Jul 7, 2023 | Branding, Marketing, Sales
A hundred years of practical experience and academic research proves that cutting marketing budgets during tough times is the worst thing you can do. Most do it, simply because it is easy, seems sensible to the uninitiated, and often prevents yelling from the corner office.
This provides great opportunity for those who hold their nerve.
Brands are built by having a ‘share of voice‘ greater than their market share over time. Brand building is a long-term exercise, which becomes cheaper in a recession, as others cut their expenditure, demand for advertising space drops, so does the price as a result, and your customer is more likely to see your ads in a less cluttered environment.
This is a strategic investment.
You should reduce the existing tactical, promotional deals if you can, as they are costs to the bottom line, not investments in your brand. You might get a short-term volume bump, but the added volume rarely replaces the margin lost from the discount.
Do the maths before you agree to the discount.
How much extra volume do you need from the promotion to recover the margin surrendered? Consider also the customers perception of the ‘right price’ for your product. Have you just lowered it?
You can cut yourself to oblivion, easily, while being clapped from the sidelines. Usually those clapping control access to consumers, as do supermarkets, or are those customers who would have been happy to pay more.
Do not miss the opportunity to build your brand while your competitors are hunkered down giving discounts in an effort to maintain volume, while destroying long term commercial sustainability.
Header credit Tom Fishburne at marketoonist, who very effectively pokes fun at marketing hubris.
Jul 5, 2023 | Change, Demand chains, Innovation, Strategy
All the recent focus of industry development, Control of IP, and sovereign manufacturing, has been on High tech.
Should we, or perhaps why don’t we, look to areas where we have dropped the ball in the past, but still have the opportunity to shape world markets, built capability, and diversify our economy.
Should we be looking at some of the obvious, but perhaps boring stuff that can make a significant difference, and where we already have a huge head start.
This race towards the newest shiny thing is fun, generates a lot of press releases, is exciting, attracts attention, as well as capital and competition, but is it the whole game?
In years gone past, Australia supplied a huge percentage of the world’s wool.
We grew it, and processed it through the many stages to the production of yarn, and exported the highly value added product to the world.
No more.
We have been supplanted as the number 1 producer by, you guessed it, China. We proudly, for now, occupy second place in the production stakes. China also is the biggest importer of Australian greasy wool, which they then process and gain the huge value add that the processing stages contribute.
I do not have all the numbers, but the current mean fibre diameter of the Australian clip is 20.8 microns, (AWPFC numbers) which is significantly less that the average of other major producers. At the extreme, production of wool at 13-15 microns is very small, requiring very considerable skill, animal husbandry, and investment in genetics. However, that investment is returned with huge price premiums paid by high end fashion manufacturers. That fine wool sells at auction for up to and sometimes more than $150/kilo, 15 times the average.
Australia’s share of world fine wool production is upward of 80%.
Why is it beyond our capability to capitalise on such a premium position, based as it is on 150 years of experience, a continuing production advantage in the preferred raw product, and many millions of dollars on R&D?
Australian Wool Innovation has been pissing around for the 30 years I have been watching, and from time to time dipping a toe into the water. They have wasted growers money and matched funding from the public purse, while failing to build a sustainable industry value chain that builds Australia’s competitive position. Making excuses, and generally having a fine old time has been the outcome of their efforts.
Having just read the latest strategic plan I can find, that sorry situation is not going to change.
As part of the National Reconstruction Fund, should we revisit old friends like wool that despite the best efforts of the last 40 years, we have failed to kill off? Surely that level of resilience requires some examination and consideration for rebuilding the supply chains that delivered many of the foundations of the prosperity we still enjoy. Such an effort would tick 5 of the 8 priority areas nominated in the reconstruction fund legislation.
13 years ago in a post I asked ‘Where next for wool‘. The question needs to be asked again, and this time we should be expecting some sensible answers.
The header graph is the average price of greasy wool over time. You can see the impact of the wool industry pricing model that ended in tears in July 1995, leaving a huge inventory of unsold wool that screwed the market for a decade. As with all averages, the graph hides the huge opportunity that has been facing us for years, which we continue to ignore.
Jul 3, 2023 | Marketing, Strategy
When building a marketing plan, one of the key choices that must be made early is a deceptively simple one that most fail to recognise.
- Are you setting out to serve existing demand?
- Are you setting out to generate new demand?
Ninety-nine times out of a hundred, when I look at a marketing program, I have no idea which the marketer has chosen. Usually this is because they have jumped the early and challenging question of translating the strategic objectives back into the planning of marketing activities. Marketing is simply the means by which the strategic objective is translated into a series of actions which are communicated to those who might be interested in paying you to consume your product.
There is of course a third option: attempt to do both. However, to do both effectively requires a specific strategic choice. Allowing the ‘do both’ option to become the default of not deciding where the priority lies is commercial cowardice. It leads in most cases to sub-optimal allocation of the limited available resources.
Header cartoon credit: Dilbert demonstrates that choices must be made for clarity.
