Creative accounting that's legal: marketing drives profits

The Lynx effect: Marketers need to help business managers focus on the long term.

Yes, the world is experiencing rapid change and it’s accelerating. However with the average tenure of management in companies constantly getting shorter, retained knowledge is being lost and long term plans are often abandoned before they have a chance to deliver returns. Short termism is rife, sales managers will always tend towards a quick fix to get orders in this month, and financial controllers will naturally be looking for new ways to reduce spending.

Yet the bottom line is it's the businesses that invest year after year in building brands that create the most wealth. The chart below compares the S&P 500 index performance, the blue line, with businesses that own stronger brands, the green line. It proves the businesses that invest in brand building ultimately generate more wealth for shareholders.

Leading brands outperform the sharemarket

A great example of how building a brand over time makes more money is to look at the work BBH in London did for Unilever. The creative leap of saying a deodorant could make a man more attractive changed the dynamics of the market category. The ad agency took an also ran product to a profit powerhouse over 20 years with the one consistent creative idea; “The Lynx effect”.

Founder of BBH Sir John Heggarty says “All we did [back in 1995] was change the thinking. It’s more than a fragrance – anyone can make a fragrance – it’s actually about the marketing.”

"I fundamentally disagree that advertising is just selling people stuff they don’t want. I believe that you have to create a competitive advantage with creativity. It seems obvious but I spend so much of my time trying to convince marketers to be more creative.”

Marketing is more art than science says the global advertising guru

Last week in Sydney Heggarty told a room full of businesspeople and advertisers “you all want it to be a science, to get the equation right and go home. But selling stuff has never been a science, it’s about persuasion and it’s an art. It will never be a science. It’s important to remember that we’re all creative. If you’re in marketing, you’re creative.”

Branding today is worth more to a business than ever before

Here is the proof for the finance department. According to Millward Brown Optimor’s analysis, in 1980 virtually the entire value of an average S&P 500 company was comprised of tangible assets (computers, factories, inventory, etc). By 2010, tangible assets accounted for only 30 to 40 percent of a company’s value. The rest is intangible value, and about half of that intangible portion, close to 30 percent of total business value, is attributed to brands. Does your CFO treat your own brand as your single biggest asset?

It truly is the era of creative destruction. ROI marketing is one of the few tools left that can still make a difference and consistently drive business growth. It's worth investing in your brand if you want long term returns.

How many ads do we see a day? Do you remember any?

"We've gone from being exposed to about 500 ads a day back in the 1970s to as many as 5,000 a day today."

Jay Walker-Smith, Yankelovich Consumer Research

Hard to believe? Well, if you include the brand label on your undies when you put them on in the morning to the box your new tube of toothpaste came in that evening you can conceive you are exposed to branding messages thousands of times a day. This researcher also counted all the junk mail you probably don't read. But 5,000 ads?

A more reasonable figure for the marketing messages you see and hear daily is probably in the hundreds. Think about your average day, from the traffic report brought to you by Bob Jane T-Mart, the bus back for some show at The Star to the flyer for a Thai massage thrust in your hands as you walk past the poster for all-you-can-eat ribs on Wednesday nights. Then a barrage of down down retail ads on the TV during My Kitchen Rules, sponsored by some diet program. And those meet women in your area now!! ads on the side of your Facebook page late in the evening? What’s that about?

Whether it’s 300 or 3,000, we see so much that we register very little – and remember even less.

So if you were advertising your business don’t you think it might be wise to be distinctive and consistent enough to be recognised for something? Of course you would. So why is it most marketing communications is neither memorable nor consistent? Why doesn’t Qantas still call Australia home?

Why would an insurance company kill off its leading actors?

I can understand why an insurance company is killing off a 3 year ad campaign featuring Rhonda who now has a full time gig in a soap, but why did they drop the memorable jingle earlier? What have they got left to ensure we remember their brand? Who was that insurance company you may well ask? Ahhhhh, Allianz? No, when I double checked it was AAMI. You'd be forgiven if you haven’t been paying attention. Instead of keeping the sign off, "Luckyyyy, your with AAMIeeee", the ads no longer end with the sound of the jingle we’ve grown familiar with over 15+ years. Wonder why?

The average tenure of the CEO of an ASX 200 company is around 4-5 years*. The head marketer changes almost as often. Those brand managers on their way up move through more often, leaving behind their mark like my pug does on street posts. Which explains why the labels on all those Lindemans wines changed so often over the last decade. Southcorp then Treasury have destroyed so much brand equity because there were no custodians with a strong thread of brand DNA. Then each new agency wants to make its name, often at the expense of the advertiser.

Why will anyone remember your brand?

I was part of the team that created the "Which bank?" campaign for Commonwealth. It outlasted my time at Saatchi and survived a change of agency, despite their attempts to get rid of it. Brand building is like compound interest, you add a bit every year. And after a while it’s worth a fortune.

'Oh what a feeling' to be a copywriter for Toyota, knowing whatever the concept you come up with, the last 25 years of ads ensure the jump at the end will guarantee recognition by a half asleep viewer. Which is why the most successful marketing campaigns are the ones with legs. They go on and on like a Duracell battery.

It’s a fine balance between testing the new and stretching the offer without breaking the elastic brand. Some brands get it right. While there have been numerous small tweaks and occasional lapses, the VB can and the Coke dynamic-ribbon have survived decades of personnel changes. Less strongly managed brands seem to change annually. So when clients tell me they are getting tired of their campaign or their tag line or the font of their logo, I like to check if it’s busted first.

Sure we live in a world of rapid change, however, it’s more likely business survival and growth will come from product and service innovation and smarter marketing techniques, not from a new typeface. It may be a better strategy to refresh and re-launch rather than completely start again if you want to hold on to some rare customer goodwill. You’re doing well if they already have a small place for your brand pegged out in their cluttered head space.

