The UK 2017 Election: A Marketer’s Perspective

thisIn the early hours of Friday morning, the result of the UK general election was clear.  Theresa May’s gamble to try to secure a landslide majority had backfired spectacularly.  Instead of the hundred seat majority the Conservative Party were seeking, the new parliament was hung.  That means that no single party could command a majority to deliver manifesto commitments.

As I write, negotiations have begun with the Democratic Unionist Party from Northern Ireland on a pact which would allow a Tory minority government to cling on to power by its fingernails.  This probably will result in want is known as a confidence and supply agreement where the DUP will vote with the Conservatives on big issues such as the budget.  This is a weak situation.  Mrs May, or whoever replaces her as she is unlikely to survive as prime minister in the long-term, will have to constantly do deals to govern.  This will involve not only the DUP but will also mean avoiding backbench rebellions.  There is a significant moderate group within the Conservative Party who do not want a ‘no deal’ exit from the EU who will frustrate much of Mrs May’s increasingly hard-line agenda.  That group now has a prominent leader in Ruth Davidson, the Scottish Tory leader, who, in contract to her English counterpart, had a highly successful election night.  Davidson returned 13 Scottish seats for the Conservatives; twelve more than the party had achieved in 2015.  Ruth Davidson and her loyal MPs are now the power brokers within the Conservative Party and the Scottish Tories are a far more moderate grouping than the party in England.  For instance, Davidson is adamant that the UK should remain within the European Single market post Brexit.  Ruth Davidson is also gay.  She is planning to marry her female partner later this year.  She is distinctly unnerved about her party having any kind of alliance with the DUP which is anti-gay rights.

The UK is entering a period of political uncertainty the likes of which it has not seen since the mid-1970s and the minority Labour government of Harold Wilson.  In that instance, Wilson’s pact with the Liberal Party (now the Liberal Democrats) lasted eight months.  I cannot see Mrs May remaining prime minister for that long.  She now must be seen as an interim leader.  I fully expect a Conservative leadership contest by the time of the party conference season and it is highly likely that there will be a second general election either in the Autumn or in the Spring of 2018.

So where did it all go wrong for Theresa May.  Many commentators are pointing at her election campaign which has been described as the worst of all time.  That is some claim considering Michael Foot’s 1983 Labour manifesto was described as “the longest suicide note in History”.  I believe the Conservatives, and Mrs May in particular, completely misread the will of the people, they didn’t properly analyse opinion poll data (much of which was probably wrong) and the forgot all the rules of marketing promotion.

In his book, Marketing in the Public Sector, describes three key questions that need to be answered when preparing a campaign:

  1. What do you want your audience to know?
  2. What do you want your audience to believe?
  3. What do you want your audience to do?

The first question is the setting out of the specifics of your offer.  The Tory manifesto did not do this.  It was wholly un-costed.  This immediately created cognitive dissonance amongst voters as it made Tory attacks on Labour seem to be unfounded.  Labour had produced a ‘costed’ manifesto.  You cannot complain about the financial impact of one parties manifesto if you haven’t bothered to provide any evidence as to the financial implications of your own policies.

The lack of specifics in the Tory campaign was startling.  It was a campaign wholly made up of vacuous soundbites most prominently ‘Strong and Stable’; more of which later.

Mrs May also forgot her second audience.  Not the electorate, but her party and her MPs.  She obviously doesn’t believe in internal marketing.  The most prominent example of this was her social care policy, which in reality was little more than a complicated equity release scheme.  Apparently, this policy was added to the manifesto at the last-minute.  Rather than discussing this policy with her cabinet, her chancellor and her MPs, Mrs May inserted this into the manifesto on the advice of her inner circle of advisors.  When the policy was announced, it overturned a long-standing commitment and when asked about it her MPs could provide not detail.  The policy was quickly amended, making her look anything but ‘Strong and Stable’.  Rather than sharing that rather crucial piece of information with her party, Mrs May kept it to herself.  It gave the impression that she didn’t want her audience to know.

