Monday, 5 November 2012
The 'average' citizen vs. the bleeding differences that make for individualism
The move from broadcast to narrow-cast, even one-to-one media marketing and social networking is a reflection of the fact that increasingly savvy consumers demand to be treated as individuals by suppliers and retailers. Combined with the increasing availability of one-to-one consumer feedback, marketers risk dilution and dissipation of the brand message in refusing to acknowledge that the traditional use of ‘average’, apart from being increasingly out-of-step with reality, is verging on becoming an insult, compared with the relative awkwardness of ‘individualism’,
In other words, ‘average’ is easy, but ‘individual’ can be a nuisance…
However, even in Japan where being the same is considered a good thing, much of the population are said to enjoy finding little differences that distinguish people, blood type being the latest example.
What blood groups show
According to popular belief in Japan, type As are sensitive perfectionists and good team players, but over-anxious. Type Os are curious and generous but stubborn. ABs are arty but mysterious and unpredictable, and type Bs are cheerful but eccentric, individualistic and selfish.
In fact a whole industry of customised products has also sprung up, with soft drinks, chewing gum, bath salts and even condoms catering for different blood groups on sale.
By the same token, NAMs that are individual, whatever the blood group, tend to make a difference, despite being something of a nuisance...
Historical signals...
Incidentally, those of you with Type AB blood of a poetic bent might have picked up this need for individualism as far back as 1939, via W.H Auden in The New Yorker.
It is the epitaph of a man, identified only by a combination of letters and numbers, described from the point of view of government organizations i.e. the "Bureau of Statistics."
The poem satirises bureaucracy and standardisation of people (the average citizen) at the expense of individualism, and perhaps explains much of what has gone wrong in the last few years....
To optimise the individualism of your next coffee break we attach Auden’s poem below - vive la difference!
The Unknown Citizen
He was found by the Bureau of Statistics to be
One against whom there was no official complaint,
And all the reports on his conduct agree
That, in the modern sense of an old-fashioned word, he was a
saint,
For in everything he did he served the Greater Community.
Except for the War till the day he retired
He worked in a factory and never got fired,
But satisfied his employers, Fudge Motors Inc.
Yet he wasn’t a scab or odd in his views,
For his Union reports that he paid his dues,
(Our report on his Union shows it was sound)
And our Social Psychology workers found
That he was popular with his mates and liked a drink.
The Press are convinced that he bought a paper every day
And that his reactions to advertisements were normal in every way.
Policies taken out in his name prove that he was fully insured,
And his Health-card shows he was once in a hospital but left it cured.
Both Producers Research and High-Grade Living declare
He was fully sensible to the advantages of the Instalment Plan
And had everything necessary to the Modern Man,
A phonograph, a radio, a car and a frigidaire.
Our researchers into Public Opinion are content
That he held the proper opinions for the time of year;
When there was peace, he was for peace: when there was war, he went.
He was married and added five children to the population,
Which our Eugenist says was the right number for a parent of his
generation.
And our teachers report that he never interfered with their
education.
Was he free? Was he happy? The question is absurd:
Had anything been wrong, we should certainly have heard
Friday, 2 November 2012
Jumpy suppliers leave Comet on brink?
Press reports that jumpy suppliers are somehow to blame for Comet's business issues are missing some fundamental aspects of the supplier-retailer relationship.
What a supplier contributes:
- With daily deliveries of some SKUs, often at zero-defect service level, a retailer can run the business on two weeks stock, or less
- With an average retail margin of 25% and store running costs of 15% the retailer is left with 10% to cover head office costs and profit, with a potential net margin of 5%
- With up to 45 days of free credit, and a shopper paying cash the retailer, allowing 5 days to to turn cash around, the retailer is left with 40 days money to place on deposit, or more creatively build new stores
- With suppliers contributing up to 15% of their sales in trade funding, most of the promotional risk is being carried by the supplier
- With suppliers carrying most of the innovation and brand development risk, the retailer simply has to make it available to consumers
- A buyer's mistakes can be sent back sale-or-return, a supplier puts theirs on prime time TV
Comet's mistake
Comet failed to anticipate the inevitable impact of online and Amazon on white-goods and home entertainment categories and were unable to re-engineer their business model fast enough to compete, in unprecedented times.
