4 critical strategies for FMCG profitability.

4 critical strategies for FMCG profitability.

 

Price promotion is just a price subsidy to consumers, and margin subsidy to retailers in disguise. .

In consumer goods, most volume that comes from a price promotion is just bringing forward sales that would have happened anyway, just over a longer time-frame. Alternatively, it is volume taken from an opposition product by buyers who will avoid ever paying the full retail by switching products based on price. It is common in FMCG for consumers to have a basket of ‘acceptable’ products that they shop from via promotional pricing.

Over the 45 years I have spent in FMCG, I have seen the terminal erosion of most proprietary brands on supermarket shelves as a direct result.

In times of inflation, the gap in real wages and price widens. This pressure will only increase over the next year or so as retailers push for better and better price promotional deals, despite the current focus on their pricing tactics.

Now is a great time to go broke being successful at securing price driven promotional slots.

To dodge the ‘go broke’ outcome, there are a few simple to say but very difficult to implement marketing practises.

Understand the elasticity of demand for your product, and tactically market accordingly. This requires that you quantify the break-even points between the tactical volume increases you generate while on promotion, the lost margin from the discount, and the cost of the promotional slot. The strategic challenge here is that erosion of margin happens over time, as buyers from whom your product is in their ‘basket’ wait to buy on promotion, and most often only buy then.

Zig as others zag. Many, if not most suppliers will stop advertising, and direct the funds into short term price and promotional activity. This offers the opportunity for those brave enough to take it to generate a higher share of advertising voice for less. Over time. the body of research that examines the relationship between brand health and price delivers irrefutable evidence of the negative impact of price on brand health. Advertising share of voice is a leading indicator of market share. In tough times, most cut advertising investment to salvage the bottom line, as advertising is seen as an expense rather than an investment in future profitability.

Understand the reality of attribution. It is way too easy to make simplistic single source attribution of price promotion as the driver of volume. This moves the sightline from the more important ‘delivered’ margin. We now have the tools to do a much better job than has been the case in the past of separating volume and margin. However, the explosion of digital channels and tools has led to a quagmire of conflicting attribution claims, most of which are no better than marginal contributors.

As a kid, the Arnott’s red trucks delivering biscuits to supermarkets were always polished to a high level, no blemish in the polish was allowed. Even now, over 60 years later, that stays with me as an indicator of the effort put into quality which feeds into my view of the Arnott’s brand, despite the years, and ownership changes.

Resist the siren song of volume. For an SME to be successful, they need to make a whole series of tough choices. Amongst the most seductive of those choices is the perceived trade-off between price and volume. I say perceived because most see the trade-off as the traditional price/volume choice drawn as the graph they saw in Economics 101. It is grossly misleading to see it in this one-dimensional way. Consumers make their purchase choice on a whole range of ‘value-delivery’ parameters, of which price is only one. When you allow it to be the only one, it will logically dominate. As a marketer, your task is to make price a minor component of the purchase choice consumers make. While short term that may dampen volume, and even deny you distribution in a retailer, the point of being in business is to make enough to remain in business. You will not do this by giving away margin for no return.

Know your costs. This seems pretty obvious. However, the number of SME’s that do not understand the detail of their costs and the difference between marginal costs and overheads never ceases to amaze me. One of the most valuable tools, previously noted, in the SME toolbox is a sophisticated understanding of their break even. When you have this model working it enables you to add in some assessment of the impact of price and volume over time. It enables consideration of the impact of pulling forward your sales volume and delivered margin on promotion, the volume and margin delivered off promotion, and volume and margin impacts of competitive promotions.

Following are a few of the many research reports that articulate the linkages between price, volume, and brand salience. I include them to demonstrate the views expressed above are way more than just my opinion.

https://tinyurl.com/496vwphy Ehrenberg Bass. Brand health (podcast)

https://tinyurl.com/4wzkebav Ehrenberg Bass. Brand salience

https://tinyurl.com/4b5er6rc Amity University. Impact of price promotion on brand equity.

https://tinyurl.com/36fr8xwf Research Gate. Long term effects of price promotion on brand choice and purchase quantity

 

Is Taylor Swift the greatest marketer of the last 20 years?

