Tchibo – Impulse Buying (and summer cheating)

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This blog is cheating.  But then it is summer so a bit of laziness is understood.  Actually some folks asked me about some cycling blogs I made on a site called Toytown when I was living Munich Germany circa 2005-2006.  Before getting to the cycling blogs, I came across this gem on a European/German institution: Tchibo.

For those who have never been to Europe or never noticed the Tchibo stores, give this blog a pass.  For those who know Tchibo, read on for some information on them.  Be sure to take a read of comments from the original thread, posted about 8 years ago.

Original thread: http://www.toytowngermany.com/forum/index.php?showtopic=28469&st=0&p=404809&fromsearch=1&#entry404809

Typical Tchibo Store Front

Tchibo: A new experience every week

Get rich selling coffee, and toasters, and…

Tchibo is quintessentially German. When I first arrived, the now familiar Tchibo logo was simply part of the background noise. My wife nudged me toward awareness as she started to buy their coffee. It was then that I noticed a whole spectrum of seemingly bizarre and unrelated products. So, for those of you who are still in the background noise phase of their Toytown sojourn; or if you don’t have a kindly wife to point out the obvious, here is the basic synopsis of this business.

Tchibo started out in 1949 selling mail-order coffee. Given the post-war state of the West Germany at this time and the shortages of many basic food stuffs, this was pretty innovative. 1963 sees Tchibo expanding its distribution channels of coffee into local bakeries; 18 years after the war’s end and before the advent of the big box store, this was another bright idea. Expanding on this pre-existing channel, in 1972 Tchibo enters the consumers goods market, but with a twist.

Each week a different set of 15 products are offered linked by a common theme. However, once these items sell out, they are gone – no rain checks, back orders or second chances. They called this model is ‘A new experience every week’ and it relies unabashedly on impulse shopping. Given that 60% of Tchibo revenue is estimated to come from non-coffee sources, a weekly collection of related consumer goods obviously works.

Nor are these themes random act, carefully planned upwards of 18 months in advance, Tchibo buyers will review numerous competing products and select the best quality for the lowest possible price. As a result, Tchibo patrons may only be offered one iron but it will be the best valued iron for its price point and features. And if it breaks, a generous guarantee with good customer service backs up the product. After all, nothing kills an impulse buy then a bad past experience.

Tchibo is described as a ‘secretive’ company owned privately by the Herz family of Hamburg. Coffee and weekly products must be lucrative because Michael Herz, his brother Wolfgang (each estimated to own 34% of the business) are multi-billionaires. There other brother Günter and sister, Daniela are out of the business but are reported to have exchanged their inheritance for $5B. A fourth brother, Joachim, makes due with a 15% share of the pie.

Even if you have not met the Herz’s or bought a gadget from them, you have probably have supported their wealth. Tchibo Holdings owns about 50% of Beiersdorf AG, the maker of Nivea products. And, until recently, they owned a large stake in the world’s fourth largest tobacco company, Reemtsma (since purchased by Imperial Tobacco). Tchibo’s brand awareness is reported to be 99% in Germany and rising in the other markets they have entered such as Holland, Austria, Switzerland, Eastern Europe and recently the UK.

I do wonder if a Tchibo concept would work in North America? Americans and Canadians have had a historical tradition of using mail order services, but we are also accustomed to a big box store having every possible variation of a product immediately available 24/7. I don’t know if North Americans would have the patience for a New Experience Every Week, we rather have one every day… oh, and here is my rain check on last months experience that I missed!

So, what is your best Tchibo experience (good or bad)? UK’ers, impressions from the Tchibo invasion on your shores, is the model working amongst the English? Any takers on buying the franchise rights to North America, it could be the next IKEA!

Select Sources: http://www.tchibo.com and links http://www.nationmas…ionaires-(2005) http://www.hoovers.c…factsheet.xhtml

Travelling Up North, Back in Time and With Pierre Berton

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If you are either a North or a Berton-phile, do I have the book for you: The Mysterious North by Pierre Berton.

I am not a huge Berton fan.  I have found some of his books great and some of them are a tedious bore.  Nevertheless he is a Canadian icon and he did do much to explain my country.  Born in the north (the Yukon), he was part of that great generation which grew up poor, went to war and then built a country.

This particular book is a series of essays and articles he wrote, mostly for Maclean’s Magazine, from 1947 to 1954.  This is a gold age before he become to much icon and not enough Berton.  He discusses a series of trips and provides some excellent vignettes about not only the territories but also about cities such as Edmonton before Leduc #1 changed its character.  After each chapter is an updated post script (circa 1989) which its self is a time capsule.

