Sep 13, 2021 | Branding, Marketing, Strategy
One of the most quoted of quotes is attributed to Ralph Waldo Emerson: ‘Build a better mousetrap, and the world will beat a path to your door’
Unfortunately, Mr Emerson got it almost entirely wrong.
The better product, on its own, never wins. Just being ‘better’ is simply not enough to win that competitive battle with incumbent but technically inferior products. I am sure there are a few exceptions, I just cannot think of any.
Why is it so?
Several common reasons pop up as I survey the field of my experience.
Customers must care.
What is the value of being different, technically superior in some way if customers do not recognise the value of that differentiation to them? If customers do not care then you will fail, despite the supposed superiority of the alternate. Customer indifference is often the reality, uncoloured as they are by the marketers enthusiasm for the new, improved features.
Peer pressure
We are social animals, and while we do like being one up on the next person, being a long way up puts us outside the herd, and therefore vulnerable to all sorts of attack.
Risk aversion
Doing what you have always done is safe, you know it works, so there is no risk. A change of any type invites risk, which we are shaped by evolution to avoid. While risk aversion varies enormously between individuals, it takes a significant effort to change from the riskless to the riskier, even if the change is slight. In addition, often we simply do not see the alternatives. Consider your own behaviour in a supermarket in commonly purchased categories. There might be something new, perhaps better, but you simply do not see it in the process of pushing the trolley down the aisle trying to get out as quickly as possible.
Habit.
Doing simple things without thought frees up cognitive space to spend in more productive ways. We develop habits, repeated relatively mindless actions as the tool to enable this more productive use of our cognitive capacity. As with risk aversion, it is an outcome of evolutionary psychology that we leave as much capacity as possible free to react quickly and decisively in a tough situation.
Incumbents leverage entrenched distribution channels.
Combined with the four above, incumbents have a huge advantage in that they have access to distribution channels that newcomers must buy their way into somehow. While it is a standard barrier to entry, it costs money to overcome, which leaves less cash available for other activities designed to counter the four above. Again, consider supermarkets. In this country (Australia) two supermarket chains have around 70% of FMCG sales. For a newcomer, no matter how superior to existing alternatives they may be, they must ‘buy’ distribution. This leaves less money available for advertising, and other demand generating activities. It is also easier for incumbents to ‘channel-stuff’ in the lead up to a competitive launch. I have both used this tactic, and been on the receiving end many times, and it works.
If you want to win the war on mice, do not just build a better trap, figure out a way to stop the buggars breeding in numbers in the first place. That way, the solution to the problem is both sufficiently different to be noticed, and it overcomes the value of incumbency given to the existing trap makers.
Sep 8, 2021 | Change, Marketing, Strategy
There is a massive but unrecognised marketing and branding war going on right on front of our eyes, unseen by most, but substantially funded by taxpayers.
It is the Covid vaccine marketing war.
Which brand will you choose?
The development of these vaccines has happened at unprecedented speed, driven by the commercial opportunities delivered to the pharmaceutical industry’s doorstep by Covid.
There are a number of agreements entered into by the Federal Government for the supply of vaccines, as well as the evolving commitment to creating manufacturing capability for mRNA vaccines. This would be additional to the rDNA capability we already have as a result of the brilliant strategic and financial management of CSL over an extended period.
Astra Zeneca? Pfizer? Both of which are TGA approved, and in distribution. Moderna is now TGA approved, on order, and about to arrive on our shores.
Which do you choose?
By moving the availability goalposts around by press release, and completely muddying the waters around the facts in the attempt to cover the total lack of planning in 2020, the federal government has created a minefield of questions and mistrust. Into this uncertainty have stepped the pharmaceutical marketers, often ignored genuine expert scientists, the ‘Looney-fringe’ with a barrow to push (a space inhabited also by some politicians with a vague grasp on the truth) purveyors of snake-oil, ‘no vaccers’, and a horde of self-appointed experts sprouting nonsense that just further confuses.
Who really knows the facts amongst the triumphant press releases and soothing words acting as prophylactics against the truth of the failure of (most) politicians to listen to, understand and communicate scientific advice.
‘Modelling’ varying covid outcomes has become a game of who can give me the answer I want. The Doherty institute modelling is widely and selectively quoted, misquoted, and ignored, as is the modelling from the Kirby Institute, and various other scientific and research organisations.
