Posted: July 23, 2014
The debate on the shape of new model marketing is hotting up. Just a couple of weeks after Cindy Gallup, founder of BBH in the US announced to a London conference that, Its time we blew up the existing agency model, what Harvard Business Review acclaims as the “most extensive marketing industry review ever” undertaken by a cohort of very heavy hitters reveals just how bad things really are. If you are still living with the the cosy belief that change is just around the corner brace yourself. It seems you’ve already missed the boat.
Those of you who read my stuff know that I’ve had a number of constant themes running for the past few years. “You are only as good as your next big idea” has been my angle on the need to drive innovation in business and the fact that products are less important that the process that creates them and that’s certainty proving true now. Big business has become entrenched in the routine and beaurocracy that drives the perpetuation of their original offer, but that’s turning out to be the single greatest inhibitor to innovation and innovation is the future.
I’ve also proclaimed long and loud that brands are communities of like-minded individuals and created my Brand Discovery programme to help businesses define and bring their brands to life. This research tells us with absolutely certainty that any kind of purchase BtoB or BtoC is an emotional experience driven by the relationships (I coined the phrase “Brandships”) that we have with brands.
It’s always been my belief that all businesses are marketing businesses and that to succeed requires that marketing is placed at the centre of any organisation. I’ve been working for a number of years with my Full Effect Marketing approach to help my clients make that shift. Now this and other research has revealed that the businesses that have done so are performing far better than those stuck in the old model.
Way back in 1991 I created a digital business blue-print for one of the world’s biggest financial services groups and have launched numerous digital enterprises since, but sadly, especially in Europe business has been slow to embrace the digital age. I know that working with new media and sales channels requires a different approach and different skills, but that’s why we need a different model for both agencies and their clients. Unfortunately, too many businesses have clung to the security blanket of traditional structures and practices for far too long. Now they are, according to analysts, facing oblivion. If you don’t believe me take it from the authors of the new report who tell us that while smart CMO’s have been pushing for years for fundamental changes in the way their businesses operate the fact that marketing has not been understood for what it is and marketing departments have been siloed rather than centralised has resulted in 80% of businesses still trying to function on an out of date model. What’s really interesting though is that the businesses that are adapting are performing so much better than those that aren’t and the decline the the performance of the latter is steepening.
The same goes for the use of data. Businesses that have re-aligned their operation to collect and analyse data are way ahead of the game, but again, even this fact is less interesting than the rate of decline of those who haven’t. However, the really big winners are the organisations that have expanded their knowledge by combining analysis of why people buy the things they do to analysis of the relationships we have with our purchases and how the purchase is emotionally fulfilling. The fact is, its not always practicalities that drive a sale, emotions play a big part in every buying decision. But then, we knew that didn’t we? Back to the branding thing again.
While the Middle East, where I have been based for almost three years, went into its customary hibernation for Ramadan, I’ve been travelling Europe, talking to the movers and shakers who are driving the agenda here at the moment and they are not the big firms you might expect them to be.
As I mentioned earlier. Big business is suffering the legacy of its past success. Some years ago Tony Mooney, now of SKY IQ, but then part of the Experian Clarity Blue success story came up with an interesting illustration of how unweildly big businesses had become. I worked with Tony then to create a kind of “parallell universe” that took new strategy and the structures and practices it demanded, out of big businesses by creating a second semi-independent business unit that operated alongside the mainstream operations of an organisation to develop innovation to a point where it was self-sustaining, then plugging it back into the main business to act as a basis around which the business as a whole could be remodelled. Tony was ahead of his time it seems as in the past few weeks I’ve come across a number of businesses that are following this basic premise successfully. In fact, I had dinner this week with the CEO and founder of one of Europe’s most successful new model agencies who revealed that they have two financial products that they have created for an international financial services group and are taking them to market right now. The client doesn’t want these products associate with them, partly because if consumers associated the new products with a traditional financial services business they would almost certainly be less successful. This, in itself says a lot about how inappropriate big businesses and their brands are in today’s market.
