Time to think
Those who run small businesses have some very common challenges.
Significant amongst them is insufficient time to get everything done that needs to be done, and no time left over for “self”
The old cliché working “in the business and not on the business” is a cliché because it is appallingly true.
Most, if not all have also heard about the “urgent but not important to Important but not urgent” continuum, certainly I have written about it in the past.
However, taking some concrete action to free up the time is harder than the easy clichés of business coaches and consultants, so here are a few added steps to take along the path. They come from the “Lean” thinking movement that has so profoundly altered the way we manufacture things over the last 25 years.
First: distinguish between policies and procedures.
Policies are the things that deliver a framework for activities an decision making. Think about it as Google earth focussed on a large region. You can see the shape and limits, but not the detail of the roads, railways and suburban areas. Procedures by contrast are a step by step expression of the sequence of activities that together contribute to the outcome. To continue the analogy, they are the GPS, giving you street by street instructions on how to get from point A to point B.
Second: Make a list of all the things that are recurrent activities, and priorities them against a list of questions you ask yourself:
- Is it required for the business to function efficiently?
- Are there repeatable steps with specific start and end points and efficiency/productivity metrics?
- Does the task have to be done by me, or could someone else do it
- Is it the best use of my time?
Third: Be ruthless about eliminating those tasks that do not add value that make no contribution to your ability to serve customers, and by delegating to others.
Fourth: write the procedures to make the tasks that remain routine, repeatable, and robust. You generally have two options in writing procedures.
- Have a roundtable with all those involved in the task, and map it out on a whiteboard, or butcher paper, capturing all the interactions that occur.
- Take a bit of time, and keep a record for a couple of times the job gets done, then whiteboard it to standardise, and eliminate the unnecessary loops and rework that almost inevitably you will uncover. Think about it like building a house. Start with the foundations, then progressively fill in the external walls, internals walls, followed by the details of the fittings and fixtures.
Once documented, test the procedure a couple of time to “stress test” it, then delegate.
Fifth: Outsource where possible those tasks that take a capability not readily available in your business, or where there is a specialist available who can do it better and quicker, and therefor in the long run cheaper, than you.
Voila! For most small business owners, 4 hours a day.
Australia day 2015
On Australia day for the last few years, I have made a point of reflecting on the place we live.
The post on January 26 2012, called for a mature debate on the challenges we face as a nation, the real, long term issues, rather than the diet of puffery and bullshit we normally are asked to digest. Quaint idea that, asking for a national debate on real issues.
In 2013, I asked what it was we wanted the place to look like in another generation, and I guess some degree of pessimism came through the words, again nothing.
Last year, 2014, I focussed on what I thought would be the defining trend that would drive our decision making, individually and for the nation, Data, and the essential truths that data can convey. This turned out to be absolutely wrong, about as wrong as anyone can be, and is again a salient lesson to those with a crystal ball hidden somewhere. Small businesses have not embraced data, Governments continue to hide it, and politicians use it to distort, mislead, and often fabricate, and we still take it on the snout, in relatively good humour.
So much for the transparency to be delivered by the internet.
This year, 2015, I will not be so grandiose or presumptuous.
Nick Kyrgios has just fought his way into the Aussie Open semi-final comprehensively replacing Tomic the tank as our favourite tennis player, the Canberra shuffle is back in full swing, educating our kids seems to be on the hands of kids, the boom of the last few years is comprehensively over and the lack if intelligent and bi-partisan comment and policy development that would enable the economy to weather the coming storm is supplanted by another call from the opposition leader for a debate on the coming republic.
For heavens sake, can we be adult about this?
Australia is the greatest country in the world, our economy is for reasons of luck and good management 20 years ago in pretty good shape relatively, but we are still failing to recognise that the piper needs to be paid now if the prosperity we have enjoyed will be handed to our children, some farsighted decisions need to be made irrespective of the political cycle.
I guess I am asking too much, pass the bottle, please.
Courtesy Geoff Roberts http://tinyurl.com/o2mcd4p
Over the years working with B2B clients, it has become evident that the sales personnel are often tied up doing other stuff, things that have nothing to do with selling.
Following up unpaid invoices, checking inventory, trying to shuffle production schedules to accommodate something that has already been stuffed up, doing forecasts, filling in annual budget forms, chasing slow paying debtors, the list goes on.
