Germany balances on its middle

Melbourne Herlald Sun, Friday August 18, 2012-08-17

Berlin, Germany

The Germans don=t have big resource mines and record prices for their products. In fact they are still the traditional manufacturing economy we have always known.  The kind that fell apart in the industrialised US and west Europe during the GFC.

So how come they are not in financial trouble and in fact are being looked on as the saviour of Italy and maybe even France?

Passing through Berlin during my European trip I was impressed at the calm flow of life and business, not much different from how I remember it in the past. Germans are well fed and contented, their taxis are brand-new Mercedes, and there seem to be a flood of new babies in expensive designer strollers.

Obviously, if we Australians have one answer to the world=s economic malaise of the past four years, they have another. What is it?

They call it the Mittelstand, the solid core of mid-sized companies that employ the majority of German labour. They give the economy, and the nation, the stability to weather any storms.

A Mittelstand company turns over less than $60 million, employs less than 500 people. Most importantly is what it does not have, in general.

It has little debt. Small bank loans. Less than 20% use stock market financing. Most of a company=s machinery and assets it owns outright. It pays its costs as its cash flows, and if they can=t afford something they don=t buy it. Which rather sounds like sacrilege in the high-flying, high-debt world of modern MBA business management.

It is this stubborn, black-hatted protestant ethic that has led Chancellor Angela Merkel into so much strife with the world=s bankers who want to see that stash of cash used to bail the rest of Europe out. Try asking any German whether they are willing to.

But what are the Germans doing to generate all this business, when any item we try to make is available fully imported from China for half of our manufacturing cost?

They do what they have always been good at. Quality. Machinery, engineering, leather goods, software, foods. Made to such a standard of excellence that price does not matter any more. Reliability of delivery, constancy of supply, consistency of quality. Once you=re out of the bargain basement, this is what matters, this will keep the customers coming back.

In recent years they have taken their products out into the booming markets of Asia, where quality, once appreciated, totally overcomes price. And into new territories like South America and Africa.

As a group they are as cautious as ever. They are advised to not allow any single customer more than 10 per cent of their business. Because if this customer departs, for whatever reason, the loss can be withstood. Not when the account takes 20 or 30 per cent, as with many of our companies.

What do you do if a customer wants more? You say, ASorry we have no more we can supply@. Now that=s a business decision worthy of an Iron Cross.

Of course everything I=ve said here is a generalisation. A very broad picture. But there are enough figures and research results to justify this view of the German economic battle ship. It=s going to take a great deal to sink this Bismark.

I=m not so sure of our own economy. Our Mittelstand has shrunk away, companies sold as soon as they start making profits, or destroyed by debt. Our own ship of the economy is faring well now - but is it sailing on shifting dunes of sand and ore? 

ray@ebeatty.com

What makes Italy so Italian?

Melbourne Herald Sun, Friday August 10, 2012

Pesaro, Italy

Here=s my report from Italy, I=m there at the moment. Oh don=t worry I=m not going to attempt a political or economic analysis of all the things that might be wrong with Italy. I wouldn=t have the patience for the task. And nobody understands it anyway.

No I=m more interested in what=s right with Italy, and what will always make it distinctly unique. Certainly from the perspective of we marketers and communicators.

The difference appeared to me many years ago, in Venice - in a hardware shop of all places. Looking around at all the pots and pans, plates and tools, it struck me. Everything in it had been designed. Every saucepan had elegant lines, every pot was a work of art. The shovels had a style and flow - this was art, expressing itself in the commonest of items.

Walking from the shop I explored the revelation further. Of course I was in the most beautiful city on earth, which set a high bench mark. But looking at the ordinary items was where the proof came out. You=ll still see it today, even though Chinese mass manufacture and American dag culture have wreaked their damage, as everywhere.

But there=s still an Italianness that overcomes the modern mass-market world, not to mention the copyists and forgers. The world=s markets might display a million copies of Armani dresses or Gucci handbags; the latest cars may borrow the slickness and sleekness of a Ferrari or Lamborghini. But those who own the real thing know it, and those who see them know it too. There=s no mistaking a real Gucci person for a fake.

Taking a look at our own world, I wonder - what=s the element that=s missing in our goods that multiplies the value of an item far beyond its raw material costs?

It always starts at the point of design. At the thought and artistry that went into the original conception. You can buy a perfectly good leather handbag for $100, so why do the wealthy put their names on waiting lists to buy a Gucci for $3000?

In Australia we have plenty of fine rare products that the world wants. The problem is they are mostly commodities with no premium for where they come from or whose hands they passed through. There=s no bonus in AAustralian iron ore@ or even AAustralian gold@. The one resource I can think of that has created a niche is the distinctive Argyle pink diamond. And this is thanks to nature more than to marketing.

How can a marketer make being Australian a badge worth paying more for? 

After years of work and dedication some of our top wines have earned the distinction, in the cellars and fine restaurants of London and New York. But there are precious few other areas that have pulled themselves out of the pack.

Our best movies are now being identified, and sought after, as AAustralian movies@, something that has taken a long road, proving to the world that we have the ability and talent to produce excellence.

 
Europe will still have rocky times ahead and Italy will no doubt suffer more crisis and pain before its economy fully recovers.

But you certainly don=t notice the troubles the way you would in Greece or Spain, there are no riots and street barricades, yet. Here life is as sunny and energetic as ever.

They know that so long as the words Amade in Italy@ still have the power to reassure consumers of distinctive style and quality, that they are the creators of fashion and flair; whatever way the world turns, in the end they will always survive.

ray@ebeatty.com;

How do you get your money's worth out of the Olympics?

Melbourne Herald Sun, Friday August 3, 2012 

Every four years I seem to find my pen dragged to the same topic: Are clients getting enough value out of their sponsorship of events - in this case, the Olympic Games?

