How to build a brand with little money

How to build a brand with little money

May 3, 2016 | Branding, Marketing, Small business

Following is an edited version of a presentation given to a group of owners of small businesses struggling with the challenges of building a brand on very limited budgets in competitive markets. This is a challenge most of my readers can relate to. It is not easy, but it can be done.

Let me know what you think.

 

brand building30 years ago I found myself marketing manager of a newly formed division of Dairy Farmers, the By-Products division, which we quickly renamed General Products, for obvious reasons. It manufactured all the products that used milk as the ingredient, but was unregulated, unlike the stuff you put on your corn flakes in the morning which was highly regulated.

It was a commercial disaster, an absolute financial basket case, and as a young bloke who had come off a pretty good run over the previous 10 years, I truly wondered what I had got myself into.

It was a nasty surprise.

The second nasty surprise was Ski yoghurt, one of the ‘gems’ of the business, and a key part of the marketing role I had taken.

Sales data, such as it was showed considerable growth for several years, However, when I looked at the market data, market share had gone from 30% or thereabouts to single figures.

Yoplait had launched into the market. New packaging format, great launch offer, 2 for 1, good advertising, and the market had exploded, leaving Ski sinking in its wake, and few at Dairy Farmers had woken up.

I started some market research to find a way through, although the Advertising budgets had been slashed when I pointed out just how bad the financial situation was. (Nobody had ever done a trading Profit & Loss on the division before. Unbelievable)

Something happened in one of the groups that caused the light bulb to go off, and I truly understood for the first time what a brand  really was.

The researcher asked the respondents in a group while I was behind the one way glass, to imagine Yoplait as a person, and that person was walking through the door: describe the person.

This question is now almost always asked, but 30 years ago, it was a relatively new idea.

Yoplait was young, hip, female, successful, educated, world at her feet. A picture most in the room could aspire to.

Ski was a 55 year old male farmer in wellies. Trustworthy, serious, reliable, but oh so boring.

My marketing problem with Ski was clear.

 

What is a brand.

 

what is a brandAt its core, a brand is something that someone cares about, and relates to, it has human dimensions.

It will never be something that everyone cares about, no brand can be all things to all people, so you have to identify those  few who will care. Then appeal to their hearts more than their minds, add value to them in some way, be very personal.

 

Coca Cola, around for 125 years, is instantly recognisable, sold everywhere, billions and billions have been spent over a long period to build the brand. There are lots of brand value list created, and Coke is almost always in the top 5 brands in the world.

Forbes Magazine in 2015 values Coke at $56 billion, (US) on revenue of $23.1 billion, and advertising of $3.5 billion.

It is a huge brand, whose primary aim in their strategic plan is to “engage with consumers in their lives”

 

 

what is a brand 2But what about this second one??

Has anyone here heard of Felix Kjellberg? Or his business Pewdipie?

A Swedish gaming satirical commentary site, hardly even a product. If you have sons under 25 who play games online, ask them!

 

If we are too measure the success of a brand by the manner in which consumers engage, then it is reasonable to look at the number of YouTube subscriptions that brand has attracted. By definition, a subscriber is someone who has specifically signed up to be sent updates by the brand because they are engaged with the brand in some way.

April 21 2016, about midday when I looked, Coca Cola had 763,133 YouTube subscribers. Not bad I thought, till I looked at Pewdipie, who had 43,421,440 subscribers, roughly 57 times Coke. An astonishing difference when Coke has been spending billions over many years with a specific objective of ‘engaging consumers’ and Pewdipie has spent a few bob on dodgy youtube videos taken with their phones.

How did Felix do it??

Well, I do not know Felix, but I can make some pretty educated guesses, and that is what the rest of this will be about.

 

a brand isFor a supplier, a brand is a commercial vehicle, a way to deliver leverage by way of price, distribution, many other factors that may be of interest to customers.

For the customer it is a way of making the decision easier, offering reassurance of performance, certainty, it is a trusted friend, and there is some level of emotional investment, even if it is just a comfortable habit.

It is really easy for marketers to go off the rails here, to see a picture of an emotional attachment that simply does not exist, They see it through their eyes, not those of the consumer. The truth is that consumers see brands as things that solve problems for them, they have preferences, sometimes very strong and exclusive ones, but in the end, in the case of consumers products like yoghurt, it is just yoghurt, not a cure for cancer, and it is not going to change the world.

