Oct 31, 2023 | Change, Marketing, Strategy
When I was a boy in this business, back in the seventies, having a brand was table stakes to be in the game. At that time, there were a number of supermarket chains, and every one was stocked with a suppliers proprietary branded product.
There were many types and scale of brands. From the small producers hoping for a modest segment in the market that would provide a living and employment in their modest factories, to the multi-national, mass market giants. There were no ‘House brands’, until Franklins as an experiment ranged ‘No Frills’ margarine, packed by my then employer Vegetable Oils Ltd, which later became Meadow Lea foods.
Over time, the number of supermarkets reduced to the two gorillas and Aldi that we have today, and the number of brands reduced from the many hundreds down to the few MNC brands, with a very few exceptions, which are slowly being squeezed of life today.
If the trends of those 40 years continue, a brand extinction event is getting closer every day.
The latest victim is Sara Lee.
Originally the brand came from the US, and at its height had diversified into a wide range of products from the initial frozen cakes to clothing, and real estate. The Australian business has been through several owners, the most recent being a Dutch company nobody outside the industry would have heard of.
Manufacturers have been their own worst enemies.
They have failed to recognise the long-term impact on their profitability of the increasing power of Woolies and Coles, with the recent addition of Aldi. Retailers do not care about proprietary brands; their goal is their own profitability. If they cannot have your product on shelf, they are just as happy to have an alternative.
Increasingly over the past 30 years that alternative has been a house brand.
When retailers own the shelf space from which consumers pick products, and also ‘own’ the sales margins from half the products for sale, guess who wins. Retailers have used their muscle to squeeze out proprietary brands, taking the proprietary margin for themselves. The stupidity is that manufacturers have aided and abetted this quest to destroy them, by supplying the products and stopping the long-term brand building that made them successful. The funds have been redirected by manufacturers from advertising and brand building back into price promotion. Selling with price being the only differentiator is a sure way to destroy a brand.
To explain the resilience of a few brands, and some that resisted the retailer pressure for years before succumbing, you need look no further than effective, long term brand building advertising. The Vegemite jingle is in the brains of most Australians over 40, and Vegemite persists. Aeroplane jelly is also there, and I would guess the brand could be rejuvenated by a return. Similarly, Meadow Lea is a shadow of its former self, but 30 years after the great ‘you ought to be congratulated’ advertising finished, the positioning of Meadow Lea remains viable, and could be revived with investment.
To explain the failure of FMCG management to continue to invest in their proprietary brands over the years, allowing house brands to take over, you need look no further than the lack of understanding of the contrary dynamics at work.
Advertising is a long term investment, over numbers of years. Advertising is treated as an expense, one that is accounted for on an annual basis in the accounts of businesses. These two contrary forces, when allied to executive KPI’s dominated by accounting thinking, and the increasing power of the retailers to demand discounts as a necessity for distribution has drained the capital necessary for brand investment. The retailers are happy, they have the margin. The short term executive profitability goals of a few executives may be reached, so they are happy individuals. However, the brands have been destroyed, and the long term viability of their manufacturing operations been compromised, in most cases, terminally.
That in a nutshell, leaving aside questions of the operational efficiency of the Sara Lee business, is why it is now on the discount block itself.
Oct 27, 2023 | Collaboration, Communication
Throughout human evolution, we have existed in small groups, tribes and clans. Individuals have worked together for the common good of the small tribe, and often, perhaps most often, been at odds with the tribe across the river.
British anthropologist Robin Dunbar introduced his theory that humans can maintain stable social relationships with no more than 150 people. This is a theory now so well accepted that ‘Dunbar’s number‘ has almost become a cliché.
The phrase ‘Stable Social Relationships’ has particular relevance in the age of social media platforms. How many friends do you have on Facebook, connections on LinkedIn, followers on Instagram?? For many, it is way beyond 150.
Question: How do you maintain ‘Stable Social Relationships’ with that number of people?
Answer: You cannot.
Social media gets the blame for all sorts of things, rightly so, but it is not the fault of the platforms, it is the fault of evolution.
