Strategic marketing consultancy | Brand marketing consultancy | The Marketing Directors logo

How to Grow your Business? 7 Tips for Successful Business Growth

Soldier on manoeuvres WW2 How to grow your business in the most difficult of circumstances

It seems that world economies follow a never ending series of boom and bust. Just when we thought global economies stable and productivity improving along come new challenges. First Covid-19 (2020), and then the Russian invasion of Ukraine (2022), and all that goes with it, including the rise of energy and food prices. However, when dealing with tough times, and particularly recession, if you face declining or flat sales, how do you grow your business? So do you plan cautiously or aggressively? In all situations marketers have a key role to play and you have a choice to view your glass as half-full or half-empty. Here are seven pointers to successful business growth:

1.   Be more vigilant to threats and opportunities

Information is a source of competitive advantage. While tough times present threats, they also present opportunities – a lower cost investment opportunity here, or opportunity to take out a competitor there. Rarely will there be greater opportunities for a smart marketing and research department to prove its worth. So understand changing market forces and customer needs and provide timely intelligence and quality thinking to spot new opportunities. There are many ways to do this. Firstly, empower your sales team to fact-find, talk to, or research customers. Also track media activity on trends and what your competitors are doing; read investment blogs and company reports too. Then take this intelligence, and use scenario planning to think through how markets might evolve, and devise strategies to survive or thrive in each circumstance. This is something most successfully undertaken by Shell to address turbulent oil prices.

2.   Ensure your business fundamentals are sound

The most successful businesses are those that are the most customer or audience driven. So if tough times impede your sales, this most likely indicates a weakness in your offer which needs to be fully understood and addressed.  So first check your market share, and if that has fallen too, it suggests you need to do more to compete. However, whatever the economic situation, clear insights must inform what you do. Your startpoint is to ensure a strong product offer. Then with a sound marketing strategy in place you’ll be in a good position to invest and grow.

3. Reassess your product and brand portfolio

A consequence of the present inflationary times, is that mortgage costs are rising, and so are savings rates. But these changes affect people differently. Those with their disposable income under pressure will behave differently to those who are ‘flush’. For example, they will be more motivated to save money (energy) by switching lights off and perhaps going to bed earlier. Whereas those who are more flush may be more willing to invest for the longer term, by investing in low-energy lighting or extra home insulation.

Fast moving consumer goods are typically the first markets to experience change in buying behaviour. Those under financial pressure may shop around more, switch to cheaper outlets, and buy own label products instead of brands. Those who are more ‘flush’ may pay more to feel better.

The purpose of this discussion is not to predict behaviour but merely to spotlight the ease and speed with it changes. Your challenge is therefore to anticipate and understand change, and react quickly.

4.   Maximise cash

The trigger for business closure is usually lack of cash. As evidenced by the recent administration of much lauded battery manufacturer, British Volt which has just been bought out by new Australian owners. Of course, cash management is the responsibility of all, but as this is a marketing blog, let’s focus on what marketers can do. One opportunity is to devise strategies to bring forward and maximise cash flows, for example, by rewarding early payment. Another is to reduce marketing costs. So seek out more efficient ways to communicate. In a worst-case situation, devise ways to rationalise your team. View change as an opportunity to ‘right-size’. Consider what roles are ‘must’ and ‘nice-to-have’. Also, make sure that the right resources are in the right places and perhaps refresh the culture. This then provides a more robust foundation to on which to build, invest and probe for renewed growth.

5.   Don’t stop promoting your products but do be smarter about how you do it

Some studies that show how the share of advertising voice correlates with market share. There is also evidence to suggest that those who invest in proactive marketing during tough times are the first to emerge from the tough times. Also that they emerge the strongest. So optimise and promote the benefits of your products, and use creativity to maximise those benefits. If you focus on building your brand you’ll help avoid creating a hostage to fortune.

6.   Invest while advertising bargains abound

The media market is in a state of perennial flux. As the share of one declines, often does the cost per impression, rating point or click. So shop around for advertising bargains. Over the last two decades promotional spend has shifted to digital media, most notably, Google and Facebook. Often when data to justify return on investment has been sparse. However, their recent declines in advertising income suggests their bubble is bursting. As money shifted to digital, other mainstream media such as television and radio became relatively better value. New kids offering better value propositions such as TikTok have also joined the block too.

7.   But manage the risks!

Of course there are risks. But think big, and cultivate a mindset of controlled aggression to mitigate the risks. So test, and test your way from low cost to higher cost business building initiatives. Though only when you are sure that investments work, and have the metrics to prove it, should you invest heavily.

Marketing Inspiration

  1. How to grow your business starts with good consumer understanding, and a good product. Then profitable product promotion.
  2. So build your business, product and brand strategies on facts by using robust market research. Also make sure you your have processes in place to identify opportunities and threats. Then you’ll be better equipped to, and more timely in making investment recommendations to your Board.
  3. Focus your resources on making sure your products are as fit and competitive as possible to compete in their niches. Because Darwinist fundamentals apply.
  4. Then, when promoting your products, carpe diem. Take a long and short term view on payback, but make sure you earn more than you spend. To do this, don’t just follow the herd, seek out lower cost marketing opportunities. In so doing you will be able to grow your business while others are worrying or sitting on their laurels.

For personal advice and support on how to grow your business just give us a call.

Business Survival; Understand the forces for change

Sales of high heeled shoes are down through the lockdown. Now's the time to plan for a lockdown bounce-back

The Covid-19 pandemic changed the lives of us all. And the consequences of the Russian invasion of Ukraine, and the Hamas attack on Israel also continue to rumble around the world. Many individuals and businesses are adversely affected through no fault of their own. But there is always more going on than first meets the eye. There are always a myriad of macro and micro forces that change customer behaviour, markets, and point to new opportunities as well as threats.

