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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.

Where to start?

What brand extension strategy best suits your brand? And when is it better to extend your brand or launch a new brand? First, here are some factors to consider.

The Rowntree story

In 1881, a confectioner called Henry Rowntree launched Fruit Pastilles, and then in 1893, Fruit Gums. His success allowed him to launch new chocolate products, including chocolate beans. However, through the early 1900s, Rowntree struggled to make milk chocolate to match the quality of market leader, Cadbury’s Dairy Milk. However in 1931, George Harris became marketing manager for chocolate products. With knowledge of marketing and consumer research gained in the USA, he launched Rowntree’s Chocolate Crisp, later renamed KitKat (Figure 1). Fast-forward to today and there are now over 200 KitKat brand extensions.

Rowntree's Chocolate Srisp brand extension became Kit Kat in 1937

He also transformed Rowntree’s Chocolate Beans into Smarties.  This is the brand we know today. It has spawned many brand extensions including large Smarties, Fruity Smarties, and ice cream Smarties.

These name changes gave KitKat and Smarties the focus to grow into discrete, and successful new ‘chocolate’ brands. Harris was lauded for this success, and in 1941 he became Rowntree’s company Chairman. As a result of his successes, he is today viewed as a father of modern marketing (Figure 2).

George Harris, Rowntree's - a father of marketing
George Harris, Rowntree’s – a father of modern marketing

Why bother extending your brand?

Typically for one or two reasons. Either or both to:

  • Grow your brand i.e. increase market penetration or share, for example by attracting new customers, entering new segments or markets, increasing use, and thus sales and profits and / or to
  • Boost your reputation or equity by increasing awareness, or rational or emotional perceptions.
Brand extension strategies
Alternative brand extension strategies

However, the further a brand extends, the greater the potential dissonance from the core. While this offers opportunity, and potential for a ‘new’ brand, it also brings greater risk. (Figure 3). A key question then, as George Harris understood, is whether extending a brand or launching a new brand will inspire greatest success?

Brand extension vs launching a new brand?

Extending a brand allows it to benefit from its existing brand awareness and equity, thus potentially reducing launch promotion costs. Conversely, launching a new brand, requires building new equity. Usually at higher cost (See Figure 4). This form of brand extension strategy is therefore likely to be most suited to launching a ‘new to world’ product or variant which requires a more differentiated positioning.

Pros and cons of brand extensions vs. new brandss

Principal brand extension strategies

There are two principal brand extension strategies; by evolving from the brand core or by making a step-change to realise a brand vision. The latter typically requires a revolutionary change in positioning.

1. Extending brands by evolving from the core

Evolving brand extensions from the core requires understanding on the nature of the brand equity, its strengths and weaknesses, and then building on those strengths, or eliminating weaknesses.  

Boots No7 brand extension

In 1935 Boots launched a retail own brand called Boots No7. Originally, it was just a skin care line, though cosmetics followed and subsequently took off after the war (3). Over the years the brand had many make-overs: both changes in livery (blue, terracotta, brown, grey, black etc). Also many brand extensions. Though growth was impeded through a close association with Boots. So in 1971 the decision was made to build an independent fashion brand, exclusive to Boots.

New products also added to the ‘skin care’ equity, for example via No7 Special Collection, including Positive Action Cream (1980) (designed to compete with upscale skin care brands). Then in 2007 No7 Protect & Perfect Serum. A BBC Horizon documentary declared it the only product on the market to have proven anti-ageing effects. As a result it caused a storm in Boots’ stores with stock selling out in two weeks. Today ‘Protect and Perfect’ is a sub-brand extension in its own right. It also sells outside of Boots’ stores (Figure 5).