Mortein tried to kill off Louie the Fly, but after over 50 years the public would have none of it. As John Laws used to say, when you’re on a good thing, stick to it.

Here's a Louie the fly ad from 1962

* Source: A Booz & Company study shows 23.5% of CEOs of ASX 200 companies left in 2011. Median tenure is 4.4 years and falling.

The top 20 valued brands in 2014

The world's most valued brands include some surprises. Coke is no longer it, in fact in the last year the brand value of Coca Cola has actually shrunk by 1%. Might not sound like much, but we are talking US$50million. A few more great ads like they used to make could have made a big difference to the bottom line. While there's a lot to lose there is a lot to be made by building a brand.

Innovation and marketing build brand value

Consider the year on year growth of Samsung as it continues to invest in product innovation and marketing. Now the number 2 in the world by brand valuation, Samsung increased it's value by US$20 billion over the last year. Coke slipped from number 9 to 12. Check out US telco Verizon, up from 10 to 5. Expect to hear more from them in Australia.

What are the highest valued Australian brands?

The value of a brand can be greater than the parts and isn't necessarily a reflection of the relative size of the business. While Australia's largest listed company by share market value is BHP, it doesn't rate on the scale for the book value of it's brand. The business with the highest valued brand in Australia is Woolworths. Woolworths sold $21 billion of food and liquor last year. The Woolworths brand is now ranked just outside the top 100 global brands and is valued at US$10.8 billion.

Racing up behind in second place is a newly invigorated Telstra which has re-invested, refreshed and relaunched it's brand over the past couple of years. The several millions spent on marketing has been rewarded, Telstra jumping 34 spots globally with an increase in brand value of over US$2.2 billion.

The banks brand valuations aren't the same as their market cap, but the shifts in brand value are a leading indicator of performance. ANZ is the smaller of the big 4 banks yet it has had a higher brand valuation for the last few years. But it's slipping, which helps give us an idea of which bank will grow faster in the coming years. ANZ, NAB and CommBank are all losing brand value and Westpac is climbing as they leverage stronger brand appeal to hold and grow customers.

So when you're in the boardroom discussing the pros and cons of discounting to drive sales or investing in marketing, show your peers what a difference a brand makes to the bottom line.

The business benefits of a strong brand

Remember just over a decade ago when IBM only sold big computers? Today most of us have more computing power on our smartphone and IBM is a consulting services business. UNO helped IBM make the transition to a service provider to mid-sized Australian businesses with a 4 year content publishing programme.

Many brands are having to change to survive

A few years ago if you wanted to find a business service you looked up the Yellow Pages. And if you wanted to make a call when you were out of the office you had to find a pay phone. It's amazing when you stop and think about how much the Internet has changed the way we do business.

Some once mighty brands like Kodak and Darrel Lea have disappeared, while others have successfully transformed what they offer. Have you taken the time to reconsider what your brand stands for in today's competitive market?

A brand is more than a name and logo

Your brand is what the public thinks you stand for. How you present your business shapes how your brand is perceived. Your brand is how your customers feel about you – the impression you make. It's how you look and how the way you speak. It's the unique way you reveal yourself to customers, from your choice of words to the typeface and colours you use.

If your business has been around for a decade then what your business does may no longer be well represented by what your brand is representing. Today's brands are distinctive yet flexible. Consider wWhat do Apple, Google and Virgin have in common? An ability to sell products and services across virtually any category by leveraging strong brand images that represent values that can be stretched as innovations are brought to market.

Strong branding is a smart business investment

Disciplined brand creation and consistant brand marketing is proven to deliver returns. Once you've differentiated your brand positioning, today you need to remember sales is no longer a linear pipeline, the power now lies with the customer. So for your brand to create wealth it needs to be discoverable across multiple touchpoints. With consistancy, the ROI from building a differentiated brand isn't just financial.

A strong differentiated brand enables the business to:

• Overcome competition based purely on price
• Prevent or slow decline of sales
• Hold on to existing customers
• Build sales leads
• Change perceived quality of your product
• Revitalise customer appeal
• Change company culture and boost employee morale
• Enter new markets
• Speed up product acceptance and trial
• Morally discourage competitors’ salespeople
• Raise capital more easily
• Sell a business more easily

See UNO's proven Formula for Growing Challenger Brands.

Who owns the world's best known brands?

"Brands are intangible assets and account for, on average, 75% of the value of a company."

– Blake Deutsch

Investors don't value what businesses make. The sharemarkets around the world have placed the most value not on production, rather they value the power of brands. Most share prices are a reflection of the future earning ability of a brand. The brands people most recognise also get the most votes from investors.

Just ten global companies own a surprising number of the world's best known brands.

From cat food to confectionary, shampoo to fragrances, each of these companies use their marketing skills to create shareholder value. As well as the dairy brands you probably associate with Nestle, the Swiss company also owns some of the most renowned brands in other diverse categories. Most people are surprised to see just how many categories just ten global corporations are active in. (View on Pinterest):

See larger image on Pinterest.

The big benefit of differentiating your brand is pricing power

The same marketing disciplines that are used to by Nestle to differentiate Kit Kat are leveraged by Nestle in other categories like fragrance. Georgio Armani Beauty is a Nestle brand, with Cate Blanchett its public face. Differentiation is why Nestle can charge a premium for perfume, Purina pet food and Nespresso coffee capsules.

In an Internet enabled world, where prospects can literally buy anything from anyone, it is now essential to differentiate your brand. It is differentiation that will ensure long term sustainable and profitable business.