Is Taylor Swift the greatest marketer of the last 20 years?

 

 

There are many contenders from around the globe for the mantle of ‘GOAT”, or at least of the last 20 years.

The obvious choice might be Steve Jobs, whose single-minded pursuit of all the factors that coalesce into great, long lasting, and commercially effective marketing culture is unparalleled.

You might nominate Elon Musk. He reshaped the auto industry worldwide, made batteries sexy, and figured out how to create a reuseable rocket, before imploding by renaming Twitter ‘X’.

How about Jeff Bezos who figured we would buy books online and turned that idea into a retail behemoth that has reshaped markets.

Some might add the foul mothed Gary Vaynerchuck to the list, whose ability to promote himself while talking about himself is unmatched.

Then there is a small number of genuinely original marketing thinkers and academics: Seth Godin, Mark Ritson, Byron Sharp, Roger Martin, and Scott Galloway.

Add in a few hands-on practitioners like Angela Ahrendts, Richard Branson, Marc Pritchard, and a trio of Aussies who changed the world, Melanie Perkins, and the Atlassian duo of Farquhar and Cannon-Brookes (whose core values include ‘don’t F%@k the customer’) and you have a good list.

However, my nomination would be from outside the usual ‘who is the GOAT’ box. It is a 34-year-old musician, songwriter, entrepreneur, and publicity machine, who has added tens of billions to the GNP of the US.

Taylor Swift.

I could not identify one Taylor Swift song, and I do not know if she even has any musical talent, but she certainly is a truly great marketer!!

To have the world talking about you, (even a 72-year-old bloke in a blog post) to have massive fan clubs of ‘Swifties’ salivating over every new piece of iconography, hordes fighting to pay eyewatering amounts to get nosebleed seats in a 100,000 seat stadium, takes some talent.

What makes her so great? Indeed, what are the common characteristics of all those in the list?

  • Understands who her customers are, and applies relentless focus. Swifts core market is young women and girls. She has demonstrated mastery in engaging with that audience with the music, visual extravaganza, and personal storytelling that resonates. She is also a powerful role model, encouraging independence, ambition, creativity and determination, emotions to which those in her market all aspire.
  • Consistently creates value for customers, individually. It seems the ‘Swifties’ out there all see Taylor as someone they easily relate to personally, across a wide range of channels and media. She is consistently delivering experiences, based on the music and extravaganza shows, but supported by all sorts of adjacent activities, such as having Kobe Bryant, a superstar in his field, come on stage at a concert and wax lyrical about her kindness, generosity, and ‘grounded’ personal values. She tells Swifties what they want to hear, and even their parents have trouble arguing!
  • Is ‘the only one’. Marketing success is an outcome of meticulous attention to detail, and the communication of all those details in a package. It requires two types of activity that is an extremely difficult mix to get right. On one hand, you need to ensure ‘activation’. The calls to action that today generate the motivation to spend money to be a part of the party. On the other, it requires that long term investment be made that build a brand, an identity that engages and creates a long-term platform from which the activation and short-term revenue generators are launched. When done well, as in this case, there will be ‘only one’. Where else can a teenage girl find the excitement, engagement, communal vibe she gets from being part of a ‘Swiftie’ fan community?
  • Swift applies compounding leverage. Taylor has executed a masterful commercial strategy. Unlike almost all other entertainers, she has retained control of everything, and runs the whole shebang as the CEO of a large, volatile and very complex business entity. Her uncanny ability to generate ‘Buzz’ around everything she does, which is spread by wildfire word of mouth and unpaid media enables a continuous stream of ‘Swift-news’ which has fans hanging out for more. She provides the creativity, leadership, and alignment most CEO’s can only dream of across the diverse range of activity her business embraces.

Swift is touring Australia, starting later this month, with multiple sold out shows in Sydney and Melbourne. The hype is becoming all consuming: you even have to reserve a spot in the line to pick up your merch and get to the cash register at the exit of the ‘pop-up’ merchandise stores.

Header illustration is via DALL-E, everything else is ‘organic’

 

4 crucial questions to unlock the power of your advertising.

4 crucial questions to unlock the power of your advertising.