Developing an online offering means having to compete directly with Amazon's 1-click convenience, zero-defect service level and 'no quibbles' returns policy. There is no halfway alternative.
Amazon is growing at 26% CAGR, not via incremental business (they have not even started yet!), but by siphoning business from traditional retail, via pricing, convenience and great fulfillment. Again their 1-click process optimises almost every impulse urge of the consumer, never missing a trick because of lack of availability...
But essentially they are simply another competitor in a free market.....and no government is going to legislate to make it any different.
Meanwhile, suppliers making 5% net profit on their Comet business, need incremental sales of £3m for every £150k that is is owed, to cover the cost of the inevitable...
Jumpy? I can think of better words....
Thursday, 1 November 2012
Bad customer service - the downside of social networking...?
UK shoppers seek customer service support by email (49%) or phone (43%), younger shoppers are highly likely to turn to social channels when these touch points fail, with 46% of under 25s and 33% of 25-33 year olds using social networks to air their grievances more publically. A new study, commissioned by Rakuten’s Play.com, consisted of an independent survey of 1,000 UK consumers.
Corrective Action?
One approach can be to consider Omotenashi – a Japanese customer service style to deliver enhanced customer service. Meanwhile, for pointers, see how Rakuten approaches customer service using Omotenashi by stepping away from the vending machine retail model and aiming to go the extra mile when delivering great customer experience.
Why this is important…
As any branded NAM will appreciate, the cost of persuading a consumer to try a new product is so high, unless they are delighted/surprised at what they find in the tin (see Aldi Xmas pud) and thus require less investment to encourage a return visit, the upfront marketing investment never achieves payback mode.
The survey indicates key influences of a second visit:
o 39% – Loyalty programs & rewards
o 20% – Strong after sales support
o 14% – Personalised offers shared after purchase
Moreover, it is only on the third visit to the brand that consumer satisfaction may result in them telling one of their friends…
Alternatively, if the experience is not satisfactory (i.e. we don’t meet their needs) the disaffected consumer will complain to 10 of their friends, and that was before the arrival of social networking…
P.S. See here for details of the survey’s key findings
Corrective Action?
One approach can be to consider Omotenashi – a Japanese customer service style to deliver enhanced customer service. Meanwhile, for pointers, see how Rakuten approaches customer service using Omotenashi by stepping away from the vending machine retail model and aiming to go the extra mile when delivering great customer experience.
Why this is important…
As any branded NAM will appreciate, the cost of persuading a consumer to try a new product is so high, unless they are delighted/surprised at what they find in the tin (see Aldi Xmas pud) and thus require less investment to encourage a return visit, the upfront marketing investment never achieves payback mode.
The survey indicates key influences of a second visit:
o 39% – Loyalty programs & rewards
o 20% – Strong after sales support
o 14% – Personalised offers shared after purchase
Moreover, it is only on the third visit to the brand that consumer satisfaction may result in them telling one of their friends…
Alternatively, if the experience is not satisfactory (i.e. we don’t meet their needs) the disaffected consumer will complain to 10 of their friends, and that was before the arrival of social networking…
P.S. See here for details of the survey’s key findings
Wednesday, 31 October 2012
Debenhams: calling a coffee a coffee….
Debenhams launches plain English coffee menu which describes coffee in simple terms has been created in direct response to customer feedback that revealed over 70% of coffee drinkers have experienced ‘coffee confusion’ in cafes, bars and restaurants. No longer will coffee-lovers be in a muddle over mocha, caught out by cappuccino or embarrassed about espresso thanks to a plain English coffee menu launched by Debenhams on 29 October 2012.
