Have you ever ordered a Vente Pumpkin Latte with eight shots of espresso, seven pumps of pumpkin syrup, a pump of maple pecan sauce, almond drink warm, light caramel drizzle, light cinnamon dollop topping….wait there’s still more… light foam, salt topping, autumn sugar topping, extra vanilla powder, extra pumpkin topping and light whip? Have you ever ordered this? What type of selfish bastard does this to a poor barista?
(Music) Welcome to Swimming in the Flood; a podcast where we develop resilient leaders and navigate the difficult currents in business. My name is Trent Theroux.
This was an actual Starbucks order made by a man in New York City. Do you think he could tell the difference between seven pumps of pumpkin syrup or six? The passive-aggressive in me would love to have been the barista, “psst…let’s piss this guy off. Only give him five pumps of pumpkin. Let’s see if he goes postal.” I struggle to believe that our palates are so refined that one derives pleasure from the precise measurements he requested. I think he likes showing off. I think he derives pleasure from holding up the line so the others can see him order the “light cinnamon dollop topping.”
It serves Starbucks right to have lines backed up if they allow these types of orders. In fact, Starbucks strategy elicits this exact type of customer experience. They want customers to try to create new products and combinations to help them foster growth of same store sales. It’s a simple strategy poured out one overpriced, over-ordered cup at a time.
Resilient leaders face many challenges among which is how to retain current customers and secondly how to attract new customers.
One of the most common strategies for growth is to create new products. I saw a billboard on my drive to work this morning advertising Orange & Vanilla Coke. Someone described the taste to me as having an orange creamsicle without the brain freeze. Here’s a rundown of the new products and some marketing gimmicks Coca-Cola has made in the past thirty plus years. 1982 introduce Diet Coke, 1983 introduce caffeine free, 1985 introduce new coke (we could have a whole podcast about that), 1986 introduce cherry coke. Then a long break. 2001 introduce coke with lemon, 2002 introduce vanilla coke (revamped and reintroduced in 2007), 2005 introduce coke zero, 2012 comes coke labels with names (never once did I see a Trent) , 2013 coke labels with song lyrics, 2014 coke-cola life with green can labels, 2018 4 new flavors of diet coke with minimalist styled silver cans. Now, the creamsicles. That is a tremendous amount of effort to maintain relevance in a declining market.
The resilient leaders of Coke face two concerns here. First, carbonated beverages are dying. How do we keep cash cows on life support? How often can we hit them with the paddles? Clear. Second, how do we hone in on what the markets want and provide more of it?
There are companies that take the exact opposite approach of Coke. Companies that will analyze their product offering to determine which Stock Keeping Units (SKUs) are under-performing and endeavor to remove those. Clorox comes to mind. Ten years ago they performed an analysis and determined that 30% of their SKUs were under-performing sales volume and profit targets, 30%. Clorox undertook a process to establish a glide path for the under-performing products. Cross functional team met monthly to evaluate each of these products. Each was given a color code. Green represented that they were exceeding targets, yellow represented that they were within 5% of target and red represented that the managers shouldn’t buy milk with a long expiration date. After three years of product rationalization, more than 90% of Clorox’s SKUs met or exceeded volume and profit targets. Retail sales per SKUs grew by more than 25%, and net customer sales per SKU nearly doubled. The more they focused, the more they were able to better allocate their corporate resources.
I’m going to go off on a tangent here about Clorox. A few months after my daughter was born I was given an assignment. Looking back it may have been the first assignment I was given since conception so I didn’t want to make a mistake. My assignment was to go grocery shopping. Jennifer wasn’t feeling well and the new family needed supplies. She gave me a grocery list and directions to the supermarket, which I was pretty thankful for the directions. I took my list and along with the cart started to make my way through the supermarket. Shopping for a family was very different from shopping for myself. Only a year earlier as a bachelor, I would have walked into a supermarket moseyed to the frozen food aisle, picked out a pizza on sale, paid and left. Maybe take some toilet paper on the way. Nothing too complicated. The next day, I would figure out what to eat then…and if I needed more toilet paper. But now, I’m trying to figure out diapers and produce and family size servings of chicken stuffing. This was exhausting. But nothing compared to the second to last aisle. I have been going up and down each aisle picking out everything on the list, cross referencing against the coupons I was given or matching brand names. The second to last aisle would change all that and make me wish to be stuck in the center of a horror movie, or a convention of ex-girlfriends arguing about my inadequacies. The last item on my list was laundry detergent.
