Why the CEO has to be the chief blogger

Successful social media strategy starts at the top of every business

It's misguided to think social media can simply be delegated to the youngest in the business, or outsourced to a digital agency. Social media is simply another relationship management channel. So it makes sense the strategy of what will be discussed in social media and what won't lies with the CEO. Social media is the one place the CEO's message can get through direct to the individual, without being filtered.

So if you're the CEO, consider this medium as your direct way to have a personal conversation where you can champion what you believe in. Before you begin, reconsider what you want your business to be known for. Ask yourself what is at the heart of why people should buy from your business, rather than your competitors?

Recent research by PR firm Weber Shandwick shows social media has positive impacts on business. (Click to enlarge.)

This simple checklist will help frame the social media agenda for your business

• What is the purpose of the business, what will success look like?
• What is the business strategy?
• What does the business believe in?
• How does it add value?
• What are its beliefs and ethics, its reason for being, its mojo?
• What is the business story? The way you express your differentiation, the reason for customers to choose you.
• Who does the business want to help? Who do you want to leave for your competitors to lose time or money trying to please?
• Who does the business want to influence? The gatekeepers to your prospects, or perhaps the well connected people who might bad mouth you through ignorance?
• Who does the business want to work with? Do you have affinity partners or associations you can share your blogs with?
• What kind of people does the business want to attract? It now matters what you look like in the blogoshere because it's the first place most potential employees will check you out.

Reputation risk has been elevated by social media

As equally important as having a social media presence is what you say. Being active across social media brings new risks. What is published online stays online, potentially forever. No wonder reputation risk is now the number one concern of CEOs globally according to the latest report from Deloitte.

Perhaps if more CEOs took control they would minimise the risk of staff who know less being the main originators of social media conversations. The CEO is best placed to set the agenda, staff can then follow through.

According to research by Weber Shandwick, more than six in 10 CEOs are already posting content on company websites. Yet only 18 per cent of the CEOs surveyed participated on social networks. The chart above gives an overview of the survey findings. Interstingly, 80% of staff want to see their CEOs on social media, largely because it's where they want to keep up to date.

I feel most CEOs I talk to are missing this powerful opportunity to spread the truth about their business vision. Social media is where these truths are shared and discussed, it's one place the leader can champion their cause with passion.

What makes mid-sized businesses more profitable than big?

So what is a mid-sized business?

GE Capital has been defining the mid market in Australia as businesses that have annual revenues of between A$10 million and A$250 million. Average firm turnover is about A$41 million. Despite comprising just 1.4% of companies by number, mid-market firms provide one in four full-time jobs and contribute A$425 billion annually to the economy.

The federal Department of Innovation, Industry, Science and Research, which has a broader definition of medium-sized businesses as those with between 20 and 199 employees, puts the economic contribution of the mid-market considerably higher.

The mid-market campaign we successfully managed over four years for IBM targeted businesses from 99 and right up to 999, the large corporate and government sectors that IBM traditionally owned really kick in around 1,000 staff.

Australian Business

Most mangers still hold the belief big means better. We hold a belief businesses can only succeed today by being nimble. The reason for this is the profound change the Internet has brought to our lives. The world even quite recently was quite slow to change, and most businesses were relatively simple. Today we all compete in a world of rapid paced change and increasing complexity. So the old big business model of slowly and effectively finding savings from gradual improvements to products and services and small efficiency gains in management and procurement are no longer enough to stay competitive. Let alone stay in business.

The evidence for the decline in profitability of big business is seen in this chart. It shows one third of market leaders in their category in 1950 were also the most profitable businesses in their category, whereas today being big almost guarantees you’ll be struggling to make a buck.

Market leaders that are also category profit leaders:

What makes big business vulnerable to challenger brands

George Shinkle is a Lecturer in the School of Strategy and Entrepreneurship at the Australian School of Business. He has been studying why big business is failing.

“Organisations grow large by becoming more efficient, so when you’re really focusing on efficiency you typically become less and less flexible. The rules and processes and procedures become more and more about keeping you efficient, constraining your ability to be flexible,” he says.

“If you talk to the CEO of a very large firm, they don’t feel as if they’ve got direct control of what the organisation’s really doing. They give guidance and they set policy but the organisation has some variance on how well they follow those things,” says Shinkle.

The learning you can take advantage of is that managers in large companies try to hide from change. Which is why, if you’re running a mid-market business, you will create your own advantage by actively seeking out things to change to differentiate from the competition.

Not too big, not too small, mid-sized business is just right

Big business is still obsessed with conformity, groupthink and doing things the way they have always been done around here. Small businesses may be the birthplace of great ideas, but they usually don’t have the scale or resources to commercialise those insights.

The mid-sized business is perfectly placed in the middle, where the distance between innovative thinkers and management that can actually make decisions is short. Unlike small business, resources aren’t so slim ideas can’t be trialled without damaging the existing business of running the business.

At a CEO Institute meeting Susan Lenehan told me the biggest frustration of the CEOs of Australian arms of global businesses she mentors is their total lack of autonomy. They are prescribed what to do by head office irrespective of local circumstances. In her words, it’s the pinnacle of the “bully culture” of big business management.

Challenger brands will prosper by taking risks

This is the great opportunity mid-sized Australian businesses are exploiting, they can leverage their ability to try changes, while the big guys are stuck in the inertia of business as usual, with its five year plans, annual targets and quarterly reporting. By challenging traditional big brands, Australians can be globally competitive in a world that is changing daily.

The real successes come from maximising returns by minimising the risks of change – we developed the challenger brand formula for growth for this very reason.

Why you need brand awareness before sales

This famous ad for advertising with McGraw Hill appeared in 1958

Business owners sometimes need reminding of the timeless challenge, why would a prospect buy from you rather than one of your competitors?

For 50 years the simple answer was to spend more on advertising than the rest of your category. As marketers now realise, simple strategies in this Internet enabled world now require more complex solutions.

