The new Revenue Generation paradigm

Nov 25, 2019 | Customers, Marketing

When was the last time you made a sale without the customer first doing a google search on their problem, and alternative solutions, before you knew they existed?

A while ago I bet!

Customers no longer need you, the information you have, and  the products you sell, simply because they can easily find many alternatives.

The traditional sales funnel, starting with awareness, moving through familiarity, to intent and action, is dead. The model of a marketing function producing ideas and collateral, which is thrown over the organisational silo wall to sales to use for everything from the cold call to take the order is also dead.

In its place is a flywheel with has customers at its centre.

This simply means you have to know your customers intimately, not just their demographics, their circumstances and behavioural patterns. This in turn implies a great deal of work has been done in defining who is your ideal customer, and being able to reach out to them at a time when they are in ‘buying mode’, with a solution to the problem they are facing, that you can solve better, in some way, than anyone else.

There are no magic bullets to any of this, it takes hard work, experimentation, and persistence, and most importantly, the assistance of those customers you do know well,  to tell you what you need to do to keep them. When you enhance your levels of service, then they will be your sales force, spreading the word, one by one.

The Buyers journey is also an old fashioned cliché, usually represented by a linear process. These days it is no such thing, it is more a series of many interdependent decision points, whose order is often  changed as your ideal customer drops in an out of a decision cycle that is independent of you, the seller.  

No longer should you see Sales and Marketing as separate functions, one feeding the other. Both are part of a highly variable non-linear Revenue Generation process over which you may have some influence, but no control.

The day of the functional silo being efficient is over, thrown out the window by the power of the buyer!

 

 

 

 

 

The curse of insider knowledge

Nov 22, 2019 | Communication, Leadership, Management

When we know something, the automatic expectation is that those with whom we are communicating understand it equally well.

This automatic, unrecognised assumption can be a barrier, and at its worst, a curse.

Participating in a conversation a while ago where I was the outsider amongst a group of Canberra bureaucrats, their verbal shorthand, particularly around the departmental names and programs was incomprehensible to me. The terminology  was perfectly well understood by all of them, and they were surprised at my ignorance, when I pulled them up and pointed it out.

Try a little experiment.

Tap out a song, like happy birthday, with a pencil on a desk, and have people tell you what it is. We expect most to be able to pick it, the tune is obvious to us, singing it in our minds as we do it, but only a few actually pick it.

Of course, this closed communication loop is used all the time as a badge of membership, and a means of exclusion.

It may be that the group I was talking to were expressing their status as insiders by excluding me, but assuming this is not the intent, it was nevertheless the effect.

Every group has its own set of verbal and behavioral tools. These can be used as an offensive weapon, a means of exclusion, or they can be a tool of inclusion, it just depends on how you use it.

 

Header cartoon credit: Scott Adams and his mate Dilbert.

Pray harder for leadership.

Nov 19, 2019 | Leadership

 

As I look out my window in suburban Sydney, there is a bluish tinge to the air.

The fires around Sydney, and along the Australian east coast have made us all aware that we do live in a very dry continent, and that we do not value the water resources we have, in fact, we literally piss them away.

It is enlightening to watch the and hear the differing conversations going on around us, not just in the pub, but in the media.

People, those who live ordinary lives, pay their taxes  raise their kids, seem to have a different set of perspectives to those who are supposed to be leading us. They seem unable to open their traps without making it a race for political points.

What better time for the pollies to do what the rest of us have done already, and come together, recognising that we are stronger together than we are divided.

News to politicians, who seem to think and act as if the opposite were true.

It is the time for leadership, and leadership is not about how much money has been spent, or how much might be spent at some time in the future, or whether there are more or less park rangers than there were a year ago, it is about the stories of bravery, sacrifice and just old fashioned humanity that will move us.

We humans evolved with stories, it is how we understand, remember and relate to others in our ‘tribe’. We do not remember facts and figures without the context of a story, when listening to a story that engages, our neural activity increases, allowing us to feel, hear and taste the essence of the story.

What an opportunity for politicians of all colours to show leadership, to restore at least a little of the lost trust and faith, that they are there not just for themselves, but for all of us. They wonder about the position of trust they occupy in public sentiment, below lawyers, and just above child molesters. It is a problem of their own making, one that can be reversed with time, honesty, transparency and humility, so I guess that is unlikely.    

The Husband of the mayor of Glen Innes Carol Sparks, Badja Sparks now virtually homeless after fire ripped through the township of Wytaliba, said it best when he said: ‘This climate has changed. Pray for rain: Pray harder for leadership’.

