when Armani launched its younger line–Armani Exchange–for 1998, it took the images from its print campaign, put them on Jones labels and distributed 200,000 bottles around Manhattan. Jones has been involved in promotions with Tommy Hilfiger and Jean Paul Gaultier, and the window-dresser for Macy’s used Jones as the basis of an eight-window fashion display. Jones Soda is also a television regular, appearing on Donny & Marie, Friends, Mad About You, Ally McBeal, Spin City–even Law & Order.

It’s important to note, however, that van Stolk has never approached anyone regarding a promotion. “Entertainment is Corporate America. I can’t play with Corporate America, so I let them play with me. I’ll put Jones in a cool hair salon in LA, some producer will see it and call me. A music industry guy sees Jones in a used book store in New York, he thinks it’s cool and calls. You identify your image zones and make sure you’re there. You’ll get discovered.”

Obviously, although van Stolk looks and sounds like your stereotypical ski bum, the guy is sharp. He knows his industry inside out–where the pit-falls are, how to avoid them.

“In the North American beverage industry, 100 new brands are introduced each year; the failure rate is 99.9%. In 1994, Snapple Iced Tea was on top of the world; in 1995, 438 new iced tea brands were introduced in the US. The flood of me-toos backed up the distribution channels, backed up retail sales, confused consumers and diluted the market. In 1995, Snapple’s sales went from $750 million to $500 million, while its costs stayed the same. So I did what most companies don’t bother to do: I spent the money to copyright my brand and my products. Now, no one can copy me and I won’t get whacked.”

To date, van Stolk has spent $1.5 million on legal fees, all to protect the Jones trademark. No one else can put photographs on soft drink bottles. No one else can rotate their labels. No one can use the name ‘Jones’ or the Jones ‘J’. No one can use any part of the Jones lexicon. Patents have been obtained, or are pending, for a host of other Jones-related items.

1998 was the Jones breakthrough year–sales went from $2.7 million in 1997 to $7 million (which translates to 13 million bottles). Among the reasons for the increase is that van Stolk doggedly worked North America, market by market, increasing the number of distributors selling his product. In 1998, he went from 98 to 105. As of this writing, 125 distributors carry Jones. When Jones has 200 distributors, it will be considered a National Brand.

“In the beverage industry, this distribution increase is considered to be a huge growth curve because distributors don’t have to choose us–they’re inundated by product. But, last year, the image started to kick in and perform. It’s a combination of business planning, timing, hard work and luck but the real key is the constant inter-action with customers–communicating with them, listening to them, responding to what they say. That’s what drives sales.”

van Stolk knows that Jones is not going to be around forever. “Rule Number One is that you never name your company after your brand–look at New York Seltzer. Rule Number Two is that you never fall in love with your brand. A brand has a seven- to ten-year life cycle. When Jones was launched, the Big 5 in the New Age category were Sundance, New York Seltzer, Koala Springs, Clearly Canadian and Snapple. As a category becomes saturated, the lead brand falls. Today’s big seller will one day be forgotten.

“Where companies run into trouble is when they see a product’s sales sliding and start throwing marketing dollars at it. But that’s just forestalling the inevitable. When you see that a product’s time has passed, you have to let it go and be ready with the next one. So Rule Number Three is that you use the power of one brand to launch a new one.” (van Stolk is launching something new in May. It’s absolutely top-secret, but he says that its like has not been seen before.)

Why launch something new when you’re riding high? Because you have to hit the wave before it starts to crest–not once it’s crested. (Wherefore Fruitopia?) van Stolk is right not to care what his customers are drinking–when he says he wants to know what they’re wearing and thinking, it’s market research. If he can see where they’re going and predict what they’re going to want, he can have their product out there, waiting for them to realize that they want it.