Challenger brands can succeed today without big ad budgets

The good news is smaller businesses can now be successful challenger brands with smaller budgets than the big brands. The staring point is to differentiate. with a singleminded story that prospects will value. you can then apply a test and learn approach to marketing across multiple mediums. Smarter strategies applied with insight will now succeed while big spending inflexible brands continue to struggle.

73% of marketers say more has changed in 2 years than the past 50

Who are you going to call to advise your business on how to grasp the rapidly expanding number of marketing communications options? Usually you’d call in an expert. However, the pace of change right across the business world and the complexity of competing solutions is so great how can any individual be an expert? And big businesses may have lots of individuals, but we all know they rarely work as a team let alone communicate well with clients.

Marketing professionals are confused

A survey* by Adobe of 1000 marketers in the US shows the crisis in confidence of the marketing services.

“Marketers are facing a dilemma: they aren’t sure what’s working, they’re feeling under-equipped to meet the challenges of digital, and they’re having a tough time keeping up with the pace of change in the industry. What’s worse, no one hands you a playbook on how to make it all work,” says Ann Lewnes, Chief Marketing Officer, Adobe.

Digital marketing is full of novices

Adobe’s survey found less than half (48%) of marketers who consider themselves primarily digital specialists feel highly proficient in digital marketing. Most digital marketers haven’t had any formal training in digital marketing. No surprise really, it’s so new and evolving very few places can teach it.

The problem for business owners is how to leverage what’s new when so few people, if indeed any, know what will work. The people whose job it is to know, professional marketers, revealed in the survey the same old issues are today’s top challenges. 82% cited reaching their customers as the biggest challenge, then the uncertainty of knowing if their campaigns are working (79%), and measuring campaign effectiveness (77%) and marketing ROI (75%).

The answer for marketing your business?

Today every part of the business has to take risks

Whether it’s your accounting systems, distribution, IT or marketing, everything now is facing change. It’s hard enough to know the right question to ask anymore, let alone have the right answer. The safest option today is counterintuitive – it’s to realise you can’t predict winners anymore.

So the safe approach with marketing is no longer to set and forget. Rather than taking a long time and spending a lot of money attempting to develop the one perfect solution, try a lot ideas and mediums. And try them quickly and often.

Test. Learn. Adjust. Test again.

Learn to feel comfortable with failures. Set out to make the risks small so the stakes aren’t too high. Then go for it with a test and learn approach to marketing. The more often you fail the quicker you’ll find yourself challenging the competition and being successful.

* Source: Adobe and Edelman Berland, online survey among a total of 1000 US marketers.  Marketing Staff (n=499), Marketing Decision Makers (n=436), Digital Marketers (n=263), and Marketing Generalists (n=754). September 2013

Are fashion retailers training customers to buy on sale?

I've written in the past how Zara led the world by applying just-in-time manufacturing and data analytics to bring us fashion forward product design. This has given them an advantage over traditional retailers by circumventing the traditional seasonal approach to fashion.

Instead of waiting for the leading designers to reveal on the Paris catwalks what we'll be wearing next year, Zara's innovation was to take the Dell Computer model. Zara replenishes stock in their stores every week, see what sells, then make more of what is popular. Rather than sitting on large quantities of stock hoping people will like what style you've backed, Zara take a test and learn approach. They never back one colour or style for a full season, Zara simply adjusts what they manufacture on the fly to what the consumer wants this week.

Fashion challenger brands risk destroying the advantage they have created

Retailers are losing the power to maintain margins by encouraging a buy on sale mentality. According to Robin Givhan, the only clothes critic to win a Pulitzer Prize, with the constant turnover and turnout of items due to the ever-quickening fashion cycle, there’s no need to buy anything at full price anymore.

While bloggers and fashion critics have used social media to drive awareness and demand of the weekly fashion cycle, retailers she says are to blame for the loss of their pricing power.

"Retailers talk a lot about how the availability of show images pique the interest of consumers before the clothes are available. But I blame retailers for creating a system in which they want spring clothes in November and more shipments every five second[s] and then putting things on sale when they've only been on the racks for one second," said Givhan.

Consumers usually don't know how to establish the value of something, it's actually within the power of the seller to frame the price that they will believe is fair.

Innovate for pricing advantage

If you have innovated your way to a price advantage, don't throw away your smartly won margin. Instead, decide how you can frame the price as fair value, for instance in terms of more for the same, or faster for the same, or better for the same. Offering something for less is an approach fashion retailers are finding comes at the cost of not just profit, but long term survival.

Don't drive your category to the bottom the way Persian Rug stores have, where in every corner of the world the SALE sign on the window now means OPEN. Here's one I snapped in Hong Kong...

Do you have a clear point of difference to drive growth?

Staying in business has never been harder. 10,632 companies collapsed in the 12 months to March 1 2013 -  ASIC also reports the number of firms being placed in administration is more than 12 per cent higher than during the GFC. Over the last few months an average of 44 small businesses were closing every day according to ABS data.

A change of government won’t change the fact the pace of change is still accelerating, the choices for customers continue growing and the decisions we all face in life are more complex than ever.

Where will your business growth come from?

These are your options:

1. From existing clients
2. By getting new clients
3. Expanding to new locations, (interstate, overseas)
4. Developing new services
5. Making acquisitions

90% of businesses focus on number 1, selling more to current customers or charging them more. Yet the upside is limited.

Of the small number that go down the acquisition path most are disappointed. An AGSM survey of mergers and acquisitions showed after 3 years just 10% exceeded expectations of synergy and only 10% - 15% met expectations. The rest had failed or were in a death spiral.

Expansion and new product or service development often require a large commitment of resources and takes attention away from the existing business.

Which leaves new business as the key driver of growth. Marketing is the one proven method that can drive scalable new business growth. A successful new business program begins by confirming you have a differentiated offer relevant to today’s customer. Every prospective customer has more than one choice. What does your business have that makes it so special they have to choose you?

Customer alignment, simplification and innovation

Here’s a simple technique that GE Capital employs to keep their business differentiated in this time of rapid change.

