Demand_Creating What People Love Before They Know They Want It

by Adrian Slywotzky

  It wasn’t obvious that Wegmans could survive in such a climate. But it did, thanks to the loyalty it attracted from hometown customers in its relatively small geographic base in western New York and Pennsylvania. From 1950 to 1976, the stores multiplied, slowly but steadily, under the leadership of Walter’s son Robert Wegman, a famously brilliant and feisty innovator who described his “philosophy about merchandising” as “To do something that no one else is doing, and to be able to offer the customer a choice she doesn’t have at the moment.” To this day, Wegmans team members quote that speech, especially its emphasis on doing the opposite of what your rivals are doing—and they strive to live by it.

  It’s easy for companies that achieve great success to become complacent and stop adapting to changing conditions. Wegmans avoided that trap. Part of its secret was simply paying close attention to emerging industry trends and striving to stay ahead of them. That’s the significance of Danny Wegman’s senior thesis at Harvard. His prediction that creative mass merchandisers like Sam Walton represented the most important challenge to the grocery industry came to pass when Walmart opened its first superstore, with a complete grocery selection, in 1988.

  By that time, Danny had already taken over as president and CEO of the company. Under his leadership, the chain has survived the Walmart challenge through continual enhancement of its stores’ magnetic qualities, and it has expanded to its current roster (as of late 2010) of seventy-seven stores.

  And when changing customer needs demand it, Wegmans is prepared to adjust its business practices in ways that might seem painful but help the product remain magnetic.

  When the economic downturn hit in 2008, Danny Wegman predicted that, over time, the recession would reduce his company’s costs, since commodity and fuel prices generally decline in a business slowdown. That would enable Wegmans to hold the line on prices, which in turn would help its customers. Remarkably, however, Wegmans didn’t wait for the expected downturn in costs. Instead, it proactively selected hundreds of staple items for price reductions—the equivalent of $12 million worth of discounts—in order to ease the burden of food shopping for cash-strapped families.

  “During difficult times like these, it’s OK with us if we make a little less money,” Danny Wegman explained.

  The Wegmans story suggests that creating a magnetic product requires a willingness to take the nonobvious, counterintuitive steps—to “offer the customer a choice she doesn’t have,” in Robert Wegman’s words. But of course there’s more to it than that.

  We’ve discovered a half-dozen common threads that link many of the world’s most magnetic products and the people who’ve created them. These behaviors don’t add up to a “formula” for creating a magnetic product—nothing so complex can be reduced to a mere formula. But an organization that fails to practice them is highly unlikely to find itself with a magnetic product on its hands.

  Let’s take a closer look at these six behaviors, one by one, and see how Wegmans has used them to bring an amazing degree of magnetism to an industry largely dominated by me-too thinking and undistinguished offerings.

  Great demand creators eliminate or reduce the hassles that make most products and services inconvenient, costly, unpleasant, and frustrating. Grocery shopping has more than its share of hassles. From wilted produce, lackluster meats, and out-of-stock specials to hard-to-navigate aisles, malfunctioning shopping carts, and indifferent salesclerks, most supermarkets present an obstacle course of hassles that millions of shoppers dread. Wegmans hasn’t eliminated every shopping hassle. But they’ve made greater progress toward reducing them than others, and they think they’re just getting started.

  Take the hassle that surveys show irritates shoppers the most (even more than high prices): long, slow checkout lines. You might assume that the vast size of a Wegmans store (over 110,000 square feet versus the industry average 45,000) would make it an inconvenient, time-wasting place to shop. But Wegmans has gone to extraordinary lengths to prevent this. When we visited on a Sunday afternoon, we found nineteen out of twenty-six cash register lanes up and running, each with no more than two customers waiting in line. And fast? Posted on a bulletin board right by the checkout lines, for everyone to see, were computer printouts reporting the number of items scanned per minute by the cashiers on each shift for the past week, with inspirational messages appended, from “12.44—We Can Do Better!” to “14.26—Good Job Everyone, Let’s Get 14.5 Next Time!”

  Wegmans takes the issue of fast checkout very seriously. (Robert Wegman was famous for watching checkout counters and getting very nervous if customers were waiting too long.) As a result, you can get in and out of a giant Wegmans faster than you can at many convenience stores. Our friend Stephen remarks, “Last time my family spent the weekend with my folks in Rochester, I ended up visiting the nearest Wegmans six times. It’s just the fastest and most convenient place to go. Once I made an emergency run to pick up some cold medicine for my son. It was the middle of the night, but they had six registers working. I was headed back home inside of five minutes.”

  Wegmans has developed many other hassle-reducing innovations. Toddlers in tow? There are special parking spaces within a few feet of the entrance dedicated to families with small kids, and most stores feature a chaperoned kids’ room where youngsters can play while parents shop. Many stores even have checkout aisles marked with “No Candy” signs. Parents can select those lanes knowing that the children propped up in their carts won’t be begging for candies temptingly displayed at eye level.

