Posted: August 18, 2014
Although he may not have intended to flatter us, I’ve no argument with Napoleon when he described Britain as a “nation of shopkeepers” and it seems that we’re proving this once again in the digital era.
While its now clear that physical retailing has largely run out of road with a 17.7% year-on-year decline in new retail space planned for the UK this year, we have embraced the digital age and are now generally regarded as the world’s most successful on-line retailing nation. However, this isn’t just about switching customers to the on-line model, its a real opportunity both for retail start-ups with a shiny new model and for established brands to take their offer to new territories without incurring the cost and risk of a traditional retail business.
We are already seeing how the varying on-line competence of big UK retailers is causing the league table to be re-written in the context of the digital, rather than physical market. In the supermarket sector alone Morrison’s represents a vivid illustration of what happens when you don’t get your digital act together with physical sales declining and no on-line business to fill the void. However the real value in the on-line phenomenon is the opportunity it provides for retailers to enter markets that offer a far higher return than their core domestic business.
Sure the volume of traffic on UK retail sites from US and UK customers is phenomenal. Of our non-UK customers 21% are from the US, which has to represent a success, but in terms of value, Asia and other emerging markets are a far more enticing prospect. A Malaysian customer for example is worth six from the UK or US and although we are only slowly making in-roads into the Chinese market a Chinese on-line shopper spends around five times what a Brit will. Nevertheless, there’s a sting in the tail of this beast that we need to be aware of.
It easy for UK retailers to operate in a bit of a vacuum, but, as I have pointed out on numerous occasions in the past, these developing markets are not without their own retail heroes. India, in particular, boasts some really good supermarket chains who are quickly catching up with their Western counterparts in terms of quality of product and professionalism of their operation. The other thing about these places is that they have thrown themselves into the digital age embracing it with considerable enthusiasm, unhindered by existing infrastructure and business models that have caused delays with better established British retailers – Morrisons being a case in point. Admittedly, their delivery doesn’t always live up to their enthusiasm, but they are getting there and what’s grease for the goose … as the saying goes. Already Indian retailers are scoring sales in the UK and US. Don’t let’s forget that a large proportion of the UK’s budget fashion comes from India, so it will be tempting for locals and attractive to UK shoppers to cut out the middle man and get even better prices. This is already happening with many small limited-inventory operations emerging and it is only a matter of time before they work out how to scale up and market to Western markets. There could even be a social welfare aspect to all of this, because one assumes that by cutting out the UK retailer there will be enough margin in the deal, even with lower retail prices, to pay Indian fashion workers a better wage or at least improve their working conditions. Sustainable fashion retailing could be the next big thing!
However, new markets mean new challenges that not every UK retailer is going to be able to get its collective head around. Supply chain is an issue in many countries. I’ve reported before that a lot of these countries don’t have what we would recognise as postal services nor street addresses, so delivering orders is a bit of a challenge. There’s also the question of warehousing. It’s easy for UK retailers because we are a very small country with good infrastructure. India and China though are a different matter (being a bit bigger!). I mentioned in an earlier post that Tesco, through their appointed regional distributor, (the conglomerate MENA Holdings Group) have arranged for the (African, but Indian run) Choithrams supermarket chain to stock Tesco products in (initially) 1,000 stores across the Middle East and India. Waitrose have been following a similar strategy with their own label for a few years too. The Tesco deal has since been extended to include another MENA Holdings members in Kuwait and Qatar. Meanwhile Argos has been trying to extend its global presence in a similar way. We all know that Tesco have announced increased focus on their on-line business recently and having your product on the ground in these places is a very useful first step to on-line supply chain development.
There’s another important challenge to the on-line globalisation though. Shopping habits and consumer attitudes in many promising markets are often very different. Not only are infrastructures frequently incomplete by Western standards, but consumer attitudes to on-line payment, returns and delivery demand that Western retailers reconsider a model born of the neat and tidy western marketplace. Nevertheless, its all do-able and with Western ingenuity and standards of execution there’s no reason why Western retailers can’t maintain their lead over the burgeoning ranks of more-Eastern challengers. In the next few months the on-line marketplace is going to be a pretty interesting place.
