Wednesday, 7 November 2012

Effective projects – the vital ingredients…


                                                                                                                          pic: Austin Kleon
Effective projects start with an exit strategy, in turn becoming the basis for the project objective, a description of the end result…

Criteria for Practical Objectives: 
Definition of basic purpose, Timed, Measurable, Worthwhile, Achievable, Compatible, Agreed, Communicated clearly, Reviewed regularly...

Example Objective: 
As a result of implementing the plan, the following will have happened:

-  Achieved successful launch of new variant
-  Sales grown by 12%
-  Profits grown by 11%,
-  Increased distribution to 78% by month two of new brand
-  Incremental business of £450,000
-  By month 7 have achieved 70% of full year target

Anything less is simply hope masquerading as achievement….

Amazon's nine steps to success - Bezos' formula

A great article in Londonlovesbusiness.com spells out Jeff Bezos’ secrets in driving a $48bn company growing at 26% CAGR.

Amazon's formula
Ranging from taking a long term view of 7 rather than 3 years, reducing customer service by getting it right first time, use of lower margins to build loyalty, managing detail, starting with consumer need and working backwards, innovating rather than copying, working hard to charge less, and rocking-the-boat to make a difference, the Amazon checklist provides a practical basis for optimising your relationship with the world’s largest online operator.

More importantly, by applying the same principles in-house, realistic NAMs will not only achieve a better match with Amazon, but could also evolve a simple, but effective customer-focused  strategy going forward…

Tuesday, 6 November 2012

'Making do' taking demand out of the market...?

With hopes for a continuing pre-Christmas sales revival dashed today amid signs that consumers are still limiting spending to essential items, it is perhaps useful to consider the impact of people ‘making do’ with existing products and postponing purchases of replacements in these uncertain times.

Housing demand
Essentially, taking big purchases first, how many householders are trading refurbishment and ‘extending’ for the purchase of a ‘new house’ that is a better match for growing family needs. Think of even a third of homeowners, with unprecedented access price–comparison facilities on sales costs, legal fees, removal charges and especially property values, deciding to postpone a house purchase for even a year, taking 33% out of the market

Cars & home entertainment
Similarly making do with the family car for a third year may add a little to upkeep costs, but takes another slice from new car demand. And what if large companies decide to apply the same logic to fleet replacement…?

The same with (age permitting), mobile phones, laptops, home entertainment, etc, etc, etc.

Austere eating...
When it comes to food, the impact of ‘making do’ on out-of-home eating is already obvious as people increasingly retire indoors, hopefully via a ready-meal+wine upgrade... Meanwhile, if consumers are stretching sell-by limits and not binning meal left-overs but are in fact re-heating for even one meal in three, we again have at least a third of demand removed from our sales forecasts…

The way forward...
Realistically, in an environment where only politicians and vested interests are optimistic, we need to factor these ‘making do’ drivers into business budgeting, accepting that our business models are based on ever increasing demand, and realise that in a zero-sum game, any growth is coming at the expense of the other guy.

In other words, assume that a third is knocked off your next year's sales, and seek ways of replacing those sales at the competition's expense, via a better match with consumer need...

Accordingly we need to find a way of identifying what the consumer thinks is important in our category, and communicating (and delivering ) the real difference our brand represents, better than, and at the expense of, our competitor, in a way that makes a savvy consumer come back for more…

Monday, 5 November 2012

The 'average' citizen vs. the bleeding differences that make for individualism



The move from broadcast to narrow-cast, even one-to-one media marketing and social networking is a reflection of the fact that increasingly savvy consumers demand to be treated as individuals by suppliers and retailers. Combined with the increasing availability of one-to-one consumer feedback, marketers risk dilution and dissipation of the brand message in refusing to acknowledge that the traditional use of ‘average’, apart from being  increasingly out-of-step with reality, is verging on becoming an insult, compared with the relative awkwardness of  ‘individualism’,

In other words, ‘average’ is easy, but ‘individual’ can be a nuisance…
However, even in Japan where being the same is considered a good thing, much of the population are said to enjoy finding little differences that distinguish people, blood type being the latest example.