 

 

Last week I provided a template for a Customer Value Proposition. The template works well, but ‘Customer Value Proposition’ is a piece of marketing jargon which just means making a promise to your customers.

This presupposes that you actually know who your ideal customers are, and what sort of promise would be attractive to them.

In the January February 2024 Harvard Business Review there is an article called ‘The right way to build your brand‘ written by Roger Martin and two Co-authors. The article sets out research that proves the hypothesis that making a specific promise to customers is more attractive than a generic claim of some level of excellence. The specific promise is about the benefit a customer will receive with use of the product. A generic claim to greatness is just about the product.

It does not surprise that the first is more powerful than the second.

‘Your promise is your strategy’ is a sub headline towards the end of the article. When you think about it, the observation must be right. Strategy is a process of influencing factors over which you have no control in such a way that the subsequent behaviour of the customers benefits your enterprise rather than an alternative. Making a promise of performance in delivering an outcome desired by a customer is about the strongest driver of short-term behaviour I can think of.

Delivering on the promise, will build trust.

Right at the end the authors ask four crucial but simple questions that can be used to determine if a proposed advertising campaign is worth investing in:

  • Is the campaign based on a clear unambiguous customer promise?
  • Were customer insights used to identify a promise the customers value?
  • Is the promise framed in a way that is truly memorable?
  • Were product marketing, sales, operations, and customer service involved to ensure the promise will be consistently fulfilled?

To me, this sounds like a comprehensive framework by which to decide if a proposed communication campaign is a worthwhile investment.

 

 

 

 

The two drivers of Brand Salience

The two drivers of Brand Salience

 

The best place to start this discussion is some sort of definition of ‘Brand Salience’. To me it is the extent to which your brand comes to mind. This might be unprompted, as in ‘what brands of beer can you name? That first question may be followed with a prompt such as ‘which of these brands are you familiar with? A brand with strong salience will be identified quickly, those with none will remain anonymous.

A common phrase in marketing is ‘build a brand’. The actions taken by marketers to address this often-mouthed objective differ. There is no template to build a brand, but there are well established principals.

Most young marketers would struggle to think past Instagram and Tick Tock, believing the way to build a brand is to do stuff that gains attention and eyeballs. The reality is that doing so barely scratches the surface of what is required.

Building a brand is a long-term proposition, inconsistent with the very highly targeted digital capability we now have. Building a brand requires that you create and leverage distinctive visual, verbal, and aural assets. On encountering one of these assets, a current or potential customer has the brand immediately brought to mind.

The first task is to identify any distinctive assets your brand might have on which to build. In most cases this is after years of zigzagging and bouncing around. The potentially distinctive assets of most brands are a bit like the jumble in the bottom of a kids toy box. Lots there, bits and pieces, but nothing that has been picked out and made really distinctive.

As a marketer it is your task to pick those pieces and build them into a distinctive asset of the brand.

The Ehrenberg-Bass institute has developed by grid that captures the essence of all the above by reflecting two factors: Fame and Uniqueness.

  • Fame quantifies the percentage of category buyers brains where the brand has an immediate and salient link to the brand asset being tracked.
  • Uniqueness quantifies the brands level of ownership of that asset versus competitor brands.

The challenge for marketers is that to build such a matrix that has real relevance can cost a lot of money. It is one thing to do an audit of an existing brand, entirely another to audit a market category to identify holes in the competitive profiles which can be leveraged.

Understanding the factors that will drive distinctiveness that are relevant to the consumer is the first point of call. There is often the debate about the role of creativity in determining what is distinctive and relevant, and how that distinctiveness is captured by the combination of visual, aural, and verbal characteristics.

For example, what I regard as being a truly great example of Australian brand building is Meadow Lea margarine. While it is now relegated to the discount bins through stupidity and poor brand management, the tagline ‘You ought to be congratulated’ would bring ‘Meadow Lea’ straight into the mind of most Australian women over 50. Early in the process of building Meadow Lea, qualitative research identified that women were still doing most cooking and housework while increasingly holding down a job and managing the family. They were sensitive to criticism in all these areas, and were looking for acknowledgement. Meadow Lea acknowledged the emotional need and addressed it by telling them they deserved to be recognised and congratulated. The advertising captured the essence of that acknowledgement, visually, aurally, and verbally. Over the course of a couple of years Meadow Lea went from being one of many brands of margarine, to being absolutely dominant. I would suggest that the remnants of that brand salience remains. 30 years after the idiots who inherited Meadow Lea after the usual multinational financial engineering occurred and the advertising stopped, most still correctly associate ‘you ought to be congratulated’ with Meadow Lea.

