With the help of usability experts from the Rochester Institute of Technology, Wegmans convened meetings with a cross section of customers—some enthusiastic users of Wegmans.com, others who found it flawed, and still others who’d never used it at all. Together they crafted a series of changes and improvements to the website and the shopping tools it provided. When the revised version of the list maker was rolled out in February 2009, it boasted a raft of new applications. Now the site lets you add or subtract items from your list with a single click. Tap the “Jump Start Your List” button and you get a starter list to edit with the twenty-six items people buy most often. Use the “Wellness Key” to build a list tailored to your specific health needs—a low-salt or gluten-free diet, for example. Pick a tempting recipe from the site and all the necessary ingredients are added to your shopping list instantly—in the amounts required for the dish. Finally, name the Wegmans store you most often visit and your list will be printed in an order that matches the store’s layout, so you never have to retrace your steps in search of an item you missed.
These features and more were added to the website as a direct result of customer input. After using the new online shopping tool, one Wegmans customer, who happened to be an IT professional, wrote the company a note calling it perhaps “the most extraordinary software she’d ever used.”
Listening to customers isn’t always easy. But it can pay off in amazing ways.
Great demand creators experiment constantly. Creating a magnetic product isn’t a one-time challenge. Customers change: They develop new interests, needs, preferences, and problems. The business environment changes, too: New competitors arise, technologies evolve, and economic sectors rise and fall. Great demand creators know that the job of updating and improving their magnetic product begins the same day it goes on sale. Building a steep trajectory of improvement means customers will continue to be excited by the product, and demand will continue to grow.
Wegmans prides itself on leading the grocery business in innovation. Practically every major technological advance in food retailing has landed at Wegmans first. Spurred on by Robert Wegman, the chain started using bar codes on products in the early seventies, and by 1999 it was pioneering (with Nabisco) in the creation of a joint retailer-and-manufacturer program for planning, forecasting, and replenishing supplies. In 2002, Danny Wegman helped launch an industry-wide campaign to reduce costly product data inaccuracies in supplier-retailer systems that has led to, among other benefits, the first third-party certification program for data quality in the food business. And in 2007, Wegmans was among the first supermarkets to test the use of radio frequency identification (RFID) technology to get fresh meat to customers faster.
Wegmans is equally innovative beyond technology. In 2007, spurred by the boom in demand for natural food products, Wegmans launched its own Organic Research Farm not far from Danny Wegman’s home in Canandaigua, New York. Although Wegmans has ongoing relationships with more than five hundred local farmers, it has trouble getting reliable year-round supplies of organic produce for all its stores (just as Walmart, Whole Foods, and other large chains do). The goal of Wegmans’ research farm is to develop new techniques for growing organic produce in the chilly Northeast that other growers can learn from and emulate.
By 2010, the farm was supplying produce to two Wegmans stores and boasting about unexpected successes—for example, an early season crop of ripe grape and cherry tomatoes grown in an organic greenhouse. “We’re excited because one of our goals is to find ways to extend the growing season in the Northeast,” said team leader Jim Heberle. “We aimed for ripe tomatoes before Memorial Day and we made it!”
Wegmans team members at every level participate in the culture of experimentation. Frontline workers continually offer suggestions for new products, dishes, and services, many of which are tested and, if successful, retained. “They let me do whatever comes into my head, which is kind of scary sometimes,” jokes Bill Garner, a part-timer in the meat department of the Pittsford, New York, store. One day some twenty years ago, Maria Benjamin, who worked in the bakery at the same store, told Danny Wegman about the amazing recipe for “chocolate meatball cookies” her Italian ancestors had left her. “Let’s sell them here,” he urged. They’re a customer favorite to this day.
The open spirit of experimentation at Wegmans ensures that when anyone in the food industry devises an innovation that could make a grocery store even more magnetic, Wegmans will probably be among the first to implement it.
Great demand creators protect their uniqueness. Having developed, through decades of trial and error, a unique food-retailing business model that is a powerfully magnetic creator of demand, Wegmans has also succeeded in meeting one of the most difficult of all business challenges: They’ve refrained from messing it up.
And the truth is that messing it up would be so easy to do.
One of the most surefire ways of dissipating the Wegmans magic would be to expand too quickly. Showing extraordinary restraint, the company has not done this. (The fact that Wegmans is privately held and therefore not subject to the same profit-growth pressures as many publicly traded companies is a helpful factor—but as we’ll see, some publicly held companies have resisted the siren song of overexpansion as well.) Despite the clamor from customers around the country who have heard from friends and relatives about the legendary charms of Wegmans, the company opens new stores only at the rate of about two per year—a comparatively glacial pace. They believe it’s more important to do it right than to do it fast.
Accordingly, when a new Wegmans is in development, months of research, planning, recruiting, and training are conducted. Managers with decades of experience at other Wegmans stores are recruited to help get the new location off to the right start—a baker from Pennsylvania, a fish expert from Maryland, a meat butcher from New Jersey. Dozens of other Wegmans staffers fly in for temporary assignments. Six weeks before the store opens, new hires attend a daylong “Living Who We Are” orientation program about Wegmans values—and at the end of the day they take home an edited DVD of the day’s events, complete with music, to share with their families.
