How much is that doggie in the window ? It's complicated

This piece was sparked by discussions around the difficulties brands are facing today as consumers grapple with the effects of the recession  and the biggest squeeze on living standards  since the financial crash in 2007-2008, due to significant increases  in the cost of essentials such as food and gas & electricity  and a drop in average disposable income as salaries lag behind inflation.

 I'm going to pick up on the issue of pricing which Les Binet (@BinetLes) spoke about amongst other topics  recently at the IPA (@TheIPA ) as part of a two part  presentation about how  brands can thrive in a recession . His talk was then  summarized into an  article  for Marketing week(@MarketingWeekEd ) 2ndDec  which I  read  this weekend.

Much has been written about  how amongst the 4p's  pricing  in particular has been both undervalued and  neglected by marketers in recent years , aided and abetted  in part by a sustained period of cheap money , low inflation and growth/ recovery from the financial crisis of 2007. Others have also written about this  , suggesting a  lack of financial nous amongst today's marketers  which  has also  contributed to declining  influence of CMOs in the boardroom (when was it ever otherwise though ? )

My take on this is as always   based on my   experience in branded packaged goods with primarily a retailer driven route to market.

As with so much in the world of marketing  marketers often have little direct control over things we are held to own, be it brand image or indeed pricing...  here's why:

The term  Pricing Power is  contentious in my opinion  not least because  in a number of countries  the ability to  directly address  with the retailer let alone dictate  or move the price the consumer pays  for your brand   is now  illegal . Unless you  therefore sell direct to the consumer  the brand owner often  has little or no  direct ability  to control consumer price. So the phrase pricing power might be said  in many ways to apply more to the brand :retailer relationship  than the brand's one with the consumer.  

As ever  the more powerful*the market position  the brand has the more influence it can have on consumer prices and the more it can sustain a premium  which increases  profitability for both brand owner and retailer alike.  It's also worth at this point saying hello  to promotions . Promotions (price based) are to pricing and profitability what Loki is to Thor...very few brands exist in a market where they can afford to not promote their brand with the retailer. I was lucky enough to work on one , it was extremely  profitable;  but the retailers wanted activity and investment,  something I come back to  later.

Somewhat perversely  the presence  of inflation  after many years of negligible  inflation  has also made it easier for stronger brands in particular to raise prices  and in some cases when coupled with supply chain efficiencies actually improve margin. 

Retailers  will negotiate against a total  annual cash revenue  and  margin  based p&l, looking  at  both revenue, profit and  income , comprising both  non promotional and promotional sales plus the renting out of  paid promotional   display space ,as well as the income from store media  ;other quarterly or year end bonus payments will also be added into the mix, based on meeting targets from  an agreed joint business plan.  

The retailers will be looking for  annual  market share gains from their competitors,  the strength of the promotional programme as well as annual increases in both money and percentages,  but they will also stubbornly resist attempts from brands to increase prices and consequently  the price the consumer pays.  

Occasionally  there are public falling outs between retailer and brand owners about price,  usually  a retailer refusing to accept price  increases  ,leading to temporary punishment  delistings ;  generally  normal business  is resumed within a year or two but it is costly to both parties , moreso typically to the brand owner in kiss and make up concessions. 

The promotional  programme  plays an important role with the retailer  as it is seen as a direct investment in the joint business,a sign of commitment, as opposed to marketing nonsense which is just  money spaffed up the wall on media  for example. 

 Controlling  let alone manipulating consumer prices is  an indirect process, where in my experience in food brands   the brand owner is more focused on managing  average revenue and profit  across the year than the difference in consumer price point between different  brands,which is not something any consumer  would ever do...Conversely   we have  created a climate where frequent promotions  are used   to  distort  natural market  rhythm, sometimes by  the retailer sometimes  by brands to bring forward  purchases. Whilst this hurts competitors temporarily it tends to have limits , be it consumers running out of  space to store their promotional swag, or  brand owner profit dilution because yes, price promotions dilute profit and  don't build brand equity , and can  furthermore dilute quality  or luxury perceptions of the promoting brand.

