Do what is wrong for your competitor, and win.

 

"Only the paranoid survive". Andy Gove

“Only the paranoid survive”. Andy Gove

We spend heaps of time setting out to satisfy customers, do what is right for them, to ensure our success, no argument, but is it enough?

To add another dimension to your competitive efforts, ask yourself the simple question “what would really hurt the opposition?”

If the answer is clear, you probably should do it to them before they either do it to you, or address the weakness.

It does not matter if you are BHP or a local business, there is a always a strong Darwinian trait displayed by those who are successful.

In my past, I spend a significant amount of time in the dairy industry, lots of lessons, but amongst them one that demonstrates the essential truth of commercial Darwinism.

My major competitor made an inordinate amount of their total profit from one product in one state, a situation that had evolved over many years, and seemed unassailable. The margins they made on this product would have funded a substantial amount of activity elsewhere that was causing us grief. The board of the dairy co-operative  I worked for would not allow me to aggressively attack that profit pool, not being prepared to lose a little bit in order to assist the competitor lose a lot.

They were concerned at retaliatory action, correctly, but the capacity to retaliate would have been limited  by the impact on their profits of a successful attack by us, and the fact that our business did  not have any equivalent weak point that made us way less vulnerable. My view at the time, and still, was that the real reason they were unprepared to be aggressive was that it was not “gentlemanly” and the dairy industry in those days, which was still evolving from a lot of smaller co-operatives, carried some of the competitive baggage of being a co-operative.

Gentlemen did not do those things!

Competitively stupid  decision, and an opportunity lost, but all this had nothing to do with the customer, beyond setting out to disrupt the comfortable relationship they had with my competitors brand in South Australia.

Some years after I left the business, my erstwhile target, having addressed their competitive weaknesses, successfully mounted a successful hostile takeover of the my previous employer, who still acted as though the competitive market place was somewhere that gentlemen met to have afternoon tea.

Sometimes we lose sight of the playing field as we play the game, we talk about competitive advantage, but often just in the context of the customer, and the value they receive, but forget the flip side of competitive advantage, finding a way to belt your competitor over the head.

Legally of course, and within the boundaries of acceptable behaviour, but nevertheless, a belting.

15 ways to ensure strategy fails.

With thanks to Tom Fishburne. http://tomfishburne.com.s3.amazonaws.com/site/wp-content/uploads/2014/05/140505.pivot_.jpg

With thanks to Tom Fishburne. http://tomfishburne.com.s3.amazonaws.com/site/wp-content/uploads/2014/05/140505.pivot_.jpg

Strategy is one of those alters of organisation to which almost everyone offers lip service, and once a year in the planning cycle, receives mass genuflection.   That does not mean we believe, just that it is a part of the duty of organisations, and as such, fails to deliver to its potential.

Over the years as a corporate employee and consultant, I have seen strategy implementations fail, sometimes with spectacular results. Usually however, strategy just whimpers in the corner, ignored and derided, but every now and again, I have been privileged to see, and be a part of successful strategic exercises. Below is a list of the most frequent sources of the failures I have seen, the good part of such a list is that taking the opposite gives you a list of what you need to do to succeed.

    1. Failing to understand that reality is  not always what people tell themselves, self talk is too often tangled up with self delusion and adherence to the status quo. Recognising the hard realities as they actually are rather than the way you would like them to be is a remarkably common delusion.
    2. Believing self serving optimism and hubris are substitutes for achievable goals. It is OK, indeed admirable  to work towards the BHAG, but allowing ego, management power based on the position rather than the person, and “group-think”   into the room , and it becomes a different beast.
    3. Not seeing “Capability inflation” for the damming flaw that it is. Virtually everyone sees themselves as better than average at whatever it is they are doing, which simply does not work. Capability like everything else in life is spread across some sort of “normal”  curve, in which the only thing that really changes is  the height of the average, in relation to the spread of scores.
    4. Not recognising that competitors do not always react in an orderly and predictable manner, they are not a party too your strategies, and rarely react in wholly predictable ways.
    5. The factors often seen as “differentiators” are very often just the table stakes to be in the game. Asking management what are the “differentiators”,  what characteristics makes any enterprise different, or its products different, and you usually get back a list of things that are just a cost of doing business, just like a watch has to tell accurate time before it is a watch.
    6. Failure to recognise and adjust for unintended consequences quickly. Usually this occurs because it is not in the plan, and plans are after all prepared by the bosses, performance measures are tied to the plan, and it is a great adornment on the shelf. (my time contracting to the Public Sector sees this blatant ignoring of unintended consequences justified by all sorts of  complicated and cliché ridden language developed as an art form)
    7. Failure to believe. For a senior management to formulate spruik, and go through the motions of articulating and implementing a strategy, then not “living” it themselves means the strategy is doomed to failure. People watch what you  do far more than they listen to what you say. Saying you believe is  not enough.
    8. Underestimating the importance of “people“, their attitudes, fears, relationships, egos, and behavioural norms.
    9. Failing to recognise the elasticity of the status quo. Its durability in the face of logic, common sense and the blinding obvious (to outsiders) is just remarkable.
    10. Failing to understand and manage the essential paradox of “predictable” and “Innovation” . Customers like predictability, they come to rely in it, but they also expect their suppliers to be at the “cutting edge” to be finding innovative solutions to their problems, and the jobs to be done by their products. Nobody has managed this paradox as well as Apple over the last 20 years. Their products are all predictable easy to use, look great, and perform beautifully, yet they are always at the cutting edge, innovating with everything they do.
    11. Failing to recognise the sources and likelihood of disruption, and preparing as if it was about to happen. The commercial technical and competitive environment in which a strategy has to succeed is increasingly being  disrupted in very hard to predict ways. Strategy is about the basic choices that make up the business model, and those are no longer models that are predictable across decades,  they are evolving almost daily. A quick look through Jerry Owyangs presentations, writings and data bases outlining the collaborative economy is all the evidence of the shifts happens that are needed, but just think a few words: Air BnB, Uber, Amazon, iTunes.
    12. Failing to understand that loyalty cannot be built by money, and material benefits, loyalty is to people, and is very local.  it must be earned by displaying and genuinely feeling respect, awareness and interest in individuals.  Dunbar’s number plays a huge, largely unrecognised role in organisations.  150 people is about the maximum we can have relationships with on a face to face basis, and the smaller the group, the more intense the potential of the relationships that exist. In this context, loyalty is local, people relate to, work with, and support those who are a part of their local “tribe” against all those outside their tribes. This can often mean other divisions from the same business, or even the other function   living down the hall. Believing this local loyalty can be leveraged or changed without real hard work is a common trap for strategists, particularly those entering a strategy that calls for organisation al change, renewal, and in the case of M&A activity.
    13. Failing to understand that data is inherently ambiguous, and swings between being of some value  and intensely dangerous. It all depends on the assumptions that drive the analysis, wrong assumptions render the analysis at best misleading. Is that upswing in sales due to the insightful marketing campaign, or the failure of a competitor to deliver due to problems in the factory? Bet I know most marketing people will say.
    14. Thinking Strategy and culture are one and the same thing, with perhaps just a few nuances for each. Whilst they must be considered together, they must be managed as separate but mutually reinforcing entities, A degree of inconsistency here will see a strategy fail, as culture is always stronger. Attempts to change culture to align with strategy, rather than recognising the the power and reliance of culture, are doomed to failure, it is simply too elastic to be easily changed. There are really only two ways to change culture. The first is bit by bit, with a leader who demonstrates the behavior required, and is unprepared to accept compromises. The second is to fire almost everybody, if  not everybody, and start again.
    15. Failure to recognise any of the above for what it really is, and calling it something politically more acceptable, thus ignoring the failure, and worse, taking no steps to correct the sources of that failure.

