- Drop your arrogance and certainty – think again and again.
The Blackberry was a Canadian product, launched in 1984. In the late 1990’s and early 2000’s engineers went to John S Chen, the CEO and Chairman of Blackberry and told him that the smartphone would kill his product. Chen brushed them off, suggesting that consumers would always want a phone that focuses on calls and messaging alone. Chen was wrong.
Kodak was also wrong when engineers and marketing staff informed the board that film was on the way out and that the company in the world with the greatest number of digital patents (Kodak) should immediately transition to digital photography. With a view to preserving their non-digital business and damaging the margins in digital photography, Kodak stood its ground.
In the late 1980’s, engineers at Apple went to Steve Jobs and suggested that Apple had to get into the smartphone business. Jobs apparently resisted fiercely, suggesting that Apple was not in the telephone business. After considerable pushing and repositioning the new product as a small computer rather than a phone, Jobs agreed to proceed with the I-phone.
According to Wharton Business School psychology professor Adam Grant, in his book Think Again – these are all examples of people – in this case, senior executives – struggling to rethink an original idea. While conceding that the original ideas developed by Chen and Jobs were fantastic, Grant highlights the fact that once the idea was formed – they brilliant men (and they both were brilliant) struggled to rethink their initial ideas. Grant goes on to highlight just how common this behaviour is.
All too frequently, we see businesses, even those as successful as Apple, Kodak and Blackberry, fail to grasp changes in the market or technologies available to address the market. I have found this in my many speeches on e-commerce. While appreciating the growth in e-commerce and the problems associated with bricks and mortar, many an audience member has refused to embrace the need for change.
Making this issue more important than ever is the rate of change in markets and technology in 2021.
Journalist Paul Kelly once wrote a book entitles – ‘The End of Certainty. While this book is about Australian politics, the core message is equally relevant to Australian and world commerce.
Lose your sense of certainty and be prepared to think again – often.
- Stop thinking it is all about price – because most often, it is not!
The taxi industry was outraged by the introduction of UBER. And well, they might be, given how much owners had paid for their taxi licences. To this point, I absolutely empathise with their position. Where the taxi drivers and owners went wrong, however, was in relation to the reasons they cited for the success of UBER. They suggested that UBER was hurting taxi’s because catching an UBER was cheaper than catching a taxi.
They were wrong! What is more, they continue to be wrong. While the lower price of an UBER ride might have sweetened the offering, the reason for the success of UBER and now other ride-sharing businesses is – a superior product and through it – superior value for money. I would argue that UBER would have killed taxis even if they were more expensive. Unlike taxis, UBER offers:
- The avoidance of the need to call and make a booking.
- The avoidance of the need to speak with an abrupt woman saying – ‘next available’.
- The capacity to track the approaching ride online.
- A more responsive service.
- Cleaner vehicles.
- More polite and friendly drivers – with a capacity to rate them.
- The ability to pay online without doing anything.
For me, there was also the opportunity to stick it up an arrogant non-competitive taxi industry that offered a poorer service than they needed to.
The point here is not to beat up on the taxi industry but rather to illustrate that price is not always the primary driver of consumer behaviour. Value is almost always more important than price, and value has two aspects:
- The price
- What consumers get for that price.
All too often, especially in Australia, businesspeople focus on price – attempting to boost sales but bringing the price down rather than what the consumer gets for the price up. This is not to suggest that price is never the issue. It sometimes is – but more often than not, we should be focusing on value – and given the impact, this can have on margins – it is difficult to understand why businesspeople display such stupidity by focusing on price alone.
Stop focusing on price and start focusing on value.
- Stop focusing on solutions and start focusing on problems.
I just read one of the ‘HBR’S 10 Must Reads’ series of books entitled ‘On Strategy – vol. 2’. Among the many issues discussed was the notion of a ‘transient advantage’. A transient advantage is the corollary of a ‘sustainable competitive advantage’. While a sustainable competitive advantage is a long-term proposition most relevant to a stable industry and marketplace, a transient advantage is a short-term proposition that will change when the market changes. The article by Rita Gunther McGrath proposed that in a rapidly changing environment – say digital technology – a sustainable competitive advantage is no longer feasible or advisable. A brand’s point of difference needs to evolve as the market changes, and more particularly, the industry innovates.
To not recognise the rapidly changing nature of the market and innovations driven by industry is stupid. To think that any business can stay the same in a rapidly changing environment is certainly stupid. Such stupidity is also reflected in the efforts of so many businesses to extend the life of a product or brand as it nears the end of its life cycle. Every product has a lifecycle involving a launch, development, exploitation, maturity, and ‘death’. It is stupid or perhaps a sign of blindness not to see the approach of death. Death can mean the product is no longer needed – or that a competitor has developed a superior option. In either case, impending death should be recognised.
