How to grow brands without slitting veins.

Melbourne Herald Sun, 24 July 2010.

Two hundred years ago your doctor's answer to most of your ailments would be to slit your vein and drain a few pints of blood out of you. The sicker you got the more blood he'd take. And if you died - well he said you were sick, didn't he?

A new book claims that most of our marketing professionals have been using the same approach to diagnose our businesses - with similarly erratic results. And he says that just like medicine, we must stop relying on myths, beliefs and assumptions. It's time to examine years of accumulated research into what really happens when a customer chooses your brand, and develop an evidence-based approach.

Byron Sharp is a professor at the University of South Australia and his new book, How brands grow (Oxford University Press), swings a hammer at some of the key beliefs and rules running our marketing operations for half a century.

For example, the belief that loyalty is the key to solid market growth, and that it is cheaper to hold an existing customer than hunt down a new one.

Not necessarily so, says Sharp. Through analysing years of research from the US, UK and Australia, he has set down principles - the Laws of Marketing he calls them - which have been overlooked or ignored by generations of marketing gurus.

Expensive, elaborate loyalty programmes are designed to prevent defections to the opposition. But he is able to show that each brand has its loyal base, and a percentage of defectors. This defection rate is remarkably constant between brands, with or without loyalty programmes.

His controversial advice is: rather than work so hard to retain a small percentage of your escaping customers, concentrate on catching part of the much larger group of customers defecting from your rivals.

Research also explains the weak or slow responsiveness of brands to advertising. Too often even large marketers do not spend enough - as a percentage of their market share - to make an immediate difference. Or they produce advertising that is just not good enough to be noticed.

Also when they stop advertising, the momentum carries on for some time and makes it hard for a marketing director to justify any increase in their budget. So the investment stays too low but eventually there is a visible decline.

He analyses the consumers who were exposed to regular advertising as opposed to those who were not. Even though they did not show immediate results, research revealed a definite decline in sales for the under-exposed.

Some of the book's revelations come as no surprise. The major factor in success is wide distribution and ready availability; people are more aware of ads that they like; and that clever, creative advertising is the way to attract attention. Most importantly - they are more likely to buy products with ads that they liked.

Of interest to me is what he says about memory structures. That you must be aware of your brand's image and produce ads that reinforce people's existing memory structure. In other words, that the ad should fit in with how they know the product, it should 'feel right'.

How brands grow will disappoint those looking for an academic text book. This is very lightly written for popular consumption.

It sets down ten laws of marketing. Most you know already under other names, but a few are genuinely surprising.

For someone who has read very little marketing literature, this would be a good primer. For everyone it is a reminder of the importance of continually researching your brand - and getting a realistic picture of who your customers are and what they are looking for in your product.

Make sure your consumer becomes a consumable

Melbourne Herald Sun, 17 July 2010

Leafing though an Officeworks catalogue I saw a good quality Hewlett-Packard colour printer for just $49. Doesn't seem so long ago that they were hundreds of dollars. Then on another page a range of HP coloured inks was selling at $85. "Ah yes," I thought, "and that's where HP get their money back".

The money's not in the printers, it's in the ongoing sale of inks, month after month. I've joked that next they'll put computer printers in Corn Flakes packets just to get them into our hands. (Yes it would be a very big Corn Flakes packet, but you know what I mean...)

If you're going to buy into a business, always check out the consumables connected to it. This can make the difference between struggle and big profits.

Four years ago when Gillette launched their new five-bladed Fusion shaver I was given a free razor and two blades as part of a promotion at my gym. Before that I'd wondered why on earth anyone would want five blades to shave with, and then just left it on the bathroom shelf for months.

But one day I tried it, it felt funny but seemed to work well, and I kept using it ever since - and buying packets of replacement blades. I now see that Britain's Office of Fair Trading is investigating allegations of price-fixing collusion between P & G (Gillette's parent) and major supermarkets.

One of their submissions says that the blades cost 10 cents to make. In my supermarket they are selling at $19 for four. So I think that by now I've paid for my razor.

For their cost, most popular cars do not have a high mark-up. On highly competitive models it can be ridiculously low. But have you noticed how all the dealerships have such bright, clean, well-managed service departments? Of course you'll take your precious new car to be serviced there. The first couple of years it's under warrantee and then it becomes a habit. And of course you'll insist on genuine spares, even if they do cost double. You've become a consumable.

From the States comes the story of the Toyota Prius. It seems some have had problems with their "high intensity discharge" headlamps. A number of them have needed replacement, which then highlights a little consumables problem: the HID lights can cost up to $2,000, including labour, to replace. And they're not covered by the warrantee. Ouch!

Have you been to a doctor or into a hospital lately? Now there's a market for consumables. Every hypodermic used once and destroyed. Sealed surgical packs opened, one or two items used, then everything dumped. The sterilisers and autoclaves gather cobwebs (metaphorically speaking - no cobwebs allowed in today's hospitals!) as truck-fulls of medical waste rumble out of the back gates.

What if you're selling a product that once purchased, will continue to do its job excellently for years? Well you have to turn it into a consumable. World business has got really good at this.

It was in 1960 that Vance Packard wrote in The Waste Makers about planned obsolescence: "The systematic attempt of business to make us wasteful, debt-ridden, permanently discontented individuals." That's a scheme that has certainly succeeded.

You've barely finished installing Windows Vista when Windows 7 comes along. You're all excited with your iPod and yet iPod 4 has arrived and is making your dearest look old. Your big old TV might still be working fine but it has probably been moved into the garage to make room for the new wide-screen plasma.

And as for your umpteen-thousand dollars worth of camera equipment - well that has all been made obsolete by so many wonderful digital cameras.

Don't think that I'm knocking consumables or planned obsolescence. They are an essential part of this economy we depend on. If Fords were made to last for ever and never need replacing, that would make Geelong obsolete, wouldn't it? (Sorry Geelong - just kidding.)

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