Category Archives: marketing

The real price of discount retailing

With markets as tough as they are it’s not surprising that more businesses than ever are weighing up whether to adopt a short-term tactical approach or hang tough with the longer-term strategic thing.  Retailers are right at the centre of this dilemma and you only have to glance at your local high street or shopping mall to see the choice that many have made.  Stores with perpetual sales or cut-price offers have become a feature of the retail landscape in pretty well every country around the world.

Even though they know that the path to instant gratification has an inevitable pay-off, cake today is becoming an irresistable proposition for idea and cash-strapped marketers, who can only be aiming to be somewhere else when the bill arrives.  So, what is the price of this kind of short-termism?

In this context there are two types of retailer – those who sell branded goods and those whose offer comprises mainly own brand.  The first group can be further divided into premium and mass-market.  The premium retailers, by and large, are chasing margin with high prices.  They are usually the last to have to make the short-term/long-term choice because their clientele are well-heeled and unfamiliar with the financial reality most of us live with.  On the other, far more popular side of the street, mass-market sellers of branded product are “champions of the consumer”.  We rely on them to negotiate with manufacturers on our behalf to deliver the branded products we all hanker after at advantageous prices.

The own brand retailers come from a different direction.  The value of their proposition is entirely their own making.  Customers recognise own-branders as an authority in the things they sell and trust them to use their knowledge and experience  to produce great value product of their own.  Retailers like this that come to mind would be Ikea and Marks and Spencer.

Now consider for a moment discount promotions as a concept.  Again, you could say they come in two kinds.  The first is the seasonal event that we have come to expect.  This is legitimate.  We understand that these promotions are the retailer’s way of clearing slow-moving stock or ends of lines and as long as it remains occasional it and the retailer will retain credibility.

The other kind of discount promotions are those run by struggling retailers to generate sort-term business.  These usually achieve their immediate objective.  The problems arise with repetition.  You must have heard people dismissing retailers as “the place with the sale on all the time”.  The perpetual sale isn’t credible, so let’s not kid ourselves that consumers are buying this line.  If a product appears to always be reduced to 99p then that’s all its worth to the consumer and no amount of double pricing is going to convince them otherwise.  We’ve all witnessed the Pierre Cardin brand get pulped in markets around the world.  Once a respectable, desirable brand, constant deep discounting has reduced it to a bargain basement brand.  Nobody pays full-price for a Pierre Cardin suit because we all know that it will be 70% off next week!

So, when do you start heading into the mire of perpetual discounts?  The answer is the minute you abandon the accepted seasonal event norm.  Then its just a matter of how far you venture in this direction and how quickly you get back to firm ground that determines whether your business is irreversibly damaged.  Discounting is like a drug habit.  Initially the hit is rewarding – you make a load of cash quickly, but as you stick with it your dependency increases and the reward diminishes.  You lie awake at night racking your brains for new superlatives to up the anti in your advertising, margin disappears and eventually your turnover will too.

Your hard-won brand community will dwindle.  We wear the products we buy and carry branded shopping bags with pride as badges of belonging.  Where’s the cudos in belonging to to the cheap shop community?  Customers will feel betrayed.  The brand that you have devalued to junk had defined their status.  Now you’ve pulled the plug.  Your authority disappears over night and whatever you say to try to re-establish value in your offer is futile.  You are just a cheapskate discounter and there’s no way back!

If your regular customers don’t abandon you they’ll do something even worse –   they’ll only turn up for the deals that you make no money on and the only new customers you can expect are all broke like you.  When The Full Effect Company went into one well-know organisation a few years back, we discovered that a third of their customers were actually costing them money because they only bought the bargains with little or no margin.  There was no spoon-full of sugar to help the medicine go down in this case, we just had to loose 30% of their customer base.  However, there are few shareholders who would stomach this kind of treatment unless, as we did, you manage to get back on track very quickly.  We replaced those customers with new, profitable ones within twelve months and met the company’s growth targets.

