No wonder marketers aren’t respected – even marketers hate marketers it seems

Professor Byron Sharp says it’s time for marketing to stand up and be confident. We have much to be proud of.

Recently campaigns that feature a “save the world” angle have done extraordinarily well in the Cannes Lions creativity awards. Any submission for a charity seems to enjoy a special inside track to winning an award. As do campaigns that link brands to social causes (brand purpose).

As Rory Sutherland, former vice-chairman of Ogilvy Group UK, cheekily observed:

“there’s an aspect to Cannes that slightly irritates me, it’s a little bit of a liberal, worthy wankfest at times. I’d kind of like to see a nice campaign for the National Rifle Association once every two years as there’s a little bit of that self congratulatory ‘mmm, yes, we’re saving the world’ stuff which, frankly, sticks in the throat a little bit.”

“What’s to worry about?” you ask, “isn’t it good that these worthy causes have become so popular with marketers?” But there is plenty to be worried about, let me explain…

First, there is the obvious point that it means that the Lions awards aren’t fair, they aren’t truly awards for creative excellence when they muddle in political correctness. A submission for the NRA would have to be truly outstanding to win an award, indeed perhaps it could never win no matter how good it was? So the festival organisers have allowed their awards to be corrupted – they need to fix this or the awards will lose their value.

More importantly though this trend says something is rotten in the world of advertising and marketing. There is an awful cringe – many people seem to hate the fact that they work in marketing, especially that they promote brands that are popular with billions of consumers and therefore sold by big businesses. This is an awful situation. That we have people prostituting themselves working to market brands when they think commerce is grubby, that big business is immoral, and that the world would be better off without the brands they promote. This cultural cringe is seen in the numbers of marketers who, once they have accumulated a small fortune, leave their agency or company to go work for a charity (or if they have accumulated a large fortune they set themselves up as philanthropists to somehow atone for their sins (or buy their way into heaven?)). If this is the example we set how will we attract ethical young people into our profession?

The loathing of big business over small is odd because it’s big businesses with big brands that are far more likely to be environmentally responsible, non-discriminatory employers. They have a reputation to keep, unlike many small businesses who are more worried about whether they will be still be in business next year.

Brands should be good corporate citizens, but the idea of turning them into saints is nuts. It’s also unimaginative. These are the sort of marketing campaigns that high school students come up with for their term papers. Showing the brand saving the world is sweet, but naive, and hardly original. An adult, Mark Ritson, wrote recently: “Patently, the whole concept of brand purpose is moronic. I do not want Starbucks telling me about race relations and world peace – I want it to serve me a decent coffee in pleasant locations. I care about race equality, deeply, but I do not trust a giant corporation with an extremely spotty reputation for paying its taxes telling me what to think.”

There is also a deep ethical issue of whether it is right to take share-holders money and spend it on your favourite cause. This is other people’s money (the pension savings of millions of people) and these individuals each have their own charitable causes.

The irony of marketing’s brand purpose fashion is that anyone familiar with statistics on human development knows that we are living in extraordinary times. Violence, malnutrition, illiteracy, child labour and infant mortality are falling faster than at any other time in human history. The world has become a drastically better place, and is continuing to get better still – and this is largely due to trade and the value it generates, which allows for investment in scientific discovery, which in turn further accelerates the gains brought about by trade. It was the trading revolution that started 10,000 years ago that brought about the specialisation that would in turn create the scientific revolution. Commerce and science together are changing the world improving lifting millions out of poverty, at a rate never seen before in the entire history of humanity. In the past century extreme poverty (which for most of history was the norm) has dropped to less than 10% of the world population, and that statistic is in free-fall.

Life expectancy has been improving dramatically throughout the world, largely as infant mortality is being eliminated. Vaccination rates throughout the developing world are typically around 90%, higher even than some wealthy, but deluded, suburbs in California. Violence is declining at a similarly dramatic rate, education levels rising, and the moral progress that started during ‘the Enlightenment’ now means that the rights of animals and children are firmly on the global agenda, when only a hundred years ago most people would have thought such notions were absurd.

Last century we saw oppressive regimes fall when they failed to deliver product choice and abundance, banned advertising, and denied their populations brand choice. Their failure to deliver economic progress made these leaders paranoid and oppressive (killers). Democracy needs markets and property rights. Today we still have modern reminders of the dangers of anti-capitalist movements in the starvation economies of North Korea and Venezuela.

Perhaps too many marketers learnt their economic history in arts school?

So at a time when the world should be celebrating the benefits of global trade, many marketers are acting not just as if they are ignorant of its benefits, but that they are genuinely misinformed, i.e. they think it is harmful. This is very odd, a parallel would be doctors opposing medical research (of course there are homeopathic and naturopath quacks who do). Marketers should be the most vocal supporters of trade, of advertising, of brands. They should be standing up proudly for the astonishing amount of choice that the modern market economy (yes, that’s capitalism) delivers. If we of all people don’t, who will?

Answering critics

Our critics have been few, and rather kind (nothing of substance has been raised).

