Organisational Buying Behaviour and Selling To Local Authorities

Too many small businesses do not differentiate between selling to businesses and selling to consumers.  They assume that there are no differences as to how organisations and the public buy goods and services. The failure to take account of organisational buying behaviour leads to many small businesses assuming that selling to large organisations is too difficult and they  concentrate solely on consumer segments.

I have discussed the four Ansoff market growth strategies several times in this blog.  Ansoff prioritises market penetration as the easiest strategy to grow your presence in the market; that is selling more of your existing products to your target market segments.  Ansoff then argues that once there are no more opportunities for market penetration, the next least risky strategy is one of market expansion; selling your existing products to new markets.  Market expansion could mean expanding your sales geographically but another perfectly plausible strategy is to sell your existing products and services to organisations.

However, business and organisational markets segment differently to consumer markets.  This difference is driven by the nature of organisational buying behaviour.

Consumers often make purchases on the spur of the moment.  They often take the decision to purchase as individuals.  Organisations tend to have structured buying procedures which are followed for the majority of purchases.  The bigger the cost and the risk of the purchase, the more likely that strict purchasing processes will be followed.

It is rare for organisational purchases to be made by an individual.  There will be a group of people behind an organisational purchase.  Where a group of people are involved in a purchase, there will be formal and informal power dynamics.

Marketers call those in an organisation involved in a purchase a Decision-making Unit (DMU).  Within a DMU there are six main roles:

  • Initiator:  This individual identifies the issue that must be overcome by the decision to purchase a product or service.  When I worked in Trading Standards this was one of my roles.  I was responsible for the maintenance, calibration and replacement of the services metrological and testing equipment.  I also had to procure the services of test laboratories for formal and informal samples of food, consumer products and fuels.  With regard to the purchase of equipment, which could cost thousands of pounds, I may have identified the need to purchase, but I could not make that purchase on my own volition.  I had to refer the purchase to a group of senior managers.
  • User:  This is the person who will actually use the product or service after it is purchased.  This could be the initiator or it could be other members of staff.  For example, an IT manager may identify the need for new copywriting software but it will be the firms marketers who will use that software.  Many organisations have implemented quality assurance systems such as Kaizen.  A feature of such systems is that staff, through suggestion boxes or quality circles identify where processes could be improved.  In such systems process improvement may mean the purchase and design of new equipment.  So in such circumstances, the user will also be the initiator.
  •  Buyer:  Many organisations will employ a professional buyer to purchase everything from office equipment, IT systems to raw materials and production equipment.  Often large organisations have central purchasing units who carry out the vast majority of purchases in bulk and from a central location such as a head office.  Professional buyers will negotiate the best price for bulk purchases and they will work from detailed technical briefs.  These technical briefs will be created by other members of the decision-making unit.
  • Influencer:  The influencer is a member of the decision making unit who does not directly make the decision to purchase or the decision as to which supplier to use; but they have a major impact on the decision.  This could be an employee of the organisation who has expert knowledge.  So the health and safety manager of a firm may influence the decision to buy machinery by advising the DMU of the law with regard to safety requirements and compliance with legislation such as the Electricity at Work Regulations.
  • Decider:  This is the person who actually makes the decision to purchase.  This could be a senior manager such as a firms managing director or in many cases, the finance director.  The greater the importance of the purchase, the more a senior figure in a firm will be involved with it.
  • Gatekeeper:  These individuals determine the flow of information that reaches the decision-making unit.  Secretaries, executive assistants and PAs often act as a gatekeeper to their busiy bosses.  Technical managers may have a preference for one supplier over another, e.g.  an IT manager may prefer Apple products over those of Microsoft.

The size and make up of the decision-making unit will depend on the size and nature of purchase.  If a company is buying new production line robots, the DMU will be significantly larger than the decision to buy a photocopier.

Organisational purchases can be classified in terms of their level of risk:

  • Routine Order Products:   These items are bought on a regular basis and are unlikely to cause performance problems regarding their use.
  • Procedural Problem Products:  These products will require some level of staff training for their use.  There may be some resistance to these products as staff resent the change to their daily life.
  • Performance Problem Products:  There are risks that the product or service purchased will not meet users’ requirements.  This issue often occurs with the implementation of new technology.
  • Political Problem Products:  Such issues occur where a purchase takes resources from one area of an organisation and gives them to another part of the organisation.  So if a business makes a high value investment in IT and that purchase takes budget from the sales team.  These purchase decisions will likely cause political strife within an organisation.  They can lead to accusations of empire building and arguments about status between managers.

Members of a decision-making unit will often act in their own self interest as well as in the interest of the organisation.  Self interest can get in the way of the aims of an organisation.  Such issues can develop when there are different incentives for different parts of an organisation.  So if an investment means that the sales team may receive lower commission rates, there may be resistance to it.

Local authority purchasing displays all the characteristics of organisational buying behaviour but there are additional considerations.  Many local authorities employ central purchasing units and have expert influencers on purchasing decisions.

Local authorities, by law, must follow best value protocols.  The definition of Best Value is often confused with a requirement to accept the lowest bid; particularly in these times of austerity where local government budgets are squeezed.

Best value does not mean a focus on the lowest bid.  Higher bids may be accepted if they offer more in terms of functionality.  So if a laptop computer is more expensive, but it has more memory and better pre-loaded apps, that may be better value to the authority than the cheaper equivalent product.

Best value protocols require local authorities to obtain multiple contract bids for products and services.  There will nearly always a competitive bidding process.  The need to obtain competitive bids can be ignored only if there are exceptional reasons for doing so. 