Posted: August 10, 2014
In my occasional capacity as advisor to marketing services firms, I have witnessed a number of new business pitches in the Middle East and with few exceptions, they have been a joke. Putting aside for the moment the clear fact that, in these parts, most of these contests are decided before they have begun on the basis of family ties, vested interests or back-handers paid to decision-makers, the processes engaged, such that there are any, are utterly useless. Its no wonder clients change agencies with the regularity of a Dubai metro, but the agency merry-go-round is counter-productive for everyone concerned. Pitches cost everyone time and money and if the strategy changes every time the agency does then the client concerned is wending their way to brand disaster.
One of the problems is that clients here (and agencies have cooperated in this) have taken the traditional Western pitch process, which they have failed to understand and tried to replicate it, even though in the West it is considered now irrelevant and largely being abandoned. At the heart of of this confusion is the failure of clients (and many of the agencies) to understand what the job of an agency is. So, let me add a little perspective.
A company needs an advertising agency or marketing agency to tell it how to do things that it doesn’t have the skills or resources to do for itself. That makes this, in every sense of the word, a simple “partnership”. It is not the old-fashioned client/supplier relationship that the old commodities traders used to have with the desert-dwelling sheihks. There is no “boss” and “serf”. Those days are behind us and the old rules are totally irrelevant (If they were ever really appropriate). A contemporary client/agency relationship is based on mutual respect. After all, the agency should be guiding the client’s decisions and advising (if not dictating) strategy that, if they are correct, could be the difference between success and failure of the client’s business. The problem is that I wouldn’t trust half the agencies I see here to go to the grocery store with a list to do my weekly shop, so I’m hardly going to take their advice on strategy. Therefore, the pitch process is, at least in part, about finding the few real agencies among the plethora of pretenders. However, that’s not hard to do if you are organised.
There’s a clear and intuitive path to developing cohesive marketing/marketing communications and it starts with your strategy. Any business should have a clearly defined business strategy that defines their objectives and sets out the way that they have chosen to reach them. If you are operating a business without this fundamental document (and I’ve seen some that are) then you deserve to go out of business and undoubtedly will very soon. Current thinking says that a business plan and marketing plan are synonymous. Today successful companies have recognised that every business is a marketing business and have placed marketing at their centre. This means that the Marketing Director writes the strategy, usually in collaboration with the CEO. Of course, you have to have a marketing Director who is capable of doing this, but, again, if you don’t, given that you are a marketing business, you are in big trouble.
Once you have your strategy, you should use this as the basis for your pitch. A marketing services firm of any kind – and that includes an advertising agency – should be commercially astute enough to be able to demonstrate what they can do to help you realise your objectives. Finding a handful of agencies who can do this should be the first stage of your pitch process. Literally write an RFP that asks for a marketing communications strategy based on your business strategy, an explanation of the processes the agency will engage to make it happen and why you should believe that they are capable of delivering. Their response should be a written document, maybe with charts and graphs to illustrate points, but definitely not to include any creative proposals. It should include their credentials presentation and examples of work that hey have done for other clients and to prove that they actually can deliver, each case study should state the objectives they were set and the results they achieved. You absolutely don’t want anything more from them at this stage and any agency that responds with anything more or different to that should be struck from your list on the basis that they lack discipline. Agencies should expect you to call up the Marketing Directors responsible for the work contained in the case studies to get feedback and you definitely should do so.
You’ll use the submissions that you get from this first stage to establish who has the commercial nous, processes and practical capability to provide the support you need. Select three or four (no more) and issue them with a brief to turn their strategy into creative work and a media/activity plan with full costings for the coming year. Don’t make the mistake of expecting your agency to dictate your budget. That’s a figure that you should be giving them. You can do so at the first stage or the second, but make no mistake this is your job not theirs. I notice that a lot of businesses here use pitches to get opinions from marketing services providers on what their budget should be, but this is a cop-out and it’s a meaningless practice that fails on just about every level. You need to calculate your budget. Any Marketing Director worthy of the title will know how to do this, but as a guide, last year, a global survey established that businesses generally invested between 7% and 10% of their turnover in marketing, while start-ups and businesses that are trying to establish themselves or a new product, invest more – often as much as 20% in total – to get the job done. You can build into your brief an opportunity for the agency to submit proposals for a different budget or add-ons provided they build a case.
