Peer pressure destroys the power of Advertising

Peer pressure destroys the power of Advertising

Oct 11, 2017 | Change, Marketing, Operations, retail

The major consequence to marketers of the transfer of power from themselves to their customers is that the effectiveness of their marketing efforts has been deflated, irrespective of their mix of legacy and digital channels, by the power of peer pressure.

As a kid, yo-yos came and went several times, usually with the backing of Coke, as did hula hoops and several others, but the story of fidget spinners appears different.

They came from nowhere, a craze amongst teenagers fuelled by YouTube, that left behind all the usual corporate toymakers who have had to scramble to get their hands on stock, probably arriving about the time the craze will end, leaving them on the beach with warehouses of product the kids see as yesterday’s news.

The toy business, like many, has a rhythm that has evolved over many years. There are a couple of peak sales periods, and the promotion of new toys is aimed at these periods, with lead times of 12-18  months or more. These hierarchical toy marketers NPD cycle times bear no resemblance to the cycle times of the newest crazy thing that catches on.

Finger spinners appeared in the US in early 2017, and sales appeared to have peaked in May or June, and are now in decline, a decline as rapid as the rise. How do businesses geared around an 18 month product development and promotion cycle time compete in this new marketplace  powered by their consumers, not even their customers, who are often the kids parents. Kids went on line to buy these thing before the bricks and mortar retailers had heard of them. Perhaps this is the virus at the core of the recent move to Chapter 11 of Toys R Us, weighed down by a mountain of debt, just before the peak selling period.

This severely condensed cycle time is the new reality of consumer markets, and our legacy  hierarchical organisation structures are unable to accommodate the change. Instead, organisations need to find more ‘organic’ ways of responding to the stuff that goes on in their markets, to see the odd things at the fringe that might become the next big thing, and respond to them with an appropriately condensed supply chain cycle time.

It is not very often organisations will be faced with something as radically short term as fidget spinners, but the lesson is appropriate in all markets, as the disruption to one extent or another, is everywhere.  This condensation of the demand cycle, way out of the control of marketers, is a tectonic shift on the nature of markets and marketing in the 21st century to which adaptation is the key success metric.

 

 

 

Is the supermarket business model developing terminal cracks?

Is the supermarket business model developing terminal cracks?

Oct 9, 2017 | Governance, Marketing, retail

Are the tiny cracks evident in the current supermarket business model just the beginning of what will become crevasses that will swallow supermarkets, or just annoyances that can be managed?

My view is the former, although we are currently a long way from Coles and Woollies being irrelevant to our lives, and as the dominating incumbents, they do have the option of anticipating and leveraging the changes as they evolve.

The current supermarket business model was built to leverage scale. That is its strength, the ability to centralise decision making and scale those decisions back through supply chains, and out into the consumers’ pockets. Scale has been the dominating characteristic of successful businesses since Alfred Sloan turned General Motors from a failing minnow into a monolithic hierarchical organisation in the 1920’s and 30’s.

The world however has changed.

Hierarchical organisations no matter how well optimised, cannot match the agility of local competition that is more organic in nature, adaptable in close to real time, and able to take advantage of the little cracks that result from the siloed management of the legacy organisation. They are simply able to adapt quicker to the changes in the competitive context in which they operate.

We see evidence of this all around us, from the turnaround in the US military capability under General Stanley McCrystal, to the organic growth of technology companies like Amazon and Google that are organised more as networks than they are as hierarchies, to the growth of local farmers markets, and pop up stores in the increasing number of empty retail spaces in suburban malls.

The siloed, hierarchical organisations of the 20th century have seen their best and are crumbling in the face of the changes in our ability to gather, curate and share information, and then act on it to create and deliver value.

While supermarket buyers optimise their net net prices with suppliers in return for mass distribution and shelf placement, local store managers are excluded from assembling a range optimised to their local buyers. By contrast, a local operator can optimise the range, but lacks the power to optimise the cost prices by virtue of their lack of scale, but that is changing slowly.

Then you have the innovations created by technology, the Amazon Go stores, exploding options to order and schedule delivery on line, the emergence of the ‘Internet of things‘ and artificial intelligence,  coupled with the social movements that are increasingly seeking product provenance as a purchase discriminator.

All this indicates to me that the capital intensive, centralised  supermarket is becoming a legacy model, just as the Department store is proving to be, demonstrated by the tsunami of bankruptcies in the US, and Myer in Australia announcing even more closures last week.

Photo credit: Gerard via Flikr

The real reason your marketing still sucks.

The real reason your marketing still sucks.

Oct 5, 2017 | Marketing

As  a young marketer, then later in my corporate career, there was only one way to get close to your “market”.

You went there.

In my case, it was into supermarkets, talking to consumers as they considered what they would buy, which of the choices they had they would select that day, and why, and try to interpret their answers into some actionable consumer intelligence.

When all clichés are removed, the only reason someone would buy something was because at that time, for a range of reasons, it filled a need.

What that meant for the marketing and advertising programs was that we had to be emotionally relevant.

Without relevance to the lives of consumers, you are nowhere, unnoticed, and unwanted, no matter how great you thought the marketing material you have might be.

These days, we have mountains of data, information, feeds, and opinions coming at us, so we sit behind desks and try and sift through it all to find the nuggets that will work for us,

We have the ability to define our ideal customer to the Wahoo, we know when they shop, what they buy, how price sensitive they are,  but it all comes from reports of some sort, not straight from the mouth of those we are trying to engage. We know so much we are either paralysed by the volume, or we tell them what they need, rather than as in the old days where we knew buggar-all, (technical market research term)  so we listened.

You cannot get close to customers from behind your desk.

