Exorbitant hidden charges 'could be consigned to history' by new up-front legislation...

The popularity of price comparison sites has influenced firms to highlight low headline prices, forcing hidden extra costs 'underground', into the small print.

In a new report by the Law Commission, cited by The Telegraph, reforms, along with airline pricing, could also affect mobile phone contracts, cancellation charges for weddings, payday loans and estate agents, with courts able to intervene to stop any unfair hidden charges.  In practice, an attempt by the law to frustrate the hit-and-run marketing tactics of those who do not understand the laws of repeat-purchase...

In other words, the law will try to put true like-with-like price comparison 'on-the-tin', theoretically making it easier for the non-savvy consumer to make an informed choice at the point of purchase...
However, the super-savvy consumer will appreciate that the ultimate responsibility still remains with the person paying the money, and remains unwilling to outsource the purchasing decision to marketers and retailers ever again.
In addition, the meat scandal has shown that even on-tin descriptions are no guarantee of the ingredients within...

While the Law continues to seek a one-stop solution to betrayal of trust, there has to be an opportunity in the marketplace for suppliers who are prepared to break ranks with 'normal industry practice' strip their offering down to basics, and strive for clarity in helping the consumer to satisfy a need via their combination of Product, Price, Presentation and Place.

Being 'in the business' such suppliers are in a position to identify where all the bodies are buried,  understand how easily the consumer is deceived, once, and can focus on formulating  a trust-based offering that truly does what it says on the tin.

This honesty will obviously result in a shelf-price in excess of 'less-honest' competing products in the category, and advertising would need to focus on explaining the difference. In effect, the supplier is thus creating a category bench-mark in the brand, educating the consumer on what they should seek-and-compare in evaluating available alternatives...

However, the consumer is still left with, and should retain, the ultimate responsibility for the decision-to-buy. The supplier simply facilitates the process, and relies upon the resulting 'tell a friend' endorsement to grow the brand, like in the old days...

What if:     Airlines sold paint

The letter vs. the spirit of multibuy promotions

Given the media coverage of Which? latest research on ‘misleading’  promotions, the key issue is how the consumer-shopper will react to creeping realisation that no-one can be trusted…

As a person or company works to the edge of ‘right and wrong’ they might acknowledge that whilst their observation of the spirit of the law might be in question, strictly speaking they remained within the letter of the law... In an environment where loyalty to a brand or store is increasingly fragile, spirit and letter become indistinguishable, especially to a savvy consumer, and, as you know we are all becoming savvy consumers...  This means that if a deal even seems wrong, the damage is already done..

The Which? findings
Which? year-long investigation into "misleading" pricing tactics by the major chains indicated that seven out of 10 people prefer straightforward discounts to multibuy offers.

Multibuy deals have become a staple of supermarket promotions in recent years, and now apply to nearly half the goods on offer in a supermarket at any one time. Which? said that of the 115 products that it examined in the first half of this year, 46% of the time they were on multibuy, compared with 35% of the time in the first half of 2011.

Increasing suspicion
But there are signs that consumers have become increasingly disillusioned by the value on offer in supermarket promotions. Around one in 10 products on supermarket shelves increased in price when they went from the previous standard price to the new multibuy price, then decreased again when the promotion ended.

Losing the consumer...
The only real issue for suppliers and retailers is whether, having been ‘mislead’ by a promotion, the shopper associates the deception with the multibuy itself, the  brand involved or the shopkeeper…  In other words, does the shopper dismiss multibuys and revert to ‘straight’ sales, switch to another brand or change stores…

Given the upfront investment in getting the consumer-shopper to this point, it seems a pity to then kick ‘em over to the opposition….

Amazon ebook VAT advantage removed - back to level-playing-field competition?

According to The Guardian, Amazon is to be stripped of its huge tax advantage in the UK (VAT 20%) on the sales of ebooks after the European commission ordered Luxembourg (VAT 3%) to close a VAT loophole. Luxembourg will be forced to increase its VAT rate to 15% on EU digital sales. This was inevitable (see Kamblog) especially given Amazon’s 90% share of the UK ebook category.