Neither the first nor second-stage briefs should be sent by e-mail. You should go to the agency’s office, meet with their teams and brief them on your project personally. The entire process is designed to find a partner that you can work with long term. Marketing is a collaborative process, you should expect to be involved at many points and this means that you have to be able to get on with your team. Chemistry is important and you’ll only be able to judge this by meeting the people and spending as much time with them as possible on their home turf.
You should expect a proposal from each agency in the form of a final presentation, divided into sections, probably as follows, but you should define the headings that you want them to work within.
- Summary of business objectives and strategy
- Outline of communications strategy
- Explanation of overall creative strategy
- Creative proposals
- Demonstration of how creative applies to specific components of the communications.
- Outline plan of activity for twelve months with budget breakdown.
From this you should be able to determine your ideal partner agency.
In my experience, most businesses in the Middle East are incapable of organising a proper pitch and that’s where consultants like me are useful in managing the process. There are few things more counter-productive than a badly run agency pitch, but many would-be clients set themselves up for failure at the starting line. I saw a brief from a major Gulf-based international business recently where someone had obviously tried to impose some level of professionalism. However, such is the chasm often seen between the capabilities of local businesses and international standards that it wasn’t much help. They started by inviting thirty agencies to “tender”. (It was a tender because the brief didn’t state a budget, which, as I have said is a major mistake for all kinds of reasons). Inviting thirty agencies to pitch is also ridiculous and among other things suggests the business and the person issuing the brief is both clueless and lazy. The most agencies you ever want on an initial pitch list are ten and you can and should arrive at this number by conducting your own research on-line and through contacts to determine which agencies you include.
The brief for this pitch looked promising at first glance. It was organised under sensible headlines and it asked for the agencies concerned to explain how they would measure the effectiveness of their proposals. Every agency worth employing would do this automatically, of course, but given the height of the bar locally this is a good pre-requisite to include in a pitch brief, except for one point. Measurements can only be applied against a stated objective and the objective stated in the brief in question was “To publicise the [name of client removed to protect their reputation] …” which is, of course, not an objective at all. More than one agency brought this brief to me asking me to advise them on what to do. My conclusion, and the conclusion of any proper agency would probably be not to tender because the client was demonstrably clue-less and unprofessional and no agency is ever going to be able to deliver decent results against these odds. I have no doubt that every agency that could, pitched though. Some because they were equally useless and didn’t spot the anomaly, while others adopted the “Take the money and run” approach, which you can understand in this part of the world, is often the case. It’s wholly counter-productive of course and that’s why businesses here tend to be pretty slow to develop. But then, clients usually get the agencies they deserve!
Posted: August 8, 2014
I think most of us have come to the point at some time in our lives where you just feel like quitting and becoming the proprietor of a village shop or something. I know I certainly have and very often this has been prompted by encounters with a particular breed of pompous asses for whom our business seems to provide a safe haven.
My wife, who is a country girl at heart, holds the view that everybody in advertising is a poseur, which may be an over-simplification, but I know where she is coming from. There are far too many people involved in marketing and advertising who are just up themselves! Like the new young Marketing Director of my friend’s client, who I mentioned in an earlier post, seemed to think that, fresh out of college (well, almost), she was going to tell a thirty-year veteran of marketing about branding!
Arseholes take many forms. There’s the one who thinks up new words to describe something that we’ve all been doing for decades and drops them into conversations or presentations with the unspoken challenge to anybody listening to question what they mean. Invariably this is a ploy that the presenter thinks will enable him to establish his superiority, but which, he fails to realise, because we are all in the communication business, just proves he’s crap at his job! There’s also the dress-code ponce who seems to see any presentation as a fashion contest. I actually had one of these tell me once that he’d scored in a presentation because he’d “out-dressed everyone else”! It’s important to hit the right note with your dress code in these situations, we’ve all witnessed “death by suit” at some time, but Armani armageddon isn’t the objective.
