Who is losing influence at a boardroom level?

Do i still believe this?

An old colleague has recently caused a stir in Ad-land with a WARC paper on the death of the creative planner (behind the paywall). It reminded me of the following essay that i wrote back in 2013 for the IPA excellence diploma. It scored me my only “distinction” (Merit overall) and the feedback was that it caused a lot of consternation with the markers (overwhelmingly creative side) who disagreed vehemently. One thing i do know is that its a well constructed paper (if i do say so myself) and remarkably well sourced…

In hindsight, and knowing what the old IPA ex markers used to like (controversy or metaphor) maybe i’d have been better placed extending this as my “future of agencies/branding is…” essay. Nevermind! ( i did write about a new model called BrandEQ based on Golemans concept of Emotional Intelligence instead but i’ll save that post for later)

Anyhow, this is a long read. I’m not sure whether I agree that Media agencies/groups are still in pole position or that it matters. Maslows hammer has become remarkably prevalent whilst media owners have taken up the creativity mantel (often media agencies just brief out and then “rate” the ideas which is pretty uninspiring and completely short sighted) amongst other structural issues but i thought i’d share. Its a long and ongoing debate and the fact its still being had 7 years after i wrote this suggests the future is slow in coming… Have fun!

“The loss of agency influence in the boardroom of clients is widely mourned by those who remember how it once was: how and why has this come about and what practical recommendation(s) would you make to re-build influence in the modern era.”


Multiple factors are presented that demonstrate that  agencies (plural) have not seen a multi-lateral decline in influence and that in fact media/comms agencies have seen their influence in the board room rise in the “modern era”.  Combining learnings taken from shift in the balance of power and added to the practical application of decision-making theory at every level of the industry, the agency world can deliver what business requires and maximise their influence in the boardroom.

Why media/comms agencies already hold the keys to influence in the boardroom

“We’re math men not mad men” – Sir Martin Sorrell 20130

Vizeum MD Richard Morris has just returned from introducing the new CEO of Burberry, Christopher Bailey, to Dentsu management in Japan.  My senior IKEA client acknowledging that Vizeum are lead agency on his business.  In 2009 working for Walker media on KFC, I alone presented the comms approach to the senior franchise board.  The rapid blurring of the line between media and transaction and the gradual automation of digital creative across all media including such strongholds as TV and Outdoor, all these small examples (I could name dozens more) are, I believe, examples of a shift in the balance of power and influence within the agency/marketing services world.

I disagree that agencies have seen a multilateral decline in influence.  I believe that in fact ad agencies are gradually losing influence whilst at the same time media/comms-planning agencies are establishing a greater say in the boardroom.

Why this is my belief, in summary

I believe this can be traced back to the mid-90’s and the emergence of digital media as a viable communications platform1.  This shift has been accelerated by subsequent developments in the science and understanding of communications, the value and accountability of media, the emergence of BIG DATA and the convergence between media and transaction.  I believe the latest neuroscience and decision-making research provides an intellectual platform that explains this process and also provides the theoretical rigour upon which I base the predicted success of my additional recommendations to increase agency boardroom influence.

My essay provides answers to the following 2 questions

  1. What factors have enabled comms planning agencies to increase their influence at a time when ad agency influence has declined and what can be learnt from them?
  2. How do the latest decision-making learnings help deliver innovation at every level of the industry in order to build agency influence?

What factors have enabled comms planning agencies to increase their influence, at a time when ad agency influence has declined?

I believe that we are in the process of a changing of the influence guard. Understanding the drivers of this process is key to understanding what agencies must do now and in the future to elevate their influence.

I believe there are 2 drivers that explain this shift and provide learnings

  1. A broadening of remit 
  2. A focus on accountability

Media/comms planning agencies have benefited from a structurally driven broadening of remit

The establishment of frameworks such as POE2 and signalling theory3, the importance of context as the key driver of association4 and the convergence of media and transaction5 all establish the intellectual & functional foundation that have enabled media/comms planning agencies to justify and deliver upon a wider remit.   

