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Sustainable Profits: TerraCycle’s Quest to Create ‘Negative-Cost’ Marketing

November 2, 2011 by Leave a Comment

Sustainable Profits

The challenges of a waste-recycling business.

TerraCycle has always had an unusual relationship with marketing. We have essentially never spent money on advertising, and we have a big aversion to doing so in the future. Instead, we have tried to leverage the publicity we are able to generate about our unusual business model, and we have taken that one step further to develop what we call negative-cost marketing.

Back when there were just a few folks at TerraCycle, we generated awareness by going to the media and attempting to drum up publicity. On average, in 2003, there was one article written about TerraCycle in a publication somewhere every week. Today, we average 17 articles a day, including weekends. This publicity does have a cost: our media department has an annual budget of around $500,000 per year. But we believe this is by far the most cost-effective way to generate awareness, highly credible awareness. It is the cheapest paid marketing that I know of. But negative-cost marketing is even cheaper. The goal of  this idea is to to create marketing content that promotes the company brand while also generating a direct payment that more than covers its cost.

For example, imagine if you made an usual fabric, like Gortex. What if you developed a do-it-yourself book explaining how to use the fabric to make a rain jacket and 99 other cool things at home? The content would be useful, which is why a publishing house might publish it and consumers might buy it. And it would deliver negative-cost marketing because you would be making money off the book while promoting your fabric.

At TerraCycle, we’ve done similar things. My book, Revolution in a Bottle, about the company’s early days, generated almost six figures in income for the company, while also getting out the word about our products. I’m in the process of writing a second book, and our design team is working on one, too. We’re also producing a magazine that will discuss the science of garbage and suggest crafts projects that make use of garbage (and when readers are done, they will have instructions on how to turn the magazine into a fruit bowl). We are partnering on the magazine project with a publishing house. We oversee production of the content, and the publisher finds the advertisers. Of course, we get a cut of the advertising revenue.

We also recently introduced a Facebook game called Trash Tycoon. The idea is that a game player lands in a city covered in garbage and wins points for cleaning it up. The player can then build recycling facilities, trash cans, and other things that help clean up the city faster. After just one month, Trash Tycoon already has 360,000 active users. The game, which promotes the TerraCycle brand, was developed by Guerilla Apps at no cost to us. We are partners on all of the advertising revenue.

Of course, the ultimate in negative-cost marketing would be to get someone to produce a television show about TerraCycle. We’ve had some experience with this, and we’re trying to do it again. As you might guess, the economics are encouraging. A major network might spend from $250,000 to $1 million per one-hour episode, and if the show is about your company, you, as the “talent,” get to keep somewhere around 5 percent to 10 percent of that. Best of all, the show that is produced is effectively a commercial for your business. Consider what Discovery Channel has done for the boys of Orange County Choppers.

Our own efforts on this front started five years ago. Because we have long thought that TerraCycle’s mission to turn the world’s waste into useful products would make for a great reality show, we went to Los Angeles where we met with agents and ended up signing with a major agency that isn’t around anymore. The agency connected us with a number of production companies, and we chose one that proceeded to create a demo that highlighted the characters and the arc of the show. Our concept was basically a docudrama about life at TerraCycle with each episode focusing on our efforts to find a productive use for a particular waste stream. We subsequently met with 15 networks and were quickly rejected by all of them.

A few years later, a production company came to our offices to film a piece for a Discovery Channel show (the result of our efforts to generate publicity). After we wrapped up, I started chatting with the producer. I asked him to be our production company partner, and he said he was interested. So we shot another demo — the same concept as before, but since several years had passed, we were much better this time around.

The demo got picked up by The National Geographic Channel, which bought a one-hour pilot. It took a full year to go from that initial “yes” to the airing of the first episode of “Garbage Moguls.” And another year passed before the next three episodes were aired. The pilot was about finding a use for  cookie wrappers (we turned them into kites that sold at Wal-Mart). The second episode was about finding a use for pet-food bags (the show’s highlight came when we actually suspended a car on the strength of one bag). The third episode focused on how we turned chip bags into trash cans sold at Home Depot. And the final episode showed us opening our own retail store in Princeton, N.J., as well as helping Target find a way to re-use plastic bags.

Of course, the world of TV can get strange. The episodes on the National Geographic Channel had their premiere back-to-back on a slow night in August last yea,  between marathons of big-game fishing shows. And that is where it ended. For our efforts, we had succeeded in producing a “mini-series,” which is a nice term for four one-hour episodes of a canceled TV show. Still, they have been aired many times, they have popped up in international markets, and they generated more than $60,000 in direct income for TerraCycle.