I would be interested in other sources of strategic failure you have witnessed, or been a part of, I am sure there are many I have missed.

 

6 Category Management ideas for small business at Christmas

Courtesy www.milehightreefarm.com

Courtesy www.milehightreefarm.com

 

The third in the series outlining the 10 ways small businesses can beat the supermarket gorillas at their own game, by aggressively executing on category management.

Read the first here, the second here.

What better time is there for small businesses  trying to make a mark with consumers and those key gatekeepers, retailers, than Christmas?

The 5 rules that normally apply to category marketig still do, but in the heat of the season, the quick and the smart can find a  bit of extra leverage.

Any time of change is a time of opportunity, and Christmas ranging is one of the biggest changes retailers go through in the manner in which they allocate their shelf space, as they seek to maximise their seasonal sales. Doesn’t matter what market retailers are in, from  fashion to  food, car accessories to handbags, pre Christmas sales are critical to the annual numbers.

Meeting customer needs, and maximising the value of the retail shelf -space  is what category management is all about.

Just think about the space supermarkets allocate to hams from the beginning of December. Where does that space come from? How do they allocate it across differing brands, sizes and types of ham? and if you are a ham producer, how can you get a slice, and if you sell some of the products that give up shelf space, to hams, how do you make up for the lack of shelf exposure?

6 simple strategies to employ to maximise sales:

    1. Know the relay schedule, and if possible be involved in the planning discussions. Most chain retailers, particularly supermarkets will  have a lead supplier who has the inside running because they have all the data, and better access to the decision makers, but that doesn’t mean you cannot participate.
    2. Understand the volumes and margins of all products in the category, and manage your recommendations to the retail buyer with his objectives in mind, maximising the absolute margins that come from the shelf space, rather than just concentrating on your margins. Retail buyers are not there to look after your margins, only theirs.
    3. Understand the sales that come from differing  shelf positions, and the impact of differing placements for differing Sku’s. Eye level is always best, but is high better than low? What about the type of shelf grouping, by size, brand, flavour, which combination is the best for you, and the retailer? Retailers will generally have a layout in place, but are often willing to experiment, from which you can  both learn.
    4. Recognise the importance of the retailers profit model, particularly for bricks and mortar: Volume X Item gross margin = gross profit.  Going one step further, dividing by the shelf space allocation gives a return on the space, and being really fancy, you can weight the value of the shelf space for a number I call RRRE. (Return on Retail Real Estate).
    5. To some degree, the discipline of the planogram that covers the other 11 months of the year will be put aside in favour of the short term outcome, knowing once the Xmas frenzy is over, they can revert to the plan, it is a great opportunity for those who can grasp it. Encourage field staff to be creative, a stack of bananas or Christmas pudding near the custard, French mustard next to the hams, dried fruit into he flour category with some cake recipes, A scarf from next door with your handbags, the potential for cross selling at Christmas is limited only by imagination.
    6. Christmas is a terrific time of the year, family, friends, social opportunities on steroids. At the same time, as the pressure comes off a bit because all the key decisions have been made, it is a great time to work on the relationships, plant the seeds that will deliver next year, and build your category management profile with your customers. After all, your competition is probably at the bar thinking the game is over. Whoops.

When you think that perhaps some external wisdom might be useful, lets have a chat.

 

 

 

4 quadrants for comprehensive customer definition

strategyaudit.com.au

Know your customer. www.strategyaudit.com.au

One of the absolute foundations of successful commercial activity is to be able to define your primary “customer” in considerable detail. The more the better.

Years ago I watched as market researcher asked a group to define the brand we were researching as if it was a person walking through the door. The insights gained were enormous, and it is a practise I have used ever since.

However, like most good ideas, they evolve with use.

I now use a quadrant, with the customer in the middle.

    1. Demographics. This is as far as most go, defining customers by age, sex, financial and social measures, with or without children, homeowners or renters, and so on. Necessary, easy,  but very limited analysis.
    2. External drivers. What are the things in the environment over which the customer does not have control, that impact on their behaviour. Answering this question requires choices to be made, as a 30 year old single  woman working full time will behave entirely differently  to her married twin sister who is at home looking after a couple of rug-rats, and you must choose which you want to appeal to. The range of variables to be considered  is huge, as are the potential responses.
    3. Internal factors. The sorts of things that people can manage and respond to for themselves, their goals, aspirations, questions they face, and the  choices they will be making in their lives. Understanding the psychology and personality of your customers helps you talk to them. No surprise there, because you can talk about they things that value and like to talk about.
    4. “Who” are they? The fourth quadrant is the behavioural picture you can draw by understanding the nuances and interactions of the first three. Jumping to this quadrant without intensively interrogating the first three will almost inevitably leave holes, but having said that, this quadrant does evolve as you iterate in marketing activity and understand better the behavioural changes that come from differing combinations of messages and service delivery.

I like to be at the point in this process where you can actually visualise the person, and associate them with someone you know well, someone whose behaviour you can anticipate. At that point, the communications you are writing, irrespective of the means of delivery, you can have that person you know well in your mind, and write for them.

The definition of your primary customers should be a constant on marketing agendas. It can easily become complicated by market structures and many other factors, so should be consistently  under active consideration.  Several of my clients are small businesses who sell to retailers of various types. By necessity, they need to consider both the retailer, who is in fact their customer and to whom the sell, and the consumers, to whom they market as separate.

Quantifying “Value”

1932 Rolls Royce Phantom 11

1932 Rolls Royce Phantom 11

I bang on about “Value” a lot, in all sorts of contexts, and using all sorts of examples and metaphors.

Defining the components of value is challenging, as value to every individual is different in differing contexts.

Value can be described as the difference between the price of an item or service, and the utility the buyer derives from delivery of those goods or services. It is made up of a myriad of variables, speed and reliability of service, timeliness, design, warranties, intrinsic cost of the components, and many, many others unique to the individual and the circumstances they face.

The core challenge of an analysis of Value is that price is quantitative, but everything else is qualitative. Every persons calculation of value will vary according to the relevant factors and the weighting allocated in any set of circumstances.

So what?