Sales people are employed to sell, and a large percentage of this other stuff is not customer facing, but just admin that somebody thinks may be necessary, and often is, but is not contributing to the next sale.
My answer is to rename the sales function “Revenue Generation” and to ensure that every activity that is not directly related to “RG” is moved elsewhere, automated, or best yet, eliminated. Sales has become just a generic functional term, it no longer carries the urgency and importance so necessary to keep everyone in jobs, and customers coming back. Revenue generation by contrast, seems to communicate that necessary urgency and importance.
When you have done all that, you will have freed up typically 30-50% of a sales persons time, and logically, that enables them to sell more (or perhaps you need less of them).
However, there are 3 further steps to be taken:
- Only have revenue generators who genuinely love what they do, and understand and can articulate the value they and your products can deliver for their customers.
- Only have revenue generators who are committed to doing what they say that will do
- Have everyone in the organisation recognising that irrespective of their role and function on a chart, their real job is to contribute to the process by which revenue is generated, and who will not let any superficial, political or shiny new thing, get in the way.
This is all pretty easy to say, but hard to do in the face of a culture that dictates the way things are done, but clarifying ‘Why” things are done always helps.
Need help? Drop me a line.
Interactive content adds greater value
The mantra “Content is King” is now about three years old, geriatric in web years.
Now almost everybody is doing it, certainly almost everyone small businesses need to compete successfully against to survive.
Content is rapidly becoming a commodity, something to be “sourced” as you would a new printer cartridge, or replacement part for a bit of machinery, the only real challenges left are to know where to look, how to sort through the options, and how much to pay.
Given this is the case, how should forward thinking marketers, particularly those on small budgets set about differentiating themselves amongst the welter of competing attention grabbing options available?
The answer is pretty easy to say, but not so easy to execute.
Find ways to actively engage the individuals in your market with your content . Just getting them to read a post, or even download a white paper is no longer good enough, you have to find the means to put their brains into gear, rather than just letting them operate on autopilot.
Turn a white paper into an interactive performance measurement tool,
Build a quizzes and games into your infographics,
Create questionnaires to complement your best practise databases,
Throw out the product brochure, and let customers design their own product and add the extras.
There are a few services evolving to assist the process, several tailored for specific social media platforms, but the hardest bit is to find the creativity, imagination, and market insight that will allow you to understand the interactions with your product and its competitors sufficiently well to know what sort of activity will engage them.
Get it right, and you will also get to gather an extraordinary array of customer behavioural data that can be leveraged, delivering value to your business and your customers.
Great communication is a two way street!
Working with a colleague over Christmas to assist in the development of a presentation that was a really important opportunity to build her personal brand with the audience. Creating presentations that work is a process, and hard work, so to start, we broke the task of building the presentation down into three components.
- Twitter Pitch. Twitter has its detractors, but the huge unintended benefit for those communicating ideas as distinct from the minutiae of their lives is that it forcse us to distill ideas into 140 characters, what I call the” twitter pitch“. Applying this discipline to the preparation of a presentation is usually the same sort of challenge as presented by developing the elevator pitch for your business. In this case, the challenge was to articulate in one sentence the central idea that was to be conveyed. Not easy.
- Know what you want to happen. Clarifying this really has three parts:
- Define what it is that you want the audience to know as a result of the presentation
- Know what you want the audience to feel during and after the presentation
- Know exactly what it is you want them to do with the information you provide, and deliver them the means to do it. A “call to action” if you like.
- Create a structure for the presentation that delivers on the points above. Again, there are three factors at work:
- Have a logical, sequential structure of some sort for the presentation.
- Gain the trust of the audience, listening but not believing is a waste of everyone’s time.
- Do it with feeling. People rarely remember facts, but they do clearly remember the emotions they felt while the facts were being recited. I do not remember the date of the assassination of JFK, but I do remember (yes, I am that bloody old) exactly what I was doing at the time, and how I and those around me reacted to the news.
Delivering a presentation is a difficult to obtain opportunity to sell. An idea, a product, your skills, the reason your business exists, it varies, but the common point is that those in the room have given you their time and attention, their most valuable resource, don’t waste it for them, and miss the opportunity for you.
On a final note, you may also notice that all of the above is in “threes”. For some reason I do not understand, the human brain is very efficient at remembering things in threes. If you organise your presentation into blocks of threes, you will be better able to manage the flow, remember the sequences and words, and deliver.
