Jan 5, 2015 | Branding, Change, Customers, Governance, Innovation, Marketing
Small business is at a crossroads as we move into 2015.
Either they embrace the opportunities and tools presented by the disruption of the “old ways” by digital technology, or they slowly, and in some cases, quickly, become irrelevant, obsolete and broke as customers move elsewhere.
Your choice, as much of the technology can now be relatively easily outsourced, and at a very reasonable cost, certainly less than most would expect. The two major challenges in outsourcing, snake oil salesmen and not knowing what you want and need, are little different to any other category of purchased service.
So, to the trends that will influence your business in 2015 that you need to be at the very least aware of, and in most cases take some sort of pre-emptive action.
- Marketing technology will continue its rise and rise. The thousands of small marketing technology players who are currently emerging will be forcibly integrated, as the big guys buy “Martec” real estate. Adobe, Microsoft, et al will spend money, and the little guys will be swallowed as the gorillas fill the holes in their offerings, and new segments emerge. At the other end of the scale, there will remain plenty of options for smaller businesses to step into the automated marketing space. The current rash of innovations to make life easier for small businesses will continue and as those smaller single purpose tools gain traction, and more are launched to fill the niches that exist to service small businesses.
- Peer to peer marketing will continue to grow at “Moores law” type rates. Jerry Owyangs honeycomb diagram and data tells it all. Almost any service I can think of has the potential too be disrupted in some way by the peer to peer capabilities being delivered by technology.
- Content creation as a process. The next evolution in marketing, the move that I think “content” will start to make from being individual pieces of information produced in an ad hoc manner to being a process that is highly individualised, responsive to the specific context, and informed by the behaviour of the individual recipient scraped from the digital ecosystem. It means that content creation needs to be come an integrated process, more than a “campaign” . The term “content” will become redundant, it is just “marketing”, focussing on the individual customer.
- Marketing will evolve even more strongly as the path to the top corporate job. Functional expertise is becoming less important, what is important is the ability to connect the dots in flattened organisations that work on collaborative projects rather than to a functional tune. This trend is as true for small businesses as it is for major corporations. There will still be challenges as many marketers are really just mothers of clichés, but those relying on the cliché and appearances for credibility are becoming more obvious as the marketing expertise in the boardroom increases, and the availability of analytics quickly uncovers the charlatans. This will make the marketing landscape increasingly competitive on bases other than price.
- Recognition that marketing is the driving force of any successful enterprise will become accepted, even by the “beanies”. Seth Godin has been banging on for years about the end of the industrial/advertising model, the old school of interruption, but many enterprises have continued to deploy the old model, but I sense that the time has come. 2015 will be the year that sees marketing finally takes over.
- Video will become bigger part of marketing, particularly advantaging the small businesses that have the drive to deploy it and the capability to manage the outsourcing of the bits that they either cannot do, or cannot do economically. The old adage of a picture telling a thousand words is coming to life in twitter streams, instagram shares, and all social media platforms. The video trend will be supported by increasing use of graphics in all forms, but particularly data visualisations as a means to communicate meaning from the mountains of data that we can now generate. The density of data on the web is now such that new ways to cut though, communicate and engage need to be found, and I suspect those will all employ visuals in some form, perhaps interactive?
- Pay to go ad free is a trend that will evolve suddenly, to some degree it is an evolution of subscription marketing. Free to date platforms will charge to be ad free, whilst new platforms and models such as the Dollar Shave Club will probably evolve.
- The death of mass and the power of triibes will become more evident. The “cat pictures ” nature of content of social media platforms will reduce as marketers discover smart ways to package and deliver messages that resonate and motivate action. The agility of digitally capable small businesses will open up opportunities for them their bigger rivals will not see, or not be compatible with their existing business models.