This remit puts media/comms planning agencies in the perfect place to advise clients on the increasingly fragmented nature of not only media, but also all the agencies that provide specialist channel advice.  These developments justify the media/comms agencies place as the expert in creating strategy, identifying roles and responsibilities and managing the communications touchpoints from end to end, from on-pack, to shopper media, to online search to traditional TV.  My experience is that increasingly media/comms planning agencies are looked to for advice in bringing POE channels together to provide a fully integrated solution for clients.  In the “Golden era” (1950 – 1980) of agency influence this role was held by the “account man” of a full service ad agency.   Essentially the orchestrating role has shifted!6

Media/Comms planning agencies have focused on accountability

A great representation of the “empirical science” blind spot from an ad agency point of view comes from Rory Sutherland who suggests that the industry is very conservative and tend to behave like ostriches, acknowledging the “lion” of new thinking but sticking their heads in the sand rather than actively dealing with the issue7.   

An example at a more micro level is the presence of less than 25% of the current IPA excellence intake coming from ad agency backgrounds.   If this truly is the “MBA OF BRANDS” then surely ad agencies need to ensure their best and brightest understand the needs of the board and how to elevate their influence.

So why have media/comms agencies naturally gravitated to this area and seen their influence grow? I believe the reason is straightforward, media/comms planning agencies own the investment8.  They buy the media and therefore are regularly challenged to justify the value of this investment at every level within the organisation especially at board level.  

This constant justification has for example led to the purchase of D2D by Aegis9 and the establishment of specialist OpCo’s such as Mediascience10across media land.  In addition their analytics departments are mushrooming in size as boards cry out for help with understanding and managing BIG DATA11.  

Influential books/articles on the science and maths of branding and advertising12 have been utilised (in my experience) primarily by media/comms agencies as they typically discuss the effectiveness of planning touch-points and investment13.  Boardrooms thrive on predictions of effectiveness and models of future performance and with this understanding of the mathematics it is the media/comms agencies that are more comfortable delivering in this area with a few exceptions14.    

This change of affairs betrays the origin of the account planner as a researcher, comfortable with statistical analysis and quantitative proof.  It’s worth asking the question “If Stephen King worked in agency land today would he sit on the communications planning side?”

In this vein you would be hard put to find a media/comms agency not talking about physical and mental availability15, applying the SOV vs. SOM16 relationship and ESOV ratio to budgets setting or planning investment using econometrically built demand curves and ROI hierarchies of performance.  Recent commercial developments like that between Aegis and Sandbox17 and the Vizeum “like” project18 show that communications agencies are focussed on developing further expertise in putting science, maths and the true value of communications at the heart of what they do.  

This approach in applying scientific rigour to marketing communications has begun to breed confidence and influence in the boardroom their takeout being that there is a real understanding of the value of this media investment and what it adds to shareholder value19.  Those that own and apply this knowledge i.e. media/comms agencies, are those that are growing in influence.  In essence media/comms agencies have by accident or design begun to communicate in a manner that delivers upon the implicit and explicit goals of the board20.

So far I have shown how and why I believe the balance of influence has shifted between ad agencies and media/comms planning agencies, how they have benefited from developments in the understanding of how communications work and how through the ownership of the accountability agenda media/comms agencies have implemented an improvement in the language and therefore lines of communication between them and the board.

There is more to be done and innovation is the key

The answer to increasing influence already exists and whilst accountability is key, recent research21suggests that to truly to increase influence in the boardroom, agencies22 need to demonstrate innovation23 as well.

This combination of innovation and accountability should come as no surprise!  In fact, Ian Priests IPA presidency is based on the commercial creativity24 agenda!  However despite the work of the IPA and isolated examples throughout ad land25, it is notable as shown, that the accountability agenda has been taken up and driven primarily by the media/comms planning agencies.

Delivering innovation to clients

Just as I believe and have shown how fulfilling the boards implicit and explicit goals26 supports why media/comms agencies have succeeded in owning the accountability agenda.  I will now show how further elements of the decision-making literature can be applied to deliver and communicate innovation to increase boardroom influence.