Urban Juice & Soda is a publicly-traded company on the Vancouver Stock Exchange, about which van Stolk says: “It has its pros and cons. If I had to do it again, I wouldn’t–I’d go the venture capital route.” On the other hand, Urban Juice & Soda was the first VSE-listed company to make the cover of Inc. Magazine.

van Stolk has received an inordinate amount of press. From CBS News, CNN, CTV, the Wall Street Journal, the New York Times, the Los Angeles Times, the Houston Chronicle and magazines such as Warp, Entrepreneurial Edge, Entrepreneur, Brandweek, Periscope and People. Maclean’s Magazine named him one of the Top 100 Canadians To Watch, NBC’s News Today placed him on its list of ‘Who & What Will be Hot in 1998’. In May, he is the Keynote Speaker at The Beverage Forum, a prestigious, invitation-only conference hosted by Beverage World Magazine where, with his shaved head and in his neon orange jumpsuit, he will tell the CEOs of Coca Cola, Pepsi and Budweiser all about Life with the Jonesers– perhaps, at the same time, holding up one of his ‘Kick Your Coke Habit’ posters.

This kind of attention is obviously much more effective than straight advertising would be. Still, van Stolk does have plans to go the orthodox route–one day.

“We will not be good clients–we’re difficult, spontaneous. A PR or advertising agency would go crazy trying to get us to do things in the traditional way. Our whole strategy has been to make people aware of us in a positive light–but letting them discover us. Because if we did the traditional PR or advertising thing and told people about ourselves, they’d get skeptical and cynical and the game would change. But, as the brand matures, we’re going to need advertising. In two years, we’ll have the grounding process complete and will be ready for traditional marketing.

“Meanwhile, I know that Jones has been successful. I know it because I know that people love my soda–because they tell us they do and because we sell more every day than we did the day before. And we’ve managed to stick to the Jones Mission Statement, which is: Sell Soda, Make Money, Make a Difference, Have Fun.”

Blitz Magazine, March 1999

 

Not Worried, Being Happy: Happy Planet Foods Makes a Splash in the Beverage Business

hp6Blitz Magazine, November 2000

“Wouldn’t it be nice if we could produce and sell the world’s best juice while promoting sustainable farming and environmental responsibility?”

“Actually, we can.”

This, one imagines, is the conversation that took place in 1994, between Randal Ius and Gregor Robertson. The two shared a deep concern for the environment, a passion for food and a knack for sales. And Robertson owned an organic farm. Happy Planet Foods was born; Ius and Robertson started selling carrot juice.

‘Sounds a little out there, but first-year sales hit $400,000. Today, Happy Planet is the fastest-growing company in BC, with 50% annual growth and 1999 sales of $3.5 million. It produces 18 beverages, introduces new flavours each year and is known as the innovator in the super-premium juice and smoothie category. Its products are sold at 550 locations, including Starbucks, Safeway and Save-On Foods, plus just about any store serving the ‘alternative’ market in Vancouver, Victoria, Whistler, Calgary, Edmonton, Toronto, Seattle and San Francisco.

The organic food movement has grown steadily since the ‘60s, fueled by an ever-increasing horror of chemicals and a more health-conscious society. It used to be, though, that organic foods weren’t very appealing. And they commanded no respect. Happy Planet (HP) has changed that, at least in the beverage category.

Most of HP’s products fall under the category of New Age beverages knows as ‘functionals’ or ‘nutraceuticals’, a segment which is growing faster than any food category in North America, and which accounted for $350 million in sales in the US last year.

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Functionals have something useful and/or beneficial added to them—minerals, vitamins, herbs etc. Happy Planet has five such beverages: Extreme Green (passion fruit, green micro-nutrients), Abundant C (strawberry, guava, Vitamin C), Spirulina Soul Food (pineapple, coconut, spirulina), Thinkgo (raspberry, mango, ginkgo biloba) and Dot.calm (papaya, pear, St. John’s Wort).

It then has ‘Organics’, which are beverages certified to contain at least 95% organic ingredients, and which may or may not be functionals. In Happy Planet’s case, they are. There is Green One (mango, plum, green micro-nutrients), Essential Echinacea (guava, strawberry, Echinacea), Power Plant (banana, strawberry, soy protein). These are just general descriptions—if you look at the full ingredient list of Radical Response, it says Apple, Plum, Apricot, Guava, Banana, Grape Seed, BetaCarotine, Citrus Bioflavinoids, Milk Thistle, Chlorophyll, Zinc, Manganese and Selenium.