Advertising people are quite ambivalent about these sponsorships. On the surface they are a loss to the agency. Usually negotiated between the client and the manufacturer, the agency sees a huge portion of "their" advertising budget disappear out of their control.

They make no commission out of the sponsorship dollars, which can be considerable. The cost of Olympic sponsorship is a great international secret, but for the top-line "Olympic Partners" it would run close to $100 million.

Pay that much for a fortnight every four years and you will certainly be looking for maximum certainty and visibility.

You are not allowed to put badges on the athletes' shirts or rotating signs on the grandstands, just how do you let people know of your generous donation?

Here the agencies do win back some revenue. The client has to run major campaigns around the event declaring their official sponsorship. Hence all those long commercials with the running children and sweating sports folk, soulful music building to a brassy victory fanfare, mothers with tears in their eyes - all leading to the end slide: "Official Olympic Partner".

Unfortunately the fact does not always register. While Adidas is sponsor, more people believe it's Nike. While McDonalds has been a primary partner for years, some 25% of Americans think Burger King is too. And as if they haven't already got enough money, Google get associated, for no cost.

Then there is all that sneaky "ambush marketing". Here non-sponsors pretend that they are. Nike has built a reputation over the years for creative piracy. This year they have their own commercial about brave young folk working hard to build themselves into Olympians in slums and remote towns like London, Nigeria; London, Ohio; London, Jamaica - what a coincidence that they all come from  towns with the same name as the Games.

The genuine sponsors need a bigger reason for their huge outlay, which would be hard to justify one burger or bottle at a time. I'd call it "respectability".

In a world where their brand is synonymous in media debates with "obesity", "diabetes", and "corrupting youth health", McDonalds can enjoy a break. They are now the providers of the world's fittest, fastest, best-looking, most exciting people in the world. And they bathe in the glow.

So it is with Coca-Cola, taking top spot because they could never afford to allow anyone else in. Especially Pepsi. Coke can boast to being the most faithful - every Olympics since 1928. Their tip to modernity is the inclusion of Powerade in the marketing mix.

There are other corporate reasons. For BP the sponsorship is a golden opportunity to rehabilitate the resources giant after its environmental disaster in the Gulf of Mexico. Moving as far as possible from undersea oil, they are supplying biofuels - made from sugar cane and grasses - to power some 5000 vehicles.

The sponsorship gives a chance to marketing's number 2s. For Adidas it's a chance to shine as a sports hero over dominant Nike. Which is why the ambush marketing makes them so mad.

Samsung can get a bit of daylight through the constant shadow of Apple - a brand that has studiously avoided any connection with sports whatsoever.

Then there is Procter & Gamble, the world's oldest marketer. They're pushing their highly successful Old Spice toiletries. Not with "Look like me" Mustafa this time, but using a geek with a motivational tape.

And of course as the originators of soap opera, P&G have mums doing the washing, cooking and taxiing for their sweaty sports kids.

ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

When is the glass ceiling a glass cliff?

Melbourne Herald Sun, Friday July 27, 2012
We can't say that women have broken the glass ceiling. But in cases around the world, they have fired a fair few holes in it.

This week's leading coffee bar topic is Marissa Mayer, whose success at Google caused Yahoo! to hunt her head, to be their new CEO.

On top of a million dollar salary, add four million in bonuses plus stocks, shares, options - a crammed Christmas sack that could add up to $130 million in five years. If she delivers the goods. She has another delivery later this year - she's pregnant.

Over at Hewlett Packard they put their faith on a woman. Meg Whitman's salary is only $1. But with it come $16 million stock options and a $6 million annual bonus. Again if she delivers the goods.

They are more used to a female boss after Carly Fiorina for six years. I'm pleased to hear that she and Meg frequently confer - in such a testosterone industry, the support options are very limited.

Australia does not have a particularly proud history of ceiling smashing. But the few we do have are pretty spectacular.

Gail Kelly has proved herself to be one of the best CEOs in the country, bringing in $3 billion profit for Westpac's first half 2012, perhaps justifying a $9 million salary. She's done this with a handicap in the saddlebags over the past 20 years. Triplets.

In the super-macho Queensland coal industry, Nicole Hollows led Macarthur Coal for four years until last year's Peabody Energy takeover bid. Down in Sydney Kerrie Mather is the boss of Sydney Airport. Much is expected of her in this tough job. But the pay's good at $3.4 million.

However, a team of British psychology researchers have pointed to a flaw in the skylight escape. The top of the glass ceiling can lead to the glass cliff. "Research suggests that women are more likely to be appointed to leadership positions that are associated with an increased risk of criticism and failure," say Dr Michelle Ryan and Prof Alex Haslam of Exeter University.

In other words, when the battlefield is getting hectic and your forces are facing defeat, push the girl out front and rely on her to calm things down. Can this be true?

In the case of Marissa Mayer, taking her success at Google and translating it into a new cash flow for the long-ailing Yahoo! is not going to be easy, against the likes of Facebook, Twitter and Google itself. The Web is all or nothing, it has no room for also-rans.

HP is a technology company desperate for a new silver bullet. This was Steve Jobs' genius, materialising an iPhone or an iPad from the air. HP's recent merging of its printer and PC divisions is a band aid, not a bullet.

Nicole Hollows left Macarthur Coal in the last dumpster. And fixing up Sydney Airport is the stuff of nightmares - no room! No noise! Curfew! No runways! Where would a girl start trying to make sense of that mess?

Of course we are well familiar with the glass cliff when it comes to politics. The woman gets her chance when there's no more chance to be had.

Remember Carmen Lawrence, made premier of WA to clean up the WA Inc mess left by Brian Burke. Kristina Keneally hopelessly trying to save NSW. Joan Kirner drawing the curtain on the Cain era. All valiant ladies, marched off the edge of the glass cliff.