On top of the existing AZ, Pfizer and about to arrive Moderna vaccines, you have a range of other brand contenders. A Johnson & Johnson rDNA vaccine is being widely used in the US, amongst a number of not yet approved in this country options, like the creatively named ‘Sputnik’ and the Chinese ‘Sinovac’ version.
Then you have the schism between the rDNA and mRNA vaccines. This is science way beyond my understanding, but to a layman it seems that the ‘old’ vaccines, typified by Astra Zeneca are rDNA, and the newer technology, Moderna and Pfizer are mRNA
Which will you choose?
What an expensive and truly monumental mess for us, and a profit pool of unprecedented depth for those Pharma companies smart enough to put themselves in a position to dip the snout.
If I was a betting man, I would be betting on Pfizer as the winning brand. They have used one of the oldest and most effective selling techniques with great skill: scarcity. It has ramped up unfulfilled demand and this has increased perceived value enormously. In addition, they are the leaders in the newest technology, and in this space, the first mover advantage is huge.
For those who may be interested, following is some of what I have learned sifting through the mounds of material relating to the brands of vaccination medications. Apologies in advance for the simplicity, and for any errors of fact.
mRNA vs rDNA. A layman’s explanation.
DNA is the double helix design we are all familiar with, that carry the genetic instructions for the development, growth, and reproduction of life. It is the long-term storage device that drives the development and evolution of a species.
RNA is in effect the messenger that converts the instructions contained in the DNA into the proteins that take action to produce the individual cells that make up the individual organism within a species.
To date, vaccines have all been based on delivering a mechanism that results in variations that give protection from specific conditions when the cells reproduce, by altering the instructions carried when the strands of DNA split to create new cells. These variations offer protection from the condition for which the vaccine was developed. It is a game of trial and error in the lab. This is typified by the existing influenza vaccines that have been around for years. Each year, the pharmaceutical companies predict the ‘next wave’ of mutation of existing strains of the flu and produce vaccines in anticipation of next winters flu. The technology is well understood, and the processes repeatable. Many members of ‘big Pharma’ produce their versions of DNA vaccines, including CSL in Australia.
RNA has offered the holy grail of being able to translate the instructions from DNA into instructions for the cells of an individual to produce proteins that protect from the targeted infection.
The Corona pandemic put a rocket under the scientific work being done on RNA for several decades, compressing the scientific development time from decades into a year. They are based on new genetic technology called ‘synthetic messenger RNA’, a manufactured version of the substance that directs protein production in our body cells. The idea has been around for several decades, based on the recognition of the role RNA (Ribonucleic Acid) plays in the transmission of genetic codes necessary for our body to produce proteins. Understanding the mechanics of RNA is like opening a recipe book for bespoke medications for individuals to address a wide range of conditions, but the technical hurdles have been significant to date.
The result is ‘new boy on the block’ mRNA vaccines represented so far by Pfizer and Moderna.
Pfizer is 150 years old, founded by an immigrant German chemist in New York in 1849. It produced and sold medications for then common ailments such as intestinal worms, until a ‘bet the company’ investment in using fermentation technology to mass produce penicillin in 1942. Since that time Pfizer has taken over a number of significant competitors and adjacent companies, becoming a huge pharma conglomerate, producing ‘hit’ wonder drugs such as Xanax and significantly by accident, Viagra. The investment in mRNA has continued for some time, as a response to the waning sales of their other drugs as the lapsing of patents enabled competition.
Moderna by contrast is a new company formed in 2010 to commercialise the science emerging from labs around compounds that supress the immune reaction to the injection of synthetic RNA into an individual’s body. For them, the emergence of Covid was a ‘gift’ that offered an injection of capital and marketability of ballistic proportions.
Where to from here?
mRNA offers the potential, indeed, probability of developing more potent and targeted vaccines almost in real time, and there is a huge research effort quietly being applied, by both incumbent pharmaceutical companies like Pfizer, J&J, and now Moderna, as well as newcomers. For example, Alphafold is an AI breakthrough of a Google subsidiary ‘Deep Mind’ that can predict the structure of proteins, an essential piece in the mRNA jigsaw . It is a combination of Neuro and Computer science. Again, this is way beyond my understanding, but those ‘in the know’ seem to be jubilant. It seems it is an advance, using similar processes to the AlphaGo program that stunned everyone by beating the best Go player in the world. Go is a game of Chinese origin many times more complex than chess, and it had been assumed that algorithms could not replicate the billions of options open in the game. AlphaGo learns as it goes, just as humans do, and that learning can be applied to the development of the immuno-proteins that make up mRNA vaccines.
