Under the Influence with Terry O'Reilly - S2E05 - Buy Less: How Some Companies Profit By Asking You to Spend Less

Episode Date: February 3, 2013

This week on Under The Influence, we look at the companies that actually profit by asking you to BUY LESS.We’ll explore a burger company that asks its customers to eat less beef, a printing company helps you print less, why Gillette has suddenly started encouraging men to change blades less often, and why a clothing company insists that you buy less of their apparel.It’s a completely counter-intuitive marketing strategy, but each of these companies is doing more business than ever. Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan. You just have to love storytelling. Subscribe now and don't miss a single beat. In case nobody's told you, weight loss goes beyond the old just eat less and move more narrative. And that's where Felix comes in. Felix is redefining weight loss for Canadians with a smarter, more personalized approach to help you crush your health goals this year.

Losing weight is about more than diet and exercise. It can also be about our genetics, hormones, metabolism. Felix connects you with online licensed healthcare practitioners who understand that everybody is different and can pair your healthy lifestyle with the right support to reach your goals. Start your visit today at Felix.ca. That's F-E-L-I-X.ca. Whether you're in your running era, Pilates era, or yoga era,

dive into Peloton workouts that work with you. From meditating at your kid's game to mastering a strength program, they've got everything you need to keep knocking down your goals. No pressure to be who you're not. Just workouts and classes to strengthen who you are. So no matter your era, make it your best with Peloton. Find your push. Find your push. Find your power.

Peloton. Visit Peloton at onepeloton.ca. From the Under the Influence digital box set, this episode is from Season 2, 2013. You're so king in it. You're lovin' it and it's now. Your teeth look whiter than noon, noon, noon! You're not you when you're hungry

you're in good hands with austin you're under the influence with terry o'reilly The greatest part of the president's job is to make decisions, big ones and small ones, dozens of them almost every day. The papers may circulate around the government for a while, but they finally reach this desk. And then there's no place else for them to go. The president, whoever he is, has to decide. He can't pass the buck to anybody. No one else can do the deciding for him.

That is his job. In his farewell speech in 1953, President Harry Truman referred to the fact the president's desk is the final stop for all the tough decisions of the nation. If the decision was easy, it is handled by someone else further down the chain of command. Only the tough decisions land in the Oval Office.

Truman actually had a sign on his desk that said, The buck stops here. Some presidents put Truman's motto in their own unique words. So I hear the voices, and I read the front page, and I know the speculation, but I'm the decider. And some presidents choose to quote Truman literally. Moreover, I am less interested in passing out blame than I am in learning from and correcting these mistakes to make us safer. For ultimately, the buck stops with me. When you are the leader of a country,

your decisions affect millions. The weight of that can be overwhelming. In a profile of Barack Obama in the October 2012 issue of Vanity Fair, writer Michael Lewis was given unprecedented access to the president. One of the things that struck Lewis was the number of issues the president had to deal with in the course of a single day. For example, in the span of a few hours, the president might go from approving a military

tactic overseas, to running a meeting on how to fix the financial system, to sitting down with the parents of a young soldier recently killed in battle, to meeting with a child with terminal cancer whose last wish is to meet the president, to deciding how to convince another head of state not to escalate a war. One of the most insightful things the president discussed with Lewis was the concept of decision-making. Obama realized that in order to make crisp, sound decisions, he had to remove the day-to-day problems from his life that absorb big chunks of time in the lives of normal people.

So, as a result, he only wears blue or gray suits and only eats certain things for breakfast and lunch. He pairs down his decisions because he has too many other much more important decisions to make. Research has shown that the very act of making decisions degrades one's ability to make further decisions. That's why so many people hit a wall while shopping. Too many decisions wear you down. The president knows he's capable of making, say,

20 good decisions a day. What he doesn't want to do is waste five of them on which clothes to wear and which cereal to have for breakfast. It's called decision fatigue. For the president, fewer decisions is the goal. Less is more. In the world of marketing, decision fatigue is chronic. Shoppers have too many choices in this world

because there are too many cars, computers, smartphones, shoes, groceries, clothes, restaurants, and movies to choose from. Advertisers strive to make that decision simpler by trying to stand out from the crowded marketplace. If your brand has top-of-mind awareness, chances are consumers will choose it. But while most companies want you to buy more, there are some advertisers who ask you to buy less. It's a completely counterintuitive marketing strategy. These companies stand out from the crowd by asking you to spend less money with them.

