How do retailers create irresistible ‘customer flypaper’?

Jan 28, 2020 | Customers, Marketing, Small business

 

As a very young kid, I remember my grandmother having flypaper stuck around her kitchen. From time to time she would smear something smelly on it, which doomed any flies in the neighbourhood.

Wouldn’t it be nice to have ‘Customer flypaper’ for your business?

Once attracted,  they will never leave, simply because they never want to.

A secondary but ideal characteristic of that customer flypaper would be that those customers who were just there tyre-kicking, shopping for the cheapest price, or were inclined to just waste the time of you and your staff, would be repelled.

Nice. I have seen such a metaphorical commercial flypaper at work.

My aging mother lives in a major regional centre, and has a range of pharmaceutical and ancillary needs. A local pharmacy has created a veritable moat of flypaper around his ever increasing customer base, my mother amongst them.

How has he done this?

  • Focus. He focusses his attention on his current customers, personalising their experiences and interactions with the pharmacy and its staff. This is done by a combination of digital record keeping software, and old fashioned humanity. If you want loyalty from your customers, you have to earn it, as it is rarely just given, and then never lightly.
  • Differentiation. Finding something that is challenging to replicate, and adds value to a cohort of customers creates a powerful attraction. In this case, the pharmacist is a compounding chemist, so is able to combine and mix the medications in such a manner, that instead of taking a pile of pills twice a day, my mother is able to take just one or two.
  • Rewards. Current customers are rewarded, not by money, discounts, or any of the other easy to replicate offers, he recognises and rewards their psychology, their instinctive need to be a part of some sort of community. In the early 50’s, psychologist F. Skinner did a series of experiments, using rats and pigeons as subjects, since validated widely in labs, and obvious any time you walk into a location with poker machines. The psychological power of an intermittent reward can be compelling, for some, irresistible. This pharmacist uses intermittent rewards that confirm he cares about his customers. A vase of flowers sent when one is in hospital, a handwritten birthday card, remembering a grandchild’s success at school, all sorts of things that just demonstrate he, and his staff, care.
  • Service. Older people sometimes find it hard to get out and go to the pharmacy. So, there is a free delivery service, for your compounded few pills, all sorted into the times you must take them, packed in a daily and, morning/afternoon blister pack that even someone with advanced arthritis can open. This is all run on an account, so not only can you get the pills delivered, you can also ring up and get other items stocked delivered at the same time, paid for in one simple monthly transaction. Being cynical, I compared the prices of a number of the ‘grocery’  items my mother had bought in this manner to other retailers. While it was not the discount promotional price sometimes available in woolies, they were by no means capitalising on an opportunity to gouge.
  • Overheads. This pharmacy is located in a suburban shop, next door to a butcher, baker, and physiotherapist, with generous and easy parking outside the door. Not only is this convenient, it would be a cheaper place to have a store than in a location with heavy passing foot traffic, and leaves a bit more in the kitty for doing the things that really matter to customers.
  • Collaboration. There is considerable collaboration between the co-located shops. The pharmacist also collaborates closely with a number of the local GP’s and specialists to ensure that their patients receive the best possible care, and medications. Mums GP from time to time, varies the dosage of some of the things she takes, and communicates that change directly to the pharmacist. This ensures that the information is clearly communicated and understood, and adding a layer of added professional scrutiny to the mix of medications she takes.
  • The ‘original’ social media. Word of mouth is the original social media, and still by a country mile, the best. My sister who lives in the town, and helps Mum, often picks up bits and pieces in the pharmacy for herself, as well as Mum. The level of service and care evident, and the simple fact that the staff also know her, and her family, means not only would she not go anywhere else, but she will not allow any of her friends or acquaintances to go anywhere else.

All this adds up to very powerful ‘commercial flypaper’.

It is not easy to build, takes time, effort, and investment ,as well as a very clear strategy within which to build the tactics that act as the flypaper.

 

 

 

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.

Is marketing losing its humanity?

Jan 8, 2020 | Marketing

Marketing, when I first started was a mind-set that had at its core, the customer.

The information we had was by todays standards in the dark ages, and we had to work really hard for it. We pored over sales and basic market research reports by hand, working with others in the supply chain, and most importantly, talking to customers, real ones, over a coffee, lunch, or even on the golf course.  In the process we learned about their problems and aspirations, and once in a while, came up with something good.

