Monthly Archives: July 2008

• The middle is the worst place to be in a recession

  Monday, July 21st, 2008 by Wes Ball

  If you are worried that the economy is swinging south (and you along with it), then you had better make sure you aren’t stuck in the middle. In fact, many companies are already seeing this happen, even though we are not “officially” in a recession yet.

  I have been doing a lot of informal research and watching the business news pages, and the evidence for why you don’t want to be in the middle is everywhere.  Mercedes dealers (at least those who were strong dealers during the good times) are either even or ahead of last year, while almost everyone else including powerhouse Toyota is having a tough time.  And that’s not because Mercedes customers are wealthy enough to not worry about the economy.  Their real strength has been in customers trading up from other cars to buy a Mercedes, especially the new “C” Class.  Toyota, on the other hand, is seeing sales slide downward, not just in total numbers but also thrugh trading down from their best-selling Camry to the Corolla.

  High end grocery stores are doing much better than their middle-of-the-road competitors.  Go into any Trader Joes, and there’s no shortage of customers.  I finally picked up a magazine to read as I waited in line the other day.  You can also go into the super discount stores that sell leftover products from other grocers, and the crowds are increasing.  It’s the middle guys that are gettin hurt.  The Wall Street Journal just had an article on July 18 about Safeway, that venerable giant, losing sales to lower-priced competitors.

  The point is: if you want to do well in a recession (or even a non-recession like this one), you need to get out of the middle and either strengthen your Alpha Assets to become more of a leader or give up and commit yourself to being a scavenger or survival brand. If you stay in the middle, you will get hurt badly, if this non-recession carries on longer than a few months.

  So, as politicians try to believe that being in the middle is the safest place to be this year, don’t take that advice for your company.  Commit one way or the other.

  Posted in Uncategorized | Comments (0)

• Why your market research doesn’t work

  Friday, July 18th, 2008 by Wes Ball

  The biggest complaint I hear about marketing research from companies I contact is that they seldom get anything “new.” The insights they get are ones they could have predicted before they ever did the research.

  The problem is not just in the questions being asked, but it is also in the model your market researcher uses when accepting or analyzing the answers they receive. You would think that someone in behavioral sciences would understand that people don’t want to reveal core motivations… either to themselves or to others.  Most people are embarrassed to admit that they make their decisions based upon emotion more than upon logic.

  It’s also a lot easier to avoid an argument about whether their final decision was the right one, when they can list several rational reasons for choosing what they did.  For instance, I caught myself doing this not long ago.  I had to choose between two suppliers for a business project.  One just made me trust him more.  When I told the other potential supplier that he did not get the business, he asked why.  Instead of going through all the reasons why the supplier I had chosen made me feel more “comfortable,” I told him that it was an issue of price.  The salesman readily accepted that answer, and I was off the phone and on to something important.

  Market researchers run into the same thing.  Customers will give a list of rational reasons why they purchased something, but hidden near the end of the list (or waiting for a good researcher to pull it out of them) is the real core reason.  And it is always an emotional one.

  I was at a group gathering a couple weeks ago, and a discussion started about baby carriers.  We were talking about how difficult it is to get past the obvious, superficial responses customers give for their answers, and one of the guys in the group said that he and his wife had just gone through the buying process for this kind of baby carrier.  We called her over and asked her why she chose the one she did after comparing several other products.  She gave a list of four or five reasons, including features, sturdiness, and a Consumer Reports article that recommended it.  She stopped, but we did not let her get away with just that.  She finally admitted that her sister had told her that this was the one to get.  She was far more influenced by the relationship she had with her sister and how going against her advice might affect that relationship than anything she saw in the product.  All the reasons she had listed were nothing but the “rationalizers” to make her emotional decision acceptable to other people.

  In Alpha analysis, we delve far beyond the superficial, rational reasons consumers and customers give for their buying decisions.  In fact, we always have at least three different ways of testing whether they are telling us the truth built right into every questionnaire.  That’s the only way you can get to the real core decision factors that are being used.

  And, since our goal is always to discover ways to change decision factors to be more in favor of our clients’ products or brands, it is critical that we not waste our clients’ time worrying about superficial things that really are not at the core of decisions.

  I always believe that, if the research doesn’t give you something “new,” then it was probably a waste of money.

  Would you agree?

  Posted in Articles, Business, Market research | Comments (1)

• How to weather an economic downturn – Part 2

  Tuesday, July 8th, 2008 by Wes Ball

   

  How retailers react, and what you can do about it  

   

  In an economic downturn, retailers react (just as consumers do) on the news of a potential downturn.  As soon as they see consumers pulling back in fear, they do not take a leadership role, but rather they start looking for ways to minimize risk.  Guess what the outcome is?  A downturn.  But that doesn’t have to hurt you, if you sell through them.  It can actually be the best time to strengthen your position and sales.

   

  Let’s start by understanding what retailers do when they start to fear a coming economic slowdown.  The first and most obvious thing they do is put together a plan for pulling back rather than looking at how they might take control and make themselves the leaders now and after the downturn.  Much of what they do is self-destructive and also harms the marketers selling through them.