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Then there are the ‘Naturals’, which are strictly thirst-quenchers and include Lost Lagoon Mango, Sunset Beach Strawberry, Righteous Raspberry, Lemon Made and O Cranada. These are the lowest-priced Happy Planet products; organics are the highest-priced.

“Naturals are the entry-level products,” explains George Noroian, HP’s President & CEO. “But people want organic and they’re prepared to pay for it. And there has been an explosion of interest in functional beverages, so our more expensive products are our biggest sellers. People don’t mind paying more if they’re getting more. Not only do we have functional ingredients but, unlike SoBe or V-8, which have 10% juice and 90% water, we offer the actual fruit—we don’t add any water. Each 16 oz. bottle contains five whole fruits, so one bottle meets Health Canada’s recommended daily intake of fruit and vegetables. Our beverages are heartier and healthier than anything else available.”

What Happy Planet adds to its juice is closely regulated by the Canadian Food Inspection Agency and Health Canada, which set guidelines for what additives are allowable, and at what levels. (Americans are more lax—Odwalla adds far more vitamin C to its products than Health Canada would allow.) As we now know, too much of a good thing can be dangerous, so Happy Planet has to constantly consult with Health Canada, as well as herbalists and naturopaths, and it has a microbiologist on staff. For in-depth information, consumers can find product literature wherever HP juices are sold, and 10,000 people consult HP’s cheerfully uncomplicated web site (www.happyplanet.com) each month.

Happy Planet uses no concentrates, preservatives, additives or genetically-modified organisms. Two-thirds of ingredients come from Canadian farms and all ingredients come from sources known to use fair trade practices. The company claims to not use any paper from old-growth forests and says it gives 10% of its net profits to environmental and humanitarian causes.

But staying with the organic thing proved to be harder than at first thought. “All-organic is not possible due to availability and price,” says  Noroian. “Organic farming is much more expensive. Pesticides cost far less than natural controls and, where in conventional farming you pick a field twice, in organic you have to pick it four or five times. That means more labour and a substantial price differential—organic bananas cost twice as much as conventionally-grown bananas. If all of our products were 100% organic, they’d be out of the acceptable price range.

“So we take a pragmatic approach. As much as possible, we deal directly with farmers to guarantee quality at the most reasonable price. And as our purchasing power and the demand for organic ingredients increases, we transition ingredients to organic—now, all of our plums and mangoes are organic, as are most of our oranges. Between 40% and 60% of our ingredients are organically grown and as the economics work more in our favour, we’re able to make an even better product at an acceptable price.”

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Happy Planet’s production takes place in 13,000 square feet of space on Vancouver’s east side. Bottles are of high-density polyethylene (which is more environmentally-responsible than glass). All apples are BC-grown and processed in Vancouver; other fruits arrive in the form of purees from trusted sources in places like Fiji, Ecuador and Hawaii. As Noroian explains, the logistics can be nightmarish.

“When you’re dealing with organic fruit, the quality changes from year to year. So there’s a much bigger effort involved in sourcing ingredients, and we have to do a lot of taste-testing and keep buffer stocks on hand. We try to maintain consistency, but sometimes we have to change recipes to accommodate changes in ingredients. Consumers notice if there’s a change in quality. They want their juice a certain way and demand consistency. Our on-going challenge is to keep our ingredients within an acceptable specification, to minimize variation in the final product, and to reflect the reality of variability of organic ingredients.”

Distribution is also a challenge. Because these juices have to be kept cold.

“Our products are fast-pasteurized. The process kills the worst bacteria but it doesn’t totally degrade the enzymes and the goodness in the fruit,” says Noroian. “So the juice is still a live product. If it’s allowed to warm up it will begin to ferment after one day.”

The HP juice has a shelf life of 21 days, and much effort goes into making sure it’s kept cold. There are refrigerated Happy Trucks and, if need be, HP will provide retailers with refrigerators. Noroian says it’s worth the cost. “We sell a unique product and no one benefits if it’s not kept cold. Besides, the fridges, because of their size, get prominent store placement. They’re great billboards.”

The Starbucks approach to selling Happy Planet is even better—Starbucks keeps the bottles in ice-filled baskets beside the cash register. On the other hand, the freshness aspect has backfired. Some grocery stores stock it, not with beverages—where people looking for something to drink will gobut in the produce department, alongside the bags of salad.