Well, the conclusion must be that defining the behavioral characteristics of your target market as closely as you possibly can is essential to maximising the mix of factors to be delivered that the customer will count positively in their calculation of “value”.

Specifying the factors that they will include in a calculation of quality, and understanding the weighting they may allocate in differing circumstances will significantly  assist you to craft messages that will engage them in some way.

Often the value derived from an item is in the way of a reward, the pleasure derived from use. A $15,000 KIA is just about as reliable a set of wheels for a journey from point A to Point B these days,  but wouldn’t that journey be far more pleasurable in a Ferrari, or BMW, or 1932 Phantom 11 Roller?

There is value in the pleasure, and the imagery usage delivers, and often it is way more important than any quantitative utility derived from use, it is just hard to define.

Assisting with the process of defining the behavior drivers of customers, a Customer Value Audit, is a core part of the StrategyAudit process, going as close as possible to quantifying the components of value for each individual.

PS. Spooky. Bernadette Jiwa, a really accomplished marketing thinker, even though she is a “sand-groper” today posted on Value, as I did. A thought provoking example, and I cannot but wonder at the co-incidence.

Great minds Bernie??

5 ideas for SME’s to compete using data.

Data management & analysis

Data management & analysis

The second of 10 ways to beat the supermarket gorillas at their own game, after understanding the way the supermarket business model works, is to be savvy with data.

Supermarket retailing is heavily data intensive. These days, any retailing beyond the archetypical lemonade stand by the side of the road is data intensive, but particularly supermarkets. Commonly a supermarket range is up to  30,000 Sku’s across a number of different formats and geographic and demographic locations, and several thousand suppliers, all with their own focus and story to tell.

The supermarkets physical space needs to be allocated across the Sku’s chosen to be on range in the way that best delivers a return on their investment in the particular store and strategically across the chain.

SME suppliers to chain supermarkets usually are playing from a position of weakness, as they lack the scale to have the data and category management resources that supermarkets demand. However, their strength is that they can be far more agile and market sensitive that their bigger rivals, often SME’s can develop and launch a product before a multinational can get the first development workshop together.

Whilst supermarkets have a wealth of data at their fingertips, both their own, and that supplied by their large suppliers, they recognise that not every piece of data is worth the digits it is written with. Data is only of any value if it leads to some sort of actionable insight, and it is here that SME’s have an advantage despite the disadvantage of small size. Making the connections between differing seemingly disconnected data points is where the gold is hidden.

There are several points at which data can be collected, from which insights can be gained. Internal, observed and purchased.

    1. Sales and margin history. No SME should be without a robust and detailed sales and margin analysis of their own sales history, and thus ability to forecast with some certainty.   Every SME has a sales history in their accounting package, most do not use it. Most use the “Office” package, which included Excel, but many do not use the power of the tools in excel. Pivot tables are the most underutilised and useful tool I have ever seen for SME’s. If you are one of  the majority who do not use them, wake up, spend 30 minutes on YouTube figuring out the basics, and start generating insights. Also in excel is the V-Lookup tool, which can be enormously valuable to SME’s to keep accurate track of a whole range of variables in their business.
    2. Sales intelligence. SME’s are usually in a position to have unfiltered market intelligence in the hands of decision makers easily and quickly. Usually the people best positioned to see change as it is evolving are those in direct contact with customers and consumers, often the lower paid front line staff. Being engaged with these staff, or indeed as is the case for many, being that staff as a part of the role of the SME business owner puts you in a position to see shifts as they occur, if you are watching. Finding a way to turn these random conversations and insights into data points that can be connected and acted on can build into a significant competitive advantage. There is  no substitute for the insights gained by simply watching and understanding the drivers of consumer behaviour, then crafting an offer that adds value.
    3. Agile operations. Scale brings its own momentum, despite the huge improvements over the last 20 years by the adoption of Lean practises. Large suppliers to supermarkets, with large factories,  fixed planning cycles  and extended supply chains  are often caught short by the unexpected and unplanned. Agile suppliers can often fill the gaps created, but do so they need to be able to make very quick decision on costs, time frames, and operational  priorities and limitations.  To make these decisions, they need absolute understanding of their cash and financial position,  costs and decision drivers like break even points, the impact of discounts, and negotiation trade-offs they can make. To be truly agile, you need accurate and detailed financial and operational data that is easily useable to make well informed decisions, then track the outcomes of those decisions.
    4. Be experimental. Having good data enables experimentation on a scale that offers great insights,  but minimises risk. The supermarkets are increasingly amenable to enabling SME’s to experiment with all sorts of offerings as they learn as well from the activity. However, you cannot just walk in and expect to be taken seriously without a history of sensible innovation and a relationship with the individual decision makers in the retailer. Having robust, realistic and well understood strategic and operational planning in place is a must if you wish to be experimental and stay in business.
    5. Purchase syndicated data. Scan data can be purchased in many forms, and to varying degrees of analysis and detail. There is a significant cost to this information, firstly the purchase costs, but more importantly, the data analysis capabilities. Increasingly scan data is being matched to the behavioural data emerging from store loyalty cards to add another  dimension to decision making, and this trend will only accelerate.  SME’e can dip in and out of this data, taking a slice here and there to provide insights without the significant investment of being fully engaged. Treated sensibly, it can be used a bit like market research, taking a small and well defined sample and using it as  representative of the whole picture.

None of this is easy, which is OK, because if it was, everyone would be doing it. However, many SME’s simply think it is all too hard, and stay away, effectively walking away from 75% of the volume in the market. For many, this is a sensible decision, but for some, those SME’s with a genuine opportunity to become larger businesses, building solid capabilities in collecting and leveraging data is essential.

 

Our most valuable personal resource.

www.strategyaudit.com.au

www.strategyaudit.com.au

Time, as is often pointed out, is our most valuable and non renewable resource. Using what we have productively is a challenge we all undertake in our own way.

We all have exactly the same amount of it available to us, the differences emerge when we examine what we do with our time.

For most,  we respond to the email, phone call, text message, distractions at the water cooler,  to all sorts of stuff that really makes little difference,  but has  the ring of urgency.

Urgent but  not important.

By contrast, at the other end of the scale, we tend to  put off things that are difficult, challenging, and often uncomfortable. That time necessary to really flesh out the assumptions underpinning the strategic plan, consideration of the nature of the business model that will see the enterprise commercially sustainable amidst the change all around us, or the culture and work patterns of those entrusted with the implementation.

Important but not urgent.

Every waking moment is spent in some way. The really productive people amongst us focus on the things that are important, they make a difference in the medium to long term, and they treasure their time.

Can you imagine Warren Buffet, Bill Gates, or Steve Jobs watching “Big Brother”?

For them, that would be an hour a day that they will not only never get back, but that adds no value whatsoever to anyone.

Commercial and personal sacrilege.

Where is the balance in your enterprise, and your life?