The new Debenhams coffee menu:
Translating Fancy name (usually seen in high street coffee shops) into Plain English version (as seen on the new Debenhams menu)
Black coffee = Simple coffee – with or without milk
Caffe latte = Really really milky coffee
Cappuccino = Frothy coffee
Caffe mocha = Chocolate flavoured coffee
Espresso shot = A shot of strong coffee
Chrissie Maher, Founder Director of Plain English Campaign also welcomes the new menu: “Whether it is coffee, tea or hot chocolate, it needs to be in plain English so customers can make an informed choice. If they can read the menu clearly, they are more likely to try something new – and who knows – they may come back for more.”
The current status quo
Over 100,000 coffees are sold each week in more than 160 Debenhams cafes and restaurants across the UK and Ireland, selling double the amount of tea. Coffee now represents 67% of sales compared to tea which is only 33%. Of the three major hot beverage categories (coffee, tea and hot chocolate), coffee is the only one to have seen volume growth over the past three years. This suggests that it has stolen share from both hot chocolate and tea.
At risk of sounding pretentious (pretentious? Moi?) it remains to be seen whether confusing mystique is a key driver in out-of-home coffee consumption……
The new Debenhams coffee menu:
Translating Fancy name (usually seen in high street coffee shops) into Plain English version (as seen on the new Debenhams menu)
Black coffee = Simple coffee – with or without milk
Caffe latte = Really really milky coffee
Cappuccino = Frothy coffee
Caffe mocha = Chocolate flavoured coffee
Espresso shot = A shot of strong coffee
Chrissie Maher, Founder Director of Plain English Campaign also welcomes the new menu: “Whether it is coffee, tea or hot chocolate, it needs to be in plain English so customers can make an informed choice. If they can read the menu clearly, they are more likely to try something new – and who knows – they may come back for more.”
The current status quo
Over 100,000 coffees are sold each week in more than 160 Debenhams cafes and restaurants across the UK and Ireland, selling double the amount of tea. Coffee now represents 67% of sales compared to tea which is only 33%. Of the three major hot beverage categories (coffee, tea and hot chocolate), coffee is the only one to have seen volume growth over the past three years. This suggests that it has stolen share from both hot chocolate and tea.
At risk of sounding pretentious (pretentious? Moi?) it remains to be seen whether confusing mystique is a key driver in out-of-home coffee consumption……
Tuesday, 30 October 2012
Late payments improving – Action for NAMs
The latest Late Payment Index from Experian®, the global information services company, reveals that UK businesses paid their bills nearly 1.3 days earlier in Q3 2012, compared to the same period last year. In July to September this year, firms paid their overdue invoices 24.88 days after agreed terms, compared to 26.17 days during the previous year (Q3 2011).
Food retailers showed the most significant improvement, paying their invoices 29.15 days after agreed terms, compared to 34.21 days in the same period last year.
Still a way to go...
Whilst suppliers will obviously be grateful for this average 5-day improvement by retailers, your finance department will remind you that invoices are being paid 29.15 days later than agreed. Think about it, you are delivering some SKUs daily, the retailer is holding average stocks of 2 weeks, and is getting cash from the shopper...
In other words it is vital, especially in this ‘post-recession’ era, to keep up the pressure for on-time payment.
Action:
Food retailers showed the most significant improvement, paying their invoices 29.15 days after agreed terms, compared to 34.21 days in the same period last year.
Still a way to go...
Whilst suppliers will obviously be grateful for this average 5-day improvement by retailers, your finance department will remind you that invoices are being paid 29.15 days later than agreed. Think about it, you are delivering some SKUs daily, the retailer is holding average stocks of 2 weeks, and is getting cash from the shopper...
In other words it is vital, especially in this ‘post-recession’ era, to keep up the pressure for on-time payment.
Action:
- Quantify the cost of financing agreed credit days
- Calculate the cost-benefit of paying settlement discount
- Calculate the cost of the additional late days (checking that you have had your fair share of the five day average improvement in days sales outstanding, from all customers!)
