How will grocery retailers leverage algorithmic pricing? 

How will grocery retailers leverage algorithmic pricing? 

May 8, 2017 | Marketing, retail

Economics 101 tells us that price is the point at which supply matches demand, a simple but infinitely variable graph. Throughout history, that equation has reflected the reality of a face to face negotiation, apart from the recent glitch created in the name of efficiency by mass retailing which fixes prices. We all know somewhere in our psyche that price is what someone is prepared to pay at a given point in time for an item.

Look at any housing auction in Sydney at the moment, all sorts of factors are at play that make an auction the best way to determine the ‘right price’ at which to strike a deal. The notion of a fixed price is almost dead in the face of this level of uncertainty about what people are prepared to pay. Uber has disrupted the taxi industry with the same idea. Couple of weeks ago, caught in the rain in mid-afternoon, Taxi’s were an extinct species, so I called up Uber, and needed a second mortgage to pay the Uber-Price, driven up by the time of day, and immediate demand generated by the fact that it was raining cats and dogs.

Price is far more than just  simple intersection on an economists graph.

Chain retailers have semi fixed prices. They have a shelf price, and a set of promotional and deal prices as wide as the imagination and pocket depth of their suppliers who fund the discounts. However, while they are variable, over the shorter time frames they are fixed at some level. This process of centralised control and a physical selling face enables the efficiency of mass merchandising to be leveraged, but loses the flexibility of being able to respond to individual demand at a particular moment in time. .

Imagine the chaos if each store manager could set his/her own prices, then negotiate at the checkout!

Category management evolved as a means to maximise the revenues and margins from a fixed retail space. It is a numbers driven game of great sophistication requiring deep pockets, analytical resources and scale to play effectively. It nevertheless relies on fixed prices, varied over a week or so, and across varieties, brands and shelf placement, but nevertheless, fixed.

On line retailers by contrast are able to vary prices not just day to day, but minute to minute, and increasingly person to person.  It is the digital equivalent to haggling, each party setting out to maximise the return they get from the transaction, by using the whole gamut of trading and negotiation tools.

Amazon is the master, their algorithmically driven pricing is hugely sensitive to hundreds, probably thousands of factors from the weather to your browsing and purchase history, and the time of day.

How would a bricks and mortar retailer combine the margin maximisation flexibility of algorithm driven pricing with the physical constraints of a retail space?

It is a logical question, one that has prompted a lot of thought by a lot of smart people, and mostly the answer is that you can’t.

However, do not tell Amazon who are always prepared, indeed, live by disruption. Their experiment in Seattle with Amazon Go may not succeed in the short term, but the logic of managing price by algorithm to maximise returns will not go away, and Amazon is a long view retailer, unencumbered by demanding quarterly driven stock markets. I do not think  this will be the end of the Australian retail duopoly any time soon, there is still plenty of areas for  them to continue to squeeze the lemon to make profits, but it is certainly a portent of things to come.

 

 

 

 

Will great marketing always powered by humans?

Will great marketing always powered by humans?

May 5, 2017 | Branding, Marketing

Great marketing has a strong visual component, even the great long form ads from the days before TV. Always has been, always will be.

Sometimes that ‘visual’ are the pictures that you form in your mind as a result of hearing something, which is why radio was, and still should be, a great communication medium, sometimes it is a great photo, video, or piece of printed material that speaks to just you.

Creativity and design are a huge part of this mix.

 

All  the tools around are convincing us that we can design stuff ourselves, just as we all seem to believe that we are photographers, just because we have a great little camera in our pockets all the time, or writers, because we can easily publish our scribblings on a multitude of channels.

Owning a saw does not make you a carpenter.

Part of the problem is that most so-called marketers know so very little about marketing any more. They do know about the tools, the algorithms, and sometimes bits of the martech stack, but little about the human reactions, relationships and intimacies that make for effective communication, the sort that does not bludgeon you into doing something, but those that deliver a message that resonates as if it was a personally addressed letter.

Remember those?

As an aside, I bought a book of stamps for  the first time in a long while last week.. a buck a stamp. I was shocked, and my first reaction was  ‘no wonder we are all going digital’  but my second was, ‘what an opportunity to be different, and get an almost 100% open rate, for just a dollar!’

The tech bunnies, headed by top bunny Facebook are doubling down on video, recognising the power. They are right to be doing this for commercial reasons, they are the advertising platforms of the 21st century, although the demise of TV particularly is grossly overstated, as old mate Bob Hoffman loves to point out. However, the users of the platform are being grossly manipulated in order to be a more marketable commodity that the platforms can sell to advertisers. Most of the users are largely blissfully unaware of their algorithmically manipulated experience, and I am increasingly uncomfortable about the ‘brand morality’ of this sad fact.

They are just eyeballs being wholesaled by the platforms for profit. At least with a TV you can grab the remote and change the channel, or go make a cup of tea.

