Why Do Businesses Stray from the Proven Path to Making Billions?

I recall the adage, “Not advertising is like kissing someone in the dark… YOU know what you’re doing, but nobody else does.”

Market research tells you:

  1. If there are any kissable people in the dark,
  2. How to find them,
  3. What sort of kiss they would like, and
  4. How likely you are to enjoy it.

It is so, so easy for big businesses to make billions… why don’t they?

If research can tell you EXACTLY how to achieve your business goals, why doesn’t EVERY business do it?

THE FIRST, OF TWO REASONS, is that bad research has a GIGO effect (garbage in, garbage out). With most executives undertrained in how to brief research, appraise and assess its implementation, and interpret the findings (properly) in concert with strategic marketing know-how, research can simply go to waste.

The second reason is (in Warren Buffet’s words) because of “Corporate Cancer”… where arrogance, bureaucracy and complacency, combined with operational micro-thinking, dilutes or discounts the demand for, and reverence towards, market research.

In the high-profit, high-growth days of B2C (FMCG and Consumer durables), research was conducted with finesse, expediency, discipline, regularity and concise interpretation.

Nowadays, few executives demonstrate any respect for, tight management of, or scientific approach to the art of research … and the results speak for themselves.

We can all probably name brands that are weaker versions of what they were, and trace it back to a departure from the disciplines of marketing strategy built upon good research.

Where is the once-dominant Sharp brand? How long can Nestle last, relying on its long-term cash-cows? How out of touch and behind is Kellogg’s? What happened to Spillers? Where’s Ampol? Grace Brothers? Criterion Furniture?

The Hurdles to the Billions

Remembering that products don’t fail, businesses don’t fail, brands don’t fail… it managers making bad decisions who fail… It is possible to remove the hurdles for failure by opening business leaders’ minds to more productive and proven methods: Commissioning and utilising market research!

In 1983/4 when My Dog had failed to launch successfully for Mars, their Product Manager asked me for help. All I did was read the research overnight, and it was clear the positioning for the re-launch had to be “for fussy eaters”: 33 years later My Dog has not made less than $250M annual sales… simply founded on good interpretation of good research.

In 1994, simply reviewing the research data for Mersyndol revealed that 95% of sales came from the 5% of heaviest analgesic users, but Mersyndol loyal users were forced to buy another brand to avoid drowsiness. In a 20-minute meeting, my identification of this and suggestion of a “Mersyndol Light”, led to the launch of Mersyndol Day-Strength, that has generated around $200M p.a for the past 23 years.

All those billions came from objective interpretation of quality market research.

IF companies REALLY want the Billions, bad research won’t ‘cut it’.

Interpretation without the synergy of understanding strategic marketing science also won’t ‘cut it’. (e.g. Brand adoption theory, innovation theory, brand equity, brand loyalty, involvement, BCG Matrix, and about 100 other key models.)

But, with good market research… well planned, well conducted, well interpreted, and well respected and followed… the path to billions is simply “finding out what people want and giving it to them”.

How easy it that? So why don’t or won’t business leaders do it?

I think it would be healthy and beneficial for anyone to share thoughts, perceptions experiences, and concerns… or just comment…

 

The two most common threats to big corporates can be ORGANISATIONAL and/or ENVIRONMENTAL.

 

As I’ve often said, “Companies don’t fail. Businesses don’t fail. Products don’t fail. Brands don’t fail… It is Leadership and Management that causes these to fail.”

 

In Woolworths case, their internal issues are their sheer refusal to believe that anyone outside their company knows anything worthwhile. It reminds me of the saying, “Only a fool knows everything” and Woollies, for all their admirable knowledge, expertise, and ability, are sailing 5º off course, right into the proverbial Titanic’s iceberg!

 

They stubbornly have refused the recent counsel of a previous CEO who has told the Board, that WOOLWORTHS has chronic “ABC Corporate Cancer” (a term coined by Warren Buffet that identifies the destructive combination of arrogance, complacency and bureaucracy). This is clearly observable when you consider their absence of strategic leadership in overcoming the long-running Coles Price war, their botched and re-botched Every-Day Reward loyalty programs, their high staff turnover in Marketing & Strategy personnel, and turnover of Chairman and CEO.