None of this is easy, and rarely is a great presentation prepared alone, and it is never done at the last moment and without practise and a critical eye.
Need a critical eye, and sounding board? I can help.
Most would acknowledge that word of mouth is the most effective marketing channel there is, then promptly forget that fact as they set about preparing and implementing their programs.
Discounts, bundles, making ads, facebook likes, social media mentions, retweets and shares, and many other activities all get a guernsey, but when was the last time you explicitly set about creating word of mouth, real life endorsements, Margie from Marrickville telling her neighbor over the fence that your product is the best thing since sliced bread?
How much of your marketing budget has as its specific aim to create personal endorsements?
We all know that “WOM” is the original marketing channel, so I was surprised to see this research that reflected that only 28% of small businesses when asked to identify their best marketing channel noted Word of mouth in its proper place.
Have we just forgotten the basics, been seduced by the the welter of choices available?
Perhaps it is just the sample, choices, or that it is from the US, but I asked a small group last week a similar question, albeit open-ended, and word of mouth came in at about the same level.
We can now target messages to specific behaviors practiced by very discrete subgroups, why would we not seek to ensure we deliver outstanding value to them, then encourage them to spread the word amongst those they know who are similarly interested?
Word of mouth, the original and still the best social media platform.
Writing a blog is hard work, great to do as it forces you to think critically, read widely, seek to question your own preconceptions, and expand your own expertise, so it can be intellectually rewarding. It is nevertheless time consuming hard work.
As such, it can be seen either as a hobby, or an investment, and if it is the latter, there should be a return on the time and energy expended.
For most small businesses, it can easily become a chore, which is why so many fall back on some formulaic way, just to pump out words and fill a schedule, and end up doing nobody, themselves particularly, any good.
There have been many posts about the “10 smart ways to write more blog posts” lots of advice that suggest a process is the way to make blogging both easy and commercially productive, this one from GrooveHQ being one of the better ones (and I borrowed their header photo) but like most others, misses the essential point.
Blogging is now so common, has become such a generic activity that most material out there is “average”. The task of filtering the really good stuff out for comment and further consideration is becoming increasingly automated, adding to the “average” tendency, as the really good stuff always happens on the fringes, and it usually elusive and challenging, just like any other sort of useful innovation.
To me there is really only three ways to be genuinely useful, to attract and keep readers.
- Display really deep domain knowledge, and be generous with it. Mitch Joel, Mark Schaefer, Avanish Kaushik and Ian Cleary are a few that spring to mind that do this consistently and well, and GrooveHQ is rapidly becoming one of my core reading list, listed down the side.
- Be genuinely interested, concerned curious, and yes, passionate, in your domain, and have that communicated simply by demonstrating an independence of mind, generosity of ideas, willingness to kick the sacred cows, and make the elephants visible.
- Be original, prepared to be challenging, and persistent.
My clients, small businesses in the most part, are being increasingly left behind as is the case in most arenas of competitive activity, they lack a depth of resources, so they just have to be smarter, more agile, and personally committed than their larger competitors.
Those that do it well will flourish.
“Content Marketing” is the new buzzword, something I consider to be a tarted-up label stuck on a set of activities we have always done, in the hope of adding a few more mirrors to the disappearing hall, so quick talkers can extract a premium for what they are supposed to be doing anyway.
Cynical perhaps, but what is copy in a newspaper column if not content, what about the promotion run by the local car dealer, or the ad on TV?
Leaving that grumble aside, the huge change that has occurred is that content no longer lasts as long as it used to, but has the chance of resurrection, for the real thing!
There is some great stuff being produced, truly inspirational material, but as usual there is a lot of crap, and the volume of crap is increasing as the appetite of the new e-mediums increases, and everyone becomes a publisher.
There has always been a 1/2 life for content, but the nature of it has changed radically.
The half life of a daily newspaper used to be a day, after which it became rubbish, of a women’s magazine, it was a bit longer, a week or two as the articles were read (are they really?) and as the copy got handed around a bit, a radio ad was about 30 seconds at best.
Material published digitally has a much longer half life, but much less chance of being seen on being published. The volumes of publishing on Social media platforms limit both the opportunity to be seen on publishing, and usually the reach of a post (facebook is now less than 5% organic reach) but do offer the opportunity for a second, and third chance, as it does not become fish wrapper tonight.