- Local, provenance, and “real”. Marketing is about stories, so here is a trend made for marketers, and you do not have too be a multinational, just have a good story, rooted in truth and humanity. ‘Hyper-local” will become a significant force. Marketing aimed at small geographies, such as is possible by estate agents, and “local” produce, such as the increasing success of “Hawkesbury Harvest” in Sydney, and the “Sydney Harvest” value chain initiative.
- Paid social media will evolve more quickly than any of us anticipate, or would be forecast by a simple extrapolation. Twitter will go paid, travelling the route Facebook took to commercialize their vast reach. Some will hate it as it filters their feeds, others will welcome the reduction of the stream coming at them from which they try and drink. Anyway, twitter et al will set out to make money by caitalising on their reach.
- Social will grab more of the market in 2015 than it has had, even though the growth has been huge over the last few years. Small businesses will either embrace social and content marketing, in which case their agility and flexibility will put them in a competitively strong position, or if they fail to do so, they will fall further behind, and become casualties.
- The customer should always be the focal point of any organisation, but often they fail to get a mention. It is becoming more important than ever that you have a “360 degree” view of your customers, as the rapid evolution of social media and data generation and mining is enabling an ever more detailed understanding of the behaviour drivers of consumers. The density of highly targeted marketing, both organic and paid is increasing almost exponentially, so if you do not have this 360 degree view, your marketing will miss the mark.
- Treat with caution all the predictions you read, keep an absolutely open mind, as the only thing we know for sure about them is that they will be wrong, as with this ripper from Bloomberg who predicted the failure of the iphone. However, as with statistical models, quoting George E.P. Box who said “Essentially, all models are wrong, it is just that some are useful” perhaps some of the predictions you find around this time of the year will be useful, by adding perspective and an alternative view to your deliberations for 2015.
As a final thought, if you think your kid may be good at marketing, be sure they learn maths and statistics. “Maths & Stats” will increasingly be the basis of marketing, and the source of highly paid jobs and service business start-ups.
Have a great 2015.
Allen
Nov 27, 2014 | Branding, Category, Change, Marketing, retail, Small business
A short while ago, I posted “10 strategies for SME’s to beat the supermarket gorillas at their own game” which generated quite a bit of comment and feedback. Amongst the feedback were a number of requests to go into more detail on each of the strategies, and so this is the first of the series, focussed on understanding the business model of the supermarkets.
I deliberately used the word “Gorillas” because of the extraordinarily concentrated nature of Australia’s supermarket retailers, with Coles and Woolworths between them holding over 70% of FMCG sales depending on the category, and whose numbers you believe.
You know the old question: “where do the 500kg gorillas sleep?”
Answer: “anywhere they bloody like”
That was the way it was, a comfy duopoly, however, more recently there have been some major strategy alterations by Coles which has dramatically lifted their financial performance, and Aldi has successfully carved out a growing niche as a third retail presence. In addition, there are still some very good independent retailers around operating out of the wholesaler Metcash, who also competes with some of their own and franchised retail outlets.
This mix, combined with the opportunities suppliers have to sell into food service and institutional markets and increasingly direct to consumers via the net and other means makes for an environment where the agile and insightful suppliers can be very successful despite the obstacles, but it is a very challenging environment.
The concept of business models is well known, in summary, it is the expression of how a business makes money. It always involves a matrix of revenue generated, the fixed and variable costs of generating that revenue, and the choices that the business makes about its customers and how they will be serviced, and the way they incur the costs of that servicing.
Supermarkets are a great example of a number of seemingly similar competitors that have slightly differing business models. At a macro level they have strong similarities, relying on volume, price, and shopper numbers to succeed, but everyone who shops knows that Woolworths is not Coles, is not Aldi.
However, they do have some common building blocks.
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- Revenue generation. Supermarkets generate revenue on both sides of the equation.
- Shoppers buy products, paying at the checkout.
- Suppliers “pay” for shelf space via a range of charges levied for every variable the retailers can dream up. Volume discounts, payment terms, promotional levies, preferred shelf positioning, promotional slots, access to sales information, and a host of others. Some are items for which suppliers receive an invoice, others are taken as discounts off the invoice price, increasingly applied automatically as a part of the trading term package.
