Is Facebooks ‘moat’ the best ever built?

Is Facebooks ‘moat’ the best ever built?

Apr 16, 2018 | Change, Marketing, Strategy

 

Building a moat seems an odd metaphor in a strategy and marketing post. Some explanation of moats may help.

My personal definition of marketing has been ‘The identification, development, protection and leveraging of competitive advantage’. Not a textbook definition, but one that has worked for me. In other words, build a ‘moat’ as a foundation block of your strategy.

Warren Buffet, who deserves to be listened to any time he chooses to speak, coined the term ‘economic moat‘ to describe his investment philosophy. Find an asset that has a ‘wide moat’, the wider the better, but is undervalued, and get  inside where the power of the moat can be employed to extract what economists call ‘economic rent’ or to us simple people, returns better than the average return on capital in that  industry.

Theory is that when such a valuable asset is identified, competitors will come in, and by the nature of competition  bring the return on capital back to the average. The game therefore is to be in front of the pack.

Moats are built in many ways. They can be wider, deeper, more turbulent, on the other side of a desert, be inside a ring of outer-moats, and so on. Point is, when there is gold in the castle, the barbarians will try and find a way to bridge the moat, and be prepared to spend proportionally to the size of the pile of gold in the castle.

Once you have a great moat built, which takes time, effort, and a lot of resources, defence becomes easier. However, defence is also static, the initiative is ceded to the opposition, so a wise moat owner busily uses some of the gold to build another moat somewhere out of the eye line of the barbarians. Unfortunately, most moat owners are so focused on the defence of  their current pot of gold that they hoard it, instead of leveraging it out of sight.

Kodak had a moat, a great one, deep, wide, incredibly well defended, but they left the side door to  their lab open so that the barbarians knocked off their own weapon, the digital camera, and used it against them. Better for Kodak to have taken the digital camera they developed down the road a bit and built another castle with a moat.

Same with Blockbuster. They even had the opportunity to buy Netflix, for what amounted to pocket money, but declined. Their moat got drained, and the barbarians came in the front gate.

All the noise around Facebook over the last month since the Cambridge Analytica fiasco surfaced was focussed last week on the sight of Mark Zuckerberg in the early stages of moat defence. Facebooks moat is perhaps  the best thought out, strongest, and best defended moat ever built. Not only are  the defences of Facebook itself daunting, but the pot of gold has been used to build a series of moats around Facebooks castle that are themselves defended with a series of interlocking moats.  66 of them since 2005, when Facebook itself was a start-up. Many we have never heard of, but all added to the Facebook moat system in some strategic way. A few however, have huge  moats themselves, still being built, and offering interlocking fields of defensive fire to the kings castle.  Instagram, WhatsApp, Oculus, were large acquisitions, on top of the impressive list of offensive and defensive tools developed in the Facebook labs and deployed strategically.

The US senate has been questioning Zuckerberg for a couple of days, and with some exceptions, making turkeys of themselves.  Senator Hatch has been a prime turkey, demonstrating breathtaking ignorance by asking how the business model worked,(1.30 into the video) and being unaware of the presence of ads as the revenue generator. The comparison between the questioners and Zuckerberg was so great the share price of Facebook went back up, delivering Zuckerberg a cool $3 billion for a few hours ‘work’

While you can build a deeper moat with that sort of loot, the real point is that the barbarians will now keep on attacking, using the regulators as their weapons of choice, and I suspect in time, as Zuckerberg himself acknowledged, they will be successful in getting a few across the moat. I suspect the barbarian scouts will look at the rules coming into force in the EU in May, the ‘General Data Protection Regulation’ (GDPR) which will mandate the manner in which consumer data is managed. It requires that consumer consent to the collection of data be explicit, that they have the right to be ‘forgotten’ and have the right to manage their own data portability.

Money and history is on the side of the  Zuck, he does not seem likely to make the mistakes Blockbuster and Kodak amongst many, made, despite the barbarians finding some potentially potent weapons. I cannot help but wonder if the turkeys are up to standard for the game that will be played.

 

Photo credit: Malcolm Gardner via flikr. Bodium Castle Cornwall

 

6 customer service clichés deconstructed.