Now and then a marketing guru issues a thinly disguised advertisement for their consulting services that tries to have a go at the laws and strategy conclusions in How Brands Grow.  They usually say something like:

“Our data confirms that larger market share brands have much higher market penetration BUT our whizz-bang proprietary metric also correlates with market share, and this proves that it drives sales growth, profits, share price, and whether or not you will be promoted to CMO”.

Often some obscure statistical analysis is vaguely mentioned, along with colourful charts, and buzzwords like:
algorithm
machine learning
emotional resonance
neuroscience

And sexy sounding (but meaningless) metrics along the lines of:
brand love
growth keys
brand velocity
true commitment
loyalty intensity

All of this should raise warning bells amongst all but the most gullible.

Let me explain the common mistakes….

Ehrenberg-Bass say brands grow only by acquiring new customers.
These critics somehow missed the word “double” in Double Jeopardy.  Larger brands have higher penetration, and all their loyalty metrics are a bit higher too, including any attitudinal metrics like satisfaction, trust, bonding… you name it.

Brands with more sales in any time period, are bought by more people in that time period.  So if you want to grow you must increase this penetration level.  In subscription markets (like home loans, insurance, some medicines) where each buyer has a repertoire of around 1, then penetration growth comes entirely from recruiting new customers to the brand.  In repertoire markets penetration growth comes from recruitment and increasing the buying frequency of the many extremely light customers who don’t buy you every period.

The “double” in Double Jeopardy tells us that some of the sales growth also comes from existing customers becoming a little more frequent, a little more brand loyal.  Also their attitudes towards the brand will improve a bit, as attitudes follow behaviour.

Improved mental and physical availability across the whole market are the main real world causes of the changes in these metrics.  The brand has become easier to buy for many of the buyers in the market, it is more regularly in their eyesight to be chosen, and more regularly present in their subconscious, ready to be recalled at the moment of choice.

Why does it matter anyway? Can’t we just build loyalty AND penetration?
Yes, that’s what Double Jeopardy says will happen if you grow.

Loyalty and penetration metrics are intrinsically linked.  They reflect the buying propensities of people in the market – propensities that follow the NBD-Dirichlet distribution and Ehrenberg’s law of buying frequencies.  Growth comes from nudging everyone’s propensity up just a little bit.  Because the vast majority of buyers in the market are very light buyers of your brand this nudge in propensities is seen largely among this group – a lot go from buying you zero times in the period to buying you once, so your penetration metric moves upwards (as do all other metrics, including attitudes).

For a typical brand hitting even modest sales/share targets requires doubling or tripling quarterly penetration, while only lifting average purchase rate by a fraction of one purchase occasion.  That tells us that we need to seriously reach out beyond ‘loyalists’, indeed beyond current customers, if we are to grow.

When budgets are limited (i.e. always) it’s tempting to think small and go for low reach, but this isn’t a recipe for growth, or even maintenance.

A focus on penetration ignores emotional decision making.
This is odd logic.  A focus on mental and physical availability explicitly realises that consumers are quick emotional decision makers, who make fast largely unthinking decisions to buy, but who if asked will then rationalise their decision afterwards.

Ehrenberg-Bass say there is no loyalty.
Really?!  On page 92 of “How Brands Grow” we write:
“Brand loyalty – a natural part of buying behaviour.  Brand loyalty is part of every market”.

On page 38 of our textbook  “Marketing: theory, evidence, practice” we write:
“Loyalty is everywhere.  We observe loyal behaviour in all categories” followed by extensive discussion of this natural behaviour.

In FMCG categories, buyers are regularly and measurably loyal – but to a repertoire of brands, not to a single brand.  And they are more loyal to the brands they see a bit more regularly, and buy a bit more regularly.

All brands enjoy loyalty, bigger brands enjoy a little bit more.

Ehrenberg-Bass analysis was only cross-sectional.
Actually, we published our first longitudinal analysis way back in 2003 (McDonald & Ehrenberg) titled “What happens when brands lose or gain share?”.  This showed, unsurprisingly, that brands that grew or lost share mainly experienced large change in their penetration.  This report also analysed which rival brands these customers were lost to or gained from.

In 2012 Charles Graham undertook probably the largest longitudinal analysis ever of buying behaviour, examining more than six years of changes in individual-level buying that accompanied brand growth and decline.  This highlighted the sales importance of extremely light buyers.

In 2014 we published a landmark article in the Journal of Business Research showing that sales and profit growth/decline was largely due to over or under performance in customer acquisition, not performance in retaining customers.  Far earlier we had explained that US car manufacturers did not experience a collapse in their customer retention when Japanese brands arrived, they each suffered a collapse in their customer acquisition rates.

But if we can change attitudes then surely that will unlock growth?

It’s rare that it’s a perceptual problem holding a brand back.  Few buyers reject any particular brand (and even most of these can be converted without changing their minds first).  The big impediment to growth is usually that most buyers seldom notice or think of our brand, and that the brand’s physical presence is less than ideal.

For more on “Marketing’s Attitude Problem” see chapter 2 of “Marketing: theory, evidence, practice” (Oxford University Press, 2013.