We English are familiar with the stories of how our small, nimble sailing ships of the sixteenth century ran rings around the previously invincible Spanish armada with its big heavily-armed galleons. Small is fast, small is adaptable. Big is slow and unwieldy. What the world needs now is the former not the latter. It looks like history is repeating itself. When these discrete business units are running smoothly and the products established, the plan is to fold the new brands into the original business (in some way yet to be defined) It may even be that the new brands will become the senior entity and rescue the original business in more ways than one. Such is the demand from the more clued-up big businesses for agencies that can offer this kind of support and the failure of existing agencies to remodel themselves, that in addition to the work they are doing in numerous other sectors my host at dinner is working for as many as four international banks. It seems when something is so “right” the concept of client conflict goes out of the window (Another lesson I’ve been delivering to my agency clients over the years)?
A few weeks ago Martin Sorrell was quoted in an interview with The Drum as saying that clients no longer get excited about TV campaigns and press advertising and traditional agencies need to start questioning their own relevance. There are undoubtedly far more crap agencies around than good ones and clients get what they deserve (and usually what they pay for). Maybe we are about to witness another clear-out of the dross in both client and agency sectors? Not before time I think.
I’ve been telling the agencies who are my clients for years that their offer to their clients has to lead with strategy. Its been the case for a long time that unless you are in the top 1% of creative agencies your work is going to fall into the “commodities” category, which means pressure on your fees and profit. To succeed beyond a few years an agency has to be able to strategise. Those who have managed this shift now have a better chance of success in the coming months and years, but what does the new model agency look like. The truth is there is no set pattern. Because every business problem demands a different and unique solution an agency needs a very wide range of skills and loads of experience on tap and the ability to combine them as and when necessary in an infinite number of permutations. This has implications for hiring strategy too. The kind of young account directors that appear to have become the norm for agencies in recent years don’t carry the gravitas or credibility to advise businesses on business strategy and clients think its insulting to suggest it. Why even refer to senior agency managers as “Account Directors” anyway. Why not, as one agency I talked to this week have CEOs of the business units?
There are very broadly three main opportunities for an agency looking to be in business in the next few years:
- Big businesses that recognise they can’t innovate and are looking to import solutions. They do this in two ways – go direct to an agency and get them to source or invent something, or hire an intrapreneur and develop their own incubator. The problem with the latter seems to be that the intrapreneurs I have spoken to all seem to face the same problem with internal politics and that kills a lot of great ideas. This is why the agency route is being favoured and even the intrapreneurs are turning to agencies now.
- Investors looking to invest in short-term and medium-term seeding projects. As I said, there seems to be plenty of these individuals or funds around, but the connection between the money and the concept is weak. This seems to be mainly because the innovators rarely have the skills to produce the documentation and make the pitch that will secure them the funds they need. These investors aren’t charities, they are looking for a return, usually a quick one, so you need a robust argument and to offer some kind of reassurance that you have sound business skills.
- People with great ideas, but without the business nous that will turn them into commercial enterprises. This is the other side of the previous point. The unanimous feedback I received this week is that innovators lack business and especially marketing skills. This is a big opportunity for agencies who can find a way to finance their involvement. There are a few models out there, but this represents possibly the biggest departure from the traditional agency skill-set and its where the weaker agencies will founder. The agencies that are having success are effectively taking over the management of the start-ups and I think this is the way to go. If you have control and the credentials to impress investors you should be looking to tie into an existing fund or start your own.
Surprisingly perhaps there is no shortage of money. Everyone I have met in the past month tells me this. Potential investors are everywhere although some of the traditional sources are probably the least useful right now (banks and their old-fashioned attitudes again!). It also seems there is no shortage of ideas. I have spoken to incubators who have assessed up to 800 innovations over the past twelve months, only to whittle them down to a handful that they have taken on. This is the result of a combination of factors. Firstly most innovators wear rose-coloured spectacles and few ideas measure up to rigorous commercial measurement. (I learned of a truly great product from a consumer’s viewpoint this week that may never see the light of day because however the agency concerned models it, they can’t get it to generate an appropriate level of profit) but mostly innovators just don’t know how to run a business or present a convincing business case.