  And yet another shopping hassle—a subtle one most consumers take for granted—is the need to visit several stores to get all your food buying done. Wegmans is the single source that is as good as multiple specialized stores. Many Wegmans customers report they can now accomplish as much in one trip to Wegmans as they used to accomplish by visiting a mainstream grocery store, a natural foods store, a butcher, a bakery, a greengrocer, a fish market, and a deli … and all without compromising on product or service quality.

  In fact, some industry analysts say that Wegmans is leading the evolution of the grocery business toward what they call the “Whole Mart” future—a blend of the best features of Whole Foods (freshness, quality, eco-friendliness, health consciousness, uniqueness) and Walmart (price, size, convenience).

  Great demand creators enhance great functionality with emotional excitement. A magnetic product fulfills its essential purpose superlatively well. Then it does much, much more.

  In Wegmans’ case, selling high-quality ingredients is only the start of what they do. One example among many: the stores’ prepared foods, which are a godsend for busy families, working couples, elderly folks, and students with little knowledge of or equipment for cooking. And with their reasonable prices—for example, the rows of four-dollar entrées we saw on display during one visit—Wegmans offers a speedy, healthful, and flavorful alternative to the fast foods many cash-strapped families resort to.

  But Wegmans also provides lots of engaging ways to help people become proficient, enthusiastic home cooks. They hire world-class chefs to demonstrate cooking techniques and favorite recipes. They sprinkle the store with signs, flyers, posters, and brochures suggesting menu combinations and offering mini-lessons on planning meals. They train staffers to absorb and share fascinating information about food—where it comes from, how it’s grown, imaginative ways to prepare it. They suggest wine and microbrew pairings to enhance meals and, where local laws permit, even display the complementary beverages right alongside the appropriate meat, fish, or vegetable. They publish a lavish four-color magazine, Menu, that is sent free to every holder of a Wegmans discount card and features really imaginative, interesting cooking ideas along with chef interviews, articles about great food-producing regions, and nutrition advice. And with the unsurpassed range and variety of products Wegmans sells (an average of sixty thousand items in stock, 42 percent higher than the industry norm), they make it easy for customers to become more imaginative and v
enturesome when it comes to making menu choices for their families. For many, getting dinner on the table morphs from a daily chore to be finished as quickly and cheaply as possible into a creative pastime in which entire families get happily involved. You don’t have to become a gourmet to appreciate Wegmans—but thousands do.

  Magnetic products enhance the emotional content of people’s lives by enabling them to do things better, more easily, and more pleasurably. Zipcar does it for transportation, providing cars that are convenient, fun, and even coolly stylish (with a BMW available for that special night out). Wegmans does it for the enjoyment of great food, helping customers not just to eat better but to participate creatively in the excitement of food culture. And, of course, in the process they generate a huge stream of new demand for the goods and services they sell.

  Great demand creators make every employee a demand creator. We’re fascinated by successful CEOs and entrepreneurs—people like Reed Hastings, Steve Jobs, and Jeff Bezos. And sometimes a brilliantly creative individual plays a major role in the development of a magnetic product. But the truth is that demand creation is almost never driven by a single person. It’s the product of efforts by an entire team of people who understand that creating demand is their chief mission and who use the resources and processes at their disposal to do just that, day in and day out. In fact, in organizations that have mastered demand creation, the process is fractal, following a similar pattern at every level of the organization, from the CEO to the supervisor to the frontline employee.

  Robert Wegman, son of cofounder Walter Wegman, understood this truth. The first thing he did after being named president in 1950 was to raise everyone’s salary—a hugely symbolic act in the notoriously low-margin grocery business, where skimping on salaries is the norm. This gesture told the world, “At Wegmans, we don’t just say that people are our most important asset—we intend to act like it.”

  He and the rest of the company’s leadership went on to develop a unique set of policies for recruiting, training, compensating, and retaining employees. As a result, they built the most dedicated, best-educated, most highly motivated team of any supermarket in the country. And then they set these remarkable people loose to use their knowledge, creativity, and good judgment in the daily work of caring for customers.

  Today, average salaries at Wegmans remain consistently higher than the industry standard. Every Wegmans employee receives benefits that include a 401(k) plan with matching company contributions and a defined-contribution retirement plan funded by the company. Everyone from master bakers to stock clerks gets full medical benefits (although since 2005 employees have been required to contribute a portion of the cost). Wegmans’ employee scholarship program will pay a full-time worker up to $2,200 per year for four years, a part-timer up to $1,500. There’s no limit on the field of study or the kind of degree being pursued. Since its launch in 1984, the company has supported education for 24,000 employees for a total of over $77 million.

  Other benefits are even more unconventional. Senior vice president Mark Ferrera says, “I spend 95 percent of my time helping the employees,” and his strategies have included everything from subsidizing monthly bus passes for workers at the Wegmans store in Princeton, New Jersey, to sponsoring an annual Cinco de Mayo celebration that the employees enjoy even more than the customers.

  Employee training at Wegmans is also unique in the industry. If you get a job in the meat or fish department, you’re expected to pass a thirty- to fifty-five-hour educational program about your specialty. Sometimes the training programs are indistinguishable from perks. Cheese manager Terri Zodarecky was sent on a company-paid ten-day trip to England, France, and Italy to sample new products and learn from master cheese makers. Other department heads have been sent overseas to learn about wines, pastries, and organic farming techniques.

