Client Relationships: can you put them on the balance sheet?

Relationships are complex things. How often do we analyse them and – ultimately- put a tangible value on them: a concept known as ‘relational capital’?

‘Relational capital??’ This might sound like a rather ethereal or groundless buzzphrase, until you consider quite how much of your business is founded on relationships. Relationships with your colleagues, relationships with your shareholders or lenders, relationships with your customers, regulators, etc etc. Yes, we talk blithely of ‘stakeholders’ as a collective, but they are all different and need to be treated differently.

At the Business Consultancy Network http://www.bcn.org.uk, I attended yesterday in leafy Cheshire, we yesterday had Tim Young of Renuma Consulting  www.renuma.com talking to us about ‘Client Relationships’ where the concept of relational capital emerged from a series of questions on the nature of the relationships we have.

Just to focus on two relationships and the ‘capital’ that lies therein, let’s take customers and employees.

With a bit of luck, you will have a number of customers. Mistake number one would be to have a customer relationship. Simply because relationships are all the same, but also all different. Their size, your points of contact, why they buy from you, how they buy from you, may all vary from case to case. Therefore, the relationship will be different. So what? Well think of your investment of time, and possibly money, in fostering them. What ‘return’ do you get on them? How valuable are they to you, your company, your strategy? I was able to quickly identify transactional and rather more ‘loyal’ customers from my own past, and also reflect that some relationships were invested in disproportionately. Hindsight’s a wonderful thing!

As for employees, there is again a strong transactional streak already present in the way we work: zero-hours contracts, freelancing, gig contracts, fixed term, and so on. Is this an inexorable journey towards pick and mix or purely transactional human resources? Possibly. And at least some large organisations have congratulated themselves on achieving it. But then, as Tim corroborated as we talked over lunch, there was a realisation. Who REALLY held the power in these relationships? Workers were acquiring knowledge, expertise and their own personal relationship networks. In other words, a form of intellectual capital (IP). And yet, the nature of an unbalanced contract of employment meant they could walk off with it all. If you look at sectors like IT, Creative, or other heavily knowledge-based economies, your ‘employee’ is also your IP. Corporates jealously guard patents and IP per se. But not always the people who generate them. And what exactly then is the asset sitting on your balance sheet? The actual IP itself, or the being that generated it?

 

So what are the take-outs?

  1. Relationships are all different. And the word ‘we’ can have many meanings. Whenever ‘we’ is mentioned, exactly who or what is ‘we’?
  2. It pays to map your relationships. Tim has a pentagon-shaped model that helps to scope the aspects and scale of several relationship characteristics based around areas such as Power, Information, Purpose, Communication, and Story (development over time).
  3. Identifying the touch points in your relationships will perhaps allow more tangible measurement of which relationships are of value to you – and why.
  4. You can use this to decide on the scale of investment you should make in each one – and ultimately arrive at modelling the return on that investment, making us more focussed and maybe less ‘promiscuous’ in how we spend our valuable time on our many relationships.

Amazon and Whole Foods: what next?

The dust is starting to settle on what some believe is the game-changing entry of Amazon into ‘proper’ grocery retailing. A couple of days ago I came across this link from FoodDive which adds a little more context. Firstly, this comes on the back of my post two weeks ago on the need for successful retailers to put omnichannel at the heart of their business. Secondly, here in the UK there is no need – yet – for the established retailers to run for the hills. Whole Foods has a small, almost insignificant presence on the ground right now. But the final strand was the Whole Foods positioning. A store rooted in organic and whole food values was not going to resonate widely enough either here or across the pond with the volume of customers Amazon is presumably eyeing. And so this snippet quoting Whole Foods CEO John Mackey puts another piece in the jigsaw. The Whole Foods of the future may not even be Whole Foods – or certainly not the sole proposition. The wholefoods sector in the US gives Amazon plenty to be going on with and will be a solid base on which to grow and diversify. I am inclined to think that it is the ‘new’ proposition that will land here in the UK, where the same sector is not large enough to serve Amazon’s ambitions. And of course this needs to integrate with the fledgling Amazon Fresh project. It’ll be fascinating to see how it unfolds.

