Feb 3, 2023 | Branding, Demand chains, Marketing, Small business, Strategy
Woolworths last week announced they would close 250 of their current 300 in store butcher shops. Clearly, centralisation and opacity of the supply chain that serves customers via Woolworths is geared to the lowest common denominator, price.
At the other end of the scale is Wolki farm in Albury. This is an integrated farm to retail supply chain that innovates at every point. Rather than just trying to do the same job as always for a lesser cost, they re-engineered the whole chain. From their website: ‘We are the connector between the conscientious consumer and quality produce’
Their 24/7 retail outlet in Albury is just the end of the chain, but full of innovation. I do not normally inhabit TikTok, but this video of owner Jake Wolki’s view of the future was referred to me by a (younger) friend, who knows my views about agricultural supply chains.
The challenge both retailers are setting out to address is the core challenge of marketing: how to create and communicate value that motivates customers to a transaction facilitating longer term engagement.
Woolworths (and Coles, Aldi, et al) do it by price and convenience. They might mumble about quality, but it is at best a second order priority. As long as it is edible, legal, and delivers the category target margin, it is OK. By absolute contrast, Wolki’s (I do not know them at all, had not heard of them until last week) are clearly focussed on quality, product provenance, and integrity. The price they charge for their produce will reflect all that, but no consumer who is looking for the cheapest cut of meat is likely to find it at Wolki’s. What they do get in detail is supply chain transparency that delivers the provenance and guarantee of quality of the product they are about to buy.
That may interest only a small proportion of the market, but that proportion is significantly larger than it was just a couple of years ago, and will continue to compound.
It seems to me that Woolies are repeating the mistake they made with Thomas Dux 6 years ago. They are ignoring the messages being sent by consumers from the ‘edges’ of their customer base that ‘Mass’ was not acceptable. More probably, they are choosing to ignore those consumers in favour of low cost supply chain control, and reluctance to rock the competitive ship by innovation. Perhaps they will prove me wrong, and use the remaining few in store butchers to experiment?
Photo credit: Wolki Farm from the website
Nov 11, 2022 | Branding, Marketing
“Marketing is too important to be left to the marketing Department”
David Packard, co-founder of Hewlett Packard with Bill Hewlett in 1939 made that observation decades ago.
He was right.
At a time when every customer touchpoint is a marketing opportunity, when algorithms seek out ways to accumulate, dissect, and reassemble data, it is even more true now than it was then.
Every function in an enterprise has a role to play in the position that enterprise holds in the world and in the minds of individuals with whom the product interacts. This building of brand salience goes way beyond the boundaries of the marketing department.
The CEO is the most important marketing person in any enterprise, irrespective of the functional experience. He/she is the one that shapes the culture, and the culture must be marketing in every strand of DNA in the place.
Many non-marketing CEO’s make the mistake of delegating, by inference, not seeing marketing as the primary source of commercial sustainability. To my mind this is not delegation of accountability, rather it is abdication of responsibility by the CEO. The result of this is usually that you end up with the commercial equivalent of lipstick on a pig.
Nov 7, 2022 | Branding, Marketing
Imagine you are faced with the task of joining two pieces of wood.
What information are you likely to need before deciding how to go about the task?
How big and important are the pieces, are they structural weight bearing, is the joint going to be seen, will the choice have a knock-on effect, what is the most efficient joint?
The point is, you need that information before you can then decide how you go about the joining. Do you nail, screw, glue, combine rebate glue and screw, countersink the screw? Without the contextual information, you cannot make an informed decision that will give you the best outcome.
Sometimes this is easy, instantaneous, other times it will require more time and research to get the right answer.
Figuring out your marketing programs is no different.
How are you going to allocate your limited resources across all the possibilities that face you?
Marketing has only one purpose, to generate revenue and resulting margin. Sometimes it is revenue today. Sometimes tomorrow, next month, next year, next decade. If you cannot see a connection between the marketing activity and future revenue, stop now!
The challenge is to know enough to ask informed and intelligent questions and be able to separate the bullshit from the good answers.
This ‘marketing game’ is full of sellers of new shiny toys that are ‘guaranteed’ to be the answer to all your commercial problems, delivering you rivers of cash.
In order to help you separate the bullshit from the reality, there are four questions you can ask to do the separation, which will assist you to see the connections to revenue.
They all are interdependent, none by themselves is of great value, and together they are a powerful way of thinking about your business.
The 4 seem simple at first glance, but in reality, are very complex questions, that in combination will give you the beginnings of an answer. The rest will come with experience and domain knowledge.
- What problem can I solve for a potential customer, or put another way, how do I add value?
- Who is my ideal customer?
- How do I apply maximum marketing leverage?
- How do I make a profit?
When you have the answer to these four questions, you are ready to spend some money.
Not before.
However, once answered, it is never enough to stand still and think the answers tomorrow will be the same as today, and that the answer today is the ideal one. Business is iterative, you learn from doing, experimenting, doing it better next time. It is an evolutionary process, so long as you are careful not to bet the farm on a dud horse. These are all connected to each other, one without the other is of less value, and the impact of answering them all well is not just cumulative, it is compounding.
These four factors, and all the lesser things that hang off them, are compounding.
The twist is that they also compound in reverse, so you must be prepared to try things, but get them off the table quickly when they do not work.
Let me know when I can help.
Header cartoon credit: Tom Gauld www.tomgauld.com
Sep 23, 2022 | Branding, Communication, Management, Marketing, Small business
In 1960, E. Jerome McCarthy published his idea of the four foundations of marketing. Price, Promotion, Product, and Place. The world has changed in the intervening 62 years, so you must wonder if this idea is still relevant, let alone a foundation.
