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MARKETING FOCUS – 1. Love your customer more than your products 2. Everybody’s talking brands 3. Promotions Fatigue 4. Unpredictable, Unprecedented 5. The hidden costs of Discounting – I2P

MARKETING FOCUS – 1. Love your customer more than your products 2. Everybody’s talking brands 3. Promotions Fatigue 4. Unpredictable, Unprecedented 5. The hidden costs of Discounting


1. LOVE YOUR CUSTOMER – MORE THAN YOUR PRODUCTS

You’ll have to lift your game (… and lower your prices, too).
This clarion-clear message from customers and clients is only now starting to resonate.
Responses up to this time have been slow, spasmodic, inconsistent and conspicuously reluctant.
Just three years ago the taxi industry was put on notice: UBER had arrived in Australia and New Zealand. Consumers, particularly women, were disenchanted with the service standards on offer, and being experienced from taxis.

The industry responses were typically personal, defensive, aggrieved and related to the financial worth of tax plates, and drivers’ incomes. Customers, it seemed, did not figure.

Similar missives and behaviours evolved in the hospitality sector with the arrival of Airbnb.

In both instances, the intrusion achieved by the new interlopers and the pain experienced by the established incumbents were substantial, and are both on-going and increasing.

The impending physical arrival in Australia of Amazon has similar implications, with a broader application. Many sectors, companies, networks, products, services and applications that have long been protected and insulated because of geographic isolation are about to experience a new order in doing business.

THE ULTIMATE SHOPPING EXPERIENCE 

An extended and intensive national series of attitudinal studies by Marketing Focus have identified, isolated and analysed the key competitive and compelling features of interactions and transactions with Amazon, Airbnb, UBER and several other leading global and national interrupters.
 
Those seeking to counter the emergence of these rapidly evolving market forces will typically need to reorient and develop corporate cultures from products, cost and self to a single focus on customers.
Embracing a sense of genuine love, respect and commitment to existing, prospective and past customers may sound emotive, provocative and “over-the-top”. But it’s all true, and essential, to achieve and to maintain the ultimate shopping experience being sought, expected and valued by customers and clients.
 
“Ultimate” is indeed a select term that underscores the reality that all sectors of commerce are now global. There is no place to hide. Protection by geographic isolation is a thing of the past. So too is exceptional customer service.

Consumers do not want, give credence to or value exception. Customers demand and give loyalty to the best, – and given a global marketplace, relative measures of excellence are now absolute by nature. Such is the scope, and complexity of the marketplace.

Half – or local – measures count for little. Amazon, Airbnb, UBER and the like take no prisoners.

Every one of us is now confronting the ultimate challenge – to be bold, daring and foremost.

Barry Urquhart

2. EVERYBODY’S TALKING BRANDS
In the words of Paul Keating, the former Australian Prime Minster: Everyone’s farmyard rooster is crowing… (brands).

One is left to wonder if anyone is listening, or, more specifically, understanding the message.

Overall, in most sectors of commerce, the recognition of, respect for, and value inherent in brands have declined significantly during the past five years.
Contributing to this scenario is the emphasis on short-term cashflow generation, transactions, digital media and on-line interactions.
It is estimated that some 92% of exposures to a brand name on digital and social media is limited to 2 seconds or less.
Yes, brevity is a virtue and less can be more – within limits.
A countervailing thrust is the promotion of, and need for leaders and effective story tellers.

Tales about brands require detail, explanation and involve outlines on customised advantages, benefits and rewards.
Compounding the complexity of the branding issue is the trend towards commoditisation of product/service ranges.
Brand leadership is enjoyed and sustained by those who enjoy exclusivity, uniqueness and difference.

Mass markets cannot be won and held with generalised, common offerings. Prime, select and exclusive are laudable adjectives for value packages. Without them, an increasing number of brands will continue to decline in value, relevance and competitive advantage.

3. PROMOTIONS FATIGUE 
Enough, already.
It seems some in business simply don’t get the (implied) messages.

Silence and an absence of responses to discounts, sales events, bargains and promotional offers do not suggest consumers’ acceptance, nor their interest or endorsement. Apathy and indifference are only probable, and marginal states of mind. Negative reactions are likely.

Put simply, an increasing number of consumers, clients and prospects are suffering various degrees of promotional fatigue.
Too many promotional and sales events have commoditised offers, companies, brands, services and applications. Disturbingly, the biggest discounts affect the integrity, and innate trust held for businesses and their product ranges.

Loyalty and rewards programs, albeit with minimal returns to consumer participants, are preferred by an overwhelming majority of customers and clients.
Progressive accumulation of points and rewards is enticing, if redeemable over “acceptably short periods of time”.

The most effective and sustainable strategy to win business, offer value and to maintain relationships is the offer of “everyday lower prices”. That platform accords individual choice, power and discretion of what to buy, where, when and at what price.

Consistency in pricing, quality, service and communication is a reassuring measure for the public and target audiences.
Fundamental, is the need to retain a tight focus on the customer, and not the competition.
Clients seldom, if ever, experience fatigue as a consequence of care, understanding, responsiveness and value.