3 essential pieces of the supermarket business model

sleeping gorillas

A short while ago, I posted “10 strategies for SME’s to beat the supermarket gorillas at their own game”  which generated quite a bit of comment and feedback. Amongst the feedback were a number of requests to go into more detail on each of the strategies,  and so this is the first of the series, focussed on understanding the business  model of the supermarkets.

I deliberately used the word “Gorillas” because of the extraordinarily concentrated nature of Australia’s supermarket retailers, with Coles and Woolworths between them holding over  70% of FMCG sales depending on the category, and whose numbers you believe.

You know the old question: “where do the 500kg gorillas sleep?”

Answer: “anywhere they bloody like”

That was the way it was, a comfy duopoly, however, more recently there have been some major strategy alterations by Coles which has dramatically lifted their financial performance, and Aldi has successfully carved out a growing niche as a third retail presence. In addition, there are still some very good independent retailers around operating out of the wholesaler Metcash, who also competes with some of  their own and franchised retail outlets.

This mix, combined with the opportunities suppliers have to sell into food service and institutional markets and increasingly direct to consumers via the net and other means makes for an environment where the agile and insightful suppliers can be very successful despite the obstacles, but it is a very challenging environment.

The concept of business models is well known, in summary, it is the expression of how a business makes money. It always involves a matrix of revenue generated, the fixed and variable costs of generating that revenue, and the choices that the business makes about its customers and how they will be serviced, and the way they incur the costs of that servicing.

Supermarkets are a great example of a number of seemingly similar competitors that have slightly differing business models. At a macro level they have strong similarities, relying on volume, price, and shopper numbers to succeed, but everyone who shops knows that Woolworths is not Coles, is not Aldi.

However, they do have some common building blocks.

    1. Revenue generation. Supermarkets generate revenue on both sides of the equation.
      • Shoppers buy products, paying at the checkout.
      • Suppliers “pay” for shelf space via a range of charges levied for every variable the retailers can dream up. Volume discounts, payment terms, promotional levies, preferred shelf positioning, promotional slots, access to sales information, and a host of others. Some are items for which suppliers receive an invoice, others are taken as discounts off the invoice price, increasingly applied automatically as a part of the trading term package.
    2. Cost management. Supermarkets work on very low percentage margins, relying on the volume to generate the cash margins.
      • Fixed costs are a significant part of retailers total costs, made up of the provision of the retail floor space, the logistics infrastructure and personnel. Supermarkets attack their fixed cost base aggressively using their scale as negotiation tools with landlords and logistics suppliers, while keeping a very substantial proportion of front line retail staff as casuals rather than permanent employees so they can better adjust staff levels to match activity. The sorts of choices retailers make are between high density shopping centre locations Vs stand alone locations. There are costs a benefits to each which are considered as a part of their strategic decision making.
      • The biggest variable cost is the cost of good sold, and they similarly use their scale to manage those costs downward. Tactics vary between retailers, but the core game is to maximise their margins while keeping prices as low as possible to attract the volume buyers. This is an extremely delicate balance.
      • Transaction costs are usually pretty well hidden in most businesses, but are really significant in the case of supermarkets simply due to the number of transactions they make.  For example, there is a cost to managing the buying relationship with a supplier, but  the larger the supplier, the less is the total costs/unit of sale of managing that relationship. This has led to a dramatic reduction of the number of suppliers supermarkets have in any category over the last 15 years or so a trend further accelerated by the increasingly common strategy of limiting the number of proprietary brands in any category  substituting house-branded products, and reducing the number of relationships to be managed. This has made negotiating shelf space increasingly hard, and because of scarcity, increasing expensive for suppliers, in turn putting extreme pressure on small suppliers.
    3. Customer service and relationships.   The retailers have each made choices about  the pricing, location, ranging, and service strategies that sets them apart from each other, and more subtly, they have back office strategies that differ. However, their common aim is to have as much market share ass possible, as volume is the profit generator.
      • As in any market, no retailer can be all things to all people, so each makes the choice of the “ideal” customer, and markets towards them, grateful for any overlap. Increasingly the marketing is being supported by customer loyalty cards and the data mining and personalised promotional opportunities that technology is delivering, but the fundamental measures of success remain unchanged: number of shoppers, share of wallet, and basket size.
      • The two major retailers have very large marketing budgets which they spend in a wide  variety of ways, across all channels of communication with customers and potential customers, and often in joint activity with their suppliers, which inevitably, the suppliers end up funding in return  for volume.  The smaller the retailer, the less “mass market” they are, so the tactics tend to differ, although strategically, finding willing supplier partners is a core part of every retailers marketing mix.
      • Consumers generally want choice when they are in a supermarket, the more the better, in any category. Woolworths and Coles stores carry 12-20,000 Sku’s  (Stock keeping unit) depending on the size and location of the store, a typical IGA might carry 8-10,000, while Aldi carry just over 1,000. The sku’s carried in any store also reflect of the demographic and cultural mix. The Woolworths store in Auburn in Sydney has a significantly different product mix to the Woolworths of a similar size in Double Bay.
      • Every retailer uses some form of category management disciplines as a means  to monitor, adjust and locate their inventory onto the sales face in the way that best meets their customers needs. This is always a data intensive mix of the volume and margin of the individual Sku, (such as Ski strawberry yoghurt 200gm) group of similar Sku’s (all strawberry 200gm yoghurt) subcategory (all strawberry yoghurt) and category (all yoghurt) and between categories. They make choices about how many brands and types to keep in stock, where they put them, on shelf and in relation to other yogurts, and indeed other chilled products. A facing of yoghurt added is a facing of some other product gone, as the sides of the stores are not elastic. At the core of the category management activities is the need to best satisfy consumers, whilst competing effectively and delivering maximised margins.

Being agile, persistent,  and prepared to experiment are about the best qualities a supplier to supermarkets can have.

4 essential questions for small business survival

No matter how fancy the building, it will not last on dodgy foundatons.

Roman baths. Bath UK. photo courtesy www.guardian.com. No matter how fancy the building, it will not last on dodgy foundatons.

 

I talk to small businesses all the time, have done for 20 years, and it makes me cry how many of them do a great job at their passion, the reason they stated the business, but a lousy job of making money from it.

A simple analogy.

When you drive around a bit, you use petrol. Everyone knows that when the gauge gets low, you need to put more petrol in, or the car will stop. Basic common sense, but how many use the same sort of common sense with the basic gauges in their business, and stop now and again to look at the levels, and recharge when necessary? Nobody can make you look at the gauge, and take the necessary action, you have to do that yourself, just like driving into a petrol station before the car stops.

There are four really simple questions to be asked that represent the “gauges” of your business, they represent the foundations of profitability and longevity. For many small business owners, motivated by the passion of what they are doing, it is too easy to ignore the basics of what will build the foundations of the busness that will allow them to keep doing what  they love.

Take this road at your peril.

However, the good news is that much of this can be automated, and outsourced, so you can spend a few minutes a week, and be sure that the foundations are in place.

 

So, to the four questions.

