Conflict, Perception and Bodegas

I heard the following story on NPR the other evening. My recount is from memory so I'm probably missing some details and embellishing others. Hopefully the point comes across anyway.

The story dealt with two well-established companies, their brand perception, and the internal conflicts facing each company as it's surroundings changed.

Any well-established company has a number of clients who have been with them since the beginning. It's true for iMarc. It's true for Pacific Green Gourmet. And it's true for Papa & Sons.

Pacific Green and Papa & Sons are neighborhood bodegas – small grocery stores – in Brooklyn. They are in different neighborhoods but are only separated by three miles.

Both neighborhoods are going through gentrification. Rents and housing prices are rising. In the neighborhood Pacific Green calls home, housing prices have doubled in the last four years. Many long time residents can't keep up, so they move out.

As each neighborhood becomes more upscale, the bodega owners see less of the old-time, local residents and more of the newer, wealthier residents. In the business world, you might equate this to getting larger clients or bigger deals.

The owners of the two bodegas found themselves in similar situations, but handled their business quite differently.

Pacific Green went all in. They stopped selling 99-cent tuna in favor of $20 imported tuna. They cleared their shelves of Campbell's and Progresso soup in favor of Wolfgang Puck Organic soup. Pacific Green's owner periodically traveled to stores in wealthier neighborhoods to check what was selling. There's not a Milk cooler in Pacific Green anymore—it's labeled, Organic Milk.

Papa & Sons took a different approach—the same approach that kept them in business for the past 15 years. Papa & Sons asked their clients what they wanted. In doing so, they ended up trying to cater to both their long time clientele and their newer wealthier neighbors. So far, selling organic free-range eggs along side Hormel Spam hasn't seemed to work.

Papa & Sons has twice the physical space of Pacific Green, but only does half the business.

One of the new residents in Papa & Sons' neighborhood was quoted as saying, "The fact that they have so many low-end products doesn't appeal to me. They sell Spam. I can't shop in a place that sells Spam."

That quote sums up brand perception. To customers, the company – and therefore the brand – is about feeling comfortable with the products on the shelf. Do people of my status shop here? Are the other customers and clients like me?

"They have so many low-end products..."

That quote also sums up a business' growing pains and the conflict between what got the business going versus where the business could go. Obviously, it was too difficult for Papa & Sons to clear out their low-end products.

How could Papa & Sons stop selling Spam or Ramen noodles or 99-cent tuna? Wouldn't that be a disservice to their long time customers? I wonder if the owner of Pacific Green had similar thoughts as he cleared his shelves of affordable goods, making way for fancy, organic, imported goods.

This conflict is amplified for the well-established business. A business that has been around for a while, like the neighborhood bodegas, correctly feels an obligation to its long-time customers. How can you abandon the customer who's bought your 99-cent tuna for the past 10 years and embrace the new face who's willing to pay $20 for tuna? Papa & Sons couldn't while Pacific Green did exactly that. As stated above, Pacific Green now does twice the business in half the space.

Conflict.