Marketing Deconstructed - Cutting the Bullsh*t and Getting Back to the Essential Strategic Tools

how many marketers does it take to change a light bulb millenials because the answer to every question in marketing is Millennials you've all received this from some numb not on LinkedIn that you know right the is this the is this right you ready so is Generation Y the other name for our friends of Millennials as you see they use tablets and smartphones texts or social media here's me over here Perl Generation X I can want to use my personal computer now apparently I don't use a phone I was born in the 70s and I orders this phone thing here's my dad over here is my dad right eat somehow he's using his car to do messages right he's easy this driveway beeping because I can't use the phone I'm from 1945 so this is the official ranking philosophy of the most socially responsible corporations according to the independent reputation Institute I'm introducing a completely new metric to measure corporate social responsibility I'm calling it trustworthy accounting exchange tax for short it would be lovely to ask the bosses of Google Microsoft and Apple whether they think there's some kind of contradiction between being socially responsible and paying virtually no tax it's about the of corporate social responsibility for companies that fail the fundamental test of it which is pay the tax that pays for hospitals roads and education pay your tax and then you can be socially responsible so I'm sending it to hell it's total and I agree with the double-a NA members we are regaled with articles about the need for a brand purpose pretty much on a on a daily basis when we get to brand purpose we reach very lofty places we get to something like Starbucks will inspire the human spirit and save the world and I think this is the problem with brand purpose I think it has led to the ultimate apogee of among marketers who leave their brand is very important is here to save the world we've overestimated the role of brands in people's lives there are three big companies that do brand valuation Interbrand Miller Browns brand Z and brand finance fine companies but what they do is pants let's do I don't know Apple the number one brand in the world you ready Interbrand says it's worth 170 billion brand z2 for seven million brand finance one to eight billion for those of you without a quantitative background that's a hundred and nineteen billion dollars of difference so welcome to lecture two cutting the and getting back to the essential strategic marketing tools our members often talk about how much marketing has changed in the last decade more so than any other profession but in keeping with the theme today is about looking at the big fundamental marketing concepts and that some of us learned as undergrads actually or MBAs so in this lecture mark will tackle the ten recurring themes critically assess them cut them up and decide whether they are still value and impact for marketing practice today for those of you new to this series here's what you need to know about mark he is indeed the master of marketing and branding and is widely acknowledged as one of the best instructors in the world he has a PhD in marketing from Lancaster University and has taught us some of the world's leading business schools including London Business School MIT Sloan and the University of Minnesota but the reason we work with mark is that he applies and tests what he preaches in the real world mark works extensively on real projects he consults on brand strategy market research segmentation CRM brand extension and his clients include McKinsey PepsiCo J&J Sephora Unilever and of course LVMH who has worked for for 14 years he's tess region he is very forthright and will take no prisoners today both on stage and as in his writing that I'm sure you've seen in Australia and in the UK so let it rip professor Ritson hello everyone hello lovely to be here again so in this session we're going to take an hour and then we'll have our debate with our senior marketers in the panel we're going to look at ten core concepts in marketing at the moment and these are the ten we're going to go through and I hope you agree I haven't picked anything East at Eric I think all these concepts are familiar to you you've work with them you know what they are and also I hope you agree that it's not going to be easy to work out which ones I'm going to say useful and which ones are useless at least at the opening point that's what I intend to do half of these concepts five of them I'm going to send to marketing hell because they're useless and half of them I'm going to elevate to marketing heaven because I think they're still some of the core topics of our discipline and a deserving of your attention and focus before we started this series we surveyed the double-a NA members about their own personal take on these concepts and we have a very nice response hundred fifty different senior marketers have all told us already on a scale of useful to useless how they rate the ten concepts and it's interesting what the results suggest the two that no one was sure about were zero based budget sand sales funnels and I think I know why we're not sure about those two and I'll come back to them so they kind of sit in the middle in a kind of no man's land the ones that you deemed to be heavenly and incredibly useful them the most popular one was brand purpose followed by differentiation targeting and SWOT analysis they were the ones that were deemed the useful concepts across the group and the less than useful ones were corporate social responsibility brand valuation Maslow's hierarchy of needs and Daniel's so I'm going to agree and disagree as we go through these but keep an eye on that because this is what the members thought and I'm gonna you know in some cases completely back you up in other cases disagree but our purpose in this hour is to review these concepts and for me to make a case there are five you should focus on and five I recommend you stop worrying about because I think they're overrated or pointless so let's start with our first concept which is brand purpose rated by you the double AAA as the most useful of them all that's no surprise there's been tons of research on marketers this actual researchers from Australia showing that in this case nine out of ten marketers believe purpose is increasingly important to building brands and we are regaled with articles about the need for a brand purpose pretty much on it on a daily basis and you can see where brand purpose comes from right when you guys were trained back in the days when we were undergrads or even MBAs we were trained on the famous benefit ladder and it's a great old tool still has lots of relevance let's take Starbucks as an example so you could position Starbucks on a feature why don't we choose the fact that they train all their baristas extremely well it's unlikely you'd see that ad campaign but you could position on features you could go one step higher and look at the product benefit of that feature in this case a well-made cappuccino but you could go higher right you could go to the customer benefit of that which is your cappuccino tastes great and of course we can go even higher in some cases to the emotional benefits of getting a great cappuccino which is I feel superior and happy in the morning yeah and our job as marketers is to go up the benefit ladder as far as we can go the higher we get the stronger pull that our positioning will elicit when we get to brand purpose we reach very lofty places we get to something like Starbucks will inspire the human spirit and save the world and I think this is the problem with brand purpose I think it has led to the ultimate Apogee of among marketers who believe their brand is very important is here to save the world it's very hard to sell a mildly stimulating coffee drink and look at yourself each morning in the mirror like you're important but if I believe that I'm here to inspire the human spirit I suddenly find myself to be far more important and justified in the world that's why I think brand purpose has so much import and I think what's really happening is we've climbed the benefit ladder to the very top and we've jumped off it into an ocean of underneath now you might accuse me of exaggerating a bit trust me I have not exaggerated this is actually the current brand mission of Starbucks it is not to make coffee oh no it is to inspire and nurture the human spirit one person one cup and one