Joe's 'Net Promoter' score drops, but his ranking improves. What gives?

Satmetrix, a company that specializes in measuring customer satisfaction, just released its 2013 Net Promoter Industry Benchmarks study, and Trader Joe’s shoved the much-loved-in-the-Northeast Wegman’s chain off the top of the ‘grocery’ category list. That’s the good news, but the bad news is that while Trader Joe’s rose one position, its ‘Net Promoter’ score has actually dropped.

The Net Promoter score is based on a survey of 20,000 consumers. Each consumer ranks the brands in the survey from 1-10 based on their own arbitrary feelings of satisfaction. The number of consumers who rate a brand from 1-6 is subtracted from the number of consumers who rate it 9 or 10.

Trader Joe’s score was 63%, which suggests that for every person with mild-to-middling negative feelings about the brand, there are two people with strongly positive feelings. That was enough to put it at the top of the grocery category. The average of all grocery stores was a measly 36%, suggesting that overall negatives outweighed positives by 2:1.

Costco scored an impressive 78%, but Satmetrix classifies it as a department store.

Both Trader Joe’s and Wegman’s scores dropped in 2013; TJ’s fell by 10 points, while Wegman’s 20-point drop caused it to fall from first to fourth in the grocery sector. According to Satmetrix, an analysis of the full survey response suggests that Wegman’s relatively premium prices were at fault when customers said they would not recommend it.

Another factor in the fluctuating scores, however, are the statistical limitations of a 20,000-customer survey. That sounds like a significant sample. However, there’s ample evidence to suggest that most grocery shoppers do not travel far to buy food. Trader Joe’s has less than 400 locations, while Wegman’s operates in a strictly limited geographic area. Satmetrix’ report summary doesn’t cite the number of consumers who responded to questions about Trader Joe’s, but since TJ’s sells roughly 1% of the groceries in the U.S., the survey probably only reached a few hundred regular TJ’s shoppers, at most; with such a small effective sample size, it’s likely that the fluctuation is inside the margin of error.

Trader Joe's beards the lion in its den

We note that Trader Joe's, which only recently arrived in the state of Texas, has yet to open it's first Austin store, but has already announced a third Austin location. By my count, the chain will have as many stores in Austin (population <1M) as it has in the Dallas-Fort Worth area (population >6M).

The strong showing in Austin probably reflects TJ's corporate assessment of Austin's lefty-liberal skew. In the rest of Texas, they call it The People's Republic of Austin. But it's also a direct dig at Whole Foods, which is based in Austin.

The two stores are very different, of course. Whole Foods carries far more SKUs, pays vastly more attention to fresh products and national brands, in much larger stores; it's premium priced, too. But, having worked at Trader Joe's, I can tell you that a lot of people come into Trader Joe's stores and load their groceries into reusable bags carrying the Whole Foods logo.

While I'm on the subject of rival grocery chains... There are persistent rumors that Trader Joe's, or Aldi, will acquire Tesco's failed Fresh & Easy chain here in the U.S. That could make sense, I suppose. (After all, I was one of the first people to suggest it.) But a more interesting development would be for Whole Foods to use Fresh & Easy as a platform to fight Trader Joe's on it's own small-store/restricted SKU/own brand territory.

With the backing of Whole Foods, Fresh & Easy could position itself with far stronger organic/sustainable credibility, and encourage Trader Joe's customers to look closer at their favorite stores' environmental credibility.

It deserves its "Whole Paycheck" nickname, but Whole Foods kicks Trader Joe's butt when it comes to produce. The Austin-based chain also maintains far better transparency on environmental issues. That would be a point it could exploit, if it ever really wanted to aggressively go after Trader Joe's erosion of Whole Foods' customer base.

Lawsuit labels Trader Joe's as liars

I see on the Huffington Post that Trader Joe's will have to defend itself in a class-action lawsuit over misleading labeling. Specifically, the suit refers to 'evaporated cane juice', listed as an ingredient in Trader Joe's yogurt. Evaporate cane juice, by another name, is simply sugar.

'Evaporated cane juice' = sugar. Although much commercial sugar is extracted from beets, sugar from the two sources is chemically identical. In fact, virtually all sugars are nutritionally identical. But 'evaporated cane juice' certainly sounds a lot healthier than 'high-fructose corn syrup'.