The sweet spot is in the overlap between the commercial and consumer view of a brand, the  Value Proposition of the brand.

 

 

3 word summaryThese 3 words,  Leverage, Niche, and Persona are the guts of how you build a brand on a little money.

They are mutually dependent, mutually reinforcing,  and 2 out of 3 is not good enough.

 

This has always been the case in marketing, we have always talked about and tried to execute on a ‘target market’ but the tools until a very few years ago were crude, too crude to be anything other than marginally useful on a small budget.

This has changed.

We can now target with great precision using digital tools, with the resulting huge increase in the productivity of  the effort.

 

LeverageFirstly, Leverage.

Leverage is simply doing more with less.

As small business people we all know about those challenges.

We all know that face to face is the best advertising by far, when someone you know and trust recommends a brand, you are way more likely to take notice than if you hear or see an ad.

On one hand that personal recommendation delivers a lot of credibility, and leverage, but it is also very time and resource intensive, one on one costs a lot, but as noted, there are now a box full of tools to make the process possible.

When a brand is ‘remarkable’ it gets leverage from both dimensions, and a lot can be done with a little.

The tools of digital have made it easier, but the space is absolutely crowded, and people are very adept at filtering out stuff of no interest.

It does not matter how well you use the tools, if the product is not remarkable, the tools will not do you much good.

The reverse is also true, if the product is remarkable, but you do not use the tools, or use them poorly, or the wrong ones, progress will at best be slow.

In the old days, you could just stick it on the box and with enough money, buy awareness, and a sale, but that model is dead, dead, dead, which is why TV stations are all losing money.

 

remarkableRemarkable.

20 years ago a marketing thinker named Seth Godin coined the term ‘purple cow’, and it has become one of those universal phrases.

What makes your brand remarkable?

 

Remarkable has two roots:

It is different

It is something worth spreading.

Seth’s story. Driving along a country road, you see cows, lots of them, they are all the same, so you barely notice them, but if one cow was purple, you would notice, and remark, “look at that purple cow”!!

But if all cows were purple it would no longer be remarkable.

When you have seen a purple cow, and when you get to your destination, you would be telling everyone else about the purple cow you saw. An idea worth spreading.

Ask yourself, What is it about you and your product that is remarkable, and to whom is it remarkable.

Figure that out, and you have the opportunity to get the idea to spread,

 

martech toolsTools

This is a list of all the digital tools done earlier this year by Scott Brinker at chiefmartec.com.

Thousands of them, many more than  the same time last year.

Newspapers, TV, radio,  magazines, all the old media are also tools that deliver leverage.

Always did, still do.

Question is are there better ways?, and the answer for most small businesses is clearly yes!.

Small businesses do not have the resources for mass media leverage, but the digital revolution has levelled the playing field somewhat.

But the problem is deciding which ones to invest in, because it is not free!!

My advice, Stick to the simple ones, the ones that give you the most leverage. Find what works for you and double down while experimenting and learning.

 

websiteYour website

It is yours, you are the owner, the publisher, you make the rules, just like living in your own home

It is the marketing cornerstone for most small businesses.

 

 

facebookFacebook for B2C

Facebook has become an amazing monster.

Tame it, and it can be wonderful, but it lives to take your money, and is very good at it.

In effect, you can pay them to get reach, the fast way, or you can do it organically, the slow way.

The tools inside Facebook are amazing, and seductive in the extreme.

 

linkedinLinkedIn for B2B

LinkedIn is for professionals, Business to Business.

414 million users worldwide, 3.6 million in Australia (as of June 2015, so probably north of 4 mill by now) all professionals, no cat photos or Aunt fanny’s famous cake recipe.

 

4 million… Do you think there might be a few in that with whom you would like, and be able, to do some business?

how do you find the ones you need/want to speak to??

The advanced search function in LinkedIn, even in the free version offers many  ways to find a person or a business with whom you might want to start a conversation. It is amongst many tools that Linkedin provides to automate the lead generation process.

 

youtubeYouTube.

You can try and do a Pewdipie, although getting such a result again is unlikely, but you can learn from modelling what they have done. .