To fail to recognise that competitive advantage, or indeed a product, is approaching the end of its viable life is to focus on the ‘solution’ rather than the ‘problem.’ The Blackberry was arguably the best solution to a problem when it was launched in 1999. By 2002 the Blackberry was no longer the best solution with the market determining that the smartphone and especially the I-phone was. Despite the mountain of evidence supporting this eventuality, the manufactures of the Blackberry stuck with the same product and the same competitive advantage – choosing to focus on the solution rather than the best way of solving the problem.
The smartest operators, like Apple, focus on the problem and developing the best solution for that problem, leveraging innovation to develop new and better solutions – with new transient advantages. The smartest operators look for changes in the problem and build their new innovative solutions around the evolving problem. Focusing on the problem and offering the best possible solution will always be a more cost-effective and productive approach to marketing. Solutions tend to change faster than problems, and the target market will invariably seek out the best – or best value – solution.
Focus on solving problems, not a solution.
- Stop wasting so much on advertising.
In 2017/2018, Proctor and Gamble reduced its advertising budget in Europe by $750 million and sacked 50 advertising agencies. In the first quarter after the cuts, sales increased by 3%. This is one of many examples of leading businesses reducing their reliance on advertising after suspecting they were spending too much. I would argue that they are one of many businesses – large and small – that are currently paying too much.
On the other side of the ledger, businesses like Zara, Rolls Royce, and Krispy Kreme have no advertising budgets at all – and some others like Apple and Ikea spend very little on advertising percentage of revenue. These are all brands that reflect the comments of NYU marketing professor Scott Galloway who suggested that the thing great businesses have in common is a – ‘fucking great product’. Indeed, these were among the businesses cited by Galloway.
It is, of course, very difficult to determine what any business should be spending on advertising – especially given the fact that all formula for calculating the right advertising spend are as stupid as the concept of a formula that applies to all businesses, in all markets, at all times. Many advertisers also find it difficult to differentiate between not the effects of too little advertising and bad advertising. Which every way it is considered, it is hard to determine the optimal advertising budget.
However, what is clear from the research is that a great product can reduce the dependence on advertising, as can an excellent customer experience, a brand community, focusing on lifetime value, more effective distribution, competitive or indeed premium pricing strategies, and so much more. In my judgement, too many businesses are spending far too much on advertising or communication – both traditional and digital. I have now resolved not to buy from a business that bombards me with remarketing – and I know others who hold the same view. Too much advertising can be damaging.
It is essential, in my view, that every business review critically their advertising budget – at least every year. Ideally, this review should be undertaken as part of a broader marketing audit – drawing on external independent assistance. All assumptions, preconceptions and bad habits need to be set aside before the review is undertaken. Such a review should never:
- Involve the advertising agency.
- Involve just the marketing manager and staff.
- Use any kind of formula.
- Involve an amount that is related to the previous year’s expenditure.
Have your advertising budget independently audited.
- Cause your target audience to complain and then listen.
I was standing waiting for service in a Westpac bank branch for 20 minutes. When I raised the lack of service, the brand manager informed me that – ‘No one else has ever complained.’ Quite apart from doubting the honesty of this comment, I struggled to see the point in it. So-what if no one else had complained? That did not make my complaint any less valid. It would seem that the manager just did not want to hear or deal with the complaint – and she is not alone in not wanting to listen to complaints. She was also not alone in being stupid.
Complaints are gold! Complaints give you the insights needed to make the changes needed to enhance the customer experience and increase each customer’s lifetime value.
The real problem lies in the research finding that 96% of people who have a bad customer experience don’t complain. Indeed, not only do 96% of people having a bad experience not complain but:
- Some 91%simply don’t come back.
- They tell an average of 15 people about their bad experience.
The associated problem is that few people who have a good experience tell you it was good, with the cumulative result being that you lack the data required to develop the optimum offering and continually fine-tune that offering in a way that addresses the needs wants, and expectations or the market. The bottom line here is that while trying to ensure customers have nothing to complain about – it is important to do what you can to ensure that those who are unhappy do complain. This might involve:
- Requesting critical input ideally in person.
- Inviting critical comment online, perhaps in a follow-up email.
- Monitoring and responding to social media comment.
- Taking each complaint seriously and responding gratefully.
- Demonstrating an openness to complaints.
Requesting or inviting critical input involves telling people that you understand that nothing is perfect and that you welcome any input – so that you can move closer to perfection. This also represents good public relations and can enhance the image of the business.
Encourage complaints and use them to improve.
My mission in marketing is to – encourage a world inspired by a moral heart and delivered by objective, critical and lateral thinking. In particular, I am alarmed at how much businesspeople rely on intuition and best guest – and concerned about how rarely marketers and executives in general commit to objective, critical and lateral thinking.
The application of more objective, critical and lateral thinking can save money and drive income by reducing waste and applying science. Marketing can be and should be more scientific.