6 components of successful gambling (otherwise known as marketing)

6 components of successful gambling (otherwise known as marketing)

Mar 25, 2019 | Marketing

Successful Marketing is like having a great hand of cards.

Each card has a value by itself, but in isolation, that is very limited. The value of a hand is in the combination of cards you have, particularly the combination you have compared to the combination of your opponent, and how you leverage that combination. Sometimes as in Bridge, the combination of your hand with that of your partner is crucial.

Marketing is gambling, you are betting on the shape of the future, and your place in that future.

Just like gambling, professionals are better able to manage and manipulate the factors ‘at the edge,’ that compounded mean the amateur will never beat the professional.

Following are 6 factors professionals use to beat the amateurs. The analogy to marketing may be a bit ‘hairy’, but for me it works!

Incumbency.

A casino, the church of gambling, has an institutional advantage over the gambler. They only have to equal the gambler to win, the gambler has to beat the house, and do it on a consistent basis to win. ‘One-off’ wins happen all the time, but over time, the institutional advantage unless mitigated in some way, will always win out. 

Know the numbers, understand the odds.

‘Counting cards’ in a game of 21 for those few who can do it, will get you thrown out of a casino, as it is one of the means by which the odds can be altered against the house. When you can remember the cards that have been discarded, you are theoretically able to calculate the odds of a given card coming up next, and alter your bets accordingly.

Poker is a game of odds. The odds are dictated by the chance of a specific combination of cards being held, and when being dealt, of a specific card arriving. Playing ‘show poker’ assists those who can count, as they are better able to calculate and recalculate the odds based on the cards shown than the amateur.

As it is with marketing, the more you know that may have an influence on the outcome, the better able you are to calculate the odds.

Know the opposition.

Serious card players are very sensitive to unconscious signals from their opposition, the presence of a ‘tell’. In the movies, the protagonist scratches his forehead when an Ace arrives in his hand, a giveaway to  the professional.

‘Body language’ is a huge component of face to face communication, a professional sees and understands the meaning of all sorts of subtle, unconscious signals coming from their opposition, and is able to use them to their advantage.

Know the rules.

Every game has rules, knowing them is a foundation skill necessary to play. Understanding how the rules can be ‘managed,’  how the usual responses can be massaged to deliver a changed outcome is the sign of a professional.

Remember the stakes, and the balance of odds.

Playing the game, any game, requires investment, and for someone to win, it requires that someone loses. Very few amateurs accurately calculate the costs of losing, in the emotion of a potential win, something the professionals rely on. They win when amateurs lose, which is most of the time!

Opportunism pays.

Sometimes, even when the odds are stacked against you, luck plays a role. When the lady does show up, you have to be able to recognise her in order to take the advantage on offer. Always remember the old dictum of Louis Pasteur: “Fortune favours the prepared mind’ and as the scouts say, Be prepared!

When you need the experience and advice of a professional on your side, give  me a call.

 

Where is the similarity between strategy development  and ‘Two-Up’

Where is the similarity between strategy development  and ‘Two-Up’

Mar 21, 2019 | Strategy

Strategy is all about making choices, which market, which customer type, which channel, and so on. Many marketers do this sort of analysis almost on autopilot, when it is in fact the core of a robust strategy, and should be the subject of rigorous consideration.

Sitting behind the choices made, mostly without much fanfare, is the basis on which the choices have been made:

Expected value!.

What is the expected value of choice A

What is the expected value of choice B.

Expected value = Anticipated outcome – Risk

Once you have articulated the value, the choice becomes clearer.

It just gets complicated when you also need to consider the expected value of the following choices that need to be made. A strategy is a series of choices, all separate, but the final outcome is a result of the interdependencies of the choices made.

A part of the process of putting a number on the expected value is the expected risk. Again, this is a cumulative process.