For example, one of my roles as a TSO was to obtain the services of expert witnesses and test laboratories.  If I believed that a particular expert or laboratory could provide exceptional value, I could ignore competitive bidding.  I often did this where a product neeed to be tested and I knew that evidence for a criminal trial would require a particular expert opinion.  I often preferred one laboratory because I knew that the court evidence would be provided by the chair of the appropriate British Standards Institution panel.

For large scale of expensive local authority purchases, it will be the case that the decision to purchase will be taken out of the hands of managers and would be taken by a committee of councillors or even a full council vote.  In such circumstances purchasing decisions can become fractious with opinions falling along party lines or even splitting between political groups within the ruling administration.

When entering organisational and B2B markets it is critical that you do your homework.  You need to carefully examine bid specifications.  You need to research the decision-making unit within the organisation and target your marketing activity on those group members who have the most influence on the decision to purchase.  You also need to work hard to get your promotional effort past gatekeepers.

Integrated Marketing Communications

Over the past couple of years I have kept a keen eye on recruitment advertisements for marketing staff in my local area.  Many of these advertisements are wholly focused on digital marketing, in particular social media account management.  It seems that many businesses in my area see social media as the main plank of their marketing activity.  I suspect that they view social media as a cheap and easy way to market their business, often at the exclusion of more traditional marketing communications channels.

I also meet many individuals who offer services as social media account managers on a freelance basis.  Often these individuals are good at the physical operation of social media platforms.  Often however, they fail to grasp the strategic goals of social media use.

Now there is no doubt that in certain markets social media is an important marketing communications channels.  If your target audience is consumers under the age of 40, and you are selling fashion or digital gadgets, social media is a perfect channel to deliver your marketing messages.  If your target audience is pensioners or you are selling to a business audience, your use of social media has to be different.

I have also found that many of the local businesses using social media channels do not do so strategically.  They have no underlying goal as to their use of social media beyond advertising their goods and services.  They do not measure the outcomes of their social media use.

Social media has yet to be shown to be a good sales channel.  Before using social media, you need to understand why you are using it as a marketing channel and you need to measure usage against predetermined goals.

The main of social media in marketing is not to directly advertise products.  It is a two-way communications channel.  You use social media to:

  • Retain existing customers by moving them up the relationship ladder (from prospect to advocate or partner)
  • To emphasise your Brand identity (brand personality)
  • As a signpost to your website or to your physical locations
  • to develop electronic word of mouth

Recently, I have seen recruitment advertisements for marketing staff from firms operating in business to business markets.  Again, there seems to be an over-riding need to use social media.  Yet the target audiences for these businesses tend not to be individuals but discreet buying groups made up of a number of people who take purchasing decisions collectively.  Social media tends to be communication from one individual to another, not an individual seeking a group to make a collective decision.  Again, there is little evidence that social media is an effective channel in such circumstances and the use of more traditional marketing communications channels may prove more successful.

It is also misleading to think of social media channels as a cheap and easy communications route.  To use social media effectively, often takes greater physical and  financial resources than traditional marketing communications channels.

So if you are tempted by claims that social media is the answer to your marketing communications delivery, beware.  Before jumping on the social media bandwagon, examine your target audience, define the purpose of your social media use and set clear goals and don’t expect miracles.

Over recent decades marketers have focused on perfecting mass marketing; selling highly standardised products to the masses.  As a result they developed mass communications techniques to supports such strategies.

Companies would spend large quantities on mass media advertising, television or print.  A single advertisement was able to reach millions of readers or viewers.

In recent years, marketing communications have changed.  In fact the media industry has changed.  Promotion has becomes the most altered part of the marketing mix.

Marketing managers have had to face the realities of the changing promotional and media landscape.

Consumers are changing.  We live in a digital connected world where consumers are better informed and they are communications empowered.  The recent Fake News crisis shows that consumers can be targeted almost on a personal basis and messages can be designed to fit with their preconceptions and beliefs (even if those preconceptions and beliefs are not true).

Consumers no longer rely solely on information provided by retailers and manufacturers.  They can easily find other sources of information through the internet or through their peers.

Consumers can connect more easily and as a result peer pressure may form a greater element in purchase decisions.  Consumer ‘tribes are fragmenting. This has created micro-segments in markets

Marketing strategies are changing.  Mass markets have fragmented.  Firms must now use focused micro-segmentation strategies.  This has resulted in a move away from mass marketing strategies.  Products are increasingly personalised.  Henry Ford may have said of the Model T, “you can have any colour you like as long as it is black’.  Compare that to the modern mini or the Brompton bicycle where consumers can ‘build’ their car or bike from a vast range of product options.  The Mini has over 1600 product options from in-car accessories to choice of wheels.  This means virtually every Mini that comes off the production line is unique.

There has also been a move away from one-off sales of products to using marketing communications to develop a relationship between the producer and the consumer.  Customer retention and customer advocacy are key.  Often the aim is to turn consumers into brand advocates.

There have been sweeping advances in communications technologies.  From mobile smartphones to interactive televisions.  This communications revolution has had a huge impact on marketing communications.  The dominance of traditional media is collapsing.  Newspaper circulation figures are falling.  The wide range of television channels means audience numbers are declining.  A prime time television programme in the UK would often gain an audience of 12 million in the 1970s.  In 1989, the BBC cancelled Doctor Who with an audience averaging 7.5 million.  Today, such a size of audience is seen as high and the programme considered a hit.

So now the modus operandi of marketing communications professionals is to use a broad selection of more specialised and highly targeted media to reach smaller customer segments.  This involves the creation of more personalised and interactive messages.  It is less broadcasting and more narrowcasting.