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com

Condoms come out into the light of day

Melbourne Herald Sun, July 20, 2012

We don't get many kids reading this column so I feel safe covering a delicate subject: the marketing of condoms.

Once I worked on the Ansell account and got excited when restrictions were taken off the promotion of condoms - I thought I might be able to write Australia's first French letter. Alas it was years before they launched onto the public screens.

But in the intervening time we have seen their coming out, so to speak. They are now a major marketing commodity, with acres of supermarket shelf space devoted to the little packets. These are no longer discreet monotones, either. Today's boxes are big, bold colourful and inevitably feature a beautiful couple eager to sample the contents.

We see these dreamy pairs everywhere. Not just inside the back door of public toilets but on the streets, in the billboards, at the movies and on TV. Sex is a mainstream commodity.

As you would expect, the personal subject matter of the product is perfectly suited to personal media and mobile phone apps.

Durex, for example has just launched the "In-Sync Song Generator", in the US, but no doubt soon to be seen here.

This little program requires answers to a series of questions about your preferences: what times do you prefer, how much variety, how energetic, how loud. Through Facebook you pass the quiz to your partner to complete. You have now identified your styles.

It will then select songs for every occasion. Sounds like this will need experimentation and practice to get the balance right.

All the major companies these days have very well-tended web sites. They have romance advice, games for couples, and catalogues of products that will amaze.

In fact, the world's second-biggest condom company is Australian. These days much of its headquarters and manufacturing is controlled from New Jersey, but corporate head office is still in Richmond. Eric Ansell was an employee of Dunlop who bought their second-hand condom making machine, in 1905, and set up his own little workshop.

Later down the line he was manufacturing surgical and work gloves, toy balloons, and a range of rubber-based medical equipment. By the twenties his sons were in the business, and in the sixties his grandson was running it. In 1969 it was acquired by Dunlop and went back into the fold.

Ironically by 2002 it was Pacific Dunlop that was ailing, They finally divested their many clothing and shoe brands, put their whole focus on healthcare and became - Ansell Limited. What goes around comes around.

It goes to show where the money is these days. Less in heavy manufactured goods, more and more in consumables - use it once and throw it away, the perfect product. It's estimated that by 2015 the world will need 18.6 billion condoms. Don't think too hard about it, just consider the money that will be involved.

Here in Australia business is booming. Julian McCrann of Roy Morgan Research reports that two million Australians bought condoms in the six months to March this year.

A third more men than women purchased them. The biggest buyers were Queenslanders, at 12 per cent, whereas Tasmanians only bought 4.5 per cent. And keep your regional jokes to yourself. Victorians and New South Welshmen were level pegging at around 10.5 per cent.

We'll have the opportunity to learn much more about the topic next year, when Melbourne becomes host city for The International AIDS Conference 2012. All the world's experts will be here - 25,000 of them - so expect to be hearing more about the serious, life-saving importance of the little condom.

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com

Geeky nights at the hackers' hostel

Melbourne Herald Sun, Friday July 13, 2012


Remember all those stories of Apple's Steve Wozniak sleeping under his workbench, Bill Gates forming Microsoft in his college games room, Facebook's Mark Zuckerberg hacking code in his Harvard monk's cell? The truly dedicated geeks don't give a toss about luxury or comfort - they live for their work.

Out of this has come an idea, started in San Francisco, that has spread through Silicon Valley and is winging its way round the world as surely as the H3N2 virus. It's called the Hacker Hostel.
Now in most respects it's not much different from the backpacker hotels that crowd St Kilda and the inner city. Young people with huge packs, from all over the world, surging in for cheap rents, happy to share stacked bunks and communal tables.


A laptop on every surface

 But the ones in Frisco don't feature late-night parties or booze-filled fridges. Here the currency is ideas, internet connections, wi-fi, and night-long discussions about microcircuits and algorithms.

The guests are interviewed and approved for their degree of nerdiness, and there's quite a queue to choose from. The stay can be for a few days, or a few months.

This is where you go to incubate and hatch that world-changing idea. The hackers and their laptops are found on every surface - the tables, the beds, the couches, the floors.

If you run into a scientific or micro-engineering problem, chances are that there will be a PhD student at the dining table who is familiar with your question, and half a dozen bright young minds willing to talk it through.

This is the attraction, the collegiate atmosphere and ambitions. Several start-ups were launched thanks to their developers being able to live together cheaply over the few intense weeks or months when every penny was needed for the project - and the hours ran on unheeded. The starting price is an affordable $40 bed and breakfast.

In this rarified atmosphere, apps are developed, discussed, refined among the guests with the bugs and glitches identified and dealt with. Marketing ideas are worked into on-line solutions. Start-ups are floated and started up.

They swap investment advice, and practice their pitches with each other, for the day when they have to present to a venture capitalist or big-league IT firm.

The idea for this now three-premises chain of mini hostels, came from two girls who realised they liked to be amongst nerds. Jade Wang is a 28-year-old neuroscientist who started it with her friend Jocelyn Berl, and called it Chez JJ.

"It's not that nerds are necessarily socially awkward among normal people," mused Jade. "If you have a large room of 99 per cent nerds and you have that one normal person, they'd be the ones who are socially awkward."

Each hostel has a hostess who makes sure the hackers get breakfast and don't forget to eat, and points them to the dishwasher and washing machine when necessary. They might organise weekly feasts, or parties, a little social action to occasionally relax the overheated brains.

Here in Melbourne the backpacker hostels are also aware of the trend. Most of them offer free wi-fi, low-cost broadband, all the technical connections that the modern young techie demands. In St Kilda they are furious they have not received a place in the queue for the National Broadband Network, and many have signed in to the on-line NBN Petition.


That scruffy backpacker might one day be the richest man in the world.
Bill Gate circa 1970.



