Sep 30, 2020 | Branding, Marketing
Any marketing activity falls somewhere on a continuum between tactical and strategic.
Most are trying to generate activity and profit today, as well as investing in your brand for the long term.
Getting the balance wrong is delivering your brand to the slaughterhouse.
The competitive world we live in now puts increasing pressure on tactical activity, at the expense of strategic. No marketing budget is infinite, therefore choices are made, every day between the tactical and strategic.
As the pressure has increased over the 45 years I have been doing this, I observe the move towards tactical, reflected in almost every product category I can think of. Once you get addicted to the tactical, it is like crack cocaine, very hard to break away.
You learn that throwing money at the problem solves it, for now, so when it comes around again, you repeat the action. It worked last time, and the long term is somebody else’s problem.
As a young marketer in FMCG, the ‘Friday afternoon call’ was a constant threat. A buyer from one of the supermarket gorillas who needed to put some cash into their co-op advertising pool for the week would phone. They would open the conversation by saying the sales manager was out, and he had a problem only I could solve by committing to a promotion of some sort that involved a Co-Op advertising payment. To decline, it was made clear, threatened the distribution of the brand concerned in his chain, and he was sure the Sales manager would not thank me for that. By the way, it was 4.45 pm, and the ‘opportunity’ closed in 5 minutes, so he needed an immediate answer.
The ultimate in tactical activity.
There was not an outcome of any value to the business I worked for from accepting this blackmail, just a downside to be avoided. We might have delivered a few extra pallets of product, but the net price we could invoice was often below anything that was sensible. Also, it consumed resources that had been earmarked for activity that would build brand equity for the long term.
Meadow Lea margarine in the late 70’s had four times the market share of its nearest competitor, in a booming and crowded margarine market. This share was based not just on a very good product, coupled with aggressive and smart sales management, but on consistent, and brilliant brand building activity over a sustained period. A decade later, after the business had been acquired by people who did not understand the dynamics of a brand, Meadow Lea had crawled back to the pack. The total size of the market had also shrunk.
The reason was the move from strategic investment in the brand to tactical activity to keep retail buyers happy.
Digital has injected steroids into this tactical explosion.
Marketers, so called only because that is what is on the door of their office, take the easy way out, and go tactical at the expense of strategic.
Don’t get me wrong, tactical impact is very important, but in isolation from the considerations of the strategic, it is brand suicide. There must be a balance between the activity necessary for today, and the activity now necessary to ensure the long term health of the brand, and in turn, its ability to deliver commercial sustainability.
Want the immediate hit? Spend all your resources on tactical activity.
Want to live a long and profitable life? Make sure you leave some for later.
Sep 21, 2020 | Leadership, Marketing
Warren Buffets side-kick Charlie Munger repeats a story in his 2007 USC Law School commencement address which he tells often. The key part is from minute 28, that I think absolutely applies to the practice of marketing.
“I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving the same standard lecture on the new quantum mechanics.
Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it’s so boring to stay in our routine. [What if] I gave the lecture in Munich and you just sat in front wearing my chauffeur’s hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics. After which a physics professor stood up and asked a perfectly ghastly question.
The Planck stand-in speaker said, “Well I’m surprised that in an advanced city like Munich I get such an elementary question. I’m going to ask my chauffeur to reply.”
The point is that knowing the name of something, does not mean you understand it.
As it is with the practice of marketing.
Many out there know the names, the jargon and new age tools with fancy labels. Unfortunately, that is not enough to be truly useful. You have to know how they work, how they interact with each other, and ultimately, how their use adds value to those with whom you are engaging.
Real knowledge and wisdom comes with doing the work, earning the right to make the claim of expertise over time gathering the experience necessary for insight.
The brother of this dictum is simplicity. Those who really understand how something works are able to go to the heart of it, and explain it in simple terms such that a non expert will understand. To quote, again, Einstein: ‘Everything should be made as simple as possible, no simpler”
Albert was not the best mathematician around, he could not even get a job teaching at undergraduate level in a university. His enormous ability was imagination, and the capacity to explain hugely complex ideas in simple terms. He could sort out the important from the unimportant, determining what was necessary to an outcome, and what was superfluous, and come up with what he called ‘mental models’ that demonstrated the explanation in simple terms to others. The mathematics was a secondary skill to the creative insights that led to the need to develop the mathematics that explained it.
Again, as it is with marketing.