I think the bottom line here is that there are plenty of opportunities, no shortage of funding and loads of innovations to keep enterprising agencies busy. It’s just that far too many agencies shouldn’t be in business anyway. They have bobbed along for decades without really contributing anything. Now is judgement day. I hope to see loads of so-called marketing consultancies, branding agencies and advertising agencies fold in the next couple of years and a new more vibrant, enterprising and useful consultancy model come to the fore. The clients who want an agency that just delivers a shopping list of wants are those that will fail and any agency relying on them for revenue will find business unsustainable, meanwhile the successful agencies will be those that are deeply involved with their clients and provide the support that evidence suggests they are desperate for right now. What kind of agency are you?
Posted: July 5, 2014
Richard Branson once said that “customer loyalty” is the same as “customer satisfaction” and who would argue with him? However, there’s a post on the LinkedIn group Dr Brians Marketing Network this morning about this very topic (although it leads with a question of “customer trust”, but it’s much the same thing) so maybe not everyone is clear about what drives loyalty nor what loyalty brings to an organisation?
Firstly, we need to get one thing straight. A loyalty programme isn’t a discount club. Sure, there will always be an element of discount among the benefits of a loyalty programme, but in these competitive times, what business can afford to commit to reducing their margins? So, if you want a loyalty programme that contributes to rather than reduces your bottom line, you have to think a little broader than most people seem to.
There are two kinds of loyalty club member – mercenaries and genuine loyalists. The former are there just for the discounts. If they can get a lower price from your competitor, be sure they’ll be shopping there, so you might as well do away with the overhead of running a loyalty programme and just reduce your prices. All the research I have seen points to these kinds of schemes delivering no long term sales advantage anyway. The latter are the customers you want. Committed customers not only buy more, they’ll pay more and recommend you to their friends, but if you want these guys on your side you’ll need to put the effort in. Think of your loyalty programme as another channel, like on-line or physical stores. Yes, loyalty programmes can delver customers to both of these other channels too. To pick up their purchases for example and there are opportunities for additional sales in that for sure, but there are incremental direct sales to be had once you leverage all of the tools available to a modern loyalty programme, otherwise there no point.
Like everything else in any organisation, it all comes back to brand. In particular your “brand promise”, that undertaking, implicit or explicit undertaking you make to prospects and customers that makes them want to move in to your community and put down roots. In my Brand Discovery programmes we devote a good deal of time to discussing this, because its probably the most important aspect of a brand. I make my clients present me with, what Julie Meyer suggested to me last week was “proof of promise”, a list of four to six facts about their business that will convince me, their prospects and their customers, that they will deliver on that promise.
I can’t stress the importance of this promise and its delivery strongly enough. Delivering the promise prompts the feeling of satisfaction that Richard Branson referred to and its the key to establishing the relationships that will separate your loyalty programme from the discount schemes of your competitors. They say it costs ten times as much to attract a new customer as it does to sell to an existing one. However, if you attract a customer with a promise that you fail to deliver it can cost you a hundred times more to bring that disappointed customer back again. With new customers in every developed market as rare as hen’s teeth, every customer you alienate is a slice off your bottom line. So, I urge you, don’t screw this up.
Get it right and your loyalty programme will significantly add to your profit. Research a few years ago by Bain and Co suggested that a customer is fifty times more profitable in their tenth year than they are in their first. With each contact they have with your brand they gain a deeper emotional attachment to your brand, they trust you better and because of this and will be more ready to experiment with new products that you bring to market and your loyalty programme is your opportunity to make those contacts more frequent and more satisfying. Genuinely loyal customers will also recommend you to their friends, which all adds up to lower advertising costs and that all-important, higher gearing to your product lifecycle, which enables you to capture a new category before the competition arrives to put pressure on your margin. As I said. Don’t mess it up!
The rules of engagement when you are putting your loyalty strategy together don’t differ from those that apply to every other aspect of you marketing – stay consistent. In particular, stay consistent to your brand promise by making those proofs of promise the sole subjects of your communications with your loyalty members.