The most viewed post on this blog was written several years ago, and just keeps on attracting readers, but on the day it was published, well, suffice to say I did not need to take my shoes off to count the numbers. In addition, good posts can be linked, shared, republished with ease, again increasing the 1/2 life, and occasionally there is the remote possibility of a digital lottery win, the viral post.
Digital phenomena like the video condemning Kony, the African nut job laying waste to swathes of central Africa using children as soldiers swept the world, breaking all records, and Psi, that whacky Korean “singer” who became an internet sensation for reasons I simply do not understand, can happen. The 1/2 life of those two may be short, but the reach was huge, and there is always the chance of a rebirth.
Particularly for small businesses with limited resources, considering the nature of their content, and crafting it to extend and expand the 1/2 life, offers great opportunities for marketing and communication leverage they never had before.
Small business is at a crossroads as we move into 2015.
Either they embrace the opportunities and tools presented by the disruption of the “old ways” by digital technology, or they slowly, and in some cases, quickly, become irrelevant, obsolete and broke as customers move elsewhere.
Your choice, as much of the technology can now be relatively easily outsourced, and at a very reasonable cost, certainly less than most would expect. The two major challenges in outsourcing, snake oil salesmen and not knowing what you want and need, are little different to any other category of purchased service.
So, to the trends that will influence your business in 2015 that you need to be at the very least aware of, and in most cases take some sort of pre-emptive action.
- Marketing technology will continue its rise and rise. The thousands of small marketing technology players who are currently emerging will be forcibly integrated, as the big guys buy “Martec” real estate. Adobe, Microsoft, et al will spend money, and the little guys will be swallowed as the gorillas fill the holes in their offerings, and new segments emerge. At the other end of the scale, there will remain plenty of options for smaller businesses to step into the automated marketing space. The current rash of innovations to make life easier for small businesses will continue and as those smaller single purpose tools gain traction, and more are launched to fill the niches that exist to service small businesses.
- Peer to peer marketing will continue to grow at “Moores law” type rates. Jerry Owyangs honeycomb diagram and data tells it all. Almost any service I can think of has the potential too be disrupted in some way by the peer to peer capabilities being delivered by technology.
- Content creation as a process. The next evolution in marketing, the move that I think “content” will start to make from being individual pieces of information produced in an ad hoc manner to being a process that is highly individualised, responsive to the specific context, and informed by the behaviour of the individual recipient scraped from the digital ecosystem. It means that content creation needs to be come an integrated process, more than a “campaign” . The term “content” will become redundant, it is just “marketing”, focussing on the individual customer.
- Marketing will evolve even more strongly as the path to the top corporate job. Functional expertise is becoming less important, what is important is the ability to connect the dots in flattened organisations that work on collaborative projects rather than to a functional tune. This trend is as true for small businesses as it is for major corporations. There will still be challenges as many marketers are really just mothers of clichés, but those relying on the cliché and appearances for credibility are becoming more obvious as the marketing expertise in the boardroom increases, and the availability of analytics quickly uncovers the charlatans. This will make the marketing landscape increasingly competitive on bases other than price.
- Recognition that marketing is the driving force of any successful enterprise will become accepted, even by the “beanies”. Seth Godin has been banging on for years about the end of the industrial/advertising model, the old school of interruption, but many enterprises have continued to deploy the old model, but I sense that the time has come. 2015 will be the year that sees marketing finally takes over.
- Video will become bigger part of marketing, particularly advantaging the small businesses that have the drive to deploy it and the capability to manage the outsourcing of the bits that they either cannot do, or cannot do economically. The old adage of a picture telling a thousand words is coming to life in twitter streams, instagram shares, and all social media platforms. The video trend will be supported by increasing use of graphics in all forms, but particularly data visualisations as a means to communicate meaning from the mountains of data that we can now generate. The density of data on the web is now such that new ways to cut though, communicate and engage need to be found, and I suspect those will all employ visuals in some form, perhaps interactive?
- Pay to go ad free is a trend that will evolve suddenly, to some degree it is an evolution of subscription marketing. Free to date platforms will charge to be ad free, whilst new platforms and models such as the Dollar Shave Club will probably evolve.
- The death of mass and the power of triibes will become more evident. The “cat pictures ” nature of content of social media platforms will reduce as marketers discover smart ways to package and deliver messages that resonate and motivate action. The agility of digitally capable small businesses will open up opportunities for them their bigger rivals will not see, or not be compatible with their existing business models.