So, before you launch your umpteenth BoGoF this year give some thought to where this road is leading.  You may not be planning to be around when this chicken comes home to roost, but there aren’t that many juicy retail marketing jobs around, so you might want to think again.

Time for a new model from Europe’s car manufacturers

When the world’s car-makers were feeling the pinch a few years back I wrote a piece speculating on the future shape of car manufacturing in Europe.  Now we are facing double-dip recession and a double-dip car-sales slump in Europe, so maybe its time to dust off my predictions and start again.

Last time around, the many trade-in schemes and new cars for scrap programmes put in place by  governments desperate to save their critical motor industries and minimise unemployment were, in typical fashion, exploited by manufacturers with no ideas, intent in salvaging the old ways.  The changes that were really necessary never came about.  We’ve struggled on with a Sellotape solution for a while, but there looks like being three million fewer cars sold in Europe this year than in 2007 and the French and Germans in particular haven’t scaled back production.  It’s true that luxury marques like BMW and Mercedes continue to sell, which also suggests that manufacturing standards also need looking at, but both countries still have all the overheads without the sales.  What’s more, cash-strapped governments aren’t in a position to bail them out again, so it’s becoming clear, even to the industry’s ostriches, that they are going to have to bite the bullet.

The idea I was expounding previously was that car design and marketing would be separated from manufacturing in much the same way that The Coca-Cola Company separates marketing from production.  If the automotive industry were to adopt this approach local manufacturers would build cars for global brands who would design and market them.

If you think this is far-fetched, you should know that its a model that is already up and running.  The Finnish Valmet company already produce cars with other firm’s badges on them and look set to start producing the Mercedes A-Class.  There seems no reason why businesses that specialise in production wouldn’t have a better chance of meeting the quality and volume demands of the shifting market.  There may be other advantages to this arrangement too.  For example the carbon footprint of car production is increased by the distance they often travel from production plant to showroom.  There seems no reason why we shouldn’t see production lines for VW and Fiat running side-by-side in the same specialist local plants.

London 2012 – the best Brand Britain could have hoped for.

As a Brit, particularly one who is keen on sports, I find myself swelling with pride at the performance of both the 2012 Olympic committee and the British athletes.  In short, from planning through building to competing, we nailed it!  However, as a marketer I’m even more delighted to see signs that whoever is driving this also knows what to do next – because, when you’ve invested 14billion quid in something there has to be a “next”.

I’ve said before that one of the reasons that countries like the US and Australia have in the past achieved such high national branding equity is that they have used their sporting successes as a vehicle for campaigns designed to boost national pride.  I’m a great fan of  events of any kind designed to generate publicity for my client’s brands and I have invested heavily over the years in initiatives designed to grab press attention.  To be honest I had not really expected the Brits to rise to this occasion.  After all, we are renown for not blowing our own trumpet.  However, London 2012 has been an astounding success and the media have been managed better than I think anyone could have hoped.  The UK habit of highlighting negatives like shortage of security personnel and drugs cheats, rightly failed to gain traction, and once the medals started flowing the PR guys were out of the blocks like Usain Bolt, steering the hacks in the right direction.  This is looking like  PR as it should be, but there’s far more mileage in this yet and managing the post-event campaign is a whole new challenge.

Its easy to see why, when the soccer-players of our football-mad nation are better at rolling around on the floor than they are scoring goals, the masses become cynical, but I think the great British public have received a really well orchestrated education in the last couple of weeks in the hardship, grueling challenges and absolute dedication demonstrated by champions worthy of the name.  We’ve had our attention drawn to the personal stories of real heroes we never knew we had.  We Brits have certainly had our values re-aligned and now the marketers have something to work with.

It will be interesting to see how government and commercial enterprises responds to this once-in-a-lifetime opportunity to build national brand equity.  There is nothing like sport to engage a community, kids love it, young adults rise to the challenge and even armchair sportsfolks get behind it, as we have seen over the last couple of weeks.  Will we have an even bigger squad of champions in 2016?  There’s no reason why not, but there’s whole lot more that Brand Britain can gain from this both domestically and internationally.  Its up to the marketers, politicians and organisers to rise to the challenge set by our new sports heroes.