Big brands have the world covered, which opens market niches to the nimble

The good news for challenger brands is the majors have slimmed down their portfolios over the last decade to concentrate on a smaller number of brands they can manage globally. So if you now apply the same proven brand marketing disciplines in niche markets you can most likely do so knowing there will be less competition from big global players.

As for Armani the fashion brand, it's still a family owned business with Georgio, it's 78 year old founder, still at the head. See how UNO grows Challenger Brands, including a number of successful Australian family businesses, just download our free eBook.

Who tweets about brands?

Technology companies get the most tweets

If Twitter users are image shapers, setting the trends in awareness in our society, it follows that marketers want to see their brands tweeted. Research by Nielsen has for the first time shown which brand categories are most tweeted, and who is doing the tweeting. Technology companies lead, followed by restaurants.

How to get people tweeting about your brand?

Be seen on TV. The age old adage, fame is the name of the brand game is underlined by the fact the brands people tweet about are the brands seen on what is still the world's mass market medium – TV. Perhaps this explains why the biggest brands still invest in TV advertising, it's the one medium that they can still use to shape mass opinion.

What Australians look for when shopping online

Myer missed the post-Christmas online retail rush, and it was BIG. On 1 January, The Australian Retailers Association put an update out on expected post-Christmas sales from Boxing Day to 14 January to be $15.1 billion.

You may have read Myer's site was down for over a week. CEO Bernie Brookes told shareholders it wasn't a big deal because online represents just 1% of Myers sales. I'd be wary of investing in a retail business that doesn't realise the importance of e-commerce.

6.4% or retail shopping is done online

In the year to November 2013, Australians spent $14.6 billion* on online retail. This level is equivalent to 6.4% of spending with traditional bricks & mortar retailers. Some discretionary spending categories are already well into the double digits for online sales. Despite Bernie's spin about the insignificance of his own online sales, in fact Myer's business plan has a 5 year target for online sales of 10%.

I've been brushing up on online retail best-practice

Those retailers that did get a share of the online post-Christmas sales rush now have stats on what worked for them. Fortunately we can all learn from what Australians did over Christmas thanks to a survey by Credit Card Selector of online gift purchases. Here are some of the insights on what shoppers are seeking online...

Why Australians purchased Christmas gifts online rather than instore

How shoppers find online stores

What gifts shoppers bought online in 2013

What would make an online shopper buy again

* Source: NAB Retail Index

How can you measure a marketer's contribution to the business?

CEOs and business owners often ask me what’s the best way for them to measure my contribution to their business. The business of business has never been more complex, yet we are actually in an era where marketing is one of the few levers left that management can actually control to engage customers. And that’s how a marketer is best judged – by the improvement of the brand’s engagement with customers.

Marketing is all about the customer. The customer

Don’t just take my word for it.

A survey of CMOs across 92 countries reveals consensus – the most valuable measures of marketing’s contribution are in the areas of engagement and “brand health”. Health being a bit of a catchall word for the grab bag of KPIs that show how much customers recognise you, like you, value and understand what you stand for. They also ranked the capabilities that will be more important to marketers over the next 5 years.

KPIs for measuring marketing effectiveness

Source: The Marketing 2020 Report, Effective Brands survey of 10,000 professionals across 92 countrie

The capabilities most important for marketers in 5 years

How to manage the 9 biggest marketing challenges

Here is how we manage the biggest marketing challenges today:

1. What do you stand for?
   Define your differentiated positioning in the market that not only you have a passion for, enough prospects will pay for.
2. Know your customer
   Base your story on what customers genuinely care about that you can deliver. The features with benefits that ideally are unmet by competitors, or unknown to prospects. Think like a challenger brand.
3. Define your target audiences
   Don’t attempt to sell something to everyone. It’s the era of niches within subgroups. Align your messages to what each customer target cares about.
4. Customer service
   Never over promise, always over deliver on expectations.See some of the proven ways to foster customer loyalty here. 
5. Pricing strategy
   Remember pricing is a two way lever, framing value to maximise profit is the game, not cost plus pricing, that was the era of mass market production line manufacturing. Be nimble and exploit unique profit opportunities from short term market mispricing. Then find another.
6. Packaging and design
   Sell the sizzle. Creativity and a consistent brand image increases cut through, recall and engagement and helps you command a price premium. Bad ads are bad for business. Stand out and apart. Safe isn’t just boring, it’s high risk.
7. Be prepared for a crisis
   The Internet now makes everything public and places the power in the customer’s hands. Have a plan. Tell the truth, you’ll be outed if you don’t. Make sure you know your legal position with social media.
8. Innovate for growth
   Or die. Big business struggles to change, this is the great advantage for those who aren’t market leaders. Become a challenger brand by zigging while the category zags. See the bottom line benefits of innovation as determined by AIM, they are significant.
9. Data
   We are now in a digitised world. The companies that have the most data on people have the power to own their custom. Whether you are a manufacturer, distributer, service business or retailer, the business that makes the most of data will control the money.
   
   

Email outperforms social media for new business, by far

McKinsey has just published some research I wrote about last year on the ineffectiveness of social media for customer acquisition. While marketers have increasingly jumped on the social media bandwagon, the stats show the effectiveness of Facebook and Twitter as a method of acquiring customers has remained flat. In contrast, email’s share of customer acquisitions has shot up over the last three years by 700%.

% of customers acquired by channel

Source: Custora, E-Commerce Customer Acquisition Snapshot, 2013. McKinsey iConsumer survey

The tip for challenger brands here is to zig when the others zag. The more your competition and every other marketer swamp social media with activity, the less likely you will be noticed. Personally, every time I now venture onto Facebook I am actually getting rather tired of being targeted by advertisers for diets, wine and dating.

