Mar 19, 2024 | Governance, Marketing
Recently at a meeting of SME’s, I found myself in a conversation about accessing government grants, initiated by a guest speaker. She was a very impressive woman with significant experience delivering grants from the Department of Industry.
The notable omission was, in my opinion, a view that reflected the experience of someone contemplating investing the time and energy into an application should consider.
Full disclosure: I ran a small grant funding business called Agri Chain Solutions as a contractor for almost 3 years from 1999 to 2002. It was a company limited by Guarantee, with a commercial board, and ranks as the only time I am aware of that a task has been outsourced by the federal Bureaucracy in this manner. The department concerned, then called Agriculture, Forestry, Fisheries Australia (AFFA) was implacably opposed to the exercise, and only complied after express instruction from John Howard, as the then new PM.
Following is a list of the irritations you can expect.
- Ambiguous guidelines, and sometimes they appear to be on roller-skates as you seek clarification.
- Unusable templates, seemingly designed to frustrate applicants.
- Bureaucratic time and commercial time do not match. The process will always take longer and consume more resources than you think would be possible as you initiate the process.
- The revolving door of ‘officials’ who will manage your application, through to the approval and then implementation. You will constantly be covering the same ground, again, and again, as departmental personnel rotate.
- Commercial in confidence: it does not exist.
- Rounds and the money has run out. For ease of management, most grant programs operate in ’rounds’, and when the money for that round has been allocated, bad luck. You could reapply in the next round. This system disregards overall merit, replacing it with merit in a particular round. The result is weak projects in less competitive rounds are sometimes approved, when in later more competitive rounds, highly meritorious projects miss out.
- The effect of influence of competitive rent seekers. Who you know is always important.
- The time taken to prepare without any indication of the probability of success usually challenges resources of SME’s. This leaves the field open to larger companies with the staff, who probably need the grants less.
- Having inexperienced young bureaucrats believing they’re important, and can dictate to you particularly in grant implementation.
- Recognise at the outset that an application will take a long time, consume significant resources, and you may not be successful. When you are not successful, the reasons for the failure may never be clear.
- Grants are taken into account as revenue, and therefore if you make a profit, you pay tax on it.
- Finally, what is important to you is usually absolutely irrelevant to those responsible for assessing and progressing your application for ‘their’ money. They are just people with their own baggage, ideas, perceptions, ambitions, and worries. Your application amongst all the others in the pile hardly rates on their radar.
Header credit: Cartoon by Tom Gauld from New Scientist magazine.
Mar 15, 2024 | Analytics, Marketing
Every market research proposal must answer a duo of critical questions before it proceeds, if it is to be of any value.
What is it for, and how will it be used?
Market research is done for all sorts of reasons. Many commissioned projects have little to do with the examination of the critical factors in driving success.
They just provide a convenient crutch.
Several projects commissioned and paid for from marketing budgets I controlled would come in under the ‘what the F&&k’ category. However, in my defence they were usually quant studies designed to generate the numbers necessary to pass the accountants various thresholds. This enabled me to progress projects that qualitatively and ‘in my guts’ were winners. That is the way they usually turned out!
In the absence of clearly understanding how the research results were to be used, how they would add strategic, operational, or technical value, why should you bother?
There is a further tier of understanding that is required: Are you looking to define an objective outcome, or are you seeking understanding and insight?
In the case of the outcome required being quantitative, simple yes/no, black/white answers to a question are sufficient.
When you are looking for insight, there may be a few numbers, way below a level of statistical significance, but they can be reassuring. However, the value lies in discovering the connections, implications, options, and potentially hard to anticipate consequences.
Research is a critical step in successful marketing programs. However, in the absence of a very clear and compelling answer to the ‘What is it for’ question, it should not proceed.
The header illustration is the only AI used in this post.
Mar 11, 2024 | Branding, Marketing
Price promotion is just a price subsidy to consumers, and margin subsidy to retailers in disguise. .
In consumer goods, most volume that comes from a price promotion is just bringing forward sales that would have happened anyway, just over a longer time-frame. Alternatively, it is volume taken from an opposition product by buyers who will avoid ever paying the full retail by switching products based on price. It is common in FMCG for consumers to have a basket of ‘acceptable’ products that they shop from via promotional pricing.
Over the 45 years I have spent in FMCG, I have seen the terminal erosion of most proprietary brands on supermarket shelves as a direct result.
In times of inflation, the gap in real wages and price widens. This pressure will only increase over the next year or so as retailers push for better and better price promotional deals, despite the current focus on their pricing tactics.
Now is a great time to go broke being successful at securing price driven promotional slots.
To dodge the ‘go broke’ outcome, there are a few simple to say but very difficult to implement marketing practises.
Understand the elasticity of demand for your product, and tactically market accordingly. This requires that you quantify the break-even points between the tactical volume increases you generate while on promotion, the lost margin from the discount, and the cost of the promotional slot. The strategic challenge here is that erosion of margin happens over time, as buyers from whom your product is in their ‘basket’ wait to buy on promotion, and most often only buy then.
Zig as others zag. Many, if not most suppliers will stop advertising, and direct the funds into short term price and promotional activity. This offers the opportunity for those brave enough to take it to generate a higher share of advertising voice for less. Over time. the body of research that examines the relationship between brand health and price delivers irrefutable evidence of the negative impact of price on brand health. Advertising share of voice is a leading indicator of market share. In tough times, most cut advertising investment to salvage the bottom line, as advertising is seen as an expense rather than an investment in future profitability.
