Customers and Employees First

Imagine a store that not only provides a variety of quality products and efficient service but also offers employees a bank, a school, a library, a gymnasium, medical care–and a weekly prayer meeting.

Is this a modern business experimenting with new ideas to retain employees? No, it was a late nineteenth- to early twentieth-century business that was far ahead of its time. (In fact, at least the prayer meeting part would be considered politically incorrect today and possibly even lead to law suits!) These innovations were the brainchildren of John, the young businessman whom I introduced in the previous blog post (“A Revolutionary Retailer”).

People conducted business differently in John’s early days than they do today. Retail stores usually specialized in only one or two types of products and had no set business hours. Clerks received no formal training. Clerks and customers haggled over the price of everything. Identical items might have several different prices. People expected merchants to try to cheat them. Merchants always made customers feel inferior; shopping was seldom pleasurable. A dissatisfied customer could not return a product for refund or exchange. The business motto of the day was caveat emptor, “Let the buyer beware.”

But John changed all that–and more. He instituted set hours and stayed until the last customer was served. He hired only the best staff and then trained them extensively in customer service. He marked prices clearly, and identical items had one price, eliminating haggling. He made customers feel important, and shopping became enjoyable. “Courtesy is the one coin you can never have too much of or be stingy with,” he instructed his employees. If a customer was dissatisfied for any reason and could show his receipt, John guaranteed a cash refund.

Moreover, John’s store was the first to have electricity, telephones, elevators, and telegraph service. He pioneered home delivery and telephone ordering. He introduced the use of pneumatic tubes whereby clerks in the various departments could send cash and receive change quickly. He offered the best products; when he couldn’t do so, he hired craftsmen or built factories to make them himself. He conducted special sales. He even built a restaurant inside his store.

John informed his customers through continuous and aggressive advertising. He once admitted, “half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” He read the papers daily, looking for good writers and artists whose work he liked, then he hired them to produce effective ads for him.

He introduced numerous benefits for his employees and their families, including vacations, pensions, bonuses, health care, life insurance, paid training, and extra pay for additional education. He scheduled public concerts, authors’ lectures, art and historical exhibits, and other forms of entertainment and education–all conducted inside his tore during store hours. He had the world’s largest organ built and installed in his store.

In short, John made work rewarding for his employees and shopping pleasurable for his customers. “When a customer enters my store,” John said, “forget me. He is king.” In return, they made him a success. But that success was a mere by-product of an even greater purpose that drove his revolutionary business.

In the next post, I will share more of this great exemplar’s legacy, which extended far beyond his retail operations, and let you in on what he considered the secrets of his success.

[Copyright (c) 2017, Dennis L. Peterson]

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Ford’s V-8 Wowed Consumers 84 Years Ago

Henry Ford with V-8 flathead engineIn a free enterprise system, businesses respond to meet the demands of the buying public. One good example of this is what happened this week in 1932: Henry Ford introduced the flathead V-8 engine in a car that was priced for the average consumer.

The perennial favorite that had made Ford a household name was the 4-cylinder Model A, and he seemed content to continue producing that as long as people would buy it. But other carmakers had begun to outsell Ford. William Durant of Chevrolet had introduced a V-6 engine that produced 20 more horsepower than Ford’s engines, and by 1931 consumers were buying more Chevys than Fords.

Ford had to do something to regain the market. His engineers suggested their own V-6, but Ford had tried that before and didn’t liked it. Besides, introducing a V-6 then would make Ford look like a mere imitator; he wanted to be the industry leader.

Ford decided that he would do the unexpected, what some people said was impossible. He would build an 8-cylinder engine, he would make it of one piece, and he would make it affordable for the average consumer. V-8 engines were not new; Frenchman Léon Levavasseur had built one in 1902. But the only V-8s were in luxury cars. The average consumer could only dream of owning one of the V-8s, V-12s, or even V-16s then on the market. But Ford would take a calculated risk—at the height of the Great Depression, no less—and mass produce a car with such an engine so that everyone could afford it.

Even as early as 1929, Ford had foreseen the problem and had tasked a team of Ford engineers and designers to build his one-piece flathead V-8. Their early versions had problems, including overheating and vast consumption of oil, but they persevered, resolved those problems, and produced a product that was introduced to the public on March 31, 1932. In addition to the larger (65 hp) engine, the new model included other innovations: rubber engine mounts to reduce vibration; a stouter frame; a gas tank in the rear, rather than the front, of the car; larger brakes; and synchronized second and third gears to reduce grinding.

The 1932 Ford V-8 immediately captured the imagination of the buying public—and the market. It catapulted Ford back to the top in car sales. The V-8 engine remained the Ford mainstay until 1953.

