Category Archives: phil darby

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.

Link

Is your business run by a monkey?

The Chimp Paradox

Image

Do you find that you waste a lot of time and effort on initiatives that aren’t strictly “on strategy” or don’t produce results that are on your list of KPIs?  These days no business can afford inefficiency, and this kind of wastage is one of the worst, but as pressure mounts in the boardroom to perform in increasingly tougher markets it seems to be happening more and more.  Could it be the “Chimp inside”?

As my regular readers will know, I often compare aspects of sport and sportspeople with people and practices in business.  I have also, in the past spoken both here and in my seminars, on how primal instincts influence purchase decisions.  Now the two topics have come together in a book by the sports psychologist Steve Peters called “The Chimp Paradox”.

Steve is the man attributed with the success of the British cycling team, but has a string of other high profile successes to his name.  His theory, very quickly explained, is that our primal instincts of fight or flight cause us to make advance judgements of our likelihood of success in any given challenge which, even though our rational side may be conditioned to rise to the challenge anyway, will always take the edge off our performance.  Somewhere in the back of your mind when you line up on the starting blocks alongside Usein Bolt, something in the back of your mind will tell you don’t have a payer!  That little voice is your Chimp.

The idea that I have explored in the past relative to purchasing decisions is that our primal instincts pre-condition us to buy the stuff we love.  We try to be all grown-up of course, but that little voice is always telling us “You know you want it” so we take the plunge and then try to rationalise the decision with a load of argument and spreadsheets that confirm we made an entirely emotionless, practical decision.  Forget it, you didn’t.

What Steve Peters does is help athletes train their chimp.  He admits that he can’t take it’s influence out of your personal struggle entirely, but he says his success has come from showing sportspeople how to manage their chimp.  We can all do this, some of us, admittedly, better than others and once we do, the chimp’s influence can be diminished and performance increases, but the tougher the challenge, the more likely you are to revert to chimp mode and its my belief that this is what we are witnessing in many of our boardrooms today.

You have to accept that there is another influence going on here too.  After all, some people are just better at handling pressure than others so their “chimp threshold” is higher, but it seems likely that these factors are tightly bound together.  I’ve seen and heard of many businesses, large and small, whose approach to business has been swinging around all over the place.  Managers have been issued with instructions to initiate unplanned activity or initiatives, or change priorities in ways that appear to have no bearing on the original strategy, not always a bad thing in the appropriate context, but all too often they prove to be a waste of time, money and effort.

This kind of behaviour is the product of poorly managed chimps responding to immediate issues.  For example, a CEO who is driven primarily by sales targets can lose sight of the fact that maybe the sales targets should change or the KPIs switched to something else rather than change the marketing strategy.

Chimps gain greatest influence and do most mischief in organistions with a short-term focus.  The time scales of those businesses that haven’t yet recognised that tactically-driven businesses almost always fail, create acute pressure on senior managers to “appear to be doing something” when sales slip.  I’m not saying that they should just kick-back and let the slide continue, but short-termists rarely take their time to study the big picture and often the actions needed to reverse a short-term decline will counter vital actions within the longer-term strategy.  Short-termists hand control over to the chimp.  If they were good enough at handling pressure to be able to take a step back and view the long-term consequences of their current performance they would be less likely to damage the business that investors actually invested in.

Knee-jerk management is never a good thing, but as pressure mounts it becomes increasingly difficult to manage the chimp.  The paradox is, that its when pressure is at its highest its the time you least need a monkey in the driving seat!

Optimism, the power of positive thought and the future of your business

I’m an optimist.  I recognised this many years ago and I’ve been reminded of the fact daily ever since.  I look around me, see and hear the responses others have to situations that we are all facing and its obvious that my responses are different.  I don’t know why this should be and and I’m not about to start trying to understand it, but what I do know is that it impacts in many ways on my life and never more so than right now.