Attitudes can predict (some) behaviour change.  Light buyers with strong brand attitude were more likely to increase their buying next year.  And heavy buyers with weak brand attitude were more likely to decrease their buying next year.

This is a mistaken interpretation, something that has tripped up a few researchers.  I’ll explain….

First, understand that a snapshot of buying behaviour (even a year) misclassifies quite a few people: some of the lights are normally heavier but were light that particular year; some of the heavies were just heavy that year (kids party, friends visited, someone dropped a bottle) and next year revert closer to their normal behaviour.  Note: for many product categories just a couple of purchases is needed to move someone into, or out of, the heavy buyer group.

Second, we must remember that attitudes tend to reflect any buyer’s longer-term norm.

So someone who is oddly heavy in buying this year will tend to be less attitudinally loyal to the brand than ‘regular’ heavies.  Someone who is oddly light this year will tend to be more attitudinally loyal to the brand.  Next year, odds are, these people’s buying moves closer to their norm and their expressed attitude.  It looks like the attitude caused a shift in behaviour, but it’s an illusion.

This statistical ‘regression to the mean’ is not real longer-term change in behaviour of the kind marketers try to create.  Nor does this show that attitudes cause behaviour – their real influence is very weak, while the effect of behaviour on attitudes is much stronger.

Ehrenberg-Bass analysis is very linear reductionist, whereas we take a quadratic holistic approach.
Really not sure what these critics are talking about, nor perhaps do they.  This is pseudo-science.

I have a super large, super special data set.
Please put the data in the public domain, or at least show the world some easy-to-understand tables of data.  If you want us to consider your claims seriously then please don’t hide behind obscure statistics and jargon.

I have data that shows Ehrenberg-Bass are wrong, but can’t show it.
MRDA.

Less is known about advertising than we think

It strikes me as very odd when people say things like “we have much to learn about [insert new media], it’s not like TV that we know so well”.

Know so well?!?  How many marketers have heard of the ‘Duplication of Viewing Law’ (Goodhardt, 1966*) ?  How many can predict a repeat-viewing rate for a program, time-slot, or channel?  Even what is known isn’t well known (nor used).

There are so many unanswered questions.  Even simple questions like is an ad spot on the left hand side of a page is worth less or more than one on the right?  And how much?

Not enough is known about how we should best use media to expose category buyers to our advertising.  Let alone how these exposures reach brains.  And this is true for even ‘old media’ like TV and print.  So much that needs to be researched.  It’s extraordinary how ignorant many marketers (and marketing academics) are about our discipline’s fundamental ignorance.

Byron Sharp, July 2015.

* Published in the most cited journal in the world, Nature (and yes the date is correct, 1966).  Yet try to find a marketing textbook that covers it (not counting this one).

What causes the Double Jeopardy law?

I was recently asked for a causal explanation of marketing’s Double Jeopardy pattern.

This is discussed in How Brands Grow (e.g. table 3.3 and surrounding text). Also see page 113 of my textbook. Though the most complete explanation is in the forthcoming “How Brands Grow part 2”.

It’s worth noting that causal explanations turn out to be ‘in the eye of the beholder’… e.g. what caused that window to break?
… the speed and mass of the ball resulting in sufficient force to break the molecular bonds in the glass of that window
… Jonny playing baseball on the front lawn when his Mum told him not to
… the wind, the pitch, the sun in Jonny’s eyes
… the Smith’s skimping and not installing double glazing ignoring their builder’s advice

All are better or worse explanations, depending on your point of view.

It’s the same for Double Jeopardy.

One explanation is simply that it’s a scientific law, it describes a bit of the universe, and that’s it… it’s simply how the world is. We don’t tend to ask why is there an opposite and equal reaction for every action (Newton’s first law), there just is.

The statistical explanation of Double Jeopardy is that it is a selection effect. Because  brand share depends largely on mental and physical availability, rather than differentiated appeals of different brands.  For marketers this is pretty important, pretty insightful, we wouldn’t get Double Jeopardy if brands were highly differentiated appealing to different segments of the market.  Since we do see Double Jeopardy all over the place that suggests that real-world differentiation is pretty mild.  Mental and physical availability must be a much bigger story than differentiation.  That’s a very important insight.

Conflicts in the marketing system

I do sometimes hear an ad agency people say “we don’t care about creative awards, we are totally dedicated to each client’s business objectives”, especially when in front of clients.  It makes me wonder whether they are lying (that’s bad), or that they are deluding themselves (which may even be worse), or if they are admitting that they simply aren’t good enough to win creative awards (and that’s not good either).

I think it is important to be grown-up, honest and up-front about conflicts of interest.e.g. Martin Sorrell wants to sell marketers stuff, his empire (like his competitors) will sell whatever marketers will buy that he can deliver profitably.  This matters far more to the agency than whether or not it is the best way to build their clients’ brands.

Creatives want to win awards.  And if this doesn’t sell a single extra of your product they aren’t really worried.

Media agencies want to do what they know, what’s easy, and they have to sell media space they have committed previously to buy.

Market research agencies want to sell standardised products, ideally that use automated data collection and analysis, or low-level people.  They can’t make big profits from stuff that requires in-depth analysis by expensive people.  They do far more R&D into reducing data collection costs than into better research.