Think about the essential Australian game of two-up. You are betting on the outcome of the flip of two coins, there is only three potential outcomes, a pair of heads, a pair of tails, or a head and tail, which is a foul throw, and is repeated.  It is possible to get a run of heads or tails, and in a modest number of throws, a marked bias towards one or the other. However, over a larger number of throws, the maths takes over and it ends up 50:50.  In this case, the range of outcomes is known, the probability of one or the other after the re-throw of ‘odds’  is exactly 50%.

I watched a mate at University (scary, 45 years ago) win next semesters fees in a run of ‘heads;’ in a two up game in Dubbo. 9 in a row, the odds are .5 X.5 X .5 X and so on, 1 in approx 19,500. Every time he spun the coins everyone was betting that the next fair throw would be tails, but the odds of each throw are exactly the same, 50:50, it is the probability of there being 9 heads throws in a row that is the really long odds, as you would need to make the bet on 9 consecutive heads before the first throw, to get the return from that outcome. In my mates case, he just kept on betting the ring each time that there would be another heads, 50:50 each time, until he had enough.

Building a strategy is similar, there are some knowns that can be calculated, there are some things that can be added in with some level of probability, and there are the random, incalculable events that can throw an unexpected result.

Trick is to know which is which, and calculate the expected value of any set of circumstances as best you can, always being prepared to accommodate the unexpected, that seems to always happen at the worst possible time.

I am tempted to also make the comparison to the state election to be held on Saturday. A choice of two, with the real possibility of a dud throw, which unfortunately cannot be re-thrown for another 4 years, but that may be inappropriate.

Photo credit: Two up at the Ypres front, 23 December 1917, Australian  war memorial.

 

 

Can ‘Platforms’ replace assets?

Can ‘Platforms’ replace assets?

Mar 18, 2019 | Innovation, Strategy

The new commercial behemoths of the 21st century, Google, Facebook, Amazon, et al, are all ‘Platform’ businesses. They leverage technology to create connections up and down value chains, replacing as they have businesses that have hard assets that make stuff.

They are facilitators, not producers.

When was the last time you ate a steak produced by a ‘facilitator’?

In order to produce the stuff we need to live and prosper, we need hard, productive, assets. Bits and algorithms help to leverage the hard assets, to build their productivity, but to believe they will replace them is to believe we can eat them and live.

Amazon may not produce the goods they sell, but somebody does, and it is these ‘somebodies’ Amazon relies on, as do the rest of us, to live. 

 

Why is deep domain experience so valuable?

Why is deep domain experience so valuable?

Mar 15, 2019 | Communication, Leadership

As an old(ish) former senior exec sort of bloke, watching this crop of younger managers come through, I find myself disturbed.

It often seems that while they know the facts, and at an intellectual level, recognise the impact, they do not seem to understand them in any instinctive sort of way.

It is disturbing, particularly as I look forward in this country and cannot help but be pessimistic, and wonder where the general equivalent of the ‘corporate memory’ of Australia is hiding.

I grew up in the late 60’s and early 70’s. The social fabric of  the world was changing at a rate that arguably has not been matched since, or will again. Not the tech world, the one we inhabit daily. The music, to that time unquestioned social behaviour, our trust in the institutions, and Vietnam: a war my now grown children know almost nothing about, that changed everything.

Trying to articulate the difference between just knowing this stuff, and really understanding it is really hard, but try this, if you are now well into your 60’s.

Let it be. The Beatles

‘Close to you’. The Carpenters.

‘In the Summertime’. The Mixtures

‘Bridge over troubled waters’. Simon & Garfunkel

‘Looking out my back door’. Credence Clearwater

‘El Condor Pasa’. Simon Garfunkel

‘Up around the bend’. Credence Clearwater

‘Knock knock who’s there? Liv Maessen

‘Whole Lotta Love’.  Led Zeppelin

That is the top 10 singles in Australia in 1970. Throw in a few of the tracks that have a place in your personal history, to make the list 15 or so. On my list would be Leonard Cohens ‘Suzanne’.

Now, ask a 35 year old about the list, they will know some of the tracks, perhaps many, but it will be a list of songs, words on paper, perhaps even a tune, but there will not be a visceral connection.

They did not live through it, their understanding is intellectual, there is no emotional connection to their soul.

