October/November, 1999

From the Editor

Creating Value

In Dodgeville, Wisconsin, is a clothing company called Lands’ End. Most of its business is sold via catalog and so, some time ago, the company came up with a great marketing idea. Lands’ End offers a money-back guarantee – forever. For any reason or for no reason at all.

As Lands’ End expanded into Germany, however, it encountered an obstacle. Retail competitors of Lands’ End took the company to court and won a judgment banning the company from advertising its guarantee. Germany’s highest court, based in Karlsruhe, placed a ban on any advertisements featuring the guarantee ruling that the guarantee was “economically unfeasible” and, as such, amounted to unfair competition.

One can quibble with the way the German legal system is structured. Perhaps the requirement should be that Lands’ End needs to obtain an insurance policy to protect consumers in the event Lands’ End itself should ever become insolvent.

If customers are damaged in some way, surely they should have the right to sue, but the very fact that competitors want to suppress this guarantee indicates it must be something consumers will find valuable.

Such a fuss over a guarantee points to the fact that, in many cases, value is added to a product by the services and support that go with the product. There are two dimensions to this dynamic that play out when buying food or agricultural products from the United States.

The first consideration has to do with procurement. Very often the guy who offers the best price is not offering the best value. Perhaps the shipper is inexperienced in export and will do a bad job in some way. He may communicate poorly and not keep you up to date on the progress of your shipment.

Very often I get messages from prospective buyers looking to avoid dealing with traders in the hope of getting the best price. It works very well sometimes, particularly if you are a very large buyer of only one item. But many buyers of a diversity of things are far better off dealing with a trader who is already buying a large range of items.

There are many opportunities for misunderstanding in the buying of a product from another country. The guy whose price is cheapest may be giving you a genuine bargain to get you as a customer or because he has a lower cost structure. But that low price may also be an early warning sign of trouble ahead. So check all the references and tread warily.

The second consideration on buying U.S. food and ag products is marketing in the destination country. Although U.S. products are often world class quality-wise and, in some cases offer the only source for volume orders of some products, many U.S. products carry a premium.

The challenge is to create a value for the product that exceeds that premium and thus make even the premium-priced product a value for consumers.

Cheap and value do not have the same meanings. Some cultures are very conscious of this. I was in Honolulu earlier this year and found lines 50-people-deep at the Prada story in Waikiki. Similar crowds could be seen at the Hermes boutique, the Louis Vuitton store and other famous haberdasheries.

The customers were almost all Japanese. Sure they found the price of these goods attractive compared to what they sold for in Japan, but still, there were less expensive pocketbooks and scarves on every corner. These marketers had done an excellent job of building a reputation for quality and exclusivity that attracted the Japanese patrons.

Many times prospective buyers contact me complaining that a particular United States company will not sell them product, even though the company’s reputation and credit is good. That may be so, but often is beside the point.

Some shippers – particularly those of commodity-type items – will sell to whomever places an order. Under some cases they may reserve an exclusive label for a given importer. But many branded product suppliers want more than a customer – they want a partner. They want to work with someone who has both an interest and an incentive to help cultivate the brand. This might mean avoiding certain retailers with a low quality image or partnering on advertising and promotion.

In the end, it is a recognition of what those German retailers, so afraid of Lands’ End and its guarantee, knew immediately. The guarantee is, of course, economically unfeasible – if consumers are dissatisfied with the product and take Lands’ End up on the guarantee. Using guarantees is a pain, but the message that consumers get from such a guarantee is that here is a product that won’t disappoint them. Lands’ End is far from the only U.S. company looking to build that image around the world.  EXP