Facebook is out of favour for new business

In the quest to deliver Facebook shareholders a profit, marketers are being encouraged to spend big. Meanwhile Facebook users are beginning to move on. The statistics show us those marketers who continue using email can expect 40 times the customer acquisition than from Facebook and Twitter combined.

That's not to say I'm recommending mass email blasts. The frequency of spam in your inbox is why marketers now have to be more discerning in what they send and who they send it to. For instance, Qantas has a frequent flyer database of 10 million members, slicing and dicing and and segmenting offers with hundreds of individual creative executions.

When Email marketing, remember what’s in it for the customer

Most of us hate spam. Prospects and customers however generally appreciate receiving an email when it concerns something of value to them. Depending on your category, different days of the week achieve higher responses. And of course, research on brand recall has proven the more creative your message, the more your brand will be remembered.

So make sure your email campaigns are well crafted and you offer a real benefit aligned to a genuine customer need. In other words, smart marketing not spam.

How Private Label hollows out brands

Australia is unique for the oligopolistic power of just two supermarkets. Coles and Woolworths have 80% market share of an industry valued at A$80+ billion.

In the UK, the two major chains Tesco and Sainsbury have 48% and the US equivalent is just 20%. Consequently when our retailers brought in management from the UK to apply the successful Private Label model developed by Tesco and Asda they did so with the potential to have a significantly bigger impact on our market overall.

Private label is no longer cheap generic Black & Gold commodity lines, it's the key to the retailers growing profit at the expense of both brands and producers. Whether you are in the FMCG business or a service business, the Private Label strategy is one that threatens every business as the company with the most customer data gains ownership of the sales process.

Global FMCG brands now struggle to turn a profit in Australia

In the last year major FMCG brand owners like Unilever and Nestle have publicly lamented their lack of power in this country to compete with the oligopoly's own brand agenda. While we have more supermarkets per capita than the US and nearly 3 times as many as the UK, the 10,000 Australian independents have so little share and such disparate distribution requirements for fulfilment they offer brands little scope for profitable scale.

Most shoppers don't realise they're being had

The trend to consumer demand for more brand choice and gourmet choices is being matched by Woolworths by it's purchase of Macro Wholefoods and roll out of Thomas Dux stores. Not only have Woolies out-merchandised the Harris Farm model, they've done an even better job in wine.

Together, Coles and Woolworths have over 50% of the liquor market, not just through retail store brands like Dan Murphys, Liquorland, 1st Choice, Porters, Theos and Vintage Cellars, but the big online database driven direct marketers like Cellarmasters and Langtons. Here is how Choice sees it:

This dominance has enabled the two majors to dictate what brands you can buy. They have delisted most small vineyards and substituted them with a cynical excercise in facadism. There is a plethora of over 240 Private Labels masquerading as boutique wines giving the impression of choice. They are merely made-up attractive wine labels stuck on bottles of mass produced vin ordinaire. From Abbey View to Willowbrook, see the list of fake wine brands for yourself.

Now they are using their data Intelligence to segment and market everything from Private Label credit cards to health insurance. For instance, they use loyalty card tracking of grocery purchases and the knowledge that if you eat red meat you are a better actuarial risk to target the insurance sales process. What insurance company can compete with this big brother view of Australians?

How does a business compete with this onslaught? A study by international branding expert Professor Mark Ritson of Melbourne Business School gives some insight...

The formula for Private Label success

• Lack of perceived differentiation between brands in a category

• Lack of value innovation of incumbent brands

• Increased proportion of price promotion activity

• Available production capacity

• For me products

• Smart retailers

• Competitive retailers

• Concentrated retailers

The power of the retailers in this market allows them to demand more price promotion from brands, which leaves little in their budgets for brand building marketing campaigns or new product innovation. In no time the brand values are hollowed out, leaving the category ripe for Private Label substitution.

The Seven stages of Private Label dominance

Stage 1: Price-based generics (Home Brand, Black and Gold etc)

Stage 2: Copycat (Penguin vs Puffin biscuits)

Australia has passed here and well into the next stage.

Stage 3: Good, Better, Best (Tesco Value, Tesco, Tesco Finest)

Stage 4: Flanker brands (brand extensions to attract brand 'switchers')

Stage 5: Category leaders (Sainsbury Extra Special Tea Bags)

Stage 6: Non exclusive (expanding beyond the store)

Stage 7: Legal monopoly

The supply side to killing brands

The no-name supplier is offered a carrot to become the stick that wacks the known brands.This business is often an existing maker of their own known brand line. Why would a Heinz for instance supply Woolies Private Label baked beans? This is what attracts them:

• Usually opportunistic origins
• Often based on excess capacity utilisation
• Any contribution over variable costs of production is seen by management as good
• Less profit... but still profit

Where it leads is usually not so positive. Here is what happens when the no-name supplier exceeds production capacity:

• Increased production costs for same or less profit
• Cannibalisation of existing branded product

Gradual strategic 'split':

• From brand builder to PL supplier
• Internal resources get utilised
• An implicit strategic change

Change of business from:

• Brand builder / innovator / consumer focus to
• PL supplier / cost cutter / business customer focus

Private Label and the weaker brands are consolidated:

• As PL grows weaker manufacturer shares decline
• Brand fights brand – not PL
• To maintain brand and shelf presence, 'lesser' products become 'propped' up with disproportionate costs
• Resources become further diluted
• Finally, once mighty brands are de-listed by the duopoly
• The retailer approaches a new potential supplier for PL, and so it all repeats

How high can Private Label go? (How low will brands fall?)

Private Label share in Australia today
23% is current floor

The UK is in the middle
50% Private Label

Theoretical ceiling
95% of product in Aldi is Private Label

Ten biggest threats to business

A global survey has given us a picture of what exactly the biggest challenges are for business managers today. Across categories and regions the message is the same – there are half a dozen particular issues companies are feeling pressured by, but don’t know how to deal with.

