What is the core KPI of Marketing?

Jan 13, 2020 | Branding, Marketing

 

The answer just has to be ‘Sustainable Margin’.

An enterprise can only do three things to increase margin, however you choose to define that term.

  1. Lift prices.
  2. Expand sales.
  3. Decrease production and operating costs.

Options 1 and 2 are often seen as mutually exclusive, but truly successful marketers prove the opposite. The gold standard here is the Apple iPhone, 15% market share of volume, 85% market share of industry profitability.

Marketing has at least some control over the prices and sales efforts, but usually little over the operating costs.

None of these strategies are easy, neither are they short term.

It would seem that a focus on the drivers of margin will pay big dividends

What is the biggest driver of margin?

Brands.

The greatest store of economic value we have ever seen.

Would Apple have  been the first trillion dollar business without the premium held by the Apple brand?

No. It would be in the gutters scrapping with Samsung, that also happens to be one of its key suppliers from whom they buy screens. I bet that Apple headquarters is looking for an alternative supplier for some price competition, and that Samsung is investing in the tech in order to hold and enhance the margins they would be making from their wealthiest customer.

In a homogenising world where it is getting harder and harder to build a brand, a long term intangible asset it is becoming ever more crucial that you do so in order to protect margins and remain competitive.

Like Rome, brands are not built in a day, and you need experts doing the building.

 

Header photo courtesy Tom Shockey via Flikr.

What is the most challenging goal you could set?

Oct 14, 2019 | Branding, Management, Strategy

 

 

Simplicity.

We live in an ever more complicated world, and our instinctive response to external complication leads to internal complication in order to be able to manage the external.

Having ‘Simplicity’ as a driving goal, something to be strived for, has the potential to offer rewards from internal savings made by the reduction in ‘friction. It also delivers benefits to customers, making it easier, and more exciting to do business with you than an alternative.

These benefits translate into cost savings and revenue increases for the business, and added value for customers, a virtuous cycle.

It does not matter if you run the corner sandwich shop, or a multinational corporation, the challenge is the same, just the size of it varies.

Apple under Steve Jobs made Simplicity more than just a goal, it was the glue that held the culture together. Simplicity became, as Jobs said, the ultimate sophistication.

Mark Twain in writing a letter to his wife wrote ‘I have written you a long letter, because I did not have the time to write a short one.‘ This captures the essence of simplicity: it is hard, even for experts to achieve.

The power, as well as the challenge, is in the simplicity

 

Header Photo: courtesy Flikr and Jeannie Tseng.

 

 

 

The sad and entirely avoidable death of a great old FMCG brand.

The sad and entirely avoidable death of a great old FMCG brand.

Aug 26, 2019 | Branding, Innovation, Marketing, Strategy

Currently in my cupboard almost gone, is a bottle of detergent, a well known and trusted brand, formerly the market leader, been around for ages.

It will not be bought again by anyone in my household.

Here is what I suspect happened.

Sales of the brand were eroding as cheaper, usually house branded product ate into the volumes. Somewhere in the multinational that owns the brand there was a bright young thing charged with resurrecting volumes, a project to ‘test their metal,’ requiring a 20% increase for success to be declared.

He, or more likely these days, she, did the corporate rounds seeking inspiration.

The R&D people believed they could improve the performance of the product by utilising a new emerging technology, but it required an extensive  R&D program to clarify some of the technical issues. No budget available.

The Engineering people reckoned they could speed up the line, reducing costs by updating, at considerable capital cost, the existing machinery, making production cheaper and more flexible. This would  reduce the systemic out of stock problem caused by the long runs required to generate factory efficiencies. These factory KPI’s are completely disconnected to the increasing difficulty of forecasting sales as volumes erode and become more erratic. No capital budget available.

The accountants are arguing for a price increase as well as a reduction in retailer promotional spend, as the gross margins fall below their target rates. Neither tactic seems well suited to the problem at hand.

The advertising agency strongly recommended a multi million dollar integrated TV, Magazine and digital marketing campaign, designed to bring back lapsed users to the brand, while intriguing new users to give it a try. No budget available.

The marketing he/she concerned reckoned it would be easier and cheaper to make the hole in the top bigger, make the product flow faster, encouraging a quicker usage cycle and therefore increasing replacement sales.

On a spreadsheet it looks logical, sensible, and with a great ROI. Everybody was happy, especially the product manager, who could see the trappings of corporate success coming his/her way by Christmas.

Whoops: forgot the value conscious consumer, to whom the integrity of the brand had remained, until now,  an important consideration, and who is not stupid. She is my wife, (who still does the bulk of the shopping) and believe me,  she is absolutely unforgiving.

Being captured by the interaction of functional KPI’s, status quo management processes, and resistance to any change, is a common corporate problem. It is unsolvable by anyone other than the Boss, who is mostly too busy contemplating the forest next door (or their navels) to see the trees in the forest they currently occupy, and take some decisive action.

When your brand, marketing, and innovation processes need a reality check, call me to tap into the ‘experience bank’ in my possession. 