Some tidbits to look out for:

  • Writing in the classic Berton style the pre-dates the stuffy political correctness.  The first nation people are Indians and they are presented as the good, the bad and the ugly.  In other words closer to real people.
  • How far things have changed.  Writing just at the end of WWII, he calmly explains that a highway was needed and one was built (the Alaskan).  Oil was needed to build the highway and a pipeline was built to provided (the Canol Pipeline).  Employment was needed to so mines were sought out and built.
  • The lost opportunities to make the north self-sufficient.  Muskox meat taste likes beef, reindeer can be herded and a 1950’s guess of arable land in the north suggested that there are a million acres of it.  To the latter, unfortunately it is not contiguous but it has upwards of 86 frost free days a year (more with a warming climate).

Great maps, great classic Berton writing style and a good read.  Well recommended (particularly on a sweltering July evening with a cold beer).

 

Phrankism: Documentation is a Waste of Time

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In World War Two, the British counted the bullet holes in airplanes that returned from missions.  Based on where the holes were, they now knew where not to bother putting armour on their airplanes (see this Mother Jones Article).

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Chance Favors the Prepared Mind – and the Oblique Approach

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(With apologies to Louis Pasteur)

Louis Pasteur, courtesy of Wikipedia.

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

I have spent most of my professional career thinking and planning for the future.  Certainly not as a futurist but as a ‘Budget-Guy’ or strategic planner.  Unlike most accountants, I preferred the numbers of tomorrow to those of yesterday.

Given that I have written my fair share of plans, I was interested in John Kay’s book which has a premise that the path to tomorrow is often not straight and definitely may not be quantifiable.  Kay proposes that a focus on passion and excellence leads to better profits than maximizing shareholder value.  For example, Boeing was more successful when aeronautic-philes ran the board room versus when it was filled with suits, MBAs and accountants.

Given that I a) own a suit; b) am an accountant and c) have a MBA; should Kay’s premise worry me?  Are budget guys of the future doomed to be replaced by those with passion?  I think not for two good reasons, both contradictory, like the premise of this book.

The first is that passion is a well-known and recognized attribute of successful companies.  Passion causes people to work long hours for NASA so as to put a man on the moon.  Or passion drives working for a charity or a non-profit organization.  Business gurus have cleared whole forests coming up with other names for passion such as an organization’s Vision or the need to stick to one’s knitting.

The second good reason is in the form of the question: ‘how do we know that Boeing was more profitable when it was run by passionate versus suited-accounting-MBA types?’.  Presumably because in both cases, suited-accounting-MBA types were still there paying the bills, developing budgets and keeping government regulators at bay.

In other words, we should be willing to take the long road home and follow our passions.  Great discoveries have been found through chance when the right person was looking in the right direction (hey, it got Louis Pasteur a nice Nobel Prize).  So, Obliquity is something to cultivate and encourage… but… in the end only execution matters.  The aeronautic-phile executives at Boeing developed the 747 through both vision and a lot of hard work (including the suited-accounting-MBA variety).

And this brings us back to Kay’s book and whether or not you should bother to read it?  My thoughts are:

  • a) Yes, because he is right.  Chance favors the prepared mind and the organization needs to expect a bit of serendipity to accomplish its goals.
  • b) No, Kay has cherry picked his examples.  For every Boeing that has re-located its passion there are dozens of Packard Motor Works who had passionate people but lacked the capital or size to compete.
  • c) Yes, because Kay is an engaging writer.  Even if the book suffers from a lack of research, it is still a great read.

I was going to suggest that you rush out and buy the book but decide to instead recommend obliquity finding it in a book shop near you while not looking for it.

Buying In – BzzAgents and Volunteer Marketers

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Just finished the book, “Buying In: The Secret Dialogue Between What We Buy and Who We Are” by Rob Walker who writes a column for the New York Times Magazine: “Consumed“.  Being a cheap consumer, I purchased the book second hand from the excellent local used book store (SHAVA) that we have here in St. Albert.  As a result, the book is a bit stale published in 2008; well before the financial melt down and the resulting impact on consumption.

Nevertheless, Walker is an engaging writer who walks the reader through the world of consumption, brands and fashion.  For example, who knew that the Hello Kitty mouth was too hard to express in a cute way – so it was cut from the final design in 1974 (pp. 15-16).

Hello Kitty - sans cute mouth

Hello Kitty – sans cute mouth

Or that the Pabst Blue Ribbon (PBR) beer was purchased in 1985 by a Texas ‘beer-baron’ whose business plan was to slash costs and let the brand “decline profitably”. PBR used to be the blue-collar beer of the working man.  Now it is the markedted blue-collar beer made en masse.

While Hello Kitty and PBR are cute and taste okay (in that order), the interesting section in his book is on volunteer product evangelists or word of mouth marketers (p. 166).  These are volunteers who work for companies like BzzAgent who employ ‘volunteers’ to talk up products.  The volunteers button-hole friends, neighbours and unsuspecting would-be consumers with encouragements to buy sausages, perfume or read particular books.  They are encouraged to post positive reviews and write glowing praise of the particular product that is being promoted.

