The Dealmaker: Jon Wendel

MARK HAMSTRA

Jon Wendel took the top marketing post at Hy-Vee in late 2008 just as the entire economy took a nosedive and the country was mired in recession.

Jon Wendel

The longtime company veteran stepped up to the challenge, however, and helped coordinate an aggressive series of sharp price promotions that drove volume during the downturn, and at the same time he took a proactive stance on the chain's approach to Web-based marketing.

Because of his success in growing Hy-Vee's sales and his shift toward more advanced electronic marketing, SN has named Wendel its 2010 Marketer of the Year.

“When I got the job, with the economy being as bad as it was and the amount of inflation we were having with fuel, I sat down and said, what are we going to do?” Wendel recalled in an interview with SN. “We are basically an upscale operator, with high-low pricing, and I knew we were going to have to do something with our price image.”

Wendel said he sat down with Randy Edeker, who has since been named president of the company, and came up with the concept of “Red Hot Deals,” an aggressive limited-time offer pricing campaign though which the company sought to drive high unit-volume movement.

The new campaign, which kicked off in January of last year, also encompassed a stronger shift toward TV advertising in response to the general public shift away from traditional newspaper readership.

“The gist of what we said in the commercials is this: ‘We know the economy is really tough, and we are working day and night to bring you red hot deals,’” Wendel explained.

The campaign soon proved successful in driving product movement, he said, and although competitors seemed slow to react at first, they have since become more aggressive themselves.

Hy-Vee's sales were up more than 3% in 2009, to $6.4 billion, according to SN's Top 75 list, which is published in this issue. The company operates 228 stores in eight states.

Wendel began his career at Hy-Vee in 1978 at age 16, working as a part-time clerk in a Hy-Vee store in his native town of Waterloo, Iowa. He worked at three other locations before being named a store director at a Hy-Vee in Newton, Iowa. He was then a director of two other stores before moving into the corporate offices in West Des Moines, Iowa, in the produce purchasing department.

He later oversaw all purchasing for the company and served for a time as vice president of perishables and as vice president of general merchandise. He was named vice president of marketing in 2008 and senior vice president of marketing later that year. He was also recently named to the company's Hall of Fame after being selected as both a store director of the year and officer of the year by his peers.

One of his first efforts as head of marketing was to integrate the company's marketing, communications and events management functions, which now includes a staff of 12, up from just four a year ago.

The autonomy that is part of Hy-Vee's culture allows ideas to percolate up from the entire staff of 55,000, Wendel explained.

“Listening to our people is very important,” he said.

With that autonomy can come a lot of responsibility, Wendel said, but he recalled stepping up to the challenge early in his career.

When he was first asked to move into the corporate offices by the chief executive officer at the time, Ron Pearson, Wendel said he knew very little about the produce he was now being asked to purchase.

“As a store manager, we had a produce manager, and I trusted him to do a great job,” Wendel said. “And then I was being asked to come and lead the direction for Hy-Vee. But Ron Pearson was very clear when he brought me in that I could make the call to do anything I wanted to.”

One of his first decisions was to start working directly with some major produce suppliers, rather than going through brokers.

“We used to buy for price in produce, from whoever gave us the best deal,” Wendel explained. “But I took a little different stance. I thought that people really buy produce for quality. We got out of the price game and took a stance on buying quality.”

The company decided to partner with branded names in produce, including Dole and Driscoll.

“That job taught me a little bit about marketing,” Wendel said.

Limited-Time Offers

One of the biggest marketing efforts Hy-Vee rolled out in the last year was the limited-time super-sale, including one that was for six hours only. This past Sunday, the chain was planning an updated version — a 12-hour sale, from 8 a.m. to 8 p.m., in which all the specials end in the number eight.

“I have family and friends telling me they can't believe the deals they are getting at Hy-Vee,” Wendel said. “People used to sing our ‘smile in every aisle’ jingle, but now people are talking about how great these Red Hot Deals are.”

The newly aggressive pricing stance also caught the eye of suppliers, Wendel explained, who were more than happy to offer sharp deals on items that the chain can move in high volume.

“We told suppliers, if you give us an aggressive price, we are going to run it aggressively,” he said. “When the suppliers see that you are willing to drive volume, all of a sudden they are willing to start giving you deals. They know if they can move 150 truckloads of Ragu or 100 loads of peanut butter for a 1-A deal, they are going to go with who can move the product.

“If you can make the top 20 companies grow their sales 15%, that takes care of everything,” he continued. “And we spend a lot of energy trying to make sure our suppliers are happy.”

Individual store directors — who operate with a high level of autonomy within the Hy-Vee system — were a little more hesitant to embrace the approach, Wendel said, although they soon came around.

“We had some store directors saying, ‘Oh no, we have this new VP of marketing, and he's going to make us go broke,’” Wendel quipped. “But it was great to see how we all came to together, and people started to see that we could be this aggressive.”

The company also became more aggressive in 2009 in promoting the value of buying entire meals at the store, kicking off a series of monthly meal deals with a steak fry — a sirloin steak, a baked potato and corn on the cob for $5. This year, Hy-Vee will take those promotions “to the next level,” Wendel said.

“They were one of the first chains who really ‘did the math for customers,’” said Neil Stern, senior partner at consulting firm McMillan Doolittle, Chicago. “As the recession started to sink in, I think supermarkets needed to — and still need to — recast themselves and make clear the value they can get from shopping at a supermarket vs. other alternatives, like eating out. While supermarkets are battling for share against other supermarkets, they are also battling for share of stomach with restaurants, and I think Hy-Vee did a very, very good job of making that clear for the consumer.”