You have to get back into the supermarket, or whatever your equivalent is, so you can talk to them, see the emotions, observe the body language, truly understand their motivations joys and challenges, and if you do that well, you have a chance to be truly relevant to them.

Then, and only then, will your marketing cease to suck.

 

 

Branding matters: Best ever evidence.

Branding matters: Best ever evidence.

Sep 29, 2017 | Branding, Marketing

The darling of the techies everywhere, Apple, is about to release new phones.

They are the iPhone X, iPhone 8, and iPhone 8Plus for outrageous prices, when compared to the offerings from almost any of the other 300 plus companies that produce phones.

The Australian price for the iPhone X will start at $1,579 and up depending on the storage you choose, and there are already concerns that demand will outstrip the capacity to supply. (Is it possible this ‘impending scarcity’ is a pitch to hype early interest? No… Apple would never stoop to that)

According to IDG, Samsung is the current world market leader of units delivered with around 23% followed by Apple with 15%, Huawei with 10%, and the other 295 odd makers fighting for the other 55%. The numbers vary a bit, depending on the researcher, the timing, and a whole lot of factors, but the pattern is consistent.

In absolute contrast, Apple leads the profitability stakes with 83% of industry profits, with Samsung taking just 13%.

Forget the rest.

Which would you rather be, Samsung market leader by units delivered, or Apple, market leader by a country mile in profits?

How can this be?

The technology is now pretty generic; all the phones work well, few of us use all the functionality they can deliver, dare I suggest that most would use less than 10% of their phones capability. Still, enough of us line up to buy the new Apples at double the price of a technically equivalent, or depending on who you listen to, superior, Samsung, or cheaper again Huawei, to make Apple hugely, even outrageously, profitable.

While Samsung and others blather on about their technology, cutting edge flexible screens (in Samsung’s case) Apple while making the observations that their tech is new and leading edge, concentrates on marketing and branding,

This is perhaps the ultimate example of great branding over a long period, resulting in a total, absolute domination of an industry profit pool.

Consider those numbers again, a 15% share of units shipped converting into an 83% market share of the industry profits. This astonishing brand performance comes in a crowded and  commoditised market, whose growth while stellar to date is showing signs of flattening.

I did doubt the ability of Tim cook to keep the apple money machine churning after the death of Steve Jobs, but is seems that by beatifying him, and building on Apples remarkable marketing DNA, the ride continues.

 

 

 

 

 

 

 

 

The single most common question I ask myself

The single most common question I ask myself

Sep 20, 2017 | Change, Governance, Marketing

How do I demonstrate value?

As a senior marketing bloke in a large business, being heard around the board table was always a problem, as it is hard to quantify the impact of what you do. Try as hard as possible, there are still holes in the case, as the reality is that you are setting out to tell the future.

‘Do this, and that will happen’

While marketers are no longer seen as the corporate equivalent of ‘Zelda the fortune teller’ it remains hard to compete for scarce resources with those who are able to table hard data, and are able to quantify the holes in your logic, should they choose to do so.

While pointing out that one is in the past and cannot be changed, while the other is in the future, and therefore is able to be shaped by sensible and informed investment, there remains the uncertainty of the future. Success depends on the confidence that a management has in the ability of the marketer to assemble facts and suppositions into a credible projection of outcomes, in line with the risk profile of the corporation

It is even harder in consulting to small businesses. Every dollar spent on marketing with the promise of better outcomes in the future is a dollar out of the owners pocket. They have all been stung by the purveyors of various forms of marketing snake oil before, so are a wary and appropriately cynical lot.

I have concluded that the answer is a bit like motherhood, the value off which is only visible over a long period, but is then indisputable.

Photo credit Ali Alhosen via Flikr

Is being ‘sticky’ the key to success.

Is being ‘sticky’ the key to success.

Sep 18, 2017 | Branding, Marketing, Strategy

Those flogging business coaching to the owners of medium sized businesses seem to focus on one of the oldest sales techniques in the book, the ‘Before &  After’ pitch.

Describe the current situation, and make it as down and dirty as possible, then describe the new world, the joy of the state achieved by the application of their great coaching/technology/process, whatever it is they are selling.

No mention of the challenge in the middle, abracadabra, all is well, just $109/month, less than the cost of coffee and a roll every day and you are on your way to the ‘laptop lifestyle’.

Tangled up in the bullshit, never articulated, at least  to my hearing is a very valid notion, that of ‘Critical Mass’.

The critical mass in a nuclear reaction is the point at which the process becomes self- sustaining. It may take only a nanosecond, but there is that critical point, below which the process is not self-sustaining, and past which, it is.

At what point does a cloud, which is just an accumulation of moisture, suddenly change from being a cloud to dropping rain?

For small business owners, the point of critical mass, from where the business is self-sustaining, is usually that point from where they can take time out of the business, and enjoy the financial rewards of success.  The road to that point will be different in every case, and most in my experience never actually consider what the elements of critical mass may be in their particular business, and how they might influence them.

I think it might be about how ‘sticky’ you can become.

‘Sticky’ is not a term often seen in any form of business writing, it is more usual in kids books, but how is this for a definition:

‘Stickiness’ in business is the function of: Share of Wallet  X Propensity of customers to advocate for you.

The stickier you are, the more likely you will be to have your customers buy from you everything you can reasonably provide, and then go one step further and tell their friends, peers, and wider networks.

If you are  not sticky enough, you will be sub self-sustaining, but pass that sticky test, and the business will sustain itself, with some ongoing tweaking, which is different from the 80 hour weeks most small  business owners put in, to make a living, but often  not have a life.

 

Cartoon credit: Hugh McLeod and Gapingvoid.com.