What blood groups show
According to popular belief in Japan, type As are sensitive perfectionists and good team players, but over-anxious. Type Os are curious and generous but stubborn. ABs are arty but mysterious and unpredictable, and type Bs are cheerful but eccentric, individualistic and selfish.
In fact a whole industry of customised products has also sprung up, with soft drinks, chewing gum, bath salts and even condoms catering for different blood groups on sale.

By the same token, NAMs that are individual, whatever the blood group, tend to make a difference, despite being something of a nuisance...

Historical signals...
Incidentally, those of you with Type AB blood of a poetic bent might have picked up this need for individualism as far back as 1939, via W.H Auden in The New Yorker.
It is the epitaph of a man, identified only by a combination of letters and numbers, described from the point of view of government organizations i.e. the "Bureau of Statistics."
The poem satirises bureaucracy and standardisation of people (the average citizen) at the expense of individualism, and perhaps explains much of what has gone wrong in the last few years....

To optimise the individualism of your next coffee break we attach Auden’s poem below   -  vive la difference!

The Unknown Citizen
He was found by the Bureau of Statistics to be
One against whom there was no official complaint,
And all the reports on his conduct agree
That, in the modern sense of an old-fashioned word, he was a
saint,
For in everything he did he served the Greater Community.
Except for the War till the day he retired
He worked in a factory and never got fired,
But satisfied his employers, Fudge Motors Inc.
Yet he wasn’t a scab or odd in his views,
For his Union reports that he paid his dues,
(Our report on his Union shows it was sound)
And our Social Psychology workers found
That he was popular with his mates and liked a drink.
The Press are convinced that he bought a paper every day
And that his reactions to advertisements were normal in every way.
Policies taken out in his name prove that he was fully insured,
And his Health-card shows he was once in a hospital but left it cured.
Both Producers Research and High-Grade Living declare
He was fully sensible to the advantages of the Instalment Plan
And had everything necessary to the Modern Man,
A phonograph, a radio, a car and a frigidaire.
Our researchers into Public Opinion are content
That he held the proper opinions for the time of year;
When there was peace, he was for peace: when there was war, he went.
He was married and added five children to the population,
Which our Eugenist says was the right number for a parent of his
generation.
And our teachers report that he never interfered with their
education.
Was he free? Was he happy? The question is absurd:
Had anything been wrong, we should certainly have heard


Friday, 2 November 2012

Jumpy suppliers leave Comet on brink?


Press reports that jumpy suppliers are somehow to blame for Comet's business issues are missing some fundamental aspects of the supplier-retailer relationship.

What a supplier contributes:
  • With daily deliveries of some SKUs, often at zero-defect service level, a retailer can run the business on two weeks stock, or less
  • With an average retail margin of 25% and store running costs of 15% the retailer is left with 10% to cover head office costs and profit, with a potential net margin of 5%
  • With up to 45 days of free credit, and a shopper paying cash the retailer, allowing 5 days to to turn cash around, the retailer is left with 40 days money to place on deposit, or more creatively build new stores
  • With suppliers contributing up to 15% of their sales in trade funding, most of the promotional risk is being carried by the supplier
  • With suppliers carrying most of the innovation and brand development risk, the retailer simply has to make it available to consumers
  • A buyer's mistakes can be sent back sale-or-return, a supplier puts theirs on prime time TV
Comet's mistake 
Comet failed to anticipate the inevitable impact of online and Amazon on white-goods and home entertainment categories and were unable to re-engineer their business model fast enough to compete, in unprecedented times.
Developing an online offering means having to compete directly with Amazon's 1-click convenience, zero-defect service level and 'no quibbles' returns policy. There is no halfway alternative.

Amazon is growing at 26% CAGR, not via incremental business (they have not even started yet!), but by siphoning business from traditional retail, via pricing, convenience and great fulfillment. Again their 1-click process optimises almost every impulse urge of the consumer, never missing  a trick because of lack of availability...
But essentially they are simply another competitor in a free market.....and no government is going to legislate to make it any different.

Meanwhile, suppliers making 5% net profit on their Comet business, need incremental sales of £3m for every £150k that is is owed, to cover the cost of the inevitable...

Jumpy?  I can think of better words....


Thursday, 1 November 2012

Bad customer service - the downside of social networking...?

UK shoppers seek customer service support by email (49%) or phone (43%), younger shoppers are highly likely to turn to social channels when these touch points fail, with 46% of under 25s and 33% of 25-33 year olds using social networks to air their grievances more publically.  A new study, commissioned by Rakuten’s Play.com, consisted of an independent survey of 1,000 UK consumers.