Retailers want to win share from other retailers.  They don’t care if this means selling another box of your product or not.

So partners yes.  But there are conflicts in the system.  This is fine, so long as everyone understands the conflicts then they can be managed – it’s possible for everyone to win.  But pretending these don’t exist is dangerous.

Professor Byron Sharp

July 2014.

Apple could charge a lot more – but should they?

Most of the things we own are OK, but a few special few are works of great craftsmanship, things of beauty. They give us pleasure in the same way that some houses, some architecture, is beautiful to look at. It’s something about being human that just looking at a building can be pleasurable yet we aren’t benefiting in any way from its function, we don’t own it, and may never even step inside it.

Beautifully crafted things usually cost more, which is understandable. In fact they often cost a great deal more – we have to pay a lot for small increases in quality, especially at the top end.

So luxury watches, handbags, wines (even business schools) cost an awful lot more even though functionally they may be rather similar to much cheaper alternatives. Luxury watches still cost tens of thousands of dollars more than throwaway watches that now are just as accurate at timekeeping.

Apple, under the guidance of chief designer Sir Jonathan Ives, makes beautifully crafted products. No tablet comes close to the build quality and sleek lines of the iPad Air, and the new Mac Pro looks like something developed using futuristic superior alien technology.

If these products came out from a company in the LVMH empire they would be priced many times higher. So why doesn’t Apple charge more? Even just a little bit more would do little to dampen demand and would add dramatically to profits. So why not?

Firstly, because Apple is in the technology business, where product features are very important and where it’s difficult to gain much of a technological advantage, certainly not one that lasts for any time. In handbags it’s taken for granted that they can all hold stuff, so design (both looks and build) matter enormously. In technology, basic functional factors like speed and screen size really matter, and Apple will never be far ahead of competitors.

Secondly, because Apple wants to build penetration and scale. They want lots of customers for their beautiful products who will then buy music, movies, books and apps from Apple – and of course future products. Getting an Apple product into someone’s pocket or bag gives Apple a medium through which to build mental availability for other Apple products. This is the same reason Amazon massively subsidies their Kindle price.

Thirdly, because Steve Jobs hated price premiums. He always wanted a lower price. Not a discount – he understood the need for profits to fund new product development and marketing, but as low a price as possible to still be profitable. He wanted his products to change the world, which meant getting them into as many hands as possible. Like Jonathan Ives he wanted people to see his art.

Anyone can have a price premium, it isn’t necessarily a sign of strength or good strategy.

So there are arguments in both directions, Apple should lower its prices and more aggressively chase share (closer to the Amazon Kindle strategy), or Apple should increase its prices and reap enormous profits. I guess from their perspective that means their prices are where they should be.

Out-take for marketers: a price premium might be nice for profits today but it holds back reach and scale, and that increases the riskiness of future profits.

PS A related interesting question is whether they should launch a cheap, minimal feature smartphone to bring kids and ‘light users’ into their fold? But they already sell the iPod touch and still have the iPhone 4S on the market so maybe this simply wouldn’t do much for them?

The heavy buyer fallacy

It seems obvious, a brand’s currently heaviest buyers generate more sales and profits (per customer) so they should be the primary target for marketing.

This is commonly held misconception. The rise of direct marketing and CRM gave this fallacy a big plug, after all it can be hard to justify sending expensive letters to light customers.

But if our aim is to grow sales then our efforts should be directed at those most likely to increase their buying as a result of our attention. It takes only a moment of thought to realise that customers who already buy our brand frequently are going to be difficult to nudge even higher.

If, instead, our aim is to prevent sales losses then heavier customers would seem more promising – after all they represent a lot of sales we might lose. But then again, they are more loyal, other brands make up less of their repertoire, their habit to buy our brand is more ingrained, our brand has rather good mental and physical availability for them. In short, they aren’t particularly at great risk of defecting nor of downgrading.

So the idea that heavy buyers of your brand (“golden households” or “super consumers”) are your best target is flawed. Dangerously simplistic.

Apple’s mythical price premium

I’ve written previously questioning the marketing orthodoxy to aim for a price premium, and specifically on the myth of Apple’s price premium.

Here is another nice quote from Steve Jobs, interviewed on stage alongside Tim Cook (current CEO). He was asked if Apple’s goal was to win back dominant share of the PC market

“I’ll tell you what our goal is…to make the best personal computers in the world and products we are proud to sell and would recommend to our family and friends. And we want to do that [raises voice] at the lowest prices we can, but I have to tell you there is some stuff out there in our industry that we wouldn’t be proud to ship, that we wouldn’t be proud to recommend to our family and friends…and we just can’t do it, we can’t ship junk”.

Advertising Age votes “How Brands Grow” the best marketing book

Readers of Advertising Age have voted “How Brands Grow” the best read of Summer 2013.