This is a screenshot of their current landing page on YouTube. Nothing too fancy there, but it works, really works!

 

emailEmail.

Last of the vital tools, but not least in any way is email.

Email is a digital metaphor for that chat over the back fence. It carries great potential for credibility.

To get email right, there are some tools you need, but the fundamental skill is a very old fashioned one:

Copywriting.

Go into your local newsagent, and look at the magazines on the rack, they are still surviving.

They have very specific target markets,

The front cover headlines entice you to open to page 6 to read the story, and the first thing you see is a second headline, that drags you into the story a little deeper, leading you to the checkout.

If you happen to be thinking about how to write a headline, and you got this in an email, would you open it????

Of course you would.

The challenge is to get it to you as you are thinking about copywriting

You don’t have their email??

There are a million ways to get an email address, including several free tools that do work, and the key task is to build a list of those who are willing to receive your communications.

Then there are a few ‘must haves’ to maximise the opening rate and actions taken as a result of your email.

It must be personal. Specifically targeted at them in some way

It does not sell  but does offer advice and assistance

It does have a call to action, something you want them to do as a result of reading the email.

 

 

nicheSecondly, Identify your niche.

We are no longer constrained by geography,

We no longer need to rely on snail mail and having someone’s telephone number.

 

My point is that if you can find a narrow, but deep niche, to whom you add great value, those at the bottom of the niche will love you, and it will be too dark and scary for the big guys to attack, and defensible if they do.

I bet if you wanted to form a group of left handed Lesbian lumberjacks, you could find enough of them to form a ‘community’ in fact, they are probably desperate to find some others who understand them, and would join such a community in a flash.

A couple of examples of small businesses carving out a niche.

http://au.whogivesacrap.org/ revolutionising bog paper

www. au.dollarshaveclub.com revolutionising the purchase of shavers

Both are niches that are deep and narrow, and they have first mover advantages that will make them very hard to move.

 

personaThirdly, the persona of your ideal customer.

Developing a persona of your ideal customer requires that you make choices.

It is as much about what you will not do, as it is about what you will do.

 

It is usually very hard for an SME not to chase every so called opportunity as it emerges, but when you are small, focus is essential.

Let me just make 2 more points quickly before I finish.

 

creativityWe are all familiar with the term “Guerrilla Marketing”.

It is a way of building leverage, but requires creativity, and an ability to see beyond the normal, be prepared to take a punt.

You do not need money to be creative, and when you are, it is a key component of remarkable

 

 

customer journeyYour customers journey. For every purchase, no matter how small and insignificant, Something triggers the research seeking a solution to a problem, to fill a need, even if that is something as simple as which yoghurt to buy today..

Each journey starts with an evaluation, sometimes with a few  brands or suppliers in mind. During the evaluation, new brands may come under consideration, some drop out, for a host of reasons, and understanding these reasons is a great way of being able too present information that addresses them for an ideal customer, deep down in a niche.

You have the opportunity at this point, before the decision is made, to shift and influence their thinking.

Customer journeys all have a flow, understand them

As a visual metaphor, look at your google analytics flow from your website, see how the customers go from pages to page, how long they stay, what they do.

If you apply this idea to the whole customer journey, not just on your website, you will see points that you can engage, intervene, make it easier to present them with information and  opportunities.

The task is to understand the journey, then you can engage at various points, and find ways to shape the journey. As the world has changed, so too have the customer journeys.

Technology has changed forever the journey as customers now do their own research before you know they are in the market. Unlike in the past, when the seller had the information the customers needed to make a decision, and therefore the power, the customer is absolutely now in charge.

As a final word, building a brand on a little money can be done.

It is not easy, if it was, everybody would be doing it,  but it can be done.

 

The 3 dimensions of Lead generation

The 3 dimensions of Lead generation

Mar 28, 2016 | Branding, Customers, Marketing, Sales

Virtually any B2B business owner I talk to, one of their key challenges is lead generation.

When you dig a bit, often it is the case that lead generation  becomes a problem where there is a shortage of sales, then they react in a short term manner.

Lead generation is a long term proposition, B2B and B2C, the techniques may differ a bit,  but when working day to day the only effective tool to get another sale is price, so you lose.