 

So THREAT No 1, the Denial in recognising the ORGANISATIONAL aspects of ABC, is sending WOOLWORTHS cascading towards disaster. They need to embrace a humility and adopt attitudinal shift to listening to and accepting external advice.

 

The often spruiked Einstein-quote of “Doing what you have always done, and expecting a different result is insanity”, might apply in the face of their diminishing success over the past 10 years.

 

Threat No 2 is an External One. WOOLWORTHS see Coles as their major competitor. While Coles struggles against WOOLWORTHS, Aldi is left to grow consistently at 7%+… Why can’t WOOLWORTHS see the writing on the wall, or at least the significance of this trend???

 

WOOLWORTHS (and Coles) have adopted the short-term, and brand corrosive pursuit of private label and house brands, at the expense of branded products. They have made enemies of FMCG companies that they should be partnering with to undo the generic attack on brand value. They should be encouraging brand equity development and new product development, and supporting brands in ways they never have than before.

 

Instead, they connive to squeeze what little is left in profits for their FMCG partners, forcing budgets dry, eliminating insights for NPD by research, or revenue for brand equity development.

 

So THREAT No 2, the Denial in recognising the ENVIRONMENTAL aspects of ABC, is undermining their own competitive advantage and market positioning, creating an industry and a market place that is becoming more willing to reject WOOLWORTHS as a preferred solution to its needs.

 

Inevitably, of course, the WOOLWORTHS Board will retire, fat on its Directors’ Fees. WOOLWORTHS senior executives will ‘migrate’ to other retail organisations, employed due to their position and political savvy, rather than their failure to save WOOLWORTHS, and WOOLWORTHS will become a company that older people “might remember”.

 

It the poor shareholders of WOOLWORTHS , the faithful investors who trusted the Board and senior executives, for whom I feel sorry; particularly when WOOLWORTHS could return to favour dominance and mega profits, by simply jumping form their self-imposed pedestal and holding cap in hand.

 

NB: WOOLWORTHS were offered a means of generating $400M is EBIT p.a. in 2007… and two senior executives individually approved the concept… but shuffles in management and politics… combined with insurmountable corporate arrogance quashed that concept regardless. Now they’re in trouble – go figure!

Members of the Sales & Marketing Institute of Australia might remember my presentation, “Coles & Woolies aren’t the bad guys, we are!”, at the FMCG Summit in August, 2012.

In this presentation, I suggested…

  1. The fundamentals of solid FMCG haven’t changed – and won’t
  2. Loyalty data has become an information goldmine
  3. FMCG now beats to different & distinct checks & measures
  4. The Category Management business is in ‘re-jig’ – they are creating business manager experts in smaller categories
  5. Buyers don’t know where their categories will head UNTIL AFTER a category review – so there’ll be more hesitation before decision but the decision will be based upon shopper satisfaction
  6. Card data will never be completely shared because it gives retailers a new advantage
  7. There is always a trade-off between sales, profit & market share
  8. There is a new imperative on suppliers to be more effective & efficient
  9. Retailers now run ‘category laboratories’ , and do – they know more than FMCG marketers do
  10. The quality of the seller must rise to meet the quality of the buyer and visa versa

The point of the presentation was that FMCG marketers must remember that their hay-day came when they discovered segmentation, and conducted segmentation studies annually… long before cost-cutters and short sighted profit goals ate away at research budgets.

FMCG companies who are struggling MUST call out  “its time for a segmentation study” if things go astray… but MORE IMPORTANTLY… to plan a product portfolio, write a 3, 5 or 7 years marketing plan, or invest in new products, new plant, or growth without clear understanding of segments and market opportunities… is suicide by Russian Roulette!

I’m not ashamed to say that Launch Engineering does outstanding segmentation studies: One FMCG client increased business 50% in a year on the basis of strategic recommendations following his LE segmentation study…. and EVERY client that takes advantage of our expert researchers with added strategist recommendations, finds inspiration and confidence in their decision-making, post report.