Our application of technology has run well ahead of our evolutionally capacity to manage it and retain the relationships that made us the most successful species ever.
It seems to me that the growth of private messaging, reversion to personalised even handwritten notes, and emotional engagement of ‘Local’ things is a response to the ‘platformisation’ of our social relationships.
I think it is a trend that will continue and grow.
Now we have the relative unknown of AI coming at us like a train, changing again the basis on which we interact.
Dr Dunbar has little advice on that score.
I wonder if ‘friends’ will ever include Robbie the Robot?
Oct 11, 2023 | Governance, Leadership, Marketing
These two words are often wrongly used as similes.
Complicated implies interdependence, you cannot pull it apart, and then put it back together in exactly the same form. Think of a knitted jumper.
Complex implies it can be simplified, much as you unfold a sheet of paper, then are able to refold it and end up in the same place.
Complex and complicated are at either end of a continuum, and rarely is something just complex, or just complicated.
Depending on where a situation or question sits in the continuum, you may be able to simplify somewhat, but not completely before you alter the form of the problem or task. It is rarely a binary choice.
Another way of describing this is the commonly used phrase ‘Think from first principles’.
Our brains have evolved a range of heuristics to deal with variables. However, depending on the people and the context of the variables, our brains can deal with only 3 to 5 at any one time before overload kicks in and confusion, procrastination, and poor choices result. By simplifying, we remove the need to consume cognitive capacity for those things we have classified as benign, to be allocated to the unexpected variables that present either danger or opportunity to us.
Simplicity enables optimisation, repeatability with little or no thought, as it is stable, and predictable. However, we are then tuned to miss the very things that can harm us, and sometimes offers opportunity.
Think about that first time you drove to a new destination. You are following a map or instructions, looking for street signs, and hazards of various types, you are concentrating on the drive. Now consider the same drive when you have been doing it every day for a while. The car seems to be on autopilot, and you are thinking of other things, only superficially aware of your surroundings. Your cognitive capacity is being used for purposes other than navigating you safely to your destination.
Therefore, the state we should be seeking is resilience. The fine line between optimised, but still vigilant to the unexpected variables and able to react to them in ways not locked into the way we did it before.
We need to be able to adjust quickly in a world of constant change, just to keep up.
Header credit: Hugh McLeod at gapingvoid.com
E&OE October 21. It has been pointed our to me that I got complex and complicated the wrong way around in the post above.
Dumb mistakes not picked up by editing do occasionally slip through. When you read the post, just reverse the meaning of the words Complex and Complicated. I considered rewriting the post, but am prepared to wear my mistakes, so left it as written. Also, I cannot help but wonder if Seth Godin saw the post, shook his head, and wrote a better one.
Oct 9, 2023 | Marketing, Social Media
Being able to market to a ‘persona’ the picture you build of your ideal customer, is a great leap forward enabled by digital. Our ability to define who buys our products, when, why, where, how, instead of what, and so on.
However, there is a flip side.
The flip is the customer, the real one.
They are not stereotypical ‘personas’ they are people, with homes and families, hopes, dreams, problems, prejudices, and challenges. They do not care about your marketing processes, how they fit into your profile, or where they are supposed to be in the ‘customer journey’.
They are people first, customers second.
Forget that simple fact amongst all the marketing tech tools, and you will lose them.
The fumbles in your process are not your customers problem. While they may like the convenience of you having some of their data, they are wary of having that privilege abused. They also like to be in control of their own lives, so be careful of denying them the ability to make their own choices as you pursue them, setting out to ‘catch and extract’ by a variety of means.
Choice is one of the few areas of our lives where the individual still has complete control. Compromise that, and it will not go well for you.
Sep 20, 2023 | Branding, Marketing
Many of my clients are SME’s whose businesses are localised in some way, usually to the boundaries of the city they are in. The budgets they have for marketing are limited, so they must make every dollar count.
A very common and deadly mistake they make is to not be aware of the distinction between ‘Sales activation’ and longer-term branding role of advertising.
They are very different, and impact your business differently.