Jun 30, 2023 | Change, Lean, Operations
Several years ago I became aware of ‘Wrights law‘. In the 1930’s, Theordore Wright an aero engineer proposed that: ‘For every cumulative doubling of units produced, costs will fall by a constant percentage’. This insight came from observing the performance of his own factories building aircraft during the thirties and over the course of the war.
While I do not have the numbers, intuitively after 50 years of observation, it holds very true.
That truth seems to hold over any manufacturing I have seen and read about, unlike its much better known sibling Moore’s Law. Gordon Moore observed the increase in the number of transistors that can be stuffed onto a silicon chip in a given period of time, and predicted that a doubling of numbers would hold consistently over the long term.
Therein lies the significant difference that manufacturers have come to rely on.
Moore’s law refers to technology improvements over time.
Wright’s law refers to the manufacturing cost reductions that come with scale.
I would suggest that the cumulative impact of the combination has had a potent effect on manufacturing costs of everything from the manufacture of simple widgets to solar panels, to the cost of human genome mapping. Wrights Law applies as scale builds, and technology provides a catalyst to a tipping point that radically alters the growth curve, after which the graph finds a new normal in the relationship between volume and cost.
Australia for lack of leadership, foresight and capital has shied away from the investment required to light that catalytic fire many times in the past.
A primary example is solar panels. We have known for a hundred years that solar energy could be harnessed. As a kid I used to burn leaves, paper, ants, and occasionally myself, with a magnifying glass. However, it took researchers at the UNSW to invent PERC (Passivated Emitter and Real Cell) technology in 1983 to kick off Australia being the international leader in Solar cell technology. Funding and the foresight to commercialise could not be assembled here, so the technology was used to develop the manufacturing industry in China, where Wright’s law has facilitated the growth of a dominating share of the world market for wafers, cells, and completed solar modules.
Forecasting manufacturing costs is at the core of every successful manufacturer. While in the early stages of commercialisation there will be a host of variables you need to be able to model, understanding the relationship between your cost base and scale will remove a significant weight from your shoulders when planning capital requirements.
Australia again finds itself on the cusp of being an international leader in Quantum computing, biotechnology, Hydrogen sourced energy, and rare earth extraction and value addition. Let’s not allow ourselves to be distracted this time, we may not get another chance.
Successful economies all have one thing in common: they manufacture stuff others want to buy. Australia’s history is littered with great ideas, and technical innovations that are commercialised elsewhere for lack of foresight, leadership and capital. We would be desperately stupid to let it happen again!
Jun 28, 2023 | Branding, Communication, Marketing
No business I have ever seen has enough in their marketing budgets to do all they would like to do. Therefore, they often start cutting bits off ‘willy nilly’ to reach a budget that can be managed.
There is a better way: Basic marketing 101, which most SME’s ignore to their detriment.
What problem do you solve.
The more specific the problem you solve better than anyone else, and the more specific you can be about those who are likely to have that problem, the more able you will be to focus your limited resources productively.
It appears easy at first glance to articulate the problem, often it is way harder than it seems. The key is to articulate it the way a customer would, rather than the way you speak about it internally. That way you have a chance to avoid the drill or the hole confusion.
Your brand.
Those who have the problem and may be inclined to pay someone to solve it for them, need to be aware of your brand, and the offer you make that will solve the problem for them. You must figure out the best way to reach these people in such a way that you may be able to at least add your brand to the list of options they have for consideration. Preferably of course, your brand is the only one they consider.
Trust.
There must be a reason for someone to pick your solution in preference to others that may be available. If that reason is price, then in most cases you have already lost by winning that race to the bottom.
Trust is hard won, and easily lost, but plays a crucial role in any sales process.
For most SME’s doing more than one thing at a time is challenging, so they tend to throw money at all three without adequate consideration of the best options they have to leverage their small budgets. There are many service providers out there who have all sorts of creative and verbally attractive ways to spend your money, but very few will go to the trouble of walking through this minefield with you.
It is easy to be overwhelmed, most are.
However, thinking about the process in these three buckets offers the opportunity to weed out a lot of the ‘noise’, although it is not easy.
The line that trips many up, even those who spend the time to deeply consider these three buckets, is the breakup of the budget between the two very different types of expenditure inherent in the whole process.
First. The resources you spend to build the brand, such that when someone is aware of the problem and is in a mind to consider solving it, your name comes to mind.
Second. ‘Activation’. The tactical means you use to swing the choice your way at the point of the transaction.
The first is long term, and very hard to measure except with hindsight, by which time the horse has bolted. The second is more immediate and subject to at least a modicum of quantitative measures.
The starting point should always be your objective.
Is it to generate leads, is it to build brand awareness, is it to build trust, and where do all these, and other points in the customers decision processes overlap?
Playing cards by yourself is usually a way to win, but it does not translate into a real game. For that you need a real appreciation of the barriers to winning, and often partners.
Call me when you need a partner who inderstands the game.