Turkish Airlines and the price of a reassuring brand

I started writing this somewhere over Eastern Europe aboard a Turkish Airlines Airbus 320 bound for Istanbul the third leg of four in a round-trip from Bahrain to Europe and back.  I can’t recall ever having traveled Turkish Airlines until two weeks ago when I made the reverse trip from Bahrain to the UK, but had I not been a captive of my round-trip ticket I would probably have switched carriers at Istanbul, never to return to the carrier again, such were the horrors of my first leg.

I find it hard to remember a more dour cabin crew than that which accompanied me from Bahrain to Istanbul.  I felt sure their training must have included hours spent in front of mirrors perfecting their scowl.  Their general, attitude toward passengers was variably off-hand or aggressive and they seem to have taken their frustrations out on the in-flight fare, which they had managed to suck all the moisture out of before throwing it at us.

What a contrast, therefore, was the second leg of the same journey, where we were greeted by smiles and tended with tasty, well-presented (by airline standard), in-flight catering.

Leg three of the round-trip was even better.  New plane, pretty attendants with nice smiles and truly good food and as I lounged in leather-clad comfort I reflected on how my opinion of Turkish Airlines may have differed, had this been my initial experience.  The final leg demonstrated how great, well-trained customer-facing personnel can even overcome other deficiencies in your offer.  The last of the quartet of Turkish Airlines planes I was to experience was clearly in the twilight of it’s years and it hadn’t been at the front of the maintenance queue either.  I found myself hoping this was because they had spent so ling diligently servicing the engines!  In the cabin there was only one working toilet, a number of the entertainment centres were faulty and the crew were put to the test by a woman with two juvenile delinquents who were sitting behind me and promised to ruin my flight.  However, they didn’t because the cabin crew worked hard to bring the experience back on track.  The complete event has underlined to me the importance for any business of achieving consistency and the essential role that internal marketing plays in that.

I have spoken many times in my seminars and writing about the importance of consistency in the success of a brand.  Not just consistency between the different facets of your business, but within each one too.  Had my third flight been my introduction to Turkish Airlines and what was my first been a subsequent experience I would have been more ready to accept that it may be difficult to get it right every time.  As things are I need more reassurance before I accept that Turkish Airline’s good stuff isn’t the fluke!  I often quote some statistics I picked up years ago that say it may cost ten times as much to sell for the first time to a customer than to make subsequent sales to the same person, but it will cost a hundred times that to entice a customer back once you have disappointed them.  Such is the price of reassurance.

Customers need the reassurance that only consistency will provide and of course while its best for everyone if you are consistently good, with all the implications that has for customer retention, pricing policy and margin; being average all the time is better than lunging from crap to brilliant in a way that makes doing business with you a lottery.

Achieving consistency is about nothing more or less than internal marketing.  Identifying your brand, its values and attributes and introducing them to every employee at every level of your business in such a way that they adopt them as their own.

If you have the right people in place they’ll take this and run with it bringing their personal skills and experience to bear and adding value to your brand and therefore your business.  There’s no shortcut.  Organisations who have chosen instead to apply a dictatorial approach to what they call “training” have consistently failed.  As dictators around the world have learned, dictatorship only works if you can preempt every eventuality, which of course you can’t, so you have to adopt a more nurturing approach and allow well-trained and motivated staff to interpret your brand values. In fact, one of the organisations that has achieved most success in this is another airline – SouthWest Airlines, who famously wooed customers with a consistent, if off-the-wall, brand personality through two industry slumps, almost uniquely maintaining profitability throughout.

These days we are all looking for ways to squeeze the highest return from investment and with the price of mainstream media what it is, communicating within your own business looks like a bargain.  What is more, most organisations find that the return they get on internal marketing significantly outstrips that of external campaigns.

I’m quite sure that had the cabin crew on my Bahrain to Istanbul flight focused on delivering the Turkish Airlines promise my overall impression of the airline would have been a lot better.  As it is, because I was a captive of my round-trip ticket the carrier had the chance to demonstrate what they really could do and I might just be persuaded to book with them again, but probably only if they were cheaper than their competitors.  As I said … such is the price of reassurance!