Increasingly consumers are in control of media exposure.  For example some video streaming services offer the opportunity to skip advertisements.  TV advertising is still a dominant channel in terms of media spend but such spending has stagnated whilst promotional budgets have shifted to new media channels.  Advertising spend in radio and print advertising has fallen sharply.

We have moved from a position where advertising is force-fed to consumers as a mass and interrupts their activities to a position where marketing communications interact with smaller groups of consumers.

Regardless of your choice of communications channel, the key is to integrate media in a way which best communicates the brand message and which enhances consumer experience.

Marketing communications is no longer simply placing advertisements.  You are managing brand content and developing conversations with your customers over a fluid mix of communications technologies.

The result is that you need to integrate marketing communications across a range of communications channels.  Failure to do this produces a hodge podge of communications to consumers which do not provide a single marketing identity.

Consumers today are bombarded with messages.  Marketing professionals may differentiate between different channels, e.g. social media, television, print, direct mail, but consumers do not.  Your promotional activity needs to present a single consistent message. A single broad image or concept.

You cannot send out one message and signal in print media which is different from the message and signal given by electronic communications.  Mixed signals from different media blurs brand perceptions in the minds of consumers.

The challenge for communications managers is to bring together brand concepts and messages across media channels in an organised way.

This is where the concept of integrated marketing communications comes in.  IMC requires the careful blending of communications tools to create a compelling, clear brand messages.

Brand messages and concepts are no longer in the sole purview of marketing departments.  They take place at every interaction between a firm and its customer base, from sales presentations to after-sales service and complaint management.  They are the responsibility of all stakeholders in a firm.  You need to identify all the customer touch points with your organisation.  Each of these is an opportunity to convey your brand identity and message to consumers. Careful coordination of your brand message is required throughout the organisation.

You need to think not just of the message you want to convey but the best method to get that message to your target consumer.  You also need to define the unique role each function of your business has in passing on your brand message to your customer base.

SOme readers may see a contradiction between the goals of integrated marketing communications and my views on the use of social media.  I see no such contradiction.

My complaint is not that firms use social media.  It is that all too often it is seen as a magic bullet.  A simple and cheap way of meeting promotional goals.  Yet far too many businesses treat social media as a form of mass marketing communication.  They use the old rules of promotion in a new media.  They fail to take account of the changes in society and technology.  Most importantly of all, they fail to set identifiable goals for social media use and they fail to measure whether those goals have been met.

Customers

In the nineteenth century, retail entrepreneurs such as Henry Gordon Selfridge popularised the mantra, ‘The customer is always right’.

As a trading standards professional with over twenty years experience in dealing with consumer complaints this is a statement I can categorically state is not true.  Customers are often badly in the wrong.

I prefer a variation of the mantra which states, ‘The customer is king’.  This amendment puts the customer in their true position.  Customers are the most important stakeholder in any business.

In business, the customer is the name of the game.  They are the source of your income and profits.  They are the reason that your business exists and survives.

To survive in business, you need to know what your customers want and who they are.  But customer needs change, as do their expectations and habits.  Market segments are in a constant state of flux.

To thrive and succeed in business you need to know more than what your customers want.  You need to internalise customers needs and wants and you need to commoditise them.

What you must not do is:

  • assume you know better about what customers want than they do.
  • think you know what they ‘ought to want’.
  • hope that customers will want what you have decided to make.
  • fail to care what consumers want because you have sales targets and you’ll be able to find someone to offload products to.

So you need to know exactly what customers want.  Except that is an impossible task. Often customers don’t know what they really want. This is a position clearly exposed by the current Brexit debate where supporters of the UK leaving the EU have vacillated between various different definitions of Brexit from a fictitious ‘world trade deal’ under WTO rules, to a ‘Canada Plus Plus Plus’ super-duper trade deal, to having the rights of EU membership without the costs.  Ask three Brexiteers as to their chosen Brexit ‘product’ and you will get three different answers.

However, even if it is impossible to know exactly what consumers want, you can reduce risk of customer indecision by carrying out market research.  You ask customers what they want, you don’t guess.  Again Brexit is a case in point. If a market researcher surveyed consumers over two variants of a product and the result of that survey was 52%/48%, the research would likely be treated as inconclusive and in need of repetition.

Market research is not marketing research.  Market research is examining the composition of markets, customer needs and wants, etc.  Marketing research is the examination of a firm’s marketing activities and its ability to access markets.

Market research is not easy and you’d be amazed what some senior managers in business have said about it:

  • “We’ve never done it”
  • “Qualitative research is too touchy-feely”
  • “How do you find out what customers themselves do not know”
  • “This organisation works on numbers; not loose concepts of ideas”
  • “The market research agencies we use don’t do that type of stuff”
  • “Sorry, the finance people won’t buy it”
  • “”Product managers hold the research budget and they have sales targets”
  • “Spending money on that hits our profit centre”.

Market research done properly informs management decision-making.  It is not a substitute for creative or professional decision-making.  Again there is a parallel with Brexit.  Many members of parliament say they personally oppose Brexit but that, because the majority in their constituency was to leave, they must obey the instruction of that majority. But such an attitude is not the role of MPs.  Members of Parliament are representatives, not delegates.  Their role is not to obey instructions, it is to use their own good judgement and to make decisions on the basis of the facts placed before them.  That role, to paraphrase Burke, is based on three duties; first, to do what is good for the country; second, to do what is good for constituents and third, party organisation: In that order and where the first duty predominates over the other two.

