Whole Foods is an anomaly.
On the one hand, they’re a $12.9 billion company.
On the other hand, they shun traditional marketing and advertising. (Oh, except for that little “Values Matter” campaign they launched, which was estimated to cost $15-20 million!)
The big question on many marketers’ minds is: Did the Values Matter campaign work, or was it a colossal waste of money?
Furthermore, will Whole Foods’ resistance to traditional marketing put their long-term fate in jeopardy?
I reached out to Joe Dobrow, who was head of marketing at Whole Foods in the late 1990s, to get his insights on the matter. In October 2014 Joe published an excellent article detailing “several inherent flaws” in the Values Matter campaign.
In the following interview, Joe shares his thoughts on why Whole Foods has been so successful, how they could have improved the Values Matter campaign, and what it was like being in charge of marketing at Whole Foods. “Mostly what I did was market the idea of marketing inside the company, instead of marketing the company outside the company,” he admits.
Joe also shares his top piece of marketing advice for organic product companies who want to reach more customers. Enjoy!
ML #1: What made you get into marketing as a career?
JD: I realized I had a natural proclivity for it at a very early age. I think I was in second grade when I organized a fundraiser for a local animal shelter. Throughout junior high and high school my great passion was putting together charitable events and supporting them through marketing. So, though I later dabbled in broadcasting, I guess there was never much doubt what I was going to do for a living.
ML #2: Briefly describe the experience you had in the late 1990s when you were head of marketing at Whole Foods. What was your responsibility at the time?
JD: I was working as the head of marketing at Fresh Fields, a 21-store chain on the East Coast, when we were bought by Whole Foods in 1996. Before long, I was asked to moved to Austin to start up a national marketing office for the whole company. Whole Foods was then, and is still now, very decentralized, so this was a real experiment on their part.
I put together a national magazine, a frequent shopper program, vendor co-op efforts, direct mail and analytical systems – but mostly what I did was market the idea of marketing inside the company, instead of marketing the company outside the company. They just needed to get used to the notion that marketing could be a driver of the business.
ML #3: If Whole Foods was so anti-marketing, why did they hire you as the “head of marketing”?
JD: Their belief at the time was “build it and they will come.” Except in a few unusual circumstances, they did not see the need for traditional marketing because their stores were so unlike anything else anyone had ever seen, they naturally attracted business (they did still do a lot of store-based grassroots marketing). But one thing about John Mackey (co-CEO of Whole Foods) – he is a smart dude. And he never, ever rests on his laurels. So he was open-minded enough to think that maybe some of the things we had done at Fresh Fields could be successful within the larger company, and hence was willing to experiment.
ML #4: Despite the opposition to conventional marketing by Whole Foods’ leadership, the company has been massively successful — it’s now a $12.9 billion company. What do you believe they owe their success to?
JD: Many things – timing, execution, adaptability, the boldness of their vision, and more. If you look back, the company’s growth was modest for a long time. It had fits and starts. Throughout the 90s, the stock price remained range-bound for long periods of time. The market had to catch up to Whole Foods. There had to be more supply, more variety, better packaging, and overall just the willingness on the part of American consumers to accept the notion that healthy food was desirable. (The occasional food scare didn’t hurt, either. See the Alar crisis of 1989.) Once that happened, Whole Foods was poised to become the dominant player.
They execute unbelievably well. The stores are all different, but they maintain a consistently high level of quality and excitement that transformed grocery shopping from a chore into an adventure. And then, each step of the way, they adapted – sometimes rising to meet competitive challenges, or dealing with growing costs and supply side issues, or labor needs, or whatever. Whole Foods is a big company that does things in a very entrepreneurial small-company kind of way. There isn’t another company like it.
ML #5: What did you think of Whole Foods’ Values Matter campaign? How could they have improved it?
JD: The “Values Matter” theme is fine for the mainstream customer (the 95% who have not yet been sold on organic) as a long-term play, but only so long as value is there first. So a better campaign would have been one that emphasized all of the things that Whole Foods does incredibly well – including several things related to price and value – that most people don’t know about, instead of veering off into the philosophical stuff that fueled its growth among the 5% (of consumers who are sold on organic) for so many years.