Noroian notes that the freshness aspect has also retarded expansion somewhat.

“Our current focus is to expand our geographic reach, to where we’re well-established in the 15 main Canadian markets, and more established in California. But because our products have to be kept at a certain temperature and have to be rotated, we have to take a more hands-on approach to distribution. We have people in New York who want to carry our juice, but we aren’t there yet.

“Our growth it also closely tied to demographics. These juices are expensive to make, expensive to buy and are not considered staples. They appeal to a specific type of consumer. So we look carefully at the demographic and psychographic profiles of every location we’re in. It would be problematic to engage a chain like 7-11 when our product is only suitable for certain of its locations. Our experience with Safeway has been very positive because Safeway knows its customers, understands our product and knows where it will and will not sell.”

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Noroian says that HP’s placement in Starbucks two years ago was an important turning point.

“Starbucks is a credible company and its seal of approval gave us credibility. It was excellent from the marketing perspective as well—people saw us in Safeway, then in Starbucks. We already had the neo-hippy, alternative affiliation; Starbucks gave us the mainstream cross-over. Now, our customer base is broader—it’s people with more disposable income, people who are physically-active and health-conscious, families, and everyone who insists on exceptional quality.”

Unfortunately, squeezing out a marketing budget has always been a problem for Happy Planet. “Our products are expensive to make and deliver,” explains Noroian. “There’s not a lot of money left for traditional marketing. So there’s always been an emphasis on the guerrilla element, just to get the juice in people’s faces. We build awareness and maintain our retailer relationships by doing a lot of store sampling, couponing and specials. We run print ads in holistic lifestyle magazines like Shared Vision and trade magazines such as Grocer Today. Will we ever buy billboards? That would be a stretch. For us, the most potent way to market is to spread the word and get other people to spread the word.”

Happy Planet spends about $40,000 a year on advertising. But, believe it or not, the company has eliminated its marketing director position. Instead, it has taken the PR route.

“Our PR firm helps with strategizing and program implementation, developing stories about the company when we do product launches and reaching people who may want to do articles on the juice or health food industry,” explains Noroian. “PR is a relatively inexpensive way of getting exposure. There’s no guarantee that you’re going to get ink, and you have no control over it, but we think you still get more bang for your buck.”

When he joined the company two years ago, HP’s former marketing director, Steve Everitt, found that his first order of business was to revamp the company’s visuals. 

“We had our juices sitting at the Starbucks tills,” he recalls. “If you asked 100 people if they’d seen the juice, they’d say yes. If you asked them what the name of the juice was, few would be able to tell you. The globe logo wasn’t working. So we brought the name off the logo and created a new wordmark. And we simplified the image by choosing popular colour schemes and a clean font as our headline. Also, previously, the materials carried images of all kinds of fruit, and leaves. We changed that to feature individual pieces of fruit. And we saw a great increase in name recognition. The wordmark is much more powerful because of its simplicity, cleanliness and legibility.”

Everitt joined Happy Planet just as Starbucks started carrying the HP line. This began a year of significant growth, when HP juices increasingly turned up in locations more concerned with branding and style. There was no direct competition; sales were increasing weekly. Then, in 1999, SoBe and Snapple’s ‘natural’ brand extensions appeared.

“All of a sudden, we had direct competitors,” says Everitt. “None of them were 100% juice with herbal ingredients—they were vaguely similar, but thinner and cheaper. SoBe, for example, has herbal ingredients but only 10% pure juice. It won on price—it was SoBe’s 20 oz bottle for $2.19 vs. our 12-oz bottle at $2.99. Our sales went up, our retailer numbers rose, but our growth leveled out. Without lots of cash, it’s hard to combat that competition. We had to just stay the course.”

Where Odwalla would spend between 4%-7% on marketing, Happy Planet allocates 1.8%-2.2% of gross revenue. Everitt stretched this budget by gang-printing vast quantities of p.o.p. materials (posters, brochures, shelf talkers, stickers). Product launches were creative and inexpensive—when O Cranada was launched, 150 media members received buckets filled with ice, cranberries, juice and the relevant literature. Dot.calm was launched with images on CD-Rom, literature printed to fit the CD case and juice packed in ice-filled Tupperware containers. The kits looked expensive, but cost only $5 each.