One thing is for sure, there is much to be gained from currying the favour of the nerds - add up the fortunes of Gates, Wozniak, Zuckerberg and other computer billionaires. That's a tourist trade worth developing.

rmailto:ray@ebeatty.com

Getting into your customer's eye when she buys

Melbourne Herald Sun, Friday July 6, 2012


The great prize in advertising is getting as close as possible to the shopper when they are making the crucial retail decision. Being in their mind as the hand reaches out to the grocery shelf.

Over the years many ways have been tried, and as technology has become more sophisticated, the techniques have improved.

In the '70s and '80s numerous systems were devised. They featured clunky back-projected slide shows, and then TVs, perched at the ends of the aisles.

They were expensive and complicated, required a big initial investment followed by a lot of costly maintenance. Then inevitably there were the disputes - should they be allowed free access because they were promoting the sale of goods, or should the supermarkets take a cut of the advertising revenue?

In these days of flat screens and wi-fi, controlled by powerful computers, things are easier. Everywhere you go you'll find the in-store screens piping commercials at you - in supermarkets and hardware stores, retail centres and even your petrol pump.

One of the industry's early innovators in Melbourne, Alex Kaplan, eventually left the business but he still believes its effectiveness: "This is the point of purchase. The site is all-important. We researched the impact of these promotions and recorded sales increases, on products that were featured, of more than 25%. It was colossal."

Today, the explosion of smartphones has given the task a new dimension - now the customers can seek out and purchase their preferences themselves.

Some months ago I wrote about Korea's "supermarket in the subway" - pictures of products on the underground's walls that can be captured, and ordered, by a click on their QR ("quick response") codes.

Now IBM has taken smartphone technology into the store itself. Still in test it's dubbed "augmented reality" (AR?) at the company's research labs in Haifa, Israel.

Put simply, you can walk into a supermarket, point your phone at the shelves, and it will identify products with the qualities you prefer, from a questionnaire you will have filled in when you first registered.

Try and follow this: it will view the packs and goods through facial-recognition type processing and feed the information back to a huge database, presumably in the cloud, and the supermarket's own computer's list of its products.

This will be compared with your own pre-entered preferences - do you prefer wholegrain or gluten-free, hate polyester, reject battery hens? Your likes and dislikes are on file.

Before leaving home you can compile your shopping list. Your phone will then search out the products in store. When it finds a match you are alerted and can question the image further: price, discounts, nutritional information, reviews.

Through optional connections with Facebook and other social networks you can see what your friends think about it, or you can alert them where you found it.

Now I've got to tell you, we're getting into the area of "too much information" for me here. I'm just not that obsessive. But it's an indication of where marketing is heading. And you always have the choice of leaving the phone in your pocket.

In planning your own business marketing, be very picky about the unlimited new technology on offer. Technical fashions constantly come and go, but I presume you intend your business to last.

Always remember that in advertising it will always be numbers that count - a few thousand Facebook clicks will never be more effective than a million TV viewers. By all means use the apps, but don't neglect the real drivers. You've still got to get the punters into the shop, in the first place.

mailto:raray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

Australia's lion now sleeps

Melbourne Herald Sun, Friday June 29, 2012 

Forget the Oscars and the BAFTAs, in the world of advertising the big gong is the Cannes Lion. That fest ended last weekend, with Australia proudly displaying 14 lions in gold, 15 silver, and 29 bronze - a total of 58. Our previous best was in 2009 with 45.

However there was some disappointment. Only two awards were in the TV commercials category where in the past we have been much more successful. Looking at commercials that did take home gold, they were good - but they also had million-dollar budgets you'd never get from a client in Australia.

Fallen angels smell aftershave

A Doritos chip commercial from BBDO London was set in a Mexican village worthy of a spaghetti western; BBH London continued the Lynx after shave tradition of adolescent sexism with "Even angels will fall" - set in a post-war Naples straight from a De Sica film.

Our own gold winner, Hahn "Super in, super out", had Lion Nathan money behind it, in the tradition of big-buck beer commercials.

The only other Aussie winner was bronze to DDB Sydney for Volkswagen Tiguan - which to my mind had more wit and humour, for much less cost.

This is a worrying trend of advertising world wide. More spent, hugely elaborate technology, more layers of complication instead of focus and communication.

On which topic we must mourn, this month, the demise of Campaign Palace. For over 30 years this agency defined the peak of Australian advertising creativity, winning the top prizes around the world - New York, London, and of course Cannes.

You'll remember their commercials even if they ran before you were born. "One day you're gonna get caught with your pants down", Rex the anteater, Dunlop tyres landing on an aircraft carrier, the Rev cow working out at the sauna and the treadmill.

They could handle emotion, too, like the little boy who loses his mother at a station - "If this is how he feels after losing you for just a minute, imagine how he'd feel if he lost you for life" - one of the strongest-ever Quit Smoking ads.

And a whole generation of girls remember Naomi Watts turning down dinner with Tom Cruise because mum had roast lamb for dinner that night.

Campaign Palace was founded by Lionel Hunt and Gordon Trembath in the 70s and quickly became a world-beater. Early in my career I was fortunate to have Hunt as my creative director and he would drill into us the basis of great advertising:

Study your product to understand its unique defining feature. Dig and dig and dig till you have distilled it down to one simple thought. You wear nice underwear because some day someone might see you in it. The tyres on your car are made by the same company that makes tyres for Harrier jets.

If mum puts a  roast dinner on, the kids will all turn up. Giving up smoking is not just for you, it's for your kids.

One simple thought, beautifully presented, sums up the thousand words someone else may have used to communicate the same concept. It sticks in the memory like the burr from a paddock. No amount of money can make an ad work as well as that.