No7 in 1935 and today

2. Extending brands by realising a brand vision

Olay is a pink beauty lotion (or Oil of Ulay, Olaz, or Ulan as it was originally known) launched in South Africa in 1952 (4). Promoted as ‘the secret of younger looking skin’, it eventually became global category leader. While largely a single product brand, it was clearly perceived by consumers as ‘for younger looking skin’. In 1985, Procter & Gamble acquired the brand, and invested significantly in R&D, to better deliver the said promise and create a raft of brand extensions. Resulting brand extensions now include Complete, Total Effects, ProX, Regenerist, Regenerist Luminous, Classics, Fresh Effects, Body (North America) and White Radiance (Asia). These products better deliver the younger looking promise via a range of active ingredients including a broad spectrum sunscreen, retinyl propionate (a vitamin A derivative), glycerin, niacinamide (vitamin B3), and amino peptides.

Some other great brand extensions and extension strategies

Gucci

Gucci started out making saddles for wealthy horsemen in Tuscany in 1921 (5). Impressed by some of the luggage he saw guests with at luxury hotels, he then employed fine leather craftsmen, and the latest machinery, to make luggage. He also set up stores to reach elite customers. Clothing then followed in 1964, as did the iconic double GG logo on belt buckles. As a result the company established a reputation for classic Italian style and luxury, and prospered through the next decade. Ups and downs then followed though the hiring of the highly creative Tom Ford to design a ready-to-wear collection in 1990 took the company to new heights. Most recently the brand extended into homeware and decoration (Figure 6). the cool and visual appeal of the brand has also encouraged social sharing via digital media. In turn, fueling further growth.

Gucci Home Decoration

Caterpillar

Caterpillar Inc. (sometimes shortened to Cat) is the world’s biggest manufacturer of construction equipment. During World War 2 their trucks also found fame with the US Navy who used them to build military bases. Then through the 1950s, the company made a series of acquisitions, bringing new products to market under the Caterpillar name.

Through the late 20th century, Caterpillar became synonymous with reliability, durability and technology, and a distinctive yellow livery.  Then in the mid 1990s, Caterpillar extended the brand to a other merchandise though a carefully controlled licensing programme. Firstly, and most famously, to boots. The footwear sector has since boomed, and it remains their most successful consumer product licensing segment to date. In the late 90s Caterpillar extended into timepieces, (Cat calls them rugged timepieces) (Catwatches.com), and in 2016, to mobile phones, and in 2020 to robotics. According to Kenny Beaupre, Caterpillar Brand Licensing Manager, “This builds positive brand awareness which helps in many ways. It also connects new and existing audiences to Caterpillar’s products and services. We’re fortunate people like being associated with our brand, and Cat licensed products are a great way to show this connection.

Caterpillar brand extensions

The Walt Disney Company

Walt Disney, a shy yet visionary man, famously created his first sound cartoon, Steamboat Willie in 1928 (4). It featured what was to become the world’s best known mouse.  Later in 1937, he went on to complete the first full-length animation, Snow White and the Seven Dwarfs. Then in 1955, he opened the world’s first amusement park, Disneyland (in Anaheim, Los Angeles). To fund this he diversified into TV programmes, including the Mickey Mouse Club, and also live action movies. When Walt Disney died in the mid 1960s, he left the company with high standards, strong beliefs, and a clear vision “to make the world happy”. His resulting ethos and vision guides Disney’s “imagineering” to this day. More recently, the acquisition of content that appeals to wider demographics, combined with the availability of fast broadband has enabled Disney to extend their brand into millions and millions of homes with their streaming service Disney+.

Marketing Inspiration

1. Brands grow through evolution (from a brand promise), or more revolutionary approach to realise a brand vision. Critical is to decide “what you want the brand to stand for”? (Figure 8)

Brand extension through evolution or revolution

2. Great brands tend to have high awareness (at least in their niche). And also distinctive rational and emotional benefits. Building both rational and emotional perceptions adds monetary value and justifies a premium vs. your competitors.

3. Successful brand development springs from clear insight, a strong creative leader, visionaries, a great R&D department, or a strong brand belief system.

4. Don’t think too linearly i.e. just within a market segment, to stretch your brand. Try and think laterally. So understand customers, and their views on your brand. Also seek a new insight or thread to connect the brand parts, and inspire a clear direction. Further even if a finding is untrue, it could still inspire growth.