Those clever marketers at Ernst & Young have come up with a catchy way of showing what we’re all facing – they call it the Risk Heat Map.

Businesses of every size are facing the same big problems. Fortunately current research shows how your business can turn this time of rapid change to your advantage.

The real insight for business owners in this picture is that while managers recognise these risks, as we look across the Y axis we realise most don’t know how to deal with them. These challenges are the consequence of a new paradigm. There’s an elephant in the boardroom – it’s right there in the middle, emerging technologies. Yes, it’s the Internet.

Drivers of business change 

The Internet has changed everything. For the first time in the history of commerce, we now have true globalisation thanks to the transparency the Internet gives customers. People can now find the truth about any product or service in just a few clicks, in the privacy of their home or using a smart phone on the shop floor.

In the recent past there was still an advantage in being big – a manufacturer could configure a product and control its availability by region, a retailer could price a product depending on the suburb. Today with instant transparency, a customer can pick and choose from what’s on offer anywhere in the world.

Brands can no longer rely on any competitive advantage from tradition, size or resources. Rather, as Boston Consulting says – “in a world of change, the spoils go to the nimble”. The key to success is not just recognising the drivers of change, it’s ACTING on them.

The biggest risk to any business today is inaction. UNO has a proven formula for growing challenger brands. We can help you start today, risk free.

Email gm@unomarcomms.com for an outline of our process.

What is beauty in commercial art?

“We have a duty to keep ads beautiful” said Craig Davis, co-chairman and chief creative officer with Publicis Mojo Australia and New Zealand in Campaign Asia, yesterday.

I respect Craig, we pitched against each other for The Rocks account decades ago when we were young and radical and creative directors of competing boutique Sydney agencies. I won. The next year I pitched against him again, for Sydney Water. He won. 

Personally I don’t think advertising is art. It’s Commercial art, capital C. The latest CEO survey published in the same magazine reports 80% of the region’s CEOs think marketing people “are in La-La Land”. 

Craig’s musings on beauty in advertising aren’t going to change those perceptions. He is concerned “talent, craft and significance of ideas are being pushed aside by the desire to save time and money.” Craig makes a point worth taking the time to consider – we have all seen examples of the office junior being asked to whip up an ad because they know how to use clip art and can have it done in no time. Or the manager’s nephew is good with computers so he can build the corporate website for less.

All of this is being driven by the changes enabled by the Internet, “the flip side of the new digital meritocracy is that there’s an inordinate amount of noise generated” observes Craig.

He reminds admen “clients pay us to deliver results.” Hear, hear I say.

Then he returns to his point that “at its best, advertising is beautiful, but in the absence of creativity, it is just pollution. In the words of John Keats: Beauty is truth, truth beauty—that is all ye know on earth, and all ye need to know.”

Advertising that works is advertising that delivers a ROI

Business owners are more inclined to see beauty in numbers, like low cost per lead, and high rates of conversion. The fine balance of marketing communications is understanding how to use creativity to commercial advantage.

There is undeniable beauty in identifying a genuine human truth and expressing it to an audience in a way they find appealing. But let’s not talk about beauty for its own sake, lets talk about craft. Both in the craft of storytelling and execution, for business sake.

A century ago Dadaists like Marcel Duchamp challenged the protectors of traditional painting with the question “What is art?”

Before you invest in advertising, social media marketing or any program to grow your business, ask yourself, is this commercial art for the 21st Century? Is the execution well enough crafted to connect with your audience and leave the desired impression? Most importantly, will it give you the best return on investment?

It’s a commercial decision after all, not a beauty contest, don’t you think?

Why CEOs like Facebook yet fear it

The 2012 IBM global CEO study is just out. It once again confirms management is often aware of what needs to change, yet fear acting on their knowledge. 

"CEOs need social media, but many fear it" – IBM

The world’s CEOs believe that in the next five years social media will push past websites, call centres and channel partners to become the No. 2 way to engage customers (after face-to-face communications).

However fear of change is preventing most from actually actioning a Facebook strategy. Many will miss capitalising on this inevitable trend to more agile competitors. Some fears are justified, there is no doubt there is risk involved with social media. Risk isn’t just bad ideas like CommBank’s terrorist Olympics viral video.

Advertisers are now liable for users' Facebook comments

Australia's digital industry is up in arms about a ruling from the ad watchdog, which determined a brand's Facebook page is an ad platform with all its material - including user-generated content - liable under the AANA code.

A recent ruling from the Advertising Standards Bureau (ASB) in a complaint against Diageo said it considered Facebook to be a marketing communication tool. The decision changes the landscape of social media advertising with brands liable for content generated by consumers.

In its ruling, the ASB wrote: “The Board considered that the Facebook site of an advertiser is a marketing communication tool over which the advertiser has a reasonable degree of control and could be considered to draw the attention of a segment of the public to a product in a manner calculated to promote or oppose directly or indirectly that product."

Social media advertising regulations and marketing your business

“The Code applies to the content generated by the advertisers as well as material or comments posted by users or friends.”

This is yet another example of how our regulatory frameworks are anachronistic in the era of the Internet. This new world of social media is merely a decade old, yet regulators like ASB are employing codes written in the steam age when ads were only mass distributed by printing press. Publishers had control of what letters to the editor were published with an eye on libel. But the pace of public postings on Facebook makes such a process for an editor of a business Facebook page less that of a publisher, more one of the town crier who invites people to the town square but can’t predict what the crowd will yell about loudest.