And believe it or not, most of these companies actually profit from the crowd by asking you to spend less money with them. And believe it or not, most of these companies actually profit from that strategy, even though there are fewer bucks to stop. Since the dawn of modern marketing, advertisers have wanted us to buy more. The more products and services we purchase, the more profit and market share those companies enjoy. Just about every meeting I have with clients results in the same task. Help us sell more product. Thank you. So, it's always fascinating to stumble across companies who ask us to buy less. Back in 1968, a fast food restaurant opened in northern Sweden.

It was called Max Burgers. Their burgers became so popular, they opened up several more restaurants within two years. Today, Max Burgers has 86 stores with 3,000 employees and revenues of over $200 million. They are more profitable than McDonald's or Burger King in Sweden.

And while that may be impressive for a family-owned company, there is another reason why this is remarkable. Because Max Burgers asks their customers to eat less beef. It all started a few years ago when the CEO of Max Burgers looked at their menu and realized their prime menu item, hamburgers,

generated 70% of their carbon footprint. So that prompted Max Burgers to make sweeping changes to become more environmentally sound. But their biggest change was to their menu. First, they offered fewer beef items and recommended more chicken, fish, and veggie sandwiches to their customers, all of which have reduced fat, sugar, and salt. The mix of non-beef items is now 30% higher than it used to be.

Then they chose the extremely counterintuitive strategy of trying to influence their customers to buy less beef by actually posting the carbon emission stats for each product. So, alongside each price on their menu is a CO2 rating. Because meat production causes one of the highest levels of CO2 when compared to other foods, it is estimated to be responsible for 18% of the

world's greenhouse gas emissions. As of this writing, Max Burgers is the only restaurant in Sweden that posts CO2 ratings. It's a courageous strategy to ask people to eat less beef, especially when the name of your restaurant is Max Burgers. But eat less beef has translated into profit.

Max Burgers stores enjoy 11 to 15% profit margins versus 2 to 5% for their bigger competitors. Clearly, customers are attracted to the company's philosophy and the eat less beef strategy has been a unique factor that has distinguished Max Burgers from their big,

multinational competitors. It has also attracted attention from all over the world. Even vegetarian crusader Sir Paul McCartney referenced Max Burgers while speaking before the European Parliament. In Sweden now, they've started to label food to show the customers the environmental damage rating. So it's giving the people a choice. You're told that, you know, this burger is

going to damage the atmosphere to the equivalent of this. And so at least the customers then can look at the goods and say, well, maybe I don't want to buy that. It is the fastest growing chain of restaurants in Sweden, expanding 20% per year, and they have enjoyed an increase in customer loyalty of over 27%. And according to a nationwide survey, MaxBurger customers have been the most satisfied customers in Sweden for the last eight years. Can I take your order, please?

It's a growth strategy born of asking people to buy less. For decades, Xerox has been one of the most successful technology companies in the world. Founded in 1906, it began by manufacturing photographic paper and equipment. It invented the first plain paper photocopier in 1959 and the laser printer 10 years later, which became a multi-billion dollar business for Xerox. Today, it has over 140,000 employees in 160 countries and enjoys revenues of over $22 billion a year. And lately, it has been implementing a new strategy, namely to help their customers print less. That's a big shift in business as usual,

considering Xerox exists to sell devices, paper and machine servicing based on printing. But Xerox can't afford to ignore the desire of their customers to create less waste. So Xerox works with its clients to reduce the number of printers sitting in individual offices

by the thousands and has shifted them instead to more centrally located network devices that combine printers, copiers, and fax machines. Using that strategy,

for example, Xerox is helping the local government offices of Rochester save millions of dollars over the next five years. It's an interesting move coming from one of the world's biggest printing companies, because they are essentially cannibalizing their own products. But, as the CEO of Xerox put it, it's better that Xerox do the cannibalizing than another company. It's a risk reduction strategy. Protect your market share at all costs.

Much has been said about the world moving toward a paperless office since the emergence of the Internet. But, as Newsweek magazine recently pointed out, the consumption of paper has actually shot up 40%. But while Xerox has been helping customers print less, it has also developed a large management business that allows companies to outsource their document needs to Xerox.

Here's a recent Xerox commercial featuring two concierge from a Marriott hotel having a conversation. Hey, did you ever finish last month's invoices? Sadly, no. But I did pick up your dry cleaning and had your shoes shined. Well, I made you a reservation at the sushi place around the corner. Well, in that case, I better get back to these invoices, which I'll do right after making your favorite pancakes. You know what? I'm going to tidy up your side of the office. I can't hear you because I'm also making you a smoothie. Marriott Hotels and Resorts knows it's better for Xerox to automate their global invoice process so they can focus on serving their customers. With Xerox, you're ready

for real business. Xerox has also developed print-on-demand systems for brochures and catalogs, so companies only print them when required. Owens Corning, for example, outsourced its printing services to Xerox and saved $1.5 million per year. Xerox is also experimenting with erasable paper. It will allow customers to print out a document they only need temporarily, then, instead of throwing it into the recycle bin, it is fed through a machine that heats the page up,

erasing all the printing, so it can be used again. A printing company that helps customers print less is a radical idea. But times are changing, and Xerox realizes that by helping customers manage their documents, even if it means less printing, will help Xerox develop deeper relationships with them. And deeper relationships mean customer loyalty. For Xerox in the 21st century, selling less printing means more market share. Who knew? And we'll be right back.