Similarly management decision-makers have a duty to do what is good for those who hold shares in the business.  That duty may conflict with the results of market research.

Like scientific and pseudo-scientific methodologies, market research has limits of error and when making decisions these limits of error must be carefully explained.

Market research is not an end in itself.  It is simply a method of reducing risk.

So who are your customers?

Customer knowledge is the biggest asset your organisation has.  Like any asset, you need to know it, maintain it and maximise the returns from it.  To do this you need to develop a robust Marketing Information System which can be used to;

  • analyse data for trends and changes
  • gives understanding behind the reasons for changes in customer behaviour
  • and which supports the marketing skills of your organisation and which allows you to do something about the changes in consumer behaviour you have identified.
  • Identifies what consumers buy from you and from your competitors.

It must be remembered that customers do not buy product features; they buy benefits or solutions to their problems.

Remember:

  1.  A product is what a product does;
  2. Customers just need to get things done;
  3. They need products to do those things;
  4. People don’t want a washing powder, they want clean clothes.

So don’t just measure sales data, measure the needs and problems of consumers which leads to those sales and which motivate purchases.  Does your firm measure more than basic sales data?

What benefits do customers seek?

Good marketing is not doing what you are good at but doing what your customers want you to do.

To meet that challenge, you need to find out:

  • What your customers wants and needs are.  The problems they need to solve and the jobs they need to do.  You need to find out where consumers ‘hurt’
  • What your customers need and want from you.  What they believe you can do for them, what they believe you are capable of offering; compared to what you actually can offer; and what they believe you are incapable of delivering.
  • What will your customers need in three months time, a year’s time and in five years’ time.

These are deceptively easy questions which are incredibly difficult to answer.  However, you need to know the answers to those questions in order to know:

  1. Where to put the money for maximum return
  2. Which customers do you want to invest time and money in.
  3. What products and services you need to develop.
  4. What products do you need to divest from or put on hold.

The really pertinent questions you need to ask consumers are:

  • What will the purchase and use of our products do for them and how will it affect a consumer’s status amongst their peers?
  • What will other people think of the consumer by their use of your products and services?
  • What will the consumer enjoy about their use of the product or service; or the result of such use?
  • Will consumers enjoy the relationship created with the producer through their purchase of the product? And will they want to maintain that relationship through repeat purchases?

 

Brand Architecture

Your choice of brand architecture has a strong influence on your organisational structure and your corporate marketing strategy: it affects how your organisation operates.

When you are developing a brand, someone in your organisation must meet the definition of a brand master; that is an individual who ensures that there is the necessary cohesion across your organisation’s divisions and territories to ensure the brand’s success.

The more a company moves to the position of a ‘branded house’, the greater the amount of cohesion required.

A brand master looks after brand values, not just the physical attributes and functional characteristics of the brand.

Developing a brand architecture is a critical responsibility of the brand master and other senior managers in your organisation. So what are the different types of brand architecture?

The Product Brand Strategy

This is the traditional ‘House of Brands’ approach.  An organisation’s products and services have individual brand names and brands have uniquely identifiable facets. Facets include brand symbols, logos, concepts and statements.

In the product brand strategy a brand name is associated with a single product.  The brand distinguishes that product from others in your range.  The brand has its own significance and meaning. It has exclusive positioning in the market.

An example is the Accor group of hotels.  The group has numerous hotel brands including Sofitel, Ibis, Suit Hotel, Formulae 1 and Motel 6.  Each brand has a unique identifiable market position.  Consumers may actually find it difficult to identify that each of these hotel chains belongs to the same corporate group.

In the extremes of the product brand strategy, a brand has an exclusive market position. The brand is its own market category. The product is so specific and unique that there is no other name for the category than that of the brand. The brand may be protected by patents and other intellectual property rights.

Usually in such an exclusive position, brand extension can only be achieved through reformulation of products.

A product brand strategy has the following advantages:

  • If your business is focused on one market segment, it is a strong offensive strategy with the aim of market domination
  • It is a strategy which allows each of your products to occupy different market segments with specific needs and expectations
  • It is a strategy to consolidate market share by becoming a category leader.
  • Your corporate name becomes discrete, if not hidden.  The focus is on brands, not your corporate identity.
  • The strategy can be used by innovative brands looking to pre-empt a market position i.e. to be the first brand in a new market or segment.
  • A unique brand identity helps consumers perceive brand characteristics
  • A product brand strategy allows risk-taking as the risks associated with one brand do not infect other brands in an business’s portfolio.
  • It allows a firm to dominate shelf space at retailers leaving little room for competitors and new entrants.  Think of your local supermarket cereal aisle, how much space is taken by Kellogg’s products?

However, there are drawbacks to a product brand strategy, predominantly economic drawbacks.

  • A product specific brand strategy can be expensive and it is not for the faint-hearted or businesses with tight finances.
  • It is a strategy which offers increasingly narrow segmentation options and which hinders rapid return on investment.
  • Often high sales volumes are required to justify the costs of the strategy.
  • It is not a suitable strategy for small or saturated markets.

The product brand strategy requires firewalls between brands.  These firewalls prohibit the development of a halo effect where the reputation of one product or brand does not assist the reputation of others in the brand.  Economies cannot cross brand firewalls.

The Line Brand Strategy

This is a variant of the branded house approach where a single brand name is used for products in different categories. One consistent and coherent response is used across market segments.  An example is L’Oreal Studio line, where the brand covers a range of hair products from shampoos and conditioners to hair gels and waxes.

The line brand strategy is often the result of successful brand extension.