What are forces for change?

Sales of high heeled shoes fell dramatically during the pandemic (1) notwithstanding the staying at home, health and fashion memes that took hold. Car usage also declined without a need or opportunity to travel. And today, the sales mix of cars continues to change due to concerns about climate change, pollution and healthy living. In the UK, most notably, also due to legislation, extension of low emission areas and the associated cost drivers and barriers.

Sales of high heels are down in the lockdown. It is time to plan a lockdown bounce-back

Pandemic magnification

Some shifts were magnified by the C-19 pandemic. And the biggest shift of all … to a digitally dominated world …. was also facilitated by smarter phones with increasing and lower access cost.

The shift is most obvious in retail (2). Whilst many retailers bemoaned the health crisis and gobbled up the Government grants, this merely diverted attention from their inability to anticipate and position themselves to compete in a digital world.  

Identify or face the consequences of shifting markets

Consequences flow from the inflexibility of Marks and Spencer, to the ubiquity of Tesco, to the profit squeezing of fund-owned brands such as Boots and Debenhams. Also the fall from grace of wheeler dealers who grew fat on the glories of pre-existing brands. All were further compromised by greedy local government making it more difficult and costly to visit any high street.

Marketing Inspiration

To survive and thrive at all times, there is a need to remain vigilant to both macro and micro forces affecting your business. Then, and only when, you understand the forces, can you figure what these mean for your future. This is key to devising effective business and marketing strategies.

Every force has an opposite though not always equal reaction. For example, for many the balance of office and home working changed. This continues today suggesting it is a long-term behavioural shift. Underpinned by an individual’s ability to save travel costs. And also to boost business productivity. There is evidence of increased staff productivity, as well as well-being and health. Businesses participating in 4-day working week trials consur! (4) So on one hand, expect a further shift to 4-day from 5-day working weeks and all that that brings. And on the other, expect more incentives to entice staff into offices.

While 77% of UK CEOS have increased their investment in digital transformation (3), we suggest you work out the best balance and inter-relationship between on-line and offline. Certainly there are pitfalls in managing marketing in a digital world as we’ve warned for years. However, they are only coming to the fore as evidenced by recently announced layoffs by the likes of Meta. Though those of you with longer memories will remember the Internet boom and then bust of nineties. So tread carefully and measure and manage promotional effectiveness across all media.

A counter force, as confirmed by our recent Buckinghamshire High Street survey, is that High Street businesses must pay more attention to the customer experience to win custom back from online. Some places, of course, already do this, and the likes of John Lewis, and many garden centres, for example, have long realised the value of combined shopping and eating/ drinking experiences.

Governments and councils speed or impede change too. By enabling a fairer or laissez-faire playing field between the High Street and online pure plays. For example, by easing High Street access, parking, reforming property charges, and taxes, shifts demand and supply-side economics. All is fair-game for the lobbyist. 

References

(1) Glossy.co (2020)
(2) A record 35% of sales were online (January 2021 – ONS)
(3) CEO survey (PricewaterhouseCoopers March 2021)
(4) 4-day working week trials (Feb 2023)
(5) Seven perks to entice staff into offices, BBC (March 2023)

Strategic Planning: The Power of a Marketing Mindset

Strategic planning process infographic

We often get asked to help businesses get closer to customers and to develop new business, marketing and brand strategies. Yet businesses plan, organise and manage in different ways. Virtually all also have their own lexicons. Thus sometimes a challenge to address the latter really requires the former and vice versa.

However, a marketing mindset is powerful to address either, and indeed all of these challenges. Marketers are also increasingly empowered to lead business strategy, and many of the world’s most successful businesses are led by CEOs who previously held marketing functional skills.

However, marketing has not always been viewed as a strategic planning and management discipline. It only emerged formally as such in the 1950s (1). Marketing functions evolved from sales, and brand functions, from communications. However, customers and brands are the only constant in a fast-moving digital world.

Simplified strategic planning: 3 steps to success

So here is a simplified strategic planning process that is adaptable for all (2) (Figure 1 – Infographic). By understanding where a business or brand is now and where a business wants to be in the future allows you to plot a route from A to B.

Strategic planning process infographic

Step 1: Clarify where the business or brand is now

The first step is to understand where the business or brand is now. So determine what are your current business, marketing and brand strengths and weaknesses and what drives growth and profitability?

The marketing discipline uniquely looks through the lens of customers and customer segments to assess issues, size market opportunities and demand influences. It also looks at competitive relativities. So the answer these questions looking through these lens. To do this most robustly, understand your own profitability where the profit opportunities are in the market.

Step 2: Use imagination and analysis to generate ideas, and determine where you want to be

Bring together your colleagues and use your combined imagination to envision your future (2).  What does this look like? What would motivate your stakeholders? Then write a series of clear, challenging, and inspiring goals. While some organisations prefer an analytical approach to business strategy development, others prefer a more creative approach. However, there is merit in dual ‘left brain’ and ‘right brain’ thinking. Left brain thinking involves assessing the pros and cons of each idea or opportunity. Right brain thinking requires stepping away from the detail, and taking inspiration from the world around, to imagine new opportunities and destinations. In our experience no-one has a monopoly on good ideas, and employing different methods leads to better outcomes.

Planning from the customer, market and brand point of view requires considering how to establish or meet customer needs or change customer perceptions. As distinct from setting financial goals, say increasing sales by 5% or realising £Xm. The limitation with the latter is that it is not initially market and customer based. Though financials will need overlaying at a later date.