So it seems to me there are three dimensions to effective lead generation:

  1. The means by which you generate the lead
  2. The conversation rates at various points  through the sales process
  3. The time taken in the sales process

Lets look at them in a little detail.

Means. This is the essence of marketing, the game is to identify who might be a buyer, why, when, and the means by which you can facilitate and support the transaction then build on it for a longer term. Digital has exploded the techniques available to us but the rules have not changed: Understand how you add value to who, and walk them through the relationship building and sales processes to a transaction. Brand building by another name.

Conversion rates.  How do you calculate your sales conversation rates? Digital is now awash with numbers, marketing has changed from the fluffy to the numerical and we are belted over the ears to get with the program.

Marketing Experiments is a shop flogging the notion that marketing experience, creativity and intuition can be turned into a mathematical formulas, and in doing so they have done a fair job of nailing the variables in a digital sale to the extent that they can be nailed:

Probability of conversion = Clarity of Value proposition + (incentive to action – friction associated with the action) – Anxiety.

Whilst a bit convoluted, it does make some sense, and you  can weight the factors according to your market, but the essential message is that marketing can be measured. To an extent  it can be, but losing sight of the emotion involved would be a mistake, and emotion will always be virtually impossible to measure with any certainty. As Gary Vaynerchuk asked, “what is the ROI of your mother?”

Time.  Every business and market is different, as is every potential customer situation so there are no rules in this except one: Only a small number of your prospects will be ready to buy right now.

However, if you extend the time frame to a month, or a year, and there will be many more ready. The challenge therefore is to be talking to them in terms that they are comfortable with at that particular point in their  journey to a transaction.  Given the reality of this journey, the worst thing to do is make the effort ‘stop-start’. It has to be a continuous marketing effort to ensure that there is a flow of leads into and through the sales process. Take the foot off the pedal and you will have a hole in the sales. Keep talking, build a relationship, guide them through the process. Demonstrate credibility and expertise, so that when they re in the buying mode, you get the call.

Too often we concentrate on finding the few who are ready to buy now, rather than playing the long game. Patience rewards the skilled fisherman, same with sales.

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The secret sauce of marketing.

The secret sauce of marketing.

Mar 16, 2016 | Branding, Communication, Customers

 

The currency of marketing success starts these days with a simple word:

Attention.

How to get it, keep it and leverage it.

In the crowded world we are in, it is the secret sauce of marketing.

Every day we are assaulted by messages, millions of them, yet we actually ‘see’ just a tiny fraction.

In a world where our brains give us comprehensive and automatic filters, where even those that get through have a split second to make an impression and gain some of our attention, it pays to understand the means by which this process happens.

Automatic sensory cues.

When was the last time you completely ignored a gorgeous bird (if you are a bloke) wearing a short skirt and blazing red shirt?

Never happens right? That is because our brain is on automatic, it sifts the information coming at it in an unconscious manner. However, when something triggers one of the basic responses in our ‘reptile’ brain, the deepest most ancient part of the grey matter that controls just a few things, we notice. This automatic response was vital to the survival of a weak mammal being hunted by sabre tooth tigers, and thankfully survives to ensure we see the red shirt.

Reputation.

We often almost automatically trust things and people based on reputation. Tom Clancy brings out a new novel, and fans of the genre will buy it based on the experience and reputation of his previous books. In the past we also tended to trust authority, police and doctors for example, but the transparency of the last 25 years has almost seen that gone, we now make judgements on a wider base. Taking that one step further, we now put some weight on crowd sourced reviews as Amazon does with their rating and referral systems.

Recognition.

When we recognise something or someone, it grabs our attention. Walking through Sydney’s CBD a few weeks ago, paying no particular attention to anything, I unexpectedly recognised someone I had not seen for many years, walking the opposite way on the opposite side of Pitt Street. The sudden and unexpected recognition riveted my attention, I had to race across the road and accost him. (luckily my recognition was accurate or it would have been embarrassing). This also works inside businesses, the recognition of the familiar, weather it be people, processes or existing patterns of behaviour are powerful motivators of future behaviour.

Think like a customer.