neighborhood at a time yeah Starbucks are going to nurture the human spirit that is their fundamental purpose and my point to you today is that horseshit and the reason it's all is is multifaceted the first reason is that ain't differentiated and I don't care how new the game is of brand purpose we still have to differentiate ourselves versus competitors to illustrate the lack of differentiation let's play a little game I call brand purpose bingo okay I'm going to show you six brands that have all got very clear brand purpose statements or missions or something that alludes to some finer goal and I want you to identify which brand and which mission go together okay they're all big brands so we're going to look at Kellogg's Starbucks IKEA Coca Cola Barclaycard and future brand all right I'm going to give you their actual brand purpose corporate purpose or brand mission statements you ready and I want you to see how many ice thinks you can get okay let's go for them in no particular order let's make today great inspire our moments of optimism get more out of today inspire the human spirit make everyday life better create a more positive future all right so let's see if you can identify which brand is attached to winch brand purpose statement you ready I I don't know Eva right the point I'm making is they're all the same sitting in their offices inspired by the love of humanity mankind and saving puppies this looks like you're changing the world but as you walk from one Purpose Driven office to another you discover differentiation is dead when it comes to brand purpose number two legitimacy remember we used to do positioning we had to say yet to be able to deliver on your promises remember those Eddy days or I don't know 4 or 5 years ago so it should apply to brand promise if your brand promise is to inspire an urge of the human spirit and particularly to inspire and nurture local neighborhoods I wonder how you could back up that promise perhaps one radical disruptive idea is you could I don't know pay your tags pay your tax I paid $600,000 in tags last year I did right that's more than Starbucks have paid in Australia in the 13 years of operation what that all about not making it up in the 13 years Australia hosted Starbucks here they paid not a dollar in tax now you might say it wasn't particularly successful and eventually of course they sold a business and moved back to the States maybe maybe not if it's thought they made a lot of money so let's look at the UK instead where Starbucks did pay tax they paid eight point six million pounds of tax over that ten year period while generating revenues of three billion pounds horseshit and you know it don't talk to me about nurturing nurturing communities in the human spirit pay your tax because you don't we do with the taxes that's how we nurture the hospitals and the roads and the education and the nurses and we can't do it if you're not nurturing them with your tax you can't back this up Starbucks number three next problem execution you may remember a couple of years ago in America Starbucks executed on this brand purpose of nurturing humanity by encouraging their baristas next to your name to write on your cup of warm cappuccino race together an attempt to have a discussion with you about racial equality before they hand it over your beverage to them in the morning I know it sounds great doesn't it this is the response from customers a day after they started doing that and writing race together on people's coffee cups and say let's talk about race for a minute before we have this coffee shall we let me give you a three of 700-thousand wonderful tweets on how people felt about nurturing the human spirit before they got their cappuccino here's April not sure what Starbucks was thinking I don't have time to explain 400 years of oppression to you and still make my train here circus obey let me explain this to Starbucks I don't think you want black people on their way to work discussing race before they've had their coffee bro and finally serious Starbucks isn't going to cure racism so let's just raise the wage so people aren't working five jobs to pay the bills consumers aren't stupid marketers are I think these three people and another thousand I could have shown you the tweets from know more about brand purpose than every bloody marketer in Australia we overestimate the role of brands people don't want Starbucks to save the world now I believe in race equality I believe in gender equality in in in sexual equality and animal rights I just don't want tax dodging corporations telling me about it it's not their place to do it we've overestimated the role of brands in people's lives give me a nice cappuccino and give it to me in a place that I admire and end there it's not a big thing it's a small thing and we can still be successful Howard Schultz a CEO of Starbucks when he was pushed about this disaster for the brand said okay we made a tactical mistake so what this isn't a tactical mistake this is a strategic mistake the baristas were only doing what the brand purpose told them to do to nurture the human spirit the strategy is wrong the purpose is wrong not the execution of it and the final problem ROI as Schultz has said frequently this this brand mission is not altruistic this is business values were big part of both the balance sheet and the income statements of Starbucks it's behind the performance yeah we're doing brand purpose because it's going to make us more money and make the business more successful now this is a common refrain you hear often there's even companies have us have the meaningful brand study every year which demonstrates that on average you'll get more of someone's wallet if you have a brand purpose and you'll outperform the stock market if you have a brand purpose now here we have a problem I was having a few drinks with cherylin for the math Academy and she introduced me to this nutcase here yeah delightful man dr. Simon Longstaff is very smart Cambridge educated philosopher and dr. Longstaff runs the ethics center and we were talking about brand purpose and I was slightly pissed he wasn't I was slightly pissed and we talked about it and we came to the same conclusion for different reasons he said it's interesting because if you try and ever justify brand purpose by saying it has a return on investment you instantly enter an ethical catch-22 so if an organization says the reason we do brand purpose like Howard Schultz does is because it makes us more money the counter-argument is well if I showed you a different approach that was brand on purpose that was borderline criminal and involved hurting people in the completely legal way would you take that path oh yes I'd take that path for sure because the reason I'm doing this is are oh I so he's very complex point is if you try and justify a brand purpose with ROI you immediately undermine completely the brand purpose that gives you the ROI in the first place and therefore it's a total and utter waste of time I do believe brand purpose does have a role for a tiny fraction of companies that began with purpose and then built brands those two hippies ben and jerry were far more interested in their ethics than they were in ice cream and they built an ice cream brand in the image of their philosophy that's different there are a tiny proportion of brands who are purpose led but that's not McDonald's and it's not Starbucks and it's not all those other brands jumping on the bandwagon because it's the latest thing to do and those brands by the way while they're around with brand purpose are not worrying about proper differentiation coca-cola last week delightfully spent all of its advertising budget in America saying we live as many we stand as one based on the race problems that have been happening out there now that's awesome and fantastic meanwhile coca-cola is in deep and I would argue in the long term those two things linked together the more you're trying to save the world in your carbonated beverage market chairs declining the more I think the two things are associated together come back to the real job of branding so for that reason I'm going to unfortunately send brand purpose all the way to hell number two heavenly or hellish sales funnels you can make a strong argument that sales funnels are literally the original first theorem of marketing invented by this fun-loving fellow here II sent elmo Lewis he's the alpha marketer he's marketer number one right he began the process with this famous model that later became