To my mind, they are not only relevant, but retain their place as a seminal part of the marketing process, it is just that the context in which we think about marketing has changed radically, so the role the 4 P’s plays has also evolved.
This used to be simple, there was a product, and there was a price. Whether it was a consumer product, or one sold to another business, it was simple, and uncongested with notions of service.
Life, and the environment in which we compete has completely changed. Let’s see.
Product.
The idea of ‘product’ has changed along with everything else. We used to buy a car, increasingly, we are now buying the means to get from point A to point B, and discovering new ways to pay for it beyond the options of cash, or some sort of loan from a bank.
Product rather than being a singular physical product or service delivered has become a system that delivers value. The scope of ‘produc’t has also changed from the immediate geography to global, and the channels by which this is achieved look nothing like those available 62 years ago.
Price.
The exchange of money is how the economy goes round; money is the fuel. However, the articulation of the ‘Price’ of a product/service bundle has changed as much as everything else. Along with the product and delivery options now available are the pricing options. There are now many ways to be paid, only a few of which were available 62 years ago.
In all developed economies to differing degrees, the taxi industry has been regulated over time. Nothing changed from 1962 when the ‘Four P’s were articulated until along came Uber and disrupted the cosy taxi environment. Uber eliminated the uncertainty of how long you had to wait for a ride, creating great psychological value, and introduced surge pricing that would entice more supply into the system at times of high demand.
Surge and subscription pricing have changed the face of commerce globally. Amazon uses both in their operations, adding the willingness of a buyer to pay higher prices based on their browsing and purchase history.
Place.
We used to buy products at a defined place, in a defined manner. No longer. The notion of ‘Place’ has been replaced by one of ‘How’ you buy rather than ‘where you buy’.
The old model of a set of mechanically driven distribution channels has been replaced by a melange of ‘omni channels’ that deliver value in a wide variety of ways.
Control of the channels, formerly in the hands of the sellers has moved into the hands of the buyers, who demand and are given in increasing amounts of transparency backwards into the supply chain. All this is enabled by the explosive growth of digital technology.
Promotion.
If the other factors have changed radically, there are no words to describe the magnitude of the change to the ways promotional activity has evolved.
It used to mean the way we gained attention of potential customers via a limited number of options, engaged them, then sold product through whichever stable distribution channel was available. While the core process is unchanged, how we promote out products has exploded.
This brings us back to the question posed: are the for ‘P’s’ of marketing still relevant.
My answer is ‘Yes’, but the clothes they wear have changed radically and therefore the way we think about then must change.
My response to the change necessary is to look at the marketing process more from the perspective of the customer. This brings me to the view that both customer and supplier can look at the process from within the framework of Objectives, Value proposition, Ideal customer, and the Current state. Each party to a transaction sees these four parameters differently, but they are all relevant to the way the transection and relationship proceeds.
Dec 1, 2021 | Branding, Innovation, retail
Promotional pricing is often the only tool used to generate volume. Ask any salesperson ‘Why’ and they will say ‘because it works’. Go next door and ask a marketer, and their response is more likely to be something like: ‘to encourage non-users to try the product, and if they like it, to come back, become loyal customers’
Therein lies the paradox. The well intentioned promotion of a brand results in killing it.
By promotional pricing the product down, you reward current users who would have bought at full price, while not being effective at persuading potentially new users to try for any reason other than price.
The power of habit is huge in routine purchases, like the ones we make every week in the supermarket. A regular consumer is not necessarily loyal to a particular brand, they are more unthinking, more habitual than most marketers will concede, especially to themselves. If a choice is to be made to change brands, that decision takes up cognitive capacity better dedicated elsewhere, and involves risk, which we are programmed by evolution to avoid.
To change habits, we must change behaviour, an extremely challenging thing to do.
Psychologists have found over and over, the best way to change habits is to change little things, one at a time, progressively leading to the changed behaviour that in its turn becomes a habit. Each stage takes 3 or 4 times to become sufficiently entrenched to start to take on the characteristics of a habit.
Back to our supermarket.
Price promotions follow each other on a weekly basis. No brand is given the time to establish its routine purchase as a new behaviour, as there is a price promotion of an alternative brand every week, often several at the same time.
The net result is that for every product on shelf, the discounted price becomes the ‘real’ price, which becomes less and less relevant as consumers are trained by the retailers to think that the discount price is the real price for the products and the categories.
That, in a nutshell, is why we are seeing less and less brands on the supermarket shelves, and as a direct result, less and less innovation, as suppliers have little chance of recouping development costs in such an environment.
Nov 24, 2021 | Branding, Marketing
Customers read much into the price you choose to charge, the architecture of your price list, and willingness to deploy price tactically.
Price can also override all your other marketing activity, as it is the quantitative reflection of what you think your customers are prepared to pay. It reflects the market in which you choose to play.
When was the last time you saw Grange discounted in Dan Murphy’s, or a ‘dinner-deal’ at the perennially ‘three hatted’ Quay restaurant in Sydney?
‘Never’ would be the right answer.
Price is a key part of the strategic choices that must be made to establish a ‘Price Architecture’. This architecture is in its turn a fundamental driver of the business model.
So called ‘premium’ products have many characteristics: extreme quality, scarcity, a differentiated offer, a strong brand, high service levels, are often hard to find and with few if any substitutes. The purchase of a truly premium product demands deep consideration and happens rarely. It is never driven by discounts.
By contrast, commodity products have none of these characteristics, but do have a low relative price, and are easily substituted.
The distance between these two extreme points is a continuum along which a product can be moved, by accident or design. The limiting factor is that it is very hard to move ‘up’ the continuum from commodity towards premium, but very easy to slide in the opposite direction.
Your position on the scale is one of both strategic and tactical choice.
Make the choice wisely.