It often surprises how little marketers actually look at their output from the perspective of those they are trying to influence. Stepping across and putting yourself into the shoes of the receiver in a way that enables you to see the material you are producing through their eyes, recognise and respond to the emotional hooks, feel urge to ‘connect’ that you are trying to build, recognise the  relevance and power of the offer or call to action. To some this capacity to jump into your customers persona comes as naturally as breathing, to others it remains a bridge too far no matter how hard they try, how much research they read. Finding someone in your team who has this capacity can mean a quantum step in the effectiveness of your efforts.   Thinking like a customer makes gathering attention much easier as you can see the cues your customer will respond to, and deliver them in a manner that creates and drives the attention.

This task, the drive to gather and leverage attention is one of the foundations of marketing success, understanding the triggers is essential.

How to Design a winner by staying out of the way.

How to Design a winner by staying out of the way.

Mar 9, 2016 | Branding, Marketing, Small business

 

Few of us are designers, although most would like to think the contrary

Few things get stuffed up more than design, and it is normally because a good designer was nowhere near the project.

You did it yourself, or had the intern do it, the boss’s wife, or you went on line and got 55 alternatives for $99.97 and picked one with a pin.

Does not work, does it!

While running large marketing departments long ago  in my corporate dark ages, there were two simple rules:

  1. There was a rigorous process of the product managers doing what they were supposed to be good at, building a design brief based on the strategies, product value proposition, and profile of the target audience, and it was followed.
  2. Nothing went out without me seeing it, and if there were several options, the one I favoured least was normally the one that was chosen.

I am a very good and widely experienced marketer, but a crap designer. Fortunately for the many successful projects over the years I know my own limitations.

So, to the design brief, the heart of any design project.  Here is a short list of do’s and don’ts

Do:

  • Offer the designer a range of emotional words you would like the designer to communicate. If the product is a healthy food product, words such as “nutritious,” “fresh,” and “natural” are likely words, but if the product is a body building supplement, they are more likely to be “Bold” “aggressive” and   “masculine”
  • Ensure the designer knows as much as it is possible to know how the customer will select, interact with, use and dispose of the product when it is finished. The more the designer can put themselves in the mind of the primary customer the better.
  • Make sure you take a mock up or two into the typical outlet to see how it fares in its competitive habitat if it is a product that must compete for retail display space.
  • Leave the graphical elements to the designer, that is their skill, so don’t box them in by specifying fonts, colours, layout ideas, or any of your  preconceptions. However, if there are elements that are mandatory, such as a brand colour guide, or that will cause the rejection of a design such as using your photograph, it would be wise to ensure they were aware of the boundaries.
  • Test where possible. Digital products can be subjected to all sorts of A/B tests and they often throw up amazing results, but in any event, be prepared to experiment, and improve with the benefit of the insights gained.
  •  First impressions matter, particularly when the impression is by someone with some empathy for the category. When running those large marketing departments of FMCG manufacturers, I used to ensure that all the women in the place were exposed to the designs, as they were more representative of the typical buyer than the men in the department.
  • Finally, and most importantly, the design has to tell a story to the buyer, it must communicate what the product does in a split second, and why they should buy it.

Do Not:

  • ‘Crowdsource’ the preferences of friends, co-workers, and particularly your partner beyond the “which do you like” question. Going one more and seeking advice on how to fix the shortcoming they see is asking for trouble.
  • Stick with a design that once in the market is clearly not working. We all make mistakes, the skill is in recognising them early, acknowledging, fixing, and moving on.

 

As a final word, do not do the design yourself, it will most times be rubbish. Design is a fundamentally important and often abused part of the process of delivering value to a customer. Short cuts almost never pay off, they end up costing heaps in rework and lost opportunity, and keep the list of Do’s handy.

5 ways to avoid brand prostitution in FMCG

5 ways to avoid brand prostitution in FMCG

Mar 8, 2016 | Branding, Category, Customers, Marketing

The primary tool used by retailers to attract customers is the discount prices that they offer on their suppliers products, largely funded by those suppliers.

As you read all the literature and case studies on brand building, and reflecting on my own experience, the last thing you want to do is indiscriminate price cutting to build volumes. Deep and regular discounting is a sure way to murder any long term position of the brand as anything other than cheap and nasty.

I have yet to see “Develop the brand to  be cheap and nasty” in a strategy document.