Step 3: Conduct gap analysis and figure how to bridge the gap

By clarifying where you are now and want to be, will allow you to quantify and qualify the size of the gap that needs bridging. In so doing, potential roadblocks or key issues to address should also become clear. So the challenge is then to design strategies – ‘how to’ solutions, to address the key issues. If this is not possible, then new goals need setting.

Strategic planning success factors

Engage colleagues to win a mandate for change

Engaging colleagues is important to gain buy-in to a way forward.

The best solution is seldom the one that is 100% technically correct if only 20% of stakeholders agree with it. However, a better solution is one that is 90% technically correct where most stakeholders agree with it.

Thus engage a broad church to fact-find, understand hopes and fears, and generate ideas. Then work together to turn your ideas into concrete strategies and solutions.

Through working together, and judicious market research, the best ideas should naturally surface to the top. And with agreement every step of the way, comes a mandate for, as well as desire and commitment to change.

Anticipate and mitigate risks

Change, and the journey to success will not happen overnight. Especially if the journey involves shifting customer hearts and minds. So be pragmatic about what’s achievable, at what cost, and by when. Also understand the risks and barriers to change and factor these into your plans.

Strategic planning context: The product to brand journey

Figure 2 shows a typical journey from basic product to power brand led business. At each stage on the product-brand continuum you’ll realise additional customer and business benefits (3).

Brand strategy continuum
If you are a product, service or sales-led organisation, there are benefits in simply understanding and meeting the needs of customers. So put the customer and his or her needs first and centre using market research.

For organisations in markets where brands are emerging as a differentiator, you also need to understand your competitors. And use these insights to better position your brand

For digital and service organisations delivering through people, and for larger product brands, understand and influencing perceptions through all brand encounters. This needs structures, skills and processes to focus and align people activities and behaviour to deliver consistent brand experiences.

Finally, the very largest organisations and those contemplating expansion into new countries and categories require more sophisticated relationship building strategies. So build brand personality, structures, skills and processes to extend your brand.

Marketing Inspiration

  1. While strategic planning is as simple as 1-2-3 it is complicated by different functional leads, who and what went before, and who is in charge. Yet customer and brand marketing views are gaining increasing traction to drive business growth. So help senior management understand this point, and start by working collaboratively to define relevant business goals.
  2. Rarely will success follow if the strategic planning is conducted in a silo, by one person or without engaging the business at large. It is more likely to work by engaging across the entire organisation.
  3. It is easy to have ‘rose-tinted’ spectacles, in other words, be overly positive about your own skills and competences. The acid test of a ‘strength’ is through the customers’ eyes and relative to competition.
  4. As business and brand drivers continually wax and wane, stay abreast of changing dynamics, and also what works and doesn’t. As a result you’ll be better able to deploy your businesses’ finite resources to influence customer choice.
  5. Finally, for those new to marketing, investing in a brand may be a step too far. However, for an inspiring view on the way forward just ask away; our marketing consulting services are always bespoke.

References

  1. Webster Frederick E. “A Perspective on the Evolution of Marketing Management” Journal of Public Policy and Marketing Vol. 24 (1) (Spring 2005)
  2. Harari Yuval Noah. Sapiens – A Brief History of Humankind (2014)
  3. Arnold Tim, Tomlinson Guy. The Marketing Director’s Handbook (2008)

Managing Marketing in the New Normal

UK online usage by age 2019 Fig 1: Managing marketing in the digital age

The digital age is now over 30 years old, though its consequences have become more prevalent due to the emergence of a (non-computer) bug that rampaged the globe.

The Coronavirus digital catalyst

The number of digital platforms, their actual usage and time spent online has simply sky-rocketed. At the height of the April 2020 Coronavirus lock-down to 4 hours and 2 minutes a day compared with the mean time spent online in 2019 of just 3 hours and 19 minutes (1).  And linked to this the online proportion of total retail sales also sky-rocketed to nearly 33% compared with less than 20% through the whole of 2019 (May 2020)(3).

It is fair to say that this massive growth caught everyone by surprise except the early digital adopters. They are easily underestimated as nerds, the youth of today or both!

Looking to the future

However, the world will never be the same again. Digital now permeates every aspect of life for every generation of whatever creed or country. Generation Y (so-called Millennials) watched as the digital world erupted around them, and Generation Z were the first generation to live digital lives from birth. The 2020 lock-down embedded the shift to digital. And the children of Millennials (Generation Alpha) are now set to be the most digitally savvy ever (Figure 1).

UK online usage by age 2019

Dominance of Google and Facebook

But did you know the extent to which Google and Facebook dominate online reach and time spent online? (Figure 2). In the UK, they reached over 95% adults and commanded over 45 minutes and 30 minutes a day respectively. Their dominance is such that a massive 39% of total time is spent on Google-owned media (including YouTube) and Facebook-owned media (including Instagram and Whats App) (4).

And as the public turned online, so has Marketing. As a result, some 57% of total UK advertising expenditure now goes online. Initially and still mostly to Google, who offer certainty of audience reach at a competitive cost and also expertise on the vagaries of search and algorithms. All without the need for a long term commitment to planning or creativity.

Yet their costs have grown and thus the balance of spend has tilted their way at the expense of TV and press, outdoor and public relations, and even other online media. Such that some 78% of online advertising spend, now goes to Google and Facebook (5). However, advertising was not their original nor primary intent, and their advertising and analysis offers are only based on a superficial understanding of marketing. Not for these digital experts the troublesome need to build brands or customer loyalty, but merely to attract clicks.  

However, there are now signs that the emperors’ clothes are wearing thin. Google’s annual minutage fell in 2019 (6), and search advertising revenue appears to be flat-lining. Though Facebook advertising shows continued growth (Figure 3).