By opening day, you’d think the brand-new Wegmans you are visiting has been in operation for years—that’s how smoothly it runs. It’s a hugely important achievement, since the opening of a new Wegmans is a giant community event that attracts intense scrutiny and often draws more visitors in a single day than the average supermarket attracts in a week.
THE WEGMANS STORY makes it clear that creating a magnetic product, and then keeping it magnetic over years and decades, is no simple matter. Which leads to what may be the biggest question of all, at least from the perspective of anyone who hopes to become a demand creator: What’s the payoff? Is it possible to lavish resources on employees, invest in enormous stores and vast amounts of inventory, and provide unheard-of levels of customer service … and still make a decent profit in a notoriously narrow-margined industry like grocery retailing?
If you do it the way Wegmans does, the answer is yes. Its operating margins are about double what the largest chains earn, larger even than those of renowned organic merchant Whole Foods. And weekly sales per square foot run close to $14, well above the industry average of $9.39.
The explanation for Wegmans’ economic success is fundamentally simple. It goes back to the theme of our chapter—the power of the magnetic product—as vividly illustrated by these research findings from a Gallup organization study of the supermarket business:
In the case of a leading supermarket chain, proof of the importance of an emotional connection can be found in both the frequency of customers’ visits and the amount of money they spent during those visits. Shoppers who were less than “extremely satisfied”—those who rated their satisfaction as 1, 2, 3, or 4 on a 5-point scale—visited this chain about 4.3 times per month, spending an average of $166 during that month. Those who were “extremely satisfied” but did not also have a strong emotional connection to the
chain (that is, they were not “fully engaged”) actually went to the store less often (4.1 times per month) and spent less ($144). In this case, extreme customer satisfaction represented no added value to the store.
However, when Gallup looked at customers who were extremely satisfied and emotionally connected to the store—customers Gallup calls “fully engaged”—a very different customer relationship emerged [emphasis added]. These customers visited the store 5.4 times and spent $210 a month.
Apparently, not all “extremely satisfied” customers are the same. Those with strong emotional connections visited the grocery chain 32% more often and spent 46% more money than those without emotional bonds. Satisfaction without engagement? Worthless. Satisfaction with engagement? Priceless.
Gallup attributes the difference between mere “satisfaction” with a supermarket’s offerings and “engagement” with them to the customer’s “emotional connection” to the store. And as we’ve seen, emotional appeal is the key ingredient that great demand creators integrate into their functionally excellent products to produce magnetic appeal. When customers are engaged, they become advocates and sources of new ideas for great products and services. The amount of money the company must invest in advertising and marketing goes down; the revenues available to serve customers even better go up; innovative improvements based on customer suggestions help Wegmans become even better, and the excited conversation about the company attracts even greater streams of demand. The power of this positive spiral is potentially limitless.
It all begins with a magnetic product. That 46 percent edge Gallup discovered in sales enjoyed by “emotionally engaging” stores like Wegmans is the Magnetism Gap. It represents the huge stream of extra demand that results when a product is more than just good—even very good. It’s magnetic.
*In this context, the word product refers to any good offered to customers, including intangible goods often referred to as “services.” For the sake of conciseness, and to avoid the frequent repetition of the phrase “product or service,” we’ll generally call both kinds of goods simply “products.”
†Zipcar’s current sign-up fees, annual membership fees, and hourly rates vary over time and by location.
2.
Hassle Map
(HA-sul map) noun 1. a diagram of the characteristics of existing products, services, and systems that cause people to waste time, energy, money 2. (from a customer’s perspective) a litany of the headaches, disappointments, and frustrations one experiences 3. (from a demand creator’s perspective) an array of tantalizing opportunities
THE LONG, ROCKY ROAD TO A
ONE-CLICK WORLD
When plans for an unprecedented New York–Paris auto race were announced in August 1907 by the publishers of the cities’ leading newspapers, the New York Times and Le Matin, even car enthusiasts were astonished by its audacity. The sponsors projected a twenty-two-thousand-mile journey nearly spanning the globe, with legs including the great American desert, the wilds of Alaska, and the Siberian tundra (with a Pacific crossing by steamer). As the race kicked off in Times Square on February 12, 1908, only five driving teams—one from Italy, one from Germany, two from France, and one from the United States—were brave or mad enough to dare the venture.
Disasters beset all five. The American car, the Thomas Flyer, piloted by a debonair celebrity driver named Montague Roberts and a resourceful young mechanic named George Schuster, got stuck in snowdrifts and could advance only as fast as shovel-wielding volunteers could clear its path. The huge Protos, steered by Lieutenant Hans Koeppen of the German army and resembling a modern pickup truck more than a race car, had to be extracted from a swamp by a team of twelve horses. And this all happened while the competitors were still in New York state.