Those of you who follow my posts will know that I recently had a bash at trying to standardise marketing nomenclature – a bit of a challenge I admit and not one that I felt was guaranteed to succeed in anything, but maybe making a few people realise that marketers reduce their credibility in the business world by failing to agree on pretty much any basic terminology. Unsurprisingly, while it got a load of views and downloads, nobody contributed to that project, so I have to conclude that marketers generally like to baffle each other (and probably themselves!). We have a saying in England that someone “calls a spade a shovel”, which is a reference to the way some folk are very blunt, direct, don’t dress things up and more than anything use simple basic language. I like people like this, you know where you are with them. I never find their bluntness insulting (which I understand, if you are a bit insecure, you might). I was talking to a Czech government minister a few weeks back and at one point I suggested that Czech government policy on start-ups was miss-aligned. He rocked in his chair “You British” he said “you have such a way with words!” I took it to mean that I was myself sliding into the mire of politically correct ambiguity and quickly re-phrased. I won’t tell you what I said but he agreed! I’ve been tempted a few times in the past to adopt a kind of inverted snobbery about this stuff, particularly when I’ve encountered particularly extreme offenders. There are few things more satisfying the just-sucked-a-lemon look on a poseurs face when you tell them, as Sir John Hegarty told the audience at a recent conference, that what they are doing is “shit!”.
My one-time colleague and ex-agency chief John Ward, probably inspired by the same arse-holes we both rubbed shoulders with in the past left adverting and set up The Slog, an hilarious and highly controversial, political blog dedicated to, as he says, “deconstructing bollocks”. John takes on heavy-hitters these days and through his myriad of extremely well-positioned political connections explodes political myths and reduces statements of the rich and influential to the meaningless pap they really are.
Anyway, here’s one for John. I’m sure he’ll appreciate this. It’s Austrian designer Stefan Sagmeister lampooning those idiots who describe their work as “Storytelling”. I’ll leave it to you to decide where you stand on this.
Posted: August 5, 2014
Very early in my career I was told by one of my mentors “Research is a light to guide your way not a lamp-post to lean on”. Its a perspective that has stuck with me and which these days applies equally well to data of any kind. Don’t get me wrong, I’m a great fan of the insights that data can give us and a supporter of any attempt to gather and manage data, but I’m growing increasingly concerned that we are relying on it to do stuff it never was intended to do, nor is capable of. It’s another symptom of the dumbing-down culture that I’ve spoken about before.
Consider all the really great entrepreneurs. Not just those from the past, but those who are emerging today. The business decisions that have led to their success have invariably been instinctive. I work with innovators, so I know that probably 80% (that’s an instinctive figure) of them are entirely product focussed. They don’t know if their inventions make good commercial sense or not and rarely care. Its not what drives them. They just know they are “neat”. Sure, most of them will never make it commercially and the big successes out there have probably at some point used data to confirm their beliefs or provide insights when making decisions, but the core idea and the really key decisions are instinctive. We can debate where this sixth sense comes from until the cows come home, its not so important. What matters is that that instinct, that Midas touch, can’t be sythesised with data and this is what we are increasingly trying to do.
There are numerous chicken and egg debates that we can get into on our way to determining why. It could be that managers are becoming risk averse for intance, but is this because the stakes are higher (which they undoubtedly are) or because today’s managers are younger (in the case of corporates you can read “cheaper”) so they lack the experience that feeds the instinct they need? We are told that data speeds up the decision-making process, but this is just bollocks put about by analysts to help them feel wanted. I love analysts, but insecure or what? There’s nothing quicker than Henry Ford’s “Nope, it’s black or black”, so don’t tell me that collecting data for three years, getting a room-full of analysts to comb through it and then hiring an interpreter to tell us what they are talking about is getting us there any quicker. Its not always more accurate either. Analysis is a cold process and fails to account for human frailty. Not everyone thinks like an analyst, so I’m not backing one to tell me for sure what Gladys from Chipping Norton’s motivations are when she’s doing the weekly shop.
No, its all a bit of a cop-out really. What we do know is that a buying decision is based on primal instinct. We buy what we like and then use rational argument to defend our choice because, somewhere along the line, we’ve been told that this is what grown-ups do and that’s exactly what most managers are doing with data. Its a cover-up, a hide-behind. “You can’t blame me for this cock up, the data told me to do it!”. Why can’t managers just accept that there’s risk in decision-making and the law of averages (which data can’t influence) says you get it wrong occasionally? The measure of a good manager is that he gets it right more often than wrong and if you make too many mistakes you get fired, but that’s the deal. You should be a grown-up by the time you get there, so get over it and the sooner we get off this mission to manufacture infallible managers the quicker we can get on with the job.