Google and Facebook advertising income : Moving annual total to 2020

Marketing Inspiration for the new normal

So how to manage marketing in the new normal?

While the digital world perpetuated keeping in touch and entertainment in many forms, customer usage also expanded through predictive text and emoji. Because people do what they always do … congregate and gossip, and be amused and saddened. For human nature is what it is.

So building strong brand relationships and customer loyalty remain the bedrock of marketing.

And understanding human nature and their concomitant behaviour is also at the heart of Marketing.

The fundamentals to manage marketing in new normal remain constant as much as change is a constant. It is in embracing change and remaining customer-centric that Marketing is most successful.

The Marketing Director’s role is to understand and exploit the change to benefit their organisation by always staying one step ahead. That’s what successful marketing has always done and must continue to do.

A digital guide for the new normal

To help you stay a step ahead, we’ve launched Volume 2 of The Marketing Director’s Handbook – Managing Digital Marketing. This spotlights, and puts marketing in the new normal in context. It helps you understand the changing digital world and also to manage key digital marketing activities. Specifically, to optimise your website for search, and better use advertising, and social media to attract and engage more customers. But most fundamentally to help you better lead your organisation, and manage marketing as a whole.

The Marketing Directors Handbook is available as a one or two volume work from all good bookshops, including Foyles, Waterstones, WH Smith, Blackwells, Amazon, many university bookshops, as well as our own bookshop (with free P&P).

References

1, 2, 5 and 6. OFCOM Online Nation 2020. Base: All adults 18+. This is updated every year.

3. Office of National Statistics May 2020.

4. OFCOM Communications Market Report September 2020. This is also updated every year.

The UK Productivity Conundrum; Eight Insights for UK plc

  • Productive worker bee on lavender

Productivity is an economic concept (Figure 1). It represents the ratio of economic output: input. Practically, productivity assesses the competitiveness of an economy, and the health or otherwise of constituent businesses. It also indicates a country’s ability to improve raise wages over costs as this depends largely on raising output per worker. Thus understanding UK productivity is key to determining how to improve the UK economy and businesses.

UK Productivity = Outputs/Inputs
UK Productivity = Outputs/Inputs

Since 2008, UK productivity failed to follow the previous 10 years plus trend line (Figure 2). Overall output fell by 6% yet employment by just 2%. As a result, productivity fell by 4%. Exactly why UK productivity failed to grow is hotly debated by economists (1). The decline is similar to other major OECD countries (with exceptions such as the USA and Ireland (2)).

UK Productivity Conundrum | Figure 2 : UK productivity 1994-2018 ONS

We, therefore, thought it helpful to have a view. So in this article, we investigate why? We also pin-point lessons for UK plc and businesses. In particular, we cover:

  • How to measure productivity?
  • The employed population
  • The role of the service sector
  • The role of the Internet
  • The rise of challenger brands
  • Management influences
  • Conclusions

How to measure productivity?

In general, labour productivity is the ratio between a measure of output volume (gross domestic product or gross value added) and a measure of input used (the total number of hours worked or total employment).

For our analysis, we use the following UK Office for National Statistics (ONS) definition (3).

Productivity = output per worker i.e. Gross Value Added  / Total Number of Hours Worked (by those employed).

Gross value added (GVA) is the same as gross domestic product (GDP) minus taxes on products plus subsidies on products. We use the ‘Chained’ definition to eliminate the effect of inflation.

We also use time series data with 2007 indexed as 100 to match Figure 2.

Thus, for productivity to improve, this means that output must rise ahead of hours worked. Or more must be produced in the same or fewer hours. Let’s investigate further.

Reasons behind UK productivity decline

Figure 3 shows first, that total hours worked failed to keep pace with the trend line between 2008-2014. The decline between 2008-2014 reflects the fall-out from the banking crisis. Between 2007 and 2009 some half a million lost their jobs when many firms down-sized, went out of business (and/or were taken over). Some notables in financial services include Northern Rock, Bradford and Bingley and Lehman Brothers.  However, total hours worked is now back on the long-term trend line mirroring population growth. Nevertheless, the number of hours worked has failed to ‘grow output’ or it has held up despite the fact there is less to do. Both options suggest some time is ‘wasted’ or ‘inefficient’.

Fig 3 : UK productivity (output/hour) 2000-2018. Depressed by low output and increasing hours worked. ONS

Second, total output (Chained GVA) grew strongly between 2000-2007. It also fell sharply at the height of the banking crisis, yet continues to under-perform the trend line. Thus this also appears a compelling reason for the productivity decline. Let’s investigate both of these factors further.  Starting with the supply-side.

The growth of single owner businesses and part-time employees depress output

Since 2008 the number of single owner businesses and part-time employees grew above the trend line (Figure 4).

UK Productivity Conundrum | Figure 4 : Growth of part-time employed and single owner businesses 2000-2018. ONS and Dept for Business, Industry and Skills

However, according to the Annual Business Survey, the ONS’s annual tracker, small firms produce less than large firms (Figure 5). Overall, therefore, it seems that a shift in the mix to less productive firms has depressed overall UK productivity. Further, as Figure 5 also shows, even the productivity of the largest firms fell during the heights of the financial crisis. This  suggests that even switching some workers to part-time contracts, failed to maintain productivity. Of course, both part-time and full-time workers still require the same training.

UK Productivity Conundrum | Figure 5 : GVA per worker 2006-2015. Larger firms produce more per worker than smaller firms. ONS, Annual Business Survey

Further, looking at the ‘W’ shape of Figure 5 suggests that firms of all sizes have ‘bounced-back’ from the worst of the recession. With output at between £43-52,000 per worker, figures match those a decade earlier. It therefore appears that both employers and workers appear to have swallowed a new pill to keep businesses fully functional, flexible and to benefit quickly from an economic recovery.

