The future of FMCG research has arrived

The future of FMCG research has arrived

Oct 26, 2016 | Marketing

My 30 year old son, a ‘gamer’ from way back, bought himself one of the new Playstation Virtual Reality units last week.

We have all heard about VR for ages, or it seems that way, always just about to be commercialised, then suddenly, a consumer retail level product that is just astonishing, for a few hundred bucks.

Fiddling with it during the week, moving through the scenarios, in between being amazed, and gobsmacked, it occurred to me that this was the future of consumer research.

Over the last 40 years I have commissioned enough consumer research to keep several firms in business,  both as an employee and more recently as an advisor. Almost all of it has been aimed at identifying the choices consumers will make between various options, price, packaging, shelf positioning, value add offers, and all the other things in the marketers toolbox.

Here is a tool that will do it all, and give a much higher degree of reliability than the methods to date.

Consider being a marketing person in a big FMCG supplier selling to the supermarkets.

Instead of the techniques used to date, gear up a virtual supermarket, and get people representing your target markets to wander the isles, making their choices as they would on a Thursday evening for their families.

This is real research in real time, and is right there to be used, right now.

 

3 things advertising cannot do, despite the claims.

3 things advertising cannot do, despite the claims.

Oct 19, 2016 | Branding, Marketing

Many small and medium sized businesses I interact with seem to have the view that advertising and marketing are synonyms, and if they had a bit more money in their marketing budgets, it would best be spent on advertising.

Rarely is that the case.

Advertising is just a part of a marketing menu, often crucial and a voracious consumer of dollars, but nevertheless often a small part.

Advertising is a great tool, a device to achieve all sorts of commercial ends, but like any tool, there are limits.

The babble that usually  accompanies the sales pitch for advertising is often long on superlatives and short on specifics.

Here is what advertising cannot do:

Advertising weight is no substitute for creativity.

Messages only really get absorbed when they appeal to our hearts, and most advertising appeals to our brains. Like all rules, there are exceptions, such as the advertising of a once only limited time price deal. No heart in that, all head, and it may be seen, and it may also be destructive of the brand, as it is commoditising it.

Advertising cannot make people care about something that has no relevance to them.

Look at all the advertising done for starving kids in Africa, soliciting 10 bucks a month to save a life. If we really cared, rather than felt guilty, the coffers would be running over. It is not that we do not abhor the fact that kids die of malnutrition, it is just that it is removed from us, has no personal impact, and we are cynical about how much of our 10 bucks is actually getting to the people who need it.  Advertising  is best when it defines the WIFM to those seeing it. The best copywriters are usually the direct response writers, they know immediately when their adverting works, and they are always appealing to the prospects top of mind self interest.

Advertising rarely increases the size of a market in the short term.

The purpose of advertising is to attract your competitors existing users, lapsed users, or light users to your products or service. From time to time advertising latches onto a latent need and does create a market, such as the great Apple advertising for the first macs or even better, DeBeers programs to create the tradition of a diamond engagement ring, but those take bucket loads of money, beyond the capacity of any medium advertiser, as well as great timing and a level of creativity rarely seen. Most advertising is aimed at nicking your competitors customers, in one way or another. When I had to turn around Ski yogurt, the target was Yoplait. There was no mistaking what we set out to do by offering a product that was distinctly different, had a different value proposition, but it was still yoghurt. Over time the combined activity increased the size of the market considerably, but our advertising target was Yoplait users and we got them by taking a stance on yogurt that had discernible pieces of fruit in it, rather than being a homogeneous product, and the taste was distinctly different, so there was a choice to be made once we persuaded consumers to trial.

The question of which channel to use for your advertising is a whole set of different questions.

Digital or analogue, is usually the first step, and the logical answer is ‘both’ as there is no one right answer. Each channel and each platform within the channel plays a different role, and has different costs and outcome expectations. It can get very complicated, and the only sensible way to sort out the mess, and conflicting claims is to be very clear about the objectives you have, then assess each advertising option against the objectives, and the value they deliver.

Digital impotence and the Black Knight

Digital impotence and the Black Knight

Oct 16, 2016 | Communication

I am in the middle of a device free week.

Not by choice, my PC took a powder, and is in the ‘hospital’ for surgery. Now, at the close of day 5 I feel like the Black Knight, still kicking, but no arms.

The term digital impotence springs to mind.

It is interesting to reflect at such a time on the dependence we have developed to these things. This post is being done on one of my kids computers, a bit like the Black Knight landing a feeble kick on his opponent. Might make him feel better but is effectively useless.

