Steven's Thoughts

Continental ties Carbon Offset to online booking

I just booked a ticket for a friend of mine who is visiting me from Japan.  Continental has added a nice feature to their booking site that lets you offset your carbon from the flight:

"Leave the World a Better Place™ - Carbon Offsetting Option
	Continental has partnered with Sustainable Travel International (STI), a non-profit organization that supports global climate protection and environmental conservation. STI offers customers the option to make a contribution to offset their carbon footprints for travel on Continental. All contributions are paid directly to STI. Continental does not receive any portion of any contribution."

This program would even be better if they donated the offset as their contribution to the environment.

Consumers want to be educated

I am a new fan of the magazine called "Good"(see previous blog). I've been reading some great articles.

• Metal is making a comeback in Egypt after a crackdown on "Satanic music."


• The Ashland Media Exchange and the Espresso Book Machine seek to put books back in people's hands


• Michael A. M. Lerner talks with the man who is putting the “science” back in political science.                           

While I was reading I came across what looked like an article which listed several facts about the dangers of pesticides.

• "six times greater the incidence of children born with autism to mothers living within 500 meters of California fields sprayed with pesticides than the rate of autism births nationwide"

• "10,400 Number of people who die in the U.S. each year from cancer related to pesticide exposure."

• "250 Number of people in the U.S. killed each year by assault rifles"

• "245,000 Number of fish killed in 1995 when a heavy rainstorm caused runoff from Alabama cotton fields into a nearby creek"

• "4,000,000 Number of people in the U.S. who routinely drink water contaminated with carcinogenic herbicides"

• "90 Percentage of municipal water treatment facilities lacking equipment to remove these chemicals from the drinking water"

• "5 Number of the nine most common pesticides used on cotton that are classified as “known carcinogens” by the EPA"

• "75 Estimated percentage of pesticides sprayed from crop dusters that blow away rather than reach the ground"
  

The article was sponsored by what I thought was a not-for-profit organization called Loomstate. I was intrigued and went right to my mac to enter www.loomstate.org. Lo and behold Loomstate is actually a organic jeans company, not an environmental not-for-profit.

What a great marketing campaign! If they would have created a typical jeans ad featuring a sexy model showing off a nice butt,  I probably would have flipped right to the next page. Well, maybe I would have looked for a little bit, but I would have quickly forgotten the brand and I definitely wouldn't have gone to their website. Rather than using sex to sell their jeans, Loomstate chooses to educate their consumers about the environment and in turn piques some interest in their product that goes beyond the surface.

Asset managers tend to show the equivalent of what are sexy models in their ads, by touting 1, 3, 5 year results. Why doesn't the industry educate advisers who are interested in investments and provide insights to portfolio mangers? Asset Mangers could present statistics or analysis, that reveals something new to advisers, which would ultimately drive traffic to their site.

I hope the financial industry catches on and the next time I open Financial Planning Magazine I will get inspired by the information presented to me. And who knows perhaps I'll  gain a new perspective that will compel me to hop on the computer and find out more.

Great business idea - give all subscription $ to charity

I was on my way to Tokyo when I stopped at one of the newsstands in the airport.  Because I was getting ready for a 14 hour flight I bought a bunch of magazines. One of them was this magazine I had never seen before called "Good".

On the plane I got completely sucked into the content.  I barely skipped any of the articles, which is very uncommon for me. But this what makes this magazine a great business ideas is not only the excellent targeted content, but also their subscription model.

First, this magazine is targeted as they call it at people who give a damm:

"We see a growing number of people tied together not by age, career, background, or circumstance, but by a shared interest. This revolves around a passion for potential mixed with fierce pragmatism and creative engagement. We sum all this up as the sensibility of giving a damn. But to shorten it, let's call it GOOD. We're here to push this movement and cover its realization."

Second, the subscription money goes to a charity that the subscriber choses. This is why they say they do this:

"We're doing this because

1) it's smart business and 2) we believe in this.

Let the secret be known—most magazines do not make money on subscriptions or newsstand sales. Traditionally, the best way to get a bunch of new subscribers is to send millions of pieces of unsolicited mail—junk mail—to people who might have some interest. We don't like junk mail, and we don't like the thought of spending millions of dollars on it. So we came up with the idea of giving away all subscription fees and allowing subscribers to choose which organization they would like to support.

This whole thing is an experiment. If it works, we'll actually spend less than half of what it traditionally costs to acquire subscribers. The success of this campaign will allow us to:

a) meet a self-selecting group of quality subscribers who find us through word of mouth, internet links, media coverage, our partner organizations, or the other crazy schemes we like to come up with; b) raise significant money for organizations that will do something important with it; and c) save resources and prove that you can do well by doing good.

Our goal for our launch year is to create 6 amazing issues of GOOD, sign up 50,000 subscribers and donate $1 million to their favorite organizations.

If you like what we're doing, please help us make it happen. Choose GOOD. Thank you".

The magazine didn't bridge the majority of my flight, but was a great read and got me to subscribe to it.

Fund Managers don't listen to investors

Most fund firms develop their products based on internal preferences, rather then investor and or advisor research.

A recent study by the Civil Society Institute showed that seven out of 10 U.S. mutual fund investors now want their mutual funds to support global warming shareholder resolutions, but not one of the nation’s largest mutual funds voted in favor of any climate change proxy measures during 2005. 

Most of the mutual funds are distributed through financial intermediaries so the question arises who should represent the shareholders/investors interest? In my opinion it should be both. But in the long run this will hurt the mutual fund companies more then the intermediaries. They will have to start creating products that investors want and that differentiate them form the pack.   

