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.

 

 

How your brain collaborates with itself

How your brain collaborates with itself

Aug 7, 2019 | Collaboration, Marketing

 

Your left brain manages the quantitative, anything that can be reduced to a spreadsheet will be a left brain activity. It can be quantified, optimised, but always lacks the spark of originality, and creativity. 

Creativity, instinct, understanding, are all functions of the right brain.

We homo sapiens respond instinctively to the cues around us in our environment, a  function of our evolutionary drive to survive in a hostile environment. However, we do it using our ‘fast’ brain, which is not a specific location or hemisphere of the brain, but an instinctive response built into us by evolution, residing deep in our amygdala. It enables instant response, which may not always be right, but is a safer bet. For example, when our ancestors were walking across the savannah, they responded to that rustle in the grass as if it was a threat. If it turns out to be just the wind, nothing is lost, but if it turns out to have been a tiger, it would have been a grave mistake to ignore it.

We interpret everything around us through this ‘fast lens’, then are able to sit back and think about it adding a layer of more thoughtful response.

The creative stuff in our brain, residing largely in the  right hemisphere is the slower part, from where we draw on our experience, learning, and context of information and environment, to come to a conclusion. It takes time and cognitive energy to assemble the factors that apply, and consider them, rather than just jumping to a conclusion.

It is this ability that distinguishes us from other mammals, and indeed, all animals.

However, the right brain needs input from the left, it requires the raw material with which to work, and when the magic happens, it needs a way for the left brain to figure out if the outcome made logical sense, then refeed the data back to the right brain for reprocessing.

I would speculate that the advent of the digital tools of instant gratification have compromised our propensity to apply the cognitive energy required to leverage the creative capability of our right brain.  Our creative output appears to me to have suffered in direct proportion to the evolution of the fast twitch tools of  the internet, which demand an instant response, not a considered one.  This does not  enable  the right brain to do what it does best, seek out interesting and non obvious solutions to a problem or situation.

For anyone more than  superficially interested in this stuff, the must read book is ‘Thinking Fast & Slow’ by Daniel Kahneman.

When you want to understand how it all applies to the generation of revenue, give me a call.

The ‘Marketing Alchemy’ that reversed the value of gold and iron.

The ‘Marketing Alchemy’ that reversed the value of gold and iron.

Jul 29, 2019 | Marketing, Strategy

1813, in Prussia, princess Marianne convinced people to turn in their gold jewelry to fund the war against France, and be given an iron replica in return. The replica jewelry was stamped with the words ‘Gold gab ich fur Eisen’ which means ‘I gave gold for iron’. Substitute iron jewelry produced by the Royal Berlin Foundry became the symbol of not just wealth and status, but of patriotism, .

Gold has an intrinsic value, it can be used, and reused, but its real value is in the belief we share that it has value in other ways, beauty, a symbol of wealth, luxury, status, and all the rest of the stuff we value.

The status of iron replica  jewelry was conjured to become higher than that of the gold originals.

Possession of gold signals things, but those signals can be reversed, because they are all about perception. It just takes a  bit of psychology, mixed in with the change of context and perception, achieved by marketing.

Marketing Alchemy.

The Prussians must have a skill for this stuff, despite their dour characterisation.

Frederick the Great achieved the opposite effect with his bit of alchemy with spuds. Frederick, who ruled Prussia from 1740 to 1786, was concerned that his people had only one source of carbohydrate, wheat. In a conflict, which he was pretty good at inciting, wheat fields could be devastated, and take a long time to be replaced, meanwhile his people would starve. The antidote was potatoes, which would provide a quick growing and reliable alternative  source, but Prussians would not eat potatoes, under any circumstances. After all, dogs would  not eat them, why should people?

Fred tried every form of coercion that he, as an absolute monarch, could dream up, but nothing worked. Then he found some magic marketing alchemy somewhere, and had his gardeners plant a potato garden which he decreed as Royal potatoes, reserved exclusively for the tables of royalty. He put a guard around his garden, but quietly he instructed the guards to be slack, and not enforce the security. This meant that the locals could nick in and knock off some royal potatoes pretty much without any real risk, while defying the king.

The net result was that potatoes quickly became a staple in the German diet.

Marketing alchemy at work!

Devising this sort of marketing alchemy is not easy, and is not always sensible at first glance. It is always different, counterintuitive, and will have more than its fair share of knockers. ‘It will never work’ they chorus, usually because they cannot see out of their status quo box. When you need some alchemy in your business, call an alchemist.

Header photo: iron jewelry in the Victoria and Albert Museum, London

 

 

Solving the paradox of marketing measurement.

Solving the paradox of marketing measurement.

Jul 22, 2019 | Branding, Marketing, Strategy

A bigger brain than mine observed that ‘You get what you measure’. This has been proven to be true time after time.

Our lives are run by those who make the rules based on what has been, simply because it is easy to quantify.

However, what do you do when you want an outcome you cannot measure?

Like ‘good parenting’. We all know the kid benefits, as does the family, and community, from good parenting, but what is the measure?   It is particularly challenging if you choose to try and measure good parenting in real time.

Like ‘Culture’.

We all want a great culture, but how is it measured? There are consultants flogging all sorts of snake-oil dressed up in pretty graphs and dashboards, but I am yet to see one that is of any demonstrable value.