In the meantime, we  got to know in some detail what they were seeking, and how we might best address that quest. Yes, it was an expensive and time consuming process, and yes, it was subject to being less of a commercial exercise than it was a tonic for the ego, but it was effective.

Now all we do is pore over the deluge of data generated by algorithms driven by marketing technology: Martech.

We delude ourselves that in doing so we  are not missing anything,  but the reality is that we are so deluged that we risk missing what should be the obvious, and more importantly, the less obvious connections visible to the experienced and informed human eye, invisible to an algorithm.

The central objective of marketing is to solve a customers problem, add value to their lives in some way, and have them come back for more.

I am unsure of how this end is achieved by constant automated updates, unsolicited sales offers, chasing them around the net with ads for stuff they do not want, and making them click away a detested pop up.  So called marketing people, those who have emerged in the last 15 years, seem to think that actually engaging with a customer, talking to them, asking questions to which they might  not like the answer, is akin to walking on stage to deliver a presentation to a crowd: to be avoided at all costs!

Marketing is at its core, all about human interaction.

Martech has its place, but is not a silver bullet, or replacement for the insight that comes from humanity.

 

Header cartoon courtesy Tom Gauld at www.tomgauld.com

 

 

 

How to think critically about your essential investments in marketing

Dec 9, 2019 | Governance, Marketing, Strategy

 

Marketing is almost always seen as an operating expense rather than an investment in the future.

This reality poses an absurd paradox.

We treat investments in capital equipment for our businesses, and various financial instruments for our own wealth generation,  as items on a balance sheet. By contrast, we treat marketing investments, and particularly those made in various forms of communication, as discretionary items recorded in the profit and loss account as an expense.

Why do we make this distinction?

Both forms of investment have as their motivator, the generation of future cash flow. Just because it is a bit harder to calculate the return on marketing investment than it is to calculate the return on an investment in capital equipment, or financial instruments, should not be a deterrent to the effort.

Nothing is more critical to the long term commercial health of an enterprise than the investment in marketing. What could be more important than identifying, communicating, creating transactions and building relationships with customers, that generate future revenue and cash flow?.

There are 3 basic strategies considered by financial investors

Index investment.

This is a passive, low cost, average but relatively safe return strategy, sticking to stocks that reflect the particular index against which the performance measures will be applied. The most usual are the S&P and ASX 200 indices.

Arbitrage investment.

Essentially this is a short term strategy that assumes the investor is smarter than the market, able to recognise mispricing before anyone else, and their IT programs. It involves a lot of buying and selling of stocks, and often commodity contracts, essentially bets on the short term movement of price. Over the long term, there is plenty of research around that indicates that the performance is around the major stock indices. This is also a high cost strategy, in that the constant trading incurs transaction fees, usually not included in the published performance metrics.

Value investment.

Investing for value is a strategy that involves taking a long term view of the businesses in which you invest. This means you engage deeply, not just with the numbers, but with the management and culture, as well as taking a view of the marketplace in which they compete. It is a ‘filtering’ strategy, one where a lot of research boils down the potential targets to a very few, in which you take a significant position. It is a focussing of resources at the specific points where you see there is long term returns available, and are prepared to accept the vagaries of the short term focussed market gyrations.

If you apply a similar frame to the manner in which businesses make investments in marketing, there is a remarkable similarity.

Index marketing.

Doing what everyone else is doing, being average, a follower, and risk minimiser. It also ensures you do not stand out from the crowd, which in a cut-throat marketing world means nobody notices or cares about you, so perhaps you should save your money.

Arbitrage marketing.

Those following this strategy are just applying tactical actions to situations they see, there is no underpinning strategy, just advertising and promotion, usually driven by a budget that has to be spent, and KPI’s that measure the activity, rather than the harder to measure  outcomes of the activity. The driving word is ‘campaign’. A string of tactical activities will be seen as a campaign, and usually there is little flow from one campaign to another. This tendency has been accelerated to stupid proportions by digital, where the cycle time of a campaign, limited as they have been, has reduced from months to days. No longer are we looking for the strategic ‘big idea’ that will engage and motivate customers over a long period, we are looking for 10 ideas for the Facebook and Instagram posts in the next 24 hours.