I am old enough to remember the ‘Pink pages’ business directory. A phone book of all registered businesses in which you could advertise. Local shops, tradies, piano tuners, and hundreds of other types of businesses were listed. When you needed one, that is where you went to find them.
The pink pages is dead, replaced by Google.
You go to Google when you need to find something, today. Google does not sell anything beyond access. Other sites like Shopify and Amazon do sell stuff, but are focussed on the transaction, the immediate sale. You only go there when you are looking to buy, now.
Advertising is the opposite end of the stick.
Most of the times you see an ad, you are not in the market for that product or service. The objective of the ad is to be remembered, to leave a positive impression, so that when you are in the market, the product comes to mind as the saviour. In the jargon, you build up ‘brand salience’, the recall of the brand and the value it delivers when the need arises.
Local businesses cannot afford large scale media, so must be more creative. However, all the disciplines that large advertisers use to get their message across and embedded in the minds of their potential customers can be used. All come from the marketing 101 basics book, and often after a set-up cost, are then free.
Following are some of the advertising ‘media’ that have proved successful over the years in generating revenue for ‘Localised marketing’
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- Vehicle signage.
- Local sponsorships, such as the kids soccer team.
- Local collaborations. The shoe shop and dress shop jointly cross promoting.
- Testimonials from well-known locals, an even unknown ones who are identified as ‘local’
- Local social media.
- Branded collateral, from stickers, to fridge magnets, shopping bags, T-shirts and caps.
- Local signage,
- Participation in, and sponsorship of local events
- A ‘locally optimised’ website, and use of the ‘Google Business Profile‘. The GBP is essential, and free.
- And, the best of all, referrals from locals to other locals.
You do not need to be a large business to be a successful advertiser, but you do need to think about advertising with a different mindset to the usual ‘grab a sale today’ that dominates the thinking of most local businesses.
Header credit: Windows Factory. The branding of Windows Factory vans have paid for themselves many times over, just from people stopping them in the street.
Sep 18, 2023 | Customers, Marketing, Operations
When you want to improve something, find a metric that drives the performance you want.
Pretty obvious, as most of us subscribe to the cliché that you get what you measure, while remembering Einstein’s observation that not all that matters can be measured.
Ultimately, what the customer thinks is crucial to success. Therefore, measuring the performance in meeting the customers’ expectations is always a good place to start measuring your performance.
Amongst my favoured measures is DIFOT.
Delivered In Full On Time.
That means not only the full order delivered on the day it is originally promised, with no errors of any sort, from quality of the product to the delivery time and accuracy of the ‘paperwork’.
DIFOT is a challenging measure, as it requires the collaboration and coordination of all the functional and operational tasks required to deliver in full on time.
As you fail to reach 100% DIFOT, as most do most of the time, at least at first, the failures are used as a source of improvement initiatives.
There is very little more important to the receipt of that next order than your performance on the previous ones. Never forget that, and measure DIFOT.
Hand in hand with DIFOT, you should also measure inventory cover.
The sibling.
You can improve DIFOT by simply increasing inventory when selling a physical product. Demand is inherently difficult to forecast, as it is the future, and entirely out of your hands. The challenge is to prevent your warehouses multiplying, and clogging the operational systems. The ideal situation is ‘make to order’, the ultimate shortening of the order to delivery cycle time.
The most common and very useful measure of inventory is ‘Days cover’. How many days of normal, average, forecast sales, whichever you prefer in your circumstances, do you have on hand to meet demand? This measure is extremely useful on a ‘by product’ basis, but when applied as an average across multiple lines with differing demand levels, can become a dangerous ‘comforter’.
Counter intuitively, the products that cause the most problems are the smaller volume ones, and new products. In both cases, demand is harder to forecast. The swings from out of stock to excess inventory can be erratic, particularly when a production line is geared to the larger volume runs of an established product as a driver of operational efficiency.
To achieve a 100% DIFOT while controlling physical inventory over an extended period is the most difficult operational challenge I have come across. As a result, it is amongst the most valuable to keep ‘front and centre’. The twin measures of DIFOT and ‘Days Cover’ are a vital element in addressing that ultimate challenge of customer service.