  1. Will you have enough cash to pay your bills? Many small business owners just look at the balance in their bank account, and answer “yes”  or “no” to that question. Mobile banking apps have made it even easier, but  that is not enough. Cash is the oxygen of business, cut it off, and you die, very quickly.  You should know if there will be enough cash to pay the GST bill in 2 months, or the long service leave entitlement of Suzie the receptionist in three months when she goes to Europe with her husband. For that you need to track your cash-flow, the money you anticipate coming in, and going out over the next three months. The formula for a cash flow forecast is pretty simple,  and takes only a small amount of time, but can save your arse.
    • Pick the period. I recommend a rolling 3 month forecast, updated weekly.
    • List all the cash you expect to come in, and when you expect it in. Not sales, cash coming in. Similarly, list  what cash will be going out, and when, as you pay the bills that come in.  This is the reality of the cash flow through your business, just like the petrol flow to your car engine driven by the mechanics of the motor as it turns over.
    • Simply subtract the cash out from cash in, and carry the total over to the following week, “rinse and repeat” for every week in the rolling three months. A very simple spreadsheet will do it for you, so long as the numbers are put in, either from your accounting system, or for micro businesses, from the pile on your desk/in your inbox, that you often manage to ignore.
    • If you have a cash shortfall forecast at any time, you have the time to do something about it. Ever gone to the bank and asked for an extension to your overdraft activated tomorrow? They will laugh at you, but go to them and ask for an extension because you will need it in 6 weeks, and chances are they will give it to you.

2. Are you making a profit? Pretty basic question that many small business owners cannot answer. To answer the question you need an “Income Statement” or as it is often called a “Profit & Loss” statement. This should be done monthly, and as with the cash flow statement, is essential to maintaining business health, and to continue the petrol analogy is a bit like knowing that your petrol gauge is accurate, and that there is not a leak in the tank, or the youngster down the road is not sneaking in at night to keep his tank full at the expense of yours. Again, the formula is pretty simple.

    • Total booked sales less expenses incurred. Sales are pretty simple, although I like to track gross sales, before any discounts, and record discounts as an expense.
    • Expenses come in two forms, fixed expenses, those that happen irrespective of  sales, like  rent, salaries, insurance, and many others. Secondly variable costs, those that occur that enable you to make the sale such as discounts, commissions, freight, advertising, and usually most importantly, the cost of the goods you have sold, which could be manufacturing costs, or some sort of acquisition costs, commonly called “Cost of goods sold” (COGS).
    • Simplistically the formula is: Sales – COGS – Variable costs – fixed costs = Profit. When you do an income statement monthly, and build up a bit of history, it becomes very easy to see what needs to be changed, and the impact that even modest changes can have on the profitability of your business. As with the cash flow, a simple spreadsheet can offer great insights and direction. What happens to your profit if you increase your sales by 5%, or decrease your COGS 2.5% when you are working with a 40% margin? Easy to calculate, and then you set out to do what is necessary to move the percentages around, although sales always remains at 100%.

3. Are you creating or destroying wealth? This question is more longer term that the P&L or cash flow statements, and is often done just twice a year. It has less immediacy than either, although if you go to your bank because you will be short of cash in 6 weeks, they will always want the most recent balance sheet.   Partly this is hard wired into banker DNA, and partly it is reassurance that the longer term  health of the business means they will get their money back, with interest. Again, the formula is pretty simple.

    • When you start, you in effect make a loan to the business, and in return take equity in, or ownership, of the business.
    • The business then uses those funds to make sales, pay all the business costs, borrow more money to operate, buy/lease equipment, and hopefully create the wealth that can deliver an return on your initial investment.
    • The in principal formula is: (Fixed assets + liquid assets) – (long term liabilities + short term liabilities) = Equity.   It is not usually expressed this way in financial statements because equity is technically a liability of the company, but this simpler way is easier to see and understand for those “number-phobics” out there. It is also complicated by all sorts of differing treatments of all the variables that can occur, such as the treatment of depreciation, and how much of Suzies long service leave has been brought to account over time. Perhaps the best example to use is the equity you have in your house. Your equity is the difference between what you owe on the mortgage, and what the house is worth if you sold it, which is rarely what you paid for it.

4. Do you have a plan? George Patton once said “unless you have a plan you are just a tourist” which is absolutely true. If you do not know where you are, or where you are going, any route can get you there. Having a plan is so essential, it is left off many lists, and to many others, it is just an exercise in extrapolation, which although easy, is not what it is all about. Good planning is all about the examination of the assumptions that underlay your business, the assumptions about costs, customers, markets, and competition. At the very least, it offers as my old marketing mentor, Jim Hagler of Harvard used to say, (or rather rumble) “at least you know the point from which you departed”

 

Most of the help you will need that shows you how to do all this stuff is available on Youtube, and all electronic accounting systems, no matter how simple, have as a core part of their reporting the first three reports. They just need some setting up, and once done, so long as they are maintained, will continue to deliver the numbers essential to the insights needed to make profits.

The last, you need to do in a much more hands on manner. Whilst there are many templates which can be of value, there is no template I have ever seen that will create a plan by itself. You need to do the numbers and research, make the enquiries, incorporate the testing that offers the chance to learn, and  then most importantly, implement, measure and adjust.

The response to these questions offers an insight into the strength of the foundations of a business. We all know that any structure lasts better on a solid foundation, and no matter how fancy the edifice,  it will not last on quicksand.

To build a really solid foundation, you may need the assistance of someone who has done it all many times, and knows the right questions to ask.

 

 

5 tips for business planners

Courtesy www.cartoonstock.com

Courtesy www.cartoonstock.com

Planning is a fundamental building block of success, but planning like everything can be done well, and done poorly. Poor planning is probably worse than no planning, as having done the planning, the expectation is that the “do-do” will not hit the fan, so when it does, the impact of the surprise can be devastating.

So, a few tips for planners:

  1. Always test assumptions, and ensure that to the extent possible, a wide range of variables have been considered, quantified, and tested.
  2. Remove ambiguous and flowery language, all that does is camouflage accountability
  3. Abandon templates that substitute for thinking. Templates that aid thinking by assisting the process of covering most of the bases can be very useful, but once they substitute for thinking they can be disastrous. Often the difference is a fine line.
  4. Make planning iterative and inclusive. I really like having a rolling 3 month planning cycle which is long enough to collect useful measures of effectiveness, but short enough to adjust in close enough to real time to be able to grab opportunities, and mitigate unexpected challenges. I also like having front line staff involved in some way, as often they are the ones that pick up the whispers well before they become evident in the numbers.
  5. Ask difficult and confronting questions, particularly those that relate to scared cows, ingrown processes, capabilities required, and possible competitive reactions to what you are doing.

Get planning, and when you need some critical thinking, drop me a line.

3 “shares” vital to success.

share of engagement

Success these days is hard won, how do you go about winning your share?