If you’re in FMCG in Australia… its tough. You could make it a whole lot easier…

For more information or a confidential chat, feel free to share your problems and I’ll let you know if I can help… you’ll find my contact details at http://www.launchengineering.com

Too many marketing strategists believe their own BS! Pricing Strategy, Communications strategy, Online Strategy, branding strategy etc. isn’t genius… it is obvious, common sense that evolves out of the fact that perfect knowledge leads to perfect decisions.

I’ve had an extraordinary number of commercial successes in my career, record-breaking ones… NOT because I am one bit smarter, more intuitive, have more street cunning or am unusually lucky, but because I persevered long enough in learning my trade to be able to recognise the one, inalienable truth of business: If you genuinely know what the customer wants and can give it to them, they WILL buy!

The absolute secret, of all extraordinary business success, is knowing the customer.

Is it REALLY that simple?

Whether it is the individual or the segment – yes!

There are so many examples of this across the internet, in each of our careers, recorded, diagnosed, studied and reported by academics around the world, and demonstrable in every case study and high return annual report… so why do we complicate and confuse, cloud and cover this fact?

Think about it…

Pricing Strategy: In particular Value-Based pricing? Know the customer!

Communications strategy: In particular advertising & positioning? Know the customer!

Retailing: In particular store layout, ranging, staffing, location? Know the customer!

Manufacturing: Everything from branding, sizing, packaging, new product development, distribution strategy? Know the customer!

Why is the business community in denial?

When FMCG hummed a merry tune, the industry habitually committed to segmentation studies annually… but as operational executives with corporate political skills rose in a culture of corporate arrogance, costs were cut to carve out larger profits, ignorant to the fact they were really blunting competitive advantage and digesting brand equity.

In adequately training marketing personnel, briefing and sustaining market research of questionable quality, undermined the payback from segmentation studies and other market research.

Over the years, the team at my firm has written strategy for transport, banks, FMCG, commodities, utilities, government that has generated record-breaking results, unimagined sales growth, and extraordinary profits… why? Simply better understanding of the customer – EVERY time!

In the zenith of the years of excellence in advertising and marketing, the seller controlled the balance of power.

Taking the empirical science of “Marketing” revealed by diligent and breakthrough academic work, with open and dedicated support from industry, sellers were industrious about applying the newly discovered “Marketing Concept” – finding out what consumers wanted and delivering the combination of those wants to accurately identified market segments.

Those were the days were a segmentation study was an annual necessity, trend analysis was a routine discipline, conjoint analysis, decision tree analysis, qualitative and quantitative research were in balance and strategic marketing tools were respected and followed.

Now, in the years I consider the nadir of “Marketing”, the word “Marketing” is more often misunderstood than understood. It is rare to find someone who has conducted a segmentation study in the past seven years, and if they have. it is unlikely the research conducted can be, or is, compared to that of the past… so trends are hidden and management is uninformed.

Branding is confused with image, artwork, and name. Brand equity is not measured or considered in context, considered in brand portfolio planning (if that even exists) or future product design and planned innovation.

Consumers are left in a vacuum-like netherworld of me-too brands, and categories filled with homogenous offerings. They are thrown little to make judgement upon, with advertising drowning in the depths of weak marketing leadership from clients and vague briefs that offer no focus or direction.

Left to their own agenda, advertising agencies are forced to deliver anything they can, from gimmicks to creative excellence in advertising, which may or may not spark some level of unsustainable brand equity, only to be admonished by their clients when things ultimately go wrong.

Consumers are disarmed from having passion for their favourite brands… often helped by cost-cutting of those who should be the brand ambassadors, but fall victim to the inevitable urge to extend a brand, or worse, alter the product in such a way as to undermine it.
Abandoned by the brands they once loved, the consumer delegates their weary preferences to the household shopper, who is less involved in brand loyalty and more inclined to economic enticements.

Nowadays, caught in the vice-like grip of 50% off, or buy BOGOF, the preferred brand is dismissed as of secondary importance, and price-led brand switching, convenient shelf position, or accidental or ambivalent alternative brand selection, has become acceptable.