There are multiple advantages to the line brand strategy:

  • It reinforces the selling power of a brand.
  • It facilitates further brand extension
  • It reduces launch costs of extension products
  • There can be a halo effect where the reputation of existing products in the line is transferred to new additions to the line.

However, there are also disadvantages.  in particular there are limits to brand extension strategies.  Extension products should have a clear link to existing products which is understandable by target consumers.

Range Brand Strategy

This is the strategy used by firms such as Campbell’s Soups and Black and Decker power tools.  All products are linked through a core brand principle, the brand concept.

Range brand strategy has the following advantages:

  • It avoids a random spread of external communications concentrating focus on a single brand name.
  • It creates brand capital across a range of products.
  • Consumer messages are concentrated on core products but the concepts contained in those messages can cross to peripheral products in the range.
  • A range brand strategy can make it easier to distribute new products as retailers and wholesalers trust the brand’s existing reputation.

A range brand strategy has the following disadvantages:

  • It increases brand opacity as the number of products in the range expands.  Consumers can feel that there is less choice available in the market
  • The range brand strategy can dilute a brand identity and can lead to the need to devise intermediate brand identities.  Findus, the now defunct frozen food brand had such an issue which led to the development of its Lean Cuisine, Gourmet and Seafoods intermediate brands.

Maker’s Mark Strategy

Brands such as Laughing Cow and Bel cheese use a maker’s mark strategy.  Often such a strategy derives from a historical symbol used to identify the products of a specific manufacturer of a generic product.  The brand relates to the manufacturer, not the product.  The oldest trademark in the world, the Bass Brewery red triangle began life as a mark used to identify barrels for collection at Taverns.

Endorsing Brand Strategy

Firms such as General Motors use an endorsing brand strategy.  General motors owns several brands of car including Pontiac, Chevrolet and Buick.  But the GM brand is used to link these entities at dealer networks.

In this strategy the main brand promotes consumer choice whilst the endorsing brand assumes a secondary, supportive position.

An endorsing brand strategy allows freedom of movement as brands are introduced or dropped from the corporate portfolio.  The endorsing brand may have less equity than the individual brands but it can evolve a powerful image capable of being recalled by consumers.  It can be an economical way to give substance to a corporate identity and a way of ensuring technical assurance for a brand.

Often the Endorsing brand strategy involves the development of a brand hierarchy:

  1. The endorsing brand is a quality guarantee
  2. The individual brand concept creates a specific promise
  3. The brand creates distinction, personalisation and even pleasure.

Umbrella Brand Strategies

The flexible umbrella brand creates a single brand level where products are given separate identities.  Apple uses such an approach where desktop computers are Macintosh; Laptops are Macbook, tablets are iPad, music players are iPod and mobile phones are iPhones.  An umbrella brand can cover several product categories and give a unified identity to a highly diversified range.

Inflexible umbrella identities gives subsidiaries a significant amount of autonomy.  This can be useful when looking to capture market share.  The brand is a corporate identifier not a product specific mark.  For example, the Mitsubishi trademark can be found on cars, electrical goods and even ships.  Communications are based on product attributes and advantages. The umbrella brand may appear distant and cold.  The brand identity can be diluted.  With luxury brands, an umbrella brand identity can communicate common attributes to consumers.

To align umbrella brands, there is often the use of a ‘Masterbrand’.  This appears similar to the endorsing brand strategy but in this case the parent brand dominates.  This is a branded house approach where the Masterbrand provides a frame of reference and sub-brands align to embody the Masterbrand.  The prototype Masterbrand was Nivea where a wide range of branded products is collated under a single concept; love and care.

A Masterbrand structure can create significant market power and economies of scale.

Source Brand Strategy

This strategy is similar to an umbrella brand strategy.  In this strategy the over-riding brand is more than a simple endorsement.  It is the brand which holds sway and which gives individual products a seal of approval. It is a strategy often used in the perfume and fashion markets e.g. Polo by Ralph Lauren or Jazz by Yves Saint Laurent,  However there is a danger that a source brand may devolve to become an endorsing brand.

A source brand can give a sense of difference and depth however the need to reflect the core identity of the brand gives strict boundaries that make brand extension difficult.

 

More on Organisational Culture

A few blog entries ago, I discussed the issue of organisational culture and how business and marketing planning can be affected by the culture of an organisation.  Organisational culture is a critical element in the success of business plans so I have no reservations in returning to the subject.

So how do you recognise the dominant culture in your organisation?

Well, as discussed in previous blog entries, there are several factors to an organisation’s culture including:

  • Organisation’s purpose and goals;
  • The external environment;
  • Organisational policies;
  • Rules and procedures;
  • Organisational structure;
  • Employees skills and attitudes:
  • Use of technology:
  • Decision-making mechanisms:
  • Communication channels:
  • Societal norms.

Organisations get into difficulty when they try to impose an organisational culture over pre-existing cultural norms.  A good example is when American banks opened offices in Spain.  The banks tried to enforce the American working day (usually 8 am to 6 pm) on their Spanish employees.  They ignored the Spanish tradition of the siesta.  The banks soon found that employees were falling asleep at their desks.  This had nothing to do with the staff being lazy.  In Spain, the working day is different.  Most people in Spain start work at around 7am.  They stop work at noon and go home for the siesta.  They then return to work at 4pm and work through to 7pm.  Most Spaniards eat their evening meal at around 10pm.  Then they socialise, either with friends or at a local club or bar.  They usually don’t retire until after 1am.

The Spanish pattern of life means that the hottest part of the day is avoided.  The workers at American banks worked an eight to six-day, but outside work they continued the hours expected in Spanish society.  Not having the siesta meant they were collapsing with tiredness.  The American banks had to change their working hours to meet Spanish culture.