The service sector is a key growth driver (Figure 6)

The UK service sector currently accounts for 80% of output and hours worked (2018). This is an increase of 7% points in output and hours worked since 2000 (from 73%). Further, in the 7 years to 2007 the increase was 4% points, yet in the last 11 years, just +3% points. While the service sector continues to grow ahead of the rest of the economy, growth remains below the pre-2007 trend line. As Government has focused on ‘belt-tightening’ since 2008, and Brexit since 2015, it is unsurprising, that spending remains depressed. But what’s going on in the different sectors?

UK Productivity Conundrum | Fig 6 : Service sector output 2000-2018. ONS

Under-performing and over-performing service sectors

Closer inspection of the performance of individual service sectors reveals six laggards: wholesale/retail, finance/insurance, recreation/culture, hotels/catering, transport/storage, and the public sector (Figure 7).  All six continue to perform below the historic trend line.  Performance changes may be due to lower levels of expenditure and/or trading down to lower value, margin, or non-essential services. This seems reasonable given several sectors appear more ‘discretionary’. A decline in transport could also be explained by an increase in ‘stay-at-home’ entertainment.

UK Productivity Conundrum | Figure 7 : Under-performing service sectors 2000-2018. ONS

Two sectors are yet to show a marked change of trajectory post the financial collapse. First, the finance sector which grew very rapidly to 2007 (with historical evidence pointing to uneconomic over-lending as the reason). ). Yet the sector still trails the pack. This seems due to a combination of low interest rates, low consumer confidence, and the rise of challenger banks (offering better value, and perhaps an opportunity for revenge). Second, the public sector; while resilient post ‘crash’, public sector GVA declined from 26 to 22% of the service economy from 2000-2017. However, hours worked remained c. 28% throughout the period. Thus output per hour has fallen and remains subdued.

Over-performing service sectors

Conversely, some service sectors have over-performed: services businesses (including rental, building and employment services), real estate, IT (including media and telephony), and other services (includes scientific, technical, law, accounting, advertising and consulting professions)  (Figure 8). However, growth for all but two remains below the historic trend line. Growing most strongly, are IT (reflecting many new markets and growing customer penetration), and service businesses.  Some services businesses, such as employment, advertising, consulting, and media firms, were highly responsive to changes in the economic environment. They quickly laid off staff or reduced hours or salaries, and vice versa, to maintain competitiveness and profitability. Many are also highly reliant on people, particularly well-educated people, to deliver services. Also on personal relationships to drive demand, rather than mass marketing, and the Internet.

UK Productivity Conundrum | Figure 8 : Over-performing service sectors 2000-2018. ONS

The growth of online is the elephant in the room

Since 2007 the UK has experienced major sociological shifts, ‘belt-tightening’ societal pressure, and the rise of online channels. The financial crisis of 2008 also seems to coincide with a tipping point in the rise of the Internet. In 2000, just 27% of the UK population had Internet access, and fast speeds were non-existent. In 2007, 75% of the population had Internet access, and 50% received broadband at an average speed of 4.6 Mb/second. The first iPhone also launched in 2007. Yet today UK Internet penetration is over 90%, and average download speeds are 45-47 Mb/second (4). The first iPhone also launched in 2007 yet today 80% own a smartphone.

Aided also by the growing number of comparison sites, there is an increasing and high propensity for customers to compare and hunt lower prices (up to 30% less) online.

Thus online purchasing has grown significantly from just 3.4% of retail sales in 2007 to nearly 18% in mid 2018. Further looking at trends (Figure 9), overall retail sales since 2007 remain below the overall output trend line. And retail sales excluding online sales, even further below the trend line. The pattern of decline is almost a mirror image of the growth in Internet users. 

Figure 9 : Growth of internet users and online sales 2000-2018. ONS

The arrival of Black Friday

The convenience and financial benefits of shopping online enabled by increasing broadband and mobile penetration continue to drive online sales growth at the expense of ‘bricks and mortar’ retailers. Black Friday appeared in the UK in 2009 championed by etailers such as Amazon, eBay, and others. It was also spurred by Asda in 2013. However in 2015 Asda de-clined to participate, announcing that their customers preferred year-round deals rather than a single day of discounting. Reading between the lines, this suggests the event had little effect on Asda’s bottom line. Perhaps merely serving to bring forward demand. Conversely, etailers have experienced significant sales and growth.

The rise of online challenger brands

The UK branch of Amazon EU alone amassed £21 billion sales in 2017, +80% over 3 years (and equivalent to £7.5m per employee). However, as this Amazon business is based in Luxembourg these sums are largely removed from the UK’s accounts.

While the wholesale/retail sector only accounts for a 10-11% of total output, other sectors such as real estate, hotels/catering, recreation, transport, and finance /insurance markets, also have burgeoning online sectors. And the last decade or so has seen online challenger brands enter and grow share in other markets too. Examples include Rightmove in real estate, Booking.com in travel/hotels, a myriad of flight search engines, Confused.com and ComparetheMarket.com in finance and insurance, and uswitch.com in energy.

The growth of online therefore appears to coincide with the removal of a significant chunk of income from the UK economy.

Significant growth in online advertising

Figures were first recorded for digital advertising expenditure in 2005. In 2005 spending was just under £600m (some 5% total advertising expenditure). In 2007 digital advertising spend was 9% of the total, and by 2017, 28% of the total (£5.7bn). This is a growth index of 474 vs. 2007 (Figure 10).

Figure 10: Growth of online advertising and online sales 2000-2018 ONS, Advertising Association and Internet Live

While online advertising potentially influences all purchases, growth better correlates with online sales rather than total output (Figure 10). While online advertising potentially drives income, it is also a cost, and only adds to profits if extra income generated exceeds extra costs. It remains to be seen whether this level of online advertising is sustainable (6-8% income) and grows margins.