Most progress of a sales prospect through the sales funnel happens with some sort of design in mind, rather than accident, even though the actual  process is usually chaotic. As the one setting out to engage, there are things that need to be done to maximise the leverage that can be applied without exerting any “hard sell” pressure on a prospective customer, poison in this day of sales mobility.

There are three headline of questions that you can ask yourself, and then reflect the answers in the manner in which you communicate, in every way from the published ads, to the website, location signage, the words your staff use, and the way you follow up any contact.

What is your Share of Attention?

    • The world we now live in is one where everyone is bombarded with messages almost every moment, from every imaginable device and location from the sophisticated and targeted offer on your own mobile phone to the ad on the back of the dunney door in the shopping centre. Those marketing their goods and services are in life and death competition just to get noticed, and extract the few seconds it takes for someone to skim a headline, and hopefully be sufficiently intrigued to take some action. Usually that action at the first point is just to read or listen to the rest of the message.
    • Who is it for? Nothing can be for everyone, and but too often this simple and basic fact of marketing life is ignored. The targeted ad to a mobile phone number is way more challenging to assemble than the general ad in the dunney door which can only discriminate by gender.  Gaining a share of attention of  someone in the market for a new car has to involve recognising the personal circumstances of that person. Setting out to sell a two seater sports car to a lady with one child and another on the way is usually a waste of effort, better to focus on delivering a car that will meet her particular needs, more likely a 4 door sedan that fits her budget and preferences. The process of answering the question “who is it for” will always throw up uncomfortable choices. In days past, as someone who spent millions in advertising on the 80’s and 90’s, the typical target audience was something like ‘women 25-40, with children” It was about as good as we could do in those days, with a bit of U&A added. Nowadays, that broad description is so inadequate as to be laughable.
    • How are you going to reach them, to create an awareness that you are in a position to meet their need or solve their problem, when and f it occurs. The tools of the web have been absolute game-changers here.

 

What is your Share or engagement?

 

    • Why should a prospect be giving you some of their most valuable resource, their time? To be worthy of peoples time, you need to add value in some way to build a share of their brain, to get them to think about what it is you have to offer and how that offer can be of value to them.
    • Why should they buy from you? In almost all cases, a buyer has options when it comes to buying something. Being clear about why the chosen vendor should be you is fundamental to getting the sale. To continue the analogy above, a car dealership that has some female sales personnel, and who have as a part of their marketing efforts a pick-up and delivery service from the local day-care centres is more likely to make the sale to our pregnant Mum than a dealership full of men emerging from the workshop with grease to the elbows, calling prospective female customers “Luv”.
    • In sales with long lead time, there is a process that most prospects will go through, from initial awareness of a need through often several stages of engagement, before a sale can be made. Tactics vary through this sales funnel, but one thing remains consistent, the sale goes to those who are constantly working all points in the funnel, being available to the prospects, and . Perhaps the best salesman ever, Joe Girard who sold 13,001 new cars over a 12 year career in one dealership, a feat that sees him in the Guinness book  of records. Joe not only never missed an opportunity to engage, and develop a relationship, and once you were on his radar, he created opportunities to speak to you, all in the days before the internet. Once you had bought a car from Joe, you got a post card about monthly from him, always thanking you for your business, congratulating you on a birthday or promotion at work, and offering help in some way. When it came time to buy Another car, Joe was the only salesman most people spoke to, as they knew him, trusted him, and understood he would be there for them.

What is your Share of Wallet?

    • Share of wallet is an absolutely vital and often overlooked measure.  When you have created a customer, ask yourself how much that customer buys over a period that you could supply. If they spend $1,000 dollars a year on products similar to yours, but you sell them only $200, your share of wallet is 20%. To continue the story of Joe Girard, he knew that the average time between new car purchases was about 3 years, so sales cycle his typical customers “wallet”  was about $20,000 every three years, and he stayed in regular contact, so that when the purchase time came around, his share was high, I have been told as high as 60%. Given some people moved away, some died, and some just changed car brands for any number of reasons, that is an astonishing figure.
    • Defining the wallet is usually a challenging exercise, what to include, what to exclude, and over what time frame. My advise is always to calculate the wallet over the average purchase cycle time, for cars, 3  years ago it was about 3 years, for refrigerators it may be 10 years, for womens fashion it may be a couple of months.  A friend of mine, a professional woman shops almost exclusively at a particular retailer.  They know her sizes and  preferences, offer her an exclusive first look at anything new that comes in that they think she might like, deliver on a few minutes notice, collaborate with the shoe shop, and accessories retailers in the vicinity to ensure everything is matched, and do a number of other small things that ensure she simply has no reason to go anywhere else. I suspect their share of my friends considerable wallet is very high indeed, and they have defined it to include the  things that go with their products, on which they make no money, but it adds to he service they provide.

 

None of this is easy, there are no formulas that work for every case, but there are general rules that can be applied. In addition, today, everything is measurable, every time you reach out to a customer or prospective customer you can measure the effectiveness of that action.   Joe Girard would have been in hog heaven.

 

A simple tool to increase productivity 25%

focus

About the most common management advice I have both had, and been given over 40 years goes something like:

“Have a To Do list, update daily, and stick to it”

Many variations, but basically make a list, ensure the list is up to date, relevant, and helps manage your most valuable resource, Time.

I have always struggled with the “list idea” despite knowing the value, trying hard, and advocating it to others. Problem seems to be threefold:

    1. Short attention span,
    2. Curiosity,
    3. Connecting dots.

My more picky friends and colleagues have always accused me of having the attention span of a mozzie on speed, and being overly curious about all sorts of things, often unconnected directly with the task at hand. However, having been picky in those two areas, they also concede that the best stuff I come up with is usually when I connect otherwise unconnected ideas, things, or people in some unpredictable way.

Somebody I know vaguely, and ran into in a cafe last week has always had a similar problem, which he has solved, he tells me with a very simple strategy, that also relies on a list.

A  “Don’t you bloody dare” list.

A list of things stuck on the wall of his home-office that commonly distract him, from looking at emails immediately the inbox “pings” to having an “excuse” not to make that difficult phone call, not completing a task he has set out to do just because the result is not due for another few days, to just staring out the window.

It is a simple hand written list, using his own brand of  the vernacular, and he swears by it, reckons it has increased his productivity by 25%.

Sounds like a great idea to me.

Fishing for leads.

Courtesy http://ultimateflytying.com/

Courtesy http://ultimateflytying.com/

Lead generation has always been a real challenge for marketers, an obsession for many.  Billions have been spent on misguided, irrelevant and wasteful activity in the name of lead generation.

So, the question remains, how do you find and engage leads through a process resulting in a continuing stream of transactions?

These days there are all sorts of automated ways, tools, and techniques that promise, with the simple swipe of a credit card, to solve the old problem.

Here is some news: it doesn’t work.

Talking to a colleague last week about his lead generation, the conversation was initially around the tools, how best to use LinkedIn, adwords, and all the rest, but what was lacking was a guiding principal, an understanding of the real value that could be delivered to customers, how to articulate that value, and what would make the offer irresistible to the potential customer.