Responding in the most destructive of all ways, national brands who cost cut, abandon brand equity building, restrain innovation, decrease market research, and have, and continue to, lay a path to destruction: Fertilising the ground for the onset of premium house brands and private label brands that will choke the life our of the diminishing brand loyalty that marketers have allowed to proliferate over the past 20 years.

The question is, “Is this a ‘swings and roundabouts’ scenario?”

Will ‘Marketing’ skills and talent regain popularity and rebuild a world of heterogeneous and loved brands or has the era of beloved brands passed away?

I’d love to see innovative and profound marketing management rise again, mainly because I love the craft and believe the power and the responsibility that goes with it belongs solely to the seller.

It is easy to lose a fight when you are more willing give up than to employ some self defence and fighting skills.

A recent Linked In discussion referred to a study predicting that Australian Supermarkets will retail 33% of private label brands.

The article suggests that supermarkets have made 33% generics a reality when, in fact, its been manufacturers that have created this environment!

Short-term profit gouging, and/or criminally negligent marketing management, and simply ignorant brand stewardship have given supermarkets a red-carpet invitation to secure consumer loyalty and win market share.

Rudimentary ‘Marketing 101’ says consumers make buying decisions based upon value. Knowing how different segments measure or assess ‘value’ is the implication and marketing science the means.

Manufacturers would be impervious to house brands, the retail word would be devoid of true house brands, IF branded products manufactures employed comprehensive strategic marketing science.

However, house brands exist because manufacturers have chosen NOT to understand and cater better for their market segments than their retailers.

Now that Coles and WW have loyalty card data… fast, immediate, and statistically reliable, they understand their segments better than the non brand-savvy marketers that supply them.

Unless huge changes to strategic marketing take place, and manufacturers don’t make quantum changes to their strategic marketing, 33% is the tip of the iceberg, and categories will ultimately have no independent brands at all… retailers will have 100%.

The following is a summary of my presentation at the 2012 FMCG Summit on Longevity, held at MGSM.

Every company must follow its mandate/mission/vision and derived corporate objectives: That’s the Board of Management’s job!

So why is everyone complaining that WW & Coles are making it hard? It’s their job to maximize profit…. and ours to help them! If we happen to make mega bucks in the process – good on us! If we get deleted in the process, we should only blame ourselves.

When marketing science reigned supreme, a very accurate and detailed segmentation study, including positioning map and competition analysis, was a yearly investment, but in the past decade, as pressure has been put on improving WW & Coles profits, operational managers have sacrificed long term strategic foresight, and stripped themselves of their most powerful ally – market segmentation knowledge.

[A show of hands at the Summit showed only 1 attendee had commission a new segmentation study in the past three years – now wonder FMCG marketers are losing bargaining power!]

Now that Woolworths, and Coles have the power of loyalty card data… data that is fast, statistically reliable, accurate, and consistent, FMCG marketers are going to be stripped of their knowledge assets, and buyers will become category experts like never before.

Buyers can now rebuild a category from scratch… deleting big brands, ranging new innovations, with assurance and confidence they have never had before… because they really KNOW their customers.

The only tool that FMCG markets have to battle is better, albeit different research.

Now, more than ever, we must see Coles and Woolworths as trade partners sharing common needs… satisfaction of the customer. FMCGers must discard the red ocean strategies of undermining competitors and fervently pursue blue ocean strategies that can be exposed by trend analysis from consistent, quality market segmentation studies conducted periodically and analyzed meticulously.

It is up to us to demonstrate to buyers that there is real and sustainable commercial advantage in ranging our products. The two basic tools are marketing effort, and positioning strategy, that together build the asset of brand equity and the outcome of significant market share.

Cynics will say this is easier said than done, but, with C-level support, it is almost easier done that said, IF we remember that the rules, laws, models and processes of professional marketing work (if applied properly) and FMCG markets simply cannot afford to shortcut on any.

 

Do this and we it is inevitable that you WILL follow your company’s mandate/mission/vision and derived corporate objectives in collusion with Woolworths and Coles instead of in spite of Woolworths and Coles.