Now you’ll probably ask: how do you know these negative-cost marketing initiatives actually work. Have you done Neilson studies to prove their efficacy versus traditional advertising? The honest answer is that I have not. What I do know is that we got paid to make them, and they generated major awareness. I’ve been stopped many times in random countries by people who have said they saw our show or read my book. We also find that our Web site traffic increases a lot every time we introduce a new initiative. By contrast, traditional advertising is extremely expensive.

To me, it comes down to a simple question:  Would you rather be the commercial that airs during a TV show, or would you rather be the TV show itself? That is why we recently signed new agents, William Morris Endeavour, and we are back in the hunt again. Stay tuned.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=b61135abc44d1001ee59f877a84f2beb

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Europe Agrees on Plan to Inject New Capital Into Banks

October 26, 2011 by Leave a Comment

In what the leaders described as an important first step, banks would be required to raise about $140 billion by the end of June — enough to increase their holdings of safe assets to 9 percent of their total capital. The percentage is regarded as crucial to assure investors of the banks’ financial health.

The leaders were having more trouble agreeing with the banks on the size of the loss investors will be asked to absorb on Greek debt, which economists agree will have to be written down if the country is to have any chance of restoring growth. Most plans under consideration called for write downs in the range of 50 percent, a leap from the 21 percent previously agreed upon.

Earlier on Wednesday German lawmakers overwhelmingly approved a measure to expand an emergency bailout fund to $1.4 trillion, more than double its current size of about $610 billion. The vote followed Chancellor Angela Merkel’s plea to lawmakers to overcome their aversion to risk and put the might of Germany, Europe’s strongest economy, firmly behind efforts to combat the crisis, which has unnerved financial markets far beyond Europe’s borders.

“The world is looking at Germany, whether we are strong enough to accept responsibility for the biggest crisis since World War II,” Mrs. Merkel said in an address to the Parliament in Berlin. “It would be irresponsible not to assume the risk.”

The $1.4 trillion figure is generally accepted as the likely target for negotiators here, but many questions remained about how the enlarged fund would be financed.

Europe does not face any hard deadline to forge a deal, as it did last month when it had to act to head off a Greek default, but its leaders would like to agree on a definitive plan to address the systemic aspects of the euro crisis rather than issuing vague proclamations as they have so often in the past.

The fear is that at some point, uncertainty surrounding the solvency of struggling countries like Greece and Portugal might infect larger economies like those of Spain and, especially, Italy, in turn raising questions about the solvency of the European banks that lent to them in large quantities. That, in turn, could ignite a panic like the one following the failure of Lehman Brothers, when financial institutions refuse to extend credit to one another for fear their counterparts might be insolvent.

The overall euro deal under discussion is complicated, weaving together the interrelated efforts to restructure Greek debt, inject new capital into Europe’s banks and expand the bailout fund so that it can ward off a financial panic in Italy — the euro zone’s third-largest economy — as well as in the relatively small economies of Greece and Portugal. Attention has focused on Italy because its moribund government seems incapable of responding to the crisis, which has undermined the markets’ faith in Europe’s capacity to solve its problems.

Mrs. Merkel and President Nicolas Sarkozy upbraided Italy’s prime minister, Silvio Berlusconi, on Sunday for failing to following through on his promises of budget cuts and various economic changes, But Mr. Berlusconi, hobbled by an internal power struggle, managed to bring only a “letter of intent” to Brussels outlining plans to implement the kind of economic changes that his counterparts want.

The Europeans also want Mr. Berlusconi to live up to his promises to do more to reduce Italy’s huge accumulated debt — about $2.65 trillion, or 120 percent of gross domestic product, among the highest in the developed world — and to promote economic growth in a largely stagnant economy. While Italy’s annual deficit is modest, the debt overhang means that speculation is driving up the cost of financing that debt, which if unchecked, could tear holes in the budget.

The current crisis has placed Mr. Berlusconi between two irreconcilable forces: his fellow European Union leaders and Umberto Bossi, the leader of the powerful Northern League, who holds the fate of the Berlusconi government in his hands and is bound to Mr. Berlusconi like an inoperable Siamese twin.

For months, Mr. Bossi had refused to back a plan to raise the retirement age to 67, relenting only on Tuesday for everything except seniority pensions, still leaving the government at risk of collapse on the issue. That change had been demanded by the European Union in return for its support.