Although Ford was a risk-taker, as all entrepreneurs are, he hedged his bets by continuing to build cars with 4-cylinder engines even as he sought to improve them with the V-8. In the same year that he introduced the V-8, he also introduced the Model B. The following year, he introduced the Model C. Both of those cars were equipped with improved 4-cylinder engines. But neither car sold well. Why would someone buy a 4-cylinder, even if it was new, when a new V-8 was available?

This is how the free enterprise system works. The public demand drives the actions of the entrepreneurs. If they want to succeed and sell their products, they respond to market demands, giving the consumers what they want at a price they are willing to pay for it. And they do it without Big Government telling them how.

Thoughts Sparked by a Kodak Argus Projector

Looking through a nostalgia magazine the other day, I came across a half-page “1956 Advertising Flashback.”  It was an ad for a Kodak Argus slide projector with a two-tone-green carrying case and rectangular aluminum slide magazines. The ad grabbed my attention because my parents bought one of those sometime between 1956, when it came out, and 1959, when our family and another family took a trip “out West” together. For many years afterward, we kids enjoyed viewing for hours the slides taken during that trip.

Interestingly, the ad announced that the slide projector, carrying case, and aluminum slide magazines sold for only $66.50. No doubt, that was a lot of money back then, but today it seems like a steal. My parents must have been “in high cotton” about that time because I also remember that they not only bought that slide projector and took the Western vacation but also built our house and bought a brand new 1957 Chevrolet (“Coral, not pink!” Dad used to remind us).

But that ad also set me to thinking about the entrepreneur who made at least some of those memories possible–George Eastman, the inventor of both roll film and the box camera that allowed anyone to become a photographer, and at a reasonable price.

Eastman was born July 12, 1854, in Waterville, New York. He died eighty-four years ago today, on March 14, 1932. Starting out as a simple, primarily self-educated farm boy, he grew into one of the most successful entrepreneurs of his day, having a net worth of approximately $94 million by the end of his life. And he amassed that fortune not on the backs of the people but by putting into the common man’s hands, financially within his grasp, the ability to make and record personal and family memories for generations to come.

In 1884, Eastman patented the process for making the first roll of transparent film. He then invented the camera that was made specifically to use roll film. He advertised his new camera with the slogan “You press the button; we do the rest.” The camera came to the purchaser preloaded with enough film for a hundred individual exposures. When the photographer had exposed the entire roll, he sent the whole camera to Kodak in Rochester, where they developed the film, made prints of the photos, inserted new film into the camera, and returned all of that to the customer.

By 1892, Eastman had founded Eastman Kodak Company and was mass producing not only roll film but also cameras and other photographic equipment. Because of his roll film, his company was more a business partner than a competitor for all of the other camera companies in the nation. After all, they used his film. His roll film made possible Thomas Edison’s 1891 motion picture camera and the whole movie industry. In recognition, Eastman has two stars on the Hollywood Walk of Fame.

But Eastman didn’t just make money; he gave a lot of it away, too. His donations made possible the founding of the Eastman School of Music and the schools of dentistry and medicine at Rochester University. He also gave large amounts to the Tuskegee and Hampton Institutes, black colleges in the South. Within his own company, he discouraged unionization by providing a paternal atmosphere in which he took care of his employees, including making them part owners of the company through a dividend program, thereby giving them a personal stake in the company’s success. He never sought recognition for his generosity.

Sadly, without God as his Savior and suffering a painful back problem late in life, Eastman saw no use in continuing to live, so he committed suicide in 1932. He left a note reading, “To my friends: My work is done. Why wait? GE.”

No man, however, can know when his life’s work is done. Only God knows that. As long as one has life–and that whether easy or hard–one must assume that God has something for him to do.

Every time you look at a photograph, you should thank God that George Eastman used his God-given talents to develop the technology that makes it possible for you to preserve and enjoy years later the memories that it captured. And then go out and record your own memories by living your God-given life to help others and glorify Him.

Mr. Wrigley Builds a Candy Empire

Too often today, business leaders (especially successful ones) get a bad rap as miserly, money-grubbing, selfish, and uncaring. Although you’re bound to find some business people who are those things, for the most part, they are not. Rather, if one looks back into history with an unbiased eye, he can find many business people who are exemplars of the very opposite characteristics. Those are the people who make free enterprise work, resulting in not only their own success but also that of others. William Wrigley Jr., who died this week in 1932, was one such person.

When William Wrigley Jr. was born in Philadelphia, the Civil War had just begun. Early in his childhood and throughout his life, he exhibited traits that made him a successful businessman and that make him an exemplar for others.

1. He had a strong work ethic.

Wrigley’s father was a soap manufacturer, and even as a child William sold that soap on the streets of Philadelphia, walking about with a basket of soap on his arm. As a teenager, he advanced to a team and wagon, which he took into the small towns surrounding Philadelphia, selling soap and convincing store owners to stock it. As a result, Wrigley soap sales did well. But none of Wrigley’s future success would have been possible without his willingness to work hard.