I’ve just completed a two-and-a-half year project that involved, among other things, creating a loyalty programme from scratch. These days, loyalty programmes aren’t just a case of issuing customers with discount cards and waiting for them to start spending. Its all about the data and the targeted communications this enables. Once your customers are signed up its your job to entertain them with information, editorial and offers that will improve their love for you. We signed up 450,000 members in a very short time span and because social media is now beyond question customers’ preferred channel of communication with vendors, social media was fully-integrated and utilised alongside e-mail marketing and telemarketing. We didn’t forget the usual in-store and e-commerce drivers though and when it was all put together we generated between a third and sixty per cent of sales of selected lines and found that over 80% of ongoing sales through both physical and on-line channels involved the loyalty programme in some way. Your loyalty programme can generate spin-offs too, including a great customer panel and the wealth of customer insights you will get from analysing the wealth of data you collect along the way. All of which helps you streamline your business generally.
Posted: July 1, 2014
After years of pushing my clients and regaling anyone who would listen with warnings of dire consequences if they fail to include HR in their strategy development, I’ve finally found a soul-mate in the shape of Michael Savage, Director of Employee Brand at JWT Inside. It’s no coincidence perhaps that he’s working with a marketing services firm, in fact, not just any marketing services firm, but one that “gets it” with a vengeance, as witnessed by Martin Sorrell’s on-going statements to the media.
In his article in recruiting trends this week Michael underlines that because it’s employees who deliver the brand promise, they need to be involved in its development and fully committed to playing their part in its delivery. Like my Full Effect Marketing strategies, Michael promotes the internal marketing (he calls it “reprogramming the workforce”) that is essential for any organisation committed to growth. In fact, because the business world generally is currently undergoing a radical transformation every business is going to have to seriously question its role, re-examine its promise and radically remodel its focus, structures and processes over the next year or so. While Michael asks business leaders not to miss the opportunity this presents to “treat their business as a start-up” I’d go one further and say, if you don’t get this radical you’ll simply not be in shape to compete in the very near future.
I’m not talking years here, I’m talking months. We are already seeing how tech companies are taking over. The David an Goliath story is being re-enacted every day as large traditional businesses are submitting to acquisition, often at far less than their book value, by new, young tech companies who represent their only hope of staying in business. Business is driven by an entirely different engine these days, which is both an opportunity and a threat. You can respond by accepting a new role in the lives of your customers, employees and suppliers, rebuild your business accordingly, introducing new skills through training or the introduction of new employees, but sitting it out is simply not an option. The businesses that succeed in the future will be those that can innovate and innovation is driven by technology. If you don’t have the skills, you’ll have to get them somehow and the first and easiest place to start is with your existing workforce.
My advice to any and every business is define your brand now, using a proven process such as my Brand Discovery programme, identify what you have to do to deliver your promise, start the internal marketing that will engage your employees, get them thinking about their role in your new organisation and invite them to decide how their skills, experience and personal characteristics enable them to contribute to the delivery of your re-aligned promise. This gives you the opportunity to identify the gaps in your skill-base and fill them with new employees or training.
Posted: July 1, 2014
Tags: Elise Sass, Greg Banas, investors, Jarmila Placha, Jihomoravske Inovacni Centrum, Julie Myer, Martin Pejsar, Start-up, Start-up summit, Start-ups, Tech companies, Vojta Bednar, wayra
The Start Up Summit in Prague on Friday was a fascinating experience. While sometimes I despair at the lack of ground made by Czech business and political communities (Twenty-five years after the fall of Communism and the Czech Airline CSA still has Communist-era customer (dis)service, banks still fail to understand basic finance and the combined might of three telcos can’t deliver broadband that’s faster than a dial-up. And nobody seems to care!) Friday demonstrated that there are a few folks out there with the determination to find a way around the obstacles and achieve some real growth.