Some of the volunteers spend as much as 10 hours a week doing the promotion, writing reports and networking with other volunteers.  This is a part-time job working for a marketing company, promoting products – all done pro bono.  Walker provides an example of one word of mouth marketer:

Gabriella and the rest of the [BzzAgent] sausage agents are not paid flunkies trying to maniplate Main Street Americans; they are Main Street Americans…. … and she gets no remuneration.  She and her many fellow agents had essentially volunteered to create “buzz” about …. dozens of … products, from books to shoes to beer to perfume.  By 2006, BzzAgent claimed to have more than 125,000 volunteer agents in its network.” (p. 168)

While these volunteers earn points for prizes – many do not cash in the points.  So what motivates them?  One BzzAgent agent Ginger explained her willingness to volunteer for the following reasons:

  • It was a chance to get products before their release (and be an insider)
  • BzzAgent gives her something to talk and opinion about with other people
  • She believes she is helping people – by promoting a specific product.

To be fair BzzAgent’s code of conduct includes an expectation that:

BzzAgents always tell others they are part of a word-of-mouth program.  Be proud to be a BzzAgent. When Bzzing others, you must let them know that you’re involved with BzzAgent and tell them what you received as part of the campaign. If you genuinely like something (or even if you don’t), it’s your open, honest opinion that counts.

Code of conduct notwithstanding, somehow it feels like BzzAgents are on the wrong side of an invisible line.  Certainly they are not boiler-room fraudsters trying to hustle little old ladies out of their life savings – but still there is a part of me that is a bit queasy about the whole word-of-mouth marketing model.

Perhaps it is because I am a ‘free-lance’ word of mouth marketer.  I promote businesses that have given me good services or products and I do so because I believe that I am being helpful.   However, I do so on products and services of my own choosing and without having to report back to the business (or an intermediary such as BzzAgent) of my efforts to date.  As well, when in the course of a normal conversation, how exactly do you interject that you are now been sponsored by the ACME corporation?  I envision a conversation like:

  • Frank’s Friend: Boy it sure hot today!
  • Frank: Sure is… oh, by the way, this part of conversation is brought to you byBzzAgent and Pabst Blue Ribbon beer or PBR.
    • Boy this PBR is sure refreshing, goes down smooth and is cheap too.  The beer of hipsters and rappers, PBR is the only beer for me. 
  • Frank: We now return to our regular conversation already in progress.
  • Frank’s Friend: Huh?  Are you okay?  I think you need to get out of the sun and stop drinking so much of the PBR swill.

Myself, I am happy to stay on this side of that invisible line and continue to promote/malign in an objective manner good/bad products and services.  Nevertheless, I would love to hear your comments – perhaps over an ice-cold and refreshing PBR, the official beer of word of mouth marketers….

Where Public Health Stops and the Nanny State Begins

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Last week I had the pleasure of hearing Dr. Talbot speak.  If you don’t know who he is but you have heard of the current measles outbreak or past-pandemics, then you know of his and his office’s work. In addition, if you get a chance to hear him speak (and hopefully not telling you that there is a quarantine on your house), be sure that you hear what he has to say.

Firstly he is an engaging and down to earth speaker who has a knack of being able to explain the complex via the simple metaphor.  Secondly he has excellent perspectives on how public health can be cheap yet effective.  Finally he has an excellent sense of the history of public health and a sense of humor.  He can tell you about the cholera outbreaks of yester-year to the current measles blip with a wry context.

So while I would encourage you to hear Dr. Talbot speak, listen as a private-citizen looking to protect your own right of choice in a free society.  Hear what he has to say on public health but ask where the public good stops and the Nanny State begins.  Here are some examples, one past and some future.  The past example is the public health battle against public smoking.  I will admit that I have had the very occasional good cigar but otherwise have never caught the smoking bug.  Thus, over the past ten years, I was ambivalent and ultimately thankful when smoking was banned in places like bars and restaurants.  In my view,assuming you have read the warnings on a cigarette package, and you are not polluting my space or kids – it was your choice to start, continue or stop smoking.  In other words, banning smoking in public places is a reasonable public health compromise of personal choice versus public good.

Fast forward now into a time when sugary drinks are perhaps the new smoking campaign.  Not only will we not be able to super-size our mega-drinks while ordering a big Muck, they pop is banned outright as a public health measure.  Because I am not a big pop drinker, perhaps I will continue to watch this change with more ambivalence.

But what about the next step beyond smokes and a glass of pop.  What happens when public health measures become so intrusive that there is a backlash against them – and good is thrown out with the bad.  Perhaps we are seeing this already with the local measles outbreak.  A virtually preventable disease making  a come back because some parents have chosen not to vaccinate their children.

In other words, public health measures which effectively reduce our choice or make decisions for us (smoking, sugary drinks) may lead to public health challenges because people are tired of having choice taken away from them.

This situation can be described in the question of where exactly does public health stop and an intrusive nanny state in the guise of public health kick in?  I don’t have an answer but it is an excellent question that I will ask Dr. Talbot the next time I hear him speak.