ML #6: Regarding the effectiveness of the Values Matter campaign, Whole Foods co-CEO Walter Robb said: “The early read is very positive, indicating a 100% increase in awareness for our target audience, with increases in both value perception and intent to shop versus our measured competitors.” Whole Foods subsequently has reported a 10% earnings increase and 10% revenue jump, to $4.67 billion, over the same quarter a year ago.” (Source.)
Do you agree that this increase in sales during the first quarter 2015 is a direct result of the campaign’s effectiveness? Or have sales increased simply because Whole Foods did ANY advertising at all?
JD: I’m not sure. They did have a pretty good first quarter, but the second quarter has not been a good one for them or the natural foods industry as a whole. I know some analysts are saying that maybe the campaign has lost its effectiveness, and now Whole Foods has indicated they will introduce a new format store next year that sounds like it will be lower priced. That could be a brilliant play, but it could also just be an acknowledgement that “values matter” as much as “value matters.”
I think the reality is that whenever a company has been quiet in the advertising arena for so long, and then jumps in, it is going to see an initial response. That’s exactly what happened, and I am glad for it. However, unless the creative is really engaging, the initial bump will be short-lived, and then it’s right back to the hard work of trying to figure out how to win over customers who now have many, many similar choices.
ML #7: In your opinion, does Whole Foods’ refusal to consistently advertise put the company’s long-term fate in jeopardy?
JD: No, but I do think that they have a great opportunity to use marketing as a driver of the business. And they have done that to a certain extent with their grassroots efforts. But they are such smart operators, I could never understand why they wouldn’t want to use other more sophisticated marketing tactics to learn more about their customers, help their vendors, target-market, etc. And now maybe perhaps they are starting to do that.
Also it’s important to note Whole Foods doesn’t love traditional or conventional advertising (mass media) and marketing, but they certainly have been world class at some of the non-traditional aspects (merchandising, brand-building, even social media).
ML #8: Like Whole Foods, many organic product companies also seem to be resistant to marketing and advertising. How would you re-frame the traditional definition of “marketing and advertising,” so that business owners see the value and necessity of it?
JD: Really good question. I think the issue here is that food retailing has traditionally been a business of very narrow margins, so most retailers have limited their expenditures to 1% of sales or even less. If they could get away with spending $0, they probably would. But now we’ve entered into a different world, in which natural and organic foods are available everywhere – Walmart, the conventional supermarkets, the gas station convenience stores, and so on. It’s no longer about product selection; that advantage has been largely neutralized.
Now it’s about education and service and niche products and, unfortunately, price. And in my opinion you can’t win those games without some kind of marketing. I am generally opposed to mass media, because it’s very expensive and too scatter-shot. But if retailers can learn more about who their customers are, what they want, what products they buy together, etc., then they can be smart marketers and get their existing customers to shift their purchases, and find new customers who look and think like the good existing customers. That’s the winning formula.
ML #9: What other marketing-related ventures have you been involved in since Whole Foods?
JD: I left Whole Foods a long time ago – 2000. I wanted to get in on the marketing experience of a lifetime, the dot-com revolution, so I became the head of marketing for Discovery Channel’s various websites. I got to enjoy it for about 9 days until NASDAQ crashed, and then I’ve seemingly spent all the years since then laying off people and figuring out how to do more marketing with fewer resources! Much of that time was in the grocery industry, as the head of marketing for Balducci’s, and then for Sprouts Farmers Market, though I also worked on some other cool ventures in sports and transportation.
These days my real passion is writing. My history of the natural foods industry, Natural Prophets (www.NaturalProphets.com) came out in 2014, and now I am working on a book called Pioneers of Promotion (www.PioneersOfPromotion.com), about four of the great marketing visionaries of the 19th Century. And I do some consulting work to try to stay above the poverty level.
ML #10: What is the top piece of marketing advice you’d give to an organic product company that wants to reach more people?
JD: Be authentic: wear your passion on your sleeve and sound human. Natural foods consumers will respond to that, assuming your product is good. And don’t get suckered in by the promise of social media. These days that looks like a cheap and easy alternative. But it’s very, very hard to convert a low-engagement “like” into a trip to the store.