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, buy 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.
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