   

  From the top down comes the order to cut costs, extend payment schedules (whether or not they actually negotiate longer terms), reduce in-stock inventories and increase special orders as a percentage of total sales (if they even offer such services), pressure their marketers to offer promotional discounting (that may or may not be passed along to end-users), become tougher on asking for other promotional allowances, and (occasionally) create new ways to get money from marketers without ever having to sell product.  That’s ugly.  But it’s the environment almost anyone selling through retail has to face. 

   

  In making these cuts and “innovations,” they typically reduce the knowledge levels of their sales staff (the higher-paid people usually get cut first) and reduce the selection of product, despite the fact that broad selection is one of the most important things customers expect from a retailer.

   

  Then they usually put even more emphasis on “store brands” that make them the exclusive place to go to get them.  This usually doesn’t have much real effect upon store traffic, but it does steal sales from their branded products (and makes for bad relations with the marketers who sell through them).

   

  All of this is “functional” innovation that they do in an attempt to make themselves “leaner” and more attractive to customers.  Most of it backfires.  That’s why retailers are in such a mess today.  Unfortunately, most brand marketers have allowed themselves to be sucked into the trap of relying upon retailers to “sell” their product.  So when tough times come along, it’s time to stop being lazy and start thinking strategically.

   

  So what can you do when faced with this?  Firstly, get excited.  This is an opportunity to make great gains for yourself both in overall sales and in gaining long-term support from your retailers.  It may even force you to innovate in ways you never would have without this impetus.

   

  Assuming that you have not given up on retailers and have decided to take distribution into your own hands (a decision that many smaller marketers are choosing), there are many things you can do that will help you now and also after the economy improves.

   

  Here are just a few ideas –

   

  Innovate to address the core needs of the retailer:

   

  1. Retailers want more customers in their doors. They don’t want to save money – that’s their desperation move.  They need traffic.  And they want it to stay in the store for a longer time period.  (For every minute a customer is in a store, their average purchases increase geometrically.)

  ·         Create ways to drive more customers into the doors of those retailers who have given you (or commit to give you) extraordinary perks in their stores.  We have had great success in getting otherwise ruthless retailers to dramatically reduce the demands placed on a marketer who drives traffic into their stores.  This can be done through marketer-sponsored ads that

  ·         Don’t forget “dealer listing” ads.  They have been poorly used by most marketers in the past, but they are a great value to retailers.  List one retailer per ad, not 20, and make it appropriate.  (We used this to great advantage by placing billboards listing one retailer across the street from a competing retailer who would not support our efforts.  The next year, the recalcitrant retailer got “on board.”)

  (This is a “Satisfaction” innovation.)

   

  1. Retail buyers want to be “heroes.” 

  ·         Using the ideas above, make your buyer the hero to be able to offer what top management really wants.  (In some cases, we have had to go around the buyer to the VP or even the CEO level, where those benefits are recognized and supported.  We’ve never had a buyer stay angry about that after his boss told him how excited he was with what was being offered.)

  ·         Offer an exclusive on a new product to your buyer at a key retailer from whom you want to get a greater commitment.  It can even be a re-packaged older product, but it will often represent a value to them.

  (This is a “Significance” innovation.)

   

   

   

  Innovate to go beyond your retailers:

   

  Don’t allow yourself to be limited by the short-sightedness of your retailers.  Sometimes, they don’t want to be helped by their brand marketers.  You don’t have to stop selling through them to make yourself stronger and to increase your sales.  For instance…

   

  1. Build your brand’s influence.  

  ·         Don’t count on retailers to sell your product.  If you are going to work through them, only allow them to be the place customers go to get it, not the place to learn about it.  The result will be immediate and future influence, which equals greater retailers support.  (Remember, retailers want to have products that attract customers.  Make yours their lead attractor.)

  ·         Make sure what you are “selling” is what customers really want.  (Beyond the obvious things they tell everyone, discover what they really wish they were getting.)

  ·         Start to drive higher customer expectations.  Once you understand what customers wish they were getting, you have the key to driving higher expectations.  If you innovate for “Significance” and “Satisfaction,” you will become the most influential brand.)

  1. Find ways to make your product available in more places.  There are more places to sell product today than every before.  The internet has become just one new way to expand the availability and influence of your product.  
  2. Go in the backdoor to increase sales through your retailers.  Many retailers offer online sales, so you could easily use your product’s website (and other information venues) to lead customers to retailers who have given you extraordinary commitment.

   

  These are only a few ideas that have worked to overcome the resistance retailers put up.  The fact is that once end-users get past the initial time of holding back as fear of a downturn is created, they want to buy the products that will address their satisfaction and significance needs.  Retailers may stand in the way of you getting your product to those customers, so do what is needed to attract customers to what you offer.

   

  If you combine that with innovating ways that make your retailers see you as they path to greater satisfaction and significance, you will be far stronger on the back side of a downturn than your competitors are.

  Posted in Applying "The Alpha Factor", Business, Uncategorized | Comments (0)