PACKAGING COSTS
 

 

 

 

 

 

 

 

 

 

 

 

Unlike typical cosmetic manufacturers, which sell through drugstores and department stores, Body Shop sells its own franchise stores. Further, in a business in which packaging costs often outstrip product costs, the Body Shop offers its products in plain, identical rows of bottles and gives discounts to customers who bring Body Shop bottles in for refills. The company has succeeded because it is so different from its rivals. Instead of assailing its customers with promotions and ads, it edu- cates them. A great deal of Body Shop’s budget is spent on training store person- nel on the detailed nature of how its products are made and how they ought to be used. Training, which is accomplished through newsletters, videotapes, and class- room study, enables salesclerks to educate consumers on hair care, problem skin treatments, and the ecological benefits of such exotic products as rhassoul and mud shampoo, white grape skin tonic, and peppermint foot lotion. Consumers have also responded to Body Shop’s environmental policies: the company uses only natural ingredients in its products, doesn’t use animals for lab testing, and publicly supports saving whales and preserving Brazilian rain forests.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Another example is provided by Enterprise Rent-a-Car Company. While Hertz, Avis, and other members of the car rental industry were aggressively com- peting to win a point or two of the business and vacation travelers market at rome airports, Enterprise invaded the hinterlands with a completely different strategy—”one that relies heavily on doughnuts, ex-college frat house jocks, and your problems with your family car.” The company’s approach is simple: It aims to provide a spare family car. Say a person’s car has been hit or has broken down, or is in for routine maintenance. Once upon a time, the person could have asked his spouse for a ride or he could have borrowed her car, but now she is commut- ing to her own job. “Lo and behold, even before you have time to kick the repair shop’s Coke machine, a well-dressed, intelligent young Enterprise agent materi- alizes with some paperwork and a car for you.”12 Typically, an Enterprise car rents for one-third less than one from an airport. Instead of massing 10,000 cars at a few dozen airports, Enterprise sets up inexpensive rental offices just about everywhere. As soon as one branch grows to about 150 cars, the company opens another a few miles away. The company claims that 90% of the American population lives within 15 minutes of an Enterprise office. Once a new office opens, employees fan out to develop relationships with the service managers of every good-size auto dealership and body shop in the area. When a person’s car is being towed, he/she is in no mood to figure out which local rent-a-car company to use. Enterprise knows that the recommendations of the garage service managers will carry enormous weight, so it has turned courting them into an art form. The end result is Enterprise has bypassed everybody in the industry. It owns over 400,000 cars and operates in more locations than Hertz. The company accounts for more than 20% of the $15 billion-a-year car rental business, versus 17% for Hertz and about 12% for Avis.