6 customer service clichés deconstructed.

Apr 11, 2018 | Customers, Marketing

It seems that every time I pony up for another insurance bill, I get one of those customer satisfaction surveys emailed within 24 hours, asking a few inane questions about my ‘experience’ and the level of service I received.

There is no room to say it was at best nondescript, often crap, that insurance is a cost I resent, am  suspicious of, and just hope that I never have to find out (again) if the after the disaster facts are actually as the advertising blurb promises.

Customer satisfaction indeed.

Normally I just ignore them, as responding only seems to encourage. (a bit like voting)

However, a recent emailed questionnaire got me thinking about what customer satisfaction really is, and how we go about creating and retaining such an ephemeral and personal idea.

Is it enough that we ‘satisfy’ our customers, and if so, what does that actually mean?

‘Delight our customers’ is a phrase that seems to have made it onto a few mission statements over the recent past. Is that one better than ‘satisfy’ or just more hyperbole?

Jeff Bezos famously demands that there be an empty chair in every meeting, a reminder that everything Amazon does is aimed at customer satisfaction. Reed Hastings has built Netflix from a minor irritation to Blockbuster into a digital entertainment behemoth by being ‘customer obsessed.’

If we are to be truly customer focussed, what should all  the common clichés really mean?

‘We listen to what our customers tell us’

Really? I listen to what my aging mother tells me, but do I follow the advice? Rarely these days. It should mean that we understand not just the words, but  the intent, and we use the information to test, and retest the delivery of our value proposition.

‘We obsess about customer satisfaction’

Most obsessions I have seen are all about the obsessor, rather than the obsessee. (are they really words?). It makes some feel better to tell ourselves we are obsessed with customer satisfaction, it justifies those long workshop sessions in a nice location. Most times when I go out and ask customers what they think of the level of service they receive, it falls short of satisfactory, let alone obsessional, and is markedly lower than the score businesses give themselves when asked the same question. It is easy to pass this off as delusional, but the reality is that customers rarely think about service until they experience it, and then only when it fails them. By contrast, companies are genuinely thinking about service consistently because it is important to them, but in an abstract way.

‘We understand what the customer expects of us’.

That is great, but also a bit unusual, as different customers almost always are looking for different things. In B2B businesses, it is essential that you understand the detail of a customer, and potential customers business processes so that you can really tailor your offering. A bit harder in B2C, but it is still true that individuals are seeking a range of different things that add up to ‘satisfaction’ in their minds. The real task is to create a situation where the customer sticks with you through thick and thin, simply because they believe you are better than any alternative.

‘We put customers in front of profits’

This gets trotted out regularly, without any understanding of the implications. The reason we have customers is ultimately, to make profits, and without profits, there will be no customer service at all. There has to be a balance, but it is true that satisfied customers lead to higher profits, it is a hard balance to get right.

‘The customer is always right’

The old perennial, and it has always been nonsense. However, treating customers with respect, humility and giving them the opportunity to be right is a great strategy. The most common example used is the retail  chain Nordstroms in the US. As the story goes, take a car tyre into Nordstroms and demand your money back because it was not up to expectations, and they will give it to you, despite not selling tyres. Perhaps it should be ‘The right customer is always right,’ to reflect the reality that there are some customers who are more trouble than they are worth, and you hope they go to your opposition.

‘The quality of our products speaks for itself’

No it does not! You need to speak for it. The base expectation of any customer is that the product you provide will deliver the outcome you promise. That is quality. A Hyundai will get you reliably from point A to Point B, does that mean it is the same quality as a Bentley, which will also get you reliably from A to B?. The answer to that question will most often be ‘No’  but then defining the ‘Value’ delivered by the extra few hundred grand to buy the Bentley becomes a different conversation entirely, with different customers.

Creating great experiences for customers brings them back for more, delivering revenue at much a reduced cost  than if you had to find a new customer. Share of Wallet and Lifetime Customer Value are the most undervalued measures of sales effectiveness, and also the most effective.

‘Burley’ is a great metaphor for marketing

‘Burley’ is a great metaphor for marketing

Mar 16, 2018 | Marketing, Small business

 

As a kid, I used to go fishing with my dad sometimes, usually off the rocks around Sydney’s northern beaches. He was a good fisherman, often came home with dinner when others around caught nothing.