Aida that became the hierarchy of effects that became sales funnels you take a customer through a series of steps resulting in sales at the end now it's changed it's morphed over the years but fundamentally most business skills we still teach a version of isa al-ma lewis's model usually now it's awareness interest etc leading to purchase it's become extremely trendy to say that particularly in a digital world where of course it's all very disruptive indifferent there's no such thing as funnels anymore Jason John for example Colin months ago an advertising age in today's digital world the sales funnel is dead it's outdated and it's dead I disagree with mr. John and in order to prove to you that sales funnel is not dead I'd like to lose a piece of evidence I'd like to use Jason John's article entitled the sales funnel is dead ok I'm going to use his opening paragraph to show him that his whole column is nonsense you ready so let me zoom into the column and let me show you the most simple sales funnel of all so he's opening sentence a few weeks ago I was at work and remember that my coffee maker had been making weird noises and was doing a less than stellar job of producing a perfect cup that's awareness that he has a problem next I took a break from checking email to run a quick search on my laptop for best coffee makers I read a couple of reviews later on that evening I was greeted by an ad I went into the stores that would be interest or information search then down the bottom there it says while I stood there in the aisle I decided to order my coffee maker from a different less expensive store when I got home that sounds to me like a decision and finally when he was at home he ordered his new coffee may from the comfort of my couch on my laptop why exactly is his point because it appears not easy wrong he's diametrically opposed to what he's just setting the title above the paragraph I don't make this up I don't think sales funnels are dead I think they're more relevant than ever the problem we have is mixing up that the sequence of steps the customer goes through with the tools that we use to drive the customer through the process clearly they have changed but the funnel itself is always going to be relevant now the problem is everyone's doing funnels wrong now forgive me this is the most basic one of all my slides but I feel it's important first thing off is you see the textbook model of a funnel forget about it it's not relevant to you it was meant to be in a textbook build your funnel from your qualitative data make it as specific as possible so get rid of this and build something unique now I can't show you ones that I've built for my clients because they're all proprietary so I have to give you another generic one but imagine building one that has very specific steps unique to you your steps and your sequences so it might be you get aware you consider you prefer you buy build it to your satisfaction next put your Net Promoter Score from your customers on the end and use that as your final advocacy or happiness metric ok the proportion where promoters now populate the thing we look at these things they're meant to be populated imagine 100 consumers at the end of that red box over there now where do they go how many of them get awareness how many of them consider how many prefer it's a hierarchy model the number should always go down you can't consider a brand you're not aware of yeah work it out from some quandary search as for questions in your research you'll be able to fill it out next don't look at the percentages because the percentages are super misleading here you might look at 21% percent preference and say that seems low it's not low because it's 21 over 44 yeah look at the conversion rates from the previous step so they look like this instead 44 over 58 is 75% for example okay now suddenly it starts to talk to you it starts to tell you hey here's the problem and this is the step where you get involved with strategy you look at your funnel and you imagine it really as a pipe yeah now into this side of the pipe I'm going to pump a hundred customers and if I was a genius marketer out the other end of the pipe 100 customers would turn into loyal sales now that never happens because your pipe as you may notice here it's got big bloody holes in it and each of those holes bleeds customers your job as a marketer is to work out which of those holes am I going to fix this year because by fixing it the water keeps moving and eventually so it crosses those other holes it turns into money yeah now be careful here look for the biggest hole look for the hole that's the easiest to fix look for the hole at the end of the pipe where if you fix it it turns into money yeah make a choice I always know a ship marketer because she's got 14 objectives and none of them are going to come true a good one they've got one choose one hole fix it there'll be other years fix one hole and it'll turn into money now how do you fix it you call it out and you write an objective that says I'm going to fix that hole yeah you write what's called a smart objective I apologize for the simplicity of this but we've forgotten this art smart specific measurable ambitious realistic time bound objectives let me show you what a smart objective doesn't look like it doesn't look like this wank here right I want to improve brand love among consumers using our brand purpose and our new digital tool set but that's what they look like if I taught your agencies and I do repeatedly this is what they get right we get as you may know right this is the this is not an objective this is what AG Lafley calls a dream that will never come true yeah you're already dead you're already it's got tactics in there it's all wrong here's a smart objective increase donated awareness in the accessible and easy segment from 58% at 75% by December 2017 now I can pay your bonus I can fire you I can brief an agency I can do everything from that place but these have disappeared from Australia client plant they're gone you talk to your agencies they'll tell you they don't even get an objective not even a shitty one they're asked to come up with one for the for the client because they have no idea what they're doing we don't have a strategy anymore we've got a a glove of doing digital stuff and that's about it you need this thing you need it because it opens the door to any things that you no longer have access to media neutrality briefing agencies properly yeah as we'll see later zero based budgeting proper objectives I'm a big fan actually of Jim Squires is the new director of marketing operations for Instagram he's asked recently should marketers be taking budget out of TV to put on Instagram now the usual digital which I ask you should you should it's a new world bla bla bla bla what Jim Squires said was very very clever he said that is a marketers decision the way I think about approaching it is what is the object if I'm trying to achieve what is the audience I want to hit look at the overall media mix the objective and where can I most efficiently reach people and make decisions based on that Bravo mr. Squires yeah because clients aren't doing that and the key word in Jim's quasi statement is objective if you don't have a smart objective you can't do this you don't know what the right major is because you don't know what your objective is strategy before tactics briefs Australian briefs yeah again if I talk to your agencies after six pints they'll tell you every brief they've got this year is yeah no strategy no positioning brand purpose and we want to engage with our customers using digital right is that it's not a brief right the worst brief I'd love to show you some of the briefs I've seen I can't it's such a shame cuz they're terrible so instead I'm going to show you a famously bad brief which is better than most of your briefs okay here's the bad brief he was written in 1969 by a very young Michael Jagger okay so Mick Jagger had to get an album cover for his sticky-fingers album and he hired a creative you may have heard of called Andrew Warhol this is the brief you're ready dear Andy I'm really pleased you can do the artwork for our new hits album here are two boxes of material which you can use and the record in my short sweet experience the more complicated the format of the album eg more complex than just pages or foldout the more up the reproduction and agonizing the delays but having said that I leave it in your capable hands to do whatever you want and please write