Retailers – check out your checkouts!

It has always puzzled me how poor some retailers are at parting you from your money and driving turnover in store.

The ‘moment of truth’ is the checkout. We all still use them to some degree and this is probably still where you tend to hear the most huffing and puffing of exasperation. Why, after all this time, are some retailers so bad at it? This the fundamental reason for trading in the first place!

A couple of examples: once I was in an outlet ‘village’ and ended up making an impulse purchase on a pair of trainers. I was already visualising how they’d look now that I had found the perfect colour for my intended outfits. At the same time the queue was lengthy and building. I was probably about 12th in line. There were two cashiers. In a corner, around 4-5 assistants were laughing and joking. The shop itself was also a disaster area with odd shoes everywhere. The giggles and larks continued as a further ten joined the queue in the time that two completed their purchase. In the end, despite the emotional attachment I had already formed with my new trainers, I decided the shop simply didn’t deserve my custom. A further two also left the queue after me: at a guess £60 turnover and let’s say minimum £10 margin gone (it was an outlet store!) between us. That was in the space of about 15 mins.

And today, I had picked up item in a leading discount store and was number two in the queue. In front was a man hoping to buy the most battered box file you will ever see: crushed and with a label missing. There was no price on it but he said it was 10p.  The missing label was the barcode. Supervisors were called. The queue swelled. Another file with code was brought. £2.99. Ah, we will have to check this further. Another call for another supervisor. And so on. Minutes passed – about four I think. I checked my phone for messages and mail. And then I put down my £2 purchase and left. This chap would have been doing them a favour if he’d just walked out with it. If your trading model is volume- driven ‘cheap and cheerful’, surely you make progress through the till truly rapid?

So that’s the ugly. What about the bad? Well again, it’s about the general approach that retailers take towards ‘The Checkout’. Some are quite happy to let queues build while making sure that the merchandise still on the shelf looks AMAZING!! Oblivious to the fact that the purchase decision is still going on.

And then, because there sometimes aren’t any floorwalking staff, queries are brought to the till. ‘Can I return this here?’ ‘Do you have this in a size x?’. ’This is the only one on the shelf but it has a hole in it….’ Etc., etc.. In every instance, cashiers are not allowed to make their own judgement: people (who quite often don’t exist) are summoned. And while we wait, we are reminded that there are alternatives: online, other retailers who DO make movement through the checkout a rapid and flexible experience, or perhaps thinking in the ten minutes waiting that I don’t actually NEED this: it’s an impulse, I’ll probably feel guilty later on. No, I think I’ll leave it.

So, my advice to all ‘bricks and mortar’ retailers finding business a war of inches:

  1. Flex your tills to cope immediately with the ebb and flow of footfall.
  2. Ensure there is a customer query or return facility that doesn’t interfere with sales.
  3. Empower your cashiers to take decisions. At the very least give them the ability to ‘co-decide’ if they work in tandem, or a value ceiling to enable them to deal with lower value items. The odd mistake in the name of effective throughput is not worth worrying about. And if you don’t trust your cashiers, why do you employ them?
  4. Ensure that each one, every shift makes at least three customer transactions: it keeps them fresh, incentivised to serve rather than look the other way when it’s busy, and the experience of dealing with customers at the moment of truth is always invaluable: to ask why they liked it, if they found everything they wanted and so on.
  5. And if you are a store manager who is happy to see queues in double figures… EVER… think about a career change or be prepared for a change of employer when yours inevitably sinks. It’s a jungle out there!

Pricing: the elephant in your room?

In my relatively short time as a business consultant it has surprised me how often people look over all my other services and pick out this one as a ‘tell me more..’ conversation.