Consider your ‘Doorman’ strategy

Consider your ‘Doorman’ strategy

Aug 19, 2019 | Branding, Marketing

 

It appears that the role of a doorman in a hotel is to hold the door for guests, easing their way into and out of the hotel.

Ostensibly the role is simple, a smiley face, welcoming word, courtesy extended. However, when you think about it, there are many more roles played by the doorman, taxi getter, luggage helper, direction giver, polite conversationalist, security,  all the while, adding to the value by creating a human face for the hotel.

When  you get rid of a doorman, as many do, and put in automatic doors, it may be cheaper, but you lose the impact of all that humanity that adds value to guests and visitors. The result over time will be added pressure on margins, as regulars go to the hotel down the road with a smiling doorman who takes the trouble to learn their names, welcome them back, and offer friendly assistance.

A cheap hotel will not have a doorman, guests in that hotel would see it as an extravagance,  but the sudden absence of a doorman in a 5 star hotel would somehow signal its slide to 4 stars.

These days, your doorman can be a website, social media persona, the tone of your advertising, as well as the people at the ‘front line’ of customer contact.

A former employer had a receptionist named Janice. She made everyone with whom she came into contact, in person or over the phone, feel better about themselves, every day. We did  not pay her anything like the value she delivered, just by being her smiling, generous self.

How does your ‘doorman’ shape up?

 

Header photo courtesy ‘Frank’  via Flikr.

The cost of failing to build brands

The cost of failing to build brands

Aug 12, 2019 | Branding, Customers, Governance, Marketing

 

Direct marketing is highly tactical, it is a one on one communication from the marketer to the consumer. Within the boundaries of some limitations, the outcome of direct marketing can be quantified with a considerable level of confidence.

You either got a response, or you did not. It is tactical, short term, and transactional.

Because it is so responsive to short term quantification, and our digital lives are all about quantification, these tactical elements are now predominant. However, there is no evidence that tactical activity alone will build a brand, and plenty that an overuse of tactical stuff will actually destroy a brand.

By contrast, building a brand takes time, investment, a great strategy, and the nerve to continue in the face of debatable real time data, and short term expediency.

Just look at what has happened to proprietary brands in supermarkets. They have been destroyed by the power of the retailers demanding tactical promotional dollars, which is code for retailer margin protection. This has been given by suppliers, usually reluctantly, at the expense of brand building, simply because it is easier and expedient in the short term to comply.

Consider Meadow Lea. At its height, Meadow Lea had a 23% market share at premium prices in a crowded and growing margarine market. The great advertising supported by a range of customer focussed promotional activity that had built the brand, was stopped in favour of tactical retailer price promotions. Now, 20 years later, Meadow Lea is just a label on a few Sku’s in the chiller cabinet.

Imagine you are the marketing manager of a branded product, you have a finite marketing budget. You need to convince the CEO, who is an engineer or an accountant, that it is better to keep advertising for  the long term health of the brand, than give in to powerful retailer demands for various forms of retailer margin supplementation, which will retain distribution in the short term. This has been a very hard argument to win for all but a very few FMCG marketers. With the benefit of hindsight, it has been a vital one that was lost.  

Had the argument been won, and a balance between the two been found, what would have been the difference to the revenue and margins of both retailers and Meadow Lea Foods?? Most probably in the hundreds of millions of dollars, and consumers would have benefitted by  continued value innovation in the spreads  category, which has been stagnant for years.

 

 

Trust: A rare priviledge that is hard to earn, never just given.

Trust: A rare priviledge that is hard to earn, never just given.

Aug 9, 2019 | Branding, Marketing

 

Trust is a word bandied around liberally, like a ticket to be attached to a piece of luggage. A label, adornment, meaning little.

In a world where the bonds of community have been broken down by the pressures of the 21st century, real trust is a rare and earned  privilege.

A brand is a badge of trust.

We tend to trust a brand where there has been a lot of media, after all, if the enterprise that owned it did not believe in the product, why would they invest? To some degree, this is the only advantage old media has over digital, most consumers see it as really expensive, while digital is seen (wrongly) as cheap.

Trust is never just given, it has to be earned.

Consider ‘The Knowledge’ as an example of trust.

This is the test you need to pass in order to get a licence to drive a black cab in London.  To pass this most demanding of tests, an applicant must know every street, major building, place of interest, cross road, and transport stop, within 6.5 miles of Charing cross station. This adds up to 25,000 streets, many of them with the same name, and 20,000 landmarks. This is in addition to all the major routes in other parts of London. In a day of the GPS, Uber, and an alternative licence for a ‘mini-cab that is not much more than an over the counter transaction, why would you bother? So why is it that there are still people lining up to do spend the time and money to do the training to qualify?

The answer may sound weird, but ask yourself, who would you rather trust with your daughter on her big night out? Someone who had invested years and a lot of money into passing The Knowledge, and who would lose it after any sort of malfeasance, or someone who just turned up with a car and a GPS? 

The driver of a black cab has earned your trust, not because you know them,  but because of the investment they have made, which they would be dumb to risk, and dumb people cannot pass ‘The Knowledge’.

Consider that the next time you could benefit from dispassionate advice based on deep experience. 

Photo credit: photo_forest.