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.

10 strategies for SME’s to beat the supermarket gorillas at their own game.

confused gorilla

Any business that has done business with the supermarkets knows that they are not there to do you any favours. They have shareholders to keep happy, customers to sell to at the lowest  prices possible consistent with their margin objectives , competitors to beat, and shelf space for sale to their suppliers.

In order to survive and prosper selling via supermarket distribution takes a business model that is tailored to the demands that the retailers make.

Following are 10 strategies that have worked in the past, the more of them you cover off the better, and the first few are mandatory.

  1. Understand the supermarket business model. The supermarket business model is based on three factors: high volumes, lowest possible supply chain and transaction costs, and low prices.  With some minor category exceptions for some retailers, they do not vary from this model, in Australia or overseas. Given the scale of their operations, they get to set the rules, and there is little room for negotiation, even for major suppliers.
  2. Be savvy with data. Mass market retailing is a data intensive game. The retailers have mountains of data at their disposal, and plenty of suppliers willing and able to interpret it for them, with the obvious disadvantage to those who do not interpret. Scan data, combined with the loyalty card data increasingly being used is a goldmine of demographic, behavioural, and promotional information. Being in a position to present data with your interpretation, and having the credibility to interpret the retailers and your competitors data is a price of success.
  3. Aggressively execute on Category Management. Category management disciplines are the foundation of the retailers ranging, promotional and in store product placement strategies. It is data intensive, and an integral part of he business model, and as such sufficiently important to be treated as a separate “to do” for those to whom success with supermarkets is essential. Allowing your products to be “category managed” by your competitors is simply not sufficiently competitive , or aggressive. You need to execute on category management in partnership with the retailers, even if you are not in the “category captain” role.
  4. Build a brand that has relevance and connection to consumers. The alternative to having a brand that has at least a small but demonstrable group of consumers your brand has no effective substitute, and who  will perhaps change their choice of retailer for, is essential. To be a price taker with no leverage at all, is to be an irrelevant supplier who is absolutely dispensable.
  5. Recognise you have two customers. The supermarkets may be your direct customers, but the consumer is also your customer, indirectly. As a part of brand building, you need to open communication channels with consumers, so that they are predisposed to buy your products. This may seem like brand building, and it is, but it is more short term direct, and actionable than building a brand which is a long term investment.  Direct promotional and communication activity can now be a part of your tactical marketing plans in a far more directed manner than has ever been possible before.
  6. Remove transaction costs. Transaction costs have two basic causes, the first is not getting “it right first time” requiring rework to correct, and the second is the penalty of small scale. It costs the same to raise and process an invoice of $1,000 as it does for an invoice of $100,000. To the extent that technology can be applied to process the invoices, the costs will not be material,  but if people are involved, the costs of the $1,000 invoice is 100 times as much as the $100,000 invoice. This relationship is reflected throughout the supply and distribution chain, and even minor improvements can deliver substantial savings. The source of Woolworths superior performance over the last decade compared to Coles has been the impact of their reductions in transaction costs that have dropped straight to the profit line. Wal-Mart became the biggest retailer in the world by focussing on the reduction of transaction costs of all types, and passing the savings on to consumers as lower prices.
  7. Collaborate for scale. Small suppliers to supermarkets have to find ways to apply leverage to their opportunities. Collaborating to reduce various forms of transaction and supply chain costs , as well as pooling data and data capabilities are logical if challenging tasks. Many produce suppliers have found ways to collaborate, but their produce is unbranded, and commoditised by retailers, so it is harder for branded FMCG but nevertheless possible.
  8. Constantly innovate. It is almost a cliché, but nevertheless true, that to stay still is to be left behind. Innovation is a part of the necessary armoury of success. Not just innovation in the product supplied by  the means of its production and supply require constant innovation.
  9. Build agile value chains. Commercial agility is the ability to alter processes in the face of changed circumstances without resorting to non value adding discussion and debate, and without losing sight of the objective. Agility is not flexibility, which implies that things “bend” then go back to normal. By contrast, agile value chains have the characteristic of being able to evolve rapidly, and improve in the process.
  10. Do not play. The last and most obvious strategy is to ignore the supermarkets, and play in channels they do not control where the value in the product is able to be recognised in some way that is impossible in the high volume low margin supermarket game. Depending on how you measure, and what category we are talking about, supermarkets control between 50 and 80% of FMCG sales, which leaves some 30 billion of Australian FMCG sales left over, not an insignificant sum.