In creating business and marketing plans, you need to ask some probing questions:

  1.  Is your organisational culture represented in your mission statement; the over-riding statement on the direction of your business and its purpose?
  2. What are the symbols of your organisational culture?  Who/what are your organisation’s heroes, rituals, values?
  3. What are the core values that define your organisation?
  4. Do your managers have cultural awareness? Do managers know the likely effect of organisational culture on the rules, procedures and technologies you want to implement?

The sociologist Charles Handy describes four generic types of organisational culture:

  1. Power Culture: Control emanates from the centre. Organisations can be very political but also very entrepreneurial.  Power from the control of resources and personal power predominate.  Often power is in the hands of a figurehead (who may not be the nominated head of the organisation).
  2. Role Culture:  This is the classical organisational culture and can it can be bureaucratic in nature.  Roles are more important than people.  Position power predominates; expert power is tolerated.  Culture serves the power of the structure.
  3. Task Culture:  The focus is on completing the job at hand.  Expertise is valued and predominates.  Personal and positional power is also important.  A unified focus on the task means collaboration and teamwork is highly valued.
  4. Person Culture:  The organisation is a loose collection of individuals, usually professionals, who share common facilities.  The individuals own goals dominate.  Power is not an issue and the culture serves the need of individuals.

We can all think of examples where the four organisational cultures described by Handy exist.   His power culture reminds me of many UK businesses in the 1970s where power over the organisation’s direction existed with union and staff representatives rather than nominated managers; Many local authorities and central government departments exhibit role culture;  The arrival of Japanese car makers in the UK shifted the industry to a task culture; an organisations such as medical practices, barristers’ chambers, architectural practices have a person culture.

Following Handy, there has been significant subsequent research into organisational cultures.  Hofstade found that cultural differences were often exhibited within the practices of competing organisations rather than the values of those organisations.  He found that cultural practices had six dimensions:

  1. On an axis between process orientation and results orientation where culture is focused on means at one end of the spectrum and the culture is focused on results at the other.
  2. On an axis between employee orientation versus job orientation; where the concern is for people at one end of the spectrum as opposed to task results at the other end.
  3. Parochial versus professional: do the members of the organisation see themselves as individual professionals or are they simply another cog in the machine, part of an organisational group?
  4. Open social system versus a closed social system: Is the organisation open to newcomers or does their arrival raise suspicions? Is the organisation inward-looking or does it have an external view.  Is the organisation secretive or is information open to all?
  5. Local control versus tight control from the centre:  Are strict observance to matters such as costs and timelines required or is there a more relaxed attitude to such issues?
  6. Do you have a narrative or pragmatic approach to customers?  Do you always require strict adherence to rules or will you bend them to meet the needs of customers.  Do you impose a strict code of ethics or is it flexible to meet the wants of customers?

Turner (1997) described four organisation types based on person focus or task focus; egalitarian attitude or hierarchical structure:

  • Incubator:  Such organisations are person orientated and egalitarian.  These organisations dislike hierarchies and prefer role equality.  Spontaneous relationships develop and creativity is engaged.  This equates to Handy’s person culture.
  • Family:  These organisations are people-oriented but hierarchical.  |There is a culture of paternalism and power is exercised through members of the organisation rather than over them.  This model equates to Handy’s power culture.
  • Guided Missile:  Egalitarian but task-orientated.  Such organisations thrive on successful teamwork and problem-solving.  Members of the organisation have pride in themselves and their professionalism. Equates to Handy’s task culture.
  • Eiffel Tower:  Bureaucratic where tasks and roles sit within a defined hierarchy. Hierarchical but task-orientated.  Relates to Handy’s Role Culture.

“The organisational architect must take account of the informal culture; the norms, values and behaviour patterns that employees collectively support and believe in” (Mumford)

Cultures evolve over time and therefore they can be shaped.  Culture is often a response to organisational problems.

If you are intentionally trying to change an organisation’s culture leadership is key.

To successfully change an organisational culture the following tactics are key:

  1.  Recruit like-minded people
  2. Socialise to instil and sustain ideologies
  3. Use cultural communications in your internal marketing
  4. Use resource allocation the mould culture
  5. Set clear criteria for rewards and discipline
  6. Examine your structure.  Is it a good fit for your desired culture?
  7. Look at your building design.  Are staff in an open plan office or are they hidden away in separate offices creating a silo culture.  Do managers sit amongst the staff or are they hidden behind security doors on the fifth floor?
  8. Describe your desired culture in your mission and goal statements.  Use these statements to form a belief system which provides basic values and a common direction for the organisation and its employees.

 

Finding and Communicating a Market Position

To develop a strategic marketing plan, there are a number of stages.

  • You need to analyse the environment in which you will operate.  This is the wider macro-environment of politics, economics, societal trends, technology, environmental concerns and legal concerns.  It is also the micro-environment represented by Porter’s five forces model of organisational stakeholders – competitors, suppliers, staff, stakeholders and new entrants.
  • You need to analyse the internal operations of an organisation, its skills, resources and capabilities.
  • Once you have analysed the environment, you need to analyse the market.  You need to examine where market gaps exist and you need to confirm that those market gaps can offer sustainable competitive advantage.
  • You then need to analyse the consumer base of the market.  Who buys the products in the market?  What is their spending power?  What are their expectations and perceptions of the market?  How will their needs be satisfied?
  • Only once you have carried out all this analysis can you develop you’re preferred market position.
  • Once you have decided on a market position and you design a marketing mix aimed at meeting the consumer need whilst fitting the competitively advantageous market gap.  And remember, the mix is two-pronged; it has to be able to compete against other market players; but it must also defend your place in the market.