- Calculate the total cost of financing the credit you give your customer, and work out the equivalent in incremental sales required to cover the cost
(i.e. if you make 8% net on your customer’s business, you need incremental sales of £12,500 sales to cover each £1,000 you give the customer )
Monday, 29 October 2012
'Food-to-come' - What if McDonalds offered home delivery?
Despite the arrival of the newly revealed post-recession era, food-to-go services are still suffering real-world issues with traditional sales.
One answer might be the introduction of home delivery by giants like McDonalds and Burger King
Obviously a trade-off between delivery charge and the health benefit of walking to the nearest outlet, an issue not likely to factor significantly with the target audience…
The real issues might be quality-on-delivery and set-up of a new home-delivery business model
Quality-on-delivery
In home delivery trials in the US, Burger King claims to have solved the problem by developing what it calls 'proprietary thermal packaging technology,' which ensures the food won't arrive cold and congealed.
Home delivery already in place
McDonald’s already offers home delivery service to more than 25 countries including India, South Korea, Malaysia, China and Egypt and is trialling via a couple of outlets in New York. Due to people becoming busier and busier and highly competitive companies as Yum Brands (KFC, Pizza Hut), McDonald’s has begun offering a home delivery service. The 24/7 McDelivery service is a fairly new business model and is continuously expanding and has proved to be highly successful.
Given the both companies appear to have solved some of the basic problems, perhaps Home Delivery UK might be worth a what-if by key stake-holders?
Thursday, 25 October 2012
‘No-brainer’ inevitabilities...Generic medicine prices in Ireland
Radical changes overdue
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest it is inevitable that:
In other words, on current levels of consumption, a 50/50 split of generics and branded, and generics pricing being reduced even by 50%, the annual drug bill will be reduced to €1.4bn, minimum…
Time for a ‘what if’ on the sales impact of matching UK levels (generics usage = 80% and generics prices reduced by 92% )?
NB. What does this mean for those outside the market?
The above is an example of a market anomaly, with change becoming inevitable when you run the numbers, hopefully leading to better business forecasting. We shall include ‘no-brainer’ inevitabilities as a regular feature of KamBlog, to help clarify the obvious in unprecedented times.
All suggestions welcome!
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest it is inevitable that:
- The government will legislate to increase generics usage to something approaching the UK %
- Prices of generics will then be forced down to levels comparable with the UK (think legislation or encouragement of parallel importing, or both)
In other words, on current levels of consumption, a 50/50 split of generics and branded, and generics pricing being reduced even by 50%, the annual drug bill will be reduced to €1.4bn, minimum…
Time for a ‘what if’ on the sales impact of matching UK levels (generics usage = 80% and generics prices reduced by 92% )?
NB. What does this mean for those outside the market?
The above is an example of a market anomaly, with change becoming inevitable when you run the numbers, hopefully leading to better business forecasting. We shall include ‘no-brainer’ inevitabilities as a regular feature of KamBlog, to help clarify the obvious in unprecedented times.
All suggestions welcome!
New Supply Chain Finance Scheme - every little helps, but..
News that a group of 38 major UK companies, including Tesco, GlaxoSmithKline, Marks & Spencer, Diageo, Rolls Royce, BAE Systems, Centrica, and Vodafone, have signed up to the Government’s new supply chain finance scheme aimed at helping improve the flow of working capital for small businesses by piggy-backing on the customer's credit rating is a great step forward, but suppliers to retailers are still under pressure from financing trade credit.....
Implications
Implications
- Great initiative in that small/medium suppliers can benefit from the credit rating of larger customers
- But they still have to finance the credit, albeit perhaps not at penal interest rates
- The real issue is retailers taking 45 days+ to pay for goods that are often daily-delivered, with shoppers paying in cash…
- See Cost of credit calculation on Kamcity
- Work out the actual cost of giving credit to the customer
- Calculate the incremental sales required to cover cost of free credit i.e. say your net margin is 5%, then every £1,000 it costs to give free credit means you need incremental sales of £20,000 to cover the cost
- Substitute your figures in the above calculation and book an appointment with the buyer...
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