Does Your Company Differentiate by Offering Good Products With Virtue?

If you want to become wealthy, “create good products with virtue.” The man who made that recommendation, Ted Leonsis, should know. As co-founder of America Online, he has repeatedly used that idea to build a financial empire.

But today’s world is so full of non-virtuous products and customer experiences that there are websites, blogs, and government agencies dedicated to sharing information about the perpetrators. Given that, could simply creating good products with virtue provide a major differentiator for a high-performance brand?

As Mr. Leonsis observes, with the unparalleled amount of customer sentiment available to producers today, “there is no reason to have bad products or services.” If only it were so easy. Companies spend many billions of dollars in pursuit silver bullets in the name of Sustainable Differentiation—often with little results to show for the effort. So whenever I uncover a “good product with virtue,” it seems awesomely different.

Do we chronically have examples of non-virtuous products because managers and investors don’t care about having virtuous ones? Because companies don’t know how to produce good products? Because many really smart people simply talk too much? What makes a product “good and virtuous” in the first place? And how can an enterprise exploit such differentiation through its sales and operational strategies?

An example provides help toward answering these questions. I thought back—before Web 2.0, viral marketing, email, data warehouses, even before Internet itself—and remembered how a grocery retailer, Giant Food Corporation of Maryland—deployed “good and virtuous” as a formidable competitive weapon for over thirty years. What differentiated the company? Consistent delivery of quality, value, and service to every customer. More than mere words, these differentiators created complex operational challenges in a demanding, highly competitive business serving a wide demographic.

One highly-effective resource the company used was a Consumer Board, a low-technology tool that was radical and controversial during the early ’80’s, when I served as a board member for two years. As remarkable as it was at the time for a retailer to provide consumers a voice, I learned what was more significant was how Giant delivered its “good and virtuous” differentiation, gaining the largest share of the grocery market in the Washington DC area in the process.

Four important tactics stand out most in my mind:

1. Bring the consumer’s voice to the executive suite. Before any of its rivals did so, Giant not only recognized the primacy of the consumer, but organized its management and operations accordingly. The Giant consumer executive at the time, Odonna Mathews, had the authority to enact recommendations that the board made. Other boards simply provided information to a corporate representative who lacked decision-making authority.
2. Direct senior management involvement with consumers. Izzy Cohen, the Giant CEO at the time, regularly attended our meetings.
3. Tight focus on the needs of individuals and communities. In creating “good and virtuous” differentiation, Giant understood that short-term profits were worth exchanging for customer loyalty. One prominent example was the Consumer Board’s recommendation for Giant to offer tabloid- and candy-free checkout lines, which the chain implemented well before the rest of the industry.
4. Independence between quality initiatives and store-level financial performance measurements. For example, if an ailing freezer needed replacement, the store’s manager wasn’t penalized with the cost of the equipment. Giant’s expenses toward quality differentiation never impacted a store’s profitability. Internal conflicts were eliminated.

The esteem that Giant Food held in the communities it served cannot be overstated. The most compelling story occurred during the riots in Washington, DC following the assassination of Martin Luther King Jr. When hundreds of other businesses were destroyed or damaged, community activists protected the Giant Food stores, all of which survived unscathed. That relationship and commitment could not have been achieved without creating “good products with virtue.” The financial rewards speak for themselves.