Customer aligned

• Employees know which customer segments we serve and what their top 3 needs are
• Our organisation rallies around these needs (customer facing & support departments)
• We continuously track customer metrics at a transaction, product and business level
• We respond to customer feedback fast

Simple

• We do less, better
• Our customer processes are intuitive
• Our internal processes are as easy as our customer processes
• We routinely identify and eliminate the bottom 30% flow value processes, reporting and meetings

Innovative

• We encourage, empower and reward staff who challenge the status quo
• We launch new ideas fast (< 45 days average)
• We have a full pipeline of ideas linked to incremental volume
• We invest a significant amount annually on innovation

Differentiation for new business growth

Don’t hold your breath waiting for the government to simplify regulation, align their policies with your needs or innovate the country’s way to prosperity. Look at your current structure, reconsider what the business currently offers and determine a positioning that will differentiate you from your competition. Today.

This is just one of the tools UNO uses to ensure when our challenger brand clients invest in marketing, the returns will be worth the effort.

Two fast food brands prove the long term value of a challenger positioning

There are few categories more sophisticated at marketing than fast food. For 50 years McDonalds has been fine-tuning their brand marketing driven machine in Australia. Other brands may talk share of voice or share of wallet, McDonalds is famous for wanting the largest share of stomach in the country.

The business is a great example of how to upsell, cross sell and find new reasons for customers to visit. From breakfast muffins through burgers and happy meals to soft serves and late night treats, washed down by McCafe coffees in between. From Pasta Zu to chicken nuggets to who knows what else a machine can transform animal castoffs into.

Want fries with that?

All of these tactics are an excuse to get more people to buy fries more often, it's where the big profits are made. Makes you wonder how anyone can compete? If you don't work for an omnipotent  global business there is evidence of hope. Roy Morgan reasearch released in August 2013 shows just how well new competitors can do by choosing to take a challenger brand positioning.

A case study in how positioning can outsmart the big brands

Hungry Jacks came much later, and has never had the footprint or the ad budget to compete head on. What has worked long term for Jack Cowin's fast food challenger up against a global heavyweight, is a differentiated positioning that gives it a clearly defined space to compete in. "The burgers are better at Hungry Jacks."

From day one they lived up to that positioning statement, better burgers; either with biigger burger patties, actual lettuce instead of a miserable pickled cucumber, to the first Angus beef burger, then bacon and now organic beef. Single mindedly niche focused, and better for it in the minds of customers, who consistently rank Hungry Jacks above Maccas.

Long-term customer satisfaction in fast food comes from smart positioning. Chart: Roy Morgan, August 2013 

Challenger brands create new terms to compete on

Subway shows the rewards of zigging when the competition zags. While fast food leaders spent their product and promotion strategies on short term price promotion or new themes, from changing with the seasons, think summer pineapple burgers to following fashions, think cajun sauce. Meanwhile Subway went where no fast food had ever successfully gone before: the good for you. positioning.

The chart shows the relative strength of Burger King's "do less of the same, better" approach, and Subway's "do something completely different" model. Both are positively recognised by the consumer and continue to command a price premium to the slower to innovate fast food competition.

What size is a typical marketing budget?

How much is the right amount to invest in marketing?

Depends who you ask. The CMO Council asked hundreds of chief marketing officers around the world across categories how big their budgets are. While this was post GFC, it gives us a useful benchmark when planning ahead.

The starting point for setting a budget uses a top down approach based on your revenue. The chart we've made below shows the percentage of revenue invested in marketing by business to business firms.

Percentage of revenue invested in B2B marketing
2010 CMO Council Survey

Interestingly, the consensus view amongst those surveyed was that a new brand launch required a minimum investment of 20% of revenue. As we can see from the chart, either there aren't many new brands launched in any year, or the majority aren't spending enough to ensure they don't fail.

Another way of determining the right size of budget is to compare how much is spent according to the size of the business.

Percentage of revenue invested in marketing by company size
2010 CMO Council Survey

We shouldn't be surprised that as businesses establish themselves and grow, the number of staff grows. As they grow, the relative proportion of their revenue invested in marketing decreases. Marketers understand the long term nature of judging the return on investiment in marketing. Marketing that is consistant delivers compounding returns, a relatively large initial spend will pay dividends in the long term.

Average marketing budget for FMCG brands

A Go-to-Market survey in 2012 found this spread of investment by revenue of FMCG brands:

% of revenue % of companies

No budget    1.1%

0 - 2%           28.6%

3 - 5%           33%

6 - 10%         21.1%

11 - 15%        8.6%

16 - 20%        4.3%

20%+             3.2%

You can use these percentages as a starting point for framing your marketing budget and then compare to the result of viewing your requirements from a bottom up view.

Bottom up marketing budget approach

Create a list of activities you plan to undertake across your integrated marcomms plan and estimate the required investments for each. Balance and adjust for frequency, reach and coverage. Consider set-up costs for all mediums and a realistic figure for content creation and creative, remembering the better the idea the less times your audience needs to see it to get a result. Factor in research and tracking and an allowance to have the flexibility to react and respond. Remember to allocate around half your total budget for labour, across both internal and outsourced agencies for development and management throughout the year.

Depending on the particular segment your brand is in, the consensus is a B2B marcomms budget needs to be between 3 and 6% of revenue and for FMCG between 6 and 12% to have at least a competitive share of voice.

The most and least trusted professions

Every year Roy Morgan releases a ranking of the trust Australians have for each of the professions. Advertising is down and real estate salesmen up in 2013.

Here are the jobs as they rank for trust in Australia

How does this compare on a global basis? See the global trust index.

The Naked truth on Rudd's interview for ads scandal

You probably already have an inkling the public rate marketers and ad people at the bottom of the trust scale for professions. You're right, they are down there with politicians. Something happened this week to reinforce the view that neither can be trusted, it's a classic example of an "whatever it takes who cares about the ethics" attitude.

Controversy blew up when Sydney based Naked Communications was exposed while working on a project for Labor when it offered video interviews with PM Kevin Rudd to online youth publishers in return for free online ad space.