But maybe it shouldn’t do. More time than I’d care to admit has been spent trying to avoid, or dig people out of, pricing rabbitholes. Pricing and pricing strategy rarely get mentioned in Marketing – or even Business – plans. And, if they are not addressed, the effect can indeed be like an elephant let loose in your workplace: messy and dangerous!

People I have spoken to who run small businesses quickly concede that they don’t know how to price. Those in the service industries seem to have a particular problem with it. And it’s both ends of the spectrum. For everyone who is dissipated by having to fight on price, there is another who misses out on business because they are ‘too cheap’. It is a common ploy in the restaurant trade to position your most profitable wine second in the price list. Few people feel proud about buying the plonk option on their first date, and most are already contemplating how much the bottles are compared to their local Aldi.  At least someone is using pricing to direct customers and enhance profit, so why can’t you? If you know your costs, and what profit you want or need, it also helps.

People in bigger businesses do have pricing methodologies, but these are often approached from a silo mentality: some will operate ‘cost-plus’, and some will want to put the kitchen sink in alongside all other overheads so that no product in the world would hit the black and ‘contribute’. New products may not be in your overhead recovery plan, and what costs really should be in? Should there be a marketing allowance built in? So much to decide, and so many different views. As always, it’s good to agree across the business what the rules are. Conflict is so time-consuming and draining.

The lack of proper engagement with pricing is odd. Firstly, it is one of the 4P’s of Marketing, alongside Promotion, Product and Place. Far too many people and organisations only get as the first of these, yet it is absolutely conjoined with product and promotional and even place strategies. Secondly, it is said that ‘demand exists only at a price’. That is, it is an economics fundamental as the intersection between supply and demand. If you cannot keep up with demand, or if you have a warehouse full of slow moving stock, it is probably pricing that is out of sync.  Then there is the issue of ownership. Who ‘owns’ pricing within your business? Is it Finance, Sales, Marketing or the nice young fellow who prints the price lists? Each will have a different view of how to approach it, and if you allow it to become a free-for-all, or the domain of only one function, you have already unleashed the elephant, or – forgive me – put a match to the bonfire.

Does it matter? I don’t think I need answer that. Pricing can be a complex discipline and there are many sophisticated minds and tools devoted to it, but for many businesses, there are two simple places to start: firstly, by asking what control you have over your marketplace pricing – and whether you have a strategy or plan for it. Secondly, how well is that plan communicated and managed within your business? Is there rigour and process in dealing with price lists, price quotations, tenders, and sales activity (including promotional offers) or is it open season? Remember, ‘demand exists only at a price’. If you can’t see the wood for the trees, or the elephant coming towards you, contact me and I’ll see if I can help.

‘Ireland After Brexit’: A personal response to an evening at the Institute of Irish Studies: University of Liverpool

Brexit has thrown up a particular curve ball in terms of future relations between Ireland and the UK. And this is considered particularly unwelcome given Ireland’s resurgence over the last three years in becoming Europe’s fastest growing economy. Last night’s talk ‘Ireland after Brexit’ held in Liverpool University’s Victoria Gallery and Museum was part of the University’s Open House series and presented by the Institute of Irish Studies. In the Chair was the Institute’s Director, Professor Peter Shirlow, the speakers being HE Dan Mulhall – Irish Ambassador to Britain, Arnold Dillon – Brexit Lead for IBEC, the Irish business and employers association , and Professor Michael Dougan – Head of Law at the University.

Short and sweet, each speaker had fifteen minutes to present their views on the issue. Ambassador Mulhall lamented the fact it had happened at all and believed the current phase was primarily about ‘damage limitation’ with the sensitivities and peculiarities of the UK/Irish border thankfully recognised by Brussels. He highlighted four key areas of concern: the border, the future of Irish/English relations, trade, and the future of UK/EU relations.  His trade concerns centred on whether the recent resurgence of the Irish economy might be impeded by Brexit. He is also concerned that Ireland may struggle to have the same voice within the EU now that Britain is leaving the table, given that together they were a formidable force. He remains absolutely certain that smaller countries like Ireland do well in multilateral organisations like the EU, and hinted that there may be a small consolation in some international companies decamping to Ireland from the UK to retain a presence within Great Britain.