It wasn’t all roses, of course. A sell-out event produced an, at best, half-full auditorium. A typically Czech response that was explained to me as being because after subscribing people probably realised the event was on a Friday and the best you can hope from anyone in this country is a half-day of work on a Friday! There was also a marked tendency for attendees to favour the buffet over the main-event. Despite the very interesting and entertaining speakers, attempts to get delegates back into the auditorium following breaks proved futile in some cases, but having taken part in many similar events in Prague in the past I’ve come to recognise that many delegates think the refreshments are the point!
The venue was quirky and again typically Czech. An old cinema with a coffee bar in the entrance hall, most of the seats in the auditorium removed and replaced by seaside deck-chairs, beer-crates and a Communist-era Skoda convertible that you could choose to park yourself in to watch the event. The up-side of this conversion was a great stage, a full-wall screen onto which everyone’s slides were projected and a brilliant sound-system.
The line-up of speakers was impressive and included the unbiquitous Julie Meyer of First Friday fame, Experts from Denmark, the UK, Poland and Estonian Elise Sass from Microsoft’s CEE Start-up initiative supplemented by some very able Czechs from organistions like Ctreative Dock, the global accelerator Wayra and the Jihomoravske Inovacni Centrum, all skilfully and entertainingly woven together by MC and organiser, Tinternety.cz’s Vojta Bednar.
Between them the speakers covered a lot of ground, much of which I suspect was news to some of the audience and therefore very valuable, but for me the three main points delegates should take home with them were:
- In future all businesses will be tech businesses
- There’s a big difference between an idea and bringing it to life
- The greatest weakness of innovators, start-ups and small businesses is an absence of marketing skills.
In the past size mattered. The big concerns had the customers, the products and the resources, but their size meant they were reliant on processes and bureaucracy, both of which inhibit innovation. Today’s new products and services are pretty well exclusively made possible by technology and because the tech companies’ have the data management, analysis, media routes and sales channels they own the playing field. No longer are the techies on the sidelines waiting to be called on when needed. These days the roles are reversed and recent acquisitions of traditional businesses by new tech businesses make that clear.
Meanwhile, some big firms are opting for the full-body transplant, trying to inject new thinking and develop new structures and practices that they hope will enable them to stay with the game. They still, on balance have the money and they are using it to employ intrapreneurs to tell them what to do next, starting incubators and launching innovation units so that they can feed off the creativity of early start-ups. It’s a symbiosis that makes sense, but I can’t help thinking that there will be at least a few corporate executives secretly thinking they’ll use the vision of benefaction to exploit innocent young minds. However, history has proven that its tougher and takes far longer to adapt an existing model than to build a new one from scratch and by the time the old guard have got their act together the new kids on the block will inevitably be down the road and out of sight.
With the enthusiasm of youth comes an inevitable dose of naivety. Ideas may be (as I have repeatedly quoted over a number of years) the currency of business these days, but they are not the end of the story and the biggest challenge is always going to be bringing them to life. There are a number of stages to the evolution of an idea including financing and marketing, but innovators tend to be product-focussed to the exclusion of all else, which is why so many neat ideas fail to get off the drawing board. It was also pointed out that a high percentage of start-ups fail because they think when they receive financing, that’s “job done”, sit back and wait for the good life to start. The Entrepreneurs we heard from made it clear that the point at which you get the money is where the hard work starts.
A local business that’s helping bring an increasing number of Czech innovations to market is Creative Dock, whose co-founder Martin Pejsa was one of the speakers at Friday’s event. Crerative Dock take on ideas, researches them, even test-launches them, then either finds funding and mentors the owners through the process of building a business around them or helps them sell their concept to one of the increasingly hungry dinosaurs. They already have an impressive collection of case studies in the Czech market and are now turning to other markets for both ideas and funding. This is the new marketing services model that I have spoken about previously and I hope a few more agencies take the hint and start thinking of themselves more in this vein.
In the coming days and weeks I’ll be exploring further some of the thoughts and ideas that emerged on Friday, but for now I’m happy to report that Prague’s Start-Up Summit, was definitely a step forward, albeit maybe a small one, for a country that might otherwise be stuck in the mire created by its politicians, bankers and traditional business leaders