Then, we have the promise of geometrically increasing data analytical capacity with the development of quantum computing.
A couple of further places I would like to go.
- We stop talking about ‘70%’ vaccination rates as the point at which we might open up. Let’s be honest, and acknowledge that it is 70% of the ‘eligible’ population, which excludes those under 18, coincidentally the voting age. The reality is that it is more like 50%, and no epidemiologist I have heard speak believes that number is even in the ballpark of a reasonable place to consider opening safely.
- Let’s have an intelligent conversation about what happens when ‘son of Delta’ arrives, as it inevitably will, and let’s not be caught again without pants around our ankles, bending over trying to tie our shoelaces so we can run from it.
- Let’s also acknowledge that 50% vaccination rate, while grossly inadequate, is way better than much of the world’s population, whose governments do not have the funds to buy the jabs, or their ‘leaders’ have their resources tied in hidden accounts in Switzerland. I wonder where Son of Delta might emerge? Yes, probably amongst those unvaccinated populations in the third world.
Hopefully, if you have read this far, it is a bit clearer. It is to me. What started out as a simple post on the observation of an essentially publicly funded branding war became a monster, as I tried to answer for myself the ever present marketing question: what has to be true to give us this outcome?
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Sep 6, 2021 | Branding, Marketing
Value is not ever just a function of the sticker price. In commodity markets, it may appear to be close, but will never be the same for all buyers.
What might offer value to one person is often absurd to another.
Value is equated in each buyers mind differently, and is related to the ‘Utility’ derived. Utility is a combination of the physical and psychological responses, specific to the individual.
Currently the most expensive NFT (Non-Fungible Token), the artistic equivalent of Bitcoin, created by artist Michael Winkelmann, brought $69.4 million US in an auction by Christies in March this year.
It is a piece of digital artwork, which you can download for free, a perfect copy of the original, for which someone paid $69.4 million.
At the absolute opposite end of the Fungible scale, we had Billy and Beatrice Cox pay artist, and I use the word cautiously, Maurizio Cattelan $120,000 in December 2019 for a banana taped to a wall in an art gallery. Someone obviously failed to appreciate the artistic value, so later in the day swiped the banana and ate it. Price, .50cents at Woolies.
Value is a continuum, from the extreme where the dollar is the only measure to where there is just some unexplainable value to a few people, like an NFT, or perhaps a pet rock, or an artistic banana.
The reality is that ‘the price’ is just what someone is prepared to pay. It has nothing at all to do with cost, which is the basis of most price lists I have ever seen, and everything to do with psychology.
Price and value are not the same thing, ever.
Go to Bunnings and buy a box of nails, it is the same as every other box of nails, but those nails hold your million dollar house together. Think about it in that context, and it may influence your view of the value of the nails.
Price is just the easiest way to articulate the product/service package we deliver, but it is one dimensional, just a small part of the whole, and fails to put any value on the benefit a customer receives by using your product/service.
It is our task if we are to stay in business, to find a way to articulate the value in terms other than price, while recognising that we need to be paid more than our costs to stay in business.
One of my favourite stories about value generation comes from Rory Sutherland. He proposed a creative alternative to spending billions to speed up the Dover to Paris train journey time. He suggested that instead, they just buy up all the back vintages of Chateau Petrus, obtain the world’s last inventory of genuine fresh caviar, and have it served by supermodels (male and female to avoid any problems) on the journey. The result would be that everyone would demand the train to be slowed, and the savings would be sufficient to feed sub–Saharan Africa for a generation.
Whimsical, but no doubt right!
Somewhere in the mix of tangible and intangible outcomes is our sweet spot, the price. It will vary enormously depending on the individuals and circumstances involved.
That is why it is so fundamentally important to know your ideal customer, as well as your own costs, so that you can both satisfy their varying needs, and make enough profit to build commercial sustainability for yourself.
An expert can often uncover ‘value’ you might not see. The old trees and forest metaphor at work.
Sep 3, 2021 | Governance, Strategy
The first is to have a monopoly, preferably a regulated one, such as a public asset that has been privatised.