- Local, provenance, and “real”. Marketing is about stories, so here is a trend made for marketers, and you do not have too be a multinational, just have a good story, rooted in truth and humanity. ‘Hyper-local” will become a significant force. Marketing aimed at small geographies, such as is possible by estate agents, and “local” produce, such as the increasing success of “Hawkesbury Harvest” in Sydney, and the “Sydney Harvest” value chain initiative.
- Paid social media will evolve more quickly than any of us anticipate, or would be forecast by a simple extrapolation. Twitter will go paid, travelling the route Facebook took to commercialize their vast reach. Some will hate it as it filters their feeds, others will welcome the reduction of the stream coming at them from which they try and drink. Anyway, twitter et al will set out to make money by caitalising on their reach.
- Social will grab more of the market in 2015 than it has had, even though the growth has been huge over the last few years. Small businesses will either embrace social and content marketing, in which case their agility and flexibility will put them in a competitively strong position, or if they fail to do so, they will fall further behind, and become casualties.
- The customer should always be the focal point of any organisation, but often they fail to get a mention. It is becoming more important than ever that you have a “360 degree” view of your customers, as the rapid evolution of social media and data generation and mining is enabling an ever more detailed understanding of the behaviour drivers of consumers. The density of highly targeted marketing, both organic and paid is increasing almost exponentially, so if you do not have this 360 degree view, your marketing will miss the mark.
- Treat with caution all the predictions you read, keep an absolutely open mind, as the only thing we know for sure about them is that they will be wrong, as with this ripper from Bloomberg who predicted the failure of the iphone. However, as with statistical models, quoting George E.P. Box who said “Essentially, all models are wrong, it is just that some are useful” perhaps some of the predictions you find around this time of the year will be useful, by adding perspective and an alternative view to your deliberations for 2015.
As a final thought, if you think your kid may be good at marketing, be sure they learn maths and statistics. “Maths & Stats” will increasingly be the basis of marketing, and the source of highly paid jobs and service business start-ups.
Have a great 2015.
happy new year
It’s been the Christmas and new year period, and over the break some introspection occurred, along with the pud, family connections and some nice wine.
One of the insights that emerged was the application of Clayton Christianson’s “job to be done” idea to marketing, and specifically the manner in which I approach the task of developing, selling and delivering Intellectual Capital.
As I thought about what is was going to take to be successful in 2015, I needed to ask, and answer three pretty basic questions:
- What is it that I do every day?
- Why would people hire me?
- How can I help them do their job better?
When I worked my way through those, the answer was pretty simple.
The job of a marketer is to discover, develop, and tell interesting and engaging stories to people who care, who may receive value from the experience an wisdom contained in the stories, and who may take an action as a result that delivers them some benefit.
The job is not to make ads, or create blog posts or posters, it is to identify the ways that as marketers we can bridge the divide between what people are looking for, the challenges and opportunities they face, and how we can help them with the task of “finding.”
I trust 2015 will be a good year for us all, at least better than 2014.
Our families, friends, colleagues, and those who are in great need around this shrinking world need some simple wisdom, helping hand and quiet counsel, and it is up to us collectively to give that to them as we can, in the best way we can.
Happy new year.
It is new years eve 2015, and being an advocate of accountability, it is only right that I submit myself to scrutiny over the predictions made in January for 2014.
Below is a reproduction of the post from January 2014, with a few comments and the score I (generously) gave myself.
All in all, a pretty good record I think, although I struggle to find much quantitative data to support the generous scores.
- Simple is the new complicated. All the conversations about social media, analytics, fragmentation of just about everything, we are bombarded with messages, options, and imperatives. Amid all this, marketing is at work, and the stuff that works is simple, cut through ideas. David Ogilvy had a bunch of “Olgivyisms”, one of which was , “big ideas are usually simple ideas”. This still holds true, it is just the big ideas have to cut through more fluff and interference than in Ogilvy’s day, and there is more confusing analytics and alternatives to be considered.
- Score. This remains a prediction, but I guess simplicity will always be a primary objective of thinking marketers. I think it was that great proponent of simplicity Steve Jobs who said “simplicity is the ultimate sophistication”. 3/5
- Simplicity facilitated by new tools. Tools to leverage the capabilities of the web have been getting simpler by the month. It will reach the point where those with absolutely no computer skills at all can participate. WordPress has made building a web presence pretty easy, but now the new generation of similar tools like Weebly, take that a further step. The 40% of SME’s who have no web presence beyond a facebook page set up by their children, has passed, they no longer have an excuse.
