Thursday, June 25, 2009

Shopper Marketing is only just beginning

Procter & Gamble calls it the "First Moment of Truth" - the moment at which the shopper is confronted with your product in the store. You may have worked hard at getting the product right, pricing it correctly, advertising it to everyone, but will he or she pick it up, and if so, will he or she buy it?

Increasingly, manufacturers and retailers are studying this moment. They are carrying out research to understand what happens. What are the shopper's thoughts? What are his or her actions? Over the next decade, this will become more and more important. New technology allows much more precise and accurate measurements to be taken.

Monday, June 22, 2009

Deep down, many companies have contempt for their customers

Many think of their customers as ignorant fools to be manipulated. This can work for a short while, but it always ends up failing. Yet, executives persist in this delusion. Hubris rarely pays off.

Saturday, June 20, 2009

Choice is overrated

Is choice really a consumer demand? It often over-whelms consumers, and it usually results in higher prices. Club stores and deep discounters offer little choice, yet they are the chains which are growing. Traditionally, business has thought that the consume is making a trade-off, but many consumers enjoy shopping at stores like Trader Joe or Costco. Consumers often say they want choice, but act as though it confuses them. Actually, we know that too many choices do confuse consumers and it is often deliberately used by business to get consumers to pay more than they need to.

Wednesday, June 17, 2009

No can think outside the box on healthcare

I find the debate on reimbursement fascinating in that it assumes essentially the same system as the US has now. That is a fee for service system which is what resulted in the expensive and inefficient system we have now. For example, I do not see any mention of capitation fees, in which primary care doctors are paid a fee based on the number of patients who sign up with them. The fee is to keep them healthy as well as co-ordinate care provided by specialists. People tend to do what is in their personal economic best interest, and the corollary is that when a large group of people behave in the same way it means that the system rewards this behavior. I do not see any interest outside a small group of experts in taking a look at what does and does not work elsewhere, and no real knowledge so that reinventing the wheel has become a requirement.

Tuesday, June 16, 2009

The US Healthcare system is like the US Automobile industry

People spend a lot of time arguing about whether or not there should be a single payer system or not - whether a public option is a requirement or treasonous. Yet, at a far more fundamental level, the US healthcare system is increasingly failing. The system is Balkanized, with each constituency only out for itself. The parts of the system do not work together to serve the consumer. If they made a movie about the fall of the US automotive industry, the UAW could be played by the AMA, GM Management by the insurance companies, dealers by hospitals, and parts suppliers by drug companies. The consumer would play the consumer.

Medical records are routinely lost. More money is spent denying claims and turning down health insurance applicants than providing care for many. Patients are routinely given drugs or treatments which have harmful or dangerous effects on each other. Many patients will see over ten specialists but no one has an overview of the process - doctors are incented to refer rather than to treat. There is substantial evidence that because of this, and the propensity to order unnecessary tests, the more that is spent per patient, the worse the outcome. The system rewards inefficiency and ineffectiveness. Unless something is done, it will only get worse.

The wosh for universal healthcare has existed since Teddy Roosevelt. Harry Truman ran up against the rocks trying to make it happen. Saddest of all is that no one has even been able to get efficiency and effectiveness within the existing system.

Sunday, June 14, 2009

Marketing is easy in principle, difficult in practice

My friend Jonathan will be comforted to know that Marketing is quite simple in principle. However, it is tougher in practice. I have come to the conclusion that good marketing runs counter to human instinct. We want to have our preconceptions confirmed by being able to sell what we think customers should want rather than finding out what they want first. The steps of good marketing are simple, but demand objectivity.
  1. Work out what is the target market.
  2. Find out what it wants, what it will pay, and where it wants to buy.
  3. Design and make the product or service and ensure that it can be done for a price which maximizes demand (not always cheap in the case of luxury goods).
  4. Ensure that it is available to the target market.
  5. Tell people about it.
As the saying goes,"nothing kills a bad product faster than good advertising." If the product does not live up to expectations, there will be no repeat purchase and buyers will tell prospective buyers about it (even faster today with review sites, blogs and other feedback mechanisms).

Yet so often, we see companies decide that what they can make should be sold to customers and then blame the sales force or marketing department for its failure. Most senior executives these days learn the right way of marketing as much as they learn to read a P&L, yet they are regularly overwhelmed by personal hubris. Many failed products were quite predictable, but became investments in management prestige - a violation of Marketing principles!

Sunday, June 07, 2009

Why do companies often start with a bad business mocel? Because it is easy!

I have seen, inherited and continue to see companies knowingly or not, start off with a business model they will regret. Whether it is distributorships which will be ineffective and expensive to change, as GM has discovered, or prime sources of revenue which are the least profitable, as Nielsen and IRI know, it happens again and again. I see it regularly. So why?

Usually, the inferior business model is easy, cheap and fast to enter. Distributors seem to offer immediate market entry at no cost. Some customers are quick to buy than those from other sectors, but will never pay much, and by making them customers, it hurts future profit. Limited distribution seems to restrict sales potential, though it often helps profitability. Companies often start by selling data, thinking that they can add value later, though they never can. Cutting quality or service may seem like a good idea to make a sale, but you can never afford to add it back.

Friday, June 05, 2009

Sales and Marketing are very different

All too often "Sales" and "Marketing" are paired even so that one person has a "Sales & Marketing" title. This often makes as much sense as pairing Finance and R&D. Peter Drucker, whom many claimed to admire, but also most ignored pointed out that Sales and Marketing were more likely to be natural adversaries than allies. After all, as he said, if Marketing were to do a perfect job, then there would be no need for sales. Yet, even though few people are good at both, the role continues to be confused to the harm of the company.

Monday, June 01, 2009

Why do companies fail? GM; Citibank; Enron?

Let's face it, as the Greeks said: "those whom the gods want humbled, they first give 40 years of prosperity!" Many companies which look successful on the outside are hollow shells. GM had the seeds of failure within it 30 years ago. Citibank, which would also be in Chapter 11 were it not for a government bailout was in the same situation. Yet a few companies, such as Apple Computer or P&G have revitalized themselves. As Jim Collins in his latest book, How the Mighty Fall, lays out five stages of failure:

Stage 1: Hubris Born of Success

Stage 2: Undisciplined Pursuit of More

Stage 3: Denial of Risk and Peril

Stage 4: Grasping for Salvation

Stage 5: Capitulation to Irrelevance or Death

In retrospect, each is capable of being reversed, yet this rarely happens. Even when warnings are loud and clear, they are rarely listened to.