We got to talking about fishing, a challenge in lead generation of another sort. We are both keen and experienced dry fly fishermen, and have occasionally fished together over some hard to get at pieces of mountain stream.

We know which flies work in which circumstances, where the trout typically lurk at various times of the day under differing circumstances, and what may lure them into the open based on the natural feed we see around the river.

Based on that knowledge we make choices about the gear we use, the manner and timing of our attacks on the trout, and how persistent we will be in a particular spot.

Why should lead generation be any different?

Just paying for an ad, using a competition, or any one of the usual lead generation tactics without a crystal clear strategy and understanding of the context and current circumstances, would be like going to a random part of an unknown river and just picking a fly at random, and blindfolding ourselves while we cast.

Unlikely to be successful.

When fishing for leads, you need patience, discipline, skill and experience. When you tire of fishing blind, give me a call.

 

Marketing suicide

Management experience Vs Customers

The stupidity of the functional silos that deliberately separates an organisations capability to deliver value and service to their customers, and the way the customer experiences those services  never ceases to amaze me.

A friend of mine has a mortgage on his home, and a cash flow problem.

The stupidity is being demonstrated again, as the bank concerned is sending him very nasty computer generated letters telling him of the dire consequences of not getting his payments back in order. His equity is around  99%, for 25 years the payments have been made on time and he has much of his other financial products through the bank.

Why would a responsible,  customer responsive, innovative and customer oriented bank, which we know they are because they spend millions every year telling us this is so, set out to so terminally piss off a long standing, loyal customer?

He has options,  few of which are beneficial for the bank, and he also has family and friends who are less than impressed, and now would not touch this bank with a bargepole, and they all communicate widely.

I pick on the bank because it is top of mind, but they are not alone.  Corporations everywhere cling to the functional management system while consumers take delivery of their products and services cross functionally.

Failure to acknowledge and manage this intersection in an age of Social media and the ubiquity of information is marketing suicide.   I guess the upside is that it leaves plenty of room for innovation for those not stuck in the C20, which has led to the rise and rise of Paypal, Uber, Airbnb, e-wallet, and thousands of others who manage the way they deliver to customers in the way customers experience the need to have a product or service delivered. Tom Fishburne put the Maths Vs Mad dilemma wonderfully simply in a cartoon this morning, pointing out the stupidity of just allowing the technology to take the place of common sense, marketing wisdom and customer intimacy.

6 things you must do to get your email opened

 

courtesy www.copyblogger.com

courtesy www.copyblogger.com

Much of Email marketing has become a bit like the electronic version of the letterbox stuffing junk mail. Marketers are aggressively and creatively finding ways to collect email addresses, then directing traffic to the addresses in the expectation that a few will be opened, and a few of them will then lead to a transaction.

However, this misses the essential point that email marketing has in its favour.  An email can be personalised and directed, just like a snail mail letter from the “old days”, it is just that most do not do the hard work necessary that puts in place the “necessaries” to get them opened.

To improve your open rate success, there are six things you need to do:

    1. Add value. An email that is just seeking to extract value from the receiver will not get much time given, usually it will be deleted assuming it gets through the spam filters. On the other hand, an email that explicitly sets out to add value to the recipient will have a way better chance of being opened and acted up on in a meaningful way.
    2. Be optimised for however the receiver wants to see you. Mobile is growing exponentially, so ensuring you are mobile optimised is a must do.
    3. Be personalised. When was the last time you opened an email directed at “Dear Mr Andrew Bloggs”   or even worse, “Dear customer”? Been a while  right? The email has to be directed to the person as if it came from their best mate, not some automating system. We may all know it is automated, but knowing and having it demonstrated by a stupid salutation are two different things.
    4. Be contextual. A personalised email is good, but if it is of no interest to the receiver, it will be discarded. Recognising the interests of the reviver in the subject line is immensely important. However, being able to do that assumes you know a lot about them, their interests, habits and lives. Without wanting to be at all spooky, it is possible to collect information on individuals and reflect that in the subject lines of the email.
    5. Be focussed in the subject line. You get a split second of a receivers attention when they first see the email. Typically people look at the subject line, if it is of interest, they usually look at who it is from, and if it is still of interest, may open it, or perhaps put it aside for a better time. Miss out on either of these two things, “interest”, and “who”, in that split second, and you have probably lost them.
    6. Measure and improve. The analytic options available that enable continuous improvement  in open rates are myriad, often free, and your competition is using them,  so there really is no excuse.

Of course, once the email is opened, the marketing game begins. When you need help with that, get in touch to access the StrategyAudit experience.

7 characteristics of the successful leaders I have seen.

mandella

Reflecting on the behaviours of the best people I have seen in leadership positions over my 35 years of playing in this area  to a friend a while ago, it seemed to come down to a small number of discrete behavioural characteristics. I know there are libraries full of books on leadership, but this is the list that evolved during that conversation. Luckily, my friend was jotting a few notes for a workshop he was running the following week, and subsequently sent me the jottings.

Those characteristics were:

    1. They always take responsibility for their own actions, and those of the people who relay on them for direction. No finger pointing, excuses, and wasted energy playing “the game” ,
    2. The flip side, of the first is that they give credit where it is due, never taking the credit for themselves, even in situations where most would say that their leadership and decisions were the deciding factor .
    3. They do not let the status quo, sacred cows and the fear of change stop them. In fact these things offer opportunities to improve, and benefit by being first, different, and recognisable.
    4. People are not pushed into the background by technology. People run the technology, design it, implement, and use it, but so often the technology comes to be the king. Great leaders would never allow themselves to be distracted by a phone call when talking to someone who was relying on them, respect given is returned in spades.
    5. They are not imitators, they look for different paths, and follow them with passion. It may lead to a few more missteps, but it also opens the opportunity of seeing the emerging opportunities first. Being the same for the sake of some concern about being seen as different is of no importance to them.
    6. They know they are not always right, so are willing to be pulled up, corrected, and accept good council. You would never hear one say “I told you so”.
    7. They are collegiate, happily working with others, contributing their time and expertise in the way that best benefits the objectives being sought.

Finding ways to build these into your natural response mechanisms can only help you become a better leader, and coaching those with whom you work to be better themselves is in itself, the essence of leadership.

 

8 simple ideas to navigate social media.

Courtesy Tom Fishburne

Courtesy http://tomfishburne.com/ Thanks Tom, love your work!

 

 

For many small business people, Social media is a mix of mystery, distraction, and something that at some level they feel they should know about. However, they have seen too many stupid cat videos, observed the stream of consciousness that can be twitter,  seen their children leave an indelible image on facebook they would rather not have seen, lack any native sense of what it is about, and lack the time to find out, so they avoid it.

It is pretty common, but misses the essential point. Social media is where your customers are, where they gather their product and supplier intelligence, and pass on their experiences. Choosing to exclude your business from these experiences is akin to going to play golf, but believing you can still be competitive if you leave your clubs at home.