In summary  building a strong brand be it unique or dominant is the best way to successfully leverage pricing for profitability. 

Do let me know what  is different in your industry or country, or what I've got wrong.

Find me on Twitter  @Runsforcoffee1  ; or on Mastodon  : @Runsforcoffee@ohai.social

DiAmoNDs aren't a brands best friend *(final.v.250)

I won't  be making any further reference  to Dungeons and Dragons. This is as close to an absolute as you'll get from me today,sorry. Also *apologies to the late Marilyn Monroe  for butchering  the title of her hit song "Diamonds are a girl's  best friend" from the1953 film "Gentlemen  prefer Blondes".

*Prologue: 

 1) There are no absolutes, successful marketing is  an ever changing context sport (did I come up with that ,or did I borrow from someone else?).

2)  Observe humbly and broadly ,Learn, experiment, apply,learn;repeat. 

*Introduction

Its all become a bit heated again on Twitter , so here's another unsolicited, resolutely neutral  and academically uninformed take,based entirely on my  packaged goods experience, which  spans two centuries.

I was stirred from my sick bed ( did I mention I have Covid yet?) by that hothead and  seeker of justice  Thom Binding @Slightly_Random  poking at another favorite  Marketing Twitter Sore,namely the meaning and value of differentiaton  vs distinctiveness. I'm deeply indebted to the articles by prof. Mark Ritson  @markritson in Marketing Week  @MarketingWeekEd ,and I have a flawed understanding of How Brands Grow 1.0 by Prof. Byron Sharp @ProfByron. I also read the recent LinkedIn post by Prof Jenni Romaniuk on the topic, and agree with her conclusion .

The parameters of discussion  seem to revolve around the following  areas of debate:

*Definition of the terminology  is as usual featuring strongly:

The meanings and thus the  differences  between  them are in the roots of the words themselves. Please do your own work  people. I think they're  actually  family. 

*The utility  of either in different parts of the marketing  landscape 

This is for me the interesting area. Contributors to this thread  have broken this down  into a number of constituent parts: Brand vs product,  and marketing  and operations as opposed to the comms world.

I think we need as ever to step back from our professional interest in marketing  and  be more focused on  being the voice of the consumer , for that is our job as marketers.

Wise people have been telling us for a while now that actually consumers aren't generally that interested  in our brands , or our ads, and I wager no amount of prawn cocktail  snacks and fizzy beverages in a late night  focus group will really  make them interested  in  what us marketers do behind closed doors , never mind argue about D&D.

So for me , for the record , in packaged goods  from a consumer first perspective  and working backwards and away from the consumer into the belly of the beast you  firstly need to be available, then  to stand out ie mental and physical availability ( distinctive get up and comms );if possible  better somehow  across one of the 4 Ps,  not necessarily  different , and then if you can be different in a meaningful way that's a good thing. If you're  selling blocks of cheddar say then the margins for differentiaton are  slim, but distinctiveness  is  certainly possible. 

The importance  placed on differentiaton  by some marketers, especially I would guess in packaged goods ,warrants  a little explanation.  Brand owners and retailers alike ( who still  overwhelmingly  control physical access to consumers ) demand improved odds on any and all lines stocked improving overall sales and category market  share,  not to mention profit ( did someone mention profit?) . The more a product  and  brand is  relevantly different from its  nearest competition  the more  pricing power and profit there is for the brand owner  and  therefore that line becomes unsubstitutable . In packaged goods  a large brand will benefit from distinctiveness  and of course habit /systems 1 behavior, irrespective  of whether it is also different or not  than a lesser known  competitor. 

Launching me too  products or brands is generally a short cut to nowhere in an open market landscape, with a) retailers having fairly brutal minimum  sales and profit threshold hurdles  to be reached within  a limited time frame, with twice yearly reviews and delistings  a feature in the UK at least; b) or unless the me too  brand owner is a market  leading brand leveraging   its market  or share of voice dominance  to copy the innovation of others.