Value marketing.

Successful marketing requires a solid strategy, well executed with a long term perspective. Over time, you will fiddle with the details as you become more familiar with the minutiae involved, and you fine tune the application of funds as you learn, but it is a multi-year commitment, not a 6 month campaign, and certainly not a few ‘cat photos’ on Instagram. Such ‘cat photos’ may be a tiny part of the tactical execution, but are never a component of the strategy. This takes time, resources, and most importantly, a laser focus on what is important to  the selected group of primary customers. Over time, you communicate your value proposition that defines why they should do business with you, rather than someone else, and do so at a price that delivers you a premium return, while delivering them premium value.  Then you retain their business, increasing your share of wallet, innovating, reducing customer churn, all of which delivers sustainable cash flow.

If any of the above arguments holds true, then it must be that the measures we use to make decisions about our financial selves should be able to be adapted to the investments we make in marketing.

Step one is to see it as a long term investment in prosperity, and not a short term expense to be reported and forgotten, hidden in a monthly P&L.

Step two is to have a robust, well thought out strategy, that is able to optimise tactically in real time.

Step three is to implement and learn relentlessly, seeking the elusive cause and effect chains that must exist between marketing activity and cash flow.

 

Cartoon credit: Scott Adams and Dilbert reflecting on investment strategies.

 

 

 

The new Revenue Generation paradigm

Nov 25, 2019 | Customers, Marketing

When was the last time you made a sale without the customer first doing a google search on their problem, and alternative solutions, before you knew they existed?

A while ago I bet!

Customers no longer need you, the information you have, and  the products you sell, simply because they can easily find many alternatives.

The traditional sales funnel, starting with awareness, moving through familiarity, to intent and action, is dead. The model of a marketing function producing ideas and collateral, which is thrown over the organisational silo wall to sales to use for everything from the cold call to take the order is also dead.

In its place is a flywheel with has customers at its centre.

This simply means you have to know your customers intimately, not just their demographics, their circumstances and behavioural patterns. This in turn implies a great deal of work has been done in defining who is your ideal customer, and being able to reach out to them at a time when they are in ‘buying mode’, with a solution to the problem they are facing, that you can solve better, in some way, than anyone else.

There are no magic bullets to any of this, it takes hard work, experimentation, and persistence, and most importantly, the assistance of those customers you do know well,  to tell you what you need to do to keep them. When you enhance your levels of service, then they will be your sales force, spreading the word, one by one.

The Buyers journey is also an old fashioned cliché, usually represented by a linear process. These days it is no such thing, it is more a series of many interdependent decision points, whose order is often  changed as your ideal customer drops in an out of a decision cycle that is independent of you, the seller.  

No longer should you see Sales and Marketing as separate functions, one feeding the other. Both are part of a highly variable non-linear Revenue Generation process over which you may have some influence, but no control.

The day of the functional silo being efficient is over, thrown out the window by the power of the buyer!

 

 

 

 

 

The curse of insider knowledge

Nov 22, 2019 | Communication, Leadership, Management

When we know something, the automatic expectation is that those with whom we are communicating understand it equally well.

This automatic, unrecognised assumption can be a barrier, and at its worst, a curse.

Participating in a conversation a while ago where I was the outsider amongst a group of Canberra bureaucrats, their verbal shorthand, particularly around the departmental names and programs was incomprehensible to me. The terminology  was perfectly well understood by all of them, and they were surprised at my ignorance, when I pulled them up and pointed it out.

Try a little experiment.

Tap out a song, like happy birthday, with a pencil on a desk, and have people tell you what it is. We expect most to be able to pick it, the tune is obvious to us, singing it in our minds as we do it, but only a few actually pick it.

Of course, this closed communication loop is used all the time as a badge of membership, and a means of exclusion.

It may be that the group I was talking to were expressing their status as insiders by excluding me, but assuming this is not the intent, it was nevertheless the effect.

Every group has its own set of verbal and behavioral tools. These can be used as an offensive weapon, a means of exclusion, or they can be a tool of inclusion, it just depends on how you use it.

 

Header cartoon credit: Scott Adams and his mate Dilbert.