back asking how much money you would like doubtless a mr. al Steckler this is their manager will contact you in New York with any further information he will probably look nervous and say hurry up take little notice that's a better brief than the ones you give to your agencies yeah who's my customer yeah properly identified what is my objective properly written smiley and what's my position not saving the world and making puppies happy what the do I want to communicate to that target audience in that objective that's all you've got to do that's your job don't ask the agencies to do it they can't do it it's not their job their job is to design the creative sales funnels go straight to heaven it's not that I think they still have a role I think they're more important than ever in the multimedia digitally obsessed world we live in next one targeting so as you know we've evolved over the last hundred years in marketing from selling to mass marketing to target segments and you know I come from the old school I believe in segments target and then position the Holy Trinity of marketing I don't think you can do it any other way because that's what marketing is it's always been that way there's always some that turns up that tells you it's all different now you've got to use a rhomboid and call it something else but the reality is you segment you target and their new position that's how you make money at least in my experience with my clients but remarkably and maybe CRM has been a little bit of an evolution from there we're now returning back to the world of mass marketing incredible incredible statements in the last 12 months now this very qualified a very senior marketer is Bruce McCall he's just retired formerly the global CMO of Mars and he said something earlier this year that made me spit my coffee out in front of me he said the following I'm not a great believer in targeting our target is about 7 billion people sitting on this planet our task is to reach as many people as we can to get them to notice us and remember us to nudge them and hopefully get them to buyers once more this year this is mass marketing coming from a very smart very experienced marketer and it's extraordinarily dangerous because most marketers on half as smart as him never wanted to target in the first place because they never believed that by focusing you could be better now the reason ASIMO is saying that is because of byron chapel at byron chat byron sharp as you may know has written a wonderful book called how brands grow he says things like this all the time the marketing textbooks have been saying for 40 years mass marketing is dead it's rubbish it's just not true now to be fair to byron first of all his book is awesome and it is a properly new insight into marketing and if it's the great book of the last ten years but the targeting piece is totally wrong you can mass market in special conditions and I think he's right and he doesn't call it mathematically he calls it sophisticated mass marketing which is mass marketing with a cravat and a cigar but nonetheless it's dangerous because not everyone's as smart as byron and the message sometimes comes out as being a floodgates open we're going after everyone now because that's what the most important marketing professor in the world has been saying so I work for clients all the time I work for client last week a very smart client with a very big launch and I have to tell you I was very pleased they had fabulous segmentation I mean proper world-class segmentation and they had really good positioning they were running correlation coefficients to measure the attributes of how much they drive purchase it was properly good stuff but when we went through the planet was interesting because after the segmentation we went to positioning and of course they're missing the bit in the middle the Holy Trinity the targeting bit you got a target for two very good reasons segmentation is not strategy market segmentation is about the market if your competitor is as smart as you in theory they should build exactly the same segmentation as you it's just descriptive targeting is the strategic step where you make the choice who do I go for in that segmentation mix which segments am I going to focus upon and when we get to positioning you try positioning to everyone you can't do it even by a child can do it which is why this book he talks about being distinctive not differentiated because he also believes in mass marketing when you try and target everyone you end up with everyone who want different things and every single competitor try taking a target segment who all want the same ship suddenly positioning gets better and suddenly in a segment Oreo all the customers the same there's usually only one big fat competitor not four and that makes it a lot easier to position against as well so the point is I believe in targeting is the ultimate strategic decision and maybe the decision as for how brands grow is you target everyone but that's your decision and don't be afraid to decide no I want I'll just target them it's your strategic choice remember what the great strategy professor Michael Porter said the essence of strategy is choosing what not to do every is going to do something what are you not going to do it's the segment's you don't target yeah it's the words you don't cram into your positioning yeah the define you as a proper strategic marketer so again I don't disagree professorship in some markets the choice should be target everyone sophisticated mass marketing makes sense in certain categories but let me tell you there are many other categories where he does make sense to target I work in actual categories where barreto's principle still applies where 20% of the customers genuinely give me 80% of the profit pool that happens yeah even if it's 20% giving me 60 I'm still interested in the 20% I want a target I work in markets where I've got five full time sales reps and 480 surgeons yeah I got a target because I can't cover the market this isn't always about consumer goods when I launch new products with clients targeting is fundamentally crucial fundamentally crucial the first customers I get drive all my success later targeting in these situations is like walking into a house if I walk into the garage the wrong segment the only place left to go is back out again if I walk into the hallway the right segment six more doors open up to me when you launch a product or service targeting and getting the right segment first to start the dynamic flow is in my experience crucial and finally don't forget that positioning point you can't write good positioning if you're trying to go after everyone because everybody wants something different you know you look at Australian brands and their positioning and we'll talk about this in the final of the three talks but my god the horror of it right it's the same usual suspects again and again and again and again innovation integrity trust quality and value why is the positioning so totally pointless actually the positioning isn't the problem the problem is the brands are trying to target everyone and when you try and target everyone you end up with these inane pointless values that everybody else has got as well so for these reasons targeting is definitely staying in marketing heaven and not going to help our next concept brand valuation or in theory brand valuation is heavenly remember what we were all told about brand valuation you're going to show that your brand has a value an asset value we can put on the balance sheet and you're going to go to your CFO and go oh by the way don't you know my brands worth four billion dollars and he or she's going to say hark I didn't know that and then you're gonna say and also I've increased it by half a billion dollars in the last two years thanks to my marketing and the CFO goes Jesus you're the most important person in the company I got marketing completely wrong come to the boardroom be in charge I'm completely useless you're the genie oblah none of that happened in theory brand equity in the financial valuation of it is perfect in practice it's pants let me demonstrate it's pants there are three big companies that do brand valuation Interbrand Miller Browns brand Z and brand finance fine companies but what they do is pants right they all produce the top 100 most valuable brands in the world right have you never noticed none of it makes any sense they publish it every year journalists write about it look at the numbers they don't make any