An iconic American brand recently entered bankruptcy: Hostess, maker of “Twinkies,” “Ding Dongs” and other snacks is hoping to restructure its balance sheet and re-emerge to make a new push for profitability.
This is yet another example of how even once-famous brands and “big businesses” are struggling in the new realities of the American economy.
What are some lessons to be learned from the Hostess bankruptcy? And how can today’s entrepreneurs find new ways to do business that will avoid the problems faced by Hostess?
1. Adapt with the times: Hostess is an 87 year old company, but Americans’ eating habits have changed drastically just within the past few years. There is a growing awareness of the health problems posed by obesity, diabetes and other ailments related to eating too many empty calories. More people are eating healthy snacks. More schools are getting rid of vending machines – or insisting that the vending machines serve healthy foods, apple slices and fruit juice. Hostess’s high calorie, sugary snack foods are out of step with the times. While Hostess has tried to introduce some lower-calorie options, it hasn’t been enough to counteract the larger trends away from “junk food.” One of the biggest advantages of being a small business (instead of a big company like Hostess with lots of overhead and entrenched ways of doing things) is that when you’re small, you can remain agile. You can find new and better ways of responding to what your customers need and give them what they want to buy. You can quickly react to change.
2. You need “fans,” not just customers: This is the era of social media, where companies increasingly know who their biggest fans are. When people love a company and its products, they will fight to keep it alive. Just like some movies become “cult favorites,” every company today has the opportunity to build it’s own “cult following” of friends and fans. But who really “loves” Hostess? Who are their biggest fans? It seems like Hostess doesn’t inspire that kind of intense devotion from customers; it’s kind of a bland, mass market company. It’s better to be small and agile, with a dedicated “tribe” of people who love your product. When you own a small business, you can forge a powerful emotional connection with your customers, every day. Who are your business’s biggest “fans?” Ask them to spread the word about what you offer.
3. The end of “mass market?” Seth Godin has a new book called “We Are All Weird” that poses the idea that we are witnessing the end of the “mass market.” Companies like Hostess exemplify the “mass market” – they sell high volume, low-profit margin, inoffensive-but-unremarkable products to a large, indifferent audience. You didn’t seek out Hostess snacks or read about them on a favorite blog, or hear about them on Facebook – you usually just bought them at a convenience store or in the “impulse buy” aisle of the grocery store. Seth Godin believes that with the new era of the Internet and social media, it’s more possible than ever for everyone to be “weird” by having their own little niche areas of interest. Instead of Hostess cupcakes, now there are neighborhood cupcake bakeries. Instead of mass market products on a shelf, more people are seeking out distinctive local flavor. People want to identify with what they buy, and every purchase tells a story about the buyer’s taste and savvy. Hostess is a better fit for the age of “mass market.” Maybe your small business will be one of the success stories of the new age of “weird.”
Many aspiring entrepreneurs worry that their business will be “too small” or that they can’t make it on their own. Don’t worry – there’s never been a better time to be small. In this economy, I’d rather be at the head of a small, adaptable business, than at the helm of a big, unwieldy corporation that is too stuck in its ways.
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