Further blurring the lines between “an interview”, and an ad campaign, the agency wrote to Faifax owned The Vine they were “particularly keen for a deeper relationship (including putting investment behind your content on YouTube).”

They also encouraged the online publication to provide “access to pro-Labor or pro-NBN talent.”

When found with their pants down, Naked were fired by Labor. The Sydney Morning Herald’s political reporter, Jonathan Swan, who broke the story, said “it seemed very odd” that Labor was oblivious to the deals offered to online youth sites.

The agency’s CEO claimed no knowledge of the deal, blaming a younger staff member. Indeed, the day after it blew up the agency planner responsible was “no longer in the building”, having left for a holiday in the UK.

What has been adland's reponse to this question of maintaining standards?

Next day the Creative Director of Wonder wrote in AdNews “how much responsibility are we giving young and inexperienced executives? I think too much. Our industry is more impressed by 20-something backward baseball cap-wearing gamers that impress us with their social media savvy than wise old owls. Where are our wise old owls? Nobody could ever accuse the marketing industry as one that eats their young. Quite the opposite, we assassinate the old and we call anyone over 50 old. Mike Wilson (CEO) is Naked’s wise old owl and the bloke is only in his 40s.”

He then suggested the team at Naked vote Abbott to avoid a Labor backlash. This received some wise comments, my favourite from No Wonder of Paddington:

"Wisdom is not the province of age, and this is not an 'odd judgement error'. It's a failure from top down to create a culture of ethics... that at all times forces doing the right thing to trump making a splash for your client. Wilson may be the straight shooter he's characterised here to be, but as the leader of the pack, he's ultimately responsible for the culture that would spawn the actions of that 'rogue executive' who was shown the door"

"This isn't the first time that Naked has been guilty of pushing the envelope at the expense of common sense, and more importantly common decency. What's worse is that the creative drive to market at any expense has had a poisonous influence on the business in general, and in some corners legitimised the art of the stunt and the bad habit of erasing the moral line to such an extent that many of the young guns don't even know it exists."

"It's the agency that should take the fall in the end, not just the employee directly responsible, and encouraging them to vote for Abbott in an attempt to avoid the negative reaction from everyone that they richly deserve shows us all just how jaded the industry at large has become. Sad and sadder."

SMH's Swan labeled the agency “a bit wild west, they’ve got a cowboy reputation” and said they have a history of “doing things a bit off-piste”. Swan also mentioned the infamous fake Facebook Witchery coat campaign which duped both mainstream media and social media users in 2009. 

When does online content become advertising?

According to the ACCC and AANA it’s one and the same in the eyes of the law, as we can see from the new Code on marketing communications that encompases social media.

Gabriel McDowell, MD of PR firm Res Publica pointed out the new risks inherent in attempting to leverage digital channels: “From a crisis management perspective, and based on the reported facts so far, I think the ALP has reacted promptly and appropriately to try to limit reputational damage to the Labor brand. They have made it clear they didn’t sanction the offending proposal and firing the responsible agency was a justifiable response given the seriousness of its misjudgement.

"And there can be no doubt that it is a whopper of a misjudgement because building trust and understanding between a brand and its public is the fundamental objective of any communication campaign and deliberately blurring the lines between editorial and advertising can only erode trust when it is uncovered.”

"It has never happened before. My mouth was on the ground. Young people are politically engaged and this is not the way to go about appealing to them. It is why we tend to shy away from the major parties."

She told AdNews it was "exactly the sort of thing that is killing media", but that brands generally grasped the value of editorial over paid content.

The challenge for the communications industry is while we may have self-regulation, only a handful of agencies are Accredited by the Communications Council. UNO is, Naked isn't and most clients don't appreciate the difference. As I commented to AdNews, "what's the point of having an agency Accreditation scheme when people arrive at work having forgotten to pack the moral compass. If we want to be regarded higher than real estate salesmen, which the latest research shows we don't, both clients and agencies need to keep briefs away from the irresponsible."

Will digital spell the end of editorial integrity?

This has all happened less than a week after Adnews editor-in-chief Paul McIntyre expressed a fear for the future of publishing as the title becomes a defacto re-publisher of PR releases and sponsored events. This is what he said in an open editorial:

"Change can be painful but equally stimulating. Just as long the industry knows where it’s all headed and in what direction it is pushing its industry media. It won’t be too far away, for example, when you all can hack back your budget for PR operatives. And PR types, brace for a much harder slog. Seriously, most of you won’t be needed. The deluge of PR-generated ideas and story angles is rising rapidly while the ability for business-to-business media to cover it is declining at the same pace. Don’t forget that. Okay, sorry, rant over."

Get social media right or "you're stuffed"

Every time you use something that you aren't being charged for, remind yourself, it's because you are the product. SMH.com.au, LinkedIn, Facebook, Pinterest all let you read and/or post for free because they are making money out of YOU. Businesses of all kinds are constantly gathering data from you and about you and your contacts most of the time you do something digitally. Facebook can now access your phone’s microphone to eavesdrop on what you are listening/watching while you post an update.

The upside is you will be served ads or content or search results that have been vetted just for you. The downside if you're marketing your own business online is you have to recognise the average person will increasingly expect to receive only what they care about.

Social marketing 101: What's in it for your customer?

As Jane Caro told a room full of online marketers recently, people are "entirely able to screen you out no matter how much money you put behind (your message.)

“If the message is not relevant, if the message doesn’t mean anything to them, you’re stuffed.

“the power has moved from those people with large pockets to the population at large. But you can have no money at all and send a Tweet that resonates and takes off like wildfire and suddenly you’re famous.”

Research by McKinseys has shown businesses have found the primary benefit of embracing social media is the ability to open a dialogue with customers and actually listen to what customers want. Not talk at them like a brochure, but understand what they care about and respond, or learn and move on. Here's a reminder of the simple etiquette of doing a business on the Itnerweb.

3 rules of social media engagement: the 3 Rs

To participate in social media as a representative of an organistion or company it is important to remember 3 rules.

Be clear about who you are representing, take personal responsibility for ensuring that any references to your company are factually correct and accurate and do not breach confidentiality requirements, and show respect for the individuals and communities with which you interact.