Understand the reality of attribution. It is way too easy to make simplistic single source attribution of price promotion as the driver of volume. This moves the sightline from the more important ‘delivered’ margin. We now have the tools to do a much better job than has been the case in the past of separating volume and margin. However, the explosion of digital channels and tools has led to a quagmire of conflicting attribution claims, most of which are no better than marginal contributors.
As a kid, the Arnott’s red trucks delivering biscuits to supermarkets were always polished to a high level, no blemish in the polish was allowed. Even now, over 60 years later, that stays with me as an indicator of the effort put into quality which feeds into my view of the Arnott’s brand, despite the years, and ownership changes.
Resist the siren song of volume. For an SME to be successful, they need to make a whole series of tough choices. Amongst the most seductive of those choices is the perceived trade-off between price and volume. I say perceived because most see the trade-off as the traditional price/volume choice drawn as the graph they saw in Economics 101. It is grossly misleading to see it in this one-dimensional way. Consumers make their purchase choice on a whole range of ‘value-delivery’ parameters, of which price is only one. When you allow it to be the only one, it will logically dominate. As a marketer, your task is to make price a minor component of the purchase choice consumers make. While short term that may dampen volume, and even deny you distribution in a retailer, the point of being in business is to make enough to remain in business. You will not do this by giving away margin for no return.
Know your costs. This seems pretty obvious. However, the number of SME’s that do not understand the detail of their costs and the difference between marginal costs and overheads never ceases to amaze me. One of the most valuable tools, previously noted, in the SME toolbox is a sophisticated understanding of their break even. When you have this model working it enables you to add in some assessment of the impact of price and volume over time. It enables consideration of the impact of pulling forward your sales volume and delivered margin on promotion, the volume and margin delivered off promotion, and volume and margin impacts of competitive promotions.
Following are a few of the many research reports that articulate the linkages between price, volume, and brand salience. I include them to demonstrate the views expressed above are way more than just my opinion.
https://tinyurl.com/496vwphy Ehrenberg Bass. Brand health (podcast)
https://tinyurl.com/4wzkebav Ehrenberg Bass. Brand salience
https://tinyurl.com/4b5er6rc Amity University. Impact of price promotion on brand equity.
https://tinyurl.com/36fr8xwf Research Gate. Long term effects of price promotion on brand choice and purchase quantity
Mar 8, 2024 | AI, Management
Cash flow is often described as the lifeblood of a business.
While it is correct, it leaves a lot on the table.
If cash flow is the lifeblood, you also need a heart to pump it around the body. The leaner and more efficient the body in which the heart resides, the easier it is to pump, reducing the stress on the mechanism, reducing risk.
Similarly, to be effective blood requires oxygen to be attracted and distributed through the system.
Oxygen is what keeps everything working, it is the source of the power required to run the system, without which the system rapidly grinds to a halt.
In a business context, the oxygen is the input of information, the lungs and heart are the analysis and leveraging of that information, and the culture of the organisation is the body that holds it all together.
You go to the doctor to get a physical, where do you go to get a ‘commercial’?
An accountant will give you part of the picture, based on the books.
A ‘lean’ expert might offer many insights into the operational processes, particularly in a factory, and at the same time offer cultural insights.
A ‘6 sigma’ expert will deliver an arithmetic analysis of the efficiency of each part of a process.
A marketing expert (if you can find a bullshit-free one) will give you opinions based often on questionable and partial information, and usually biased towards their particular view of the role of marketing.
A sales expert will opine that everything else will be OK if you just get more leads for them to convert, and here is how!!
The point is that each will give you a picture of your business as they see it based on their experience, training, predisposition, domain knowledge, and their own assessment of WIFM.
Finding someone who ties all that together, and offers a complete, unbiased, and expert picture is a challenge.
Mar 4, 2024 | AI, Change
Covid was a Darwinian catalyst, at least in my view.
A decade of slow change was supercharged into 6 months as businesses, institutions, and individuals, struggled with the need to change rapidly, and radically. It also unleashed an unprecedented innovation cycle in medical science that will have long term impacts on drug discovery.
In November 2022, another Darwinian catalyst struck. Open AI launched ChatGPT into the wild, setting off a chain reaction that surpassed the impact of Covid, which has since become endemic, and we have largely stopped worrying.
We have yet to understand the longer-term impacts of AI on social dislocation, personal security, and the ways in which the largess can be fairly spread across the community.
The trends in both cases were all there for those who looked closely enough with an open mind to see.
Pre-Covid it was clear that there were too many cafes, and we were generally over-shopped. Home delivery was increasing, as was remote work. The installation of ‘smart’ devices in factories and homes was normal, and product differentiation based on digital features was everywhere. Yet, it was slow going.
We had a binary mindset, the cake was a given size, and any change to the way it was sliced up meant there were winners and losers. Nobody wanted to be the latter.
Suddenly, in two whacks behind the ear, the cake has changed size and shape radically. The pre-Covid/AI status quo that included many points of friction and often unseen waste, previously sacrosanct, have been swept away.
All this costs money, so the cake has changed ingredients as well as shape and size. The suppliers of those ingredients have morphed into a few monster corporations that will continue to change the shape of our cake with little or no public oversight. Governance has become whatever it takes to make more money, as the power of regulators is substantially diminished.
This level of uncertainty has made us very jumpy, unwilling to trust, and wary of the future impact on our finances, security and familial connections. It has also made possible development of products and services inconceivable previously.
If you are a glass half full type, the opportunities are endless. If you are the other sort, find a comfortable place to hide, if there are any left.
How would Darwin see human evolution post covid & AI?
Header: Is a photo of Ghandi leading the ‘Salt march’ in 1930 which was the catalyst to the recognition that British rule over India needed to end.