With the economies of just about every country now in turmoil every business, anywhere in the world is having to make significant changes.  If you have followed my work for any length of time, you’ll have probably picked up that I like change.  Change is good, same is bad.  You are only as good as your NEXT big idea.  I can’t stand companies who strike it lucky and then settle into the rut of replicating what they did time and time again to milk it for all its worth.  I don’t like them because there is an inevitable consequence to this approach – failure.  The world moves on, customer needs change, attitudes swing, everything is in a state of flux.  It is a very lucky business that has a product that will be equally successful through time with no change at all and right now I can’t even think of one.

I’ve been inside more companies over the years than I could even list and it has become clear to me that successful companies all have a spirit of optimism.  Talk to their employees and their chatter is about HOW they are going to achieve things not WHETHER they can achieve them and that’s simply because they don’t consider for one minute that they won’t get there.  And why should they?  Anything is achievable.  We are our own limitations.

I have never been far away from sports of one kind or another and the great sporting enlightenment of the last few decades has been sports psychology.  At an elite level most athletes have equal capabilities.  What separates them is most often belief in their ability to succeed.  That’s where visualisation plays its part.  Most athletes these days will sit and visualise their success, sometimes for hours.  This conditions their brain so that it doesn’t consider failure as an option and that in turn enables them to perform to their full potential.  It works, but if you don’t believe me consider this.  Within twelve months of Roger Banister achieving the one-minute mile, 37 other runners did the same thing.  What caused this surge of performance after years of believing it was impossible?  The belief that it could be done!  I’ve seen sportspeople who habitually performed below their skill level, transformed.  What’s more, once they realise it’s working it becomes a self-perpetuating cycle – confidence increases, performance increases, success increases, confidence increases etc…   It also works with sportspeople who are not in the elite group, even weekend warriors.

Anyway, back to business and why its clear to me which companies are going to make the transition that will earn them a place in the new world market.

I hear organisations all over the world acknowledging that they have to change to survive, but very few actually end up making the changes that are necessary.  The reason for this is a combination of comfort with the status quo and fear of failure.  Firstly, these organisations don’t have the change culture that I mentioned earlier (You are only as good as your NEXT big idea) so it’s not their habit to constantly look for improvements or changes. Secondly, they are, both individually as employees and on a corporate level terrified of doing something that will go wrong.

This fear is based on the failure to recognise that we are all capable of succeeding at anything.  Anything is possible it’s just a matter of how badly you want it.  If one company can innovate then you can.  It’s just a matter of self-belief.  My advice is, instead of focusing on the potential for failure, turn your attention to the risk of failing to exploit an opportunity, because that’s all that matters.

Attitude change like this has to start at the top.  If you are a manager who accepts failure as inevitable or who doesn’t assume success, you need to pay a visit to a motivator or business psychologist, or you could quit of course if you think you’ll never make the change! (think about that comment, it’s deep)  If you choose to re-focus your mind your next step has to be to eliminate all the doubters in your organisation.  You can do this either by firing or re-training them.  The latter is the best option of course, but you are going to have to focus a great deal of attention on internal marketing to pull it off.

Once you have introduced your organisation to positive thinking you’ll be surprised what you can achieve.  Someone asked one of my contractors this week how sure they were that they would deliver a particular task.  “Absolutely” was the unhesitating reply, but the questioner wasn’t convinced.  “How can you be so certain?” came the response, to which my contractor replied “Anything can be done, its just a matter of how much time or money or effort you put behind it”.  That task would never have been attempted until we came on the scene, but they’ll do it now and it will work and it will improve their business performance and I know that because my contractor recognises that anything is achievable.  What’s more, like the cycle of positive thought I referred to earlier, the achievement will fuel further, bigger achievements for the company concerned.

It definitely pays to be an optimist.

Latvians show Greece how to smile in the face of austerity – Its all just National Branding

As you contemplate the austerity that your government has wrought upon you, spare a thought for how national branding can make the whole thing both more acceptable and successful.  You don’t believe me?  Well try this.