Innovation can have many meanings, I prefer a broad definition

“Innovation is the application of better solutions that meet new requirements, inarticulated needs, or existing market needs27.”

How do the latest decision-making learnings help deliver innovation at every level of the industry in order to build agency influence?

I believe that innovation should occur at 4 levels 

  • The individual level
  • The agency level
  • The group level 
  • The industry level

At each level I will show how through understanding and applying the latest communications theory we can deliver innovations to improve our clients businesses.

Level 1 – How physical and mental availability can drive an individuals true understanding of a clients businesses

How can agencies deliver better solutions if they don’t understand the current client needs?  E.g. less than 10%28 of agency people read their clients company reports!  To help improve this understanding I propose the wholesale return of the agency secondment29 or at least a regular agency residency within our clients businesses.  This increases the physical and mental availability30of agencies and business towards each other, combats the “them and us”31 view and generates true understanding of the client business challenges and how they make money.  

Since the P&O team at Vizeum have taken to spending one day a week working at the clients office we have seen our NPS scores rise significantly, whist feedback has specifically mentioned increasingly relevant and innovative strategic recommendations.  To implement this effectively their needs to be an open and honest discussion about agency remuneration, no longer can individuals’ time be allocated over 100% as client placement demands focus of service.

Level 2 – How agencies should change their implicit signals 

Signalling theory32 shows that most communication is at the implicit level.  Better solutions from a Boardroom perspective require functional, demonstrative action plans that are easy to understand, they require the confidence that their investment is being spent wisely and effectively and they need to know that risk is being managed but not to the detriment of new thinking.  A review of any board level document shows that better solutions come from clarity of communication and a focussed approach to strategies that can be proven.  Overlong PowerPoint presentations and unnecessary, unscaleable innovation33 betray a lack of business understanding, whilst a lack of conviction in terms of business outcomes does not inspire the confidence required34.  

In order to remedy this state of affairs I suggest the application of three simple process innovations that implicitly communicate directly to board requirements.  

  • Utilise the 10-slide presentation35 or PechaKucha36 approach
    • The best ideas are always the simplest.  This approach forces agencies to concentrate on a simple understandable strategy that can be easily implemented brilliantly
  • A mandatory “This will deliver….” page
    • Communicates confidence, effectiveness and forces rigour
  • Applying the 70:20:1037 approach to innovation to every challenge
    • Reinforces confidence in risk management and establishes the principle of consistently managed innovation, testing and learning38

Level 3 – How at group level loss aversion puts “agency skin in the game “

A criticism often aimed at agencies is that they deliver solutions and then walk away already concentrating on the next deliverable39.  Delivering true innovation can come from a radical approach to the agency model.  This recommendation is based on the theory of loss aversion40moving agencies from mere suppliers to owners and/or distributors too.  If business knows we have “skin in the game” then Boardrooms are likely to take more notice as we begin to share in the risk or our recommendations.  

The Dentsu business model provides a template that can and has elevated agencies from mere suppliers.  Dentsu invest not only in media buying but go further up the chain to invest in entertainment rights and talent management, which they then sell to clients and non-clients.  They effectively move from poachers to gamekeepers.  This fundamentally ties Dentsu into making a success of these rights not only to allow them to benefit directly but also for their clients business.  Dentsus’ presence on client boards in Japan41 and SE Asia is testament to the success of this model and having bought Aegis for over £2b they are keen to roll this model out into the rest of the world.  What could be more innovative than an agency network buying the rights to broadcast the World cup in Russia42 or competing with BSKYB and BT for the next tranche of Premiership rights? 

Level 4 – How industry level collaboration can promote WYSIATI*

Ian Priests ADAPT agenda43 is a great first step in reinvigorating the client/agency relationship whilst promoting creative commerciality; however I believe the right audience still isn’t being included. We need to step beyond the marketing sphere and include those non-marketers at board level engaging these key stakeholders in the process.  As these senior stakeholders become exposed to our thinking, perceptions can be changed instilling the Kahneman principle of WYSIATI44 so that the whole agency world benefits from this reflected glory.