However, promoting your product, as distinct from stand alone price cutting is a potent way to get trial, and any brand building exercise  contains measures that  encourage and reward trial; setting out to turn trial into habit.

It is a delicate balance, generating trial and confirming to customers that  the product is delivering value for the non promotion price, when the discounted price rolls around every few weeks.

So how do you combat it, when  you  have so little control over the retail interface with consumers?

Not easy, particularly when to retain shelf space, discounting is mandatory, and often the  suppliers have ceded control of their promotion timing and type via  trading term agreements.

In effect the retailers do what they want, when they want, with your products to build their revenues and margins, and charge you for it.

In other words, they are able to prostitute your brand in their battle for market share and margin.

How do you break this cycle?

Not easy, and not without risks, as retailers can always delete your products and put  something else in the space, and increasingly this is a housebrand.

The answer is in several parts.

Make the CEO the senior  product manager. Too often, the boss is too busy to attend to the details of the sales and marketing programs, and conventional management wisdom  is that you leave the detail to those responsible for the outcomes.  However, abrogating responsibility is very different from leaving the details to the functional management. The boss must be engaged in the battles with retailers. Such engagement delivers certainty that you are serious to the retailers, and assures your people that the boss has their back if it goes pear-shaped.

Have a plan to manage the customer as well as the consumer.  It is essential that you have a plan actively supported by the CEO around the supply chain challenges of building of a brand. This means that the CEO needs to support the sales and marketing management in the implementation in the face of retailer pressure, removing the retailers opportunity to play the  ‘go to your boss’ card.  Obviously, any marketing plan needs to address the consumer  you are talking to, what they are looking for, and how you are delivering that value to them, or they will fail, but most in my experience miss the explicit references to those who control the choke points in the distribution chain.

Regain some control over trading terms. This is easy to say, but enormously hard to do, and is impossible in one negotiation round.  To the extent that sales success requires distribution in the two gorillas, you need to be very aggressive and smart about wresting back some of the control of the on shelf promotional and price decisions. Branding success requires that you deliver consumer trial in a competitive environment, followed up and consolidated by the reward of great value, which is way more than a cheap pick-up price. Just going along with a retailer delivering a low price to consumers only rewards brand prostitution by the retailer.

Manage your data. You need data on which to base all your decisions, as debating challenging questions with a retailer on the basis of what you think is not good enough.  Assembling data that demonstrates the ROI on promotional activity across a variety of time frames and consumer centric parameters is essential. This requires both scan data and external consumer and social data to be combined and analysed. Not an easy task, and certainly not without cost. However, if your volumes are dependent on promotional pricing without the ROI knowledge offered by data analysis, you have already lost.

Consumers need to be engaged. Outside the price, you need to be communicating with your consumers, supporting the value proposition in every way possible. This is now possible through a multitude of channels and tools not dreamed of just a few years ago, and these need to be used. However, if  you have the budgets, old fashioned advertising, so long as it is good advertising that communicate clearly the value of the brand, still works.

Yeas ago as a young product manager, I was a (minor) part of the team that built Meadow Lea margarine into the dominating market leader in margarine. Meadow Lea peaked above 20% market share, well over 3 times its nearest competitor, in a crowded market, at premium prices. It was just margarine, a great product, but hardly worth that sort of dominance until you remember that we were busy congratulating mothers for using it for the benefit of their families health and  happiness. I have not seen any numbers in a long time, but I have also not seen advertising for a long time, so I bet Meadow Lea is back with the pack, only selling on promotion, at discounted prices, and the parent company, which took a short term view of marketing, went from being a successful large company to an unsuccessful way smaller one until it was flogged off to a Singaporean group.

Sad that.

We built a brand powerhouse, only to have it squandered.

As a final groan, just pre Christmas I went into Woolworths to buy the family Christmas ham. The only choice was one of a number of Woolworths house brands.  I went elsewhere, and found a really good ham from a specialist retailer, probably cost an extra $5, but was worth every cent.

I wonder if this experience is a portent of things to come, or just me being cranky.

Why did Thomas Dux really fail?

Why did Thomas Dux really fail?

Feb 10, 2016 | Branding, Marketing, retail

There is a whole lot of discussion around the progressive closure of Thomas Dux stores by owner Woolworths, and the assumption that it will be closed down if a trade sale does not evolve.