- Score. I think this prediction still holds, but I remain astonished at how many small businesses do not get it. The 40% of SME’s without websites remains about the right figure, sand the take-up the new tools does not seem to be as wide as I expected.2/5
- Reach and frequency is dead. This was the mantra of paid advertising for most of my long career, you paid for both in a matrix that focused on a demographic, “women 25-40 with children” or “working women earning over 50k” and so on. Before behavior based analytics with any more accuracy than a big U&A study, it was the best we could do, but it was pretty crap. Now with every man, his friends, and parents on facebook LinkedIn, Pinterest, et al, reach and frequency have a different sound. The enormous penetration of social media and the opportunity for behavioural analytics have changed the dynamics of advertising, and advertisers have raced to the new platforms, without recognising that the existence of the platform, free, and ubiquitous, has changed the rules entirely.
- Score. Not as dead as I thought, but declining. The wider use by Google and facebook particularly of advertising payments based on an outcome beyond just “availability” of an ad is a step that has highlighted to marketers the value of closely defining their targets then personalising communications. Most small businesses however still do not have much idea of how to best use Googles adwords and facebook ads.3/5
- Banner advertising on the web is also dead. Web banners simply do not work in the way a banner on the corner of your street did. They do not grab attention, and convey a message, they are simply in the way. Look no further than the huge drop in rates from a decade ago when they were touted to be the next advertising El Dorado. I am not surprised, simple supply and demand economics would indicate that when supply is infinite, the price at which demand can be met is close to zero. However, there is a caveat. The IPO of facebook in 2012, and Twitter in November 13, based on revenue projections that demand banner ads remain revenue generators is forcing some pretty smart people to consider how to make them sufficiently relevant to continue to attract revenue, and they may just crack the code.
- Score. Did poorly here, marketers are still wasting huge sums on digital banner ads that promise reach, but deliver little of value. I am not sure if this is stupid marketers, or stupid boardrooms, either way, I score myself down. 1/5
- Values matter, more than ever. The temptation is to “pimp” your products and services at every opportunity. LinkedIn forums are full of new “discussions”, which are just pimping a product, very few get opened, they certainly rarely create an discussion, and are one step away from Spam. If you are gong to spend your resources, money, time, talent, on marketing, make it count, tell people “why”. Steve Jobs articulated this very well when launching the now famous “Think Different” ad to Apple employees.
- Score. Got this wrong, pimping products seems to be more prevalent than it was in 2013, but I am prepared to believe that the worm will turn at some point. Perhaps 2015?
- Content is serious business. Content is not just a word, it is a consumer of considerable marketing resources, and the capability of creative content creation to build a brand is evolving at a rapid rate. In the past, I have wondered at the capacity of the web as a brand building device, giving it top marks as a medium of delivery, but I could not think of a brand that had been built by the net. Now it seems, that Red Bull will get a guernsey. Their web presence is exceptional, huge resources are put into creating the positioning as extreme sports in all sorts of amazing ways. This best of 2013 post on Digiday has some great marketing, including Red Bull, and this terrific story of an old Nissan Maxima . The new year will see great strides in video brand building, the pace of creative change, and the socialization of the change, as demonstrated by the Maxima example, will continue to accelerate. In 2014, the “Social” component, promising businesses interacting with their markets for free, will be overtaken by the “media” part of the social media equations, as to be noticed bucks will have to be spent. There will be the off the wall hits, but the average cost of being seen will go up substantially. Content creation without any content marketing and compelling reason why a consumer should even look at it let alone give it any consideration will rapidly become almost useless. Your content is competing in a highly competitive and fragmented market for a share of consumers limited attention, and the old rules of marketing apply.
- Score. At last, a 5, and the evolution will continue.
- “Environmental” research. This is not tree-hugging, it is my term for standing back and forming a view of the context in which your customers and markets live, what is changing that will alter their lives, and how can you leverage those changes by innovating in the manner in which you serve them. Now more than ever, this is a skill required, as there is simply so much data and information around, it is easier than ever to drown in the detail without understanding the context. For example, in my view, 3-D printing is an emerging disruption, not just to manufacturing but across industries that are in any way engaged with selling “things” rather than services. Forming some views on how this may impact on you, and your value chains, and taking steps to build the capabilities that will become necessary to survive and prosper is as important as breathing.