The competition was large, many books, some awful, but also some very worthy research-based books such as:

Thinking Fast & Slow by Daniel Kahneman
The Halo Effect by Phil Rosenzweig
Decoded by Phil Barden
Applying Scientific Thinking to Marketing by Terry Grapentine
Everything is Obvious by Duncan Watts
Viral Marketing: the science of sharing by Karen Nelson-Field



A short critique of “a critique of Double Jeopardy”

Bongers, M. & Hofmeyr, J. 2010. ‘Why modeling averages is not good enough – a critique of Double Jeopardy.’ Journal of Advertising research, 50:3, 323-33.

A longer explanation of the mistakes made in the above article can be read in:
Sharp, B., Wright, M., Dawes, J., Driesener, C., Meyer-Waarden, L., Stocchi, L. & Stern, P. 2012. ‘It’s a Dirichlet World: Modeling individuals’ Loyalties reveals How Brands Compete, Grow, and Decline.’ Journal of Advertising Research, 52:2, 203-13.

Here is a short critique:

The title is misleading, this is not a critique of the empirical phenomenon ‘double jeopardy’ but of the theoretical model ‘the Dirichlet’ – a stochastic model of purchase incidence and brand choice, which predicts double jeopardy and several other empirical laws in choice behaviour (see Ehrenberg et al 1994). The critique is naive, and the “test” of the Dirichlet is wrong.

To explain:

The Dirichlet is used daily within the marketing science units of corporations to benchmark their brand metrics against the model’s predictions for patterns of buying in a stationary and non-partitioned market. It is useful because the market conditions it models are well understood. It is also interesting to marketing theory because these conditions have been shown to be so prevalent (contrary to the world portrayed in most marketing textbooks).

Bongers & Hofmeyr use the purchasing of non-stationary brands to test an assumption of a stationary model. Even if they had found something real all they’d be saying was that non-stationary behaviour doesn’t look stationary.  Unsurprising.

It is, however, good and appropriate to question the underlying assumptions of models – even ones that work very well. In this case there has been more than 30 years of serious investigation of the NBD and Dirichet’s underlying assumptions (e.g. Kahn and Morrison 1989), a literature that the authors of this paper should have read. There is also new work seeking to expand such models to non-stationary conditions and to add co-variates (causal variables).

The Dirichlet belongs is a class of stochastic models, which is a technical way of saying that it assumes a particular distribution of purchase probabilities (concerning the probability to buy from the category, and the probability to buy particular brands within the category). These purchase probabilities (loyalties) for each buyer in the population are fixed in the model, that’s why we say it’s stationary – and therefore the brands obviously don’t change share because if people aren’t changing their loyalties then brand shares stay stable (which in reality they often do, at least over normal planning periods).  These stationary benchmarks are useful to compare change, when it happens, against.

Bongers & Hofmeyr tackle the Dirichlet model’s assumption that consumers have steady-purchase probabilities (steady loyalties); their paper attempts to refute this by showing a selection of purchases of individual panellists of non-stationary brands. They see what looks like lots of variation, natural wobble in purchase runs, and mistakenly interpret this as changes in loyalties.  The Dirichlet correctly incorporates a degree of random variation in purchasing even for stable loyalties.  Now if I gambled regularly I’d have a steady on-going propensity to lose money at the casino – but some nights I would actually make money yet that doesn’t mean the casino investors assumptions are wrong.  All B&H show is that runs of purchases exhibit variation (as do gamblers), rather than nice neat identical purchase weights in each quarter period. Similarly, if we had a panel of coin tossers we would see that only a few panel members made nice neat runs of tosses HTHTHTHT. If we looked at small runs of tosses we would see very many where ‘Heads” was far from 50% of the tosses. However, it would be foolish to send off a paper to a statistical journal critiquing the long-standing assumption of coins being weighted 50:50.

Now the Dirichlet models something much more complex than coin tossing. We have the probability to buy from the category mixed with the probability to buy particular brands.

The Dirichlet assumes steady-state probabilities with substantial stochastic wobble (around each individual’s steady-state mean). The multinomial assumption of choices amongst available brands means that a buyer with a 10% probability of buying the brand will buy it in the long run on 10% of their category purchase occasions but this buying will be in an as-if random fashion independently of the brand they bought on last occasion. Put simply when you look at any individual’s brand purchasing for short periods you see a lot of stochastic variation (which the model accounts for – hence its very accurate predictions).

It’s quite reasonable that even though I didn’t buy chocolate last quarter that I still have a on-going probability of buying it 4 times a year on average – that doesn’t mean I buy it exactly 4 times every year, some years I only once or twice, some years 8 times (and how I distribute my purchases amongst brands adds further (predictable stochastic) variation).

The authors don’t understand this stochastic variation and it has tripped them up. If it is any consolation it’s not uncommon for analysts to misunderstand stochastic variation in purchase data. Common mistakes include taking a group of heavy buyers (e.g. the top 20%) then noticing that in a subsequent period their purchasing is lighter and assuming that real changes in propensity have occurred (rather than regression to the mean). Or simply noticing that a person who bought in one period did not in a subsequent period and inferring that they have defected from the brand. I recommend reading Schmittlein, Cooper and Morrison (1993) for their discussion on true underlying propensities.

References:

Ehrenberg, Andrew S C, Mark D Uncles, and Gerald G Goodhardt (2004), “Understanding brand performance measures: using Dirichlet benchmarks,” Journal of Business Research, 57 (12), 1307-25.