How catering franchises change the world

As I have travelled around the world, I’ve become an observer of retail food franchises and the way they perform when they are a long way from home.  Catering franchises are among the most potent brands we have.  Customer loyalty can be the strongest you’ll find in the retail sector and the emerging capacity of some brands to develop their brand communities is only going to enhance that.

These brands change the communities in which they reside just as the individuals that join any brand community changes that a little by bringing with them new character traits and values.  Restaurants like McDonald’s and KFC have changed countries and lesser retail food brands do the same to a lesser extent.  Today I made my second visit to what is fast becoming one of my favourite restaurant chains Tony Roma’s and as I sat there listening to The Eagles’ Hotel California I considered the impact they are having on the local community.  Quite significant I believe, because this is Saudi Arabia, where music is banned in any public place.

Here Tony Roma’s is a franchise run by a local Sheik already heavily into retail.  Clearly he is rather more progressive than others of his countrymen and though I don’t know him I am sure he must be a controversial figure.  Although Tony’s famous pork ribs were conspicuously absent from the menu the music isn’t the only taboo he is breaking.  Restaurants in Saudi Arabia are segregated.  Single men sit in one part and families and women on their own sit behind impenetrable screens in a separate part of the building.  They usually even have different entrances.  I’m not sure how this is supposed to work.  I guess it’s something to do with women not being able to eat through a veil and men not being allowed to look at a woman who isn’t wearing one, but, like many things in this country it is a mass of contradictions, doesn’t work and ends up being a bit of a farce (although the “Emperor’s New Clothes” applies here as everywhere).  Certainly in Tony Roma’s it doesn’t work because although they had areas designated as “single men” and “family”, everyone was allowed to sit where they liked, almost like real life!

The success of Tony Roma’s in Saudi Arabia is a testament to the changing tide.  The manager in this restaurant told me that he has clear instructions from head office that the music will be turned off at prayer time and should anybody complain at any other time.  So far though, in three years, complaints have been minimal and mostly from religious police who make inspection visits from time to time.  The real measure of popular feeling however has to be bums on seats and by all accounts the liberals have a landslide.  Whether any other businesses have the bottle to join this movement for freedom of choice remains to be seen.  I suspect they will, but while they are getting their act together maybe you could ponder on two issues this raises.  Firstly, as I have said the power of brands like these to influence change and secondly the fact that maybe the Saudis are not as completely inflexible as we Westerners think.

Building Brand Britain

Over that last week or so, prompted by the UK riots, we Brits have listened to endless analyses and proclamations by local community members, civil servants and politicians centred on fixing our “broken society”.  As always with these situations, there has been plenty of scepticism heaped on the potential any new initiative has for success.  However, there is only one real obstacle to all the remedial plans announced by David Cameron and others and that’s motivation.

I believe that Dave is a good motivator and getting better, he talks sense, even though his opponent Ed Miliband, seems intent on trying to neutralise that with mindless and responsible political point-scoring.  (If I were him I’d shut up before people started to realise that it’s the left-wing, crap that his party has expounded for decades that has given certain sectors of society the idea that they have rights they haven’t earned and therefore created this disaffection).

The marketers among us will recognise the task facing us as brand-building and as anybody reading this blog over the last few years will know building Brand Britain is one of my pet subjects. The problem is that we have singularly failed to respond to the obvious need to develop Brand Britain and we still don’t have the right people in harness to tackle the job.  Forget the political masseurs, data-analysis’s and bean-counters, where are the marketers in the team?  Without them we won’t get past first base because the people who are currently in the driving seat simply don’t get it.

Over the past few years I have approached politicians, government departments, local councils and private enterprises with initiatives designed to help build Brand Britain.  In many cases, because I have always believed that unemployment and local business initiatives are both inextricably linked and critical to the cause, these initiatives have addressed local unemployment, been designed to strengthen communities and help the mid-sized local businesses who are the key to the future of our nation, shift up a gear and take on the world.