Arnold Dillon agreed that neither did the 7500 members of Ireland’s largest employer organisation want Brexit nor saw it coming. He is further dismayed by the Hard Brexit rhetoric coming from Westminster, although he senses that this has been heightened by pre-election posturing. IBEC is already seeing a hit in cross border trade currently valued at £1bn a week, and interestingly, suggests that the importance of UK trade to some Irish processors might result in them eyeing bases within the UK. Otherwise he hopes for an orderly transition and a benign trade arrangement for the future, although it was stressed that this is not for Ireland for negotiate – if the EU wishes to punish the UK then there could be a different outcome which might suit Brussels more than Dublin.

Professor Dougan went on to develop the theme of who is actually driving the terms of the UK’s exit. In a short but fascinating overview, he bluntly put it that even now, UK pro-Brexit politicians simply do not recognise the legal framework they are in. The view that the High Court would come to the rescue on all legal complications being cited as naïve in the extreme. He also unravelled the concept of ‘the border’, putting it that it was not a single entity but a whole host of different controls and checks that could be treated in any number of different ways. It may be simple to negotiate, or it may be an endless morass. But for this very reason, he believes that despite the best will in the world, the border will harden. Borders are not just about customs and customs revenue!

So, there is concern amongst all we heard from that the current excellent relations and economic performance between the two states could suffer. This is compounded by a complex interrelationship between the Irish state, the UK and the EU – and in the case of trade you can also include WTO.  And furthermore, the issue goes far beyond trade and people movement: complex as these are there are many other potential disconnects buried in the detail. And the final straw? There are too many media operators and politicians who are wilfully misleading the UK and Irish public on the true issues behind Brexit. One speaker’s view was that Scotland is making a far better fist of understanding and articulating the true issues around Brexit than is the UK. So, Pandora’s Box is open. And it will be a long road to restoring any sense of ‘business as usual’.

My thanks to all concerned for an excellent distillation of some important issues. On the basis of this offering, the Institute seems to be very well resourced and placed to offer an important perspective on Brexit. And spare a thought too for HE Dan Mulhall. He leaves his post shortly to take up another in Washington DC.

 

Anyone wanting further detail and insight from this is welcome to contact me at mark@bonfiremarketer.com.

Projects: International Marketing

The advent of e-commerce, or simply the desire to expand territories and markets are both strong drivers in broadening a business’s horizons.

Your business should have a marketing strategy anyway, and if you have international pretensions, these should be in it. Otherwise, it is more likely to become a Friday afternoon or Cinderella aspect. Trading overseas is complex and that is not a good place to be!

Ignoring all the associated aspects such as currency, export documentation, and so on, there are still plenty of core Marketing issues you need to be considering. Taking each of the traditional 4P’s of Marketing as a structure, you may need to consider:

Product

  • Is the product saleable in your territory of choice? Does its composition or ingredients comply with local regulations?
  • Is the packaging suitable? Both for the task of getting it to market undamaged, but also so that the pack copy is compliant and appropriate to local regulations? And is the pack size appropriate? In the ‘States, people have garages. In Hong Kong, space is absolutely at a premium.
  • Do you have the rights to sell your brand in your chosen territory (see below)? Does the brand travel well? We all laugh at ‘Krapp!’ toilet tissue or other faux pas, but brands need to be distinctive for the right reasons.

Place

  • Why is the territory you have chosen right for you? How do you know the people there want or need your product? Is it easy to get it there? Is the political regime stable? Do you know the exact route to market (see below)?
  • Is the territory best serviced ‘on the ground’ or via e-commerce?
  • Are you going to test market? If so, where? What’s your plan?
  • What are the implications of BREXIT for you?