5. You are more likely to reveal extraordinary brand extension ideas, through a culture of innovation. So hire bold and creative thinkers.

6. Don’t cannibalise your own sales unless you are making more money i.e. higher margins.

7. Slapping your brand name on any product risks eroding rather than boosting your brand. So avoid a stretch too far – only launch a new brand when clearly different and the upside potential is great.

Need some help? Just get in touch using the form below.

References

1. The Rowntree Society

2. Sébastien Jaulent, Katia Luxin, and Yna Sacko, Dissertation on ‘Advantages and Disadvantages of Brand Extension Strategy for Companies’

3. No7 Beauty

4. Olay – Our History

5. Gucci

6. Caterpillar and their shop

7. Capodagli Bill, Jackson Lynn, The Disney Way – Harnessing the Management Secrets of Disney in Your Company  (1988)

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.

Evolution of products vs brands

Product recognition is a marketing fundamental. But what really is the difference between products vs brands? The early brands used marks like the red triangle of BASS beer. This was actually a symbol of strength similar to Castlemaine XXXX or Wadworth 6X (Figure 1). Others from Ford to Kellogg to Boots used the simple signature of the owner. These were the first differentiators that enabled products evolve into brands.

Beer brand logos - Bass, CastlemaineXXXX and Wadworth 6X; illustrating how brands evolved from products

Products that are named and recognisable in design and packaging can then be recalled by their qualities, properties, and attributes and benefits. This is all very logical so far ….

Brands add ‘values’ and value

Yet brands also convey ‘values’ – the importance, worth, utility or usefulness of something (1). They build an image or perceptions in the customer’s eyes. In turn they also build a relationship based on emotions of trust and care, responsibility, and respect. Elevating products to brands involves working out what makes them different and better. This process is called brand positioning.

Benefits of brands

Compared with products, brands are more distinctive, and build stronger relationships with customers. In turn they are more valued and valuable. Simply adding more products under the umbrella of the brand also has many attractions. We call this brand extension. In today’s particularly fragmented and targeted media environment, it adds weight to messaging, and scale to business.

Pitfalls to avoid

So make sure that brand values match product performance. Especially in both technical and service sectors. A single poor experience in a restaurant will lower the brand reputation across the entire chain.

This is a problem that befell airplane manufacturer Boeing. When their much-vaulted new plane, the Boeing 737 Max, fell out of the sky it took two years to sort out. The planes underwent final stages of airworthy certification. And Ryanair have now ordered over 200. However, they are no longer named Max (Figure 2). They are now named the Boeing 737-8200.

Illustration of the Boeing 737 Max and Boeing 737-8200 nose cones showing the use of product vs brand names as a differentiator. Yet there is no difference in the products

Marketing Inspiration

So to summarise the difference between products vs brands. Brands are a value-added subset of products and services. All brands are either products or services. However, not all products and services are brands. This is because products and services are typically more generic. Whereas brands have a good awareness, a distinctive image and a stronger emotional connection with consumers. Thus they command premium prices and the strongest brands command higher share prices, reflecting their higher earnings multipliers over the also rans.

So be clear about the difference between products vs brands. And manage the risks and invest accordingly.

References

(1). Oxford English Dictionary. While the word ‘values’ is useful to a point, it is also a somewhat vague term. And thus we prefer the more specific concepts of benefits, personality traits, beliefs and behaviours to understand and describe brands. They are more powerful to develop brand strategies.

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)

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)

As marketing folk, rather than politicians, we think in a particular way. We also have roots across the country, and don’t live in the London bubble. So reflecting on marketing politics over the General Election, and since the EU Referendum, we share thoughts on lessons learned.

It is Friday 13th December and all of the results from the first winter-time general election since 1923 are in. Of 650 seats, the Conservative Party have 365, a clear majority of 80. That’s an increase of 47 more seats, while Labour Party lost 59 seats. The reflects a 44% and 32% share of the vote respectively. The SNP also gained seats with a 45% share of the Scottish vote. The Lib Dems lost one seat overall, most notably that of leader, Jo Swinson. Their vote share was just 11%.