The essay question makes an assumption that agencies (plural) have lost influence in recent years.  I disagree and believe it isn’t as simple as that, I have shown that in fact, media/comms agencies have increased their influence, aided by understanding the power of context, frameworks such as POE and the convergence of media and transaction but; most of all from the desire to prove the value of media in achieving the explicit and implicit goals of the boardroom.   These developments set out the new base level of client expectation that other agencies should look to learn from.  

However, more is still to be done to facilitate innovation for our clients, whether through greater understanding, better delivery, agency offering or improved client relationships in order to further elevate the influence of agencies in the boardroom.  

The future is bright, we have the vocabulary, we have the techniques and we have the answers, we must now apply and not ignore them.


  • http://www.beet.tv/2013/04/wppsorrelll.html “Research, plus direct marketing and digital-well over half of our business is scientific or science-related. The rest is what you might call pure art and big ideas” – Sir Martin Sorrell 2013
  • The first clickable web ad was served in 1993 whilst the first ad-server platform was developed in 1996 http://en.wikipedia.org/wiki/Web_banner
  • http://www.google.co.uk/trends/explore?q=paid+owned+earned#q=paid%20owned%20earned%2C%20paid%20owned%20earned%20media&cmpt=q
  • The application of the biological principle of signalling and the communication of brand intent via body language.  Exploiting the Implicit, Pete Buckley, (2012) http://www.mecglobal.co.uk/what-we-think/publications/strategy/exploiting-the-implicit/
  • The associative machine. Thinking fast and slow, Daniel Kahneman, (Penguin, 2011) and Framing, the “autopilot” frames our experiences, Decoded, The science behind why we buy, Phil Barden (Wiley, 2013)
  • The digital world has facilitated the convergence of the consumption of media and the ability to purchase.  In 1-click consumers can see an item advertised and purchase it in an instance.  This powerful engine of change shifts the onus of media from an advertising device to a distribution and sales channel, elevating it to a directly attributable business channel
  • Whilst acknowledging the “decision architecture” theory of Sustein and Thalers Nudge.  Nudge, Thaler and Sunstein (Penguin, 2008), this term most directly references the work of Nick Hirsts experience architects. Nick Hirst, Why experience architecture is the future of planning, (ADMAP, 2012) and the conclusions of  datamine 3 Kate Cox, John Crowther, Tracy Hubbard and Denise Turner, IPA dataMINE, New Models of Marketing Effectiveness – From Integration to Orchestration, (WARC, 2011)
  • The record of the marketing services community to what seems to be a Copernican revolution in the behavioural sciences has so far been notable by its absence.  The past reaction to earlier work by Ehrenberg, Jones, Stephen King and so on – which challenges assumptions with real empirical evidence – suggests that marketers may do what they usually do: show great interest and appreciation of this new information, before carrying on doing what they have always done” Taken from the foreword written by Rory Sutherland in Decoded – The science behind why we buy, Phil Barden (Wiley, 2103)
  • Media agencies were after all created after being flung out of full-service agencies in the 1980’s to provide an independent view on investment, separate from the revenue requirements of the ad agency.
  • This occurred in 2012 bringing econometric modelling into the Aegis OpCo business from an established and well respected entity
  • Brandscience are an OpCo within Omnicom, Businessscience are based out of Mediacom whilst MEC have OHAL inhouse.
  • BIG Data has been the business worlds buzzword for a number of years IBMs From stretched to strengthened (2009) details it as a key issue facing business whilst 3 years later 2012s Are CMOs ready for the digital marketing era (2012) showed that data was still a major headache topping the list of unpreparedness (79% said they were unprepared)  http://visual.ly/ibm-cmo-study-infographics-2012
  • The varied work of the Ehrenberg institute summarised by Byron Sharp How Brands Grow, Byron Sharp, ((200, Oxford University Press), Kahnemans lifetime of output, Thinking fast and slow, Daniel Kahneman, (Penguin, 2011), The Decoded businesses approach to neuroscience, Decoded – The science behind why we buy, Phil Barden (Wiley, 2103) and the seminal publications by Binet and Field, The long and the short of it, Binet and Field (2013, IPA) and Marketing in the era of accountability, binet and Field (2007, IPA)