Crucial to the development of a marketing mix and its associated communications strategy is the development of a positioning statement which fits your chosen integrated marketing objectives.

A positioning statement must be clear and concise.  It should clearly state what your brand stands for and differentiate your offer from that of competitors.

There are two approaches to a positioning statement:

  1. A functional statement which clearly shows brand benefits, e.g. Gorilla Glue is the strongest adhesive on the market
  2. An expressive statement – which shows the ego, social and hedonistic satisfactions of a brand, e.g. Smirnoff vodka being the spirit of choice for party people.

In managing positions, you need to:

  • Determine the positions of your competitors: using tools such as perceptual mapping
  • Examine the position of a focus brand in a market (the market leader or the brand with the greatest share of voice; the brand which consumers will use to evaluate your offer).
  • Confirm that your desired market position is feasible.  Can you defend it, do you have the resources to achieve it and will it offer sufficient returns in the long-term?
  • Develop your positioning strategy
  • Implement your marketing mix and communications programme to achieve the desired market position
  • Continue to monitor consumer perceptions so as to evolve with the market.

There are three broad approaches to developing a position based on the market, the customer profile and the appeal of the brand.

From these three basic approaches a range of strategies can be developed.  Often there is a need to develop a hybrid approach using one or more of these strategies.  Examples are:

  1. Product Features:  This is a commonly adopted approach.  Examples include Dyson promoting vacuum cleaners on the basis of improved suction or the Halifax promoting the ease of making small payments with their debit card.
  2. Price/Quality:  Again a commonly used approach.  Examples include Aldi advertising how much you can buy in their stores compared to buying branded goods at other supermarket chains (for no apparent loss of quality).  Price itself can be a good indicator of quality.  Sainsbury’s used to advertise using the slogan ‘Good Food Costs Less’; Stella Artois Lager is ‘Reassuringly Expensive’.  An Audi car costs more than the equivalent Volkswagen despite both brands sharing hundreds of components.
  3. Use: Informing consumers as to how a product should be used. For example, Readybrek was ‘Central Heating For Kids’, a nutritious hot breakfast for winter mornings.  Kellogg’s are currently trying to reposition Corn flakes as not a breakfast cereal but a snack food which can be eaten at any time of day.  Belvita is doing the opposite and trying to make biscuits a breakfast food.  After Eight chocolates are the wafer thin mint to finish off a dinner party. Wash and Go is the shampoo that is quick and easy to use and suitable for people with busy lifestyles.
  4. Product Class Dissociation:  This position is often taken in markets which appear humdrum or boring.  It is often used where competitors have taken all available positions.  You disassociate yourself from your competitors.  So if you produce margarine, you compare your product to butter, not other margarines, e.g. I Can’t Believe it’s Not Butter.  You compare your brand to a higher quality offer.
  5. User:  You position yourself by clearly defining target users.  So Sheila’s Wheels was car insurance specifically for women drivers.  Often celebrity endorsements are used as a shortcut to defining the user.  Hence the proliferation of fragrances which use the names of pop stars.  Sports endorsements often try to link brands to users.  Nick Faldo used Mizuno golf clubs, Tiger Woods links to Nike, Justin Rose uses TaylorMade, etc.
  6. Competitor:  You position yourself against your main competitor.  Pepsi uses its ‘taste challenge’ to directly place itself against Coca Cola (and does so without naming Coke).  Avis Car Rental ‘Tries Harder’ i.e. is better than Enterprise.  Qualcast advertised their lawn mowers as ‘A lot less bovver than a hover”; a direct comparison to Flymo.
  7. Benefit: You position your brand by proclaiming a benefit.  So Sensodyne toothpaste reduces or eliminates sensitivity from hot and cold foods. Voltarol gel relieves pain and allows you to be active.
  8. Heritage or Cultural Symbol:  Some brands use coats of arms to indicate heritage (although this can be a risky tactic as UK heraldry bodies regularly prosecute for the misuse of heraldic symbols).  Bass beer’s red triangle is the oldest registered trademark in the world.  Lyle’s Golden Syrup and ‘From Great Strength Comes Forth Sweetness’ is a similarly long-lived brand.  Many businesses state ‘Established since’ in advertising.  Kronenberg 1664  lager uses the date in the brand name to indicate longevity. These dates and symbols infer permanence and depth of experience.

Whatever position you choose, it must be supported and expressed across your communications and across your marketing mix.  You must be consistent.

If you promote a high quality position, your product and service quality must be better than your competitors.  Land Rover markets a position as a tough off-road access all areas vehicle, yet they also have a reputation for mechanical faults. Land Rover’s position has often differed from the experience of consumers. A troubling situation.

If you are promoting a position of exclusivity, that will directly affect your communications mix.  You will be less likely to use sales promotion and advertising will be in carefully chosen publications.  Your messages will infer affluence, particularly visually.  A family car will be shown being driven down a local high street; A luxury car will be shown motoring in the Cote D’Azur and arriving at an exclusive restaurant or nightclub overlooking a marina of luxury yachts.

Dimensions of your position must be relevant and important to the target audience of your communications.  Image cues must be believable and considered credible.

Market Positions must developed over the long-term if they are to prove effective; but they must also be flexible enough so as to cope with changes in the market environment and consumer expectations.

Often it is necessary to reposition a brand within a market.  Technology means that consumer tastes are changing rapidly as is their behaviour.  Market positions therefore must evolve at an equivalent pace.  technology also allows new substitute offers to proliferate.

