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The Biz Roundup April 11 & 12

We shoulda said “so long” so long ago.

Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses. Others are leaving because of culture clashes at merging companies, like Bank of America and Merrill Lynch, and still others are simply retiring early.

(“Crisis Altering Wall Street as Big Banks Lose Top Talent,” New York Times, April 12) I have said it a million times on this blog: if there’s one thing this crisis has focused a klieg light on, it’s that the finance industry compensation system is seriously broken, skewing benefits in such a way to misalign the interests of managers and traders away from the interests of stockholders and, well, the rest of us who are wittingly or not chained to the same roller coaster ride. Wall Street and Hollywood share one thing in common — I have lived in both worlds, so I know — there is no shortage of talent willing to rush in when people rush out. Like the most exclusive clubs in L.A. or New York, the line goes out the door and most people aren’t let in. (And both Hollywood and Wall Street have hopelessly screwed-up compensation systems that frequently reward long-term failure — just look at what the studios pay Will Smith for the privilege of losing millions of dollars.) The first order of business isn’t bank regulation, it’s fixing the compensation system. Like it or not, that begins with a “brain drain” of the folks who achieve in the wrong direction, so to speak, and filling it (easily) with equally great talent that pins ambition on achieving in the right direction.

I’m not sure I’d eat at Denny’s even at the low, low price of “free.”

To lure customers in the midst of a recession, Denny’s has turned to a radical strategy: giving away the store. On February 1, the 56-year-old company aired a Super Bowl commercial that promised free Grand Slams to anyone who walked through the door from 6 a.m. to 2 p.m. on Feb. 3. Denny’s, which is open 24/7, says some two million free meals were served. Pleased with the buzz and foot traffic the February offer generated, Denny’s followed up with the two-for-one food sale on April 8. “We had to do something bold,” says Denny’s CEO Nelson Marchioli. “We said ‘free’ makes a lot of sense to us in this economy — with all the other offers the consumer is getting slammed with, we really need to come out and do something that people will stand up and notice. We need to reacquaint the consumer with Denny’s.”

(“Denny’s: Where The Food Is Free, and Drunks Can Pee,” Time, April 11) Regular readers of this blog know that when the subject of giving away the store comes up, I’ll send them racing over to The Order of the Stick #135. Restaurants, however, are a different kettle of rotting fish. The goal of restaurant marketing is to create loyal, repeat customers, who generate most of the revenues and profits (unless you’re running a stop and slop on a freeway exit ramp). In that case, the key is to convert the deal-seekers into regular clients, to convince them to put your restaurant on their “short list.” And that comes down to quality food and excellent customer service. Now, I would only eat at Denny’s if I haven’t had access to food in a month or so, but if Denny’s or any other restaurant can deliver on the factors that drive loyalty, this is as brilliant and effective a marketing device as any.

So do you think the lines going out the door would inspire Coke to actually market this thing?

“They’re [Passover Coke] quite popular not just with Jews, but non-Jews as well,” said Rabbi Alan Schwartz. The reason — Coca-Cola uses sugar to sweeten the beverage instead of the normal fructose corn syrup. It’s how Coke was made years ago and for many it’s the taste they prefer

Kosher for Passover Coke is usually only in stores around Passover time, so many non-Jewish fans take the opportunity to stock up on it saying they like the “original taste.” Others, including Coca-Cola, believe there’s no significant difference in the taste.

(“Kosher Coke ‘flying off the shelves,'” USA Today, April 8) I have bought Passover Coke several years running. And, every once in a while, when I throw a wild shindig at my L.A. area ranch, I troop on over to the local Mexican grocery, like Vallarta, and stock up on Mexican Coke, which, like Passover Coke, is made with real sugar. I’m old enought to remember sugar-sweetened Coke (back when a HUGE bottle of Coke was 12 ounces.) Coca-Cola’s official response is there is no taste difference, but in blind taste tests I’ve done, people spot the difference 10 out of 10 times and vastly prefer the real thing. Even if there is no difference, why should Coke care? People are willing to drive great distances and pay a premium for sugar-sweetened Passover Coke — isn’t that motivation enough to roll out a premium-priced sugar-sweetened Coke? So is Coke getting the message? They could double the price, increase their margins, and grab market share from Pepsi. Any sales they cannibalize from Coke will go to a higher margin product. That’s a bad thing? Surprisingly, however, it’s not “there-is-no-difference” Coke that’s learning the Passover Coke lesson, it’s Pepsi, who plans to release a sugar-sweetened Pepsi and Mountain Dew in May (with the unfortunate name of “Pepsi Throwback”). Now, sugar-sweetened Pepsi ain’t sugar-sweetened Coke, but it’s much better than corn-sweetened Coke.

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