So tied up are we with the dire straights that Greece finds itself in, we might forget that not so long ago Latvia faced a worse economic plight than Greece or Portugal are facing right now.  Latvia fixed it with extremely stringent austerity measures and bounced back to become a very successful economy, in a far shorter time than we are anticipate will be the lot of the Greeks.  What’s more, during the process their government was re-elected.  So, what’s the trick?

There’s a hint in the fact that at the time of their crisis, polls of the Latvian public revealed a marked spirit of shared endeavour or one-ness.  They were definitely meeting the challenge in the spirit of all for one and one for all.  Now, that’s a state of collective minds that only a strong national brand can generate.  While the Greek people (and to some extent pretty well all of the rest of us) play the blame game and try to lay responsibility for the mess on someone other than themselves, the Latvians kinda’ got the fact that arguing about whose fault it was, wasn’t going to fix it, and knuckled down to the task.  Result – they fixed it in record time and suffered far less than the rest of us are going to unless we wise up fast.  The big tick in the satisfaction box also makes the exercise self-perpetuating, serving to strengthen the community spirit and give the subject organisation or country the scope for more and bigger challenges.

The difference between Latvia and Greece or Portugal is national pride.  The Greeks, despite their claims to the contrary don’t have any.  If they did they would have been paying their taxes for the last few decades, which might have averted their current plight.  Greeks are largely in it for themselves.  Don’t get me wrong, I’m not saying they are any different from most of the rest of us, driven as we are by the belief that the only difference between happiness and abject misery is lodasamoney.  From that perspective it’s but a short step to topping Gran for her pension.

National pride, in turn, is a product of good national branding (A subject that I have been beating on about for years).  Once you have that sorted you can do some neat stuff – like win wars, bring home the world cup or sort one of the worst financial crises in recent history, in no time at all.

In fact, national branding is no different from any other kind of branding and the benefits it brings are no different either.  Contrary to what I sometimes think is popular myth among businesspeople, branding isn’t just for customers, it’s for employees too.  In fact, employees are where you start with any brand development programme, because unless they are on-board and have that feeling of belonging you aren’t even going to get to first base with customers.

A strong brand is represented, among other things, by a spirit of shared responsibility and those businesses that have set about building one have found that with the right guidance it can be channeled in any direction.  Southwest Airlines employees famously went to all kinds of extreme lengths to create one of the most successful airlines in commercial aviation history.  ABB Brown Boveri returned from the jaws of death and reduced their product development time from three years to three months.  A one-man-and-a-dog operation called Saatchi & Saatchi (The real one not the one we know today) did the reverse takeover trick on the monolith Garland Compton and went on to build the world’s biggest advertising agency and Apple have persuaded millions of people that lap-tops with iffy software are best thing since sliced bread.  I could cite innumerable others, but you get the idea.

So, if you are running a business or a country that’s facing a bit of a challenge right now, consider what the power of a strong brand can achieve and start building yours.  You’ll be able to achieve more with less, probably give your competitors a good kicking and could even do all of this with a smile on your collective face throughout.

Fairy story beginning for a neat social campaign

Every now and then someone comes up with a really great idea that deserves a second look.

Not only is this commercial from the Guardian a great idea well implemented, its part of an integrated on-line campaign that is equally smart and undoubtedly destined to generate some big numbers.

It used to be that anybody with half an idea could generate a following in social media, but audiences, particularly in developed Western markets, are now so refined that being on-line is no longer novel enough in itself to get results, you have to have that big idea, just as you do with any other medium.

I’ve just launched an integrated grass-roots and social campaign and I know how tough it can be to overcome the expectations of businesses that simply doing something digital achieves instant success.  It takes good planning, hard work, the all-important “big idea” and time to recoup the investment in an initiative like this, but because The Guardian don’t appear to have skimped on any of these my guess is they’ll get their pay-back.

What do you think?