  Treating your team members well is important. It may earn you a spot on Fortune magazine’s annual “Best Companies to Work For” list. (Wegmans has appeared at or near the top of the rankings every single year and in 2005 was named to Fortune’s “Best Companies Hall of Fame.”) It also makes it easy for you to recruit and retain the very best talent. The star power Wegmans brings to the food business is stunning. Pierre Hermé, once dubbed “the Picasso of pastry” by Vogue magazine, has trained Wegmans bakers to make his specialty tartes, pastries, and French toast bagels. Famed chef David Bouley (winner of the James Beard Foundation’s Best Chef prize and proprietor of the top-ranked restaurant in Zagat’s New York ratings) helped design some of Wegmans’ prepared-food entrées. The sous-chef at Wegmans’ Pittsford, New York, store is Charles Saccardi, who previously worked for Thomas Keller, proprietor of Napa Valley’s French Laundry restaurant.

  But even more important, Wegmans gives its many gifted employees the power to meet customer needs using creativity and flair, following their own best judgment rather than rules in a manual. It’s hard to overstate the attraction this creates for really desirable workers. A pastry chef who was asked why he’d left a more lucrative career in the restaurant business to join Wegmans replied, with a shrug, “Are you kidding? All my old friends from there want to come and work here. We are doing much more creative work than I ever did in the restaurant game.”

  Attracting and retaining this kind of team gives rise to the tales of customer service that have become legendary among Wegmans fans—like the time a Wegmans chef rescued a frantic customer whose Thanksgiving turkey turned out to be too big for her oven by roasting it for her at the store. Similar customer-thrilling deeds on a smaller scale are repeated every day—when a salesclerk takes it upon herself to offer a free dinner to a customer who found her last one disappointing, or a team of employees stands waiting with umbrellas to escort shoppers to their cars during a sudden downpour.

  Robert Wegman and son Danny have both been great demand creators. But the CEO can’t be everywhere. A big part of the genius of Wegmans is a system that turns thirty thousand team members into demand creators in their own right. The ultimate outcome? An unequaled stream of demand for the combination of great foods and amazing services that Wegmans offers.

  However, organizational leaders must remember that they can’t simply buy a team of demand creators. Good pay is important in attracting the best workers. (It also reduces the need for employees to moonlight at second jobs and the time they spend worrying about personal finances.) But as real-life experience teaches, and as many experimental studies have confirmed, an extra dollar or two alone won’t unleash employees’ passion. The difference lies in what social psychologists refer to as “social norms,” which operate separately from the “market norms” that most businesspeople focus on.

  Market norms are about paying for what you get. Fair exchange is the driving force, and emotional connections play a minimal role. By contrast, the world of social norms is the world of community, where people help one another out of feelings of friendship, mutual respect, and shared responsibility, without any expectation of immediate payback. In this world, financial reward is only partially relevant to our behavior, and in fact excessive focus on money can easily destroy the positive power of social norms. (Try offering to pay your best friend for helping you move a sofa, or your spouse for fixing you dinner, and watch how quickly your relationship gets damaged.) So combining social norms with market norms is an important but delicate balancing act.

  Wegmans is one of the few companies that has successfully infused its employee relationships with the leavening power of social norms. Like many employers, it talks about “treating our people like family”—and it actually follows through. Adopt a baby and you get an assistance package including time off to welcome the newcomer and a check to help defray expenses. Start college and you can hand your supervisor your class schedule knowing your hours will be adjusted to match your availability. Stories circulate like the one about the clerk fretting about an overdue electric bill who found out that Wegmans had quietly interceded with the utility company to make sure his l
ights stayed on.

  Having been treated like family, Wegmans employees reciprocate, passing the feeling along to customers. That’s why Wegmans stores, and their people, become part of the local community to a far deeper, richer extent than other supermarkets.

  Danny Wegman sums up the company’s reliance on its people with his comment, “It’s our knowledge that can help the customer. So the first pump we have to prime is our own people.” And Wegmans executive Jack DePeters makes the same point when he remarks, only half jokingly, that Wegmans is “a three-billion-dollar company run by sixteen-year-old cashiers.”

  And they run it amazingly well.

  Great demand creators have the guts to listen to customers. Practically all of the Wegmans innovations we’ve mentioned can be traced back to one or more company employees who really listened to customers. But here’s an example that illustrates the process especially vividly.

  In early 2008, Wegmans launched an online shopping tool to make life easier for their customers. It was pretty good. Customers could use it to build personal shopping lists to ensure they didn’t forget the things they needed when visiting their favorite Wegmans store. Sale items were highlighted, you could find online recipes and select ingredients, and lists were easy to print out and save. Customers liked the tool, and Wegmans could have let it go at that. Most retailers would have been proud to have added such a convenient twenty-first-century information-age service to make things easier for customers.

  So far, so normal. Then something not-so-normal happened. A few customers who used the shopping tool sent Wegmans e-mails or left phone messages offering suggestions for improvement. Some had complaints about software glitches they encountered. Others provided wish lists of features they’d like to see. And Wegmans actually listened.