Remember, you are personally responsible for the content of the posts online. If employing a ghost writer, it is your responsibility to sign off on final content. Ensure any information about your products and services that you provide is true and factually accurate.

Respect copyright, privacy, financial disclosure and other applicable laws when publishing on social media platforms.

If you break the law you may also be personally liable.

There is no best way to compete

Remember that scene with Steve Martin ordering coffee L.A. style – "a half double decaf decaffeinated half caf... with a twist of lemon." (The video is at the end for you to enjoy.) It seems every single decision we now make throughout the day comes with an endless number of choices.

So it came as no surprise when a global a marketing guru presented research to the World Business Forum in Sydney that proves, in industry after industry, there is no single best way to compete.

How to differentiate your brand today

The worst mistake in strategy is to compete with rivals on the same dimensions, Professor Michael Porter says. The man who’s made strategy his life work says many businesses still get confused around the definition of the concept of differentiation, and that even trying to be ‘the best’ means a business is starting in the wrong place strategically.

Porter points out "we all know it’s impossible to meet every need of every customer uniquely well. That’s impossible. There’s no one way to deliver value.

“Strategy starts with a notion that the fundamental question is not how to be the best, it’s actually how to deliver something unique. To the customers you’re choosing to serve. Not because what you’re doing is ‘the best’ but because what you’re doing is delivering distinctive value.

Strategy is about being unique. That’s ultimately what all successful companies are able to achieve for some period of time."

The formula for growing challenger brands

If today we are spoiled for choice, it follows the prospective customers for our business are too. So instead of seeking some magic wand global answer, a better strategy is to identify one thing people you're trying to serve actually care about. Something that you're good at delivering. Finding your mojo is the fundamental starting point in our formula for growing challenger brands.

What happens when the CMO spends more on IT than the CIO

The head of marketing will soon be spending more on IT than the head of IT, so a recent study by Gartner found. Last week at the annual adfest in Cannes, Ogilvy's top creative warned of how too much faith was being put into data and not enough into ideas. This was resulting in well planned and placed ads that don't actually achieve much.

Where is the real value to be found in marketing?

The more things change the more they stay the same. The problem in the past was IT managers spent a fortune, first on hardware and then software to sytemise the running of the business. Whether or not the customers' experience was improved was not the concern of the CIO. You only had to dial 3 for support to know that. The main focus of the CIO was all about having bragging rights his IT budget was bigger than the competitors'.

Now we are seeing marketing managers playing the same game, "my Big Data budget is bigger than yours." Businesses are paying more and more to collect big brother levels of information on people. You've experienced the result like everyone else – being hit with ads on Facebook when all you want to do is see a picture of a friend's fishing trip. This may be how Zuckerberg will try to make an earn for shareholders, it isn't the road to marketing Nirvana. Just like the IT managers of the past, what the customer wants once again isn't the focus.

The constant here is managers within the business concentrating on the business of the business, rather than looking for ways to make a customer's life better. You probably recognise the trap, I fell for it. For several years I paid too much time and money on experienced professional staff and IT consultants to implement and manage programs to systemise my business. None of it added to the power of connecting and motivating, inspiring or creating. It was money spent on smooth bureaucracy for neatness sake and failed to grow my customers' businesses, nor consequently my own.

Rational Vs emotional marketing approach

"Investment" in IT has always been a rational spreadsheet sell to the chief decision maker. How often have you witnessed a marketing department asking for a "brand building" budget lose out to the CIO who could promise a guaranteed ROI from some new IT? Problem is marketers seem to be giving up the fight at the board level for using emotion to connect with customers, instead choosing the easy route of asking for funding for data. Spend X get Y. Yet economic modelling consistently shows the customer is innately irrational, human beings are pre-programmed that way. This is at the heart of getting the best marketing ROI.

Your customers are more emotional when making purchase decisions than rational

The influential role of emotion in consumer behavior is well documented, here is a summary by Antonio Damasio, professor of neuroscience at the University of Southern California –

• MRI neuro-imagery shows that when evaluating brands, consumers primarily use emotions (personal feelings and experiences) rather than information (brand attributes, features, and facts).
• Advertising research reveals that emotional response to an ad has far greater influence on a consumer’s reported intent to buy a product than does the ad’s content – by a factor of 3-to-1 for television commercials and 2-to-1 for print ads.
• Research conducted by the Advertising Research Foundation concluded that the emotion of “likeability” is the measure most predictive of whether an advertisement will increase a brand’s sales.
• Studies show that positive emotions toward a brand have far greater influence on consumer loyalty than trust and other judgments which are based on a brand’s attributes.

So it follows a business that concentrates on chasing efficiency by spending big on data risks failing to connect on the more powerful emotional level.

Challenger brands care most about what the customer thinks matters most

Challenger brands that actually care about what customers want are winning by using the Cloud to remove superfluous steps from the delivery of products and services, often without big IT budgets. One example I know intimately is an Australian first, UNOsmsf, Cloud based Self Managed Super.

The rational customer benefit: More choice, more control, lower fees. We'll be using an emotional truth to appeal to prospective clients: your fund can do better than your mates with more money who are paying through the nose for an average product the big banks want to sell them using big data.

Check out the superannuation challenger brand taking on the banks from the Cloud.

Top 5 biz management blunders

Have you read any of Robert Gottliebsen's recent articles on the impending 12 billion dollar plane crash coming our way? Australia's purchase of three squadrons of Joint Strike Fighters – 58 at over $100million each is a fine example of the 5 management blunders many businesses tend to make.

5 blunders for management to avoid (& tips on marketing)

Gottliebsen quoted Liberal senator Jensen, a scientist, explaining what a blunder the decision to purchase the JSF is proving to be. Here I paraphrase Robert, with my own warnings on the blunders to avoid when making decisions about marketing::

Rule 1 of management blunders

Ignore expert advice and go with your gut. A decade ago Australia's manager at the top, John Howard, ignored the advice of aviation experts and bought into the development of the JSF. In my experience, being told the CEO doesn't believe in marketing or paying for external advice is more common than finding a boss willing to admit where their expertise ends.