The European Central Bank demanded various changes as the price for buying up Italian debt at a reasonable, nonmarket price. But as soon as the bank stepped in, Mr. Berlusconi failed to propose a convincing package of measures, let alone put them into effect, infuriating his European counterparts and the bank.

Steven Erlanger reported from Brussels and Rachel Donadio from Athens. Reporting was contributed Stephen Castle from Brussels, Jack Ewing from Frankfurt and Elisabetta Povoledo from Rome.

Article source: http://feeds.nytimes.com/click.phdo?i=ca04d1aecd48c28eea0c67781cc13f9a

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Memo From Berlin: Germans’ Deep Suspicions of Nuclear Power Reach a Political Tipping Point

June 2, 2011 by Leave a Comment

No matter that the incipient nuclear catastrophe was about 5,500 miles away, or that Germany, unlike Japan, did not lie on known tectonic fault lines. On the streets of major cities, hundreds of thousands of protesters, casting events in Japan as a portent of what might happen here, turned out ahead of state elections to demand a halt to Germany’s own nuclear power program, the source of nearly a quarter of the nation’s electricity.

Those two intertwined phenomena — angst and electoral maneuvering — led to what seemed one of the most abrupt reversals of Angela Merkel’s years as German chancellor: On Monday, she abandoned plans laid only nine months earlier to extend the life of the country’s nuclear power stations and ordered instead that they be phased out by 2022.

The decision meant that, at Europe’s heart, the Continent’s economic powerhouse had committed itself far more radically than its neighbors to the east or west to replace nuclear power with renewable sources of energy like wind turbines — or at least, critics said, with nuclear-generated power imported from neighbors like France.

But the German move also raised a question whose answer seemed elusive: What is there in this land of 82 million people that has, over decades, bred an aversion to nuclear energy that seems unrivaled among its economic peers, defying its reputation for reasoned debate?

“Just as creationists attempt to ban the theory of evolution from the school books,” said a physicist, Peter Heller, in a Web posting that challenged the national nuclear orthodoxy, “it almost seems as if every factual and neutral explanation in Germany is now in the process of being deleted” from the nuclear debate.

Indeed, said Reinhard Wolf, a professor in Frankfurt, the debate is so passionate that “you are either with us or against us.”

“There is no middle ground,” Professor Wolf said.

The power of antinuclear sentiment has already redrawn the politics of survival for Mrs. Merkel. Recent regional elections in the southern state of Baden-Württemberg and in the northern city-state of Bremen have undermined her conservative Christian Democratic Union to the benefit of the antinuclear Green Party. The Greens’ showing was so strong it seemed that if national elections were held now, they would emerge again as kingmakers, as they were before Mrs. Merkel came to power in 2005.

Within days of that fundamental shift, her energy policy, once firmly based on extending the life of Germany’s nuclear plants, swung around in favor of closing the plants much sooner. As she said after the Fukushima crisis began, events in Japan changed “everything in Germany.”

When Mrs. Merkel on Monday announced her plans to phase out all of Germany’s 17 nuclear reactors, said Gerd Gigerenzer, director of the Max Planck Institute for Human Development here, she courted the danger “that when a government reacts too quickly to an incident like Fukishima, it creates the impression that there is no real reason except winning votes.”

“The government has decided to listen to the anxiety of the people and go to the position where the opposition wants them to go,” Mr. Gigerenzer said in a telephone interview.

Some call the process Merkelism, defined by the columnist Roland Nelles in the weekly Der Spiegel as politics “based on two principles.”

“The first is that, if the people want it, it must be right,” Mr. Nelles wrote. “The second is that whatever is useful to the people must also be useful to the chancellor.”

That calculation seemed borne out by opinion surveys suggesting that around 70 percent of Germans believed that their chancellor was maneuvering for electoral advantage. The same proportion, significantly, said they were prepared to pay higher electricity bills in return for ending nuclear energy.

That again seemed to underscore the way the nuclear debate here draws such apocalyptic comparisons.

“What Sept. 11, 2001, meant for the vulnerability of the West,” the center-left Süddeutsche Zeitung said, for instance, the catastrophe in Japan on March 11, 2011, “will mean for the idea that nuclear power is controllable. That idea can no longer be supported.”

Of course, few modern German reflexes are completely free of what Professor Wolf in Frankfurt called “the German experience” of its Nazi past, which has made many suspicious of the industrialization of destructive forces, whether chemical or nuclear.

Article source: http://feeds.nytimes.com/click.phdo?i=8f91c3475c82c45b1b7dfcd7ccb1b536

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