I turned into the second to last aisle which had a large sign reading laundry detergent. I was looking for laundry detergent. All was good…until…I looked at the laundry detergents (plural). My mother always told me that I thought my clothes were cleaned by the laundry fairy. I’m pretty sure she was being sarcastic, but I was a little slow on the uptake as a teenager. Now I was faced with a wall of laundry detergents from which to select. Quick show of hands. How many different types of laundry detergents would you expect to find at your local supermarket? Hmmm? I’ll give you how many I counted in a minute. Their marketing frustrated me. Did I need color safe? Did I want all purpose? Food stains? How about cold temperatures? Grass stains? Combined with fabric softener? Should it have a teddy bear on the label? Maybe a NASCAR Chevy Monte Carlo? Liquid? Powder? Family size? Economy package? The choices seemed endless. My mind couldn’t take the overload.
Maybe it wasn’t just the laundry detergent…it could have been the new baby…or the new baby that doesn’t sleep…or the new house we just moved into…or the new furniture to furnish the new house…or the new marriage…or maybe I just wasn’t qualified to decide which laundry detergent would satisfy my family’s needs.
The answer to my previous question is twenty-seven. There were twenty seven different varieties of laundry detergent to choose from. I counted them all. Then, I read the labels on the back of each to determine the differences. I read them and took mental notes and here’s what I learned. Over 95% of the ingredients were exactly the same. 95% of these bottles contained the exact same materials. Fraternal twins don’t have that high of a genetic match! It was the same crap in different bottles. I spent over forty-five minutes in this section of the aisle to determine that it didn’t matter what I bought. They all would work the exact same. If I could only convince Jennifer of that. Hmmm…Still I didn’t want to bring home an incorrect brand.
I am now going to give you my unscientific, non-peer reviewed theory on minimizing SKUs. Are you ready? Got your pencils out? Here it is. Cheese and Ham. You heard it right. Cheese and Ham. It was endorsed by at least one 1930s punch drunk pugilistic wiseguy. Here is how it works. In the early 1990s, my office was in an old industrial revolution age mill alongside a raging river. The original guard shack was converted into a lunchtime commissary managed by Frankie No-Last Name, just Frankie. He was a lower weight class boxer back in the 1930s before someone threw a punch to the side of his head and – hey, you want a pickle with dat. Every day he would have three sandwiches available for you to choose from, Ham and Cheese (the everyday staple). The second sandwich varied by day Tuesdays was turkey, Friday was tuna. The third sandwich was cheese and ham. He would call these out to you. “Hey Frankie, whatta you got?” “We gots ham and cheese, we gots tuna and we gots cheese and ham.” It cracked us up every day. Cheese and ham. He actually wrote out in order ham and cheese, tuna, cheese and ham. The cheese properly spelled with a Z. Frankie thought that too much variety in life wasn’t a “good ting.” Limit their choices, but give them good food and they will be satisfied.
There was a great joke from the old sitcom, All in the Family. Meathead asked, “If everything today is new and improved, what was it before old and lousy?” That joke was made nearly 50 years ago and is still pertinent today. Everything doesn’t need to be new and improved to be of value. Sometimes resilient leaders need to accept that the products you brought to market are strong and don’t need to be tricked out like a car in Pimp My Ride.
Hey Frankie, why don’t you give me the tuna along with a coke and no pumps of pumpkin spice syrup? “And yeah, I want a pickle with dat?”
Folks, thank you for listening to Swimming in the Flood. Resilient leaders face challenging choices and it’s tough navigating life’s currents but with one tack or another we can get there together. If you like this podcast check out some of our previous ones. You can find more podcasts and videos on my website at www.trenttheroux.com. If you enjoyed today’s show, please tell a friend, leave a comment…subscribe. I would be happy to discuss speaking at your next conference or event. Please write to me at email@example.com. I look forward to getting together next week. See ya.