Like ‘Great marketing’. ‘I will know it when I see it’ is simply not good enough!  How do you predict which marketing strategy will be great, and which will be a steaming pile of crap?

If a PhD candidate was to compare the balance sheet valuation to the market cap of the top 1000 listed companies of 1998, I would bet my house that there would be a far closer correlation then, than a similar comparison done in 2018. In those 20 years, capital markets learned to factor into their valuations the future value of intangible assets. 

Facebook paid 19 Billion, yes Billion US in 2014 for WhatsApp, when it was owned and run by 12 people in a garage, supported by a VC investment. At the time it was seen as an insane price by most pundits, the same ones who are now saying it was the purchase of the century.

Intangibles now make up a significant proportion of the market cap of most successful companies, and where do Intangibles come from?

Marketing!!

But what is the measure?

We can see the value with the great benefit of hindsight, but hindsight is not available to us as we do the planning.

So, the question becomes: ‘How do we generate quantitative links between cause and effect?‘

 Such links will provide the connections between Foresight and Hindsight, so we can learn and accumulate wisdom as we go, make resource allocation decision based on what should happen, rather than what we hope may happen, or even worse, an assumption that the future will look just like the past?

Even then, we need to remember the sage words of Einstein who knew a bit about measuring things, when he said ‘Not all things that are important can be measured’

 

Header cartoon courtesy of Hugh McLeod at www.gapingvoid.com

Marketing is dead; Long live marketing

Marketing is dead; Long live marketing

Jul 15, 2019 | Branding, Marketing

 

In 1973 I graduated with a marketing degree, something few had heard of. My father was appalled, as I had set out to get an accounting degree, but had been waylaid by some  new age nonsense that would not get me a job.

Several years later, after quenching my wanderlust, I went looking for a job back in Australia. At that time, marketing was becoming important in a couple of areas, the food industry, and FMCG more generally, being the leader.

I was lucky and scored a job in an environment  which would give rise to one of the (formerly) great Australian brands; Meadow Lea.

Brands had become important through the 20th century in food, as they were a mark of quality, and reassurance that there were no nasties in there that would terminally stunt your growth.  Pretty important in food that you have not grown yourself,  and it is where the big brands emerged, creating the cycle of scale.

Large volumes enables capital expenditure,  and advertising, which exploded when TV emerged in the 50’s, creating massive consumer brands that dominated the landscape of our lives. The corollary is  that there were also many smaller brands, yapping around the edges, stealing a crust here and there, and generally keeping the big blokes honest.

Supermarkets built their scale for the same reasons, delivering price and convenience to consumers, then progressively they  set out to capture some of the proprietary margin of the big brands by leveraging their distribution muscle, by launching house brands in the 80’s. The very first one was a ‘No Frills’ margarine, launched by Franklins in Sydney, supplied by what became Meadow Lea Foods.

Then came the marketing ‘Big Bang’, the arrival of the internet.

I remember seeing the first fax around 1983, and thinking ‘this will change the world’ and it did, but not how I expected, and the fax was nothing compared to the disruption 20 years later.

Suddenly there were thousands of ways to communicate, TV remained, and still does remain an important vehicle, but like an aged boxing champion, is unable to deliver the impact of his youth against a horde of more agile, and stronger contenders who learn on the job every day.

The big brand owners, not wanting to miss out on this new wave of communication channels chucked money and their established ways of doing things at them, and wondered why they were being ignored. At the same time, supermarkets doubled down on housebrands, setting out to market their retail brands as someone you could trust to deliver quality and integrity, while consumers recognised that health regulations made putting nasties in food products a thing of the past.

Who needs brands anymore?

Well, the answer to that question is just about anyone who needs to offer a sense of security, certainty of performance, and a guarantee that they will stand behind their products performance,  to their customers and potential customers. That means anyone pushing the established boundaries of production, distribution, or technology.

Obviously Google, Facebook, Apple, et al fall into this category, and they have built huge global brands in less than 20 years, but those brands look nothing like those of my early years.

They have been built using new channels, as well as reimagining the old ones and executing at scale in ways unimaginable to incumbents. Apple is now the most successful bricks and mortar retailer in the world, when measured on the retailers own key KPI, margin per square foot of retail space, Amazon Go, and Whole Foods are rethinking FMCG retailing, and their bookstores are popping up in places where Dymocks,   Borders, et al closed down a decade ago.

The challenge is that the new marketers emerging now have no idea of how to really build a real brand. FMCG brands are largely irrelevant, so that training ground has gone, the new places to get marketing experience is in tech, and financial services. Tech is building brands despite themselves, simply because they are replacing the old ways with new ones, and financial services, well,  look how puny and irrelevant their brands are in the face of profit pressures, and simply nobody will believe them anymore.

Trust is zero.

Brands cost money to build, and take time building them is an investment in the future, and will not pay off until the future arrives. Unless you have the skills now, the future is looking bleak.

Fortunately there are a few old heads around who still remember, and recognise the ‘4 P’s’ still apply, and a few new heads, not seduced by the newest, shiny tech tool that skates across the surface of brand building

Brands are everywhere, without them, chaos will prevail, but to build one today, you need to be smarter than the next bloke, not just be lucky enough to have more resources and distribution scale. Genuine, creative and forward looking marketing is getting another lease of life.

 Call me when you need a dose of invaluable experience.

 

Header cartoon courtesy Tom Fishburn at www.marketoonsist.com