Ages ago in an effort to retain some control of my time, I decided that I would not connect my phone to my email. Clients who might need me at short notice all have my mobile, so I do not need the constant email alerts going off, they are nothing but an unwelcome distraction, and kill battery life.  However, being disconnected since Wednesday morning is starting to have psychological effects.

Sweating, worrying that I just might have missed a return communication from someone not yet a client, but who is keen to be, a link to something that I would have liked the time to consider, the list drags on, and on, as does the time.

Nir Eyal writes about the habits we form, with some focus on digital products, his book ‘Hooked” is a disturbing, enlightening and fascinating read, but I thought I was largely immune.

No so.

Please give me back my PC before I lose my legs as well.

Where now for the two big supermarket retailers?

Where now for the two big supermarket retailers?

Oct 10, 2016 | Marketing, retail, Strategy

What a fascinating time to be an observer of FMCG.

The speed of strategic evolution is ramping up, and the risks to the investors in the two retail gorillas must be increasing as a result.

15 years ago FMCG retailing in Australia  was a two horse race. Coles or Woolies, there seemed to be no other options. While there were other options, independent retailers of varying types, particularly in SA and WA, their profile and strategic relevance was generally lower than a dwarf in a game of basketball. They could be annoying, and occasionally useful, but would never change the outcome of a game.

The net result is that Coles and Woolies concentrated on their short term game, with Woolies winning hands down in the shareholder returns stakes until recently. However, in the process, they lost sight of those who made a difference to their strategic numbers as distinct from their immediate financial ones: Customers.

They used their power to belt suppliers, and ignore customers beyond the land grab to put stores in every place where more than a footy team could congregate.

They ignored the opportunity to innovate beyond optimising what was already there, in other words they ensured innovation could not happen, or at least, ensure they carried absolutely no risk in the process.

The world has evolved since then, and panic has set in.

Woolworths botched Hardware in spades, demonstrating an astonishing lack of strategic insight, closed down Thomas Dux after strategically emasculating it just as it was gaining traction, is closing the Metro stores, and now it has been reported over the weekend, that they are considering selling the petrol retailing business. All that and declaring a $1.2 Billion loss for the 2015-6 year.

Meanwhile Coles has renewed itself, and announced a $1.86 billion profit for the year amongst some large write-downs in other parts of the Westfarmers group, particularly worryingly, Target.

Relative newcomer Aldi has upset the comfortable duopoly by grabbing market share and shopper penetration at a rapid and continuing rate. On top of all that you have alternative and web enabled retailers taking an increasing share of mind and attention that will over time convert to sales share. 15 years ago you could not find a Farmers Market, now they seem to be everywhere, and doing great business, and the net retailers seem to be able to actually deliver, sometimes.

For Woolies and Coles to fight each other, and invader Aldi on price makes no sense at all. The logical outcome of a battle on price is that Aldi will win simply because their business model is aligned to accommodate low margins and the gorillas are not, but if they do win that race to the bottom, the real risk is that they will go broke in the process.

No joy there.

So Woolies and Coles are left with where supermarkets started back in the thirties, delivering value to customers.

What an interesting notion for the gorillas, to be competing on the basis of the total value they deliver to customers, not just on price.  They might even have to collaborate in a meaningful way with suppliers, invoking  Joy’s Law, named after  Sun Microsystems co-founder Bill Joy who noted ‘No matter who you are, most of the smartest people work for someone else’.

Clearly, very few of the smartest people work for the gorillas, although there are some more left in their supplier base. However, those suppliers of any real scale who remain locally owned could together just about fill a phone box.

There is plenty of room in the demand chain left for innovation. The first step is to recognise the necessary change from a retail optimised supply chain that implies screwing suppliers for margin in any way you can dream up, while maximising margins at the checkout, to one that puts the consumer front and centre.

A demand chain.

This change requires recognition that the consumer has a reasonably certain amount of money to spend on groceries and household supplies, and will allocate those dollars in the ways  that best suits them and their circumstances.  Economists will call this phenomenon ‘Customer demand”. The name of the game then is to share out those consumer dollars in the best way that serves the whole supply chain based on that actual and latent demand.

Plenty of room for collaboration through the chain, enabling innovation and sustainable profitability. You just have to see the competitive game completely differently. I wonder if the gorillas are capable of that sort of strategic renewal or if I should sell my (very few) shares ASAP.

 

 

Is ‘Proprietary Housebrand’ an oxymoron?

Is ‘Proprietary Housebrand’ an oxymoron?

Oct 4, 2016 | Branding, Marketing, retail

Is this range of McWilliams wines a housebrand or not?

it is exclusive to Dan Murpy’s, so ‘yes’, but it is a proprietary brand, so ‘no’. At the very least, the trading terms conversations would have been interesting.