His explanation of his relative success was hard for a kid to understand, a combination of the tides, moon, time of year, the spot he picked, and some mysterious concoction brewing under the house called ‘Burley’.

Burley he told me, was a brew he varied depending on the fish he thought would be around, making it easier for them to find him, and willingly receive bait that was irresistible, but hiding a hook.

Not  a bad metaphor for marketing.

Focus on the most likely target given the conditions

Go to where they might be found

Spread around something irresistible to them to attract lookers

Ensure you have the right bait when they turn up

Heat up the pan to receive the ‘incoming’.

 

Marketing ‘burley’ is a tricky thing to get right, so find someone with the experience and knowledge to  ensure your mix works.

Image credit: Hatalina via Flikr

8 habits to generate a return on your investment  attending network meetings

8 habits to generate a return on your investment  attending network meetings

Mar 14, 2018 | Customers, Marketing, Strategy

 

As small business owners, most of us go to network meetings of some sort. BNI, Rotary, your industry association, the local SME network, whatever it is, with the idea that we will make connections with people who may, at some point be useful to us, and to whom we may be useful.

Going to these meetings usually costs a bit of money, but more importantly to time poor entrepreneurs and grinders, it costs us our time.

So how do we make the most of the investment?

It really is pretty simple, all it needs is to be genuinely interested in others, genuinely prepared to help, without necessarily asking for anything in return. This builds trust, and trust is reciprocated.

However, there are some simple things you can do to communicate your value without having to blab it.

Eye contact.

Maintaining eye contact signals sincerity and warmth, weather you are speaking to an individual, or a group. Either way, maintain eye contact. When speaking to more than one, do not  just gaze off into the ether, maintain eye contact with individuals in the audience, move it around, to engage with numbers. Few things annoy me more than meeting someone who is then looking over my shoulder for someone more interesting

Use their name.

Using someones name generates some level of intimacy, especially when we have just met. We are all told that we should repeat back the name of someone to whom we have just been introduced, but many of us do not, so the name goes as we are introduced to the next person. Do whatever is necessary for you to remember peoples names and fall back on the old excuse of ‘I am hopeless with names‘ as sparingly as possible, as it communicates ‘you are not worth knowing‘

Listen actively.

This really just means you give your full attention to the other person when they are speaking. Listen to them, repeat back what they have said as confirmation and perhaps clarification, and ask relevant questions that demonstrates you have been listening thoughtfully, giving their ideas and words your full attention.

Know who you are talking to.

Often this may not be possible, but if you can, know a bit about the person you are talking to by doing a bit of research beforehand. This enables you to ask questions, and make observations to those you meet that will tweak the emotions and motivations of their favourite person, themselves. Often this is impossible, but these days using LinkedIn and the various notifications sent around of who is attending, enables some level of research to be done prior to the meeting. This research always pays off.

Mirroring.

Body language 101 teaches us that people who are interested tend to mirror in very automatic and  subtle ways, the mannerisms and body language of those we are communicating with. There is considerable research that demonstrates conclusively this is not just learned behaviour, but an evolutionary biological process that enables us to distinguish between friends and enemies. It is not creepy to  set out to reflect body language, it is simply empathising.

Be respectful and grateful.

When someone has given you their time and attention, be grateful, and respectful for both.  When you communicate that sense of gratitude, most recipients will return the favour in spades. Wandering through the chairman’s lounge in an airport nearly 20 years ago, I walked past Pat Rafter, at the height of his career, just sitting by himself. By chance, I  caught his eye, slowed down without any intention of stopping, and thanked him for  the pleasure he had given me watching him play over many years. He responded by inviting me to sit, and we had a terrific conversation for 20 minutes until the flight was called. He would not remember, but I do!

Follow up.

This is so obvious it is often missed. Following up a casual meeting at a network group is the first step to be taken in the building of a relationship that might deliver a transaction at some point.  It is also the case that those you meet are often a window into their networks, so even if they are not in your ‘ideal customer’ profile, it is fairly certain that they know someone who is.