  • Whilst there is some attempt to measure creativity by Peter Field in The value of Creativity, Peter Field, (2011, Market Leader) which concludes that creativity is great for effectiveness it is difficult to construct a tool kit to deliver “creativity”.  How do you create a process that consistently delivers a concept that is fundamentally in the eye of the beholder!
  • Whilst much of this evidence is based on experience or hearsay, it is telling that the only creative agency with a visible effectiveness department is that run by Peter Field for Adam and Eve/DDB.  Across clients as varied at the Lloyds Banking Group, The Department of Health smoking cessation department, IKEA and KFC (to name but a handful across a range of different ad agency partners) it has been the media/comms agency who have pursued the effectiveness agenda and put forward recommendations
  • Physical availability relates to the ability to maximise distribution so that consumers can purchase via as many outlets as possible.  Mental availability relates to the mental proximity of a brand to a consumption opportunity.  How Brands Grow, Byron Sharp, ((200, Oxford University Press
  • This relationship has been known about for over 30 years although most recently the seminal Marketing in the era of accountability, binet and Field (2007, IPA) has established its usage more widely.
  • Sandtable http://www.sandtable.com are a business that develops Agent Based Modelling tools.  Agent based modelling is the next step in agencies ability to predict likely outcomes based on certain inputs.  Agent based modelling essentially creates a simulated world of individuals in a computer programme http://en.wikipedia.org/wiki/Agent-based_model .  Rules are established and then variables such as NPD are entered into the model to see what the response is.  I was part of the project team that originally led the creation of a model for DoH Tobacco control which helped prove the rationale for the month long quitting event “Stoptober” Aegis media have signed a contract with Sandbox to work exclusively for a period in developing standard worlds to enable clients to simulate business inputs at a lower cost that building a unique world from scratch.  
  • A project detailing the value of a “like” to business http://vizeum.co.uk/p/the-science-of-social-social-media-week/
  • Boardrooms are targeted with maximising shareholder gains.  As such the impact of investment upon shareholder value should be the number 1 target for any service business providing investment advice.
  • Essentially Comms planning agencies have begun to fulfil the explicit and implicit goal* requirements of the board.  Boards deal explicitly in facts, science and measurement, allowing risk to be managed and investment performance to be predicted and whilst a full brain scan of the board is unlikely I believe that you would typically find that comms agency behaviour has begun to align with the implicit goals of security and discipline* a key requirement of successful communication according to Decodeds neuro-boffins. Decoded, The science behind why we buy, Phil Barden (Wiley, 2013)
  • CIM, marketing wave confidence monitor wave 5.  Reference by Professor Vincent-Wayne Mitchell in the October issues of Marketing magazine http://www.marketingmagazine.co.uk/article/1214724/marketers-need-marketings-case
  • Whilst the research explicitly references marketing, as marketing services businesses we need to enable marketing as James Murphy states here http://www.campaignlive.co.uk/opinion/1220566/agencies-looking-empower-marketers/  as the deliverables apply to both.
  • Innovation is a broad term and I have taken it to mean innovation is the broadest sense whether it is innovation in service, product, or delivery.  This reference relates to the evidence shown in ref 7
  • http://www.ipa.co.uk/page/ian-priest-unveils-his-adapt-programme-at-cannes#.UpITYZE29Fw
  • Most notably the work of Les Binet and Peter Field in developing the IPA databank, the datamine series of publications and Binets effectiveness lab at Adam and Eve/DDB
  • The need to match implicit and explicit goals Decoded, The science behind why we buy, Phil Barden (Wiley, 2013)
  • http://en.wikipedia.org/wiki/Innovation