Although the U.S. Food and Drug Administration has officially banned the use of the term, but Pierce Gore* - a San Francisco-based consumer affairs attorney who has launched dozens of similar suits - claims Trader Joe's continues to use the term in a fraudulent attempt to make its prepared foods appear healthier than they really are.

I was interested to read some of the comments that appeared on Huffington's post about the suit, because they underline key points that I made in Build a Brand Like Trader Joe's -- mainly that the company's devoted fans will leap to its defense even when, as in this instance, critics have a solid case.

One poster asked, "How stupid would consumers have to be, not to realize that 'evaporated cane juice' was just another name for sugar?" Obviously, Trader Joe's doesn't think consumers do know that it's just another name for sugar; if they did, they'd just list 'sugar'.

Another pointed out that since a lot of sugar comes from beets, which are often GMO, by listing evaporated cane juice, Trader Joe's was reassuring customers of the non-GMO source of the sweetener. Leaving aside the fact that there is no genetic material in sugar, rendering GMO fears moot, that defense begs the question, why not list 'cane sugar' as the ingredient? Doing so would obviate any criticism of disingenuous labeling.

When I worked at Trader Joe's, I rolled my eyes when I saw that 'evaporated cane juice' ingredient. Notwithstanding Trader Joe's ardent defenders on HuffPo, the truth is that the company actively seeks to abet the conflation of terms like 'all natural', 'organic', and 'healthy' in its customers' minds.

Prepared foods account for the lion's share of Trader Joe's profits, and per square foot, the frozen foods section is the most profitable section of the store. And while virtually everything in there is 'all natural', and much of it is 'organic', those convenient meals are loaded with fat, calories, and especially sodium. (When I was being trained, I was warned that one question I was bound to get was, "Why is there so much salt in Trader Joe's foods?" I was told to answer that Trader Joe's never used artificial preservatives, and salt was necessary as a natural one." I was, like, Yeah but we're talking about food that's frozen.)

For those in the know, Trader Joe's spokesperson Alison Mochizuici's official statement that the company won't comment on pending litigation is kinda' funny; the company won't comment on anything, more like it. Gore, the lawyer, will either win this one or force Trader Joe's to settle and change at least one (highly) questionable labeling practice. If the management is smart, it will take this opportunity to bring both labeling and, over time, formulations of prepared foods into line with the perception people have of the brand.

*Yes, he's the Al Gore's cousin.

Message to retailers: Greedy for increased profits? Then pay rank-and-file staff more

Costco's CEO Craig Jelinek is an outspoken proponent of an even-higher minimum wage than the one proposed by Obama in the most recent State of the Union address. Costco is, in fact, a sort of poster child for higher salaries for front-line retail employees.

Most retail employees earn less than Obama's wished-for $9/hour minimum rate. And while Republicans howled that raising the minimum to that level would bankrupt businesses or, at the very least cause them to stop hiring altogether, Costco's latest quarterly report proves that it's far-more-generous pay-and-benefits package hasn't hurt profits. In fact, Jelinek believes it's helped the retail giant to a quarterly profit of $537 million -- a 35% increase over the same quarter last year. By coincidence, Costco's per-employee profit is about $10,000, which is about 35% more than Walmart's.

Vice-President Joe Biden was disappointed that Costco didn't carry shotgun shells, but otherwise pleased that Costco co-founder Jim Sinegal (center) and current CEO Craig Jelinek generally support progressive policies. Jelinek recently suggested that $10.10/hour would be an appropriate minimum wage.

The average Costco worker earned $45,000 last year -- almost triple the average employee of Sam's Club (a similar warehouse store owned by Walmart). The majority of Costco's full- and part-time workers are covered by health insurance, too.

According to Jelinek, “At Costco, we know that paying employees good wages makes good sense for business. Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty."

While Trader Joe's will never release profitability figures, it's certainly another highly profitable retailer that offers far better than average salaries to customer-service staff. When I was researching my book, Build a Brand Like Trader Joe's, I found tons of evidence to suggest that the correlation between higher wages and higher profits is general; it's not something that only works for certain retailers, like Trader Joe's and Costco. In Trader Joe's case, higher wages allow the chain to selectively hire the kinds of employees who will build the store's unique, idiosyncratic brand, too.