 So, differentiaton is a good goal if meeting unmet needs, but distinctiveness  is a must. If you don't stand out simply you won't be noticed or bought. 

Examples of some brands with products  which had both differentiaton  and distinctiveness :  Vienetta, Marmite,Ferrero Rocher. 

Bonne Maman and Nutella deserve a special mention for distinctiveness  without any  technical  wizardry.

 I can't  really  think of examples of successful differentiaton without  distinctiveness  in an open market, but please do give me examples. 

D&D in brands you ask? In some categories the brand carries  a heavier 'look at me' burden than arguably the product ,  fashion and luxury goods spring to mind. I've worked in strategic brand development, in packaged foods ,and was  regularly  confronted by what I still  consider  if unqualified and unchallenged as  the  siren call of the mermaid luring us onto the rocks theory which says 'none of our competitors is in space x, we can own it, we should go into it'....

Where would you place brands like : Tony's chocolonely? For me it's both distinctive in get up and tone of comms  and differentiated in brand positioning.  product is fairly standard chocolate albeit in jawbreaking profile of chunks. Body Shop in its founder days was both distinctive in getup and product as well as differentiated

When it comes to the role of D&D in comms,  history  suggests  that the consumer is most likely to notice and be interested ie  comms more effective  when  messages focus on what benefits accrue to them by  choosing  our brand  and product , duly presented in a distinctive and entertaining  manner, rather than a focus on features in isolation .  Topically and perhaps fortuitously I do not work in the airline business  which is clearly  a very different  market to mayonnaise... and no I have not reinvented features and benefits thank you...

The debate about the primordial importance of differentiaton  or not is unlikely to be definitively  answered,  because no absolutes.... Only one company in my personal memory database put  differentiated Innovation  so high up the list , and that was 3M the inventors of Post It notes , where it was at one time  reportedly mandated that executives spend 30% of their time on breakthrough Innovation  projects.

In conclusion  I  believe  that for distinctiveness and differentiaton   the more you have the better  , just like distinctive assets.  But ultimately  of the two  distinctiveness  is more critical to business success. 

I'm going to go and probably  throw up now ,thanks to  covid and Crohn's disease holding a simultaneous  rave in my body.  I hope reading this is much easier on you than it was for me writing this ...

What's Brand love got to do with it?

 There is  an ongoing tension between different  viewpoints around pretty much every aspect of marketing  ,and  recently we have been discussing  on Twitter whether  brand loyalty exists(@paulmarkbailey) ,  those who are seemingly always down on our  own discipline(@derekwalker)  and points inbetween.  

I'm concentrating my comments  around  packaged consumer goods as it is my field of useful experience ; if you know or think different from elsewhere do please chip in.

The question of preference vs loyalty  is interesting  because  the debate  highlights  the need to embrace not only the ambiguities of human behaviors and the limitations of data to tell us what not why , but the importance as ever  of context , shared understanding of the marketing lexicon  and at a more  fundamental level the future of the world... or brands anyway. 

To over simplify /  dramatize  : If there's no such thing as brand  loyalty  and by extension   no such thing as brand added value why isn't everyone  just buying the cheapest , usually a perfectly  good enough private label (I'm talking lemonade not luxury look at me status brands )?

The main vectors potentially to this are :

* Consumer indifference and repertoire purchase :    when  consumer brand indifference meets product  parity, you get a risk of  wholesale substitutability.  Strong brands do exist  in my experience even in categories with little  product differentiaton or status , be it eg staple products like cheddar cheese here in Britain and elsewhere in my  professional travels.

*preference vs loyalty: arguably loyalty is a  somewhat loaded, psychological  term which does not belong in debate about  eg prepackaged cheese or toilet cleaner.

'Loyalty is preference'   seemed to be one marker in the debate ,  but I don't think that goes quite far enough. Loyalty  is  a  feature of   (some ) human relationships and for me it goes beyond  a transactional  relationship  which is  what most consumers have with brands; if brand x isn't available  they'll   happily  buy  brand y as we all  know.  Preference  as a concept is unburdened by any sense of obligation to follow through with purchase, unlike loyalty anyway so at a  nuanced minimum it is a more binding notion ? 