 

The 3 complications of calculating an accurate ROI on your digital marketing investment.

Nov 18, 2019 | Marketing, Social Media

Self styled ‘experts’, flog all sorts of metrics that are supposed to tell you how well your digital marketing efforts are doing.

Many of them do give useful information,  but it is only ever partial.

I am certainly one who loudly  advocates the extensive use of data to measure and improve the productivity of marketing investments.

Opt in rates

Sales Conversion rates

Earnings per click

Cost per click,

On, and on, and on.

Being an old fart means I like simple stuff, and the simple measure of the effectiveness of your marketing dollar is the return on investment. ROI. The actions taken as a result of the investment divided by the cost to inspire and  motivate that action.

Always has been the best measure, always will be!

Until the digital stuff took over, the best you could do was take an educated guess, informed by some research and experience.

Now you can usually get a pretty good read on ROI if  you think hard about it.

How much did we spend divided by how much we got back.

There are  really only three  complications, beyond the technical ones involving statistics, and the lies that they can tell. Also, unfortunately, many marketers are lousy at statistics and mathematics, which is often a challenge to credibility.

First. Over what time frame do you do the measurement?  For example, the lifetime value of a customer means you need a framework to make the calculation. This involves a lot of data as well as assumptions, and an intimate knowledge of customer behaviour over an extended period. This is very hard to get right, so most just use averages, which are almost always misleading. If my right foot is in a fire, and my left in a bucket of ice water, on average, my feet are at a comfortable temperature. Nonsense.

Second. Attribution. Which part of the investment led to the transaction? Was it the digital marketing activity, or the manner in which the receptionist took the phone call, or a thousand other sometimes tiny things that contribute to the transaction evolving. This challenge is not exclusive to digital marketing, it is to all marketing activity. However, the specific and very misleading claim made by most digital urgers, that you can measure the effectiveness of an investment in digital because you can measure movement through the ‘sales funnel’ is simply ignoring the reality of attribution. The claims made by the urgers of digital that they can reliably deliver attribution sufficient to make micro adjustments to the allocation of resources in an ever evolving competitive context is rubbish. You can get closer than a ‘best guess,’ but not with anything resembling statistical reliability.

Third. There are still things that we simply cannot measure. Most of us would agree that being a good parent is a great investment in the success of our kids, but how do you calculate an ROI on parenthood? Similarly, the impact of being part of an enterprise culture that encourages and values diversity of opinion,  enables all stakeholders to have a genuine voice, and creates alignment of objectives, is hard to measure.

None of the above should restrain you from making the effort, and continuously improving the methodology as you learn more about your customers, and their behaviour, but it is a warning to those who just believe the nonsense peddled by digital urgers with a dog in the fight for your money.

Header cartoon credit: Tom Fishburne at www.marketoonist.com

 

 

Where to now for the bashed-up dairy industry?

Nov 12, 2019 | Governance, Strategy

 

There is an awful lot of hand-wringing going on amongst politicians, bureaucrats of various types, and industry pontificators about the state of the dairy industry. Sadly, it has been going on for as long as I have been an observer, which is a long time!

The current drought has been a disaster for the industry, but is not the cause of the long term decline. For 30 years, smaller family farms all over the place have been going to the wall, and those left are mostly just surviving as a result of the margin squeeze, caused by concurrent cost increases and downward price pressure, as well as short term thinking and often mismanagement throughout the supply chain.

This is not a recipe for long term industry health.

25 years ago I was booted out of a senior role in one of the largest businesses in the industry. I had consistently voiced disapproval of industry policy (this was before the inevitable de-regulation in NSW) and of some aspects of the management of my employer. They were as sick of me, as I was of them, so there I was, after a decade of delivering growth and profit, on the footpath with a young family.

After a frustrating search for another job, I emerged as a strategy consultant, never again to be required to act against my best instincts and experience.

Very recently I was asked to prepare a proposal for a body in the industry, and while I had little belief it would proceed, did some on the ground research to uncover the changes that had occurred in the 25 years since I had left active participation, upon which too base my recommendations.

Sadly, I could have almost written the list below 25 years ago.

The drivers of the industry have not changed much, nor has the lack of strategic response. Each factor has impacts on others, and the compounding impact has been significant, and probably terminal for most small operations in the absence of substantive and therefore unlikely change.  The reduction in numbers of family dairy  farm operations over the last 25 years leads to the conclusion that there will be very few, if any, left in another decade.

The list following is not weighted, or in any particular order.

Scale.