- Cost management. Supermarkets work on very low percentage margins, relying on the volume to generate the cash margins.
- Fixed costs are a significant part of retailers total costs, made up of the provision of the retail floor space, the logistics infrastructure and personnel. Supermarkets attack their fixed cost base aggressively using their scale as negotiation tools with landlords and logistics suppliers, while keeping a very substantial proportion of front line retail staff as casuals rather than permanent employees so they can better adjust staff levels to match activity. The sorts of choices retailers make are between high density shopping centre locations Vs stand alone locations. There are costs and benefits to each which are considered as a part of their strategic decision making.
- The biggest variable cost is the cost of good sold, and they similarly use their scale to manage those costs downward. Tactics vary between retailers, but the core game is to maximise their margins while keeping prices as low as possible to attract the volume buyers. This is an extremely delicate balance.
- Transaction costs are usually pretty well hidden in most businesses, but are really significant in the case of supermarkets simply due to the number of transactions they make. For example, there is a cost to managing the buying relationship with a supplier, but the larger the supplier, the less is the total costs/unit of sale of managing that relationship. This has led to a dramatic reduction of the number of suppliers supermarkets have in any category over the last 15 years or so a trend further accelerated by the increasingly common strategy of limiting the number of proprietary brands in any category substituting house-branded products, and reducing the number of relationships to be managed. This has made negotiating shelf space increasingly hard, and because of scarcity, increasingly expensive for suppliers, in turn putting extreme pressure on small suppliers.
- Customer service and relationships. The retailers have each made choices about the pricing, location, ranging, and service strategies that sets them apart from each other, and more subtly, they have back office strategies that differ. However, their common aim is to have as much market share ass possible, as volume is the profit generator.
- As in any market, no retailer can be all things to all people, so each makes the choice of the “ideal” customer, and markets towards them, grateful for any overlap. Increasingly the marketing is being supported by customer loyalty cards and the data mining and personalised promotional opportunities that technology is delivering, but the fundamental measures of success remain unchanged: number of shoppers, share of wallet, and basket size.
- The two major retailers have very large marketing budgets which they spend in a wide variety of ways, across all channels of communication with customers and potential customers, and often in joint activity with their suppliers, which inevitably, the suppliers end up funding in return for volume. The smaller the retailer, the less “mass market” they are, so the tactics tend to differ, although strategically, finding willing supplier partners is a core part of every retailers marketing mix.
- Consumers generally want choice when they are in a supermarket, the more the better, in any category. Woolworths and Coles stores carry 12-20,000 Sku’s (Stock keeping unit) depending on the size and location of the store, a typical IGA might carry 8-10,000, while Aldi carry just over 1,000. The sku’s carried in any store also reflect of the demographic and cultural mix. The Woolworths store in Auburn in Sydney has a significantly different product mix to the Woolworths of a similar size in Double Bay.
- Every retailer uses some form of category management disciplines as a means to monitor, adjust and locate their inventory onto the sales face in the way that best meets their customers needs and maximises impulse pick-up. This is always a data intensive mix of the volume and margin of the individual Sku, (such as Ski strawberry yoghurt 200gm) group of similar Sku’s (all strawberry 200gm yoghurt) subcategory (all strawberry yoghurt) and category (all yoghurt) and between categories. They make choices about how many brands and types to keep in stock, where they put them, on shelf and in relation to other yogurts, and indeed other chilled products. A facing of yoghurt added is a facing of some other product gone, as the sides of the stores are not elastic. At the core of the category management activities is the need to best satisfy consumers, whilst competing effectively and delivering maximised margins.
Being agile, persistent, and prepared to experiment are about the best qualities a supplier to supermarkets can have.
Oct 17, 2014 | Branding, Marketing, Strategy
Majors Bay Rd Concord, Sydney.