If you're enjoying this episode, why not dip into our archives, available wherever you download your pods. Go to terryoreilly.ca for a master episode list. Warren Buffett is perhaps the world's best-known investor. His company, Berkshire Hathaway, is famous for investing in traditional blue-chip companies. One of those companies was Gillette. Buffett first invested in Gillette back in 1989. For many years, Gillette has enjoyed a dominant 80% market share in the disposable blade category.

That's why Buffett said that it's, quote, pleasant to go to bed each night knowing there are 2.5 billion men in the world who will have to shave in the morning. But recently, Gillette put out a TV commercial that got everyone's attention. Gillette wanted to see how far one ProGlide cartridge could go. So they sent me around the world to find out.

I learned a few things along the way. First impressions do matter. Fear is your enemy and your friend. Laughter needs no translation. Never say no to a gift. One world, five weeks. The only thing that didn't change was my razor. Up to five weeks of comfortable shaves with one ProGlide cartridge.

Great things start with Gillette. The reason it got so much attention was because it said something Gillette had never said before. Because, for the first time ever, Gillette talked about how long a blade could last. Shaving blade companies have been notoriously tight-lipped about how long their blades stay sharp. The most Gillette has said in the past, according to Fortune magazine, was that the average man takes 150 strokes per shave, that men's faces have 10,000 to 15,000 hair follicles, and that 10% of men replace their blades according to the calendar,

and the rest of us go by feel. As Fortune says, Gillette never mentioned blade life because it was better if the customer didn't know. By not knowing, a customer might replace the blade more often than necessary. Way back in its debut episode in 1975, Saturday Night Live did this shaving blade commercial parody shortly after the launch of the two-blade razor. In the dawn of civilization, long before the Bronze Age,

man first began his search for the close shave. Since then, man has been ardently striving to design the perfect shaving instrument. Introducing the Triple Track. Not just two blades in one system, but three stainless platinum teflex coated blades melded together to form one incredible shaving cartridge, easily fitted into your old twin blade holder. Triple Trac's triple thread cartridge with more close shaves than ever before. Here's how it works.

The first blade grabs at the whisker, tugging it away from your face to protect it from the second blade. Blade number two catches and digs into the stubble before it has the chance to snap back and injure you, pulling it farther out so that it is now ready for shearing. Triple Track's third blade, a finely honed bonded platinum instrument, cuts cleanly through the whisker at its base, leaving your face as smooth as a billiard ball. The Triple Track. Because you'll believe anything.

Ha, I never forgot that last line. Back then, the thought of a three-bladed razor seemed ludicrous. 31 years later, Gillette launched the six-blade fusion line. By telling the public their blades last at least five weeks, Gillette is saying you don't need to buy their product as often. So, why does Gillette want us to buy less blades? Well, one possible answer is that Gillette's famous market share has been losing some ground. Since 2010, some reports state they have lost three share points

due to the economy and some pricing pressure from competitors. While three share points may not sound like much, each share point is worth millions, and smart marketers watch dropping SharePoints closely to see if it's the sign of a trend. Rival Schick, for example, is priced lower than Gillette,

and recently this very amusing video hit YouTube from an upstart company called the Dollar Shave Club, which pokes a stick at Gillette's celebrity spokesman, Roger Federer. Hi, I'm Mike, founder of dollarshaveclub.com. What is dollarshaveclub.com? Well, for a dollar a month, we send high-quality razors right to your door. Our blades are f***ing great.

Each razor has stainless steel blades and aloe vera lubricating strip and a pivot head. It's so gentle, a toddler could use it. And do you like spending $20 a month on brand name razors? 19 go to Roger Federer. So stop forgetting to buy your blades every month and start deciding where you're going to stack all those dollar bills I'm saving you. We are dollarshaveclub.com and the party is on. One of the main marketing strategies of market leaders is to protect market share.

It's doubtful that Gillette could expand beyond its 80% dominance, but that also means they are constantly in defense mode. So, to defend their leadership position, Gillette made a statement they have never made before. In other words, they hope the value in having to buy fewer five-week blades will stop competitors from breaching their market share. Buy less. Sometimes that strategy can even fortify a company's position. The Patagonia Company has always played by its own rules.