Everitt also maximized exposure by managing an exhaustive contra program. “You always have to make more juice than you could sell; every week, I would end up with anywhere from 500 to 2,000 bottles of juice to work with. So I would give juice to Greenpeace, the David Suzuki Foundation, the Evergreen Foundation. They’d serve the juice at their events and meetings; we’d get space in their publications. In two years, I negotiated 400 contra arrangements with 200,000 bottles of juice given out in exchange for ad and advertorial space. Vancouver’s a prime market for this type of approach. And when you don’t have lots of cash, it’s a great way to get the product into people’s hands.”

While Happy Planet gives generously to food banks, Everitt also worked, or was involved in, 75 events a year—the Children’s Festival, the Folk Festival, the Carnival of Souls etc. “We used any relevant occasion to reach consumers. We’d see a slight increase in sales following these events but the impact of events is hard to measure. People would see us everywhere but whether or not that translated into increased sales is unknown.”

Everitt was able to conduct some focus groups. “The focus groups were very useful—and produced surprising results. It reinforced what we knew; that our primary market was the health-conscious female age 25-39. What was surprising was that we thought our secondary audience was the age group of 40-55. In fact, our second strongest following is males 17-25.”

That became particularly apparent when Happy Planet was confronted by a large adversary in the form of Coca Cola. For obvious reasons, Whistler is one of HP’s biggest markets. Every store carries it and HP sponsors many sporting events there. But last winter, Coca Cola had Happy Planet bounced off the mountain.

“Coca Cola takes a very wide view when considering its competition,” says Everitt. “Some of its executives were up from Atlanta during the snowboard championships, they’d put a lot of money into Intrawest, they saw our fridges on the hill—next day, we were gone. Then they tried to have us removed from the University of British Columbia campus. The students found out, put pressure on the administration and we prevailed.

“That’s one occasion where the philosophy of the company came into play. For the most part, people don’t care about a company. They care about the product. The only time the philosophy comes into play is when consumers are faced with competing products. If the taste and price are equal, they’ll look down the line for reasons to choose and they’ll choose the company that’s committed to positive things. Happy Planet has that in spades. It will hopefully be a long time before the corporate philosophy has to win out again. In the meantime, Happy Planet has to focus on the fact that it’s not selling a company or an idea, it’s selling juice.

“We’d run into trouble trying to sell the fact that HP juice is the best in Canada and part of a healthy lifestyle—while also telling people about the company message of sustainability and commitment to the earth. That company message clouds the marketing message—the consumer wants to know that the product tastes good and is good and is worth the price. We had three or four totally unique types of users. Some were attracted by the health aspect, some by the organic aspect, some by the meal replacement aspect, some by the corporate ethic. It was always difficult to hammer home all the real benefits to everyone.

“I felt that we had the largest growth potential in the mainstream grocery business, considering that the natural food business is 10% of the market in Canada. And if you want to go mainstream, you have to do consumer advertising. And Happy Planet is still a small company with a small marketing budget and distribution covering a large geographic area.”

For his part, Noroian is undaunted. “So far, we’ve been experimenting and developing the brand. Now we’ll focus on more robust growth, availability and new markets. In the more distant future, we’ll expand into products like baby food, nutritional bars, soup. For now, we’re committed to being the best at what we’re doing.”

 

The Olympic Logo Design Competition: A Definite No-No

vanoc1Blitz Magazine, June 2004

In mid-May, I switched on the TV news and found my art director, Matt Warburton, surrounded by reporters and looking seriously miffed. Why?  Warburton, Past-President of the Graphic Designers of Canada (GDC), was at a news conference hosted by the Vancouver 2010 Olympic Committee (VANOC) and was perturbed by its announcement that it was holding a competition for its logo design.

Warburton is unequivocal. “This is demeaning to the profession. A logo is part of an integrated marketing and branding strategy—not a piece of art that you can stick on everything. You can’t treat graphic design and logo creation as an art contest. This is like a cattle call. It’s not sound business practice and it’s asking designers to waste of thousands of hours and dollars on a lottery.”