Is there a sinister plot by corporate employers afoot to cut costs by employing less experienced managers and giving them mountains of data in the hope that this will enable them (in the absence of experience and instinct) to make smart decisions? If so, its not working, nor is it going to. Anything you save on managers salaries is more than used up paying for analysis and, as I have said, data won’t trump instinct. There’s no cutting corners with this. The best way to build a business is by investing in your people. Train your managers. Enable them to accumulate knowledge and by the time they reach an age when they have enough experience to make valued judgements they have the kit to do it with. A recent survey revealed that over 60% of managers felt they weren’t up to the job they had, and most execs expect to be in a role for no more than two years (Its funny how those two facts add up!) so let experienced and prepared people use data to refine their instinctive decisions rather than actually make the decisions for them and you’ll reduce failure rate and increase ROI.
Footnote: An old friend of mine, deeply respected in the marketing world and now operating as a mentor to some decent-sized businesses, recently met for the first time with a young woman who has found herself in the Marketing Director role of one of his international clients. She started the conversation with “I don’t know if you are familiar with branding …”. Its people like her (and there are many of them) who need data to lean on because, frankly, she’s way out of her depth.
Posted: August 5, 2014
Do you ever have that dream where there is someone some metres in front of you about to get mown down by a juggernaut that for some reason they just aren’t aware of? You are shouting a warning to them and they can see that you are trying to tell them something, but they just can’t hear you. Well, I feel like I have been living this for the past few years!
There’s nothing worse than feeling cosy. Especially in business and sadly there are so many businesses and business people out there who have snuggled into a warm and comfortable business model and just can’t see that the reasons for abandoning it could possibly overcome the nice warm feeling they get inside every day. Sure, business is getting tougher, but that’s the case for everyone … isn’t it? Its just a matter of improving efficiency, streamlining a little and maybe settling for a little less out of the whole deal. Besides, there’s enough slack in this old machine to get us through to retirement and then … who cares really?
Well, I have news for you. The days of nip and tuck are gone. One business analyst this week stated that he thought businesses that haven’t revised their model will fold within the next twelve months. Its not that the writing hasn’t been on the wall for the past few years. I’m not alone in having given warnings to businesses that I have worked with. What’s going to catch people out is the pace of the change. Its accelerating like crazy and a lot of businesses are going to find the tail end of that whip wiping them off the face of the business map any day now.
You can see it happening already. The most vulnerable businesses, even major international concerns have had to accept they are doomed because they didn’t move fast enough and now there’s no wriggle-room. We’ve seen household names bought up by smart young businesses founded on a new business model for a fraction of their market value simply because they had to admit they couldn’t make the necessary changes.
In the past they might have tried to acquire the younger businesses and steal their model, but these days the new businesses, especially the tech ones, have the upper hand in any bargaining session. They hold all the cards. They are lean, energetic, nimble, market savvy and built on a culture of innovation. They started with the premise that their value wasn’t in the product they created, but in their ability to generate ideas that work and instead of building a business that merely produced the same old thing day after day they set about creating a model that generated new ideas every day. As I have repeated many times over the last few years “You are only as good as your NEXT big idea”.
There’s no doubt about it, innovation is what it’s all about, but how do you drive it? In fact there is probably no set answer to this, but there is a basis that its essential to establish as a platform upon which to build. Its your brand.
For decades business people have talked about brands and still few of them have actually worked out what a brand is. Now, having and understanding a brand is the key to success in the new business world. Seth Godin calls them “tribes” I have always referred to them, as “communities”. Whatever, a brand is not a product, nor is it a logo, a business or even an idea, its people. A whole mass of people from different places who share a set of desires and beliefs. A brand community is made up of employees of the company that manages it (It’s a fallacy that companies own brands), their partners, suppliers and investors and their customers. Their values and beliefs are manifested in a product, products or service, which will change and adapt as their needs evolve. Some of them make it, others buy it, they all believe in it. Kevin Roberts at Saatchi & Saatchi calls these communities “Lovemarks” and we have a relationship with them something like that which we have with our friends. That’s why I have coined the term “brandships” and the key to their success is the feeling of belonging that they generate.