sense look let's do I don't know Apple the number one brand in the world you ready Interbrand says it's worth 170 billion brand z2 for seven million brand finance one to eight billion for those of you that a quantitative background that's a hundred and nineteen billion dollars of difference we can't agree on the value of the world's biggest brand within a hundred billion dollars ah that's half the gross national product of Scotland coca-cola very famous brand you ready into brand says it's worth seventy eight billion bronzy says it's worth 84 billion brand vineland says 36 billion that's twice as much what there's always going to be some variance in valuation it's subjective but one of them thinks it's worth twice as much as the other firm does that sound right to you or his visa you ready Interbrand says seven billion dollars bronzy says ninety two billion dollars brand violence says nine billion dollars that's eighty five billion dollars of difference hey that's twelve times someone thinks it's worth twelve times the amount of the other group or 15 times visas net income for 2014 oh it doesn't make sense why the finance people think marketers are fluffy cuz we are cuz we are anyway I've been writing this every year every year the brown valuation tables come out and every year I write marketing with your column that says pretty sure Brown valuations a waste of time but I make the point look out of the three big firms maybe one of them is right and the other two are totally wrong I can't tell and in my column once I said this about three years ago I said what we need is an Archimedean point of comparison some kind of truth so we can see who's got it right and who's got it wrong and to my delight last year a company spoke to me sent me a a letter beautiful letter from Switzerland a company called markable z-- and they said to me uh we read your article ding I'm happy if anyone reads anything I write ding we've done the analysis ding and here's a results ding ding ding ding ding so they said we've compared over the last 10 years any situation where a company paid for a company and in there was an allocated amount paid for a brand the brand equity purchase price and we've compared it to the brand valuation that the company said the brand was worth in the brand valuation League table in that year so you can now compare reality to perception so for example compact was bought by hewlett-packard in 2002 and the brand price that was paid was 1.4 billion dollars so to be clear hewlett-packard out on top of all the other money paid 1.4 billion dollars to buy the compact brand in that same year Interbrand valued the brand at being with nine point eight billion dollars so they were 700 percent wrong zero is the right answer here right a hundred is either half or twice as much they were seven hundred percent wrong a mil bought by UnitedHealth in 2012 the and was paid six hundred and eleven million dollars bronzy value that year is being worth two hundred and ninety five million dollars so again they're one hundred percent wrong and actually marker balls found one hundred and sixty examples across the three firms to compare reality with estimation now what you should see if these firms were close to good is plus or minus twenty percent that's the fair variance in estimating value either above or below by twenty percent would look something like this slightly above slightly below does not like that let's go through the three firms let me show you their performance let's start with the most accurate brand valuation firm in the world which is Millward Brown with their brands evaluation they're only ninety eight percent off it's a Pyrrhic victory right but they are the number one they're only ninety eight percent off as you can see here they're just as likely to be a hundred percent off as they are to be bang on the money but that makes them a lot better than Interbrand who are uh as you see here a little bit further off 196 percent off okay 196 percent off so they're hopeless I would say but that makes them a lot better than brand finance who is wait for it three hundred twenty three percent off imagine you selling your apartment in Sydney and you get three of the leading real estate firms in I'm not letting go yet one of them says it's worth one point seven million one of them says it's 2.6 million one of them says it's worth four million in the end you have to vote and sell it for eight hundred fifty thousand dollars what would you conclude you say this valuation thing it's a lot of bollocks well it is a lot of bollocks and we're going to send brand valuation completely to hell in theory it's beautiful in practice it doesn't stack up now let's have a pause now it's halftime and let me tell you my favorite joke you really how many marketers does it take to change a light bulb Millennials because the answer to every question in marketing is Millennials so let's debate Millennials not for long right every I called Millennials Millennials males are playing Pokemon go right this is the spike in interest in Millennials in the last 2 years right according to my internet search for every one article about any other demographic group there are 42 articles about Millennials we are obsessed with them we are stalking them and of course we're stalking them in particular because reaching Millennials into the digital world let's imagine for a second I started my talk with this chart and I talk to you about a new segmentation framework that I've created based on country of origin and I said there's some different segments I've discovered yeah there's the Indian who's friendly and like spicy food there's the Palmer likes to whinge Allah and his at sport this year afro-caribbean is easygoing and into reggae there's your Scotsman is always drunk and trying to save money and there's your Frenchman is arrogant likes romance he's always try to have sex with your wife yeah you'd say to me that's inappropriate its stereotypical and it's not correct and I'd say actually you're right this is not appropriate so how the is that appropriate you've all received this from some num not on LinkedIn that you know right the is this the is this right you ready so is Generation Y the other name for our friends the Millennials as you see they use tablets and smartphones texts or social media here's me over here Perl Generation X I can't want to use my personal computer now apparently I don't use a phone I was born in the 70s my lord is this phone thing here's my dad over here is my dad right eat somehow he's using his car to do messages right he's in his driveway beeping because I can't use the phone I'm from 1945 horseshit right so let's I know let's talk about segmentation like a like proper segmentation rather than made-up horseshit yeah so my favorite all professors guy called bill Stanton is a great old marketing professor last long on my favorite definition of segmentation market segmentation is the process of dividing the total heterogeneous market for a good or service into several segments each of which tends to be homogeneous in all significant aspects to each other and heterogeneous to the other segments we're all the same inside on key things and we're different from the others yeah it's a good definition demographics were never meant to be a segmentation variable in Australia they somehow became one you find a group that want the same and then you see if they're all male/female old young but you start with behavior and attitudes now what's delightful about this is a few months ago a company called Future cast did a major piece of research to understand the Millennial mindset and show how it was different from other demographic groups and unfortunately they did a really good bit of research so they sampled two and a half thousand American customers aged 18 to 65 asked them 200 different attitudinal belief statements measured it and then showed how the demographics how the different age based cohorts had different mindsets here's what they found oh and they were measuring how Millennials are different on innovation purpose of course social self and accessibility here's how Millennials differ from the other groups on innovation on purposefulness on social circle the reason the Boomers are down is because most their friends are dead accessibility and self now again some of you don't have a statistics background so let me help you that's two fifths of fuck-all it's a rounding error on that scale it literally is it's not meaningful these guys set out to prove the