The responses I have received from the public sector jobs-worths in particular, though unsurprising have been nonetheless frustrating.  Unimaginative Job Centre Plus employees civil servants and local councillors have simply disregarded projects and initiatives as representing just another unwelcome task.  There’s no point and very little scope for public sector workers like these to adopt an initiative that’s not dictated letter by letter from Whitehall because their world isn’t a meritocracy.  Why should they take on something they aren’t compelled to?  There’s nothing in it for them.  Besides, these people aren’t employed for their creativity and they are entombed in a culture that actively discourages any kind of creative thinking, so expecting them to appreciate any concept is always an ask too far.

Life skills that should have been taught throughout a person’s school life, if not at the cradle, are belatedly outsourced by Job Centre Plus to HR and recruitment companies.  I’ve spoken to a few of these contractors.  They view these projects with the glee of a paedophile assigned to changing room duty at kids swimming gala and submit proposals that represent minimal input and maximum income for them with the balls-out cheek that comes from knowing the people assigning these projects don’t have the first idea what they are doing and are just relieved to have a tick in the “assigned” box.  When I have gone to these organisations to volunteer help and advice, the response has been eerily uniform and something to the effect that “…we‘ve managed to blag the approval of the JCP people for this half-baked programme, so there’s nothing in it for us if we actually do the job properly”.

These are the kinds of issues that will threaten any British brand development programme and unless someone wakes up pretty quickly and recognises that we ARE building a brand and therefore need to follow the appropriate process, we are destined to failure once again.  That means someone (Dave will do) having a clear picture of what Brand Britain looks like and starting with the mother of all internal marketing campaigns that will bring the public sector and government puppet masters into line behind the concept.  The public are motivated, the players are listening and we’re unlikely to find ourselves with a better promise of success for a brand building venture than now this side of World War Three.

Customer Loyalty – Stop trying to buy it and start earning it!

Yesterday I came across a great piece by Luca Paderni on iMedia Connection entitled “Why Your Brand Loyalty is Failing”.  Luca covers pretty well all the angles and raises many important issues, but there’s no escaping the underlying truth that kept surfacing among the other well-made points – customer loyalty is simply a product of customer satisfaction.

I run many workshops on this subject with businesses around the world and I’m used to receiving a torrent of ideas from delegates for programmes and initiatives designed to reward loyalty.  Sadly I get fewer ideas for ensuring that the brand promise that brought customers to the point of purchase in the first place is delivered. If my delegates are indicative of the people driving marketing these days, its hardly surprising that the focus of so many businesses appear to be trying to buy rather than earn customer love.  And they do this regardless of the fact that it’s a ludicrously expensive and extremely short-term way to run a business.

These days loyalty is the dominant business driver.  With most customers already claimed/assigned to vendors (apart from in emerging markets there are few emerging customers) the return you’ll get on acquisition investment is always going to be limited and its hard work.  The future lies in selling more stuff to your existing customers and they’ll only buy if they love you.  The problem is there seems to be confusion among marketers over what drives these brandships.

Sure customers will appreciate add-ons and freebies, They’ll add to the customer experience, but they only have value if you have already given your customers what they came for and simply will never be an alternative to simply delivering your brand promise.  My advice to any business that asks me about customer loyalty is to start by measuring customer satisfaction.  There’s only one way to do this and that’s by measuring your performance against your brand promise and the pillars that support it. (see the tab for Brand Discovery above for definitions.

Yes, there is no escaping it.  It’s back to my old favourite, the Brand Model again, because that’s where everything in any successful organisation has to start and it’s why my Brand Discovery programme places so much up-front emphasis on this vital business tool.  If you have set about creating your Brand Model correctly and placed the appropriate emphasis on marketing it internally, if you have developed the right briefing processes and checks to back it up, everyone (and I do mean everyone) in your organisation will be focussed on delivering your Brand Promise and none of your customers will be disappointed.  THEN the rewards that everyone seems so keen to give away can make sense.