Price

  • What control will you have over pricing? How long is the distribution chain and who is taking a cut of the profits?
  • How do you insulate retail or final pricing against currency movements?

Promotion

  • Remember, no matter how well known you are in your home market, you are starting all over again.
  • Who is your salesforce and local spokesperson? No one knows your products and business as well as you – but then you can’t be in two places at once.
  • Be clear on your objectives: is the proposition relevant? Are you going after the right targets or just replicating what you’ve always done?
  • Are you going to hard or soft launch? Have you set a budget? Do you have local expertise and contacts?
  • Are there any cultural issues (alcohol, religion, politics etc) that might need special attention?

Example One: Cracking the US

This company had had several attempts in the past to ‘crack’ the USA. Each had ended in dismal failure until a different approach was taken. We formed a Joint Venture with a large domestic player. Our products dovetailed perfectly with theirs and by adding to their range we immediately had a sales force, a customer base and established distribution. They had their own skilled marketing team and recommended test marketing in a defined area they knew well. We had not previously done this. They had some firm views on how to get decent publicity for a modest outlay. However, we were keen to retain control of the trade selling as we knew the product best, and we wanted to understand the relationship dynamic for ourselves. My role was to act as the interface between the two parties and also oversee the Marketing we were doing. The launch succeeded and for the first time we were trading in the ‘States. The insight gained from our own studies and the local partner was invaluable in truly understanding the market. We also quickly came to understand why previous attempts had failed. At last we could move forward on firm foundations.

Example Two: Why brand protection matters

We had been selling into this distant ex-colonial territory for many years. After a strategic review, we decided that the territory was ripe for further development – particularly in the retail channel. We planned a new range tailored to local requirements and were on the point of going live when we discovered by chance that we couldn’t trade using our brand. This one territory was unique in us having long ago signed over the territory brand rights to what had been a former subsidiary. We had to abandon the entire launch. The story ended happily as we instead decided to fulfil demand by going down the private label route and volumes rose very rapidly due to the overall success of the retailer concerned, but it proved that brand protection matters, plus it is good to have considered contingency plans in case something goes wrong.

Example Three: Never assume!

I have covered this example in another sheet (Pricing, Sales Promotion and Category Management), but suffice to say, when launching through a channel you know extremely well in your own market – in this case multiple grocery retailing – do not assume that it works the same way in other territories. And leave NOTHING to chance in ensuring that your product actually makes it onto the shelf. As they say, ‘Retail is Detail’. I’m sure the same is true elsewhere.

International trading by nature can be complex. Consider teaming up with a trade association, The DTI, your local Chamber or other networks that understand the issues and can offer advice.

Mark Bosworth

Bonfire Consultancy Services            bonfiremarketer.com              07742 110018

Projects: Digital Marketing and E-Commerce

Maybe you are absolutely convinced that ‘Digital’ is the future and have built your entire business operation around it. Or maybe you want to be ‘omnichannel’ and cover all the options. Maybe you are still working out how to successfully integrate digital marketing with your current methods – or how to best trade online. In reverse order then:

  • If you are working out how to create or integrate digital marketing into your current methods, remember that the plan must be right for your Don’t do it digitally unless you have a compelling reason. Marketing a local window-cleaning business is very different to exporting air-conditioning equipment. Business owners like the idea of going digital because it’s ‘cheap’. They also like it because it’s measurable. But Digital Marketing is still marketing. It should be planned, and it should have an ultimate motive in mind: either making sales or building a hot lead database. Anything else is, frankly, a waste of time and effort. I can help you understand if it’s the right thing to do, and to put the basics in place to give you purpose and lead you to some kind of equity. And all without the techie jargon – because I don’t know any.