Market positions are frequently being challenged in the minds of consumers.  If your position has strong foundations and it is continually reinforced; if your position can be communicated by clear, simple messages, there may be little need to change your original market position.  otherwise, situations will arise where you will need to reposition.  This may be as a result of market opportunities and developments such as takeovers and mergers.  Buyer preferences change.  This may make an existing position untenable.  Repositioning will therefore be necessary.

Repositioning is difficult, and risky, but it can be successful.  often consumers have entrenched positions as to brands.

To reposition successfully, the old market position needs to be suppressed so that consumers no longer relate to it.  Consumers also need to learn the new position.

These two processes can be complimentary as by weakening the old position you can reinforce the new position.

 

The Challenger Credo

Business is about competition.  It is therefore often compared to sport.

Take the Premier League in football.  You have leaders, teams which year after year compete for the English title.  These are teams like Manchester United, Liverpool, Chelsea and Arsenal.  If they do not win the league, they usually obtain the qualification spots for European competitions.

Also in the league, you have ‘Strivers’.  These are teams who are competing not to get relegated.  Their goal is survival.  Some succeed and stay in the league another year: Others fail and exit the league.

There is a third category of team in the league.  These are teams who look to challenge the established order by becoming one of the league leadership group.  In recent years such teams include Watford, Leicester and Bournemouth.  Often these are teams previously seen as unfashionable but which have received significant financial power through a new billionaire owner.

In business the term challenger is often used to describe businesses ‘in the middle of the league’.  Such a general description is an incorrect definition of the concept of a challenger firm.  There is more to being a challenger than being ‘of the middling sort’. Being a market challenger is as much a state of mind as it is a statement of intent.

I can think of sport’s clubs who are happy to maintain a mid-league position.  Owners want a club which breaks even financially and meets its role as a form of entertainment but who do not want to incur the significant costs associated with being in a leadership position.

Similarly there are businesses who do not want market leadership as being a leader costs in terms of defending that position.  Being a market leader is often not a position in which profits can be maximised. It costs to be a leader.

To be a market challenger, is to have ambitions which exceed your conventional marketing resources.  This means being strategically and tactically bold to overcome the resource gap.

So what are the core challenger characteristics?

  1.  Challengers embrace intelligent naivety.  They do not accept the historical norms of a market or its traditional process models.  The rules written by others aren’t the challenger’s rules.
  2. Challengers build a ‘lighthouse identity’.  They take and communicate their own position and they are clear where they stand on issues affecting the market.  They project that sense to target consumers like the beam of a lighthouse.
  3. Challengers take thought leadership of their category.  Apple isn’t the leader in the mobile phone market; Dyson aren’t the leader in the vacuum cleaner market; but both these companies lead their sectors in terms of design and thought.
  4. Challengers create symbols of re-evaluation.  They seek to continually shake up the consumer’s view of the market or brand category.  So Apple and Dyson continually add functionality and features to their products which alter the consumer’s expectations of the category.
  5. Challengers are willing to sacrifice.  Rejection isn’t the fear of challengers.  They fear indifference.  Be willing to sacrifice that which does not present a strong position to your target audience.
  6. Challengers are willing to over-commit to build a market position.  This over-commitment could be in the form of guerrilla marketing or to go a step further than your competitors to gain a market foothold.
  7. Challengers use PR and social networks to enter social culture.  the use of communications is strategic.
  8. Challengers become ideas-centred.  they need to continually come up with new ideas to keep their presence fresh.  They don’t do the same thing over and over again.

Research has shown ten potential challenger narratives.  These are:

  1.  The Feisty Underdog:  This is the classic challenger narrative.  It’s David versus Goliath.  It is often the position of the initial market disruptor.
  2. The Peoples’ Champion:  Challengers can develop a market position where they are seen as fighting to make the consumer the real winner.  They fight against the market’s ‘cynical fat cats’.  Take the mobile phone network Giff Gaff as an example.
  3. The Missionary:  These challengers want to bring a new way of thinking to a market category.  An example is The Body Shop which promoted natural and environmentally sound cosmetics manufacturer.
  4. The Democratiser:  This is the Robin Hood challenger wanting to take from the few to give to the many.  For example, H & M, the fashion retailer looks to give high fashion looks usually only available to those who can afford designer prices, to the mass market.
  5. The Enlightened Zagger:  These are challengers who divert from the cultural current in a market.  When competitors ‘zig’, they ‘zag’.  This is a brand by opposition to expected norms not matching the propositions of others.
  6. The Real and Human Challenger:  These challengers are clear to show that there are people behind the brand, not just AI and algorithms.  They promote human to human communication.  They aim to make a human and emotional connection.  There is personal commitment to quality and service.
  7. The Visionary:  These challengers aim to transcend the category.  An example is Whole Foods, the American grocery chain which uses the vision statement “Whole Foods, Whole People, Whole Planet”.  This statement reflects the triple bottom line of People, Planet, Profit. That business is more than the aggregation of wealth.
  8. The Next Generation:  These challengers look to get consumers to re-evaluate the market.  Tesla are an example as it gives an image of the future through alternative energy production and electric vehicles.
  9. The Game-Changer: These challengers offer a significantly different proposition that changes the market.  Such challengers have included Airbnb, and budget airlines such as Ryanair.

As challengers often lack the resources to compete against market leaders head on, they have a duty to be flexible, fleet-of-foot and imaginative.  As the  nuclear physicist Sir Ernest Rutherford said or UK scientific research, “We have no money, therefore we are obliged to think”.