Right now the judiciary has similarly lacked an ability to adapt as the public circumvents contempt of court rules and out accused on Facebook, passing collective judgement before a trial. No blurred pictures of the accused’s face like in the press or on TV. Think the Kings Cross king hitter, perhaps fuelled by Diageo products. Lets see a post on a liquor brand’s Facebook about the next alcohol induced murder and ponder the consequences. It's going to happen, irrespective of what the ASB stipulates.

So if CEOs are going to increasingly use Facebook for a dialogue with prospects, we will need to be extremely diligent to keep on the right side of the law, irrespective of how sensible we think regulations are today.

Learn from Darrell Lea's Rocky Road

Darrell Lea's new Perth concept store opened in March. Too late to keep the administrators from the door?

Most business leaders know the 4 Ps from marketing 101. As Darrell Lea’s predicament shows, in today’s marketplace where change is underway at an increasingly blistering pace, keeping those easily understood basics working in your favour is becoming increasingly difficult. Here they are one by one:

Product

Mega trends like multiculturalism, gourmetisation of food products, better for you choices, and social issues like fair trade today shape what we choose to eat.

In the past it was enough to make minor adjustments to products and expect a sales lift simply by placing a NEW IMPROVED flash on the wrapping. For the last couple of decades there’s been little in the way of product innovation at Darrel Lea. As well intentioned as they may have been, small line extensions like fruit flavoured liquorice haven’t been enough to stop the sales decline.

Businesses have to be wary of who they entrust to give them independent counsel. Darrell Lea invested in research that resulted in a new tag line, “85 years of creating sweet magic”. One can argue this simply reinforced a backward looking management mindset.

Today customers are rewarding brave leaps forward in categories. As Max Brenner’s website proclaims, “Chocolate is not just about taste” it’s also about fashion. From Mexican spicy chocolate and hot chocolate shots to chocolate soufflés and Tiramisu, Australians are spending more money on chocolate than ever before as brands can come up with new adventurous ways to tempt them.

Challenger brands aren’t just new companies doing new things, old companies doing things differently are also being rewarded. Australia’s oldest chocolate maker/retailer, 97 year old family business Haigh’s has kept customers coming back and continues to entice new ones with adventurous new takes on chocolates.

Promotion

Cutting back on advertising for a short term cost saving is proven to come at a long term significant loss. Once a significant investor in advertising, Darrell Lea has been absent from mass media marketing for several years. It takes many years to build a brand and nanoseconds to damage one in social media. It pays to treat advertising as a compounding investment that pays an annuity in return.

Price

Too often price is only mentioned in the same sentence as promotion. It is in fact a two way lever. A 4 for $15 offer on Rocklea Road isn’t going to entice a new customer, it simply reduces the margin on a sale to an existing one.

Whereas Lindt, once considered a niche special occasion brand, has grown by offering a variety of chocolate balls across a range of pricepoints and product sizes that still maintain a premium.

Place

The Internet is making everyone reconsider where is the best place to make a sale? Ecommerce may not be right for a product that will melt in the mail, but is owning a shop the best alternative? Why own 63 shops when most chocolate sales are through Coles and Woolworths and convenience stores?

If you are going to have a retail outlet, it needs to have a good reason to justify the high overheads. Darrell Lea’s average over the counter sale is around $11 per customer. You’d need a lot of footfall to justify the rental on the King and George Street Sydney store. On the opposite corners are the eye candy Apple store and Louis Vuitton, where the products cost thousands (and are never discounted).

Challenger brands understand stores are the new 3D interactive ad medium. They are all about theatre and entertainment. Max Brenner has the theatre of their liquid chocolate Willy Wonka-esque stores.

Other retailers realise the store is simply the best way to gather new customers details for database driven online sales. The objective of the shop front is to entice prospects in and the brief to staff is to start a long-term relationship. For instance, banks lose money on physical branches, but haven’t found a better way to gain new customers. Citibank’s new branches in Hong Kong have been designed by the same architects as the Apple Stores. You can’t make a deposit at one of these new gleaming white banks with couches and interactive screens, you can have an espresso made by a barrista who is briefed to cross sell financial products to you.

How to stay competitive

Many market leaders are vulnerable to the threat that comes from failing to re-look at their entire business models. Simply reviewing the 4 Ps from the perspective of traditional wisdom will no longer ensure a business stays competitive. Market leaders that fail to embrace change, not just across product and service but entire systems and relationships, are increasingly less profitable than smaller challenger brands. There are a number of proven tools and techniques to help businesses rapidly adapt and trial new ways, feel free to ask us about some of them. 

Boston Consulting has formally identified what savvy marketers know is the driver of business growth today:

In a world of change, the spoils go to the nimble*

*Martin Reeves and Mike Deimler, Boston Consulting Group, 
Harvard Business Review July-August 2011

At 97, Haigh’s is Australia’s oldest chocolate challenger brand

Founded in Adelaide by Alfred E Haigh in 1915, Australia’s oldest family-owned chocolate maker/retailer has a history of embracing change.

In the 1950s grandson John learned from Swiss masters Lindt and Sprungli and introduced European fine chocolate making to Australians. The current fourth generation Haigh family management preside over a business that represents barely 1% of Australia’s chocolate sales. Yet I would venture to say they are very profitable.

By continuing to innovate Haigh's continues to prosper as a challenger brand

Their award-winning Australian Collection was launched in 2003, with six native food centres including quandong, macadamia nut and honey, lemon myrtle and wattle seed. And as Australian’s have become more sophisticated in food tastes, Haigh’s have kept up with such adventurous chocolates as a South Australian truffle duet made with premium wines from the State’s wine regions.

Haigh’s environmental policies and sponsorships are just one indicator of how in touch this old business is with today’s consumer.