No business can do everything, so the easy way to start is to do the thing you can do well, as long as it is at least partly the thing that also makes you different.
In a suburb not far from me in Sydney, there is a street that over the last 5 years or so has evolved into an eclectic mix of cafes and restaurants, occasionally separated by some other hang-over shop from a previous age. There must be 25 or 30 of them down both sides of the street, each vying for a share of the dollars the punters bring in from all over Sydney.
One of the cafes, on a corner, not only has plenty of outside room on the footpath, friendly service, and a good range of only mildly over priced cafe meals, and treats, they also roast their own coffee beans. This just reinforces that they have the best and freshest coffee experience in the area, supported by a blend of service, location and that aroma as they roast.
Intoxicating.
It also confirms them as “knowing their coffee” an important cache in an environment where coffee-wankery is reaching disturbing proportions, and cafe’s are springing up like mushrooms after rain.
It cannot be too hard to set up a roasting operation, it delivers a great marketing advantage to the cafe, offers an added income stream from bagged coffee sales, and, oh, did I mention the aroma?
Differentiating yourself is a must in this homogenising world, and doing it in a way that reinforces the marketing story in the way this cafe has done merits competitive success, which by my observation every time I go there is substantial.
Oct 13, 2014 | Branding, Marketing, Sales, Small business, Social Media
When looked at from the “helicopter perspective ” there seems to be three points of threshold competitive activity that you simply have to get right, or all else is irrelevant. Having a few meaningful measures at those three points is essential to understanding the effectiveness of a marketing investment, and testing ways to improve.
- Share of attention of your target market
- Share of engagement from your target market
- Share of wallet from your target market.
Traffic to a site is a useful measure, but really is not all that important, it is what happens then that is important. Just counting traffic is like counting people walking past a pet shop, they may even see the dog in the window, but that does not mean they are in any way likely to buy one. Your conversion rate to sale of this casual traffic would be miniscule. The challenge is to get the attention of those who for some reason are in thinking about how nice it would be to have a dog. When those people walk past, and see your doggies, you have a chance of getting their attention, which is why there are always some cute pups in the window, to grab the attention.
Having seen your doggies, those who walk into the shop for a closer look have given you a share of their engagement, you have the opportunity to talk to them, find out what sort of dog they may like, a pet for the kids, companion for an older relative, or something to keep the bikies away. Whatever it is, you need to know in order to be able to make an offer that meets their needs. They may also be looking elsewhere, so the share of engagement is important, are they serious buyers, or just filling in 5 minutes to look at some cute pups?
To get a share of their wallet, you need to be able to make an offer that persuades them to buy from you. There are many alternatives to a pet shop, breeders can deliver a very specific dog that will fill a purpose, with all the vetinary stuff done, or you can go to the kid down the road whose dog is just about to have a litter after a night of indiscriminate passion with some unknown stray, and comes with all the risks of the unknown. Alternatively, you could just go to the pound and find something that takes your fancy and needs a home. Share of wallet can also include the share of the ongoing costs of having the dog, food, accessories medicines, vet services, even in time a replacement. Measuring each of these situations delivers knowledge you can use not just for this sale, but on an ongoing basis.
Back to our e-marketing challenges from the doggie shop. Following are some simple metrics that you could consider.
Share of attention.
- Social shares, from any social platform
- Bounce rate and visit time. These two go together, how long the landing page hold attention, and what did the visitor do then, leave, or go to another page, followed by another…
- Pages per visit. Clearly if just one page was visited, there is less attention given than if the visitor had gone to 3 or 4.
Share of engagement
- Click through rates for your call to action tags.
- Comments made, on the blog, and/or in conjunction with the social shares. It is easy for someone to click the twitter share button on a website, but it takes a greater level of engagement to click the button, then take the time to add an endorsing comment, and this social proof can be marketing gold.
- Downloads of information from your site
- Questions that come back seeking information and clarification
Share of wallet.