What we do know however, is that a very great proportion of online advertising income is also due to US owned Google and Facebook – both based in Ireland. Google Ireland’s turnover is £27.5bn (£9.2m/employee) and Facebook Ireland’s turnover is £16bn (£4m/employee). Again this suggests a significant chunk of UK advertising output has shifted offshore.

Structured management practices enhance productivity

Now let’s return to the role of internal business influences on productivity (Figure 11). In 2016, the ONS surveyed management practices among 25,000 firms. The so-called ‘management practice’ score is an aggregate of several measures including practices relating to continuous improvement and employment management – such as those relating to promotions, performance reviews, training and managing under-performance. In the questions, a score of 1 is assigned to the most structured management practice and 0 the least.  The mean score across all organisations was 0.49. Their analysis found a statistically significant correlation between management practices and labour productivity, with an increase in management score of 0.1 associated with a 9.6% increase in productivity.

Figure 11 - Management practice score by size of organisation. ONS

The analysis also shows a statistically significant relationship between management practices, the size of a firm, and productivity.  Further analysis also reveals that family firms have lower management practice scores and productivity than non-family or foreign-owned firms. Management scores are also higher for the real estate, service business, and other services (scientific and technical) businesses. A higher incidence of degree-level staff is also associated with a higher management practice score and greater productivity.

Does time spent online at work affect productivity? 

Finally, we explore the effect of hours spent online at work to see if this has any bearing on productivity (Figure 12). Since 2007 the number of hours spent online at work (or in education) doubled from 3.3 hours (10% total in 2007) to 6.6 hours (20% total in 2017) (6).

Figure 12: Hours spent online at work or place of education

While we cannot precisely quantify productivity in those hours, some research raises questions. Asked whether ‘I feel more productive without the Internet’, 10% of adults 16+, and 15% of those aged 18-34 answered ‘yes’ (6). Recent announcements that Wetherspoons, and Lush Cosmetics, are closing their social media accounts, also confirms (at least for them) that the marketing time-costs fail to outweigh the benefits. And if marketers are failing to realise benefits, it raises the question are you?

Marketing Inspiration

  1. It appears that there are many supply and demand side-factors that depress UK productivity. Including competition from other nations.
  2. While the financial crisis spurred many new businesses, the smallest are least productive, and have most to learn. They should seek help from the UK’s world-leading academic, creative, and marketing consulting community.
  3. The financial crisis of 2008 also depressed customer confidence and purchasing. However, marketing deals with changing attitudes and perceptions. And basic marketing communication principles suggest that businesses and customers will buy and invest to secure benefits, rather than to avoid disbenefits. To drive demand, all should therefore promote positive messages. The national campaign starts here.
  4. Further technological and societal change is inevitable. And with online sales accounting for c.20% total, expect further growth. Marketing’s answer to the UK productivity crisis is to invest more in understanding the social and behavioural causes and effects, and inspiring products and services that deliver benefits.
  5. Off-line players face threats from low price online players and disintermediation. So choose to join and beat them. Or lose out. Winning requires improved customer value propositions or world-efficient supply and production capabilities.
  6. Digital marketing is here to stay. Though online advertisers should carefully measure returns. And remember that the marketing mix also includes off-line media with very high reach and impact.
  7. Declining public sector productivity is a threat to the whole economy, as income comes from private sources. The challenge is to deliver more for less, build world-class organisations and reduce income loss from UK shores.
  8. The openness of the UK economy, high Internet and smartphone penetration, and fast broadband, fuels customer and business agility, and innovation. However, the Internet also brings distractions that appear to dilute UK productivity. Addressing this starts with awareness of the issue.

What do you think?

References

(1) Patterson, Peter, Deputy Chief Economist, Office for National Statistics, The Productivity Conundrum, Explanations and Preliminary Analysis, 2012

(2) Organisation for Economic Development (OECD)

(3) Camus, Dawn, Editor, The ONS Productivity Handbook – A Statistical Overview and Guide, 2007

(4) UK Home Broadband Performance (Residential), OFCOM, November 2017 (link to latest data)

(5) Management and Expectations Survey, Office of National Statistics and Economic Statistics Centre of Excellence (ESCoE), 2016

(6) Communications Market Report, OFCOM, August 2018 (link to latest reports)

Thanks to the UK productivity team at the Office of National Statistics for answering our questions and helping with our analysis. Also to fellow marketing consultants at The Marketing Directors, Chris West, and Tim Arnold. To anyone wishing to build on this analysis, please do. We’re also happy to share our datasets and insights to help you.

B2B vs B2C Marketing; What Works Best on the Dance Floor?

B2B vs. B2C marketing

B2B vs B2C marketing is a very different proposition. Or is it? The growth of digital media means that there is an increasing number of channels and methods from which to choose. So how should marketers approach the task of engaging and winning customers? It’s a bit like learning a dance.

Comparing B2B vs B2C marketing

B2B vs. B2C marketing

Businesses that Sell to Consumers

The B2C marketing challenge is to build product awareness and convert browsers into buyers.  As it’s usually a ‘low involvement’ purchase, say to buy a confectionery bar, thus marketing campaigns must capture the consumer’s interest immediately. Typically mass promotion activities like TV and press advertising are employed.  Special offers such as discounts or vouchers also ‘activate’ the purchase. The challenge is therefore to establish an effective one-step routine.

In the online world, an email or search marketing campaign encourages consumers to click and buy. The email or advert encourages consumers to a website landing page designed to sell the product. If the purchasing process takes more than a couple of clicks then this risks the customer shopping elsewhere. So make it simple and easy, for example, by integrating the shopping basket and checkout page.