Header cartoon courtesy Tom Gauld at TomGauld.com
Sep 7, 2020 | Analytics, Management, Marketing
As a marketer, I want data to better understand the risks and impact of investments in marketing. I am a true believer in data, which also means that the limitations of data are factored into my thinking.
The nonsense pushed around for decades that by default, human beings respond to stimuli in a binary way is increasingly being recognised for the bunkum it is. Marketing effectiveness is not as easily subject to risk analysis and probability based reasoning as most, including myself, would like to be the case.
Data that represents what has happened in the past might be objectively true, but as we see every day, can easily be interpreted and presented differently to deliver the message the carrier wants to be heard.
If we can do it with real data collected from past activities, imagine the vagaries that can be built into the data that is supposed to be telling us what will happen!
The selling point of all the digital data around is that it is both accurate and actionable. Tactically this is partly true, strategically it ranks with the fortune teller in the local fete as a base from which to make long term choices.
The two fundamental drivers of calculating an objective assessment of the impact of a marketing investment are:
Attribution.
Attribution is a particularly difficult and often overlooked problem. Is that purchase because of the anonymous display ads on Google, the annoying branded email that follows you around for weeks after a casual search, the fact that the truck that went past your door delivering was clean, the TV advertising, or that the packaging looked good on a supermarket shelf? All these factors play a role in creating a successful marketing investment, but how do you sort out the relative weights of the impact with one dimensional data?
The unpredictability of human behaviour.
Then you have the fact that people simply do not act rationally, or always in their own best interests, the two foundations of econometrics. They act on a range of impulses and learned behaviours that have little to do with rational economics, and everything to do with psychology. We are only just beginning to understand the impact of psychology on an individuals decision making.
Between them, these two factors make assessment of marketing effectiveness an elusive target. It is best served with the combination of data, and intelligent hindsight, mixed with a high degree of qualitative sensitivity to the drivers in the market, and instinct. These characteristics are only gathered with deep experience, years down in the marketing weeds, learning by doing. It does not come from a textbook, online course, or a few years following instructions.
Sep 2, 2020 | Governance, Marketing, Small business
How do you execute on that BEHAG?
How do you fulfil the vision?
How do you accomplish the mission?
These are all questions I get from time to time from people stumped at the point where the dream, whatever label you choose to put on it, has to be turned into some sort of activity.
A dream in the absence of the steps to achieve that dream is commonly called a fantasy.
The process that I help people through is what I call ‘Hindsight Planning’
It has four distinct steps.
Step 1. Understand the market dynamics.
There is no avoiding the necessity to understand the drivers in the markets you are seeking to leverage. The technologies, barriers to entry and exit, capital requirements, regulatory requirements, major competitive factors, and a host of others all play a role. In the absence of at least having some idea of the ‘Current state’ of the market, you risk that plan being just a shattered dream. Unless you understand what it is you want to change in order to grow, and what the probable drivers of that growth will be, it will remain a fantasy.
Step 2. Agree on the shape of the business down the track.
Planning horizons change from market to market. Technology markets are changing almost as we speak, some others have very long lead times, although it is often these that are disrupted by newcomers who throw the long held beliefs that have driven the market over the wall and change everything. Nevertheless, difficult choices need to be made. What you will do and how, but often more importantly, what you will not do and why.
Step 3. Plan backwards.
Having agreed the shape and size of the business in 1, 3, or 5 years, whatever horizon you have agreed on, the task now is to ‘put yourself there’. Imagine the outcome has been achieved, and then articulate the steps you have taken in that journey. This might seem just to be an exercise in words, and to some extent that is true, but importantly, it is also an exercise in perspective. Working backwards enables you to test ideas, assumptions and choices, against an outcome you have agreed has already occurred, albeit in your collective minds. In that way, a ‘reality filter’ of sorts has been applied.
Some of the obvious questions that need to be answered may be:
- Where did the revenue come from? Growth is not possible in the absence of revenue, so list the sources on a whiteboard. Current customers, new customers, channels, business models, products, technical achievements, geographies, and so on. However, do not just list them, articulate in some detail how it has happened. Again, that past perspective adds real ‘grunt’ to the conversations.
- Where did the capital come from? Growth is a veracious consumer of resources, particularly capital. How did you fund that growth? Reinvestment of retained earnings, capital raising from friends and family, or from the markets, public and private, debt finance considering the necessity for assets as collateral?