The Conservative seat gains are largely in the North, Midlands and Wales. These are also amongst the highest Brexit supporting areas. And also areas of traditional working class labour support. Though Labour also lost share of vote in strong remain areas (1).

Six lessons learned

1. The winner best matched the electorate’s wishes

According to numerous polls in the run up to the election, the key issue facing the country was firstly, though not universally, Brexit. Second, health (i.e. the NHS). And third of approximatly equal importance, crime, immigration and the economy (2).

Of course, the Brexit issue masks different needs, either to leave or remain in the EU. Nevertheless, the 2016 Referendum result stands, and ‘leave’ was endorsed in the 2019 local European elections. Further, Parliament’s inability to get the job done has compounded public frustration.

2. Simplicity of offering and message

The Conservative message focused primarily on ‘Get Brexit Done’ and also ‘Unleash Britain’s Potential’. Secondarily that enabled investment in the NHS (20 new hospitals, 30-50k new nurses etc.) and 20k more police. Thus cleverly linking the voter’s #2 and #3 concerns to the first. Whereas Labour focused primarily on the NHS (the concern most relevant to their supporters) yet offered a protracted and no obvious solution on Brexit.

Yet interestingly, despite the Conservative’s focus on Brexit messaging, a recent survey suggested that still only some 57% associate the party with this cause. Thus while many of us may be bored with the message, it failed to reach 43%.

3. Messages must be believable

At the same time as promoting ‘Get Brexit Done’ the Conservatives also ‘dissed’ the ambiguity and incredibility of Labour’s position in calling for another referendum, and being unclear what they would support.

Conversely the Labour Party attempted to stoke fear that the NHS would be sold by the Conservatives to Donald Trump). This message was strongly challenged, unsupported by documents provided. Procuring drugs from US companies at the right price appears an entirely different and less relevant point.

4. Targeting by demographics alone is not enough

While historically voting allegiances split along age, wealth and geographic lines, the Brexit issue has complicated this pattern (3). There now appear to be more different types of people with differing underlying concerns. In London, folk are younger, more white collar, work for big, multi-national business and are remain concerned. Whereas in the Midlands, North, and Wales, as well as parts of the South, there are also larger numbers of blue collar, small business, and leave concerned. As the Conservatives have won them over, reading between the lines, it appears that Labour has failed to understand and meet their hopes.

Social media which allows targeting by multiple demographic and psychographic variables seems to have played a significant role.

Of course, it remains to be seen whether Labour voters’ switch of allegiance is temporary or evidence of a fundamental shift in attitudes.

5. Personality counts

The Conservatives elected Boris Johnson leader partly on the premise that he would give them a bounce in the polls. He has also consistently led Jeremy Corbyn on leadership ratings (strong, decisive) (4). While there are many personality issues on both sides, it appears there is considerable anecdotal evidence on doorsteps that JC was a liability. The Conservatives knew this and it was central to their communication strategy – ‘we’re not Jeremy Corbyn’ (rated dislikeable, weak, untrustworthy) (4).

6. Know where you are on the brand lifecycle

Sensing decline under Mrs. May in the Summer, the Conservatives, quickly replaced her with a fresh face. While much has been made of his personal life little appears to have harmed. Again this is interesting, and by comparison, we should remember that a ‘colourful’ personal life appears essential to get top jobs in countries such as France and Italy. Looking to the future, it remains to see what type of Prime Minister Boris Johnson will be. He has the opportunity to choose and learn from others – perhaps Winston Churchill or Ronald Reagan.

Today’s announcement that JC will not stand at the next election in order to oversee a change of leadership and not go quickly seems to prolong Labour’s difficulty. Though perhaps in time, the Labour Party will thank the Conservatives for hastening his end.