millennial mindset and managed to disprove that it exists look they're the same they're the same ah now what do millenials want from work as you've heard from all kinds of morons all they're very different hard to manage because they come from a new digital group right Millennials in the workplace the IBM Institute of Business Valley did a massive survey 1,800 employees in 12 countries six different industries a battery of attitudinal and behavioral questions about work you know what they found absolutely nothing they're the same now they are young they'll get old yeah it's not different it's just young it's not anything different and the Harvard Business Review recently concluded on this and many other studies what while pithy descriptions of what makes Millennials unique are presented is self-evident and seem to have a ring of truth about them very few are supported with solid empirical research on the contrary a growing body of evidence suggests that employees of all ages are much alike than different in their attitudes and values at work to the extent that any gap does exist they amount to small differences that have always existed between younger and all the workers throughout history and have little to do with the Millennial Generation per se it's nonsense it's made up mythical nonsense so we're going to send Millennials straight to hell they have one advantage though anyone talking about writing about presenting about Millennials is a and doesn't know marketing it will help you identify who gets it and who doesn't Millennials don't qualify as a segment they're not the same within and they're not different without and anyone who hasn't worked that out doesn't understand segmentation and if they don't understand segmentation with respect I think there are more on so I do I think you have to question these things it doesn't stand up corporate social responsibility speaking of things that don't stand up so CSR there's a wonderful company called the reputation Institute which measures CSR every year and they create kinda like the valuation companies a top ten of the most socially responsible corporations here's the list for 2015 according to their in-depth analysis of many different variables the top 10 global CSR companies are Google BMW Walt Disney Microsoft daemon Lego Apple Intel rolls-royce Rolex okay they all have scores you can see there there they are there so this is the official ranking philosophy of the most socially responsible corporations according to the independent reputation Institute I would like to launch my new system for measuring corporate social responsibility here in Sydney today at this venue I'm introducing a completely new metric to measure corporate social responsibility I'm calling it trustworthy accounting exchange tax for short and what I'd like to do is use a long-standing way they don't normally use for market research but they do have that purpose it's a new company that is market research called the Australian Taxation Office and I'd like to share with you the how these wonderfully socially responsible corporations how they've been paying their tax for the year 2013-14 which is the last published set of figures so you ready here's the top ten let's look at their Australian corporate tax payments that's how much each of them paid in tax for the full financial year 13 to 14 Google managed nine million dollars yeah that's only 20 times what I paid right now okay daily did 50 for Apple did 74 that sounds a lot but is it really well if you look at corporate tax as a percentage of taxable income and the level is almost 30% the good news is most of them do pay their fair share but then you should look again Apple only generate 247 million dollars of income that seems a little short doesn't it but that's taxable income that's money that's registered as income and taxable they made a little bit more than that in Australia but some of it for various reasons involving island of Bermuda and the Netherlands never actually made it through our tax system in the case of Apple here in Australia they actually generated revenues of six point 1 billion dollars and those giants of corporate social responsibility managed to pay 74 million dollars in tax that year it's not as bad as America where current estimates suggest that they have managed to avoid paying fifty nine billion dollars in tax so if you look at that as a proportion their corporate tax as a percentage of total income is one to three percent now these are not random companies these are the ten most socially responsible corporations in the world that's why I'm picking on them maybe I can put it more cleanly in perspective the average Australian marketer this year will earn seventy six thousand dollars three hundred and seven dollars and what does that mean it means that by current tax levels of assuming you pay attacks properly of course means that you would pay about sixteen thousand dollars in income tax now you've got it wrong see because if you could follow these social responsible organizations and have a similar tax regime to them you'd end up paying or I don't know about fifteen hundred dollars a tenth of what you're currently paying wouldn't it be nice wouldn't it be nice it's a pity isn't it a shame we couldn't ask these socially responsible corporations to explain how they can be socially responsible corporations but not really pay any tax it would be lovely to ask the bosses of Google Microsoft and Apple whether they think there's some kind of contradiction between being socially responsible and paying virtually no tax oh I know we could because last year there was a Senate hearing on tax minimization where the three Australian bosses of Google Apple and Microsoft were asked to explain what the was going on I give you the Giants of corporate social responsibility explaining their tax payments not implying or saying that any of this is necessarily illegal behavior that's tax evasion that's a matter for the tax office but the question is and I'm sure that's been put to you before the morality of having these kinds of structures and whether there is a greater corporate and social responsibility your companies have that you're not meeting we're not opposed to paying tax what we're opposed to as being uncompetitive and because I said we have competition sitting at this table and all around the world and when I think about the morality of it I think the people who need to answer what use that right number quite frankly other people sitting on your side of the of the room and what we need to do is make sure that we're living up to that I asked you about the allegation that Professor ting has made in his submission that basically you have an international tax avoidance structure and that it's a double Irish sandwich with Dutch associations now let let me let me ask you what is a double Irish sandwich with the Dutch affiliations senator I have no idea what you're talking about oh come on and come on repeater and come here today to say that we reported all of our revenue and all of our costs I know we did ask you how much of that went overseas our net profit was 250 how much of the money we're going to seize how much of that six billion dollars is paid by Australian consumers went overseas can you please tell us that I'll take that question on notice listen to this inquiry are you serious you've come to this inquiry on on the tax minimization an aggressive tax minimization and you weren't expecting a question like that we pay for all of our product and I answer the question please mr. King how much of the six billion dollars that Australian consumers have pay for Apple products actually have gone overseas it's very simple question so we buy all of our products from international subsidiaries at an arm's length Christ you're not gonna answer that are you what I can't you you get the idea do you not it goes on now let's be clear what I'm saying those companies are not doing anything illegal what's more they're doing something very smart which is there protecting profits by not paying the full possible tax amount I would do the same thing if my accountant came to me and said I can get you legally an income tax of one percent I would take the deal faster than you can say tax minimization no question and I'd sit back for the rest of the year in my much larger armchair smoking much better cigars not having a worry about that but what I wouldn't do is get on this stage and tell you I'm so should responsible I'd keep quiet and enjoy my cigars this isn't