I would suggest loyalty  goes beyond logic and reason  and may entail a personal cost ; just ask long suffering supporters of  long term unsuccessful  sports teams. By contrast if a brand of  say mobile phone comes up with an altogether better functional  product  unless the pain of switching is too high it is likely  it will steal users from other brands or systems tied into its ecosystem of eg of apps and software.

*The importance as ever  of context:   

It is not loyalty  if the barrier to switching is too high for consumers, see internet providers , banks , utility providers, such that laws have been introduced  to protect consumer freedom to switch provider. In packaged goods switching  meets the  time pressured repurchase  habit with consumers spending literally only  seconds in front of a typical  or virtual  display shelf to find their usual choices, the vagaries  of negotiated  physical distribution and on shelf  visibility eg pack location and  number of facings, display within category  eg eye level vs top shelf or bottom shelf also play a role ; and  private label  often using  similar designs to leading brands, supposedly not copying as such but using established category ie brand leader  visual design colour  codes ...

*The commercial value of targeting loyalists vs all category consumers. 

Whilst I get and agree with aspects of the  prevailing belief  in the wisdom of targeting all consumers and that penetration is  the key objective , it begs one question  for me which is : what are the consequences  then for differentiaton and targeting  products against specific target consumers and their needs or CEPs?

Look to the cola brands as an example  of  wrestling with the right balance  between  brand campaigns  and brand block dominated  designs  vs  more product specific  approaches. It may  well  be true that consumers of full fat cola will also buy light  variants ( not gonna pick a fight with Prof Byron Sharp am I ..), but  as a traditional marketer I would argue they as products meet different  need states and have different benefits ,even though the consumer profiles  may overlap in the same person at some points , whether it be same person consuming  or as  someone  purchasing for a  family  unit.

Hope this contributes to the debate in some way ; do let me know what you think ...

Thanks again to marketing Twitter for sparking this piece, acknowledgements and attributions  * :Tina Turner; @paulmarkbailey ,@johnnieego,@andywheatley,@clayton_phillip,@derekwalker,@Jonlombardo ,@bruceclarkprof,@keerti007,@AtomicAdMan

'Fifty ways to brand your cheddar', the song Paul Simon never wrote

This  stream of thought was prompted by  recent  articles and exchanges on Twitter about the language, types  and construct of brands ; thinking amongst others here of @clairestrickett , @paulmarkbailey and @bruceclarkprof amongst many others.

As always my focus is b2c packaged groceries , where my personal core experience lies; things may well be very different  elsewhere, and I'd be interested to hear about it.

 The questions it prompted were ones I occasionally mused about  during my time as a brand marketer  when first grappling with  the  challenges of competing with  retailer private label, from way back when this was a new phenomenon  in the UK in the 80's. 

For context  retailers  today  may have up to four tiers of private label  in the same category  from lowest price  hard discounter clone  without retailers logo or identifying marks on the pack through value , standard and premium, all bearing the retailers pack identifying codes and logos. Furthermore retailer private labels are frequently  when aggregated  together the  overall market leaders which makes for a more complex competitor landscape for the  manufacturer brand marketer 

The questions : 

*Do the same rules of branding apply to retailer private label brands as those of manufacture  owned brands?

For example  could I as  a manufacturer brand of cheddar  enter the market for  say deodorants  with the same brand  without losing brand identity in the minds of consumers? I think not, but this 'no borders' approach is one of the basic  operating characteristics  and differentiators ( for marketers  anyway)  of retail private label. Similarly  I  note from my experience in food how rare it is for brands to successfully go cross category within food  without a landscape brand positioning  and benefit which is not anchored in any one  specific category , thinking du darfst from Unilever, weight watchers etc., 

more  outside food  though, thinking Dove, Nivea  and such.

*Do consumers  see differences  between manufacter brand and retailer private label and what are they ?