The big are getting bigger, sometimes vertically integrating through the chain, and the small are being squeezed out. This applies to all steps in the supply chain, farmers, processors, and retailers. In this environment, scale becomes the primary driver, delivering financial returns at the expense of other considerations. Product quality becomes ‘averaged’. The smaller operations cannot compete on price/cost, and do not attract a commercial reward for the higher quality they are able to deliver. A few have been able to find a niche that does value a superior product, but most have had no option other than to accept the price on offer, irrespective of costs incurred or quality delivered.

Capability.

Over a very long period we have hollowed out our scientific, management, and innovation capability in dairy, as well as allowing it to be taken into overseas ownership. The management focus of larger players is on international prices and commodity trading, rather than domestic demand responsiveness, market development and innovation. As a result, the whole industry has been commoditised. You can buy milk, a natural, nutritious product at your local supermarket for $1.10 a litre, while in the isle next door, water, virtually free from the taps sells for multiples of $1.10 a litre. A gross failure of industry and enterprise marketing, and not one that can be fixed with nonsensical regulation.

Financial depth.

Small farming operations do not have the financial capacity to expand beyond their dairy boundaries, and usually do not have the depth to even utilise existing technology to optimise current operations. This precludes both investing in potential productivity improvements on farm, and moving further into the supply chain to capture some of the value added margins that are potentially available.

Education.

The emerging generation of potential dairy farmers has nowhere to go to learn.  There is no longer any dairy education in Australia, which means that there will not only be a degradation of the management capability of existing industry participants, there will be no new blood coming in, and there will be no process or product innovation. This factor applies throughout the supply chain, but is particularly evident in dairying operations. There are a number of ‘cottage industry’ training courses around, such as cheese making courses. These only teach the ‘how,’ without any reference to the ‘why’ things happen. To a significant degree they also substitute for real education in the public mind, which makes it easier to close down the real education that has the potential to add long term industry value. Most of us would agree to the notion that education is a core foundation of long term success, and yet we have stood aside while it has been raped and thrown out into the street.

Scientific foundation.

The scientific base upon which all else is built has been discarded, not just degraded, discarded. Werribee, formerly the centre of dairy science is an uninhabited ghost-town, and as noted tertiary education in all its forms in dairy technology has been discontinued.  If I wanted my kids to do a degree in dairy technology, they would have to commute to New Zealand.

Food security.

Along with other parts of the food supply chain, Dairy has been sold off to international entities. We no longer control our own food supplies, the manufacturing capability is largely overseas, and local production increasingly in the hands of Multinationals who make decisions on their commercial needs, which are not necessarily aligned with the best interest of Australians.

Water security.

The current drought is a disaster but is not more than a nasty reminder that, in the driest continent on earth, we have allowed water security to diminish, and sub-optimal use to be made of the resource available. This impacts all aspects of primary production and has had a profound impact on the ecological and environmental management of the land.

‘Metro’ farming.

Dairy farming (and intensive farming generally) evolved close to population centres, often on the best land. That land is now more valuable as a short-term development opportunity than it is as a long-term producer of food, and so is largely sold off as ‘bedrooms’ to the population centres, pushing farming to more marginal and logistically costly areas.

Power.

Australia is a substantial net exporter of power, yet we have very high power prices by comparison to other developed economies. This is a failure of public policy over a long period. For dairy farmers, it has proved to be a real problem as they need a lot of power to drive refrigeration and their operational plant. Power costs alone are driving small operators out of the industry.

Survival mode.

Small farmers are in ‘survival mode’ working long hours for little financial return. This leaves little in the ‘kitty’, financial, time, or energy, to undertake the challenges of change on their own. They desperately need an infrastructure that supports and rewards their efforts. Rebuilding this infrastructure is not a short term ‘fix-it now’ press release response, it needs bipartisan political support across a number of  portfolios and geographies.

Demographics.

The average age of dairy farmers is now approaching retirement age (25 years ago it was 56 and it does not seem to have reversed). These people are retiring, selling the farms, and their children and grandchildren are not going to follow on. This loss of farming wisdom may seem minor in the scheme of things, but in the long term will diminish us all, as we try and address the increasing environmental challenges facing us.

 

The egg that is the dairy industry cannot be unscrambled, but there is some hope that a reasonable omelette can still be made. However the chefs seem to be out to lunch, and the apprentices do not know what to do, or how to do it. Only going right back to the basics, removing the politics of power and influence, of all types,  and rebuilding from the foundations up, has any hope of there being much more than a few corporate farms and the odd family with a couple of cows left in a few years.