a session about tax minimization it's about the of corporate social responsibility for companies that fail the fundamental test of it which is pay the tax that pays for hospitals roads and education pay your tax and then you can be socially responsible so I'm sending it to hell it's total and I agree with the double-a and a members okay next one heavenly or hellish we move on to zero based budget so see if my sponge is dead interesting they were invented in the 1970s by a guy called Peter fer and they're really not a marketing tool they were used as an accounting approach originally but what happened was they sort of got adopted in the 80s by some marketers and in particular their beloved of the private equity funds that would use zero base when they went into a newly acquired company an actually 3G capital put them into Kraft and Heinz when they made that acquisition not that long ago and so zero base is now a big part of the Kraft Heinz marketing approach as you may have read Unilever have adopted it as have Mandalay and now coca-cola so some of the biggest marketers in the world are using zero base budgeting to do their marketing budgets in fact McKinsey now estimates that the number of companies mentioning zero based budgeting on a quarterly earnings call is going through the roof it is coming to you if you're part of a multinational and later an Australian organization bets on the next five to ten years zero based budgeting will get introduced in your company now to understand zero based budgeting let me pause and enjoy how stupid your budgeting system is right now okay this is the market the way your marketing budget is set in almost every case it may be statistic there'll be three people in the room that don't do it this moronic way but the rest of you this is how your marketing budget is set are you ready it's a stunning piece of stupidity so it's no no it is a CFO in Sydney or more likely in zhuge or in Cincinnati takes a look at your 2016 sales your sales for this year then she looks at the kegger so you sells for this year might be on at ten million dollars then she takes a basic compound and you'll grow Freight over the past let's say five years let's say you're doing really well and the markets growing at ten percent all your cells are growing at 10 percent she applies the kegger to the 2016 figure that you're going to achieve and comes up with the fact that next year you should hit eleven million dollars then she applies what we call an advertising to sales ratio so she takes a percentage of that figure to be spent on advertising but all marketing as well let's say it's five percent of sales she multiplies five by eleven and we end up with five hundred fifty thousand dollars that's your marketing budget for next year now let's pause because this doesn't make any sense if I explain this to an undergraduate student they'd go how doesn't make any sense first of all if I already know how much money I'm going to make next year why are we bother doing any marketing instantly everything you do is a cost which is wrong yeah I've already worked out how much money I'm going to make second where does that figure come from the five percent do you know it comes from a famous database called the soma database straight out of my ass see if I was using it all the time sometimes it goes up usually it goes down there's no strategic rationale for it yeah that's a no way you love it that's how your budget was set yeah that is how your budget was set right the thing about zero base is it's better than that don't fear the zero there's been some people were so worried zero base that sounds bad it sounds like I'm gonna get no money it's you start with zero it's a much better process so zero base we're going to start with no idea how much we're going to invest into our marketing next year and I think the agencies don't like I'm not pre allocating any of the money anywhere because I don't know what I'm gonna do with my tactics cuz I haven't worked out what my strategy is yet imagine that world right I'm starting every year afresh and then you just do your job you do your marketing job properly you do your research you do segmentation targeting and positioning you set smart objectives not fluffy hell you know empty wishes you set proper smart objectives you work out what's the value of achieving those objectives in dollar terms which you can do if they're smart because they got numbers in them right very important you analyze that value because it doesn't will happen on January the 1st yeah you've got a phase or annualize the money or you'll break yourself on it and then you bring your agencies in now this is a key point that we seem to miss in Australia you finish your strategy and then bring in your agencies here so that works and then they do the tactics of your brief yeah what we don't do is what we seem to descend into Australia which is you generally bring in some agencies and mumble something about digital and Millennials and the agencies then go what the are we gonna do they haven't got a strategy man to make something up for them give them something they need something right no this is the story your agencies will give you up to six points yeah so you brief your agencies on target position objectives the agencies come back and say we could do this we think it will cost about that you pick the right agencies you present your plan to the senior team and unlike these marketing plans that just waft around in the air a good zero based marketing plan ends with two things here's how much investment I need next year and here's how much money I'll make you yeah doesn't it sound better then some and zhuge has never even been to Australia telling you you've got $550,000 and in my experience with zero base when we've put it into a client I've worked for overseas several times as many times as not we get more money in the marketing budget than less but it's done in the right way now it causes panic when I put this into clients the finance guys have a heart attack because I think the marketers are in charge of the budget the reality is most of it is still top-down this CFO has already told the street here's how much money I'm going to deliver next year and that CFO is called the MD and Australia and gone I need four hundred million dollars out of the Australian sales figures so that's all top-down the bit that's bottom-up the bit that zero-based is the marketing bit that we do we present a marketing plan and a proposal for investment and the managing director gets to play option theory with his or her marketing plans and that's the bit that works the ship plans get nothing why would we put company resources into ship plans and the good plans get what they asked for but mind you when Christmas comes they better have our money like they promised us and we get better we put ourselves in the position of delivering rather than designing ads as if we're a cost working at the behest of the finance team who see it as a cost because that's how they set our budgets zero based budgets are a great thing they go to heaven but they will challenge you to do your job properly in order to be able to deliver them coming to an end so differentiation to understand differentiation we must understand the oligopoly oligopoly by a dictionary definition is a state of limited competition in which a market is shared by a small number of producers or sellers okay we studied oligopolies for many years they're like a monopoly but there's a few more players yet three or four brands each getting twenty five thirty five percent share we know that in an oligopoly market orientation is low no one gives a about customers because everyone's winning innovation is low because everyone's doing fine without innovation competitiveness is low because we're all friends together in this beautiful healthy market ironically executive humility is also low because they think they're awesome because their gross margins and market share are fantastic even though their orientation innovation and competition is low their marketing competence is terrifying and their differentiation is non-existent cuz we're all going to get our slice now I know the word oligopoly is hard to say so there's another word we often use instead of oligopoly which is much easier to pronounce we sometimes use the word Australia we are the world formerly the world's biggest oligopoly media beer supermarkets we could go on we were the oligopoly now it's often said that nature a boars a vacuum and by the same token