MV newsletter - July/August 2004

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In our last newsletter, we asked people whether their premium brands or their price-fighting brands were the most profitable.

(Our argument was that it should be possible to adjust your business model to make the price-fighting brand as profitable as the premium one).

Everyone, without exception, who answered the survey reported that their premium brands were the most profitable.

They also claimed to have very sophisticated cost-assessment tools.

That was not the answer we were looking for, but it may be reality.

Models laid bare…………………

We have always wanted to set up a website called “Naked Nancy – business models laid bare!”

So here is where we start.

We were recently told that Walmart made no profits on its operations whatsoever. It flourished off the interest on the money paid into the bank as the difference between when the customers paid it, and when it decided to pay its suppliers.

A quick glance at Walmart’s statement of accounts suggests that this is something of an urban myth. Banks, on the other hand, use this trick all the time. When they could take a trillionth of a second to transfer your money, they actually deduct it from your account in a trillionth of a second, then take 3 working days to transfer it, making interest on it all the while.

The other trick used to be uncashed travellers cheques. Not only is there usually a few days’ to a few weeks’ gap between the customer handing over the cash and the bank having to honour the cheques, but something like 25% of all cheques are not cashed within even a year. Some 10% of Amex travellers cheques have never been cashed at all, as they are regarded as more reliable currency than the dodgy bank notes supplied by some governments.

Other big financial operators include The Ford Motor Corporation (which makes nearly all its profits from the financial deals incidental to selling cars) GM and GE. Most retailers are no slouches nowadays either.

Amazon has also been profiting from some alternative models recently. Nowadays, it can avoid all those troublesome logistics by hosting competitors’ offers on its site and taking commission. It is also selling its “Those who bought this also bought………..” algorithm. Why work for a living?

And Google is still peddling that old Internet model of giving away the core traffic-building services for free, and then charging for all the stuff around the side. When we initially checked out the Google Ads that you will see proudly displayed on Mud Valley, we were impressed by how well they matched what we did.

If you are interested in New Economy business models, you can do a lot worse than to visit Business Models on the web, which explores the business models of many of the recent greats, including Amazon, eBay, Google, MySimon and Paypal.

Who am I? (And do you agree?)…………..

While we hesitate to sound like the headline on a piece of spam mail, knowing who we are is not just a philosophical or psychological question.

We were recently working on some personal branding modules for a Canadian company. It had two sets of clients: the BMWs and the Mercedes.

The BMWs were 30-ish wanabes who wanted to be at the top. They seriously wanted to unbalance their lives just to get there. The Mercedes class had once been BMWs, but at 40-ish had already made it and wanted to rebalance themselves and be able to share two or more civil words with their spouses and/or children.

In both cases, personal branding we thought could help. The BMWs could sharpen their brands and ensure the achievement of their ambitious goals. The Mercedes’ could use the process to explore more spiritual values leading to a Jungian rebirth.

But seriously though, have you ever found that your life-partner or more fleeting infatuation, has launched into a torrent of descriptive purple prose (well, rage actually) about your character, and you sit there thinking “That is not me”, “That is not what I intended” and “Everything s/he is saying is totally to twist the facts” (OK, in real life, you would have split that infinitive)?

The truth is that we see ourselves one way, others see us more or less the same way, and yet others see us differently. This is the essence of branding – getting those we want to have relationships with to see us the same way, and the rest can go hang. Being hated can be good, so long as it is by the right people.

Which is why we developed our My Brand suite of tools. We borrowed from some of the all-time greats – George Mead’s “I/Me” theory, George Kelly’s “Personal Construct Theory”, “Attribution Theory” and Irving Goffman’s “Role Play” theory, but the fun is the contrast between how we see ourselves and how others see us.

We may save a few marriages, we may make a few people rich, most will walk on by, but all we really want to do is save the world.

Click here to play your part.

Walking on by…………………

Why is it that so much of the world is geared to preventing the few abusers rather than to enabling the many decent law-abiding citizens to go about their usual business of amateur tax evasion and minor traffic violations?

Entitlement laws become horribly complicated the minute someone asks “Who could take advantage of this? The decent, taxpaying citizen etc. etc……”.