Weeks later, after Roberts, the driver with matinee idol good looks, had abandoned the crazy quest in Nebraska, young Schuster found himself pleading with officials of Union Pacific to classify the Flyer as a train so it could rattle over the railroad tracks rather than navigate the trackless wastes of the West. When crossbars on a Siberian horse-cart bridge snapped beneath the Flyer’s weight, Schuster avoided a thirty-foot plunge into foaming rapids only by adroitly steering the car onto the creaking wooden support rails at the edge of the bridge. Eventually, Schuster won the race, arriving in Paris after 169 grueling days—one of just three competitors to complete the trek.
Such was the state of car travel in 1908 … fully thirty years after German engineer Karl Benz invented his four-stroke gasoline engine and, with it, the modern automobile. For decades after the invention of the automobile, car travel was strictly for adventurers, even in relatively well-developed North America. Drivers donned special gear—hats, goggles, gloves, voluminous dusters—to shield them from the fumes, sparks, and dirt churned up on rutted country lanes. A tool kit was standard equipment in every vehicle, and motorists were advised to be expert in basic repairs (including, when necessary, the manufacture of spare parts). The earliest guides for tourism by car assumed—quite correctly—that motorists would have to find their way through a formless chaos of unmarked roads, half-cleared trails, and cattle crossings.
The automobile itself was just one piece of the puzzle that needed to be completed before the United States could become the hypermobile country it is today. Standardized highway signage, modern road design guidelines, the Interstate Highway System, and vast networks of supporting businesses from gas stations and repair shops to roadside eateries, motels, and parking garages all had to be conceived and built before the hassles of auto travel were truly tamed. Only then could the age-old desire for mobility be expressed in demand for cars—cars by the hundreds of millions.
Today, in the twenty-first century, the infrastructure that supports car travel is still being refined and expanded. Only in the past decade have E-ZPass and other automated networks reduced the hassles associated with driving on toll roads, bridges, and tunnels. The car-sharing revolution launched by Zipcar is finally addressing the hassles faced by the urban driver. A generation from now, automated guidance systems that maintain buffer zones between cars and dangerous obstacles may make deaths by collision almost unheard-of … and in time, drivers may marvel, and shudder, at the callous inhumanity of a civilization that tolerated forty thousand annual deaths in car crashes. We’ve lived in an internal-combustion world for more than a century, yet even today some of the lingering hassles of that world continue to baffle our best efforts to solve them.
So perhaps it shouldn’t be surprising to observe that today—six decades after the onset of the electronics revolution (with William Shockley’s invention of the transistor) and almost three decades after the advent of the PC—the world of digital communication and information is still hassle-ridden, plagued with mutually incompatible systems, buggy programs, unresponsive networks, and products that don’t quite work as intended. Like the internal-combustion world, the digital world will likely take a while to thoroughly de-hassle.
What’s more surprising—indeed, almost shocking—is the fact that very few people are thinking about, let alone building, the new products, services, and systems needed to make the world’s digital resources available to everybody in easy, hassle-free form. Which makes the handful of exceptions rather amazing in their own way.
The exceptions are people who focus not just on the brilliant potential of new technology but on the hassles that prevent us from taking advantage of it—the high-tech equivalent of unmarked roads, undrained swamps, and axle-snapping potholes. In any arena, hassles like these are often the first clues—the earliest flashing signals—of unrealized potential demand. That’s why, in case after case, the creation of a magnetic product has begun with someone drawing a map of the hassles and points of friction in customers’ lives—and then figuring out a way to reduce or eliminate them.
You remember the story we told, in the introduction, of one man’s frustration with video-store late fees, and his determination to do something about them. Many of us e
xperienced similar annoyances—but only Reed Hastings recognized those hassles as an opportunity to create the demand generator known as Netflix.
Or consider another observer’s comment about one of the ubiquitous hassle generators of the early 2000s: “We all had cell phones. We just hated them, they were so awful to use. The software was terrible. The hardware wasn’t very good. We talked to our friends, and they all hated their cell phones too. Everybody seemed to hate their phones.” You know what he means: the awkward message interfaces, inadequate Web browsing, hard-to-read screens, time-consuming procedures, and unfriendly applications that plagued (and still plague) countless cell phone users. Only Steve Jobs (who of course is the “observer” we just quoted) understood that those hassles were crying out to be solved by a new kind of device—the iPhone.
Jobs and his team at Apple set to work at fixing those hassles. They invented “visual voice mail,” which allows users to scan their voice mail messages like e-mail and pick the items they want to listen to, in the order they prefer. They made reading text messages and scanning the Internet more pleasurable by making the iPhone capable of multitasking, building in the Safari browser, and enabling the iPhone to rotate horizontally, creating an easy-to-read widescreen effect. And they applied Apple’s trademark talent for simplifying and clarifying user interfaces, reducing the number of key clicks needed to download a song (for example) to just five—as compared to the eighteen to thirty-nine clicks required on other devices.
Demand_Creating What People Love Before They Know They Want It Page 6