- What is the dominant business model? Are you a middleman, retailer, on line item sales, subscription sales, did you achieve a position to monetise arbitrage opportunities, and so on. Digital has delivered a host of new and emerging business models to us over the last decade, but one thing that has become clear, if it was not already, is that differing business models do not live comfortably in the same house. Therefore, if your revenue streams come from different business models, the structure of your resulting business needs to be decentralised by those differing business models.
- What is the ideal corporate structure? Have you remained private, are you publicly owned, a partnership, Joint venture, franchise system? There are many options, and as in the previous question, potential siblings rarely successfully live in the same house.
- What capabilities were required to succeed? This is a question in two parts. Firstly, what capabilities were required from individuals, technical, strategic, financial, and all the other factors that make human beings able to contribute? Secondly, what were the organisational, leadership and cultural factors that enabled the organization to leverage the capabilities the individuals brought in each morning as they turned up to work.
Step 4. Execution of the plan
As noted, a plan of any sort remains a fantasy in the absence of the means to execute, and deliver on the plan.
Executing on a plan to achieve an objective has a few wrinkles that must be accommodated:
- ‘No plan’, as George Patton said, ‘survives first contact with the enemy. This means that the plan must be sufficiently agile to accommodate the unexpected, while remaining focussed on the objective.
- All stakeholders, and most particularly those who are employed, must not only know the plan, but they must understand and ‘buy into’ the objective, while reacting tactically to the unplanned things that confront them. The means to achieve these usually mutually exclusive outcomes, is that they not only understand their role, and the part their role plays in the larger objective, but they must also be prepared to be more than just an unthinking functionary, doing as they are told, or at least as they understand they are being told. It is a process of critical thinking and feedback going up, down, and very importantly, across the management chain. Not an easy thing to achieve and one we normally just attribute to some natural ‘leader’ who emerges. However, everyone has the capacity to be a leader, simply by being a participant in the process and holding themselves accountable for the actions of others.
- Operationally deploying ‘Nested’ functional plans. Like the operations of a mechanical watch, to tell accurate time, each part of the mechanism must contribute in a defined way to every other part of the mechanism, while not being overtly connected. There are always a range of flywheels driving others of varying sizes that are doing different roles, that all add up to that accurate time. An organisation is just the same, and this diversity of role, timing, and relationships to other flywheels must all be kept in synch if the outcome is to be achieved. No easy task, which is why it so often fails. Successfully driving towards an objective, means that the various parts of the mechanism of the organisation must work be synchronised in ways that are able to accommodate the tactical opportunities and reverses that inevitably occur while not losing sight of the objective. This all requires what I call ‘operational nesting’
When you need an expert to help you think about these things, let me know.
Aug 31, 2020 | Change, Management, Marketing
We are in uncertain times, and under those circumstances, perhaps counter intuitively, there are many opportunities for all forms of M&A activity.
For many owners of SME’s, this Covid crisis is the last straw.
You have worked hard for years to build a business, survived and prospered as technology has changed the competitive landscape, avoided the trap of not managing your cash well enough to cover the unanticipated, and survived the various financial meltdowns that have occurred.
Now you are ready to sell, as there is no way the kids want to work as hard, and thanklessly as they have seen you work, and the current uncertainty makes an easier life seem very attractive.
Following are 10 of the traps I have seen over the years, which have resulted in a seller obtaining less than a business may have been worth to a buyer.
Never forget the role that psychology plays in the process.
There are many financial and strategic due diligence boxes that will need to be ticked over the course of a successful transaction. However, the psychological drivers on both sides of the transaction will have a profound and often unrecognised role. From beginning to end, it is an all in negotiation, where skill and experience will play a huge role. This is a double edged sword, and can be made to work for you by judicious planning and execution of the sale process.
Appearing too keen to sell.
Once you appear really keen to sell, that influences the context of negotiations. Nothing is as obvious to a buyer as the desperation of a seller.
Not marketing and managing the selling process.
Marketing plays a decisive role in setting the context for a transaction. How many buyers you can interest, how you go about identifying and generating that interest, how you communicate with interested parties, what information you provide, and when, and how you conduct yourself. It will consume a lot of time and effort when done well, done poorly; you will ‘get done over’. Selling a business is no different to selling a piece of capital equipment, or a tub of yogurt, it is a process to which there is more than one party, with ranges of interests, drivers, motivations and resources available. Pretty obviously, the more keen and genuine buyers the better.