Lots 'o people love Trader Joe's. But not like Nico Lang

Millions of people love Trader Joe's. I wrote a whole book about how that happened. But Nico Lang -- whose work often appears on Chicago's NPR mega-station WBEZ -- has taken TJ's love to a new level, pledging to marry Trader Joe's.

I don't know whether Nico wants to marry the entire chain, or just one Chicago store. Or, if Illinois approves gay marriage, maybe he'll marry Joe Coulombe (though I doubt the original 'Joe' is up for it.)

In a long post on the well-written Thought Catalog blog, Lang rhapsodizes about the marriageability of Trader Joe's, comparing it favorably to such presumably marriage-worthy stars as Ryan Gosling and George Clooney.

Nico's essay may be tongue-in-cheek, but it's interesting to me that he makes a couple of points that I made in my book. (I'm not saying he listened to my interview on WBEZ, but he might have...)

You might think that we’re in the honeymoon period and that I can’t see your flaws, but I accept you — for whatever you throw my way. Is that price not correctly marked? Is the food not always as healthy and organic as it appears? You think that I just see food that tastes good and don’t think about the politics behind it? I know why I have to travel from my “diverse” neighborhood a half an hour by bus to get to you, and why you only seem to be located in “white” neighborhoods. I understand food deserts. I know what your deal is.

I’m ready for a real relationship with you, which means calling you on your bullshit and knowing that your parents (or society) made you this way. They screwed you up, but we get better when we help each other. I see the good in you and know that sometimes instead of throwing the food that has “gone bad” away, you donate it or leave your dumpsters open for garbage pickers to reduce your food waste. You’ve got some baggage, but you’re also a force for good in the world. You care.

What fascinates me still, is that Trader Joe's fans cut the chain so much slack, in exactly the way that we excuse flaws in our friends that we'd find totally irritating in strangers. When he says, "Is the food not always as healthy and organic as it appears? You think that I just see food that tastes good and don’t think about the politics behind it?" it's as if he's been reading this blog.

Nico has an idealist's view of marriage as something you work on. "Is the food not always as healthy and organic as it appears? You think that I just see food that tastes good and don’t think about the politics behind it?" The implication is, of course, that Trader Joe's will actually listen.

"We have to talk" is not something that Trader Joe's famously close-mouthed senior management is ever going to respond to...

Liberals biased towards Trader Joe's? Conservatives for Walmart?

A recent story on the Pacific Standard web site -- which has since been repeated on the Huffington Post and many other aggregators’ sites -- purports to ‘explain’ liberals’ bias towards stores like Trader Joe’s, and conservatives’ bias towards Walmart.

Color me skeptical.

The underlying academic study was published by a researcher named Vishal Singh in the journal Psychological Science. It was, in fact, not a study of Trader Joe’s vs. Walmart per se, or the two chains’ customers. Rather, it associated religiosity and a tendency to vote Republican in conservative-leaning counties with those counties’ consumers’ tendency to favor branded over generic products. 

The research was a bland piece of statistical meta-analysis. Journalists who picked up the story turned it into a meme by leaping to the conclusion that it provided scientific confirmation of their own opinions about Trader Joe’s and Walmart customers.

From my perspective as an expert on Trader Joe’s, the conclusion is flawed. It was wrong to cast Trader Joe’s as a supplier of generic products, for the simple reason that to Trader Joe’s customers, ‘Trader Joe’s’ is a highly-desirable brand in its own right.

I’m not surprised that the ‘journalists’ who repeated Pacific Standard’s flawed conclusion believe that liberals are biased towards Trader Joe’s. Until very recently, almost all Trader Joe’s stores were located in blue states. Likewise, Walmart stores tend to serve consumers who live outside of the U.S.’ largest urban centers. (There’s not a single Walmart anywhere on the San Francisco peninsula, nor is there a Walmart anywhere in Manhattan or Brooklyn.) If there are no Walmart stores in such big liberal enclaves, it’s not surprising Walmart customers skew conservative.  

The truth is always more complex. 