I wonder if in the long term they will not look back as see that  they have broken the moral component of the foundations of a brand.

Facebook particularly is aggressively using their huge base to be continually testing, adding features, and renovating older ones in order to maximise ad revenue. It is pretty easy to be taken in by the often published numbers,  but sometimes a dose of reality would be useful, as highlighted in February’s MUmBRELLA article.

Bob Hoffman was right again.

 

This Social Media Examiner podcast has Mari Smith outlining what Facebook is doing,  and is worth the 40 minutes, and a scan of the show notes and links .

Back to where I started.

As marketers, we have a responsibility to both those who pay us, and those who listen to and act on what we suggest to them. We need to consider the foundation skills of our craft,  to react in a human way, to reflect the wisdom and experience coming from the humanity around us, rather than taking that feedback and running it through a bunch of algorithms to get the most clinical outcome.

As AI augmented AI, and machine learning continue to make inroads, they will consume the repetitive tasks in every job, but are a very long way from replacing the emotion and humanity that turns a slab of copy into a compelling call to action.

In answer to the question posed in the headline, Yes!

In time, mediocre, mass marketing may be executed by algorithms, but in a highly personalised world, that will not be good enough.

Image credit: Once again, Hugh McLeod at the Gaping void.

 

7 ways to avoid a hiring failure.

7 ways to avoid a hiring failure.

May 3, 2017 | Governance, Small business

The small and medium businesses I work with are usually pretty wary of the recruitment consultants that chase them, promising to deliver the ‘Perfect ‘ hire for just 20% of their annual salary. They are usually seen, usually rightly, as just short term  ‘body shops’ that add little lasting value.

As a result I often get to have some input into the hiring decisions they make, as the ‘go-it-alone’ strategy using one or more of the on line job boards is becoming more common.

Taking on a new employee is a significant decision for a modest business. When it is a senior management decision it can be a make or break choice, and more often than not, once the gloss of the interview and enthusiastic references from the candidates friends masquerading as referees wears off, there are holes.

Making that right choice has two parts:

  • You need a realistic and detailed understanding of the job you are filling, its frustrations and challenges, along with the technical skills necessary to get the job done.
  • You need a good understanding of the underlying emotions, attitudes, and perspectives of the person you are considering.

Sounds simple, but we all know it is  not.

Over the years I have developed through experience and observation a set of personal criteria I look for when involved in this exercise. It is important for me to help get it right, as my clients rely on me for  the advice that is improving their businesses, so making a mistake can badly damage my position with them, and more importantly, compromises their efforts to change, and evolve the business.

The list has 7 elements, after the technical parameters of the job have been adequately addressed. All are hard to assess in an interview type Q&A, but can emerge in a more casual conversation, that is less about the role, more about the person.

  • Curiosity. In a world changing as rapidly as ours, domain knowledge cannot be static, so being curious about what is going on around them, about other people, technologies, environments, is a core part of a person who will continue to learn by absorbing new information, and keep being able to contribute.
  • Absorb blame while passing on praise. We have all seen the destructiveness of someone who does the opposite.  The ability to give credit for success, while making others feel ‘safe’ to experiment, think laterally, and risk failing is a powerful leadership quality.
  • Action oriented. There are those that talk, and those that do, and we all know which is the better. Being prepared to take decisions, often without perfect information, recognising not all decisions will be right, but doing something, learning as a result, and adjusting as necessary is way better than waiting for perfect information. Mixed in is a recognition that due diligence in risk assessment is crucial, the widely accepted ‘failure porn’ is to my mind destructive.
  • We all want leaders, but we usually hire managers, to get stuff done, to exercise organisational power. Far better to have a group who are able to lead without the authority, who inspire performance, and create an emotional commitment.
  • Prepared to prepare. Generally, the more preparation that is done, the easier things look. Playing football (Rugby, the heavenly game) in my youth at University, we had a coach who used to drive us into the ground at training. He used to say at least 10 times a session, ‘train hard, play easy’, a lesson that has served me well.
  • ‘CUR’. My personal acronym for ‘Cock-Up Recovery’. Everyone makes mistakes, except perhaps those who do nothing, so the measure of the person is the manner in which they recover, address the situation, and as the saying goes, ‘get back on the horse’.
  • Operate well under pressure. Let’s face it, life is a roller coaster of deadlines, demands, and crises, so being able to operate optimally under pressure is critical to good and consistent performance.

Keeping the conversation casual is important, and I usually end by asking something like, ‘what have you accomplished that makes you proud?’ In most interviews, no matter how casual, people default to what they do, or have done.  ‘Accomplished’ is a bit different, the word elicits a more personal response, something that may offer an insight into the person, and what is important to them.

 

 

 

In defence of United Airlines employees

In defence of United Airlines employees

May 1, 2017 | Branding, Marketing

United is the butt of everyone’s jokes and derision, including mine, but it maybe useful to consider how  they got there.