Do  not expect an immediate return.

Business is still largely done between people, despite the B2B label much of it goes by. As people, we prefer to do business with those we know,  like and trust, and that implies a relationship into which some investment of time, energy and sometimes a lot of caffeine has been made.

 

Despite all the digital tools, there is nothing like looking into the whites of someones eyes to decide if you want to have more to do with them or not.

Photo credit: Andre Luis via Flikr

The rise and rise of the digital milkman

The rise and rise of the digital milkman

Mar 8, 2018 | Change, Marketing, retail

The retail gorillas, Coles and Woolworths may still have 75% of grocery market share, but they are in the gunsights of a horde of hunters, all using new fangled weapons developed from the base of ‘Digital’ in a myriad of ways.

Meanwhile. The gorillas are acting like frogs, quietly doing backstroke across the pan, and back again, as the digital hunters pile wood onto the stove. They do have some digital services, order and delivery, order and pick up, but all suffer from the disease that eventually killed Thomas Dux, they are an offshoot of the current model, not an experiment  designed from the ground up to disrupt and destroy the current model.

In the future, the business model we are all used to, the suburban or mall based supermarket carrying anything from 1,000 Sku’s as does Aldi, up to 12-20,000 as do the biggest Coles and Woollies stores will decline significantly in importance. In the future, the  supermarket as we see them currently will be a much smaller part of the revenue pie, for a number of reasons:

  • Cost of entry is reducing. Cost of entry into FMCG has been, and will be further, eroded. From global sourcing from low cost non proprietary manufacturers, to the ability to cut out the retailers with direct to customer channels. These days, all you need is an idea, a little working capital and youtube channel. This may be a radical over-simplification, but there are now products and brands we have never heard of that are selling successfully using this direct model. There have been some notable successes, like Dollar Shave club, a 2012 start-up recently sold for a billion dollars to Unilever, after becoming the second largest shaver brand in the US. No supermarkets. I have read commentary that a $billion hugely over values the purchase, but given it gives Unilever an entry point into a category where they had no offerings, that is adjacent to their mens grooming and personal care business, it makes a lot of sense. Similarly, Procter and Gamble, not known for knee jerk marketing, is trialling a laundry pick-up and delivery service branded ‘Tide Spin’ in Chicago,  and is experimenting with Amazon Prime, and IoT  again using the Tide
  • Availability is the new benchmark. The gorillas have up to 20,000 SKU’s on their books, most individual outlets will not have more than 10,000 on shelf, available, after local conditions are accommodated. Digital retailers have hundreds of thousands of options, all available within a very short time. If you need it right now, immediately, go to the local store, and if they have it, so can you, but if you can wait a day, you can have whatever you want delivered. It seems to me a that consumers are prepared to pay a premium for convenience, simply an anagram (almost) of ‘Availability’.
  • Customer loyalty is dead. Loyalty to a channel, and individual retailers in the channel has been eroded terminally by the range of purchase options opening up. Coles and Woolies compete on price, and parking, only two of a wide range of options consumers now have available to them to determine ‘Value’  of a purchase channel.

 

The complication for digital ‘mass grocery’ has been that challenging ‘last mile’. How do you get the products to the consumers efficiently, and cost effectively. It can work pretty well for high value dry goods, perishables present  their own particular problems nobody has solved yet. Indeed, Aussie Farmers Direct, one of the groups that seemed to have survived the start-up phase, and had built a customer base and presumably processes to manage customer relationships went into administration on Monday, March 5, citing competition from the supermarket chains as the reason.

However, autonomous everything powered by data will deliver us models that work, just as Uber cracked the taxi industry, and is now moving into home delivery for restaurants with UberEats, Supermarkets are an easy next step.

As I reflect on my commercial history, part of it was in the dairy industry, where there were milkmen calling on pretty much every suburban home every day. There was a ‘Depot’ system covering the country, and every milk company tried hard to get the ‘milkos’ to deliver more than just milk. After all, they were there anyway, so the marginal cost was low. Hindsight, and we knew it at the time, tells me that the communication and payments systems were not up to the job 30 years ago.

They are  now, so I predict the return of the ‘Milko’ just the digitally enhanced model. Pity the dairy companies all took the short term view and flogged off all that real estate with the depots on them!