It is also claimed to be an ‘Innovation’ which redefines my understanding of what that word means. Housebrands do not innovate, they copy, some may say act as a parasite on the innovation activities of proprietary brands.  Product innovation is one of the two key competitive options (the other being the opportunity to now connect with their consumers digitally) available to FMCG suppliers by which they can differentiate their products from their housebrand competition. Supermarket chains have done well squeezing costs out of their supply chains with process innovation, usually to the cost of their suppliers, incapable to this point to be effective with product innovation.

Exclusivity has always been a demand of retailers, difficult in Australia with just the two of them having such overwhelming dominance, but in unbranded categories like produce, they have successfully developed strongly preferential supply arrangements. But wine? one of the most brand sensitive categories around?

From  Woolies owned Dan Murphy’s I got the above offer the other day for an exclusive to Dans branded McWilliams Bagtown range, from the Griffith area. All the hyperbolic language and story telling that goes with the wine category, but an exclusive range to Dans. it seems Woolies have started something I have not seen before in Australia that has the potential for wider use. For years in Hong Kong, you dealt with one or the other of the two major FMCG retailers, but not both. Problem here with that strategy is that there are only 24 million of us, and widely scattered so the twisted economics and trading term requirements surrounding proprietary branded retail chain distribution have simply not allowed a similar development here. Till now?

The McWilliams sales manager will be having an interesting conversation with the Liquorland buyer the next time he visits, although it is reasonable to expect he will get a phone call, and probably lose either some distribution or a promotional slot, or something that reflects that McWilliams have crossed a line, and Liquorland will not be left out.

As an aside, the Dan Murphy’s 90 point label badge borders on the dodgy. You can expect a 90 point wine (Silver medal) judged at one of the major shows to be pretty good, warranting a place in any cellar. The wine in this case might be OK, but it has not been judged by anyone outside Dans staff, and they are unlikely to tell the boss that his choice sucked. Griffith is not known for its cabernet, the climate is all wrong for the grape variety, and the few I have tried were well short of 90 points. Hopefully this one is an exception.

Should I use Facebook as an advertising medium?

Should I use Facebook as an advertising medium?

Sep 21, 2016 | Communication, Marketing, Social Media

Once again yesterday I found myself in a conversation both extolling and deriding the utility of Facebook as a small business marketing tool.

Seems to happen a lot that small businesses hear (urban myth?) of someone making a fortune just using Facebook and think ‘Why not me”

Fair question, with a bunch of ‘maybe’s’ as answers. What should be remembered is that Facebook is one of a large number of social platforms, all are different, but all are vying for your attention and the money that flows from that attention, so choose wisely

Facebook benefits.

  • Facebook (as are all social platforms)  is a wholesaler of eyeballs, they leverage your use of the platform to attract other eyeballs to which they can sell access. The sheer numbers using the platform, and the targeting ability generated makes Facebook a potent marketing tool, when used well.
  • Facebook is terrific at connecting people, one on one. It has become sometimes easier to connect on Facebook than by email or phone, although there is a strong demographic factor in this. Want to connect with me, Facebook is not the place, but you will find my kids there.
  • The small focussed groups, connecting one to a few where there is a strong common interest is also a potentially powerful marketing tool for small business, depending on their markets. However, it takes an investment of time, effort, and often money, to leverage it.
  • As a tool in the list building box, Facebook has a place, particularly as you seek to identify specific behaviours and interests. This targeting potential of Facebook is from a marketing perspective, its most potent tool

 

Facebook costs.

  • Access to your friends and followers is limited by the algorithms Facebook uses. The organic reach is now around 6%, if you want more, you pay. They may be your posts, friends and followers, but you are in Facebooks house, and they make the rules to suit them, not you.
  • Facebook has an addictive quality about it, and can become a ferocious consumer of your time, the only non renewable resource you have, so use it wisely.
  • Conversion to a sale on Facebook is a challenging prospect, often overlooked. You can spend heaps and get no sales, no financial return. You might have lots of friends, shares, followers, group members, and all the rest, but few sales. Largely this is because Facebook is at the ‘social’ end of the social media spectrum. People are on Facebook not to buy and sell, but to be ‘social’ There are however, exceptions. There is a buy/sell group in Armidale NSW with thousands of members, and it constitutes a social marketplace, but the transactions often occur offline.

 

Take-out.

Facebook is great, in some circumstances, use it when those circumstances favour you, and ‘managing‘ your involvement can deliver rewards. However, if you are not focussed on what you want, Facebook will take you to the cleaners. The only right answer to the question ‘Should I use Facebook” is the same as that question directed to any other cost in your business: do it If, and only if, it makes commercial sense to you.