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No Growth. No IPO. And a new CEO?

This week, the CEO of Eircom resigned.

We have not been told why, but the media have speculated that it is because Herb Hribar was unable to deliver a successful IPO for Eircom. The Irish Times on 20th & 24th September speculated that the IPO was postponed because Eircom, despite an aggressive approach to cost reduction but they have also fundamentally failed to grow revenues.  While the IPO may have been the reason, I agree with the Irish Times that it may have been because for two years Eircom failed to grow revenues.

So why have Eircom not grown revenues? Could it be that Eircom’s marketing has not delivered? While it might seem unfair to single out marketing, when we look at the role of the various functions within a business, it is the role of marketing to make money for the business. This is common sense and it is not just my belief, but it also supported by Prof. Byron Sharp author of How Brands Grow, Dunn and Hallsall in their book, The Marketing Accountability Imperative and Les Binet and Peter Field in their reports Marketing in the Era of Accountability and The Long and the Short of it.

I have watched Eircom reduce the pricing of their bundles from €45.00 (broadband and home phone) to a current price of €24.00 and still their revenues have continued to slide. So if reducing prices is not working and despite the use of TV, Radio, DM and door to door sales to support these reductions, why aren’t Eircom’s revenues growing?

If Eircom has some underlying problems with its product offering then that might explain it, but that can only be discovered by customers, once they have bought it. If revenues are not growing, even with the price reductions and new product offerings, it is because people just don’t want Eircom.

The question then is, how will Eircom persuade customers to want them? If I were to try and answer this, it would be pure speculation and as Sherlock Holmes said “to speculate without data is a capital offence”. So does the answer reside in the data that Eircom has gathered over many years? I believe so and I also believe and that it is also in their messaging.

So, now that the Herb Hribar has resigned, will the interim CEO take his marketing function to task and ask them to guarantee that Eircom’s marketing spend will grow revenues and deliver profitability for the company? If he’s not prepared to do this, then he too might reign over a further decline in Eircom’s revenues or he could change things and cash in his share of the €35 million that has been set aside for the group’s senior executives to share under the terms of a management incentive plan.

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Why Marketing matters.

Marketing matters. What happens in marketing determines – for better or worse – the  financial results of any organisation. Why is this so? Well, if as some of the more authoritative leaders in marketing believe  that marketings role is to make money for the business, then what is does matters a lot, a hell of a lot.

So, is marketing in its current form working? With the unnerving and seemingly unstoppable developments in social media, digital marketing, media proliferation, ‘big data’  and the competition for consumers money, marketing has more and more to contend with! But can it contend with these, using existing practices? It’s hard to say. Only marketers and the businesses they work for can answer this question. 

The only way this question can be answered is for marketers and their organisations to evaluate if their marketing spend is ‘moving the needle’ in terms of growing topline revenues and profitability. People like Prof. Byron Sharp author of ‘How Brands Grow‘ would say they are not, because they are not utilising scientific principles and laws. Marketing needs to embrace more scientific thinking in how it works. In order to do this, marketing needs to identify new models, new ways of doing things. 

So with limited marketing budgets and organisations looking to boost short-term revenues and increase long-term retention, what are they to do? Well, first and foremost, be honest and accept that significant change is required. Develop a strategy that is compelling, by digging deep and giving customers reasons to believe that they should part with their money and give it to your business. And the starting point has to be establishing the commercial and financial goals of the organisation. 

In a unique set of studies looking at marketing campaigns Les Binet and Peter Field ( see Marketing in the Era of Accountability and The Long and the Short of it), established that the primary goal of marketing and its campaigns must be profitability “campaigns that aim to increase profitability outperform all others..in the case of for-profit businesses, profit as a primary campaign objective strongly promotes success. All other objectives should be subservient to that end” ( Binet and Field 2008). 

By leveraging a quantitative approach complemented by the disciplines of ‘art’ and ‘creativity’ that are necessary in the development of effective marketing communications, will lead to increased revenues, improved market share and retained customers.  By aligning both a quantitative model and a qualitative approach to the business objectives, will ensure the future of the organisation to the benefit of its employees, customers, suppliers and shareholders. 

So the question arises, is your marketing focussed on profitability or is is being distracted by the pursuit of the laudable, but less relevant goals of what Binet and Field term ‘intermediate metrics’ or the alternative terminology ‘soft metrics’. These include metrics such as ‘brand awareness’, advertising recall and social media ‘likes’. While these are useful metrics, they do not indicate or predict the financial goals of the business. Marketing needs to begin with the ‘end in mind’. Focussing on turnover and more importantly profit, will help marketers identify the customers, media channels, campaigns and tactics that will deliver these key business objectives. 