That is an awful lot to do, and the best time to start was a while ago. However, the second best time is now, so go to it. If you need a bit of assistance, just get in touch, and I will bring along my 35 years of experience with this stuff and put it at your disposal.

 

 

 

 

Marketing Plumber

tap

You know the old story, the plumber who goes around fixing other peoples dripping taps, but has a houseful of leakers himself.

This site has been my home since march 2009, and it has been full of leaking metaphorical taps. All the things I admonished my clients to do, or not to do were here.

A freebie hosting that prevented a whole host of functionality

No analytics beyond the most basic few measures

A boring and dull site template

Well, all that is in the process of changing, I am taking my own advice, and fixing the leaky taps.

The hosting has been moved, several plugins added, along with an analytics package. Progressively over the near future you will see the changes evolving as I progressively fix the taps.

About time!!

What will not change is the commitment to bring original marketing thinking and ideas to the small businesses that are the lifeblood, the reason for being of this site. I hope you continue to enjoy, comment on, share and learn from the posts and the comments they elicit.

Let me know what you think, your comments are both welcome, and vital to improvement.

 

 

 

Mapping Social Media

London underground

Most Aussies will probably recognise the diagram above, the London Underground.

The first time anyone arrives in London, an underground map is  a vital piece of paper, even in these days of mobile phone enabled GPS tools.

The underground system in London is pretty complex until you figure out how it works, and when you take into account the interchanges with London buses and British rail, it is not something you approach without a clear understanding of the details of your intended journey.  To get anywhere, you need to know just two things:

Where you are

Where you need to go.

After that, with the map, you can figure out the best way to get there ,what the  route options may be, what it will cost, and how long it should take to get to the destination.

Why is it that people understand this instinctively for a sojourn on the underground, but fail to do it for  their business?

Social Media is the shiny new toy around at the moment, everyone knows it is there, some dabble in it without a map, and get lost, have their pockets picked, and decide that from now on they will catch a taxi, if they really have to get somewhere. Other wise they will just stay in their hotel.

“Social Media” used as a noun, has some similarity to the underground,  in that it is complex, but navigable with a map, where it differs is that it changes, evolves, even mutates, every single day, in some meaningful  way. However, if you understand the structure, where and how it all fits together, navigation can become relatively easy, relatively risk free, and open up the opportunities of a wonderful tool.

Need a map?

 

Start with the things you can do.

Majors bay rd

Majors Bay Rd Concord, Sydney.

No business can do everything, so the easy way to start is to do the thing you can do well, as long as it is at least partly the thing that also makes you different.

In a suburb not far from me in Sydney, there is a street that over the last 5 years or so has evolved into an eclectic mix of cafes and restaurants, occasionally separated by some other hang-over shop from a previous age. There must be 25 or 30 of them down both sides of the street, each vying for a share of the dollars the punters bring in from all over Sydney.

One of the cafes, on a corner, not only has plenty of outside room on the footpath, friendly service, and a good range of only mildly over priced cafe meals, and treats, they also roast their own coffee beans. This just reinforces that they have the best and freshest coffee experience in the area, supported by a blend of service, location and that aroma as they roast.

Intoxicating.

It also confirms them as “knowing their coffee” an important cache in an environment where coffee-wankery is reaching disturbing proportions, and cafe’s are springing up like mushrooms after rain.

It cannot be too hard to set up a roasting operation, it delivers a great marketing advantage to the cafe, offers an added income stream from bagged coffee sales, and, oh, did I mention the aroma?

Differentiating yourself is a must in this homogenising world, and doing it in a way that reinforces the marketing story in the way this cafe has done merits competitive success, which by my observation every time I go there is substantial.