Rule 2 of management blunders

When you make a big decision, those who continue to oppose you need to be pushed aside -- everyone must get with the program. Creativity is stifled by group think, yet it's creative thinking that helps businesses compete on their own terms, rather than taking the category head on.

Rule 3 of management blunders

All staff involved in the decision are ‘looked after’. E.g. In the case of the JSF, Senator Jensen has studied carefully what happened and says "there are too many who get jobs with contractors where they have provided advice favouring that contractor's product.” Advertising is renowned for managers procuring from friends who are designers, family members who know photoshop and printers who give them tickets to the rugby.

Rule 4 of management blunders

Delay as long as possible in telling the people at the top that the decision is wrong. In corporations, big, sudden write-downs are often caused because management down the line keeps putting a good spin on the data to keep their jobs, until finally they have to confess. Or in my experience, they are found out long after they've moved on. One CEO didn't realise that for two years none of my proposals to fix their problems had ever been passed up to him by his marketing manager. It was only after firing the manager he discovered an email trail where my strategies and estimates had been constantly forwarded to her close friend, who was then being commissioned for services beyond their capability at far higher prices.

Rule number five

Obscure the costs with all sorts of creative accounting. In marketing and advertising, this is really easy when so many managers claim to know the cost of everything, when they actually don't understand the value of anything.

The common theme here is the tendency of management to throw staff at problems, at great long term cost, when trusting experts would be better for business.

Get onboard the online retail bandwagon: $14.9bn & racing

The idea that online retail is about discounts isn't in line with the facts. While margins might be tighter, e-commerce is no longer just about bargains and end-of-line clearances. The latest NAB Online Retail Sales Index shows just how broad Australian retailing has become. Daily Deals sites are stuck at 3% share. The biggest online sales growth stories now are in liquor and groceries.

Department stores and appliance retailers the big winners, or losers online?

The mainstreaming of e-commerce can be seen in the leadership of department store products with a whopping one third of online spending. Once slow to adopt, Myer now offers 119,000 individual products online.

Domestic operators still have the lion’s share of online sales at around 75%. Gerry Harvey’s call for a GST on foreign online sales is just noise when you consider he mostly sells homewares and appliances, the second largest online category. I don’t see Australia Post delivering washing machines bought from Best Buy New York via their online store as a threat to Gerry. The threat is internal, his stores are failing to add value to the sales process and Harvey Norman still doesn't appear to have a strategy to compete with local online challengers.

Challenger brands have an advantage online

If anything, e-commerce puts the power back into the hands of customers who want to deal direct with manufacturers. Australian challenger brands, when they make a product that locals actually want, can cut out the blood sucking Coles/Woollies duopoly and the Gerry Harvey’s.

When brands reinvest into marketing a portion of the retailer margins that going online cuts from the delivery chain, they can grow share long term. This way e-commerce becomes a WIN, WIN equation for brand and customer.

An example of this approach is the transformation of a traditional Australian designer manufacturer of compression and sportswear – Quick Response. UNO has helped them transform from a wholesaler at the mercy of retailers to a direct-to-consumer e-business. This challenger brand is now competing with SKINS, (the retail market leader with a high priced foreign made product), by offering superior Australian made garments direct online, at a better price. Check out the QRS compression online store.

The future for online retail marketing

While retail sales generally have been mostly flat, ABS figures show Australian’s spent 27% more online in the year to March than the year before.

The NAB online spend index doesn’t include online shopping paid for by Paypal, transfers or EFTPOS, so the 6.5% of all retail spending measured in the latest report to March 2014 is an underestimate of the reality. Marketers need to view online retail as a growing opportunity for current business growth, not just a nice to have in the future.

Source: National Australia Bank Online Retail Sales Index.

Truth in advertising?

Which professions are most trusted in 2014? Research shows the Australian public rate nurses 91% for ethics and honesty, once again at the top, whereas most professions don't rank well in the trust stakes at all.

No prizes for guessing who rates last at 3%, it's the same profession that has been at the bottom every year since Roy Morgan began their annual "Image of Professions" survey in 1986.

2014 rankings of professions for ethics and honesty 

1. Nurses
2. Pharmacists
3. Doctors
4. High Court Judges
5. Dentists
6. School teachers
7. Engineers
8. Police
9. Supreme Court Judges
10. University lecturers
11. Accountants
12. Bank managers
13. Lawyers
14. Ministers of religion
15. Public servants
16. Public opinion pollsters
17. Financial planners
18. Directors of public companies
19. TV reporters
20. Newspaper journalists
21. Business executives
22. Insurance brokers
23. Stock brokers
24. Talk-back radio hosts
25. State MPs
26. Federal MPs
27. Union leaders
28. Real estate agents
29. Advertising people
30. Car salesmen

Source: Roy Morgan annual 'Image of Professions' survey for 2014

Design Thinking makes more money than traditional business management

Since the GFC businesses and investors have struggled to find consistent ways to achieve double digit returns. You can continue to blame the shake out that the credit crunch brought down on our heads, or perhaps the current tough environment is the new normal. The new normal is a world where businesses and governments and media proprietors no longer have control. Everything has been digitised, and thanks to Google and global Internet access from mobile phones at low prices the slevers are now controlled by the public, your customers.

The last decade has seen what Deloitte term the era of Digital Disruption. In a paper last year they identified which Australian industries are facing a short fuse, big bang trashing of their business models. Traditional business models that could control supply and demand and charge a premium have dissappeared or in the case of Delloittes hit list of financial services and are about to.

The businesses that prosper will be those that can embrace the new digital normal. It is the business managers that apply design thinking to their entire way of operating that will survive. The good news for SMEs is they have eless to lose than corporations and also have the management structure to embrace change. The best thing about all this si design thinking makes more money for a business than traditional management approaches. Here are some figures on just how much more profitable design centric businesses have been since the GFC. 