Last August at the Family Business Australia Conference, Joint Managing Director Alister Haigh told me they were ready for the next big change - online sales. The only sticking point is developing a delivery method that can guarantee the integrity of their heat sensitive product.

Following the biggest fine in UK finance history, it’s timely to look again at Barclays’ Big Ad

Barclays agreed to pay a record $442 million fine for rigging the London interbank offered rate last month. The scandal has cost the jobs of Barclays CEO Robert Diamond (below), Chairman Marcus Agius, and Chief Operating Officer Jerry Del Missier.

It pays to consider the future consequences of a single-minded marketing tagline. For Barclays, “We’re Big” just doesn’t cut it anymore.               

If you're a marketer, Read This Or Die...

A friend sent me a YouTube link via Facebook – a comedy sketch by Bill Hicks, where the comedian asks anyone in the audience that’s in advertising or marketing to “kill yourself".

I was reminded of my profession’s tenuous grip on social acceptance when this week leading researchers Roy Morgan released their latest annual survey of how Australians rate the professions: ad people are still near the bottom, just above car salesman.

There is still hope for Admen and marketers – it’s about having conversations at the board level that explain in understandable terms how we can add value. This week McKinsey Quarterly published a checklist of 5 things that will help business managers get the best ROI from their marketing.

So for those who rate the wisdom of McKinsey's consultants, here in my words are the 5 tips that will make any CEO take you seriously.

1. What exactly influences our consumers today?

Mass media marketing to the masses is oh so yesterday. Thanks to the Internet, shoppers now consider options at more times in more ways, from reading online reviews to comparing prices when in-store using their mobiles. Once someone has bought something, they potentially become a reviewer themselves.

So how do you get into the new consumer's head? You can use anything from traditional research to online polls or social media tracking to get a better understanding of what consumers are now thinking about a category. The key is to be open minded about what you learn and have a management team willing to let go of accepted wisdoms.

2. How well informed (really) is our marketing judgment?

It was only a decade ago when traditional advertising was all that mattered. Marketers who new their stuff could make decisions safe in the knowledge what always worked in the past probably would tomorrow. And planned accordingly. Today you have to be able to recognise signals of change, and act on them. This means managers have to move out of their comfort zones and hypothesise, test new ways, then measure, analyse and adapt. Again and again. In McKinsey’s words there has always been a a need to define a “clear relationship between marketing spending and business results”. Today it has shifted from “should we be spending on marketing at all?” to “what’s the optimum marketing spending needed to hit our targets?”

3. How are we managing financial risk in our marketing plans?

Successful marketing communication takes hitting the right audience with the right message at the right time. The difference today is the targets are increasingly individuals and they are moving faster than ever. Traditional mass media allows advertisers to minimise risk by using metrics based on years of surveys that measure frequency and impact of a particular medium. Not so now. With today’s new media “influence can shift rapidly, and there is little accumulated experience about which messages work, when marketers should apply them, how they can be scaled, or even whom they influence”.

Measurement and risk reduction today comes from a closer relationship between sales and marketing and the channel. One of our clients has found scan data has new meaning now it can be overlaid with pre and post campaign brand tracking and the incredible analytics available using Shopperpedia.

4. How are we coping with added complexity in the marketing
organisation?

If you think it’s hard to keep up now, it’s only going to get harder faster. McKinsey's unsurprisingly suggest “you’ll require a number of specialists. You can’t get the skills and knowledge you need in just one person, and you’re not likely to get everything you need internally”. 

5. What metrics should we track given our (imperfect) options?

At this point McKinsey goes into a whole grab bag of consultant speak. At UNO we think it best to get back to business basics – success should be measured by profit, not volume of sales or market rank. A business is successful when it can compete on more things than just price. And it knows it’s a real challenger brand when staff and partners are aligned and customers are referrers.

Now if you’re in advertising or marketing and you can’t get your head around the idea you have to change to survive, take a couple of minutes to laugh out loud as Bill Hicks encourages you to kill yourself

Where the smart budgets are being spent...Social Media

Have you noticed over the last decade that just about anything that isn’t nailed down has been digitised. Today we can access nearly everything from anywhere on anything – from getting the news on a tablet, trading shares on a mobile or accessing software services from the cloud. Plumbers are relatively safe, but most other businesses have to change.

The difficulty for business managers though is not just deciding how to make the change to digital, but how to make money out of it...

Pew Research Centre in the United States found that digitisation is burning money

Newspapers lost $10 in print ad revenue last year for every $1 they gained online. Just five companies, none of which existed a couple of decades ago are now taking 68% of online ad revenue: Google, Microsoft, Yahoo, AOL and Facebook.

Marketers know that they need to integrate traditional mediums with digital. Few businesses actually do – and some still think online is primarily for brands with young customers.

Businesses may be surprised to discover that the place where Australians spend the most time online, is also the most popular with women 25-45 years old.

The papers continue to spend money on journalists and creating the content, while these new companies continue to grow their revenue off the papers’ labours. Now because of their growing databases, fuelled by an understanding of people’s behaviour and preferences gathered from social media use, the digital intermediaries can now target ads more precisely than the old publishers.

The things we can now do on Facebook are incredible. In the past only advertisers who could afford to buy expensive data and research could precisely target their consumers. Now any advertiser can pretty well plan as effectively as the global giants by tapping into the growing wealth of intelligence of the social media technologists.

The Pew report says: “Two trends in the last year overlap and reinforce the sense that the gap between the news and technology industries is widening. First, the explosion of new mobile platforms and social media channels represents another layer of technology with which news organisations must keep pace. Second, in the last year a small number of technology giants began rapidly moving to consolidate their power by becoming makers of 'everything' in our digital lives. Google, Amazon, Facebook, Apple and a few others are manoeuvring to make the hardware people use, the operating systems that run those devices, the browsers on which people navigate, the e-mail services on which they communicate, the social networks on which they share and the web platforms on which they shop and play. And all of this will provide these companies with detailed personal data about each consumer.”

