NEW YORK (AdAge.com) -- After building an impressive resume that boasts stints as former president-chief operating officer of Citicorp, CEO of Medco Containment Services and chairman-CEO of Priceline.com, Rick Braddock has distilled a marketing philosophy that's become the cornerstone of his approach as CEO of FreshDirect. Indeed, Mr. Braddock, 67, had an extensive career before joining the internet grocer in 2005, attracted to its innovative model of delivering fresh food to customers in the New York metropolitan area. And what he's been working to do the last few years is make FreshDirect a company known as much for its customer service as its 2-inch-thick steaks.
While it wasn't the first internet grocery business, FreshDirect, started in 2002, has been able to succeed where others before it failed. But success was elusive initially. "We're at a very good time in our history," said Mr. Braddock, who drives the company's marketing strategy. "We've made a lot of mistakes. We've learned from them. We're growing right through this period. We're making money. To my knowledge, we're the first standalone internet grocer that ever has made money. And we've been in this market for a long time."
The seemingly simple concept -- let consumers order high-quality groceries online that are delivered to their door -- is actually a very complex business, he said. "Because behind the internet, which is usually a very virtual tool, there's actually a real business there that has a lot of complexity to it in making sure that the produce is fresh and the quality of the product is good. Having said that, putting that on the internet gives you a chance to really create a much greater amount of information about your customer, and then to use that information to improve their experience over time with you."
Mr. Braddock's customer focus appears to be paying dividends amid recessionary constraints. He puts FreshDirect's annual marketing budget at around $20 million. In the first half of 2010, the company, claiming revenue of more than $250 million, plans to expand further into Westchester County, N.Y.; Connecticut; New Jersey; and Long Island, N.Y., and in the first quarter it is launching a new testimonial-based campaign using actual customers, rather than celebrities -- like Bobby Flay and Spike Lee -- featured in the past. "Our customers are spoiled. They are telling some of the nice things we're doing for them," Mr. Braddock said.
Mr. Braddock sat down with Ad Age recently to talk about why customer centricity is FreshDirect's most important provision.
Ad Age: What mistakes did you make in the beginning?
Mr. Braddock: We broke a ton of eggs. And we had a lot of late deliveries. If you look backward, you see some really painful moments we had in our past and on a variety of fronts. Learning to fix things once so they stay fixed is a very hard management challenge. We've managed to do that. But I can still to this day show you some comments from customers who were very upset with us for things that we do. We're ashamed of them when they happen. We just try to be better every day.
Ad Age: When you came on board, what brand positioning did you want to solidify?
Mr. Braddock: Early on we got into a view that we wanted to reinforce the idea that our customers were the smart ones. So our tag line is, "Our food is fresh. Our customers are spoiled." We tried to use that as a way to get across the point that we were not only trying to treat them specially, but also that we can never have a zero-defect customer model. We can never be perfect. So we have to convince our customers that in return for the fact that we're going to make some mistakes, we're going to try hard not to, and we're going to give them an experience that in other respects is second to none.
Ad Age: How is that taking a negative and turning it into a positive from a marketing point of view?
Mr. Braddock: It starts with the view that you start with your customer and you work back to the business. The needs that we are fulfilling -- and certainly convenience is one, but there are several others -- you have to understand what that means to your customer, how they define what those various attributes and benefits are, and then deliver on it and measure to be sure you're effectively doing it. You also have to marshal the voice of the customer in a way that is very timely and can be spread throughout the organization. By keeping that customer in front of us every single day, it gives us a chance to understand what we need to accomplish to really do our job well.
Ad Age: How specifically are you doing that?
Mr. Braddock: We use an internet-based research tool; it's a very effective, quick and [in-depth] measurement of customer attitudes, intentions, awareness. We do weekly surveys, monthly surveys at a deeper level, and then specialized surveys for various development activities to improve our business. We do about 140 of these a year. I make very sure that all our company sees all the results.
Ad Age: Does being an internet-based company make taking that approach easier?
Mr. Braddock: Marketing in today's world is broadly sub-optimized when it comes to the internet. A lot of people know that the internet is a free distribution channel, and in other respects, a way that you have to distribute your product. Because if you're not there, someone like Amazon is going to steal your business. But most people don't focus on the fact that the internet is the greatest marketing aid that we've ever had. You are able to know your customers in great depth on the internet, deeper than you've ever been able to know them before. And you're able to operate at a real-time pace. That word "pace" takes many big companies out of play, because the marketing processes in these companies are sort of leisurely. There is still a major opportunity for businesses to rethink their approaches to both marketing and management using these internet values and really inculcate them in the way they should be doing marketing.
Ad Age: Have you had to lower prices or offer new discounts during this recession?
Mr. Braddock: The reality of this environment is that everyone is more value-conscious. Our prices are pretty good, relative to most. Our need is to price ourselves competitively. There are two ways in a troubled economy for a company to do well. One is by aggressively selling value. That's the most evident one. And the people who have succeeded, Walmart, Costco, Amazon, my old company, Priceline, have been there because they offer great deals. But the other way is to be close to your customers and to use the information you have to create a tight bond with your customers. We're trying to use [customer-preference] information in a troubled time to give our customers a feeling we're there for them and that we're giving them a better way.
Ad Age: So clearly, customer service is central to what you offer.
Mr. Braddock: Absolutely. Service is a requisite. I've never run a business where I didn't feel we could get to the zero-defect service, which I used to think was a given. And now I realize it's only a dream for us. We have a lot of hard work to do, and we've made an awful lot of progress in the last year and a half on our service. We really try to keep on top of [the 30 to 40 metrics we measure]. And that's the way we promote ownership of the customer throughout the company, because if the plant doesn't do their job or transportation doesn't do their job, we're not going to give our customers good service. [Customers] don't know the difference; they don't know what plant vs. transportation does -- they just know FreshDirect.