There are a number of pretty simple ways to start. Social media is by its nature both incremental when you choose it to be, whilst at the same time if you allow it, overwhelming. There are just a few simple things to remember:

    1. Nobody can know it all, even the experts. Anybody who tells you different is either a liar, delusional, or just after your money. In the end, like all business decisions, there is risk and reward, your job in business is to be on the positive side of the ledger, and to do that you must make decisions and take action.
    2. Anybody can become engaged, in a small way, become comfortable, gain some understanding, and take another step, or indeed, backtrack and take another route.
    3. Social Media is a combination of two words, “Social” and “Media”. Individually they mean different things, together they take on another persona. If you remember the “social” part, and behave on SM as you would face to face, there is very little that can go wrong, unless, just like it is in person, you act stupidly, without regard to consequences.
    4. You need a “map”. Navigating Social Media is no different to finding your way through any unfamiliar territory. You need to know where you are, where you want to end up, and then if you have a map, you can make choices along the way depending on the circumstances in which you find yourself.
    5. Know who you want to talk to, and find the e-places they congregate. The better you can define your target “receiver” the better you can focus your communication on their needs and wishes. Demographics are just a start, on top you need behavioural and contextual information, how they react in different circumstances. If you can describe your intended audience as a person walking through the door, you will have done well, as to get to that point, you will have to have made choices about who is in, and who is out.
    6. Social Media platforms are not alike, almost not at all. Whilst there are similarities, and overlap, it is both relatively simple and sensible to choose 2 or at most three platforms on which to engage, depending on who you want to talk to, what you want to talks about,  what you want to say, and importantly, what you want them to do with the information you give.
    7. Leveraging social media commercially rather than using it as a simple place to “e-meet” requires that you assemble and find ways to leverage the “list” those who by signing up in some way give their permission for you to market to them. This is a concept first articulated by Seth Godin 20 years ago, and is probably more relevant now than it was then.
    8. Develop curiosity. The best way to get to get to understand and feel comfortable with social media is to play around with it, make a few mistakes, gain some confidence, and most importantly, be curious, and experimental. After a while, it becomes easier, and the easier it becomes, the more you will use it and in turn get better at using it.

To get started, shop around until you find someone in whom you have confidence, can demonstrate they know what they are talking about, and  read widely to inform yourself, then just get on with it.

 

Marketing’s new middleman

marketing automation software

In the 35 years I have been practising marketing, absolutely everything has changed.

Well, almost everything.

What has not changed are the foundations.

The recognition that delivering value to a customer is the “raison d’être” of marketing, and that seeing everything you do from the customers perspective is absolutely essential if you are to understand what “Value” really means in any given context.

It is a fact of life now that marketing is controlled by software.

Marketing was pretty late to the software game, but in the last 5 or 6 years, it has exploded. Now we can not only automate a whole lot of tasks previously taking up valuable time, and gain vast leverage from the automation, but we can measure the performance of activities, bringing a whole new world of accountability and reach to the practice of marketing.

What we cannot automate, and really only measure after the fact is the influence of creativity on the process, the ability to see what others cannot, to interpret a given set of numbers and circumstances through new eyes, to connect the unconnected dots.

This explosion of automation and tools has created a new “middleman” in marketing, he/she is called “Software”.

Like all middlemen, “Software” needs to be proactively managed. There are many choices  of middleman that can be made, often more than one may be appropriate, but those chosen  need to be managed, and these tasks require a whole new set of capabilities many businesses do not have, and smaller ones often think they cannot afford.

They also need a new way of working, a collaborative, and cross functional culture that encourages hypothesis generation and experimentation. It must be “failure tolerant”, simply because failure is not really failure, it is an opportunity to learn about your market, competitors and customers.

 

 

 

 

 

Unravelling the mysteries of Social Media

Social media

Believe it or not, Social media is a mystery to many,  particularly those of us of a “certain age”, many of whom are running their own small businesses.

They know it is important to their businesses, know that their competitors are probably using it too beat them over the head, but how to proceed and find a way to understand and leverage the power, and importantly, where to find the time is still a mystery. Often managing and engaging on Social media is a task  left to their kids, the summer intern, or the bloke next door who dabbles a bit, which almost inevitably ends in tears.

Couple of weeks ago over the course of a morning, I collaborated with a colleague, Nelson Luc of Asprout to  deliver an information session to a group of small business people and their friends and colleagues from Inner West Referrals  in Sydney.

I did the “strategic” stuff, what it was, how it worked, when to use it, and a bit about the evolution that is  going on at the speed of a rampaging bull, while Nelson gave a session on the specifics of Google adwords and Facebook ads.  These were things they had specifically asked about in a pre-session survey, and a couple of days later, I gave a couple of them a  session over a coffee on the basics of Linkedin, and some of the simple tools available in the free version.

The intention was to remove a bit of the mystery, to create  a sense that curiosity and experimentation , to offer a few simple tools to start with, and to leave them with the understanding so long as you applied a bit of common sense, and an open mind, Social Media is not so scary. It is just a tool, one that when well used is a wonderful tool for small businesses to get their message out in a way impossible for them just a few years ago.

It all went well, the scores given in the session feedback form were the sorts of scores I usually just dream about, and I see several have dipped their toes into the water, that now seems a little less murky.

 

What really adds the value?

fine dining 3

What is the difference between a cookbook of recipes and tips/secrets by a top chef, and the stuff you turn out at home using the book?

Usually a fair bit, surprising really when you have all the information necessary to create and present the dish to hand.

The difference is not the Intellectual Property reflected in the cookbook, the stuff that gets written down, it is the Intellectual Capital of the chef, what is between his ears that cannot be adequately reflected in just words and pictures, but just “happens”.

Same in business.

I have an occasional client that sells technical flavor and texture enhancing products to an industry niche. They are a successful and long lived business, increasingly struggling in a world that they seem not to understand despite the brainpower in the labs.

They have a fancy website that tells you nothing, not even the basis of the recipes to continue the metaphor. In their mind, the “recipes” of technical ingredients are their intellectual property, not to be given out to their customers and competitors under any circumstances.

However, their customers all have a pretty good idea of the “recipes”, they are trained in “recipe” generation, they just lack the nuanced understanding of the real detail, the stuff that is between the ears of a few of my occasional clients employees. Their competitors are unlikely to learn anything they do not already know, they have their own “chefs”, and their own Intellectual Capital that they set out to leverage with customers. The real competitive arena is not the recipes themselves, but the value they add to their customers operational processes, and the outcomes in their consumers mouths when they get to taste the finished products.

Net result of this Neanderthal view of the digital world is that nobody comes to them via their website, or other digital means. They wonder why and conclude that this digital marketing is just a stunt brought on by shysters who do not know anything about the technology they are so proud of, which they believe is so good that it must just sell itself.

Bullshit.

Their products are now almost commoditised, at least to the recipe level.

To sell nowadays, you must demonstrate that not only do you know the recipe, but that when the dish comes together, it really is something special.

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