Businesses that Sell to Businesses

The goal of B2B marketing is also to convert prospects into customers. However the purchase is usually more considered. More decision makers are also usually involved. So the challenge is to engage and educate the target audience and build relationships with them. To succeed a B2B company must generate and nurture leads over a longer time period. A careless or quick step could mean a lost partner (or customer). The challenge is to therefore also to establish an effective multi-step relationship building routine.

In the online world, an email campaign or online advertising campaign also drives prospects to a website. However it is less likely to achieve an immediate sale.  A more realistic aim is to secure a meeting with a sales representative to discuss the customer’s business requirements and also influence him, her or them to buy (i.e. complete a sale). By providing information about the products and services, benefits, features, possibly pricing, and also contact information, reassures customers and wins trust. Conceiving marketing activity as one of several steps in a longer, integrated, multi-step campaign is more likely to persuade. So consider awareness and relationship building via direct mail, newsletters, video promotion, webinars, virtual exhibitions, conferences or live events and also social media such as Twitter or LinkedIn .

Marketing Inspiration

While there are differences between B2B vs B2C marketing, engagment and relationship building principles remain the same. So use market research to understand the customer journey from the customer’s point of view.  In particular, the sources of information and the selection criteria that the customer uses, and the triggers and barriers to building awareness, relationships, and drive sales. At each step along the journey, learn how your brand experience compares with your competitors. And if it is no different, then improve it.

This information will then help you build a better marketing communication strategy. Specifically the key messages, media and timing to attract and engage customers at each step on the journey. If you are a B2B marketer, learn how to dance the marketing 2 or 3 step. And while B2C marketers may be 1 step routine masters, learning a 2 or 3 step routine may help you to build stronger customer relationships. In so doing you will better invest your resources to really make a difference.

Brexit Planning; Time for UK business to embrace the world

Brexit - UK business and marketers should embrace the world l World of flags

On Dec 31st 2020 the UK left the EU single market. So what does this mean for UK businesses and marketers? As everyone digests the facts, and plans are enacted, new issues and opportunities become more evident. So it is never too late to finesse your Brexit plans.

Rather than think doom, gloom and despondency, think positive, and as global citizens, embrace the world

The trade barriers erected around the EU protect EU businesses from global competitive pressures. As a result they cause ‘flabby’ rather than ‘fit’ competitors. The UK has a proud history as a free trading nation and being ‘open for business’. Thus UK business should be materially ‘fit’ to compete in unfettered markets. Also to attract inward investment.

The world is a big market

According to the IMF (1) the world economy was worth $73.2 billion with the EU accounting for $16.2bn (22%) (Figure 1) in 2015. Thus the rest of the world accounts for the larger proportion (78%), with the USA, China and Japan, being the largest markets.

Global economy 2015
The world economy by country (2015)

Many global opportunities

Moreover, emerging markets are forecast to grow faster than the developed markets, and China and India will both reach the top 3 by 2030 (Figure 2). There are many opportunities to grasp.

Top 20 economies 2015 - 2050 ranked by GDP in dollars
The top 20 largest economies in the world 2014-2050

As marketers we know that the most successful businesses are those that understand and meet the needs of their customers. Thus investing in research and marketing to better understand and meet future customers’ needs, and build relationships and value makes sense.

Marketing Inspiration

1. To best manage the risks, and realise opportunities, you should continually update your business and marketing plans. Also make clear that you that you value your customer relationships, and take steps to strengthen those relationships.
2. Keep searching for win-win opportunities to sell, invest and buy. Also acquire knowledge to build competitive advantage. Use research to uncover insights and and realise short and long term opportunities.
3. Have no fear. The fittest or most able will be the most successful. So stay true to good business and marketing principles; understand customer needs, and demonstrate and deliver value in meeting needs.
4. For any business that considers themselves unfit, finesse your Brexit plans to maximise the value of your offer and embrace the world.

References

  1. International Monetary Fund
  2. PricewaterhouseCoopers

The Role of Marketing in Driving Business Success

Marketing strategy | Popping the cork to celebrate marketing success

What enables some businesses to weather the changing economic climate and the cold wind of market forces, while others wither? The most successful businesses grow income and budgets steadily, while the weakest experience diminishing income and budgets. Or die. Just as Darwin observed, only the fittest survive and thrive. While research by Jim Collins and Jerry Porras (1) revealed many successful business essentials, however, the role of marketing has received less attention.

popping a cork on a champagne bottle as a metaphor for business success

Business success factors

Business strategy and marketing were first recognised as important in the middle of the twentieth century.

Though the role of marketing is most recognised and best understood by leading consumer goods companies. It is also most influential in the most successful businesses, such as Procter & Gamble and Unilever. By contrast the discipline plays second or third fiddle in companies in sectors such as business-to-business (b2b) and utilities.

Marketing is a business success factor

The effects of marketing communication campaigns are well documented. Some show positive results, yet some, negative. Though it is difficult to find empirical evidence to prove how or what aspects of marketing drive business success. Or explain what businesses should do strategically. So we’ve done some research and thus, here, we summarise some ‘hard’ evidence to spotlight the role of marketing.

In 2006 Booz & Company (2) identified that businesses with ‘healthy marketing DNA’ were almost 60% more profitable than their competitors. Further, that those with ‘super DNA’, some 9% of the sample, were 20% more likely to show superior growth. But what is ‘healthy marketing DNA’ and how can it be ‘bottled’?