In my opinion, what is more important for publishers and other suppliers to Amazon was a reference to base price equality in the original Guardian article…..   

Contract terms with Amazon
According to The Guardian, an Amazon contract they have seen says: "If the base price exceeds the base price … provided to a similar service then … the base price hereunder will be deemed to be equal to such lower price, effective as of the date such lower price comes into effect." In other words, if Amazon discover that a retail competitor is being given a lower price, they will apply that price to current dealings and claw back any difference, from the time the lower price was charged.

Like all retailers, we believe that Amazon are entitled to set and agree trading terms in advance and apply conditions that they will enforce where necessary. It is the responsibility of suppliers to ensure that they quantify the terms and implications of all deals with retailers before entering into contractual agreements...

Application of base-price-equality to all retailers, retrospectively...
In the case of Amazon’s ebook base-pricing comparison, the issue for all suppliers is even more important. There is nothing to prevent the same principle being applied to the rest of Amazon’s business, or indeed, to any retailer buying from suppliers.

Action for suppliers:

1. Check your base-price per customer, and do a numbers-based ‘what if’ on the lowest price being applied to your entire customer portfolio, retrospectively (its not going to go away)
2. Forget ‘trade secrecy’ and assume all customers know everything (remembering that it only takes one staff member…)
3. Check that a true-like-with-like comparison is being made, and be able to calculate and demonstrate your rationale (the numbers will count in the end...)
4. Find ways of lowering prices to customers to the same level for the same level-of-access to consumer, or find ways of terminating the ‘lowest price’ customer (pay the retailer for work done on your behalf)
5. In the meantime, ask for proof of lower prices elsewhere, to avoid the mistake of defending the wrong case, and thereby giving the retailer additional scope for claw-back (hear the buyer out, and answer the objection)

In other words, best to play fair with all customers, before you are forced to, and establish a defensible basis for fair-share negotiation via sustainable numbers…before you need to....

Walmart bases training on British military academies!

According to People Management, Walmart has turned to British military leadership training expertise at Sandhurst, Lympstone and the Ministry of Defence’s Staff College to speed up the development of its managers in America.

However, before eager NAMs reschedule their weekend leisure, the retailer’s leadership training does not include assault courses or shooting exercises, instead it emulates other areas of military academy learning.

Promoting on performance, the academy also works to push people beyond their current capabilities, so attendees are not just trained for their current job, they are trained for the next rank up and the one beyond that and for two more levels beyond that.

In other words, rather like our NamNews training, where even new NAMs are treated like CEOs, as many of today’s ROCE-based leaders will confirm, by personal example…

Coupon promotions in uncertain times, how Risk Intelligence can help

News that coupon redemption is increasing and moving up the social and economic scales may call to mind that coupons have been known to have been ‘too successful’, on this the 20th anniversary of the Hoover Free Flights fiasco. Those with long memories will recall when Hoover's free flights promotion was launched to a wide-eyed British public in August 1992, it seemed too good to be true. Over the next 21 months, many Hoover customers discovered it was. It ended up costing the company £48m…

Anticipating coupon redemption-rates is but one of the uncertainties a NAM needs to be able to factor into the day-job and sleep nights.

There is a special kind of intelligence for dealing with risk and uncertainty. It doesn’t correlate with IQ and most psychologists fail to spot it  because it is found in a disparate group of people such as weather forecasters, professional gamblers and hedge-fund managers…

A new book, Risk Intelligence: How to live with uncertainty by Dylan Evans , can be a NAM’s guide to the twilight zone of probabilities and speculation, a DIY tool to making decisions in all aspects of the role.