Design Thinking has doubled the returns of companies across a range of industries

The Design Management Institute in the US worked together with Motiv Strategies to create a share market index for tracking the returns of businesses that have Design Thinking at the centre of the organisation. Called the Design Value Index, it shows the 15 rigorously-selected companies that understand the value of design beat the S&P Index by a whopping 228% over the last 10 years.

Who are these profit powerhouse businesses and what do they have in common?

Design is an integrated function across the entire enterprise; they invest in design and it shapes the way employees interact and report, management structure is flat or receptive to ideas; experienced design executives are given power to direct design activities; and there is a senior leadership-level commitment to design. Some of the companies on the list won’t surprise you – Apple, Coca-Cola, Walt Disney and Nike. Others might – Ford, Herman-Miller, IBM, Intuit, Newell-Rubbermaid, Procter & Gamble, Starbucks, Starwood, Steelcase, Target and Whirlpool.

Designers are lateral thinkers, utilise their creative leaps

The way designers think is much more open to ideas, random thoughts from diverse sources and then building on these. By starting with the question what does a customer want and what makes them happy the designer is liberating from current accepted practices within a business. They challenge all aspects, collaborating across all the people in a business from sales to complaints, production to procurement. Compare this to control and command structures, like the public service where you aren’t allowed to ask a superior a question let alone challenge what they believe is the way it’s always been done.

Change, rather than wait to be redundant. As Deloitte warns, redundancy is coming sooner rather than later.

Design Thinking makes more money than traditional business management

Since the GFC businesses and investors have struggled to find consistent ways to achieve double digit returns. You can continue to blame the shakeout that the credit crunch brought down on our heads, or accept that the current tough environment is the new normal. We now have to operate in a world where businesses and governments and media proprietors no longer have control. Everything has been digitised.

Thanks to Google the information levers are now controlled by the public. In other words, your customers now call the shots.

The last decade has seen what Deloitte term the era of Digital Disruption. In a paper last year they identified which Australian industries are facing a short fuse, big bang trashing of business models. Traditional business management techniques that could control supply and demand and charge a premium have disappeared. You can see from Deloitte's hit list, even industries not used to rapid change like financial services and arts and recreation are about to face significant disruption.

Deloitte's Digital Disruption map

The formula for small & medium business survival in this time of disruption

The businesses that prosper next year and beyond will be those that can embrace the new digital normal. It will be the business managers who apply design thinking to their entire way of operating that will survive. The good news for SMEs is they have less to lose than corporations and more flexibility in the management structure to embrace change.

SMEs are perfectly placed to become tomorrow's challenger brands. The best thing about all this is design thinking makes more money for a business than traditional management approaches. Here is a chart that shows just how much more profitable design-centric businesses have been since the GFC. 

Design Thinking has doubled the returns of companies across a range of industries

The Design Management Institute in the US worked together with Motiv Strategies to create a share market index for tracking the returns of businesses that have Design Thinking at the centre of the organisation. Called the Design Value Index, it shows the 15 rigorously-selected companies that understand the value of design beat the S&P Index by a whopping 228% over the last 10 years.

Who are these profit powerhouse businesses and what do they have in common?

Design is an integrated function across the entire enterprise; they invest in design and it shapes the way employees interact and report, management structure is flat or receptive to ideas; experienced design executives are given power to direct design activities; and there is a senior leadership-level commitment to design. Some of the companies on the list won’t surprise you – Apple, Coca-Cola, Walt Disney and Nike. Others might – Ford, Herman-Miller, IBM, Intuit, Newell-Rubbermaid, Procter & Gamble, Starbucks, Starwood, Steelcase, Target and Whirlpool.

Designers are lateral thinkers, utilise their creative leaps

The way designers think is much more open to ideas, random thoughts from diverse sources and then building on these. By starting with the question what does a customer want and what makes them happy the designer is liberating from current accepted practices within a business. They challenge all aspects, collaborating across all the people in a business from sales to complaints, production to procurement. Compare this to control and command structures, like the public service where you aren’t allowed to ask a superior a question let alone challenge what they believe is the way it’s always been done.

Change, rather than wait to be redundant. As Deloitte warns, a big bang of disruption is coming sooner rather than later for most businesses.

How do you lead your business in the Digital Age?

The answer is in the mail. Australia Post is over 204 years old, but that hasn’t stopped it making the most of the digitised world. At a presentation to business leaders at the AGSM Leading The Digital Enterprise event yesterday, I found Tracey Gosling, a director of Australia Post, the biggest surprise. While the usual suspects, like the Head of Policy at Facebook and an author on Innovation helped open the eyes of the bank managers and bureaucrats in the room to the way generation X and Y want to be treated at work, it was the true stories of change at Australia Post I found most useful.

What's the future for AusPost in a digitised world?

Tracey shared real examples of the often simple ways ordinary people in their business have made changes that have worked. They show us what can actually be achieved when the starting point is very grim. Which gives real hope for small and medium sized businesses that aren't as tied down by the inertia of a monopoly like AusPost.

Tracey painted a picture of a vast post office workforce laboring under the emotional burden of the fear of change. Imagine you were a postie, one of my schoolmates from 30 years ago still is. Imagine over the last decade the postie doing the daily rounds would feel the bag of mail on their back was lighter than the week before. And next week it will be lighter still as people stop posting letters. They'd be worrying when will the day come there is no mail to deliver and they're out of a job?

To survive Australia Post has to manage a bigger change to the way customers exchange information than past revolutions like telegraph to telephone, horse borne deliveries to airmail, phone to fax. The Internet has changed everything more significantly than any of those innovations. Manage the change they have.

To quote the Australia Post annual report: “For the 13th consecutive year, we met or exceeded all of the performance standards that relate to our community service obligations. We delivered 95.5 per cent of domestic letters on time or early (against our 94 per cent target) and we increased the number of postal outlets to 4,429 nationwide. Total revenue grew to $5.9 billion and our after-tax profit increased by 10.9 per cent to $311.9 million. This means net profit has grown 21 per cent per annum since we enacted our Future Ready transformation program."