capitalism hates and oligopoly and in around 2008 in Australia you may have noticed this things began to change we avoided a recession that hit everyone else our dollar got super valuable actually getting a premium over the US dollar for a while and the psychological distance between Australia and the US and Europe just got smaller and smaller and smaller and suddenly they started to come Aldi Costco our top shop and they discovered it was easy to make money in Australia remember all those Australian businesses tell or you'll find it's pretty difficult mate Australia's difficult market stuff here pretty good what we do pretty good what we do make your stole you'll struggle new fashion brands you'll struggle Matt you'll struggle it's a complex for you guys in Spain Zara you won't get it because here in the window it's summer you won't get that you won't survive that that's gonna be a problem for you strategically you won't get that right that's what they said so what we saw was all these big giant companies piling into Australia making more money they could believe and knocking over our local oligopolistic much pure marketing competitors knocking them over like there was no tomorrow yeah and it was easy and it was easy and of course what's happening is it's not the don't get me wrong I love Australia Australia for the rest of my life Australian executives are as smart as anywhere else maybe smarter but we grew up in a fat lazy oligopolistic place that meant we weren't as good as our foreign competitors and these guys came in from Spain from the u.s. from Canada and they were sharp because you have to be sharp there because competition has made them sharp and they took us apart limb by limb it was like going to a fencing match and the other guy as a as a Magnum that's what it was like yeah it wasn't a fair fight what's happening now fascinatingly in Australia is some companies are getting an international level of competition and differentiation and some art and there's no better place to study over the last five years than the Coles Woolworths knife versus revolver battle that's been taking place before us you may have seen Cole's brought in a bunch of people from foreign climes with a little bit of a sharper approach to marketing and suddenly they had a hot chef yeah and a very good strategy that worked and Woolworths is a classic oligopoly player when ah well we got a chef too doesn't quite make sense well we got a chef well it will match your chef with a chef can we go back down to not having any more trouble please and then after a while Koz launched this extremely clever both animal and hormone based policy on food which gave them a genuine leg strategically in terms of their me and Woolworths when we got to kind of like something circular that looks like it doesn't really mean anything so we can kind of match what you did I please stop it now no more differentiation that's just let's just let's just all be friends now and take our our money shall we and then of course in an implement infamous place of corporate differentiation Woolworths spent you know what you know what they've got Bunnings making so much money you know what we need we needed a gigantic international DIY style store that'll sort it out for us what got us to 2008 will not get us any further the old white men these CEOs the don't think customers count you know why they think that because they came from the 1980s when customers didn't count they're not dumb people they come from a different land an oligopoly that no longer exists we have to move on and get internationally good quick and the key to it is learning to differentiate properly to walk a different path rather than matching our rivals with similar tactics differentiation belongs in heaven finally I'm conscious of time so I'm going to do a two-for-one at the end so Maslow's hierarchy of needs in Swat let's start with Maslow's hierarchy of needs you've all seen it before so invented in 1943 what is Maslow's contribution well as you know we start with physiological needs at the bottom if those are met we move to safety needs then belongingness and love needs then esteem and finally at the highest end self-actualization so what what does Maslow teaches what he teaches us for example that if I really need to take a piss I'm not so worried about how I look while I'm taking a piss I'm not making that up that's really one of the insights from Maslow or here's another one if I'm worried about the guy next to me beating my face in I'm less worried about being creative this is what Maslow teaches us it's so banal yeah now the key question is how do I use that to sell photocopies and the answer is POC now knows I'm either sell photocopies and all I know is if I need to take a piss I'm not so worried about being Co what I'm not exactly that's what it is there's nothing I'm not missing something behind the pyramid that's it right so why is Maslow in every ship marketing plan you've ever seen there's two reasons first of all the word Maslow sounds European and faintly intellectual and it's got a hierarchy and that's got to be good too the reason we use Maslow's hierarchy of needs is we got nothing else nothing else so stick in a slide 14 and pretend you know what the you're talking about SWAT SWAT so you've all done swats I've done swats I've wasted at least four weeks of my life doing swats right you know what happens right we spend a day in a knee filling out boxes on a white board yeah rarely with any data rarely with anything new to say everything is equally weighted like it's all just gonna be the same you know someone once did a SWAT of a SWAT you know you know what they discovered guess what the strengths of SWAT are none guess what the opportunities are it can fill a day guess what its weaknesses are eat guess what the threats are somebody realizes it's it's and I can prove it to you you ready you know in these days sois right no one is ever use of SWAT to do anything just waste a day you know it's the same there's no one ever sat around one of these tables filling out a swan at the end of the day gone you know what I'm looking at that SWAT and I'm realizing holy our new product launch it's a massive opportunity next year if I had to put it in that box I would have missed that man we'd have gone the whole year I thought it was a threat someone doesn't sit there and go oh I'm looking at the threat box man look at the threat box who knew our competitor was a threat to us this changes everything quick call the CEO every it never happens it's eat they are the Laurel and Hardy of marketing plants no training no concepts no idea are shoving a SWAT Lou maslow's and everything will be okay hopeless hopeless and we are sending them straight to hell so Oh one advantage anyone that's got a maslow and a SWAT and they go together like venereal disease and herpes by the way if you notice they're always together anyone who's got one of these you always throw their if you know what you're doing you got man here we go Maslow wait for it waiver all here's the SWAT very good get rid of them so this is what this is what we had at the end right so this is what originally the double AAA members chose frankly I'm pretty much aligned with you guys on except for a couple right I want brand purpose out of the heavens I think it's a distraction I think it's a trendy distraction I think there's some arguments for corporate purpose but I think for the most part it's nonsense and we need to put it in hell I think SWAT also has to join its brother Maslow down there in the flames as well I'd agree with you on differentiation in targeting 100% but I want to take zero based budget and I want to put them up there they're coming to your office embrace them they'll make you better and I want sales funnels back where they belong so they'll give you proper objectives and so there we have our heaven and hellish concepts thank you you

Channel: Australian Association of National Advertisers

Views: 25,945

Rating: 4.9047618 out of 5

Keywords: Australian Association of National Advertisers, AANA, Marketing video, Marketing tools, Australia (country), Essential Strategic Tools, Cutting the Bullsh*t, Marketing Deconstructed, Lecture 2, Mark Ritson, Advertising, Media, SWOT Analysis, Millennials, Corporate responsibility, CSR, Marketing hell or heaven, Zero base budgets, Sales funnels, Brand purpose, Differentiation, Targeting, Brand valuation, Maslow’s hierarchy, MCN

Id: 2TEgcIddxkI

Length: 69min 3sec (4143 seconds)

Published: Thu Aug 04 2016