Jon Hauptman, a partner with Willard Bishop, Barrington, Ill., noted that Hy-Vee has always done a good job promoting private label — not only its own brands but those of its Skokie, Ill.-based supplier, Topco.

“In-store, they do a nice job of highlighting Midwest Country Fair as the best value in the category, and they often highlight Hy-Vee brands as being the best seller in the category, thereby sending a message to shoppers that there isn't a lot of risk in trying the Hy-Vee brand since it seems to sell quite well,” he said.

He also said Hy-Vee provides a good example “that you don't have to be fancy to communicate price and value.

“Their signage and their messages are not fancy or dramatic, but they are eye-catching and appear to be effective.”

Online Marketing

While Wendel took Hy-Vee more heavily into the online marketing world in 2009, the best is yet to come, he told SN.

“In 2010, Hy-Vee will make drastic moves in the ways customers receive information — from Hy-Vee.com, Facebook, Twitter, TV and radio,” he told SN. “Forever in our industry it has been about sticking an ad out there on Wednesday and leaving it there, but that generation is moving on, and uses things like Facebook and Twitter.

“We are going to move pretty quickly on this,” he added. “Starbucks is pretty awesome in the way they do this, rewarding their customers daily with different things, and Hy-Vee is going to move that way fast this year.”

To accommodate the changes, Wendel has also been beefing up the marketing staff. A year ago, the company had one staffer handling the website, and that person was also handling other responsibilities in graphic design. Now there are two people working on the site, and Wendel said he thinks the company might add more.

“I think we might need three or four just to stay up with HyVee.com so it is fresh and cool and sexy every day that somebody wants to go see it,” he said.

As part of the transition, the company has shifted 50% of its weekly print ad to the website, and the print ad refers readers to the website to find additional deals.

In one two-day promotion the company conducted earlier this month, Hy-Vee used no print media at all and instead promoted the event entirely through electronic media: TV, radio, the website, Facebook and Twitter.

In 2009, as Hy-Vee shifted a large portion of its print-ad budget into TV and into the redesign of the website, the company saw a 40% increase in Web traffic, a Hy-Vee spokeswoman told SN. In addition, subscriptions to the company's electronic newsletters more than doubled.

“In my opinion, leveraging the power of online communication and social media is the next big idea to strengthen communication and drive trips,” said Hauptman of Willard Bishop.

Hy-Vee also recently began looking into a rewards-card program — Hy-Vee does not use a loyalty card — and is eyeing further testing around the middle of 2010.

“Instead of rewarding with lower prices on particular items, it will reward you for shopping at Hy-Vee in other ways,” Wendel said. “It will reward you with gas and other things.”

Sports Marketing

Another big change in Hy-Vee's marketing department in the last year was the company's new, multi-year sponsorship of the Kansas City Chiefs football team, succeeding local operator Price Chopper as the supermarket sponsor. The effort included posting 28 billboards around the city and other efforts.

Hy-Vee has a long history of sponsorships of professional and collegiate teams in its marketing areas, including the Kansas City Royals baseball team, with which it also inked a new multi-year deal. Colleges it partners with include Iowa State and the University of Iowa, and now the University of Wisconsin in Madison, where the company opened its newest store last year.

The tie-ins with sports teams help to get across the company's strong health image, Wendel explained. Perhaps the biggest sports-marketing tie-in the company has is with the Hy-Vee Triathlon, the largest event of its kind and a qualifier for the Olympic event.

In keeping with its strong emphasis on health, Hy-Vee was also one of the first chains to roll out Topco's NuVal nutritional labeling system.

New Markets

One of the unexpected tasks Wendel faced in his role as the top marketer in the last year was the company's opening of the new store in Madison, Wis.

“When we entered that eighth state, we knew we had to put in a special marketing plan,” Wendel explained. “We did everything from billboards to placing 25,000 sacks of Hy-Vee private-label products on door handles. You and I know who Hy-Vee is, but Madison, Wis., didn't have a clue.”

It turned out to be one of the biggest openings in the history of the company, he explained.

“It was the first time in my history with the company that we ever put a specific marketing plan to open a new store, from billboard to radio to TV,” he said. “I think what we leaned from this is that we will probably do it every time we open a new store, not just when we go into new markets.”

The Madison plan, he said, unfolded over five weeks, with each week bringing new messages about the store, which also was the company's first Leadership in Energy and Environmental Design (LEED) certified supermarket.

“I think we can do an unbelievable job of opening new stores, and working on our health and community image, just by talking to customers in advance,” Wendel said.

Another important component of Hy-Vee's marketing is its community involvement, and that too benefits from the decentralized, autonomous structure of the company, Wendel explained.

Last year, for example, some Hy-Vee employees came up with the idea of sending local World War II veterans to Washington to see the new war memorial. The “Honor Flight” program, as it was called, ended up costing Hy-Vee about $500,000 for two flights.

“Anyone in our company will tell you the response we got in terms of emails and feedback was the most overwhelming thing we've ever seen,” Wendel said.

The idea came from a group of people at Hy-Vee who just took the initiative upon themselves, he explained.

“They didn't have to go ask 50 people for approval, they just went ahead and did it,” he said. “Our autonomy runs very deep at this company.

“The reason this company is successful is not that it's the top telling the bottom what to do, it's the bottom telling the top, ‘Hey we need hot prices,’ and then believing in it. It's a marketing effort by the whole company.”