What has AusPost changed to keep up? Nearly everything, they had to. Last year they lost $189 million on mail delivery. AusPost now makes more from servicing e-commerce businesses and other activities that didn’t exist just a decade ago. There are secure 24/7 Parcel Lockers within minutes drive of most homes for out of hours parcel deliveries, digital self serve kiosks in post shops and soon digital I.D. recognition software that will mean documents like banking applications and contracts won’t need signatures by hand.

If a bureaucracy can go digital, so can your business

These changes to a huge and diverse business are making sure it can remain competitive as digitisation changes the world. As with most things in business, change management is being enabled at Auspost from the top. CEO Ahmed Fahour is a case study in the new style of management required for the digital age – leadership by openness, not power. This infographic sums it up nicely.

View this image on Pinterest.

Here are some examples of how Ahmed Fahour has let go of control:

1. Let staff fail

Individuals in offices can change their methods behind the counter to see if it works better than current processes without asking prior permission from senior management. If it doesn’t work, no great loss. If it does make an improvement, it’s shared across the organisation.

2. Social media is for everyone

While most government departments still don’t allow social media or even Google to be used in the office, Fahour has let employees at every level of share an opinion on Facebook. Just a few years before only 2 people were officially given the role to manage social media, yet even then there were 15,000 conversations happening on social media each year amongst staff.

Businesses need to recognise they can’t control what staff want, or constantly roadblock how they want to do it. Indeed today, in the words of former Cisco Senior Director Martin Stewart-Weeks, "a network routes around an obstacle." It's the same with staff, they will go around you, or leave.

3. What does the customer want that they’re not getting?

To improve the way they can fulfill for e-commerce customers, staff who had never shopped online were encouraged to do so in work hours. This led to an understanding at many levels of post  employee of what online businesses do well and not so well, and discover what shoppers want from the whole order to delivery process. One consequent innovation is the 24/7 Parcel Locker, which means you don’t have to be at home to receive a valuable e-purchase.

4. What can you do that’s new?

Things are changing fast, so what you’ve always sold in the past is less likely to be as attractive to new customers tomorrow. Again, take inspiration from the top postie:

“We capitalised on the boom in online shopping with the Parcel & Express Services segment earning profit of $354.8 million, on the back of 9.3 per cent growth in domestic parcel volumes. And, despite difficult retailing conditions, Retail Services profit again grew to $200.6 million, mainly through adding new financial and identity services.”

“Initiatives are all focused on capturing our immediate customer growth opportunities in the digital economy – especially in e-commerce, digital communications and trusted services.”

We are constantly exploring the new possibilities with our clients, it's how we help to keep them growing as successful challenger brands.

What if consumers were as determined as the businesses they dealt with?

Making meaningful comparisons as a consumer is challenging, especially with superannuation. Christopher Zinn says we need to understand how to make informed choices when incumbent businesses operate in a "confuscopoly". 

It is a big ‘what if’ because too many businesses profit from the lack of determination of their customers for better products, services and even prices.The public’s desire for improvement is dulled by a widespread disengagement, resignation and inertia that anything they do may actually be much better for them.

And the consumer malaise seems worse in those markets which really count most because of the sums involved: superannuation, health and other insurances, energy such as electricity and telecommunications.

The symptoms are a lack of switching to better offers, which tends to benefit the incumbent above the challenger brand, and even paying over the odds by sticking with the wrong plan and perhaps the wrong provider.

The figures are sobering. The Australian Communications and Media Authority says poor plan choice around telecoms has cost consumers a probably under-estimated $1.5 billion a year.

Superannuation is confusing for customers

The ATO holds more than $18 billion in lost superannuation accounts. And despite more than 11 million Australians are covered by private health insurance less than 40,000 of them switch each year.

The fault is not solely the consumers. The ‘confusopoly’ of the mobile phone market in particular makes meaningful comparisons more than challenging.

Our cognitive biases, which make us particularly vulnerable to decisions around money and cause us to favour the present as opposed to the future, do not serve us well when it comes to assessing strategies around retirement savings.

And the complex and changing rules around health cover and premium rebates tend to drive policy-holders to sit pretty instead of seeking better value.

Of course some consumers are determined and realise a little time and effort in acquiring knowledge of these markets can save significant pain and expense.

But there’s a limit to even their patience and how much effort is worth it for how little a reward. There’s also the issue of expertise and the imbalance of information: as consumers we are amateurs buying from professionals.

We may only purchase a new car every few years, but the sales staff sell them every day, and however canny you are they will always know more about the vehicle, its true value and how to upsell you on various unnecessary warranties.

One way to correct this asymmetry, as it’s sometimes called, is to gather like-minded consumers together and use their numbers as leverage in negotiating better terms.

It’s already happening in specific markets such as energy and insurance as One Big Switch, with whom I used to be director of campaigns, has demonstrated here and overseas.

Another way is selectively reforming markets by regulation. In Australia conflicts of interest with financial planners led to the Future of Financial Advice (FoFA) legislation.

The government is seeking to severely dilute these much needed consumer protections, claiming they are somehow excess ‘red-tape’. In fact they represent a much-needed shark-proof cage for consumers to more safely navigate financial waters.

In the US and UK regulation is helping liberate consumers’ usage data from the back offices of utilities and banks so citizens can employ trusted third parties to crunch the numbers and help them make better decisions.

The determined consumer can take back control

Being determined as a consumer is not just a state of mind, although that helps. In the future it will require the technologies which can bring us together quickly and cheaply to use some people power in markets.

It will also require more consumers to get hold of their own data and then find emerging intermediaries to help them make real sense of the complexity and choice fatigue which bedevils too many markets.

Determined consumers do not need to be told to shop around or read the fine print. They already know that, but they do need help in turning their determination into better decisions.

Christopher Zinn is an independent consumer advocate currently running a campaign to highlight the financial advice protections (www.saveourfofa.com.au). His other initiative is www.determinedconsumer.com.au which is aimed at motivating consumer action. UNO worked with Chris on consumer empowering programmes at CHOICE. He also co-founded One Big Switch as well as being a repoorter/producer at the ABC, Channel Nine and several newspapers.