That brings us to the second question, what do you want your audience to believe?  It was absolutely clear what Mrs May wanted her audience to believe.  She wanted them to believe she was the reincarnation of Margaret Thatcher, a strong unbending leader who would be able to drive through a ‘hard’ Brexit.  To this end, the election campaign hardly mentioned the words Conservative Party.  It was a presidential campaign for Mrs May.  Her name was emblazoned all over the parties battle bus.  Conservative was in very small print on its door.  Mrs May was everywhere.  Other cabinet ministers were locked out from debate.  To this day, nothing has been heard from Boris Johnson, Philip Hammond and other senior cabinet members.  This wasn’t a British election, it resembled a personality cult; and the British electorate did not like it.

The answer to the third question is obvious.  The public were to vote for Theresa May and to give her a dominant thumping majority.  I suspect that this made many voter thoroughly uneasy.  It smacked of a democratic dictatorship where political discourse and differing views were to be silenced.  It was an Orwellian, 1984 vision.  Mrs May was big brother watching on.  ‘Saboteurs’ would be crushed. Objectors were the ‘Enemies of the People’ (both headlines in the hard right Daily Mail, a newspaper which in 1938 supported Hitler and Oswald Moseley’s fascist party of Great Britain).  I suspect this vision unsettled many Tory voters of the centre right.  The British people are proud of their democracy and the Tory campaign seemed to be riding roughshod over it.  That made many voters in the centre ground abandon a Conservative Party which appeared overly authoritarian.

In his book, Philip Kotler also gives advice of effective messages.  He says:

  1. Keep it simple
  2. Focus on citizen benefits
  3. Use words which create vivid messages
  4. Use words which are easy to remember
  5. Ensure the style and tone that fit the brand

The May campaign certainly applied the first criterion.  The campaign was little more than the words ‘Strong and Stable repeated Ad Nauseam.  If anything the message was too simple; this was a general election, not a campaign for washing powder.  It gave the impression that the Conservatives were keeping things secret; that there were horrors behind the curtains of number 10 which they did not want to get out.  The lack of any kind of detail and the vagueness of the party manifesto announcements spooked the electorate.  In fact there are many horrors being hidden from public view.  Take as an example the impact of Brexit.  It was leaked during the campaign that the government had prepared 60 impact assessments on the likely effects of Brexit on the UK.  Normally, such documents are published for consultation amongst politicians and affected organisations.  Not one of these impact assessments was released for scrutiny; which implies they hold adverse information of the effect Brexit will have on the rights of the electorate and running of the UK economy.

The manifesto also attacked the interests of target tory voters.  The Conservatives rely on the votes of over 50s.  It is the party of the affluent middle-aged and their parents.  A segment of the UK population which has done very well for itself over the last forty years.  The Conservatives ignored the youth vote during the election believing, incorrectly that ‘market segment’ does not vote in large numbers.  That was a bad judgement call and Labour were highly successful in motivating young people, particularly students to vote.

The seat of Canterbury was a fine example.  That seat has been Conservative since the 19th century.  However, it went to Labour.  Mrs May held the election during University term time, which meant that 40,000 students were registered to vote in the city.  En masse the voted for Labour and a safe Tory seat was lost.

Then, halfway through the election campaign Mrs May made her changes to social care.  Elderly people were to pay for care through property equity.  They wouldn’t be able to pass on more than £100,000 to their children in their will.  There was no cap on the amount they would have to pay for their care.  In addition, their winter heating allowance was to be means tested.  It was quickly pointed out that the social care policy, dubbed a death tax, was a licence for mortgage equity release mis-selling and fraud.

The ‘death tax’ was a direct attack of the Conservatives core target audience.  It went down like a bag of cold sick.  When it was rapidly altered, it destroyed any attempt to describe Mrs May and her close-knit team as ‘Strong and Stable’.  Her opponents had a wound at which to scratch.  Theresa May wasn’t ‘strong and stable’, she was ‘weak and wobbly’.

The idea that a prominent announcement, of a barely thought out policy, kept secret from prominent members of your party and which attacked the interests of your core voting constituency is idiotic and politically naïve.

Finally, we come to the fifth element of effective messaging, ensuring that the style and tone of the message fits your brand.  The Tory campaign completely ignored this factor.

The Conservatives ran a personality campaign.  Who do you like better, Theresa May or Jeremy Corbyn.  The answer was that the majority of the electorate didn’t like either of these options.