 I've read plenty of anecdotal  commentary in  qualitative research  mainly  about price/value/quality parity,  freedom from brand tax  and so forth ,but haven't read anything more substantial, particularly  if ( to simplify in the extreme)  manufacturer brands  can maybe  win on psychological  benefits whilst retailer private labels  are more likely  to win on  a rational / transactional  basis.

* Can manufacturer brands own relevant  different  associations in the minds of consumers  as a result ?

 Kellogg's  from memory used to have body copy along  the lines of ' we don't make for anyone else' , but this is functional rational talk.

Conversely , in my own experience some retailer private labels , especially a

in the premium  tier  are seen as doing a better  job than manufacturer brands in some categories  in terms of  functionality, quality, innovation  and prestige. 

There was even  a thing called ' having a Mark's and Spencer dinner party ' where the accent was on the conversation  and all the food was ready made and sold under the retailers  own brand. 

As retailer private label has grown in  presence and market share across all categories  we have seen manufacturer brands going the other way  ,with high profile  multinationals  like Unilever  and Danone seeking to rationalise  their portfolio of brands and categories that were  partly the result of   acquisitions , either by divestment or migration.

So in summary  retailers,  because they control  access to the consumer via ownership of  the  shelves as well as ultimate consumer prices  , have been able to rewrite part of the brand  marketing handbook as regards core competence if nothing else,  and together with  a quality supply chain  have fully segmented and met consumer needs . 

Are we harnessing the benefits of experience ?

 The topic of experience crops up regularly in my social media threads and it's normally divisive.

There are two  main  areas , namely the oft mentioned , reportedly ageist nature of certain industries and disciplines including my own field of brand  marketing;or the value of  formal learning , typically  juxtaposed with  the hidden elephant in the room of experience. I'll  save the latter  topic for another post though and concentrate on the age related angle here if I can just  find my glasses and stay awake.

I have a personal interest in this topic  as my interest in the practice of marketing has outlived my employability (although age may not be the main reason of course); I have also seen  highly motivated and  capable  people consigned to the career scrapheap due effectively to their age, although  this could never be acknowledged overtly  due presumably to legislation. My own  last full time  marketing post was secured at the age of 50 ,and I was told informally  this was an exception or experiment on their part. 

Marketing is  accused of many things,  but not understanding or being representative of an (ageing ) demographic  never mind the economic profile of the consumers it seeks to woo is something that's  easily fixed if there was a will on the part of employers..after all isn't marketing  all about being focused  on meeting  consumer needs?

Experience is of  itself no guarantee of  future economic value to any potential employer, and shouldn't  be given precedence over talent and potential. Equally  there needs to be proper space for younger people to grow their careers without opportunities being blocked by older  incumbents. Perhaps a case for more creative  job sharing ? Other criteria of evaluation eg  performance should of course be applied in the same way to all.  Marketing  for example has quite a different  face now to when I began my working life , so it doesn't follow that my experience will  still be relevant.  Conversely  the essentials of marketing  are as relevant today as they always were , even if they've had a rebrand ...

Others have written eloquently about  how deep knowledge of a business can disappear  with the loss of key personnel  , such as happens all too often after  acquisition ;  it also applies I would argue with retirement of key people. 

Conversely  and speaking   personally  I suddenly found myself with over 30 years of frontline brand marketing experience I  could  neither use to earn a living  ,nor share with others ,hence my  overuse of Twitter  where I regularly enjoy being part  of conversations with others of all backgrounds and ages  including  academics and practitioners. 

I don't  buy into the stereotype of all older people  as necessarily more resistant to change or technically more challenged than today's digital natives , but there will of course  be some. If nothing else experience has honed my own ability to smell BS early on though.

Given the likely  continuing increases in retirement age more and more people will have to find ways to stay gainfully employed beyond their  current  employment sell by date.