Corrective Action?
One approach can be to consider Omotenashi – a Japanese customer service style to deliver enhanced customer service. Meanwhile, for pointers, see how Rakuten approaches customer service using Omotenashi by stepping  away from the vending machine retail model and aiming to go the extra mile when delivering great customer experience.

Why this is important…
As any branded NAM will appreciate, the cost of persuading a consumer to try a new product is so high, unless they are delighted/surprised at what they find in the tin (see Aldi Xmas pud) and thus require less investment to encourage a return visit, the upfront marketing investment never achieves payback mode.

The survey indicates key influences of a second visit:
o 39% – Loyalty programs & rewards
o 20% – Strong after sales support
o 14% – Personalised offers shared after purchase

Moreover, it is only on the third visit to the brand that consumer satisfaction may result in them telling one of their friends…

Alternatively, if the experience is not satisfactory (i.e. we don’t meet their needs) the disaffected consumer will complain to 10 of their friends, and that was before the arrival of social networking…

P.S. See here for details of the survey’s key findings

Wednesday, 31 October 2012

Debenhams: calling a coffee a coffee….

Debenhams launches plain English coffee menu which describes coffee in simple terms has been created in direct response to customer feedback that revealed over 70% of coffee drinkers have experienced ‘coffee confusion’ in cafes, bars and restaurants. No longer will coffee-lovers be in a muddle over mocha, caught out by cappuccino or embarrassed about espresso thanks to a plain English coffee menu launched by Debenhams on 29 October 2012.

The new Debenhams coffee menu:
Translating Fancy name (usually seen in high street coffee shops) into Plain English version (as seen on the new Debenhams menu)

Black coffee  = Simple coffee – with or without milk

Caffe latte      = Really really milky coffee

Cappuccino   = Frothy coffee

Caffe mocha  = Chocolate flavoured coffee

Espresso shot = A shot of strong coffee

Chrissie Maher, Founder Director of Plain English Campaign also welcomes the new menu: “Whether it is coffee, tea or hot chocolate, it needs to be in plain English so customers can make an informed choice. If they can read the menu clearly, they are more likely to try something new – and who knows – they may come back for more.”

The current status quo
Over 100,000 coffees are sold each week in more than 160 Debenhams cafes and restaurants across the UK and Ireland, selling double the amount of tea. Coffee now represents 67% of sales compared to tea which is only 33%. Of the three major hot beverage categories (coffee, tea and hot chocolate), coffee is the only one to have seen volume growth over the past three years. This suggests that it has stolen share from both hot chocolate and tea.

At risk of sounding pretentious (pretentious? Moi?) it remains to be seen whether confusing mystique is a key driver in out-of-home coffee consumption……


Tuesday, 30 October 2012

Late payments improving – Action for NAMs

The latest Late Payment Index from Experian®, the global information services company, reveals that UK businesses paid their bills nearly 1.3 days earlier in Q3 2012, compared to the same period last year.  In July to September this year, firms paid their overdue invoices 24.88 days after agreed terms, compared to 26.17 days during the previous year (Q3 2011).

Food retailers showed the most significant improvement, paying their invoices 29.15 days after agreed terms, compared to 34.21 days in the same period last year.

Still a way to go...
Whilst suppliers will obviously be grateful for this average 5-day improvement by retailers, your finance department will remind you that invoices are being paid 29.15 days later than agreed. Think about it, you are delivering some SKUs daily, the retailer is holding average stocks of 2 weeks, and is getting cash from the shopper...

In other words it is vital, especially in this ‘post-recession’ era, to keep up the pressure for on-time payment.

Action: 
  • Quantify the cost of financing agreed credit days
  • Calculate the cost-benefit of paying settlement discount
  • Calculate the cost of the additional late days (checking that you have had your fair share of the five day average improvement in days sales outstanding, from all customers!)
  • Calculate the total cost of financing the credit you give your customer, and work out the equivalent in incremental sales required to cover the cost
    (i.e. if you make 8% net on your customer’s business, you need incremental sales of £12,500 sales to cover each £1,000 you give the customer )
Now join the queue outside the buyer’s office….(why not optimise the queuing time by checking out NamCalc?)