Kahn, Barbara E. and Donald G. Morrison (1989), “A Note on ‘Random’ Purchasing: Additional Insights from Dunn, Reader and Wrigley,” Applied Statistician, 38 (1), 111-14.

Schmittlein, David C., Lee G. Cooper, and Donald G. Morrison (1993), “Truth in Concentration in the Land of (80/20) Laws,” Marketing Science, 12 (2), 167-83.

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Bad service habits

One of the most important functions of marketing is cultural, to prevent the organisation from slipping into a production orientation, to keep it focussed on the customer and the market.

Recently I was told off in the Bordeaux Apple Store, but rather that take it I told the employee off. You see I had taken a space on a large desk that had lots of spare space, to sit and write on the new version of How Brands Grow. So I’m sitting there with my new MacBook Pro and new iPhone (clearly I’m a good customer) and an Apple Store employee interupts me and tries to say that this table is only for one-on-one demonstrations. But the table is largely empty I said, if I’m in the way I’ll move. No you aren’t in the way he said, but the table is just for demonstrations. Now this struck me as absurd and I told him so. He said it was store policy. No it isn’t I said. I asked him to reflect how this incident would look to him if he were observing as a third party, or if he were watching it on a customer service training video!

I knew there was no silly policy like this. I’d even previously be summoned into the store to work by an employee who saw me sitting on the ledge outside the store using their wifi) “Come into work anytime he said”. Another employee had told my wife how children were always welcome to play in the Apple Store because they were future customers – to which my wife noted “our daughter is already a paying customer”.

Anyway the Apple Store employee went away, presumably to talk to their manager, came back and said I could continue to work. Then later he interrupted me again, “what now” I thought. And then he not only apologized but thanked me, explaining how easy it is to get into a bad habit, where you start to make rules of how the store should be without thinking why the store is here, to serve customers.

I said that I understood, that as a young university student I’d worked in a service industry and I now reflect how over-the-top, officious even, we often became in bossing customers around. In that instance our excuse (it was an amusement park, with a large rollercoaster) was safety – but that was an excuse for slipping out of a customer service orientation into a production orientation.

We are all human. It takes training, and reminders, to stop us slipping into bad service habits.

True Brand Loyalty – it doesn’t matter

This is a footnote from “How Brands Grow“.

There is a very long (too long!) history of marketing writers debating what ‘true loyalty’ is. This is a perfect example of what the twentieth century’s most famous philosopher of science, Sir Karl Popper, called essentialism: seeking to define the essence of an abstract theoretical concept (Esslemont & Wright, 1994). We can forever debate issues (like, What is true love? What is marketing?), but as these questions are simply about the definitions we decide to use there is no logical way of ever resolving them. To suggest that one approach captures the true meaning of brand loyalty, while another (by implication) does not, is bad philosophy, and bad science. Contrary to popular belief the purpose of science is not to say what things are but rather to say things about things: how they behave, how they relate to other things. Physicists can tell you a great deal about the properties and behaviour of things like gravity and mass while there is no rigid definition of what these things ‘truly’ are. Hence, this book is about what we can say about real world loyalty-type behaviour, both verbal behaviour (expressed attitudes) and overt behaviour (buying).

“Never let yourself be goaded into taking seriously problems about words and their meanings. What must be taken seriously are questions of fact, and assertions about facts; theories and hypotheses; the problems they solve; and the problems they raise” (Popper, 1976).

The rise and rise of retail chains and brands

I was telling a colleague about Hema, a dutch chain of stores that sell everyday staples, “everything from a needle to an anchor” my grandfather would say.  Well they don’t sell anchors but they do sell needles and all sorts of other useful things you need, regularly, for round the house.  And everything is their own brand.

It started me wondering about the rise of manufacturer-retailers or retailer-manufacturers, and single brand stores.  So I wandered around the shops and took note of which were multi-brand stores, like (most) supermarkets and department stores, and which were single brand chains.  It’s fascinating how the world looks different when you look at it systematically, out of “everyday mode”.  I expected to find lots of retailers who stocked multiple brands but they are a tiny minority – and look to be disappearing.  My list is at the end of this post, I could have gone on walking and made it five times as long but you can see most stores are singe brand.

Indeed I’m sitting in an Apple store writing this post.  An LA-based computer manufacturer that once had no stores, now it operates this store here in France and quite a few more like it around the globe.  When I was a student at university I remember quite a few case studies of manufacturers that had tried to get into retail to ensure distribution (e.g. brewers who bought pubs) and how it had often back-fired; manufacturing and retailing are different businesses was the lesson.  Well it seems that management has improved and many firms can do it (see list below), and many retailers find that they can have a central office buying (and branding and marketing) and that makes life more simple than having to stock their stores by choosing stock from many sellers.  The retail staff can just concentrate on retailing, whereas a purely retail store has to buy and sell.  This is perhaps why we see chains replacing owner-operated stores, even (sadly) in restaurants (though thankfully not in France).