In fact, we all know that most people are overly honest. There was a guy who used to leave an unguarded money box out at his garden centre because he was so bored sitting there collecting money, and nearly everyone paid him. He ended up developing an enormous business keeping lawns green and untarnished in town-by-town BlitzKrieg campaigns. Locally here, the farmers use the same principle for selling eggs, spoiled by a rather aggressive sign assuring you that if you are abusing the system “We are watching you, you bastards”.

In social policy, there are those who try to exploit the system unmercifully, but the government may also be spending huge sums of money trying to persuade the vast majority of people with legal entitlement to apply for it.

On the Net, 90% of the e-mails you receive are spam, generated by a tiny number of people using revolving names from your address book. Sending out messages to zillions of people is incredibly cheap, but is there a single person on the planet who still desires a penis extension or who opens a message entitled “Hello!” (attachment)?

Is noise where it all ends?

Or is it branding? We still trust our favourite brands to be increasingly jealous of their reputations. Their messages will still get through.

Can’t get no satisfaction from customer satisfaction surveys……….

We were recently persuaded by someone selling a key account loyalty process that you could even use such a tool on your spouse/partner.

You would scope out a number of aspects of the relationship (6-10), including finances and meaningful communications, and ask how each of you performed, whether things were improving or deteriorating, and whom you knew who did it better. For certain questions, the “Who does it better?” might be unwise, or destroy long-lasting friendships, but the principle is good.

While loyalty surveys are rarely used in a marital context, might they work in business?

At one time, many people thought so. Customer Satisfaction gurus, Customer Loyalty gurus and Quality gurus all argued like obsessives about how you might do it, but were all agreed that it was a good thing to do (their way), with thrilling results.

We would lay a small bet that most companies have commissioned customer satisfaction surveys at least once, but that very few have had thrilling results. More often they have scratched their heads trying to split the difference between the mean scores of 3.8 and 3.9, and carried on as before.

Why is this?

The gurus argue that it is because customer satisfaction is not the issue. The real prize is customer loyalty. When that fails, they declare that it is attitudinal loyalty you really need, not behavioural loyalty (retention).

Is this it?

We would argue that the problem lies with those who keep insisting that customer satisfaction & loyalty data is market research, not a springboard for customer response. How many CustSat surveys have you seen where the interviewer doesn’t sound either bored or as if phoning from another (drug-induced) planet, and where the questions have not been constructed as if by robots with a subtle misunderstanding of language?

Perhaps more critically, on how many interviews have you had a follow-up personally from someone senior in the company to acknowledge your contribution and discuss your views.

In our experience, for the supplier to take a CustSat survey seriously is extremely rare, but when they do so the impact can be significant over time.

But what happens when you suggest such an approach? “We don’t want to over-promise”, declare the young corporate executives earnestly. “And to suggest to my boss that s/he should spend all day following up a survey would not be a career-enhancing move”.

They are right, of course, and that is where it stops.

However, should you wish to use this powerful tool in the way it actually works, your career will not necessarily be destroyed after all.

Preaching to the unconverted…………….

The Customer Loyalty “Conversion” model has been around a while, but is very rarely used, again because it gets confused with market research.

The fundamentals are that it is a waste of time trying to lure away customers who are loyal to another brand. It is not that this approach will not work sometimes, rather that it is an opportunity cost. People who are loyal to another brand tend to filter out what you say, and to use it to reinforce their attitudes in favour of that other brand.

On the other hand, there are some customers of competitors who are just waiting for you to turn up and to proposition them. Most of almost any brand’s database are inertia buyers, who just keep buying the same product because no-one else has seriously suggested that they should switch brands.

Brand equity surveys can easily be used to pinpoint these people. Who are your competitors’ customers who actually prefer you as a brand? What drives them to prefer you? Where do your competitors under-perform?

It should be as simple as 1-2-3.

• Belgium tel: +32 (0)2 747 0945
• France tel: +33 (0)1 76 63 74 09
• UK tel: +44 (0)208 099 7385

or by e-mail at enquiries@mudvalley.co.uk.

© 2004, Mud Valley ™ brand marketing community.

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