The challenge then is to find ways to gainfully  and creatively harness the experience that the older person has  and wants to offer:  I'm not  personally looking  for full time employment  in marketing , or indeed elsewhere, but the odd advisory role in a  project however  might be of interest.  I've noted before an excellent ,historic scheme with a former employer of bringing  back experienced people on a ( paid) project basis where specific skills or experience were lacking  , and it self evidently  could have  potential benefits for all .

So  back to the beginning  , are we harnessing the potential of  all the accumulated experience out there ? You tell me..

Private Label is not the friend you think you need

 

This will be unpopular and comes without evidence ,but with plenty of experience.

With retailer private label in grocery on a long term upward trend and dependant on country,category and retailer market profiles ,reaching national  market shares of  50% is not uncommon. Against this backdrop  it is easy to see the manufacture of private label as a smart business  move. My experience in Multinationals over 30 years suggests the complete reverse. 

Suggested benefits  : 

Improves customer relations and this enhanced  relationship helps our brand as well

Consumers know , like and trust  private label  and they also  have a strong purchase price  and value advantage over most brand leaders.

If we don't someone else will/ we're locked out of eg 50%of the market, a non brand retailer.

Helps overhead/capacity management. 

Considerations against:

I never experienced private label being profitable,  even  at Gross Profit level. 

Does not improve account profitability or payment times.

Customers request open book costing  and proprietary recipes at sharply reduced prices.

Difficult to protect proprietary  recipe or technical secrets .

Contracts are under regular review,  yearly at least in my experience, so prices cannot easily be raised. Contract volumes are often divided between several  suppliers.

Requires a dedicated business  team of sales ,marketing ,product development  ,supply chain  people. Regulatory burden on factories is higher than internal only. 

Volumes can be very high, and managing capacity peaks and troughs,especially if you lose the contract. beware large  write offs on eg new designs,inventory .

Rarely delivers brand benefit  as retailers also have separate teams.

Reduces internal focus on building our brands.

Literalism schism

Consumers don't care about your brand  or your new clever creative idea for the new ad. 

Consumers and   bosses  often  take new ideas ,especially advertising  ,literally in my experience  .

This makes  bold creative leaps much  harder  to bring to market, and partly explains  why so many  vanilla ideas /ads provoke only indifference, thereby generating  limited returns...  and increasing the chances of stand out work cleaning up .

The marketing and creative team is  far more vested in and exposed to their work than anyone else who may come across it will likely ever be,literally. Literalism schism..

Harming customers is a business model

I spent years believing and defending the notion that having a business model which sought to damage the health of its customers would be bad for that business ,never mind morally reprehensible.There are obvious exceptions of course , like drugs cartels.

 I worked in packaged foodstuffs almost all of my career , long a target of negative sentiment, sadly sometimes deserved. 

If we just look at the business world and leave the politics aside, which is not as straightforward as it might apppear there are a few notable examples in fields I know nothing about which do suggest that insufficiently regulated businesses are as dangerous as unaccountable governments when it comes to the health of nations.

 Currently the public debate in the UK centres around the windfall profits of energy producers combined with limited government response pushing significant numbers of UK households into potential energy poverty in the coming months as consumer prices reach record and unaffordable levels. 

The opiod crisis in the USA has been rumbling on a few years now.

Raw sewage in UK waters thanks to privatized utilities and rolling back of legal safeguards.

The dangers of social media platforms when it comes to protecting the mental health of in particular the young, vulnerable and impressionable.

The dangers of online platforms facilitating the spread of falsehoods be they political , medical or economic.

The legalization of adverts for online gambling and alcohol.

The role and responsibilities of food and drink companies in trying to help prevent the spread of obesity and related health issues such as type 2 diabetes .

The decades long fight by the tobacco industry to disassociate smoking from the incidence of various cancers.

All the above pose potential if not real risk of harm to customers. 

These examples suggest to me at least that some businesses do not have the health and wellbeing of customers at the top of their priorities, just limitless profits.

It starts at the top ,sadly, with governments choosing to subject in particular more disadvantaged citizens to life threatening hardships directly through economic ,medical and social policies.

Maybe harming your customers is a business model after all.  Maybe I need to revisit  my views on purpose...