Differentiate or make $22 mil

G Richard Wagoner Jr, CEO of GM, made $22 mil over the last 5 years. How can a firm and a CEO be allowed to lose $8.6 billion, or $15.13 a share? The car industry should be an important warning sign for the Asset Management industry. Most US car makers don't offer cars with differentiating features that people want to buy. At the same time, they have a labor force that is deemed too expensive to produce the cars cost-effectively.

In our industry, most Asset Managers also have trouble developing differentiated products and firms are not looking at the profitability of their distribution relationships. 

Why can the Mini and the Hummer sell at the suggested retail price and their customers will put themselves on a waiting list to get the car? Because they are different. The Mini is the smallest and the Hummer is the biggest car. They don't try to be a car for everyone. Asset Managers need to take the same approach. Develop products and a brand that people care about. In order to do that firms can't go the safe route and try to appeal to everyone. Advisers need to tell a story to their clients. Asset mangers need to provide that story to them.

On the profitability side firms need to evaluate their distribution relationships and the cost structure to support that. Firms need to look at net new revenue added and the profitability rate, which need to be considered both for existing assets as well for assets that will be gathered in the future. Only by going through this exercise can firms ensure focus on the most profitable relationships.

Brilliant Billboard by the Economist

WalMart Steps up its Environmental Mission

WalMart has been getting a lot of negative press in regards to their labor practices. Now they are stepping it up on the environment front.

In October of 2005, CEO Lee Scott announced a host of initiatives that would warm the heart of any environmentalist.

Their environmental goals are:

1. To be supplied 100 percent by renewable energy.
2. To create zero waste.
3. To sell products that sustain our resources and environment.

WalMart pledges to:

• Increase their trucks fuel mileage by 25 percent over the next 3 years and double it within ten years.
• Eliminate 30 percent of the energy used by the stores.
• Invest $500 million annually in technologies and innovation to:
  • Reducing greenhouse gases at our existing store, club and DC base around the world by 20 percent over the next 7 years.
  • Designing and opening a viable prototype that is 25-30 percent more efficient and will produce up to 30 percent fewer greenhouse gas emissions within the next 4 years.
• Reducing solid waste from U.S. stores and clubs by 25 percent in the next 3
  years.
• Working with suppliers to create less packaging overall, increase product
  packaging recycling and increase use of post-consumer material.
• Replacing PVC packaging for their private brands with alternatives that are more
  sustainable and recyclable within the next 2 years.
• Sell some of their house brand products using organic cotton and vegetables (albeit on a limited basis).

The release of these actions are tied to the recent criticism. But if they are able to follow through on these issues it will force many firms to follow suit.

How to Differentiate

I was recently speaking with a client about brand differentiation. Their company, like most asset management firms, is struggling to differentiate itself. Whole Foods has been able to stand out in the grocery business and has even been able to charge a premium for their food.

How have they been able to do this?

They established a niche by selling chicken without hormones, fresher produce and healthy prepared meals. They elegantly paired the products they sell with a strong social mission:

"We believe companies, like individuals, must assume their share of responsibility as tenants of Planet Earth. On a global basis we actively support organic farming — the best method for promoting sustainable agriculture and protecting the environment and the farm workers. On a local basis, we are actively involved in our communities by supporting food banks, sponsoring neighborhood events, compensating our team members for community service work, and contributing at least five percent of total net profits to not-for-profit organizations".

In line with their mission, they recently announced  that they will intorduce solar power lighting systems at their Berkeley store.   This initiative will:

• Produce and save more than one million kilowatt hours over 25 years.
• Results in more than 1,060 tons of CO2 emissions avoided, the equivalent of removing 285 cars from the roadways.

It is possible to differentiate as a commodity player. The importance is it to search for who you are and then live your mission. Whole Foods is a great example of this.

   

Great Customer Service

Lee and I were in Kansas City yesterday and had to stop by for some ribs at Gates and Sons Bar-B-Q. Even though the ribs tasted great my stomach was not in agreement with it.

Half an hour later, at the American Airlines lounge,  I asked for a Pepto Bismol to help me releave my suffering. They didn't have one, so the only choice was to go back out to the newsstand and come back through security. The extremely nice lady at the desk offered to get it for me and a few minutes later she came with a glass of water and the Pepto Bismol.

This incident has been one of the most amazing customer service experiences. She did not have to do it, but it made me feel like a valued customers of American Airlines and gives me another reason to fly American.

Can Cool Advertising Carry a Brand?

Can batteries be cool? Panasonic Consumer Electronics is trying to boost their youth image by marketing their new high-powered battery Oxyride battery to teens with their online campaign www.oxyrideme.com, college campus tour and late night TV Spots.

Instead of investing in new, portable CE products they are promoting these batteries and have given them a personality -- the batteries are allegedly powered by mischievous characters called the Oxymites. These Oxymites have been promoted on MySpace www.myspace.com/oxyride (they have 3000+ friends to date) and on Yahoo! IMVironments. The whole idea is that youth need a battery that can keep up with their late night lifestyle. All of their TV spots run after midnight and they are sponsoring an after hours blog -- www.afterhourscity.com.

Although the marketing strategy is quite creative -- spearheaded by marketing agency Renegade Marketing Group -- Panasonic should invest in new products that target youth rather than relying on batteries. Most high-drain products use rechargeable batteries, very few digital cameras and MP3 players even use AA and AAA.

However, Panasonic is banking that their cool advertising will have a halo effect and teens will see their advertising and think all Panasonic products must be cool. It's working for their battery, their recent online branding study with Dynamic Logic shows online ad awareness and brand favorability for the Oxyride brand are up. But will it work for their other products, that remains to be seen.