Business journalist Leon Gettler points out “Newspaper groups like Fairfax are the canaries in the coal mine for other industries facing similar challenges, from book shops and publishing to health care, industries where barriers to entry are low and where information is the main product. The trend to digitisation will accelerate with 'Generation C', people born from 1990 on who expect to be constantly connected through every possible device now entering the workforce, and with costs of computing and technology equipment dropping.”

“In every organisation, from media to retailers like David Jones, Myer and Harvey Norman, the biggest challenge always comes down to the tension between those who advocate a more aggressive approach and those aligned with legacy traditions, those who want to go fast and those who want to slow down.”

Adaptability: the new competitive advantage 

As the pace of change accelerates, adaptability becomes the new competitive advantage. Long established leaders like Kodak, Borders and Fletcher Jones are a lesson in what management can expect if they don’t change their business model to integrate digitised marketing with their traditional methods.

Sources: Leon Gettler, Business Spectator, 28/3/12
Pew Research Centre, How Newspapers Are Faring Trying to Build Digital Revenue, 5/3/12

Why are marketers using Smartphones today?

The answer is in the numbers, and is a pointer to the next big thing.

Google researched 300,000 people around the world to find out their Smartphone use. Now as Australian marketers we can compare and contrast markets.

Number 2 for Smartphones in the world
Australia is now ahead of the US, UK, and Japan.

Average Smartphone under 12 months
Most of Australia’s Smartphones were purchased in the last 12months. We’ve gone from the back of the pack to the second highest penetration of this technology in the last year. Every month 1-2% of the entire population of Australia buys a Smartphone.

81% do it at home
More Australians used their Smartphones at home during the past 7 days than out – just 66% use them on the go.

50% like to watch
Almost 1 in 2 use their Smartphone while watching TV, while 1 in 3 use Smartphones and another Internet-enabled device at the same time. Talk about adult ADHD media consumption.

Smartphones are good for business
49% use their Smartphone to research and then call businesses – and 45% visit a business they’ve found using their Smartphone.

Aussies are obsessed with real estate
The stats confirm what we’ve all known from dinner party conversations – 1 in 5 Australians surveyed had looked for an apartment or house with their Smartphone – that’s 33% higher than the US or UK.

40% search daily
2 in 5 of Australian Smartphone owners use mobile search daily, that’s more than the UK or Germany and almost as high as the number who use desktop search daily.

The number of queries about retailers made via mobile devices has jumped 220 per cent year on year, and is now about 25 per cent of all queries.*

App, app and away
Australian survey respondents had 25 apps on average per Smartphone, Vs 23 in the US & UK. We’re not just talking free apps; Australians averaged 8 paid apps per phone.

TV or not TV?…
1 in 5 Aussie Smartphone owners would rather give up their TV than their Smartphone.

Better than sex?
1 in 3 say so according to a Telenav survey, that’s how many would choose their Smartphone rather than sex.

Now you’re up to speed with the omnipresence of mobile you’ll need to start thinking about how you can extend your online activity beyond a website that is viewed on a PC.

But wait, there’s more. Nothing stands still nowadays; to keep up you also need to be thinking of how to stay ahead of the competition.

So what’s next?
In just a year Australians have learnt to surf the web, send emails and watch movies on a Smartphone. Now consumers are moving to tablets because they are more convenient than laptops and obviously have a bigger screen than Smartphones.

1.2 million this year
In 2011 tablets will outsell Smartphones in Australia. 64 million tablets will be sold worldwide by the end of this year. #

73% of them will be iPads
Apple will sell 47 million iPads this year.#

We believe video to mobile devices is a game changing opportunity for challenger brands. Until now many marketers have been held back by the high cost of entry of mass media advertising. The amount of media consumption online has risen from 25 per cent in 2007 to about 42 per cent now. A new buzzword for marketers in the US is ''SoLoMo'' – as in social media, local networks and mobile. Savvy marketers are recognising the need to develop strategies that make the most of these new, powerful mediums. *

We believe you can now punch above your weight more effectively than ever by integrating video and content to create a genuine one-to-one dialogue on customers’ mobile devices. You’ll be surprised what is now possible…
50% conversion rate

50 per cent of people who inquired about a hotel via a mobile device went on to make a booking within a couple of days, compared with 20 per cent for those online via a computer. *

Give me a call on my Smartphone, 0412 982 538, if you’d like to know more.

*Ross McDonald, Google, 9/12/11
#Gartner, 8/12/11

"Greenwashing" Why a great idea that isn't true is a bad idea

What a shame this great ad for Steggles wasn’t for a producer of real free-range eggs. It was pulled because it’s a lie, even though beautifully told. Every person in every agency should be stegglers for detail.

The public deserves better than marketers passing off intensively “farmed” produce as free range when there isn’t room for the animal to scratch itself. “Greenwashing” takes many forms, like adding the claim Hormone Free to chicken packs when it’s been illegal to add hormones to any farmed chicken in this country since 1968.

At the moment here at UNO we are working on a campaign for an Australian innovation, the first plastic to biodegrade in modern landfill, which is where a billion disposable coffee cups end up each year across our country. We have told our client he can succeed as a challenger brand by telling the truth. There will be no green washing, just the facts about what this product can and can’t do. And we’ll do that the way all ad people should, with creative wit and human insight.

J Walter Thompson’s words of over 100 years ago are as right today as ever – “The truth, well told” is why we get up in the morning.

See the vodcast about what makes biorene biodegradable – the Earth eats it up!