Typically, the steps to build a brand cost a lot of money in advertising, and importantly in the initial stage of identifying those elements that can be built into distinctive brand assets.  Most small businesses do not have the resources to even begin. However, two points are relevant:

  • If you are a local plumber, accountant, architect, whatever you may be, you need only be distinctive in your local market, however you define that market.
  • AI is throwing up tools that locals can use that promise to deliver at a relatively modest cost, and with some marginally compromised accuracy, the sort of understanding previously only possible after big investments. Mark Ritson, Marketing Prof at large recently wrote a very useful post in which he labels this data as: ‘synthetic data’.

Thinking strategically and acting creatively is the foundation of identifying, building and leveraging distinctive brand assets. You should try it!

My thanks for the catalyst of this post, and the outline for the header graphic goes to the Ehrenberg-Bass Institute for marketing science.

 

The six essential copywriting tips.

The six essential copywriting tips.

 

Over the course of writing 2,500 plus blog posts and many articles and presentations while reading widely on the advice to copywriters, usually published by those desperately seeking to sell some sort of course, the commonality of advice is clear.

  • Without an attention grabbing headline you are toast. David Ogilvy noted: ‘On average five times as many people read the headline as read the body copy. When you’ve written your headline you have spent $0.80 out of your dollar”. Find a way to insert your key benefit into the headline
  • Have an early hook in the copy. This could be a question, surprising fact, contentious observation, a statement of the bleeding obvious, or even a one line joke. All of these will encourage the reader to get further into the copy.
  • Employ the bouncing magnet. Everywhere use the device of bouncing from positive to negative, to positive, back to negative, back to positive. For example, copy selling a cash flow service might read as follows:

Imagine a future where your business is thriving, cash flow is strong, and financial freedom is beckoning.

Sadly, the reality for many business owners is quite different.

Cash flow problems seem endemic.

Payment of unexpected expenses, slow debtor payments, losing a significant order, can make life a nightmare.

Don’t despair, we’re here to help you regain control.

Our proven financial management solutions have empowered many businesses to turn the cash flow challenges into opportunities for growth.

It is a fact that many financial advisors and software tools promise the world and deliver little. You’ve been burnt by these claims in the past.

Our approach is different.

We do not offer quick fixes or empty promises, we provide a tailored, data driven plan that aligns with your unique business goals and challenges.

You have a right to be hesitant given the previous promises made and broken.

That is why we offer a satisfaction guarantee: if within 60 days you are not experiencing a noticeable improvement in your cash flow, we will refund your investment in full.

Take control of your financial future today, join our satisfied clients who have seen their cash flow transformed, and dreams become a reality.

  • Consider the ratio of copy to surrounding whitespace. Blocks of dense small font copy tends to be intimidating and uninviting to the casual visitor. It is much better to have lots of white space surrounding the copy with numerous paragraph breaks to make the reading of it easy and inviting. If you need evidence of this, copy the above cash flow tool sales pitch, remove the paragraph breaks, and see how less readable it is then!
  • Say more with less. Enough said.
  • Recognise the first draught will be rubbish. First draft is what you’re setting out to say, the 3rd or 4th is how you really want to say it. There are editing tools in Word, and other commonly used writing software and AI is throwing up new editing and copy improvement tools like mushrooms after rain. Use them to assist the development of your copy. Good writing like anything that is good takes time and effort on top of some level of talent for the task.

I try and do all this in my writing, but generally I’m only able to reach a level I would consider OK. I’m a scribbler rather than a copywriter.  However as a means of organising and extracting from between my ears all the stuff going on, it is an absolutely necessary exercise. The quality of the writing in technical terms is an entirely different matter, and ultimately up to the reader

PS. Where do I buy that cash flow tool?