There are a few exceptions like shoe stores, opticians, and cosmetic stores but even here there are single brand stores (e.g. L’Occitane, Julique), where the manufacturer (or designer or at least buyer) is also the retailer.  Department stores, supermarkets and wine stores are among the last, it seems, where the norm is for them to stock themselves with many brands from competing manufacturers – though even here they usually have their own private label brand along with the others.

So what does this mean for marketing?  In some ways it’s an indictment on the quality (and quantity) of marketing by manufacturers.  They were poor at building their brands, and retailers found that their retail presence was as good at building mental availability as the (little bit) of advertising that the manufacturers were doing.  Of course, it also shows that some manufacturers worked out how to be retailers, and very good retailers.  So it’s also an indictment on retailers who operated largely as shelf stockers, renting space to competing brands.

Will dedicated manufacturer-marketers and retailer-marketers survive?  Meaning stores that stock multiple brands?  I think we have the answer, the future is largely already here.  Yes there will be a few, a few dept stores, supermarkets, and some specialist stores.  But the majority will be single brand chain stores, where one head office designs and/or buys/manufactures its own brand’s product range which it sells through its own stores.

OK, what if you own your own shop, stocking manufacturer brands?  Hmm, the tide seems to be flowing against you.  I can’t think of any new chains that have emerged along these lines.

OK what if you are a manufacturer brand marketer without your own retail channel?  Again it looks like the tide of history is not flowing your way.  But can a company like Unilever operate its own stores?  It’s an interesting question; L’Oreal already owns The Body Shop.  Procter & Gamble and others have their “toe in the water” with their own online stores but that’s a long way from having a Hema type store stocked entirely by P&G.

Will we see wine stores dedicated to a single company? We already see some stores that stock many brands that are in effect commissioned by them, they own or control the marketing of these brands.  But might we see a large luxury wine brand like Penfolds open its own stores.  Nespresso did it – if only to use stores as a way of showcasing/advertising the brand.

Hmmm, predicting the future is difficult, but while 10 years ago the idea of manufacturers who depended on many different retailers, like Apple and Levi, opening their own stores and surviving seemed unlikely. And it has happenned.

PS Retail marketing scientist Herb Sorensen points out that “own brand stores” are a strike back by manufacturers at “private label”.

 

List single brand retail chains I made walking around Bordeaux:

H&M

Levi’s

Mango

Paul

Pimkie

Pull&Bear

Jules

Etam

Bocage

Heyraud

Minelli

Apple

Guess

Oliver Grant

MaxMara

Minelli

Atelson

Aigle

Somewhere

IKKS

BCNGMaxazria

Diesel

Zapa

Gant

JB Martin

Faconnable

Eden Park

Hugo Boss

L’epetto

Lancel

Father. & son

Devernois

Orange

Baillardran

Alain Figaret

Louis Vuitton

Nespresso

Hermes

Weill

Laingo

Ballon

Florence Kooijman

Mangas

Pain de sucre

Eric Bompard

Olivers & co (olive oil !!)

Petrusse

Rosa Bagh

Alienor chocolatier

Osaka

and so on…..

Exceptions I noted:

Pharmacies
Galleries Lafayette
Bijoutiers but only some
Opticiens
Cosmetics but only some
Manfield – shoes
Outdoor and sports clothing
Kitchenware/design
Wine shops

New marketing practice, evidence or fashion?

A new study of 10 years of medical research in one of the very top journals shows that reversals are not uncommon.  This is where later evidence shows that a new medical practice is no better or worse than older practice (or doing nothing).

40% of the studies that examined a current practice found it shouldn’t have been adopted.

The problem is partly that tests of new practice tend to be biased towards being positive. So later, better, studies are going to find that a good number of their findings were wrong.

Also practice tends to adopt invasive practices perhaps due to patient pressure, and doctor desire, to “do something, rather than nothing”. Though there are also reversals to current practices that refuse to take up something new (e.g. vaccinate, take aspirin) because of some (often theory-based) fear, which turns out to be unfounded.

This shows that the advance of (medical) science, and evidence-based practice, is not a straight line. Reversals are common.

Now in marketing practice the tinniest whiff of evidence that something might be useful is enough to send lemmings running for the cliff! Fear of missing out? I’d put both the widespread adoption of banner and search advertising, marketing mix modelling, ROI calculations, and equity monitors in this camp.  We praise doing something new, even if it is harmful.

Then there are things like loyalty programs which were adopted without any evidence at all, just theory.

When evidence finally does emerge that a practice is flawed there can be great reluctance to accept it – especially amongst those who make money from it.  For example, how many market research agencies have changed their practices in presenting segmentation data after we showed comprehensively that brands do not differ from their competitors in the types of customer they attract?  For example, marketers are still launching new loyalty programs with the aim of extracting lots more business out of existing customers.

And not enough marketers worry when “emperor’s new clothes” type questions highlight the astonishing lack of credible evidence and testing of techniques like mix modelling or brand equity based predictions.  People even say things like “but if I stop doing this, what will I do instead”, as if doing something useless is better than doing nothing.  Marketing needs to grow up, because the medical example shows how easy it is to get something wrong even when you are as careful and circumspect as doctors are.