Politics and Marketing Inspiration

  1. Successfully marketing politics, political parties, and policies, as well as any product or service, relies on a clear understanding of audiences, their needs and attitudes.
  2. Understanding, segmenting and targeting audiences by needs and attitudes is easier, more discriminating and effective than demographics alone.
  3. Don’t under-estimate the importance of a clear singled-minded message, and benefit, backed by a credible supporting argument. Equally, fuzzy messages are both difficult to understand and identify with. They also question the credibility of the message sender.
  4. Personality is also differentiating. It is fine to have a few warts and use colourful language or display strength of character such as drive and determination, in order to get your message across and engage. Though it is important that your overall beliefs and behaviours are consistent, and grounded in what’s generally regarded as truthful.
  5. Monitor where you are on the brand lifecycle. If sales or support wanes, it is time to rethink your brand communication. Start with #1.

References

  1. Based on EU Referendum estimates by the BBC and Professor Chris Hanratty
  2. Sir John Curtice, Strathclyde University writing for the BBC.
  3. Sir John Curtice’s research on political leadership as published by the BBC
  4. You Gov Political tracker

Marketing myths

A glance at the back pages of many newspapers or online reveals a variety of different titles for the job of marketing director. Including head of customer, demand, experience, digital, direct, brand, communications, commercial and so on. Yet there are many myths about the role of marketing. Some perceive marketers ‘fluffy’ and lacking in commercial nous. Yet others as customer champions, growth drivers and highly creative. Thus it is no wonder there are differing job titles and sometimes contradictory perceptions. However all of this underlines that a successful marketing director requires a combination of skills and expertise.

Seven essentials to being a successful or great marketing director or CMO (Fig 2.1)

How to be a successful or great marketing director
The Marketing Director’s Superior Performance Model’

1. Explain, influence, manage and lead your colleagues

It never surprises us how few really understand marketing. Also how many fail to think from a marketing viewpoint. So go out of your way to explain what marketing is to your colleagues. In particular, how it works, and adds value. This will help win their trust.

At the same time, steer your business to a more successful place. Success will follow not just from what you do, but also how you do it. So engage your colleagues and set the tempo for the business. Work to win friends and influence, manage the day to day, get what needs to be done done, while looking to the future. In particular, develop and express a bright and motivating future.

As Jack Welch once wrote in a letter to shareholders:

“In the old culture, managers got their power from secret knowledge: profit margins, market share, and all that … In the new culture, the role of the leader is to express a vision, get buy-in, and implement it. That calls for open, caring relations with every employee, and face-to-face communication. People who can’t convincingly articulate a vision won’t be successful. But those who can will become even more open – because success breeds self-confidence.”

Jack Welch

2. Be a disciple of customer understanding

No matter how sophisticated organisations might seem on the outside, it’s amazing how many hire and expect marketers to make decisions based on their own ‘gut-feel’.   But remember that you’ll make better decisions based on facts.

History suggests that the most successful organisations are those that best understand their customers

This is therefore not something to pay lip-service to. Though while our increasingly digital world begets more and more data, it remains a world that is often sadly lacking in insight. So focus on understanding who your customers are, their needs, attitudes and behaviour. Accurate and comprehensive understanding on customers and their needs is vital to optimise products, services, and communications.

This also means understanding the ‘whys’ behind that ‘whats’? And investing in processes and people, and encouraging colleagues to do likewise.

3. Be the eyes, ears and ‘early warning radar’ of the organisation

The nature of customers, markets, and technology, also means that new opportunities and threats are emerging all of the time. Yet history is littered with organisations that failed to adapt or change to new threats.

It is also easy to become ‘blinkered’ by corporate cultures, and trapped by a ‘flimsy’ job specification. Someone in the company therefore needs to look outwards, and challenge and reinvent the ‘wheel’ to grasp new opportunities and anticipate and head-off threats. That someone is you.

Becoming the organisation’s ‘early warning radar’ fits perfectly with helping everyone understand and focus on customers. However, don’t do this on your own, and don’t view this as a power grab. Simply a way to empower your colleagues to feedback to your organisation’s brain.

By knowing most, and what’s going on first, gives a competitive advantage. Some also call this foresight.

4. Measure and manage the numbers

Attracting customers and driving demand are common business goals. This is where marketing makes its most important contribution. However, only marketing directly fuels growth. Other functions fuel efficiency. So combining both leads to more profit, and better returns.