Four Steps to Calculating Probability
Essentially, risk intelligence is about having the right amount of certainty, and Dylan outlines four mental steps in estimating a probability and when assessing the truth or falsehood of a statement:

1. First take stock of what you know about the issue (identify the bits of information you already possess that may bear on the issue)
2. Next, for each bit of information, decide (a) whether it makes the statement more or less likely, and (b) by how much it affects the probability that you are correct
3. The outcome of the process should be a hunch or feeling, the strength of which varies according to your degree of belief
4. Finally, translate this feeling into a number that expresses that degree of certainty (use % i.e. 65% certain that this is the way forward)

It helps to distinguish Risk Intelligence, a purely intellectual ability, from Risk Appetite, an emotional trait, more to do with how comfortable you are with taking risks. Risk Appetite governs how much risk you want to take, while risk intelligence involves being aware of how much risk you are actually taking… 

The book goes on to help readers improve their risk intelligence, think by numbers, make use of probabilities (the 100 percent rule), and even evaluate betting odds... In fact, with the right degree of application, the book will point you at everything a NAM needs to help cope with unprecedented times, or even anticipate the outcome of promotions…

In short, it debugs the process of using numbers and probabilities to clarify your thinking, helping you to risk excelling in the day-job, while others are unaware of the risk they are actually taking by awaiting a return to the ‘risk-free’ days of twenty years ago..

Online retailing: Killing the killer-charge at checkout…

News that the OFT are ordering the removal of unexpected charges at online checkout, should not be news, and above all should not be necessary...

Alienating the first-time shopper
The issue does not affect the regular online user, who arrives at checkout knowing all the downside, may grumble at the extras, but completes the purchase.

The real problem is the fact that the online retailer, having gone to the trouble, expense and use of price to attract the suspicious, dithering first-user, and drawn them through the hoops of the online purchasing process, suddenly at checkout presents a surprise extra charge that causes them to hit the cancel-button and head for the shops...

Repeat purchase as the only KPI
Any brand owner can confirm that the upfront expense of attracting a new user can only be recovered if that consumer requires less persuasion to come back a second time, and may break-even on a spontaneous  third visit to the brand.  ‘Telling their friends’ may happen if the brand experience exceeds expectations…

Amazon, the real competitor
Apart from keeping in mind that if the OFT are getting involved, it is already too late, online retailers hoping to survive should re-check their biggest competitor, and hopefully conclude that Amazon’s entire offering is based on comfort, trust and re-assurance for every user, with 1-click purchase a reward for coming back a second time…

Amazon are not growing at 26% CAGR by accident, or by attempting to charge shoppers more than they bargained for… 

How Poundland makes its millions - the brand-issue for suppliers and retailers

Monday's Poundland item in NamNews resulted in over 250 downloads, indicating a high degree of NAM-interest and perhaps curiosity re possible 'trick-missing' in some cases.

Given that the Telegraph article was also the subject of a 30-min prime TV programme (see 'Dispatches: Secrets of Poundland’ on September 17, Channel 4, 8pm) poundshop optimisation raises important issues for suppliers wanting to maintain their brand equity.

Coping with inflation
In order to maintain the £1 price-point, suppliers and pound-shops have reduced pack-contents over the years. This is about consumer expectation, not the letter of promotions' legislation. As you know the original idea of branding was to persuade the consumer that the contents were safe, consistent and matched or even exceeded the expectation created by the advertising.... Think of the impact on a loyal user of having the contents of a £1 Family pack reduced by 50% in five years.
We all know why it happens, but we need to focus more on the impact

Extra-value packs 
Pound shops sell a number of well-known brands with “50% Extra Free”, or even “100% Extra Free”, on the packaging. i.e. a pack of eight bars for £1,while the mults offer the same eight bars for £1 also, without the flash.   Again a potential bad taste...

Consumer perception as driver
The issue is not about morality or even the letter of the law, but is more about the negative impact on consumer perception, a serious dilution of hard-won brand equity.
In the process we risk converting a savvy consumer into a cynical shopper that nowadays has the incentive and means to express their opinions via the internet...

The way forward
Brand-owners need to meet trade needs, but not at a cost to brand equity. Brand equity has to remain sacrosanct, its all you've got... Also, the retailers face the same challenge in preserving shop brand equity whilst responding to shopper demands, a possible basis for joint consultation?

It all goes back to trust in business, the basis for everything, and worth a lot more than a pound...