Three marketing prerequisites to drive business success

1. Ability to measure contribution to business growth

Many organisations hire marketers with lots of experience in a business sector and then rely on them to ‘judge’ what to do and where to invest. This compounds a perception that marketers are ‘fluffy’. It also compounds that they are unworthy of a seat at the board-room table.

In 1955, Peter Drucker wrote ‘what gets measured gets managed’ (3).  Yet, in 2005, a CMO Council study of US CMOs (4) revealed that over 80% of organisations had yet to develop meaningful and comprehensive organisational measures or metrics.

However, the 20% introducing useful measures substantially outperformed their competitors in terms of revenue growth, market share and profit. Thus, around two-thirds now believe that measuring marketing ROI will be the most important measure of success in the next few years (5). So while far from easy, marketers must measure and prove marketing activities drive sales and profits.

2. Deep customer understanding

Organisations that invest more effort in capturing and using customer information to make decisions and foster stronger customer relationships outperform others. This is endoresed by a CMO study confirming market research as the most important source of information influencing strategy decisions (cited as important by 82% CMOs).

3. Broad strategic role, supporting and influencing senior decision makers

In some organisations, marketing operates solely as a communication or promotion department. In others, as a management ‘gopher’, responsible for tactical initiatives, and sometimes reactive to management demands.

Organisations with marketing teams structured to work closely with the CEO, across the organisation, and also assume broader strategic responsibility, are more successful. Their roles include business analysis and development, product innovation, and also approving large investments. Also gathering customer insights and communicating and making decisions based on those insights across organisation boundaries. By better and more quickly engaging management and employees also drives out-performance.

Marketing Inspiration

So what to do? Unlike the DNA of living organisms, organisational DNA can change. So start your business strategy process by understanding where the business and marketing capability is now. Then where it should be in the future. From The Marketing Directors’ research (5), there are just 14 executive marketing directors on the main boards of the UK FTSE 100 companies. This therefore suggests that the role of marketing is relatively unimportant in 86 of those companies. Or that competition is benign.

While the ability and role of marketing is widely misunderstood, and not recognised, recognition is growing. As more and more sectors, and more and more organisations face the colds winds of competition, more are embracing the benefits of marketing.

Deep customer understanding is necessary to reveal both strategic and tactical business opportunities. These insights enable colleagues to make better decisions and design, deliver and promote products and experiences that customers want. Thus offering more customer benefits and advancing growth and profitability.

Marketers should therefore view themselves as the voice of customers and directors of growth. This is endorsed by 63% of CMOs who believe they can grow their influence as the voice of the consumer (6). According to CIM, marketers’ influence is also greater when competition is intense and the market turbulent (7). Thus, champion and understand customers, and measure and report on business performance and business drivers.

References

(1) Porras Jerry and Collins Jim I, Built to Last, 1994, based on research and analysis of pairs of companies in 18 industries.
(2) Landry Edward, Tipping Andrew, Dixon Brodie, Six Types of Marketing, Booz & Company and the Association of National Advertisers, 200, based on an online survey with 30,000 responses.
(3) Drucker Peter F, The Practice of Management, 1955.
(4) The CMO Council, Assessing Marketing’s Value and Impact, 2004.
(5) Arnold Tim, Tomlinson Guy, The Marketing Director’s Handbook, 2008, 2021.
(6) Korsten Peter, Heller Baird Carolyn, et al, From Stretched to Strengthened, Insights from the Global Chief Marketing Officer Study, IBM, 2011, based on face-to-face conversations with 1,734 CMOs in 64 countries.
(7) Argyriou Dr. Evmorfia, Leeflang Prof. Peter, Saunders Prof. John, Verhoef Prof. Peter, Paper: The Future of Marketing, The Chartered Institute of Marketing, 2009.

Restoring Business Growth; 3 Step Business Turn -around

Arrow showing decline and rise. metaphor for business turn-around
Restoring business growth or turn-around

Do you need a business turn-around plan?

Often new hires, either a CEO, or CMO, coincide with a challenge of restoring business growth. But how? Here are three steps for a fast and effective business turn-around.

1. Understand the effect on your business

First, understand the effect on your business or portfolio as a whole. How significant or material is the effect in relation to the business as a whole? If it is small then delegate responsibility to solve the problem, if large, then there is a case for you to invest more of your own time.

2. Diagnose the problem

Then diagnose the cause as quickly as possible. Ask questions and form your own opinion of the cause and the ability of your team to solve the problem. The scale, complexity, political sensitivities of the problem will affect the ability of your own team to develop a solution.

Then diagnose the cause as quickly as possible. Ask questions and form your own opinion of the cause and the ability of your team to solve the problem.

  • First, is the problem a one-off, recurring or ongoing?
  • Second, is the problem caused by an internal operational issue or external market forces?
  • Third, is the problem product, promotion or strategy related?
  • Fourth, is it people or process related?
  • Finally, what plans do we have to deal with the issue?

To check that the problem is understood, and to corroborate this is the case, ask for a paper discussing the issue as well as recommending options to deal with it.

The scale, complexity, political sensitivities of the problem will affect the ability of your own team to develop a solution.  If your own team struggle to be objective, seek help from a third party. Using experienced consultants and conducting original customer research helps you remain objective and apolitical.

3. Drive change

When you fully understand the issues and then create a marketing strategy and business turn-around plan.  However, the nature of your approach should depend on the effect of the business problem, and the ability of your team to solve the problem. If the problem is less significant, prefer a light touch approach. If the problem is significant or catastrophic, prefer a more directive and hands-on approach.  First, check that the problem is understood. To check ask for a paper discussing the issue as well as recommending options to deal with it. Then drive action. If the problem reaches across departments, set-up a task force to deal with it and ensure clear access to relevant senior management. If the problem is beyond the ability or experience of your current managers, then strengthen the team or replace the key people.