Having unrealistic price expectations.
Few will see the business as you do, and most owners of SME’s consider their emotional commitment over the years has a value. It may do, so long as it is reflected in the financial and strategic value to a buyer, but in itself, it has no value to a buyer. The manner in which the price is structured can vary enormously, from a ‘cash on the barrel’ agreement to swaps of shares, delayed payments, and work-outs dependent on future earnings. Each has their own set of challenges which need to be anticipated and factored into the calculations in a realistic manner. However, going into the process with unrealistic expectations can sour the well.
Poor anticipatory Due Diligence.
Any serious buyer will undertake a DD process, the depth and investment in this will be driven by the size of the transaction more than anything else. Making it simple for the buyer will be appreciated, and add to the trust they have in the forecasts you may make. Anticipating questions that may emerge during the process, and answering them before they are asked defuses them as a potential issue. Removing potential negatives before they become objections is sales 101. Never forget the rules of sales apply, so leverage them.
Ignoring the qualitative elements.
Can you work with these people? Are you prepared to have them take over the business, and its relationships you have nurtured? Do the emerging conditions of purchase cause you to lose sleep?. It may be that none of these apply, so you do not care. However, I have seen transactions turn sour at the last moment after considerable effort, just on the basis of personality, so consider it early and avoid the pain.
Risk assessments.
Every transaction has risks, covering them in an anticipatory DD process so you have the answers before the question is asked, is extraordinarily useful. A buyer will make their own assessments, but the better yours are, the more likely that any difficulties in the negotiation will be papered over. Selling any business is based on the assumptions that a buyer will make of the value that business will add to them. I.e, it is all about revenue and margins over time. The temptation of the seller will always be to beef up the forecasts, which is usually a mistake. Be realistic, but break the revenues down into its components and make assumptions at the more granular level. For example, costumer margins, the trends over time and the influences that adverse events have had. Any comprehensive buyer DD will ask the questions, so have the answers in a robust defensible form.
Understand the strategic value to every potential buyer.
Every buyer will be different, understanding the drivers of each is critical to maximising the price. Make your own assessment of what strategic value your business can add to theirs. This analysis is always way more than just a calculation of future cash flows, although that will always be the starting point. Items such as an assessment of the value of your brand to a buyer, the rate of customer churn, longevity of customer relationships based on barriers to entry and exit, recurring revenue vs ad hoc sales, and many others, will all add to the strategic value to a buyer. Each potential buyer will value these items differently, so developing a nuanced understanding of their business is an essential element of the sale process.
Avoiding the cost of good advice.
Professional advice can be expensive, and for an SME owner keen to maximise the dollars in their pocket, a seemingly avoidable expense. The problem is that selling a business can be a complex exercise, and is always more complex than it first seems. Having good accounting, legal and strategic advice is like any investment, it is made to either make or save money. In the case of the sale of a business, the objective is to maximise the sale price, and minimise the risk to the seller. Experienced buyers will often overwhelm a potential seller with documentation, questions, and promises which conceal the gaps and traps into which the unwary and poorly advised can easily fall.
No plan B.
Selling a business can be a lengthy and difficult process. Many spend time on the process that would be better spent managing the business they are setting out to sell, optimising the value that someone might pay for it. As a flip side of the same coin, many invest themselves in the sale process in the absence of a plan B. When a sale falls through, not only to they have to get back the running the business, they have to deal with the unfulfilled expectations of customers, employees, and yourself.
As a final point, when you get the unsolicited offers, do not invest too much time in considering them in the absence of a real demonstration of the intent of the hopeful buyer. There are many reasons for an unsolicited approach, and none have anything to do with maximising the value for you, as the seller.
Aug 26, 2020 | Marketing, Social Media
The fundamental problem with ‘digital advertising’ is that there is little competition for ideas.
In the past, with limited availability of media, the competition happened before the public got to see anything, as those that controlled access to peoples eyeballs did the fact checking, curation, and idea vetting.
Now that is gone, and there is unlimited competition without the curation, the competition is for attention, then for head-space.
The competition for attention, now has infinite potential to consume the competition of ideas, hence we have the crap that just keeps coming at us in increasing volume.
There are some versions of curated content on line, where the ideas are curated and vetted as they were before, but they are struggling for survival in the sea of social sharks consuming everything around them of any value, and squirting out shark-shit.
And, that is all before the rampant fraud in the digital ad supply chain is considered.