Founded in 1972, the outdoor clothing company has always had a sustainability strategy at the core of its DNA. But recently, Patagonia has begun to actively encourage its customers to do something few retailers would ever do. To buy less. This strategy is actually leading to increased profits. Here's how it works. Patagonia has created a program called the Common Threads Initiative. On their website, they ask people to take a pledge

to reduce excessive consumption to save the planet we all share. That pledge has four elements. The first component is that you'll promise to reduce what you buy. Patagonia says it will help you with that promise by only making clothing that will last. So you don't have to keep repurchasing their apparel. In essence, Patagonia is asking you to buy less. The second component of the pledge is

to promise to repair any clothing article that breaks down instead of replacing it. Patagonia says it will help you do that by repairing items at a fair cost. The third component is to reuse clothing. To achieve this, Patagonia has entered into a partnership with eBay, creating a unique site where customers can sell their used Patagonia clothing instead of sending it to the landfill. And the final component of the pledge is to recycle. When your Patagonia clothing finally does wear out and can no longer be reused, Patagonia will take

it back and recycle the materials to make new clothing the basic underpinning for this strategy is Patagonia's belief that the greenest clothing is the clothing that already exists as long as they can keep it out of the landfill through repair reuse and recycle the planet will be better off. But the most extraordinary aspect of this, to me, is the first part of the pledge, that you promise not to buy what you don't need. In other words, they are asking people to buy less new clothes from their company. In an essay titled, Don't Buy This Shirt Unless You Need It,

Patagonia's founder articulates the company's philosophy of making products that last so you can consume less. Traditionally, once a piece of clothing is paid for, that is the end of a company's relationship with it. But Patagonia wants to stay connected. And where most fashions only last a season and are designed to look outdated within a year, Patagonia designs for the long run. The strategy has led to increased business because the Common Threads initiative is an ideal that draws in more and more customers who care about sustainability.

As I've said many times before, a company's core philosophy, its fundamental belief system, is what brings customers to the door. More and more, we're seeing that products don't attract customers. What a company stands for and against does. And those customers, in turn,

become the store's evangelists. In Patagonia's case, they do the seemingly impossible. They create customer loyalty by asking them to buy less. In a buy-more world, a company that asks us to buy less is like a cowbell in a symphony orchestra. It's a plan that goes against the grain of most marketing strategies. But as marketer Jim Stengel says in his book titled Grow, the only way a business can truly grow in the 21st century

is if businesses and customers share the same agenda. That's a big if, because it means a company must lock its business model onto the motives of its customers, not the stock market. There is an interesting subtext to each of the examples you heard here today. In Patagonia's case,

buy less actually promotes the high quality of their apparel. They're really saying you won't have to buy more because their clothing is so good. In Max Burger's example, they're really saying the rest of their menu must be incredibly fresh and delicious in order to convince you to buy less beef. In Gillette's case,

a five-week blade really means leading-edge technology. And printing less really means Xerox is a company that listens to its customers. It's called a pull strategy. Most marketers employ a push strategy, pushing products at you in the hope you'll buy them. But a pull strategy is when a company persuades customers to seek them out. The buy less strategy didn't draw customers to the product, it drew them to the company. And that is the difference in the new world of 21st century marketing when you're under the influence.

I'm Terry O'Reilly. Hello, Terry. It's your wife. You mentioned that President Obama tries to make as few decisions as possible so that he can make the big decisions later. One way we can make that work in our life is to have you make fewer decisions at home. So, in the spirit of that, I have decided the following. One, my mom will be coming next week and staying for a month. Two, we'll be watching The Way We Were followed by Yentl tonight. And three, on Saturday evening, we'll head down to the Curling Club to catch a few games.

Talk to you later, honey. Under the Influence was produced at Pirate Toronto. Sound engineer, Keith Oman. Theme music by Ari Posner and Ian Lefevre. Series coordinator, Debbie O'Reilly. Research by Warren Brown. Download the podcasts on iTunes. See all the visual elements from this episode at cbc.ca slash under the influence.

See you next week. New year, new me. Season is here and honestly, we're already over it. Enter Felix, the healthcare company helping Canadians take a different approach to weight loss this year. Weight loss is more than just diet and exercise. It can be about tackling genetics, hormones, metabolism. Felix gets it. They connect you with licensed healthcare practitioners online who will create a personalized treatment plan that pairs your healthy lifestyle with a little help and a little extra support.

Start your visit today at felix.ca. That's F-E-L-I-X dot C-A.