4. UNPREDICTABLE, UNPRECEDENTED 
Consumer behaviour is changing rapidly, often in the most unexpected ways. The causal and contributing factors are many and varied.
Lifestyles, technology, access to information, family dynamics, confidence, job security, income stability and the economy at large are all impacting on perceptions, expectations and buying intentions.
Few, if any, are aspects over which an individual, couple, family or commercial entity have total or any control. External variables indeed!

Anticipating or accurately forecasting consumer behaviour or patterns is difficult, if not impossible. Consistent trends are not apparent and are therefore challenging to isolate and analyse.
Behavioural, buying, perception and attitudinal cues are similarly hard to identify, monitor, influence and manage. Accordingly, inferred changes in interest, demand and revenue are questionable and subjective.

The value of quantitative and qualitative market research is itself questionable. Much of the current consumer behaviour is unprecedented and unpredictable.

Endeavours to promptly and appropriately respond are fraught with dangers and inadequacies. Ah, the ideas of consumer-led marketplaces and economics.
Conspicuous, active, articulate and assured approaches have the capacity to influence and modulate consumer behaviour. Particularly now, consumers and clients, particularly now, like to, and value, being led, sold and applauded.

It won’t work for all. Success, response and conversion rates will be marginal and inconsistent. However, they represent the best prospects for sales, revenue and consumer (client) traffic enhancement. Put simply, research, analysis and contemplation have their limits, particularly in a market which is characterised as being unpredictable and unprecedented.

5. THE HIDDEN COSTS OF DISCOUNTING 
Everything costs, including discounts.
Price cutting is currently rampant …possibly endemic.
The practice seems infectious, if not too rash.

Short-term sales events, bargains and promotional offers have immediate, widespread and lasting impacts on the integrity of brands, and the trust placed in the related value-packaging. As a consequence, full, standard and recommended retail prices are typically forever beyond reach and retrieval.

Customer relationships and loyalty are often casualties of consistent, tactical price discounting.

THE NEW ORDER 
The intrusion of global fast-fashion outlets like Zara, H&M, UNIQLO and Forever 21, has dictated the need for all in the fashion retailing supply chains to invoke discipline, to strive for greater productivity, velocity and volume, and to trim margins to remain competitive, relevant and compellingly attractive.

Individually and collectively, those initiatives are not discounting prices.
Rather, they are the aspects of a new dynamic, customer-focused business model that constitutes a new order.
It is exciting for some, particularly consumers, and burdensome for others.

COST/BENEFIT EQUATION 
The underlying premise of discounting is that lower prices will stimulate sufficient interest and increased sales, to more than compensate for the loss of profit that is integral in lowering prices.

It is well to remember that 100% of the discount is taken from the profit margin. Fixed and variable costs remain essentially constant in the short-term.
Disturbingly, few “discounters” undertake forensic analysis of just how much increased turnover is required to compensate for, and to neutralise, the impact on profits of lower prices.

Attendant costs and operational considerations are incurred, including increases in inventory, warehousing and retail space, staff numbers, electricity costs, rentals, insurance premiums, advertising and shrinkage. Understandably, most are bracketed in the variable-cost structure.
As a sweeping generality applied to retailing per se, (with a 30% profit margin) a 10% across-the-board discount will require an increase in turnover of around 296%. That’s right, a near three-fold increase in turnover.

For those who market, seek and retail services, (such as travel agents,) physical inventories are not a key factor in the equations. They require a “modest” 180% average increment in turnover to counter a 10% company-wide discount.

I readily accept and, indeed, can endorse discount propositions …. – once that I’m assured of a 1.8 to 3 times resultant acceleration in turnover. On-going variability in prices result in further costs. That is – the impact on the integrity and trust attributed to the brand. Arguably that can be, and often is, dismissed (or discounted!) as an opportunity cost.

Its presence is not apparent on spreadsheets.
However, its manifestations are quantifiable.

START AT THE BEGINNING 
Too often, the introduction of a discounting philosophy or policy is the unintended beginning of the end.
A rush to, and a rush of “corrective” contingency plans are the usual consequences.
An appropriate alternative is to recognise, respect and respond to a new prevailing structural order of the industry, sector or category.

Formulating, documenting, implementing, operating and developing a fresh business model are laudable.
Avoiding comparative analyses and lamenting past “buoyant times” is essential.
A clean slate, a zero-datum point, a focus on customers and clients, and an orientation to the future must come first.

It is, arguably, too late to expose the virtues of self-induced obsolescence, given that that mantle has been assumed by economic, competitive and innovative “disruptions”.

Fortunately, in the new order there are no traditions, norms or established rules.
One is left to dictate their one’s own standards, projections and values.

Productivity, velocity and volumes will be the foundation touch-points, the measures of which will be self-determined.

SO, WHAT’S NEW?
Some fundamentals in commerce are constants. Ignoring them has consequences.
History is littered with case studies of failure which resulted from unabashed, typically aggressively advertised discounting campaigns.
Offering consumers attractive “savings” can mean that little prospect exists to save the company.

THE AUTHOR
Barry Urquhart of Marketing Focus is an internationally respected business strategist, consumer behaviour analyst and conference keynote speaker.

Barry Urquhart
Marketing Focus

M:      041 983 5555
T:       08 9257 1777
E:       Urquhart@marketingfocus.net.au
W:      www.marketingfocus.net.au
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