If you are to run a campaign on personality rather than issues, it is best to check that your candidate has one.  Theresa May is stilted, awkward and appears unable to think on her feet.  Her campaign was a series of tightly controlled press conferences and events.  She rarely met a voter, she refused face to face debates with her opponents.  She only answered questions with carefully rehearsed soundbites.  She gave the impression of being unable to think on her feet and she seemed incapable of off the cuff humour. Her appearance on the BBC magazine programme The One Show was execrable.  She came across as a mix of Hannibal Lecter and Zelda, the puppet villain from the Gerry Anderson television series Terrahawks.

Media was full of tales of factory visits where the workers were told to leave.  Late in her campaign, in an attempt to rescue her profile she visited Smithfield Meat Market where she was met by catcalls and calls of “Vote Labour”.

Compare her campaign with that of her Scottish equivalent Ruth Davidson.  Davidson is a moderate Tory.  She is a martial arts enthusiast and a lesbian.  She is quick-witted and funny.  Ruth Davidson is a human, Theresa May is a robot.  People genuinely like Ruth Davidson even if they don’t agree with her politics.  She can relate to them where Mrs May cannot.

The decision to base the Conservative election campaign on Mrs May’s empty personality, to reduce it to a personality cult and to obfuscate policy detail was a huge error and made a weak and divided Labour party look electable.

Since the election Mrs May and her coterie of extreme Brexiteers have tried to act as if nothing has changed.  It is business as usual they say.  They are spinning faster than a laboratory centrifuge.  The result has been a further advance for Labour in the polls.  Survation, the polling company who provided the most accurate prediction of the election now has Labour leading the Conservatives by six points.

Theresa May cannot hang on to power.  The coup is coming.  The enforced resignation of her two Chiefs of Staff and their replacement by a former MP who strongly supported remain in the EU referendum is a clear sign that the moderates in the Tory party are regaining control from the right of the party.  Hard Brexit is dead.

I for one am somewhat relieved by the election outcome.  Yes, things are complex and there will be many difficulties ahead but the prospect of the most damaging form of Brexit, which would have belittled the UK as a nation and which would have meant extreme hardship for the least able in the country is much less of a possibility.  In fact, once the details of the effects of Brexit on the UK economy start to leak out; and they will; the whole rotten concept may be abandoned completely.

 

 

What determines your advertising spend?

Determining how much you are going to spend on your marketing communications can be a difficult process.  It is difficult to quantify precisely the amounts needed to complete all the required tasks.  Communications budgets do not fit neatly into accounting practices.  The diversity of communication’s tools available makes it difficult to allocate spending appropriately.  the budget setting process can be less than clear-cut.

There are four main sets of stakeholder in the setting of communications budgets:

  1. The organisation
  2. Communications (advertising) agencies
  3. Media providers (TV companies, publishers)
  4. Production and fulfilment houses

There can be difficulties in the appropriate allocation of budgets between these parties.  Difficulties can be both political and financial.  For example, is your digital marketing spend the responsibility of your marketing team or is it overly influenced by IT professionals who know the technical detail?

Increasingly, in the modern world, there is audience and media fragmentation.  There are now hundreds of television stations, not the three or four of the 1970s.  This means smaller audiences.  In the 1970s it was not unusual for audiences to be ten to fifteen million.  Now an audience of 5 million is seen as high.

Consumers have changing priorities and increasingly, due to the worldwide web, there is a global perspective in marketing.

Over the decades, several methods of assessing communications and other marketing budgets have been developed.  These are added to traditional unscientific methods used in small businesses.