Brand Equity twaddle

I occasionally send some friends interesting (both good and bad) articles from marketing academia.  This is an interesting reply.  I won’t name the academic paper.

Dear Byron,

Thank you for sending this paper. I think the correct response, using the scientific vernacular, is ‘utter twaddle’.

The framework below is very neat. It’s very sequential. But it’s also very wrong.

When marketing academics observe what really happens in the real world, they can make powerful discoveries that help further the discourse around how people behave and make choices. But when marketing academics start with a hunch (disguised as a testable hypothesis) and then find data to back it up, they are, at best, worthless, and at worst, damaging.

I wouldn’t waste my time critiquing each component in this model. What I will do is give you an example of a very real ‘real world’ observation about how people behave, despite what one might think they have in their heads regarding Brand Associations and so called Brand Equity.

I am lucky to live in a very nice suburb of southwest London called St.Margarets. It’s what one might call leafy and affluent. Its residents are, on the whole, fortunate to be significantly better off than the average UK population in socio-economic terms. Lots of doctors and lawyers and bankers and media types.

 The overwhelming majority of my St. Margaretian friends and acquaintances are well-educated and, again on the whole, politically liberal. Generally left of centre, having evolved from the armchair socialism of their more zealous, youthful days. I should put an important caveat in place here; I was never an armchair socialist, nor indeed a socialist of any kind really. Anyway, I digress.

There is a nice sense of community in St. Margarets and I have made many good friends here over the years. And in addition to these friends, there are plenty of others with whom I can enjoyably engage in pleasant and cordial passing conversations. As you can imagine, it’s fertile ground for many dinner parties and for gatherings in local hostelries.

Once the wine has started flowing, and the initial greetings and polite exchanges (such as how the kids are getting on) have been completed, conversations inevitably move on to the more ‘serious’ topics du jour. House prices, gossip about who Sally was seen with last week, standards of schooling, what Charles said to his accountant, how moral standards are becoming polarised between the haves and the have nots, what Carol was caught doing with Bob down by the river. You know the sort of thing, I’m sure.

Commerce will often have it’s place in this cauldron of righteousness as well. I distinctly recall more than a few conversations about business ethics. And a number of these have centred around a well-known retailer which has had the temerity to open one of its smaller store formats slap bang in the middle of St. Margarets. Right next door to the railway station. Outrage abounds.

“Tesco Express … they’re crucifying all our little local traders,” opines Gareth. “They bully farmers into bulk deals with derisory margins … Tesco is ruining our agriculture,” shrieks Camilla. “The way they treat their shop workers … it’s slave labour … they should be taken to the International Court of Human Rights,” booms Barry.

I listen with interest. Sometimes, I must admit, the odd fair point can be heard from time to time amongst the remonstrations and general distaste for having such a purportedly disreputable behemoth impose itself on our little suburban ‘village’ (as the Estate Agents like to describe it). But the over-riding theme is one of deep-seated antipathy. A theme with which, I must say for the record, I disagree. I think Tesco is a great business and great for our economy.

The dinner parties end, the hostelries close, and we all go home to our beds. Watered, fed and safe in the knowledge that the world would be a better place … if only ‘they’ just listened to our wisdom.

When I travel home from work during the week, I frequently do so by train. Most of my friends and acquaintances do the same. We come in to St. Margarets station, wearied by the day’s travails, ready to put our feet up and watch the telly. We trudge up the station stairs to the street. As I start to walk down the street  I remember that Cathy called me to remind me to pick up a pint of milk and some chicken breasts for dinner. Ooh, and I can pick up a half decent bottle of wine too … why not!

I turn in to a shop which is already teeming with St. Margaretian commuters.

Before I can even reach down to pick up the chicken breasts I’m tapped on the shoulder. I turn around to see a smiling friend; it’s Camilla. “How lovely to see you”, she says, “(mwah mwah) feels like I saw you just two days ago at Barry’s for dinner.” We both laugh. “Oh, look, speak of the devil, Barry’s over there with Gareth at the check-out.”

“Anyway, see you soon I hope, Camilla,” I say, “We’re going round to the Greensmith’s next Saturday, probably see you there.”

As I leave Tesco, which is slap bang in the middle of St.Margarets, right next to the railway station (to where thousands of well-heeled St. Margaretians return every evening), I give a little wave to Sally, Charles, Carol and Bob. They have arrived back on the next train. They’re just popping in to Tesco to pick up some things before they go home.

As I open my front door, a question comes to mind; can the need to get a pint of milk, as easily as possible, really trump the most heartfelt attitudes expressed around a dinner table in St. Margarets only a day or so earlier! It would appear so.

‘There’s nowt as queer as folk,’ as the old Yorkshire saying goes.

People may claim to hold firm perspectives about brands. The truth is that there is a world of difference between what someone consciously says and what they actually decide (primarily subconsciously) to do.

So, yes, that paper is truly dreadful.

Cheers,

Seamus

 

On 4 May 2013, at 01:25, Byron Sharp wrote:

A poster-child for everything that is wrong with brand equity research.  If you can’t be bothered reading the article just look at the struggle they had to come up with any findings or implications.