The Lions lose their Palace

Just one other gold lion TVC worked that well, I'd written about it some weeks before - the Argentinian "Dads in briefs". A simple idea: what's worst on a muggy day than your dad wandering around the house in his underpants. Simple photography, low budget, hilarious concept. Quick, buy an air conditioner.

Now that's the sort of brilliance Campaign Palace used to bring to Australian advertising. Will we see the like again?


ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

Have we hit saturation point?

Melbourne Herald Sun, Friday June 22, 2012

Manufacturers, retailers, economists and politicians, are all huddled and worried. What is happening with society - people have never been better off or more financially secure, yet the their behaviour is not reflecting this. Certainly not their buying behaviour.

America is painfully but positively recovering from the GFC, and in Europe the Dread of the Drachma does not have to be as terrifying as it is portrayed. But in any case, what has that to do with shoppers in Chadstone or drivers in Darlinghurst?

Yet everywhere we hear these tales of slowing desires. Sales are down, expectations are low. Life is especially painful for the department stores - and we all know the empty-shop gaps in our high streets.

The politicians and commentators have a field day throwing blame around, usually at each other. It's the financial crisis; it's the carbon tax; it's the internet; it's the cost of housing that's too high for the homeless and too low for the sellers.

But there's something no-one talks about. What happens when everybody has got everything that they want? The thought struck me when my favourite men's shop had yet another sale and some particularly fine, expensive shirts were suddenly within my price range.

As my hand reached out I stopped. I recalled two shirts from this shop bought a couple of months ago and still in their plastic wrapping. Did I really need two more shirts? As I picked through my wardrobe in my mind, I realised that I also had enough trousers, jackets, and more shoes than would fit on the racks. I had reached saturation point.

Of course men have the advantage of less demanding fashion turnover. But even with girls, I wonder how many of you, over the past month, have unpacked your winter trunks and discovered skirts and slacks and jackets you'd completely forgotten about. They're as good as new, only worn a few times last winter, and finding them again felt like a new shopping expedition.

As we look at the goods that fill our lives, there aren't many that wear out and have to be tossed. Perhaps it's time to replace the TV you bought 10 years ago with a new huge flat 3D monster to transform your living room. But the washing machine still works fine and so does the fridge.

So how do you market around saturation? Motor companies have followed the money. Their booming sales are up 10 per cent in WA and 7.5 in Queensland. But in Tasmania they've fallen by 12.3, and are flat in Victoria and NSW around four percent. Of course it's very easy to spend a bit on mechanics and push your car for another year or two of service.

Fortunately we all have to eat, much to the relief of supermarkets and restaurants. Here though the marketing trick is adjusting how much is spent on each visit. The past decade has seen the decline of many of our fine food establishments. We may see more arise in the future. And all those TV competitions have revived an interest in cooking.

In fact the future does look promising if you ignore the doomsayers. Mortgage repayments are down; the carbon tax sweeteners will soon drop into people's paypackets; children's school and welfare grants will increase; and this year's inflation rate of 1.6 per cent ensures costs will remain stable.

So there is no reason for you to not feel confident and well-off. The only trouble is, once you go out to shop - is there anything you really need, and when you get it home, where will you put it?

ray@ebeatty.com

Classic marketing hits world top in 25 years

Melbourne Herald Sun, June 15, 2012


Here's how a company went from zero to the world's largest in its field in just 25 years. It's a product you may not be very familiar with: classical music.

In the big music stores like JB HiFi you'll search past vast racks of popular music and in a dusty corner find a small display of classical CDs. But when you add up all the albums sold around the world, it's a very sizable business. And for a long time very neglected, an ideal target for clever marketing.

Except that Klaus Heymann stumbled into it. He went to Hong Kong as a journalist, and then set up a business, importing fine electronic gear from his native Germany. As part of the promotion he staged concerts, and discovered there were no classical music companies in the region, so he started to import and distribute the records.

The eighties saw the growth of CDs. Heymann took advantage by setting up Naxos Records to sell bargain-priced music. He bought most of his early works from behind what was still the Iron Curtain. In cities like Prague and Budapest and Moscow were some of the world's best musicians, orchestras and singers - totally unknown in the west.

His packaging was simple and display cases of the works could be found in every record store that sold classics. Before long music lovers discovered that the performances were superb, the engineering first class, and the prices a third of what the EMIs and Deccas charged.

There were no big names or star prima donnas - though many, like Sumi Jo (below), have since shot to the top. They did not duplicate versions of their works. They did very little promotion but gradually built up a huge catalogue of music.

Classical recordings are small in sales numbers per store - but have world-wide appeal. So Naxos was an early user of internet marketing. In Australia maybe a few dozen people would get excited about a new recording of madrigals by 16th century composer Gesualdo. But if you searched world-wide you would find thousands. This is what the web allows you to do, and Heymann recognised this.

Naxos.com now has a huge inventory of music, from mediaeval chants, to the great composers, to modern glass-breaking experimental compositions. So in the classical field it has grown bigger than giants like Deutsche Grammophon or even EMI, publishing some 40 titles a month.

Their marketing plan has been to determinedly keep on track - but also to look out for other niche interests that will smoothly fit into the huge distribution channel they have created.

So they have brought in other neglected music areas - Japanese classical, Jewish-American, world music, Asian classical, jazz. All that music that the big labels could no longer support because of their old, ungainly marketing structures.

Marketing experts are warning that records are a dying business in the wake of the iTunes revolution. This is no surprise for Heymann. Recent years have brought in streaming web radio, podcasts, and the Naxos Music Library. This is aimed at schools, universities, professional music bodies and conservatories. Through it the students have access to over a million classical musical pieces.

Naxos is a great example of how a company can start off as the ignored, despised cheapie in the bargain basement and through consistent application of its passion and principles, rise to the very top.

While the rest of the music industry frets about the changes around it, Heymann and his team look for the other paths to success that are emerging - because the population, and the market, are still growing. You just have to be where they are.

ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

The Chinese invasion is on

Melbourne Herald Sun, Friday June 8, 2012

The massed forces of the Chinese proletariat are swarming across the sea, onto the mainland of Australia in serried ranks and with determination on their faces. Yes the Chinese invasion is here - and we've just committed another $250 million to help it along.

As our nation is getting older it's getting smarter and what was regarded as a peril a century ago is now seen as some of the best business we have ever had. Here in Business Daily every page holds some story about resources sold for billions, new ventures, new technologies tied to our links with China and the rest of prospering eastern Asia.

This week's focus has been on tourism, with the launch of Australia's new global advertising campaign. Not in New York or London but in Shanghai. Added to the drive for the dollar and euro is the yen for the yuan.

The current campaign does not swear at the visitors. How would "bloody hell" translate into Mandarin anyway? And there are no jolly Hogans putting shrimps on the barbie. But there is a child feeding a joey at the beach. Combining kangaroos and surf was quite a stroke, I thought. I hope visitors don't expect to see pods of them.

I always sympathise with the poor creative directors. They have to make sure each state gets a few seconds on screen or else there is political tub thumping. Already the Victorians are rumbling that their three seconds of Crown's flame-throwing do not equate to the more leisurely flight over Sydney harbour.

Then there's Katherine Gorge, rain forests, Uluru, wombats, Whitsundays, over a soulful background song with a viola that sounds almost Chinese. Oh what a tapestry to weave and make look like you meant it.

The slogan holding the bundle together is the two-years-old tag, "There's nothing like Australia". It ticks the right boxes, stressing our uniqueness and mentioning the product, though you couldn't call it memorable. But if you ever write a campaign to be translated into 17 different languages, as this one is, you learn to keep it simple.

A lot of emphasis has been put on social media, even bigger in China than here. Tourism Minister Martin Ferguson and MD Andrew McEnvoy proudly showed the Chinese media their interactive tablet app that becomes a colourful photographic brochure.

The high Australian dollar has made us an expensive holiday destination, so the campaign is very much targeted at the upper middle classes (forgive me, Chairman Mao, for using such a term) that can afford luxury. But amongst a billion people there are lots of them.

Last year passengers through Tullamarine from China increased by 32 per cent. Indonesia suddenly discovered its great south land, with their numbers jumping 86 per cent. Japan, South Korea and the Philippines also mushroomed.

Walking the city, I see fleets of buses pulling up at rather mysterious shops, around Collins and Bourke. A couple of times I've ventured in to discover big department stores totally geared to the tourist market.

Swarms of tourists rush around buying koala dolls and boxes of macadamias that you know you could get much cheaper at the Queen Vic market. But this is tourism territory, from toys to opals to snow-globe Opera Houses. I've seen variations on these in every tourist centre in the world. So it's good that we come into that category.

And tourism is not just ephemeral. The government is looking for long-term investment from these visitors, with outlines already prepared for some 80 projects - with $42 billion worth either planned or underway already. That's a lot of stuffed koalas.

ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

The psychology of naked girls and burning books

Melbourne Herald Sun, Friday June 1, 2012

So many of the best advertising campaigns are not just ads. By getting into the psychology of their audience and communicating to their wants and needs, marketers can achieve so much, for so little cost.

Imagine a beautiful near-naked girl writhing with pleasure as she looks at your picture. Or a morning alarm call that drags you out of bed to go running, by threatening you. Or the prospects of burning 200,000 books to make a political point.

They don't sound like billboards and TV commercials, do they? Yet they are some of the most successful ad campaigns over the past year.

Of course your interested is piqued by the beautiful girl wearing just flimsy lace bra and tiny panties, writhing on her bed in pleasure as she thinks about you. Well this is a bit of interactive trickery from Sydney agency Arnold Furnace, promoting Stonemen underwear.

It's an online video, accessed through your computer or mobile phone, that requires you to upload a head shot of yourself (or unsuspecting friend). When it is played, a stunning model goes through her soft-porn motions for a minute, and is finally revealed to be looking at a hunky, muscular magazine centrefold - with your face.

Reebok have created The Promise Keeper. It's a smartphone app that you can set to wake you up on jogging mornings and then tells your friends, through Facebook, how good you've been. If you don't get up it tells them you're a wimp and failed your commitment. Better pull the blanket over your head.

But the best example of a psychological campaign was devised by Leo Burnett, Detroit. Last year the library at Troy, Michigan, needed funds to survive the coming five years. The council proposed an 0.7 per cent levy on rates. When the conservative Tea Party heard this they frothed and massed, condemning "New Taxes", and defeated the measure.

There was a second opportunity to vote on August 2. So a campaign was launched: "Vote to close the library. Book burning party on August 5!" Signs were planted around town and on social media promoting the event - and now it was the pro-library faction that frothed.

The campaign grabbed the national press, the TV and radio, even foreign news broadcasts - all without a cent of media expenditure.

On Facebook, slogans proclaimed, "The Troy Public Library might be short on money but it has books to burn!" Another post showed a barbecue burning some books: "Imagine this times 200,000. How cool is that?" A band was booked for the event.

When the indignation became overwhelming, the secret slipped out: the real campaign slogan was "A vote to close the library is like a vote to burn books." They actually wanted to save the library. And it would only take a 0.7 levy to do it. They had succeeded in turning the conversation around from "No more taxes!" to "Save the books!"

On voting day thousands who wouldn't normally turn out to vote took themselves to the booths. In the end, the Yes vote was a landslide, 342 per cent higher than projected, and the Teas were bagged.

None of these three campaigns cost much more than the price of a handful of prime time ads. Yet they were far more effective than their expensive competitors. They worked because their creators thought through, into the minds of their audience, and triggered their psychology.