Effective management is only possible by measuring ‘key performance indicators’ (KPIs). So as you have growth objectives, and responsibility for marketing initiatives, it is natural that you measure and manage the numbers. Simply to understand and address any deviation.

Also to plan with confidence

To do this understand the relationship between customer and financial outcomes. Then you’ll be better able to justify where to invest, and fine-tune, your marketing activities.  

The more heads on the case, the better the ‘measurement’ solution. A quick win is to get your CFO onside. Work with your CFO to establish a marketing and financial dash-board. This will also boost your Boardroom credibility.

5. Develop and deliver your brand or brands

If your colleagues do not understand marketing, you can be sure they do not understand brands. Addressing this challenge starts by helping them understand, particularly, ‘why bother with your brand?

Reasons to bother with brands

First, to simplify and drive customer choice and purchase. Second, to enhance value and shareholder value. Third, to focus effort to deliver a consistent brand experience.

Implications for marketers

While marketing is the management function to boost brand stand-out and appeal, you’ll also need help from others to deliver your brand.

Particularly in service companies, where the good work of an advert in raising expectations is sometimes undermined by a surly customer service agent, or poor system. So effective management of the customer touch-points or underlying processes is vital to deliver a great brand experience. The devil is in the detail. Even a tiny improvement in response could add millions to revenue or profits.

So work with your colleagues to identify and overcome issues and deliver a consistent and high quality service.

6. Both strategy and execution make a difference

So set up processes, tools and techniques to make sure that both strategic and executional decisions are of the highest order. And then test implementation and test again from low to high investment.

7. Use your creative skills to solve problems

Through your great advertising and promotions you’ll build a reputation for being creative. So use this strength to help colleagues and the business as a whole. Also think about it this way. If the CEO’s role is to manage the big picture and the financial director’s is to manage the numbers, then the task of creating ideas lies with you.

So take the lead to solve problems that your business faces. Also bring colleagues together to this end. With the right skills, resources and creative tools in place, no problem is insurmountable. And if bravery does not come naturally, remember that it is a just state of mind. So go for it! Remember too that even if the problem lies outside of the marketing department, the health of the business remains your prime responsibility. And if you feel trapped by ‘politics’, bring in external help. A more objective approach could better help you unite and align your colleagues.

Marketing Inspiration

1. In short, you want to be a GREAT marketing director not just a good marketing director. Though greatness comes through business success. So if you imagine the scope of your marketing job responsibility as defined by a ‘box’. Then whatever the official prose, aim to ‘punch’ through that ‘box’.

2. Communicating AND also managing the effective delivery of the business plan and marketing strategy through the business is key to being a successful marketing director.

3. Success will follow through your ability to persuade others. In other words through your personal skills and relationships. This is often more important than technical excellence.

4. So put yourself in the customer’s shoes (and fully understand him or her, and how to meet his or her needs) to make the best decisions.

5. If in doubt, sleep on it.

6. If still in doubt, then ask round and about.

7. Remember you are not alone and don’t have to do everything yourself. Because help is always at hand.

Introducing The Marketing Director’s Handbook

The Marketing Director’s Handbook is the definitive guide to being a great marketing director. Uniquely it covers both the marketing and management responsibilities of the role. It is also packed with top tips to help you succeed. Structured in five parts and 31 chapters it covers: Marketing essentials, the marketing year, operational leadership, and how to manage key projects. An entire section is also devoted to the role of digital. It is a ‘must-keep by your side’ for all marketers and a ‘must-read’ for all business owners and directors. So read the FREE introductory chapter, reviews, and order your copy today.

It’s available at all good bookshops including: Foyles, Waterstones, Blackwells, WHSmith, the Chartered Institute of Marketing bookshop, JS Group, university bookshops, Amazon, The Book Depository, and The Marketing Director’s bookshop.

The Marketing Director's Handbook Volumes 1 and 2
The Marketing Director’s Handbook Combined Edition

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 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.