Photo credit: Ben Watkin Via Flikr.

7 tips on  how not to be boring while presenting.

7 tips on  how not to be boring while presenting.

Mar 6, 2018 | Communication, Marketing, Small business

As small business owners, we are often called on to speak publicly, and like most people, find that intimidating, and for some uncomfortable to the point of nausea.

There are many pieces of advice on how to structure a presentation, thousands of them on the web, and a few contributions from this site, but little about ‘how’ to speak beyond the very good advice on body language.

For most the degree of discomfort is brought on by fear.

Fear of making a dill of yourself

Fear of forgetting the important bits

Fear of boring your audience.

All can be addressed using a few simple things, that will not remove the instinctive fear of being the one outside the herd that in evolutionary times became a tigers breakfast, but at least will give you a few tools to beat the beast off.

Do not repeat to them what they already know.

Most speakers just repeat lots of stuff in the public domain, things most already know, or they pimp their companies and products.

Both are as boring as batshit.

You have been given the privilege of controlling the time of others, and the status of expert by whoever is organising the event you are speaking at, do not waste it by repeating boring stuff. Even if all you do is reverse the usually quoted factoids, and adding a bit, it will be more interesting. For example, instead of just stating ‘8% of transactions are now carried out ‘on line’,  say ‘while 92% of transactions are still carried out in person,  75% of purchasers do extensive research on line before you see them in the shop. How should that impact on your marketing strategies?’

Do not speak about things where you have only superficial knowledge.

Tempting as it is for some of us to speak at the opening of an envelope, resist the temptation unless you can genuinely impart some relevant and useful knowledge to the audience. Knowing you have valuable information that others will benefit from makes the process of imparting it that much easier.

Do not read to them what they can see.

Reading slides back to an audience is an absolutely sure fire way to ensure they all dive for their phones to check the Facebook update or what their  mother in law is doing for dinner. I cannot believe how often I see this, we have all seen it, yet  many allow themselves to knowingly bore the pants off the audience by doing it themselves. It is simply a response to fear, we can wrap ourselves in a sheet that excludes others, removing the presentation obligation to ‘connect’ with the audience.

PowerPoint has destroyed our instinct to be interesting when we speak, to hold the audience’s attention.

Resist the siren song of PowerPoint. When you use it, which is in most cases, always use it as no more than a memory jogger and to keep you moving along to a plan by having no more than a couple of words on a slide, but using it as a way to communicate in simple graphic manner the point that you are currently making. If you cannot condense that part of the discussion to a single graphical representation, remove the whole thing.

Do not just give them your opinion.

An expert speaker always has a point of view, but to be truly persuasive, that point of view will be based on solid facts, research, and data. Deliver that data, while articulating how you used it to form the views you have. Demonstrate the links between cause and effect. Failure to do this effectively is a large part of why we no longer trust politicians. While they are often slick talkers, they just give us opinions, and mostly we know they are not their private opinions, just the convenient line of the day, without any foundation of relevant fact and cause and effect links.

Do not stand still.

Particularly, do  not stand still behind a lectern.  When speaking, the stage is your domain, dominate it by moving around, using it to make your points, engage with the audience, match your voice to the point you are making, and be interesting physically. Back to evolutionary psychology, the tiger will have less chance at breakfast if the target is moving, so  move!

Do not just recite, tell stories.

Imagine your audience is one of your kids to whom you are telling a bed-time story, and you want more than anything for it to be memorable for them. To be memorable, every story has a structure. A beginning, an end, and a middle bit, drama, tension,  villains, heroes, laughter and sadness, suspense, and a point that you are trying to make. Use as many of them as possible in your presentation, with particular attention to the point to be made.

Do not end with thank you for coming.

You have been given the status of expert, someone worth listening to, by whoever has organised the gathering. Do not surrender that status by thanking the audience for all being there, for their attention. Instead, demonstrate why the investment of their time has been worthwhile, by telling them what to do next.

When you manage all that, I guarantee that not only will you have been of benefit to the audience, you will probably have enjoyed the experience, at least just a bit, and you will be better for the practice next  time.