  1. Marginal Analysis – Which compares promotional expenditure with sales and profit margins.  The aim is to find the point where marginal revenue is equal to marginal costs.  At this point profits are maximised.  At a certain point promotional spend does not cause a further increase in sales,  After this point, profit margins will fall because of promotional saturation.  There are many issues with marginal analysis.  It doesn’t take account of your competitors’ reaction to your promotional expenditure.  It assumes that your products are evenly distributed across your market. It also assumes that communications are the only factor affecting sales.
  2. Arbitrary – This is often known as ‘chairperson’s rules’.  The boss sets the communications budget of gut feeling.  Budget is allocated on a guess.  Budgets are allocated ‘on the hoof’.  No attempt is made to consider need, strategy or environmental changes.  No budgets should be set in this way.
  3. Inertia – Communications budgets are always the same.  There is a failure to respond to market and environmental challenges.  Again, this is not a way to set any budget.
  4. Media Multiplier – This recognises changes in the cost of media charges and inflation.  Budgets are changed to account for increases and decreases in these costs.  Such a strategy assumes that marketing strategy never changes.
  5. Percentage of Sales – Communications budgets are set as a percentage of past sales or expected sales e.g. Communications budget is 5% of turnover. This can be a backward-looking strategy and can make no account of sales potential.  The result can be a limiting of your performance.
  6. Affordable – This is often seen as a sophisticated method relatively free of risk.  Each unit of output is allocated a share of the cost of production and a share value-added activity costs such as packaging.  An allowance is made for profits.  What is left over is spent on communications.  This is often used in companies which are product not customer focused.  If your market fluctuates it can be a vague calculation.  It can also lead to new opportunities being missed.

Quantitative approaches to budget setting include:

  1. Objective and Task (often referred to as Zero Budgeting) – The resources required to achieve each objective are determined.  The costs of each of these resources is aggregated to form an overall budget.  The focus of management is the achievement of goals.  Sophisticated monitoring and feedback mechanisms need to be developed.  What is often missed is a strategic focus.  Objective and task can be good for individual campaigns but bad in terms of overall strategy.  It can also result in regular ‘bun fights’ for budget allocation and cause resentment amongst the staff of different departments.  It can be a disaster for staff morale as resentment between teams can develop.  Often Payout Plans need to be developed where two or three future revenues and costs are estimated to ensure budget expenditure is recouped.  Sensitivity analysis is also used to peg back expenditure because costs are larger than expected or sales develop too slowly.  This leads to objectives being changed mid-stream and strategies altered to reduce the payback period.
  2. Competitor Parity – You spend the same percentage of overall budget on your communications as that of your competitors.  This assumes that everyone in the market is the same and that everybody has the same strategy.  You are not necessarily comparing like with like.  This can lead to a ‘me too’ attitude to marketing and it ignores qualitative aspects of communications.
  3. Advertising to Sales Ratio – where you take account of your market share in your advertising spend.  This assumes a direct correlation between advertising and sales.  It also assumes that you can calculate the overall promotional spend of the market as a whole and of your competitors.  By comparing your communications spend to the market average, you can assess whether you have economies of scale or if your communications are working harder for each pound spent.  A/S ratio can be a valuable indicator as to overall communications spend but not the value of individual campaigns.
  4. Share of Voice – This method is commonly used by marketing professionals.  Basically it is a measure of who shouts loudest in the market.  It measures your share of advertising spend (Adspend) as a percentage of what is spent in your market as a whole.  It is often combined with market share.  Where share of voice and share of market are equal, equilibrium is achieved.  In such circumstances, when communications spending is increased, the market share will increase; and vice-versa.  A useful calculation is to compare your share of market with your competitor’s share of voice:
    1. If both are high, the best strategy is to spend on communications to defend your market position
    2. If your competitor’s share of voice is high, but your share of market is low, it is best to find a niche position, to decrease advertising spend and find other ways to promote your products.
    3. If your competitor’s share of voice is low and your share of market high, you need to hold your position and moderate your advertising spend to maximise income.
    4. Where both are low, there is the opportunity to attack your competitor’s market position through adspend and take advantage of growth opportunities.

Where Share of Voice is greater than Share of Market, investment brands are defined.  These may be new products or products in the growth stage of their lifespan.

Where Share of Voice is less than Market Share, there is opportunity for profit taking.  These may be mature brands and cash cows.

In assessing share of voice, it is important to note:

  1. That new products often require higher communications spending than long-established products.
  2. That smaller brands often have smaller profit margins than larger competitors due to economies of scale and the requirement to have a higher proportion of adspend to sales.
  3. That large brands are often milked for profits and their share of voice is regularly smaller than their market share.