- Score. The jury is out, but the judge (me) still sees this sort of research as absolutely fundamental to success. 3/5
- Data accumulation and “personal leveraging” Word of mouth has always been the best marketing tool available, now the continuing development of social media platforms and marketing automation, the opportunity to be “personal” is increasing with every day that passes. In conjunction with this is the building of lists, contacts with whom you have the opportunity to build a relationship.
- Score. Absolutely. 5/5
- Every person is a potential media channel. Just consider the capability to connect to facebook, LinkedIn, and the rest, and send information, ideas, links, referrals, to everyone in their networks. Media channels used to be a few radio, TV, newspaper and magazine channels, they were all one way, the “stuff” got pushed out and the opportunity to respond was limited to letters to the editor. No longer!
- Score. Still the case, although many, perhaps most small businesses are still not taking advantage of the opportunities.
- Personal Kaizen. Kaizen is Japanese word for “continuous improvement” extensively used in lean literature. Lean is more than just an operational strategy, it is one for every facet of your life and business. Every time you do something, strive to do it better, by being smarter, than the time before. Being serious about personal kaizen makes you curious, interested, and interesting, qualities that attract opportunity.
- Score. I have seen the tern “Kaizen” pop up a bit in the last 12 months in the marketing literature, but that does not mean much is happening. I leave it to you to mark yourself. My mark of me, a bit harsh, but private.
- Craftsmanship. In a world of increasing homogeneity delivered by specification driven design and manufacturing, where differences are often just cosmetic and qualitative, genuine craftsmanship, bespoke design, and catering to the individuality of people is increasingly important. The extent to which craftsmanship and “manufacturing” beyond the C20 concepts of mass manufacturing for operational efficiency can become integrated is just starting to evolve. There are many examples, one I am personally familiar with is Ian berry who is Ironsides leather. Ian crafts leather, belts, harness, bags, using just the old tools of the trade, experience, true skill, and passion. It is true craftsmanship, and buying a belt from him is receiving a gift of that experience and craftsmanship. Ian is also a great advertisement for the point above about simplicity. He produced his website using a Weebly template, a few photos, and a bit of time, no cost. No HTML, no complex menus, no computer skills beyond a one finger familiarity with a keyboard.
- Score. Still the case, perhaps more so. 5/5
- Marketing and technology will continue to collide. The days of marketing being unaccountable are over, there is no excuse for not calculating the ROI of your marketing investments these days. Scott Brinkers blog on the intersection oftechnology and marketing is a terrific resource, his thinking on this is in front of the pack, and allied with Avinash Kaushik’s wonderful Occam’s Razor blog, there is enough brain food to keep most of us fed on the topic.
- Score. Also still the case, if anything, the rate of growth of marketing technology is accelerating. The first Marketing technology conference held in Boston in march 2014 was a resounding success, and I hear from Scott Brinker that the second planned for march 2015 will be even bigger. Enough said. 5/5
- Collaborative marketplaces will continue to rise and rise. The web 2.0 enabled one way markets to thrive, Amazon, Ebay, electronic banking, and many others. More recently, collaborative marketplaces have emerged, where both sides of the transaction put something in, rather than just buying a product. Airbnb, Uber, and many others, will continue to explode, mainstream companies in areas threatened will need to consider how they respond. Car hire companies need to have a service, to disrupt themselves, hotel chains need an equivalent to Airbnb, and so on, the disruption is profound, and just beginning. The best thinking around in this is being done by Jeremiah Owyang, whosebody of work on the topic is extraordinary.
- Score. Still the case, and accelerating. Jerry Owyang’s latest database of recently funded startups on the topic is extraordinary, and expanding. 5/5
- Mobile first. Use of mobile devices to access websites and social media platforms continues to increase, reaching numbers in late 2013 upward of 65%, and reaching the eighties for some specific sites, numbers that astonish even the bullish predictions of a year ago. In developing countries, where the economies are booming, and fixed line infrastructure is limited, mobile and wireless have simply jumped ahead, and the infrastructure of the developed world will simply not be installed. It is these countries that are driving mobile innovation.