 

  • An Omnichannel business model basically means doing a bit of everything: you may be a traditional retailer looking to follow the crowd away from the High Street, or looking for new routes to market. This is the best and worst of both worlds. The best, because it can combine all the best aspects of retailing, and it is increasingly where the established retailers are heading. The worst, because you may end up doing twice as much work. As a seasoned observer and trading partner working with retailers huge and tiny, I have some practical advice on how to keep it real.

 

 

  • If you are a ‘pureplay’ digitally-focussed business, you will be either fighting with or collaborating with the mammoths of pureplay like Ebay, Amazon, Wiggle and many others. You might be a techie first and a digital marketer second Even when you are pureplay, your customers often aren’t. They like to get out occasionally. Have you noticed how many pureplay businesses do print advertising for example? I can act as a counterweight to the digitally-focused business and help you see the customer experience in the round.

 

 

 

Example One: The transformation from offline to online communications

This company operated primarily in B2B selling to the trade. Historically, this had meant printing plentiful supplies of price lists, product lists and trade brochures. We were regularly told this was the ONLY way customers would receive information. And yet we had a warehouse full of obsolete brochures. Very quickly, we set out the benefits of transferring as much of this as possible online. We were also able to prove that those same ‘luddite’ customers were already ordering a lot of their supplies off their smartphone! We were fortunate in having a product perfect for inspiring and engaging. What we needed were three things: a plentiful supply of content, internal agreement that a combination of hard copy and digital ‘literature’ would be more flexible, current and manageable, and the buy-in of both customers and our traditionally-minded sales team. As we progressed we realised: a) we were fast becoming digital broadcasters and needed to think in terms of programming and editorial policy. B) we needed the resources and skills to do this job as content was no longer a ‘Friday afternoon’ task. C) We were able to use the data we were collecting to gather a degree of insight and intelligence we could never have afforded through traditional market research, along with a plentiful supply of qualified leads.

Example Two: The world-wide web!

A key benefit of digital for export companies is its worldwide reach. Very quickly, huge strides have been made in being able to offer instant translation widgets to all and sundry. Job done! Or is it? When we decided to launch our range of food products into the US, our website was going to be the only marketing communications tool we needed. Right? Wrong! Our product lent itself to demonstration and inspiration. The trouble was that there was a specialised vocabulary to this pursuit and we and our American audience didn’t speak the same language. As it turned out, everything, from product descriptions, product specifications and the terminology we were using to explain our products needed to be adapted. After all, we had decided we were just ‘foreigners’ taking a speculative punt: we were serious about presenting our brand and products as specifically tailored to the US market. So, one technology, one website but a complicated marketing task if we were to succeed. We succeeded and the process has since been repeated elsewhere. And it proves that the technical solution is often completely different to the marketing solution. I can show you how.

Example Three: E-commerce

When you are selling B2C (i.e. to the general public), you have to have a strong retail focus. Enough said. Selling B2B (to trade), is a different but equal challenge. Selling to both can be complicated! In two (B2B) companies I have implemented an e-commerce route to market. They had very different objectives and fulfilment was also different: one in-house and one using a specialist fulfilment house. And businesses that are predominantly B2B sometimes benefit by creating their own route to market. Of course it needs to be done carefully to avoid a trade backlash, but if you want to offer your whole range or even want to ‘trial market’ new products, this can be a useful tool for both generating incremental business and improving your new product launch strike rate.

It’s worth remembering though that the ‘moment of truth’ is always when the customer has their goods turn up on time and intact. But this is often outside the expertise and control of you as a seller. How do you manage this? And do you want to create any e-commerce infrastructure or simply sell it via an Amazon or Ebay store? It all depends what you want to achieve. If you want an impartial view to understand the options, or understand what you really need to focus on, I can get you started.

Whether you are looking to make your marketing communications more engaging, more measurable or more integrated, I can help. And if you are looking to trade and need a retail-eye view of how to do it, again, just ask.