Marketing success is often measured through Share of Voice as opposed to budget size.  It also has to be remembered that a large proportion of communications spend is used to retain a market position rather than to attract new customers.

In determining the appropriate level of communications spend, you need to take account of:

  1. your organisations structure, strategy, direction and values
  2. your available financial resources
  3. the activities of your competitors and wider market conditions
  4. The economic confidence of consumers and retailers
  5. Your required level of product development and your marketing objectives.

The setting of communications budgets needs a strategic approach.

Going Beyond Porter’s Generic Strategies

Recently, I was fiddling about with my car radio and I caught the long-running Radio 4 soap opera, The Archers.  This tale of ‘everyday country folk’ has been running since World War Two.  It was set up as a vehicle to give the farming community advice on farming practices.  The agricultural content has diminished over the years but the show still retains an agricultural consultant and often storylines debate current issues with the UK country scene, such as ecology (the Grundy’s have accidentally loosed their pigs onto a site of special scientific interest) and disease outbreaks (a recent breach in biosecurity has spread disease across several herds of cattle).

In the episode I caught, Pip Archer, who works for an agritech company was speaking to her father David about the use of satellites to monitor the application of fertiliser.  This conversation reminded me of the work of Professor Malcom Macdonald at ICI’s Fertiliser division in the 1980s.

At the time of Professor Macdonald’s work with ICI, no fertiliser manufacturer in the world was profitable.  Fertiliser was seen as a generic product sold on the promises of price and increased yield.  The marketing approach was the same to all farmers.

Professor Macdonald examined the farming community and found that there were seven types of farmer and that using these types to segment the market, greater sales could be achieved.

The farmers in the Archers exemplify three of the seven types identified by Professor MacDonald.  Brian Archer is the tech farmer interested in the most modern farming techniques and the application of new technology.  For instance, he has recently purchased a drone so he can monitor his fields from above.  Pip’s talk of applying fertilizer scientifically using satellite technology directly matches his high-tech approach.

However, if Pip was talking to Tony Archer, Brian’s brother, it is unlikely that the technological approach would work.  Tony’s approach to farming is that of the eco-farmer interested in preserving nature and using organic methods.  If Pip was selling a fertilising system to Tony, the best approach would be to talk up the green benefits of the product and its low impact on the natural world.

Brian Aldridge, a friend and confident of the Archers is a different kettle of fish.  Aldridge is a traditional, ‘if it ain’t broke, don’t fix it’ farmer.  He is after the best deal possible and focuses on the best yield for the least money.  If selling fertiliser to Brian Aldridge, Pip would be best to highlight the value her products offer.  If she speaks about ecology or technology, she is unlikely to make the sale.

Michael Porter described three generic marketing strategies, cost focus, differentiation and niche.  He also states that following several of these strategies at the same time can result in a firm sitting in no man’s land and wasting marketing spend.

A big company like ICI can afford to spend on a differentiated strategy.  They can afford to spend on different marketing mixes to attract different farming segments for their fertilizer products.  Small producers cannot.  Small traders are often left with a niche strategy as they cannot meet the volumes required for a cost focus strategy or the extensive budgets needed for a differentiated strategy.

Rather than trying to attract David, Brian and Tony, their approach may only be to sell to one of the segments, the eco-farmer, the tech farmer or the yield-focused farmer.

However, even with niche marketing, there may be an overall issue to be addressed.  All three of the Archer’s farmers want the same thing.  They want to maximise their income and reduce the running costs of their farm.  They simply disagree as to how this should be done.

So if following a differentiation strategy, the solution to the problem may start in the same way.  I have never met a farmer who will willing waste money.  It is the emphasis of how they use money that will alter.  David will want a technological solution so he does not waste fertiliser.  Brian will want a traditional answer.  Tony will want an eco-friendly way of getting the best-bang for his buck.

So each segment identified can be broken down into micro segments.  The prime motivation of the segment may be the same but the message must be tweaked for each micro-segment.

Car firms do this by creating ideal customer profiles.  These can be very detailed listing the ideal customers family make-up, their job, the stage of their career, where they live, their hobbies, etc.  A range of these ideal customer profiles are created for each market segment and the marketing mix tested so that different attributes can be highlighted to different micro-segments.