Jun 13, 2022 | Customers, Marketing
Manufacturing Week was last week in Sydney. I spent Wednesday there, snooping for solutions to problems most of my SME manufacturing clients may not yet recognise they have, and just looking for ideas.
Found one that might be useful, but it was hard going, very hard going.
There were 170 exhibitors in one of the ICC halls, ranging from the small 9 square foot booths to enormous installations that must have cost tens of thousands just for the floor space. On top of that there was the cost of the installation of the gear, manning the stands, and all the associated costs.
Every stand had the name of the company emblazoned somewhere.
Not one stand, not one, had any reference to the problems they solved.
Why?
It is useful to have the names up there. Many visitors would find their existing suppliers to have a yarn, complain about service, look at the new versions, or do a deal. However, those like me, with a problem to solve, the name of the company is of little use.
How much better would it be for them to have up in lights the problems their products are uniquely designed to solve?
I had a look at several participants websites, and they make the same mistake.
They almost all have an ‘About us’ page. It might make them feel good, but I am not interested in the family history, or the great awards they have won, I only care about the problem they solve for me.
They all fail my 3 second Vegemite test, and as a result have wasted at least part of the investment made in being there.
Where are their marketing people hiding?
Having thrown a brickbat, it is also fair to acknowledge that there was some pretty impressive stuff on show.
Header photo courtesy university of Woolongong.
May 11, 2022 | Leadership, Management, Marketing
There is an enormous difference between knowing the name of something, and truly understanding it.
Most move through school, university, and life by skimming, remembering bits about which questions are asked, and judiciously using jargon to get away with it.
Few take the time, and make the effort to truly understand.
The test is to explain that complex idea to a 12-year-old in such a way that they understand it. When you cannot do that, it is not the 12-year old’s fault, it is yours. You do not understand it fully enough to be able in simple words, metaphors, and similes to communicate the essential nature of the thing.
This is what I see from most calling themselves marketers.
Many marketers, particularly the younger ones, come up against a problem, and before doing any reasonable analysis, jump straight to some sort of digital conclusion that is often grossly sub-optimal.
Marketing is part science, part art.
It is a difficult balance, made more difficult by the simple fact that the art part of the equation only comes with experience, built upon the foundation of the science.
‘Anyone can make a subject complicated, but only someone who truly understands it can make it simple’. Richard Feynman
May 2, 2022 | Communication, Customers
The BATNA (Best Alternative to a Negotiated Agreement) has become an essential tool in the negotiation toolbox, yet many leave it in the box.
It is, in effect, your ‘walk-away’ point.
However, before you walk away, there are always alternatives that can be considered. Identifying these alternatives that make the ‘pie bigger’ is often a challenge only overcome after considerable work, but having done this preparation before entering the negotiation starts will always be useful.
Understanding your own BATNA is essential, but it is just as important to understand as best you can, the BATNA of the other party, or parties.
What do they value that you can deliver?
What are their ‘non-negotiables?
Will the decision maker be at the table?
How can you make the pie bigger for them at little cost to you?
There is a myriad of questions you can ask yourself that will give you a better feel for your relative position, simply by thinking about them, and assembling some information that may otherwise have been overlooked.
In a negotiation, we tend to automatically set ourselves for some sort of compromise. We assume that the net effect of the balance of wins and losses for both parties in the compromise will be the most satisfactory outcome for all.
Often it is not.
Prospect theory, first articulated by Daniel Kahneman points out that the pain we feel for a loss is much greater than the joy we feel for a gain. If we are given $50, we just say thanks, and are happy. If we are given $100, then $50 is immediately taken back, we feel pain. The outcome of both is the same, we are $50 ahead, but the balance of pain and joy is completely different.
This applies in a negotiation when trying to balance gains and losses for an acceptable outcome. At a rational level we can reach an agreement on the net outcome, but at an emotional level, a compromise generally does not allow for the impact of prospect theory on the perception of an individual of the net value delivered.
It will pay you to consider deeply how the impact of this disparity between gains and losses will be felt.
Negotiation is all about the recognition, articulation, and exchange of value.
The challenge is we all see value differently. Being able to recognise the value as the other parties in a negotiation see it will deliver hugely valuable insights to be leveraged.
In other words, understand the psychological BATNA of the other party as well as you can.
Header cartoon credit. Scott Adams and Dogbert perfect negotiation tactics.
Apr 27, 2022 | Leadership, Management, Marketing, Small business
The inflation figures released this morning put the annualised inflation rate at 5.1%, up from 3.5% at the end of the December quarter last year. While it may bounce around given the volatility of fuel and food prices, the trend is very clear, and the current election driven lucky dip of spending promises will not help. This increase in a single quarter is the largest I can remember since the mid eighties.
Australia is in for a rocky ride, and it will not matter who wins on May 21, the impact will be felt in every corner of the economy, and by every Australian.
For SME’s who have weathered the challenges of covid and are now experiencing the added burdens of broken supply chains, and lack of labour, while trying to re-establish some level of certainty in their businesses in an environment where demand has ramped up, the prospects are daunting.
Irrespective of the decision made by the Reserve next Tuesday, to raise the cash rate from the current 0.1% to 0.4% or 0.5% which seem to be the prediction of the majority of economists, the squeeze is on. Raising the rate during an election campaign will test the independence of the reserve bank. I bet there are some phone calls being made!
How will this impact your business?
Those impacts will vary enormously depending on the industry circumstances. The rate that gets all the attention is a weighted average, with the actual sector numbers varying from a slight reduction in communication costs, to a 13.7% increase for transport costs.