Sydney’s Kingsford Smith airport was flogged off by the government to a private operator who makes obscene profits, not just from the landing rights, but parking, retail concessions, and every other opportunity to gouge. What are your options… catch a train to Singapore?
The second is to be in a market where the person shelling out the money for your product is not the decision maker in the purchase.
My dog does not care how much the food I deliver to her/him costs, the marketer is selling the stuff to me on the basis that my dog will prefer it, and it is better for them, and I am a bad person if I deprive my beloved pet of the best care possible.
The Australian publicly funded pharmaceutical benefits scheme is similar.
Once on the list, the pharma companies sell to the doctors, persuade them to prescribe their magic to their patients, who pay a consistent subsidised cost whatever the price of the drug to the public purse. Perhaps inconsistently, I am in favor of this scheme, despite the obvious rorting that goes on.
I am always caught between amazed laughter and despair when I hear a politician whining about the prices of some commodity, the ownership of which they have flogged off to private enterprise, who then proceeds to make a profit, because they can.
Just look at what has happened to power prices since the privatisation of the poles and wires, done in a strategic vacuum for short term political gain.
No matter the words used, what they have done is subsidise private profit from the public purse.
One that should get a mention but does not despite the disruption over the last couple of years is the takeover of Healthscope, the operator of the new French’s Forest hospital in Sydney’s north, by Canadian group, Brookfield in June 2019. Brookfield held a featured place in the Panama and Paradise papers as protagonists in tax avoidance via trusts located in tax havens.
The state government poured 2 billion dollars into the hospital in a so called partnership with Healthscope previously an ASX listed company, and closed the alternatives in the area, Mona Vale and Manly hospitals.
So much for the competition, and for the tax on the resulting profits.
Sep 1, 2021 | Collaboration, Governance
Trust in our institutions is generally accepted as being on a slippery slide to zilch. I am certainly one who has loudly carried that message.
It is easy to say, but what are the essential elements of trust amongst a group?
If you look up the wisdom of Dr. Google, you will see a library of articles, posts and opinion that varies in the words used, but when boiled down, are saying pretty much the same 7 things.
Trust that others have your back. When things go wrong, you will not be left to carry the burden yourself.
Trust in common values and objectives. This implies that the values and objectives are an outcome of the group, rather than having them imposed on the group. Objectives and values can be superficially common, as in a group put together for some specific task. However, those objectives and values will not necessarily be shared, which comes from the interactions of the group with each other over time.
Trust that we will keep each other’s confidences. Inability to keep confidences indicates a lack of integrity, poison to any level of trust.
Trust in our willingness to learn from each other. This is a two way street, and is not driven by artificial hierarchy such as position on the organisation chart.
Trust that people will do as they say they will do. No further explanation required.
Trust that we are free to express our views and ideas. Often, we refer to ‘psychological safety’ as if it were a fence constructed in some way to keep the nasties out. However, it is a fence only in our individual and collective minds, but is critical to building relationships.
Trust that we are able to be critical without being personal. We need to be able to be tough on our friends, without damaging the foundations of friendship and respect. Commonly I refer to this as ‘transparency’. It is not inconsistent with the requirement to be sure that confidences will be kept, it is more a foundation that enables those critical confidences to be shared and kept. Nothing is as corrosive as uncertainty, whether it be about your performance of a task, or how long it will take for the taxi to get to you.
In an HBR article from February 2019, the authors cited three elements a leader must have to hold the trust of those for whom he/she is responsible:
Positive relationships. Meaning a leader must demonstrate empathy, balance results with concern for people, resolve conflict as it occurs, and deliver honest and helpful feedback.
Good judgement and Expertise. People being led will be willingly led, as distinct from managed by someone who demonstrates good and consistent judgement in decision making, seeks and absorbs the opinions of others, and has the expertise relevant to the task.
Consistency. This is simply walking the talk, following through, setting a good example, and being prepared to do what is necessary.
To my mind, the 7 elements cited above contain these three, with a perspective that is a bit closer to the sorts of situations individuals find themselves in over the course of time. They are more specific, less generic than the three cited in the HBR article.
I recently heard a definition of the point at which you have a ‘group’ that is more than an assembly of people looking to achieve a defined outcome, which I like:
“A group is when you do not need to look around to know everyone is doing the right thing, but you do look around to see that everyone is OK’
Cartoon header courtesy www.gapinvoid.com