The Trader Joe’s store where I worked, in Kansas City, served a diverse population. Two miles to the east, there was a neighborhood that was poor, high-crime, and mostly African-American. I served lots of customers who Mitt Romney would have happily characterized as congenitally Democrat -- members of the 47% of the population subsisting on hand-outs. Two miles to the west of my store was the posh suburb of Mission, KS. You can be sure shoppers coming from the west voted Republican. 

I’m not surprised, either, by the sketchy merit of the underlying study, in spite of Psychological Science’s claim to be one of the top-10 peer-reviewed journals in its area.  This study’s not based on actually observing the purchasing habits of conservative consumers, or even on surveys of such consumers. 

Singh’s study analyzed “a comprehensive database that tracks weekly store sales of thousands of products. Focusing on 416 counties which collectively represent 47 percent of the U.S. population, they calculated the market share of generics in 26 categories, including coffee, deodorant, and peanut butter.” Reports don’t suggest the researchers are capable of parsing the subtle distinction between ‘generic’ and ‘own-brand’ products.

I don’t know enough about the database to comment on the likelihood that it reflects total consumption. But even if the database included all grocery purchases -- which it certainly doesn’t -- Singh merely proves that counties in which a high percentage of the population self-report as religious and/or Republican are also counties in which sales of generic products (and newly introduced branded products) lag. Singh’s research doesn’t -- and can’t -- prove that those religious and/or Republican consumers are the very same people eschewing generics.

In fact, the research doesn’t actually prove that anyone is rejecting generics. What it proves is that academic psychologists don’t know anything about the grocery business.

Walmart, for example, is the largest grocery retailer in the U.S., and it concentrates on selling national brands and deemphasizes generics. As noted above, Walmart skews rural-to-small-city. Religiosity and Republican voting patterns also skew that way. So, an inverse relationship between generic products and religiosity/Republicanism is an expected association, and doesn’t necessarily mean those religious, Republican consumers are consciously avoiding generics. It only means that the stores where they shop push brands, not generics.

Two Buck Chuck goes to $2.49 in California, but I doubt it will get 20% better

A price you won't see again, even in California.

The Mayan Apocalypse prediction was a flop, but shortly afterward, we did get evidence that the end of the world is near. Yes, Trader Joe's has finally raised the price of its famous 'Two-Buck Chuck'. Yes, Charles Shaw wines will henceforth sell for $2.49 in all California Trader Joe's stores.

We called it 'Two Buck Chuck', but Charles Shaw wines always sold for $2.99 at my store here in Kansas City. Pricing varies based on state-by-state liquor taxes and transportation costs. According to NBC, the highest price was $3.78 in TJ's stores in Ohio.

Still, Trader Joe's was desperate to hold the original $1.99 price as long as possible in California. I'm sure they squeezed Fred Franzia as hard as he squeezed his grapes, in order to control that cost.

Honestly, I had trouble recommending it at any price. All batch processed wines vary, and while I occasionally tasted a Charles Shaw wine and thought it was decent at the price, I more often found it undrinkable. There are more than a few people who call it 'Two Buck Upchuck', but I think that's a cheap shot. (I did occasionally cook with it, and you can usually use it as the basis for a decent sangria.)

We sold several $5-$10 wines that were easily twice as good as our $2.99 Charles Shaw stuff. I always advised customers to buy something twice as good and drink half as much of it.

However, if you're really desperate for the cheapest possible booze, buy one bottle and taste it. If you like it, immediately buy a case or two. If you don't like it, try again in a month. It really varies quite a lot from batch to batch.

In the meantime, if you want to remember the good old days, when Two Buck Chuck was really less than two bucks, you can read a great article about industrial winemaker Fred Franzia and the creation of Charles Shaw wines here, in the digital archives of New Yorker magazine.

It remains to be seen whether Trader Joe's abandonment of the $1.99 price point will release other discount winemakers, like Barefoot, to raise their prices, too.

UPDATE

According to the unusually loquacious Alison Mochizuki, spokeswoman for Trader Joe’s:

We work hard to have every item in the store at an intersection of quality and price that highlights outstanding value. In general, our retail prices change only when our costs change.

We’ve held a $1.99 retail price for 11 years. Quite a bit has happened during those years and the move to $2.49 allows us to offer the same quality that has made the wine famous the world over.