- Labour costs will soar, as the demand for labour continues to grow, while immigration is still constricted, and the cost of living blows out.
- Transport costs, which most just see in the petrol prices at the local station, which impact everything that moves in the economy will quickly feed into cost of goods sold in every product category.
- Businesses will see a sudden increase in their accounts receivable days, their cash conversion cycles will become longer.
- There will be pressure on margins from multiple fronts. Volumes will be constrained as supply chain failures impact, and competitors scrambling for volume will be more likely to reduce prices to grab that extra sale. At the same time, costs are increasing, and price increases will be harder to get, as buyers exercise their buying power and shop around.
- You will be pressured by your suppliers for quick payments, as they are being squeezed for margin, just as you are.
- General overheads will increase. We have seen significant increases in lease costs for small factory spaces, insurance costs will be turbo-charged after the floods, fires, and pestilence of the last 2 years, down to the little things like costs of coffee for the lunchroom. All these individually manageable cost increases cumulatively add up to substantial and hard to control increases.
So, what should the SME’s that wish to remain successful be doing?
- Customers shopping around for a deal in greater numbers can present an opportunity for those who understand the drivers of Value for customers in their specific market.
- Resist the temptation to cut marketing and selling expenses. History demonstrates with absolute certainty that those that keep marketing when their competitors shut down in tough times not only do better during the tough times but retain their positions after the worm has turned. Optimising your marketing expenditure is not the same as cutting it.
- Actively engage employees and stakeholders in ways to maintain profitability. This should always be a priority, but is more pressing and visible in tough times.
- Focus on the 10 tactics outlined in the Inflation Busting Roadmap published previously
- Consider from the perspective of necessity the five types of cost in your business, with particular attention being given to the last three, as that is usually where the opportunities hide.
Many have not experienced a spurt of inflation before, the last serious spurt was in the mid-eighties while Paul Keating was treasurer. In management terms, this was over a generation ago. If the experience of those times would be of benefit, give me a call.
The header graph is from the ABS website updated as the announcement of the scary 5.1% heqadline inflation rate was announced.
Mar 28, 2022 | Leadership, Marketing
Our enterprises are organised vertically, by function. Accounting, IT, HR, and so on, all vertically arranged to accommodate the leverage of resources that scaling of the output of those functions delivers.
Customers do not give a toss about your internal processes. Their only concern is the degree to which you can deliver the value they have paid for, the solution to the problem, the salve to their irritant, the mechanism to enable them to grow.
‘General management’ is a term that implies cross functional knowledge and accountability. Often however, the reality is different.
Functional expertise does not necessarily translate into cross functional effectiveness. Almost all ‘general managers’ irrespective of their title, are in that role because of functional skill and success.
Successful marketing by contrast relies on being able to assemble cross functional expertise and capacity in the absence of the functional power to do so. Marketers are the internal representatives of customers and potential customers, as well as being the custodians of the future cash flow initiatives of an enterprise.
Why is it that so few marketers make it to the ‘GM’ role? Why is it the tenure of senior marketing individuals is far shorter than the tenure of their senior functional peers?
Marketing, being about the future, requires foresight, an ability to deal with ambiguity, and a willingness to make decisions with less than complete information. Surely these are useful leadership skills?
It normally takes a while for the future to arrive, so success is hard to measure except with hindsight. It also make more obvious the inevitable mistakes that occur when a marketing function is seeking competitive advantage. Being wrong as you often will be when predicting the future, is rarely an ingredient in successful corporate pole-climbing.
Successful marketing requires horizontal skills as well as deep vertical ones concentrated on the tools to be used on the levers to be pulled. Of all of them available, the most important are in the hands of their functional peers, so horizontal, collaborative skill is an absolute requirement of successful marketers.
Often it is just called ‘leadership’
Mar 16, 2022 | Customers, Marketing
We are confronted every day with hundreds, thousands of messages, all competing for our attention. The volume has ramped up exponentially since the net delivered access to anyone with a connection.
The vast majority are tactical thought bubbles, cat photos and brain farts by people vying for attention, but then not knowing what to do with it when they are the winners of the lucky dip.
‘Yesterday’, access was not so available, you needed lots of money, which ensured there was a barrier to entry not hurdled by the figurative cat photo.
The generation of revenue, the process that encompasses both ‘Marketing’ and ‘Sales’ is a continuum. Sales comes in right at the end, at the point of, or near to the transaction. Marketing is the longer-term stuff that provides the opportunity to open and lead the process culminating in a transaction.
Think of it like a race.
Are you running a sprint next month, or a marathon?
If it is the sprint, training can be short sharp explosive sessions. You focus on the detail, short sharp sprints, and many of them.
By contrast, if it is the marathon, training for a sprint will not get you far. You need to have longer sessions, building slowly to the marathon distance.
Building a relationship that leads to making a sale is a marathon, not a sprint.
Most of the marketing I see is designed as if the race was a sprint. Usually this is the wrong training, as in most instances beyond small value commodity items, you need to get set for the marathon.
As a result, you have all this crappy tactical sales stuff thrown at you daily, which is rarely of any interest, so you turn off. Turning off just encourages the tactical digital set to chuck more crap at you in the hope that something sticks.
When you have to churn out new messages daily, weekly, it removes the opportunity for creativity, the building of the relationships that may lead to something meaningful at the end.
Most so called ‘marketers’ brought up on a diet of digital are unfamiliar, and as a result do not deeply understand this more strategic approach. They set out to sprint in a marathon, and end up coming in at the tail, assuming they actually finish.
Header photo: Marathon startline 1904 Olympics