The Olympic Emblem Design Competition is, according to its web site, “in the spirit of Olympic competition”, and open to “anyone with the talent and discipline to pursue their dreams.” Only Canadians need enter—students of graphic design, and those working in the design field. The judges have not yet been named; VANOC says that the winning logo will be chosen by a group of Canadian and international professionals. The prize is $25,000.00 plus two tickets to the 2010 opening ceremonies. Once the logo is chosen, an RFP will be issued.

VANOC’s Executive Director for Communications, Jane Burnes (perhaps the most hostile PR person I’ve ever spoken with), says it’s “unfortunate” that the GDC “hijacked the news conference” and defends VANOC’s contest, claiming that such competitions are Olympic tradition.

“Athens, Torino and Beijing all did the same thing, but they held international competitions. We’ve limited our competition to Canadians. This is a level playing field and the best and brightest idea will win. We see it as a great opportunity for the design industry in Canada. The competition is in keeping with IOC guidelines, and GDC guidelines. It’s too bad the GDC doesn’t agree.”

The GDC’s position is that its “members may compete for projects of a general, community or public interest if they are of a non-profit nature.”

VANOC is, in the eyes of the law, a not-for-profit organization. In fact, there is no more well-oiled money-making machine than the Olympic Games and, given that BC taxpayers are not inclined to foot the bill, the staff of the 2010 games will be working very hard to make sure that the BC games make a profit. And it had better be substantial or whatever political party is in power is 2011 is going to have a helluva headache. ‘Bottom line is, the GDC doesn’t view VANOC’s as a non-profit organization. The two sides have now agreed to disagree. The GDC is not supporting or endorsing VANOC’s competition, but it is not prohibiting its members from competing.

While Burnes claims that several designers are “embarrassed by the GDC’s behaviour”, a look at the letters on the GDC website indicates that it’s VANOC who should be embarrassed. Letters from across Canada, as well as from Seattle, San Diego, Chicago and Mexico City, condemn VANOC’s competition as “tacky”, “amateurish”, “insulting”, “counter to the fundamentals of business,” “inexcusable”, “unacceptable”, “unprofessional”, “potentially economically harmful”, “exploitative” and “unethical”. Respondents believe that the contest can “lead to copyright infringement, negative competitive practices” and “devalue the profession.” One writer is “Incredulous at the not-for-profit claim and at the idea that designers should consider it an honour to work for free.” Another wants to know if every service contract for the 2010 Olympics will be determined by the same type of competition, including legal and financial services, PR and advertising, architecture and construction. What about staffing?

As one designer put it: “The IOC believes that emblem competition open to the public is a good way to generate Olympic spirit, unity and participation. The general public should participate—maybe with t-shirt, mascot or pin design, but not in creating an essential piece of communication that will be licensed to the world. The best designers and marketing analysts should be consulted and paid for their time.”

The VANOC website says that it believes that Canadian designers are the best in the world. If that’s true, Warburton says that: “VANOC should be an intelligent client. It should issue an RFP. Do its research. Identify which firms are most able. Brief them thoroughly regarding the logo’s requirements and applications. Arrive at a short list. Then pay them for the concept work.”

When you take all of the above into consideration, this contest appears to be a colossal blunder. Because, while ad agencies may be able to devote some time to the logo competition without losing money, most of Canada’s best designers are not at agencies. They’re on their own or have their own firms. Because they’re the best, they’re busy—too busy to waste time and money on spec work.

We all know that this is true. I know it’s true from my own experience. Over the years, I’ve written countless ads, minutely detailed proposals—even marketing plans, on spec. Inexplicably, I once got roped into writing an award-winning annual report for $500. Now I know better. I don’t have to do anything on spec. And I won’t.

Neither, I suspect, will those who have what it takes to create the perfect logo for the Vancouver 2010 Olympics. For proof, look at the number of entries to the last three logo competitions. These were international competitions, open to every designer in the world. The Beijing competition received 1,985 entries, the Torino competition 1,400, the Athens competition 690. Now that’s embarrassing.