In my travels around Asia and the Middle East I have seen many businesses that run on a “flog ‘em and fire ‘em” approach to HR management. It works to a point when your business objective is just to pump out the same old product in ever increasing volumes, but we all know that the world market is finite and we are nearing the end of the road as far as that model goes. Once everyone in the world who can afford one, owns a smartphone, apart from making more people more wealthy (which economists are telling us isn’t going to happen like it used to) the only thing you can sell them is a smarter one – Its that innovation thing again. Businesses like these exist in the West too, for the time being at least, but we have more real brand communities. Smart businesses recognised a long time ago that your bottom line is better when your employees are “engaged” and the way to do that is to focus on brand building. A brand gives people something to focus on, an objective. Handled well a brand will get all your employees behind the promise you make to your customers. It will help partners understand the role you need them to play in delivering that promise and it provides the belief system that consumers can relate to. Members of a brand community are proud to be so. They carry your logos around as a badge of belonging and act as evangelists. Recommendation is far more effective than advertising when it comes to customer acquisition so your cost of sale reduces. Meanwhile your happy, committed workforce set about the innovations that enable you, in turn, to deliver your brand promise. There’s no confusion, so you don’t waste time, effort and money chasing ideas that don’t fit your community’s expectations. Suddenly, you are efficient, lean, energetic, just like those smart young businesses who are buying up your big competitors right now.
The question you have to ask yourself right now is “Is my brand strong enough to get me through the next twelve months?”
Posted: August 2, 2014
It’s been a while since I explored a sporting analogy, but my son shared a video with me this week that I just couldn’t resist. It’s a short film of a climber bouldering (For those of you who don’t follow these things, bouldering is low-height, rope-less climbing that focusses on technical moves rather than the length of the climb) on what would seem to most people to be a perfectly smooth rock-face. The climber uses the very tips of his fingers and toes to get traction on the tiniest of edges, advances in smooth fluid motions and avoids jerky movements to eliminate slipping while distributing his weight perfectly to avoid overloading each hold. Done well its a masterpiece of strength, physics and ballet, but in this case, he doesn’t even make it look that difficult.
This short clip seemed to parallel the way we tackle business challenges. I earn my living showing businesses ways around obstacles to growth that, like the route up this boulder, just aren’t visible to them. Its not rocket science, but I guess it’s an art of sorts. Also like the bouldering, every challenge is unique and there isn’t a set route. The moves you need to employ have to suit the particular rock-face and often you are making them up as you go, but having encountered so many of them over the years I’ve developed a knack for spotting the way forward and can “invent” solutions for the day-to-day issues that the bigger challenge throws up. I talked about that in a pice a few months ago on “adaptive management“.
As I see it, when you face challenges like this you have three choices. The first is to just accept defeat and assume that its impossible, but that, of course, gets you nowhere. As you will know, a lot of businesses do just that. Another approach is to throw yourself at it like a raging bull – all adrenalin and brute force, but this rarely works because you over-stress holds and miss your footing. The third might seem at first to be the slow approach, but its actually the one that usually results in the greatest progress. It involves initial planning and considered moves.
I’ve always recognised that I am impatient and perhaps the biggest lesson I have learned over the years has been to take my time to increase my chances of success. Nevertheless, I have never lost my sense of urgency, which has proven a good thing in recent years, in my work with start-ups, where winning the race for minimum viable product (MVP), the generally regarded point at which an innovation achieves critical mass, is critical. In my seminars I used to talk around a diagram that demonstrated the compression over the years of the early stages of a product lifecycle. These days, of course, the period between innovation and competitors coming to market with the same product is a mere fraction of what it was ten years ago, but it remains the time in which an early mover can recoup their investment and put cash in the bank. In fact, the time span is often so small that early viability studies frequently prove that however good an innovation may be it isn’t going to float commercially. It’s frequently a fine line and the only way, besides straight-up luck (and if you are that lucky you should just keep life simple and play the lottery!), of hitting pay dirt at speed is with a whole lot of experience behind you. It’s that adaptive management thing again. That’s why, while many of the innovations we see hitting the streets today are the product of lively and unrestrained young minds, its the old guys who are increasingly making them happen.