- Score. Still the case. 5/5
Let me know what you think,
Another amongst the tsunami of 2015 prediction posts will be along in a few days, but as has been my focus in the past, I seek to articulate the strategic drivers and trends I think will shape our commercial environment, rather than make specific predictions about particular events. Makes holding me to account that much harder.
Hope you had a good Christmas break, now almost over, and that 2015 is a stellar year for you.
Thanks for reading, commenting, and sharing over 2014.
Taking inventory is one of the most boring things, but necessary things we all need to do. Understanding what you have in stock is fundamental to determining the operational priorities for the future.
Taking physical inventory is familiar to everyone, it is an essential part of staying in business, but how many take an inventory of their marketing assets?
We spend time and money creating things that we hope will deliver leads, or push them through the conversion stages, but how often do we stop and think about optimising the leverage those assets are generating?.
The Christmas break is a great time to get some of this essential stuff done, to examine from the recipients point of view, how well your marketing assets actually work. Following is a list of the typical marketing assets even a small business should have, and often will have without really considering the implications, consequences and costs.
Planning and tracking.
- Do you have a marketing plan that reflects the short to medium term activities needed to deliver on a longer term strategic plan?
- Is there an activity plan for marketing investments that outlines the timing, costs and expected returns from marketing activity in 2015?
- Have you put in place the measures that will enable you to calculate a Return on your marketing investments at each stage of the engagement funnel?
- Are there tracking measures in place that will enable you to improve your returns?
- How well do you know your existing customers?
- Who are they?
- What problem are you solving for them?
- Would they be prepared to recommend you to others?
- What is your share of their wallet?
- Why do they use you instead of your competitor?
- Do you know who your priority target customers are?
- Are they defined to the point where you could personalise them?
- Are your communications “personalised” and directed to their specific needs and challenges?
- Do you understand their behaviour
- Do you understand why you lost customers, and have you made the choice not to spend resources to keep, or get them back?
- Are there some ex customers you are happy are ex? And why
- Are your websites and social media platforms linked and cross posting?
- Are your profiles optimised on each platform?
- Are tracking codes in place and optimised on each web page and platform?
- Do you work the key search terms for your segments naturally into the headlines and body copy of posts?
- Are the auto responder emails appropriate for the trigger response?
- Do you say “Thank You” enough?
- Are you capturing data at every opportunity?
- The “ABC of sales” or “Always be closing” school of sales has changed to “always be collecting”.
- Are you using analytics to test, test, and test again to improve your conversion rates?
- Do you track conversion rates at each stage of the sales funnel?
- Are you seeking ways to build and leverage relationships with suppliers, and natural partners?
- What is the balance of your sales efforts between nurturing existing relationships to building new ones, and is that balance appropriate?
- How would you rate your relationships with your best customers?
- How deep and appropriate is your management “bench” or in its absence, contractors to fill gaps?
- Have you defined the capabilities necessary to sustain growth and profitability, and set about building on the existing, and filling any holes?
As the owner of a business, the most valuable asset you have is your time. Problem is usually there is not enough of it, and others do not value it so try to use it to their purposes.
- Do you have the business/life balance right? I know it is a cliché, but that is why it is true.
- Do you explicitly set out to work “on your business” rather than in it? Another cliché, but also true.
- Does the business run without your detailed day to day involvement?
- If not, when will that day come?
I often get puzzled looks when as a marketing consultant I bang on about things financial. However, it does not matter how good your marketing is if the product is crap, or delivered late, or sold at below cost. Financial management is the foundation of any enterprise, as much as marketing is the essential ingredient for success.
- Do you have a cash flow forecast?
- Do you know and actively your costs, fixed and variable?
- Have you calculated your break even?
- Have you a revenue forecast and operational planning in place?
The above is just a start, a “taster” for 2015 which I expect to be a difficult year, so those who are best prepared, will do well, the others… well, they sell flowers at the funeral home.
Thanks for reading, responding and sharing my musings through 2014. I am going to take a break from the keyboard for a short time. Have a safe and merry Christmas, and I will see you in 2015.
“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.
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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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)
- 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.
- Underestimating the importance of “people“, their attitudes, fears, relationships, egos, and behavioural norms.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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:
- 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.
- 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.
- 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.
- 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).
- 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.
- 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.
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.
- 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.
- 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.
- 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.
- “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.
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.
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??
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.
- 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.
- 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.
- 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.
- 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.
- 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.
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?
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.
- 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.
- 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.
- 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.