Carlos Munoz was awarded the communicator of the year  in March, a few weeks before the unfortunate Dr Dao booked a seat to go and see a patient in Louisville. This now seems to be the ultimate irony, and I suspect the communicator of the year award now has its own PR problem.

However, in hindsight, a real brain-fart seems almost inevitable , with several recent similar events, and even further back, Dave Carroll‘s guitar signalling a truly broken culture.

When you think about it, the actions on flight 3411 were driven by the rigid, unthinking application of a set of rules.  The culture of an airline is one based on checklists, inviolable rules, and strict adherence to those rules. When you are flying, and want the plane to stay up, it seems that it may be a good idea to have whole sets of rules that ensure that it does so.

Perhaps the challenge at United may not have been about the stupidity and arrogance of staff, after all they are people, who have the same concerns and pressures, loves and joys that the rest of us have, but about the culture of rules that drive behaviour, and do not allow any room for doubt. Mix that with a few insensitive individuals and you have the toxic mix demonstrated so visibly on flight 3411

When there is a rule, follow it, without question, creativity or deviation.

That explains away the actions, sort of.

So the challenge is how to have a rule based culture that ensures that the job gets done the right way, every time, co-existing with one that  enables individual initiative and sensitivity to the situation.

This is not a unique challenge.

Almost every business  I work with is a medium sized manufacturer, they require rules to operate safely and efficiently, and the less explicit, transparent and flexible the rules are, the greater the CUS (cock up score) that exists.

One of the tenets of the TPS is ‘respect for people’ and never has the value of this as a foundation of culture been more on display that at United, over a long period.

Respect for People is a double sided coin. On one side there is the necessity for stable, repeatable and optimised processes, and the other on personal initiative and situational sensitivity, challenging to reflect in a set of detailed rules.  At the intersection is respect for people, their intelligence, initiative, desire to do the job as best they can, and go home safely.

At the time of posting, United CEO and chief PR guru Munoz has come out with a couple of further statements. The first outlines changes to improve customer experience as a result of the ‘incident’. This,  in contrast to the blame shifting and destructive crap put out after the incident is not a bad effort, but it reflects no more than a reasonable expectation of someone paying for a seat on a plane. At least it is clear, and Munoz at last took responsibility for the treatment of Dr Dao. The second simply announces that Dr Dao and United have reached an ‘amicable resolution’ of the incident, without any details. My guess is that the next time Dr Dao needs to fly anywhere, he can just call up his private plane, no need to  bother with those uncomfortable commercial flights any more.

As a final thought, the only one in an organisation who can really change a prevailing culture is the person at the top. I guess United needs a new one, as both a symbol that they are committed to change, and to get the process going in deeds rather than just a bunch of belated words following the crappola sandwich first served up.

 

 

 

The two faces of a successful brand

The two faces of a successful brand

Apr 28, 2017 | Branding, Marketing

People relate to brands, see them as having characteristics best described in human terms

Whenever I have done research over 40 years in this game and sought to identify the elements of a brand, the one constant has been that human terms have been used to describe them, both good and bad.

I wonder what words would be used to describe United airlines at the moment?

Who would want to be in the airline business anyway? It is a capital intensive, highly regulated business, competing on price with a number of significant airlines being subsidised as the national flag carrier, with a major consumable cost, fuel, subject to wild and largely unpredictable fluctuations.

The branded competitive framework we all work in is a double sided coin.

On one side is the regulatory requirements, which must be followed, the other is the moral responsibility that all businesses have  to their customers, the promise made by the brand. You take their money in the promise of delivery, just how you go about that delivery can vary, that is the moral dimension.

United airlines failed miserably.

As far as I am aware, the United flight 3411 arrived in Louisville safely, and roughly on time. But they failed the moral responsibility badly.

An airline is legally entitled to overbook, they are legally entitled to remove passengers for a number of reasons, and they are legally entitled to fly their staff to a destination where they are required. Question is, do they have a moral right to pull a passenger off the plane to and substitute their own staff for operational reasons.

They made a promise to their customers, that they would take their money to get them to a destination safely, and in some comfort.

Coming in the same week as the United fiasco, this story of Alaska Airlines managing a problem represents the difference in the moral decisions that are taken and they have a profound impact on the brand.

Those who own brands make choices about a range of things, how they want to be seen, usually represented by the statements of missions and values they stick in their lobbies, however, what really matters is how they behave, particularly when there are choices involved, and the harder the better, as it is the hard ones that demonstrate the real value of the brand.

Customers do not read and remember the crap in your lobby, but they watch what you do, and remember.

So, what sort of brand to you aspire too be?

 

Image credit: By Unknown or not provided – U.S. National Archives and Records Administration, Public Domain, https://commons.wikimedia.org/w/index.php?curid=17413025