SOW is one of the most powerful measures on the success of revenue generation efforts, and almost always requires qualitative input. How you define the wallet shapes the numbers that will be generated. Our pet shop owner may choose to define his wallet simply as the share of sales of pets he generates, in his area, or he may include the accessories and food after the initial sale, and if he has a vetinary surgery service as part of the enterprise, he may or may not include that, depending on what is important to his understanding of the returns coming from the investments made.
- revenue per customer, or “basket” size
- Purchase “basket” contents,
- Customer return visits that deliver a transaction
E-marketing is the shiny new thing, different and potentially seductive, but in the end it is only the set of tools that is new, the principals of marketing still apply, the toolbox is just bigger and more complex. When you need help sorting the complexity, the experience of the StrategyAudit team is at your disposal.
Sep 29, 2014 | Branding, Customers, Marketing, Small business
Share of wallet, share of attention
Share of Wallet is, very simply, your share of an existing customers total purchases in a domain you service. You can fiddle at the edges in the way you define the domain, but it remains that better servicing an existing customer to get a greater share of their wallet is almost always more productive than going hunting for a new customer.
Share of attention as a measure can be as simple or complicated as you like. Definitions vary widely, but usually include measures of aided and unaided brand awareness, and the awareness of a specific marketing activity amongst the target market of that activity.
Share of wallet is the measure to be applied at the bottom of the sales funnel, share of attention the measure at the top. It is unlikely that a marketer will ever get to have a share of wallet until there has been a share of attention established.
Share of wallet always has been, and still is, a simple measure of great power. Share of attention used to be pretty simple when the communication mediums were limited to the few TV and radio stations, magazines and newspapers people consumed, but has become remarkably more complicated since the fragmentation of media.
Attention is the thing that those with whom we wish to communicate allow us to have from them, it is a gift of their time and intellect, and we so often undervalue or even abuse it.
We have 8 hours sleeping, 8 hours working, that leaves 8 discretionary hours to be spent, broken up into social time family time, entertainment, and all the other things we do with our lives.
Gaining peoples attention amongst all the competition, the first and necessary task in a marketing program is a huge task, but the benefit delivered by digital media is the huge palette we now have where creativity, innovation and an intimate understanding of the market and customers inhabiting the market pays dividends.
Sep 22, 2014 | Branding, Governance, Marketing, Social Media
Your facebook, linkedin accounts, and all the other social media platforms with which you interact are not home, they are places you visit, and perhaps rent a space to leave something behind for storage and easier access and use. They can be taken away, moved, or you can be banned, excluded, or diminished without being able to do anything about it.
Just like renting a house, you have some rights, but ultimately, you do not own it, and the ones who do hold all the cards. When you own the house you live in, you can do pretty much anything you like. You own it, and it cannot be taken away.
When you think about your digital life with this simple thought in mind, it should change the way you behave.
You know the old story, rental cars go really fast in reverse, they can be abused by those renting them, simply because they do not own them, and are not responsible for the damage done beyond the superficial. That is also true for rented space on the digital platforms others own. Your content, presence and connections can be misused, abused and lent to others without your knowledge or consent. Just ask the B class celebs who recently have had their nude pictures shared from the Apple servers.
Should, have kept their nude antics at home.
Anything you want to own that is held on a public platform, your mailing lists and personal photos for example, must be assumed to be at some point, compromised. If you do not want the risk of it being on the front page of the paper one day, keep it at private, at home.
At the very least, back them up onto something you own, leaving it where it is on a rented or worse, free platform, anything can happen.
For business, it comes back to the notion of owned, earned and paid media. Each has its place, and can be complementary as well as synergistic, but make sure you get the mix right, and that you understand the implications.
As a result of the increasingly powerful grip the social platforms have on the reach you can generate organically, driven by their business model. It is therefore ESSENTIAL that you have your own digital real estatre.In other words, a website hosted on your URL, which actd as yur home base. .