Maybe there is a plan to save it, but I cannot see it, and having bought some rubbish grapes at an inflated price in the Lane Cove store during the week,  I do not know what it might be.

Not a lot of the discussion actually addresses the strategic failure that is the foundation of the commercial failure, just its superficial symptoms.

Strategic failure seems to have found its way into Woolies DNA over the past 15 years or so. They became so financially dominant in supermarkets that they forgot that they still have consumers to keep loyal, suppliers to keep in business, and competitors very keen to eat their lunch. They have done OK in petrol, well in liquor, absolutely bombed in hardware, poorly in general merchandise , and missed office supplies, electrical and furnishings completely, and are fiddling around with odd things like pet health insurance. Not a lot of logic in that mix.

I have watched Dux closely since the launch,  had a number of clients products listed, and visited all the Sydney stores multiple times since the first Lane Cove store opened. Until a short while ago, I really thought they would defy the corporate odds, and make it work.

The apparent failure is a sad day for the specialty end of the Australian food manufacturing industry, what is left of it, one less way to reach consumers.

So, with the clarity of (almost) hindsight, where did they go wrong?

 

Confused business model.

Whilst Dux had separate management, they operated out of the Woolworths warehouse, using the WW back office systems and presumably KPI’s which are all focussed on mass merchandise, stock turn and margin. This makes sense to the accountants who seek efficiencies but in the end forces the big brother behaviour on the upstart sibling who needs to do things differently to survive and prosper.

They forgot their “Why“.

Perhaps they never had it beyond a kneejerk response to an upstart competitor. The slogan “Inspiring your passion for food” is at least a half way decent one, until you see packets of mass market products available in the Woolies and Coles stores next door at lower prices. As a consumer, going into Dux , the presence of such items is inconsistent and diminishes any claim to a differentiated and valuable consumer value proposition.

Value delivery.

Consumers are not stupid, there is a limit to the price they will pay for something with a fancy name, fuzzy claim and benefit, and not much else. Pushing the prices beyond that limit in order to boost the GM% is pretty silly, because you do not bank percentages, just dollars. It is a fine line, but by observation, they got it wrong as much as they got it right, which is not enough.

Discounters are not the competition.

Giving in to the accepted wisdom that discounters are winning and that Dux is competing for the same consumer dollar is nonsense.  Consumers are looking for an experience, for specialist products not available in mass retailers.  They started well with their “foodies”, in store chefs available to give advice and recommendations, but the enthusiasm for this potentially differentiating strategy seems to have waned over time. Behaving like a discounter in some Sku’s but like a high end, fancy pants deli in others just confuses consumers, and I suspect their own staff.

What you will not do.

Strategy is, amongst other things, about what you will not do, as much as it is about what you will do. Thomas Dux seems to have forgotten this lesson and succumbed to the temptation to stock SKU’s that did not add to the positioning of Dux as a retailer on whom you could rely on to deliver quality and differentiated specialist food products along with a level of service well beyond the usual expectation. This confuses and devalues the brand. Thomas Dux is like any other brand in a development phase, it requires absolute focus on what makes you different and better. So why can I buy Kelloggs Corn flakes and Blend 43 coffee there?

It takes time.

Dux has been around for a while now, perhaps 10 years? That should have been enough time to establish a defensible place in consumers minds when it is clear there is a segment looking for an alternative to the mass market supermarkets. I suspect that the financial pressure has increased markedly over the last few years as Woolies excursion into hardware drained group profitability. The net result was that the quarterly numbers mattered more than the long term, so savings were made by management, the sort of savings that delivered me the rubbish grapes the other day. If the grapes were not good enough to justify the price, they should not have been on the shelf. That sort of challenging culture requires time and continual effort to reinforce, and a reversion to a quarterly focus removes the management incentive to not sell grapes this week because they are not good enough, they need the margin today at the expense of tomorrow.

 

Meanwhile  Harris Farm, the original target of Dux appears to be powering along. Perhaps Woolies will rue the day they did not buy Harris Farm when they were still young and vulnerable. I understand they tried, but were given the finger by the venerable Mr Harris.  Perhaps they should have tried again, it would have been less costly to both their coffers and their reputation.

What do you think?