Unfortunately these success stories are rare. Not because the ideas aren't out there - but too often, because of a lack of courage to risk a daring stroke.

Maybe I should send an outline of the "Taxes" campaign to the Prime Minister...

ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

Kangaroo hops the ads

Melbourne Herald Sun, Friday May 25, 2012

A cartoon kangaroo is at the centre of a new American media storm that is going to be just as relevant here. It's the perennial topic of ad skipping. Are you being unfair, and risking your nightly entertainment, by removing the ads?

The topic has surfaced with the recent release of a new heavy-duty digital video recorder called "The Hopper" (hence the kangaroo logo). It will record up to six channels at once, and as it replays, it can automatically cut out the commercials - hop over them.

The television networks don't like this recorder. In fact several have refused to play commercials for the product (rather ironic if you think about it) because of its potential to damage them. The latest, just this past week, was Fox Network in New York.

The reason is obvious. If everyone was able to skip the ads on their nightly programs, the advertisers would close their cheque books and walk out. Network revenue would plummet and they would suffer even greater financial pains than many of them are already feeling.

The simple fact is that if we want varied, entertaining TV stations they have to be paid for, somehow. Currently it's through an invisible tax - the manufacturers' advertising budgets. Oh yes it is a tax - it is collected from every dollar you pass across the shopping counter. Fortunately for our governments, no-one calls it a tax.

The popular alternative to ads is the ABC. But once again you are paying the cost of those invisible commercials. Only here the tax is direct, paid from consolidated revenue so you actually see it. Hence the annual brawl between the network's management trying to get more, against the government trying to balance the budget.

If ad skipping robbed the TV stations of their income, they too would then have to charge us direct - some kind of monthly subscription fees, like the cable stations already do. But even those fees would rise if they lost the subsidies provided by the advertisers.

Again in America, the head of CBS, Les Moonves, used this very point as a warning over the growth of hopper technology. "How does Charlie Ergen," the manufacturer of the technology, "expect I produce CSI without advertisements?" All that blood and gore costs around $6 million an episode to produce.

Time Warner's Glenn Britt agreed: "The dual stream of advertising and subscription fees has been great for content providers and we don't want to destroy one of those revenue streams,"

This argument has been around since the earliest introduction of video recorders. The fast-forward button allows you to "zap" the commercials out of pre-recorded programs, perhaps not as efficiently as a hop but just as effectively.

But what we have learned from that experience is that once we're settled in for the night, the zapping decreases. After all, those three-minute breaks are the ideal length to check the kids' bedrooms or visit the loo.

However, automated hopping is a command you can set and forget. This is what has agitated the networks.

This battle has already been fought, nearly a decade ago. When the TiVo first hit the American market it had commercial-zapping technology as a major selling point. But it was a laborious process involving transfers to your PC and installation of downloaded apps.

A competitor, ReplayTV, had built-in, automatic cutting. They were sued by the TV industry, sending their parent company broke.

Will this be the fate of the hopping kangaroo? Right now there are intense discussions among the normally factious networks about the ways and means to kill this threat to their revenues.

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com

Abra-Shazam! An Instant Millionaire

Melbourne Herald Sun, Friday May 18, 2012

Late today - Friday American time - Facebook will launch into the public market. It will create a feeding frenzy that will make a pirana tank look like high tea at the vicarage.

The issue of 421 million shares is expected to hit $38 each, valuing the company up to $100 billion. Mark Zuckerberg will celebrate his 28th birthday a few days later. He'll retain control of 58 per cent of the voting shares. Two of his boardroom insiders will collect more than a billion and a half apiece. Not bad for a company that started eight years ago.

We're living in a world where - literally - new inventions are appearing every day. The 19th and 20th centuries were gloriously inventive. But now it's not steam engines and aeroplanes that excite our wonder, it's the thousands of little inventions that have taken over every spare corner of our lives.

At the big end are robotics and energy science, but at the small end is the invasion of countless applications for our appliances, televisions and phones - the apps that for a lucky few can spell almost-instant riches.

I was pointed to one a few days ago, called Shazam. Download it free onto your mobile phone, and next time you hear a piece of music you like, press the Shazam icon and it will tell you its name.

Now that sounded far-fetched to me so I tried it. The YouTube demos show it finding music by the likes of Metallica but I wanted to give it something difficult. Going as far as you'll get from Metallica I played Brahms' Second Symphony and pointed the phone at the loudspeaker.

The logo on the phone screen rotated and blinked, then sent a signal to its brain in the cloud. A few seconds later the answer came back. Correct, it even named Herbert von Karajan as conductor. I was seriously impressed.

Now I know a lot of you will think I'm pretty late getting here - after all there are 200 million people Shazaming in 200 countries around the world already (yes it is now a verb. Already). But many of my readers won't know it yet.

Which raises the question - how long can you be a start-up before you are discovered, or you go broke? Shazam, after all, was developed in 2002 and slowly, quietly grew until smartphones took off a few years later. Now it has doubled in membership just in the past year.

Economists love talking about "monetising" - how do you make a quid out of your product, ideally more than you are putting into it. In Shazam's case it was easy. When it finds that elusive song for you, it shows another button on screen. Click through to iTunes to download and buy the track.

Now there is the gold. A few cents commission a time on how many million downloads a day...? They are also expanding the service into TV. You can click a participating commercial and perhaps win a gift or enter a contest. For the advertiser it gives them a measure of real-time responses to their campaign.

We can safely predict that when Shazam raises its initial public offering - soon, they say - it won't go anywhere near as high as Facebook, but it will still make the owners filthy rich. Oh to be that muddy.

Unusually, the company is British - showing that you can create a great app without living in Silicon Valley. It also made them eligible for some British honours.

Just last month it was awarded the Queen’s Award for Enterprise in Innovation. Maybe they can break a record for winning knighthoods.