2. He had a dream and a vision for the future.

As good as his sales record was, Wrigley wanted to do better. He wanted to improve himself, to advance in life. And he didn’t want to be tied to his father’s business. Rather, he wanted to be his own boss, to work for himself. In 1891, with only $32 in his pocket, he left home to seek his fortune in Chicago. He started out there still selling his father’s soap, but he introduced incentives (or “premiums”) to his sales arsenal. He gave a free can of baking powder to store owners if they would stock the soap. Sales increased.

3. He could see the consumers’ viewpoint and change his methods to meet changing market needs.

Wrigley soon noticed that his baking powder gifts were more in demand than his soap, so he started selling the baking powder and got out of the soap-selling business. But he continued to offer an incentive–a free pack of gum for every can of baking powder purchased. That ploy proved successful, but demand for the gum soon surpassed the demand for the baking powder.

4. He was willing to innovate.

In 1893, during an economic depression, Wrigley introduced a new gum flavor, which he called Juicy Fruit(R). The new gum proved so popular that in 1911 he was able to buy the company that had been making the gum for him. He then introduced two other flavors: Spearmint(R) and Doublemint(R).

The spirit of innovation extended throughout Wrigley corporate leadership even after his death, and the company introduced no less than six other kinds of gum between 1974 and 2001 [Freedent(R), Big Red(R), Extra(R), Winterfresh(R), Eclipse(R), and Orbit(R)]. It also pioneered the use of bar codes for pricing in 1974.

5. He was willing to take risks.

Just like the nation itself, the Wrigley company weathered its share of economic problems. But Wrigley was an entrepreneur, and he could see opportunities where others saw only risk. In 1907, during an national economic downturn, Wrigley mortgaged everything he owned and spent $250,00 to buy $1.5 million in advertising. That great risk paid off: the company became national in scope. Sales increased dramatically, topping $1 million in 1908.

Taking risks for expansion has also been an ongoing characteristic of the company since Wrigley’s passing. For example, the company opened additional factories in Santa Cruz, California (1954) and Gainesville, Georgia (1971). It also bought out the Life Savers(R) brand, which had been introduced in 1912 by chocolate maker Clarence Crane as a “summer candy” less susceptible to melting. Today, Wrigley is in more than 40 countries, and its products are distributed in more than 180 countries.

6. He was willing to accept social responsibility.

Wrigley’s focus was not just on making money for himself; he had a sincere desire to do good for both his employees and the public. In 1916, he established a “health and welfare department” for his employees. In 1919, the company went public, and Wrigley offered his employees stock, giving them a stake in the company’s success and adding another incentive to work hard. In 1924, Wrigley became one of the first American companies to give employees a five-day work week with Saturday and Sunday off, and he offered employees a $300 paid-in-full life insurance policy after three months of employment, not a small benefit in the Twenties.

Wrigley’s public spiritedness continued in the company beyond his death. During World War II, sugar rationing prevented the production of the high-quality gum that the public had come to expect, so Wrigley suspended domestic sales of the regular products and devoted that production to military personnel. It introduced a substitute, Orbit(R), for the domestic market. To keep the company’s main brands in the public eye, the company ran a “Remember This Wrapper” ad campaign. They reintroduced Spearmint(R) and Juicy Fruit(R) in 1946 and Doublemint(R) in 1947.

7. He recognized the importance of advertising.

Perhaps Wrigley’s real genius was his recognition of the importance of advertising and how it could be used. His offer of incentives, of course, was one smart use of advertising. But in 1915 he pioneered direct marketing when he sent free samples of gum to every name listed in the phone books of the nation. He later distributed Mother Goose booklets to children on their second birthday. He also arranged for the distribution of the booklets in schools, especially in poor areas, as an aid to learning.

Wrigley became known as the father of modern advertising. His advertising savvy grew with the company. In 1939, the company began the concept of the Doublemint(R) Twins in advertisements, and it developed into one of the most successful and longest-lasting campaigns ever. At first, they featured double piano players, double violinists, and even double-talking comedians. But the apex was the introduction of actual twins, Joan and Jane Boyd, in 1961-64.

When William Wrigley Jr. died on January 26, 1932, his net worth was approximately $34 million. That was a long way from the $32 he had brought with him forty-one years earlier!

In 2008, Wrigley was bought out by Mars, Incorporated, one of the largest family-owned businesses in the nation. Mars operated on five principles: quality, responsibility, efficiency, mutuality, and freedom. William Wrigley Jr. would be proud.

(All quotations are taken from http://www.wrigley.com/global/about-us/the-story-of-wrigley.aspx and http://www.wrigley.com/global/about-us/heritage-timeline.aspx.)