By focussing on, as Binet and Field suggest these ‘business metrics’, which are the ‘hard’ financial facts, marketers can ensure that they take a ‘zero-based’ approach to marketing investments, whereby budgets are determined solely on the basis of the companys and brands business objectives.

This reinforces transparency and accountability in marketing spend. In addition, it will help marketing gain the confidence of the C-Suite, as marketing will be able to demonstrate that it can and does deliver revenues and is not just a cost centre. Marketing can confidently argue for budget allocations based on company objectives which, based on hard facts can help marketers avoid relying on assumptions, which according to Dunn and Halsall are unreliable and misleading  “ ..a root – cause diagnosis of many ineffective marketing programs points to a single point of failure — either poor thinking (often based on erroneous assumptions)…” (The Marketing Accountability Imperative 2009).

It is important to note that marketing cannot act alone or undertake a ‘silo’ approach to achieving the financial goals of the organisation. It has to co-operate and collaborate with all other functions in the business, from finance to IT, from sales to distribution, from HR to production. This is vitally important as all aspects of the business have a direct interest in the financial success of the business. After all its the business that pays the wages/ salaries, via the revenues it derives from customers.

I will leave the final words to one of the worlds best management thinkers, Peter Drucker

“The purpose of business is to create and keep a customer.”

X Factor “collaborative competition” and marketing.

This is a post I wrote elsewhere on November 1st.
While I was watching the X Factor last night I was struck by the judges reaction to a singer called Abi. They congratulated her on being brave and being herself in how she tackled a version of the disco hit, ‘I will survive’. It seemed to me, that she was as Malcolm Gladwell would say being an ‘outlier’. She didn’t follow the other contestants and the feedback from the judges sounded more like platitudes that congratulations.
Now, I don’t know a lot about music, but I do know that for me she did stand out and was authentic to herself. She didn’t compete with the other acts for the ‘middle ground’.
Whilst listening to her, I recalled the words of Cindy Gallop from a presentation she gave at the Dublin Web Summit 2013,  when she spoke about the “syndrome of collaborative competition” which she described as“where everyone in your sector competes with everyone else by doing exactly the same thing as everyone else, is a very dangerous thing to do, because that is what allows true innovation and disruption to come in from the outside” (Cindy Gallop speech) and this is where Abi was the outlier, she was being ‘disruptive’.
Will Abi get through to the next round, will the public vote for her, I don’t know but this got me thinking about marketing and more importantly marketing communications and for this particular blog, advertising.
It is very interesting to see how many big advertisers are all suffering from this syndrome of collaborative competition.  An example of this is in the Insurance sector, where virtually all advertising for both car and home insurance is suffering from this collaborative competition syndrome.
In car insurance they all seem focussed on PRICE (usually based on some ‘fictitious’ customer) or in home insurance getting one or two months FREE!
Think about this for a moment. Between broadcast media, print and online advertising channels they are all disseminating the same message. Is it any wonder that according to David Trott in his book, ‘Predatory Thinking’ that 4% of Advertising is positively remembered, 7% negatively remembered and 89% not remembered at all! So adding up the negative with the not remembered gives you a whopping 96%, strangely equivalent to what physicists believe is the combined numbers behind Dark Matter and Dark Energy. So, if seems as if a lot of MONEY is being wasted.
So how can marketers operating in this collaborative competition mindset rise out of it and start investing their marketing money more effectively? Well, I’d recommend that they should probably read not just Predatory Thinking, but also How Brands Grow, by Prof. Byron Sharp, Marketing in the era of Accountability and The Long and the Short of it, by Les Binet and Peter Field, but also The Marketing Accountability Imperativeby Dunn and Hallsall. Within these works, they will discover some very interesting findings and conclusions, which they can use to guide their marketing strategies.
They will see that by falling into the collaborative competitive mindset, they are wasting significant parts of their marketing budgets. Yes, I know there will be those who say that price in the current economic environment is important, but if according to some reports, that just 10% of purchase decisions are based on price, then that means that 90% of decisions are based on other criterion. And these decisions are not just based on the marketers ability to exploit channels whether they be print, broadcast, social or digital. While important, they are just channels to help marketers execute their strategy and message.
Think about this. If your strategy is based on achieving your organisations commercial and financial goals, will you compete on price or freebies? Unlikely, as every organisation has a very different set of commercial and financial objectives and marketers need to execute a communications strategy that will deliver these goals. As Les Binet says “message is more important than channels”.
So what can marketers do to cure themselves of this “syndrome of collaborative competition”? Will they develop, execute and measure a strategy that will create a message that is not-to-copy? Can they rise above the competition and deliver their commercial and financial goals and win the competition for the customers money?
So, will Abi get through to Sunday nights X Factor? I hope she does, because she will be proof that while everyone is competing for the ‘middle ground’, the best territory is won by those who are willing to be disruptive. Are you willing and ready to be disruptive in your marketing?