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com

Get the most out of every customer

Melbourne Herald Sun, Friday May 11, 2011

They call it "the cost to serve" or CTS. According to supply chain consultancy Logistics Bureau the figures are pretty consistent across all industries: 20 per cent of customer orders make negative profit, 10 per cent of the product range makes no contribution, and 12 per cent of customers are totally unprofitable.

Think about your own business - the cost of opening the door every morning, paying staff, rent, overheads, buying product - and you'll probably say the figures are conservative.

So you work hard to drag each customer in. But once you have them, do you get all you should out of them?

The art of good business is maximising your sale. The shopkeeper in the deli knows it, and asks, "something else?" at the end of each purchase. The fast food retailer knows it, when the customer orders a hamburger and is asked "you want fries with that?"

This on-selling is an essential part of the marketing strategy for the likes of McDonalds and KFC. More than a third of fast food and snack sales in these restaurants include a soft drink with them.

When you consider the billions of dollars turned over by these companies, you get an inkling of the amount of money involved. No wonder Coca-Cola has a division totally devoted to McDonalds, complete with its own president. After all, he has to ensure that Coke is bought with the burgers sold in 31,000 outlets in 100 countries.

The other method is up-sizing. Whenever you buy a soft drink at the cinema, you are offered ice cream and popcorn in a bulk buy. Another dollar and you get the super-humungous box that will keep you annoying the neighbours throughout the movie.

But hey, if they have sold you a ticket for $15 and then another $10 worth of nibbles, that's a 66% increase in your value as a customer.

But you don't have to run a restaurant to make good use of on-selling. A smart tailor won't let you out of the shop without pointing out a couple of shirts which will perfectly complement your new suit.

The hairdresser will persuade you that to maintain your expensive new cut and colour you need this salon-quality shampoo and conditioner set. And a travel agent will persuade you that before taking the overseas holiday, the family had better be covered by insurance.

If you consider how difficult and expensive it is winning the customer in the first place, it's so obvious that you should maximise the sale - sometimes even double it - by adding that "something else...?"

But think back to how many purchases you make that miss out on this extra sale. The assistant blankly takes your money, bags the sale, and turns away. Often it is up to you to add, "By the way, do you also sell thingamy jigs?" Sometimes you even have to go to the back of the queue and start all over again.

It all comes down to staff training. It's difficult when the teenage shop assistants have their brains tuned to Saturday night's date, to get their focus back on the job in hand.

You have to make sure they understand their product, the stock, and the mind-set of the customer. The suit buyer isn't looking for a garment but for how he will look when it first goes on.

The patron hasn't come to see a movie but for an entertainment experience. The travellers want to enjoy the holiday, not worry about the unforseen.

When your staff understand the bigger picture, they can maximise that hard-won sale.

ray@ebeatty.com
Blog: themarketeer-raybeatty.blogspot.com

Has our creative flourish gone to South America?

Melbourne Herald Sun, Friday May 4th, 2012

The TV commercial starts with a serious voice-over. "Along with summer comes every family's worst nightmare (pause): Dads in briefs!"

The visual is a series of slow-motion shots of pudgy fathers shuffling about their houses in their underpants, much to the disgust of their children, from teenagers to schoolkids, not to mention mums and even the dog.

We're out of season now but the scenes, and the grossed-out responses, will be familiar to any Australian family. As it turns out the brilliant commercial promotes air conditioners.

It's a commercial that would be perfect for Australia. The problem is, says McCann Creative Director John Mescall, that it was made in Argentina.

"The issue for Australian marketers is: that used to be us. The South Americans are not afraid to be unique, and to express their cultural uniqueness through their work. But too much of our work feels like it could’ve come from anywhere in the world."

He sums up a feeling I've had for years now: why don't we create great work here any more? Once, like Olympians, we punched well above our weight in the creative contests of London and New York. These days the Cannes lions have been won by our PR and on-line work, rather than a strong representation of TV commercials.

"The work that we do has changed now," explained Mescall, "from advertising to integrated campaigns." As he sees it, a decade ago, "With a brilliant commercial you could shift the fortunes of a brand," and in turn the work attracted adventurous clients. Now the world is a more cautious place.

Worse, thinks Mescall, our modern generation's constant exposure to the world of TV, mostly American, has given us a global culture. This has been uncovered in research they have carried out which shows "There isn't a popular Australian culture any more".

If you doubt his words, spend a few hours channel surfing through young people's TV shows. The streets, clothes, accents are mostly American and the commercials feature skate boards and baseball caps because these are now the Australian norm. They don't even bother to change the accents on the imported TV commercials much of the time.

Alas to be a boring protectionist, but many of us predicted this consequence when TV advertising quotas were pulled down. Once a high percentage of commercials had to be made in Australia. Today the only local ones tend to be the boring retail one-camera walk-throughs.

However, talent can't be held back forever. Some good stuff does get through. The beer and drinks category still has enough money to make some witty, daring stuff. Like the Canadian Club "Beer Fairies" campaign, where beer drinkers are depicted as fat slothful boors with tattered wings on their backs.

One commercial that won gold at Cannes was really a short film. Made for rock station Channel [V], it's a montage of nightmare pictures worthy of Dante's Inferno, slowly rising up until it becomes a rock 'n' roll heavy metal heaven. Very clever, chase it down on YouTube.

The essence of great Australian ads has always been the strength of wit rather than big budgets. They might have been made before you were born but you'll still be aware of the Holeproof "Some day you're gonna get caught" or "I'm wearing no nickers" campaigns. No expensive sets or locations, just cleverly showing the benefits.

Or more currently McDonald's. where a couple set up a garage sale, anxiously watch till an item is sold for a small sum, and then rush off to buy the day's burger bargain. Simple, witty, award winning. We need more of these.

ray@ebeatty.com

Blog: themarketeer-raybeatty.blogspot.com