Having deep domain experience is the same thing, intuitive, visceral, extremely hard to articulate, but of immense value when harnessed.

 

Picture credit: New Yorker Magazine. (The second time I have used it).

 

 

 

 

 

 

 

What does marketing to Supermarkets and Pharmaceutical research have in common?

What does marketing to Supermarkets and Pharmaceutical research have in common?

Mar 13, 2019 | Branding, Governance, Marketing, retail

Quantifying the ROI of marketing investments remains the single most challenging task of marketers. While marketing costs  remain being seen as a variable expense, stuck in the monthly P&L , it will remain hostage to the whims of expediency, corporate politics, and short term thinking. The real KPI of marketing investment should be the sustainable margin delivered over a considerable time, as you would with an investment in machinery.

The obvious problem is that you can measure the output and productivity improvements associated with a piece of machinery, the numbers become available with use, although, they are all in the past. Marketing investment is all about influencing the future, and measurement, even with the benefit of hindsight is very hard, and useful only as a learning tool.

Is there something we marketers can learn from elsewhere?

The  Kaplan Meier curve is a basic concept used all the time by medical and pharmaceutical researchers. For example, if they are testing a new drug for say, patients with diagnosed terminal prostate cancer, you plot on a daily curve the lifespan of those on the test drug, and those on the placebo.

Assuming there are 100 patients in the trial, at day 1, all 100 are alive, then  you plot the numbers who remain alive daily with, and without the drug. If the plot line of those with the drug goes above the line of those without, you can imply the outcome of longer life, and you have some numbers to support the conclusion. If the line of those on the drug dips below the placebo line, you are killing patients. Lines that stay together indicate the drug has no impact.

Simple idea, widely used in medical research.

For years I have watched suppliers to supermarkets being screwed by those supermarkets, and increasingly allocating advertising funds aimed at brand building , which delivers margins over time to the brand owners, and indirectly despite the protestations to the contrary, to the retailers. This reallocation of advertising to working capital and margin via in store promotional activities, and supermarket profitability, at the expense of advertising, has been a huge mistake.

It has seen the demise of some great brands. To be fair however, consumers have benefitted by cheaper prices, at the expense of choice.

A few weeks ago,  the recently merged businesses of Kraft and Heinz, announced a disastrous profit result. This came about as progressively brand advertising that gave consumers confidence in the  brands has been redirected to price promotion that is the primary competitive tool of supermarkets. Meanwhile, those  same retailers have introduced house brands that look very similar, and that trade off the value proposition developed by Heinz and Kraft over many years.

The same thing has happened in Australia, perhaps more so given the concentration of supermarket retailing.

I was around as a junior product manager in the early  days of Meadow Lea brand building, at what was then Vegetable Oils Pty Ltd, a long gone business, swallowed up by corporate stupidity.

 ‘You ought to be congratulated’ is one of the great propositions of Australian brand building. In a hugely crowded margarine market, Meadow Lea held at its height, a 23% percent market share at premium prices, four times that of its closest rival. This was a direct outcome of a good product, great advertising, and a brand that delivered.

I had a look in a supermarket yesterday, and had trouble finding anything labelled Meadow Lea.

What happened?

Retailer power happened, combined with the lack of  understanding of the power of great brand building consumer propositions by retailers. Meadow Lea was squeezed by retailers for more and more promotional dollars that ended up  being funded by reductions in the brand advertising and building activity, with the end result that the brand in effect no longer exists.

It has become nothing more than a label!

I wonder where the  next market building initiative will come from?

Certainly not from the manufacturers, as they know that immediately they create a market the retailers will undermine it with cheap versions, so there is no value in the risks involved in the innovation necessary, and no reward.

Back to where I started, and I do not have the data for this, but I bet that applying a Kaplan Meier analysis to  the delivered margin from Meadow Lea over time, both to the now owners of the brand, and the retailers, would show that the allocation of brand activity to the low prices demanded by retailers had hurt everybody concerned, including consumers.

Image credit: Wikipedia