  • Based on a survey monkey survey conducted within Vizeum UK and scaled up.
  • http://www.ipa.co.uk/blog/search/let’s-reintroduce-client-agency-secondments/10236#.UpIgbJE29Fw
  • The physical proximity, close to point of consumption i.e. the completion of work, of working together increases the physical and mental availability of agencies and clients towards each other stimulating communication and reinforcing the knowledge of capability in the same way advertising can increase the mental availability of a brand in the minds of a consumer.  How Brands Grow, Byron Sharp, ((200, Oxford University Press
  • http://www.campaignlive.co.uk/opinion/1220566/agencies-looking-empower-marketers/ A direct outcome of the first Adaptathon on Alliances
  • The application of the biological principle of signalling and the communication of brand intent via body language suggests that agencies may implicitly communicating the wrong things to the board even without saying anything.  Exploiting the Implicit, Pete Buckley, (2012) http://www.mecglobal.co.uk/what-we-think/publications/strategy/exploiting-the-implicit/  
  • The meat snacking helmet for mattessons fridge raiders is a cannes award winning idea http://www.youtube.com/watch?v=cukCTFH_JaY costing over £500k to reach the Syndicate group of 3.5m individuals.  With these ratios it’s difficult to conclude that this was a worthwhile business recommendation with little scalability and impact.
  • Consultants deal in confidence bands.  They will enter a business; make a guarantee using case studies and norms based on previous work and then base at least part of their fee on delivering upon it.  The confidence that is implicitly communicated by these actions explains in part why they have influence in the boardroom.
  • Whilst I worked on Lloyds Banking Group, Catherine Kehoe, the head of marketing and brand was quoted as saying she hates slide number 5.  As such we changed our whole way of presenting so that slide number 5 never materialised.  It forced us to pinpoint exactly what we wanted to say and provide the rationale as quickly and efficiently as possible.
  • http://en.wikipedia.org/wiki/PechaKucha
  • Based on the Google approach to innovation that was stolen from 3M, this breaks down time or spend into 3 elements.  70% of time or money is spent on what we know works, 20% is spent on activity related to the 70% but that tests a new area.  The final 10% is all about the disruptive, innovative ideas that could provide the step change in business performance. 
  • This constant test, learn refine approach is key in maintaining an innovative approach.  It harks back to the reductive approach to reasoning the logic of scientific discovery, Karl Popper, (2005, Routledge) and helps business and marketing manage risk whilst pursuing an on-going innovation program.
  • Original Innocent founder Richard Reed was fond of telling agencies that “why should I trust you, you have no skin in the game”
  • The principle uncovered by Kahneman and Tversky that demonstrated that human’s value losing more than gaining.  Thinking fast and slow, Daniel Kahneman, (Penguin, 2011)
  • Two examples are that Dentsu staff are present on both Honda and Sonys management boards.
  • http://www.dentsu.com/digitalbooks/index.html  Dentsu have previous having bought the rights to the 2002 world cup in Japan and South Korea
  • http://www.ipa.co.uk/page/ian-priest-unveils-his-adapt-programme-at-cannes#.UpITYZE29Fw
  • What You See Is All There Is the Kahneman discovery that the System 1 mind makes decisions using immediate info at hand and if it doesn’t have that information then it substitutes and creates explanations to maintain cognitive ease.  When applied to this context it is about creating the simple associations in the mind that the agency world understands and can add value to business.  By implanting this knowledge and developing this heuristic in the minds of non-marketing board members the industry can take advantage of the unconscious minds processes for its own benefit. Thinking fast and slow, Daniel Kahneman, (Penguin, 2011)

The most important metric you’ve never heard of

So earlier this week I WARC published the first of a two part article shining a light on an insight that i alighted upon around 6 years ago. The aim of this article was to get this out into the public domain alongside a number of practical applications that would help people use it. The article is here

I chose WARC because the bar to get published is high and it’s also THE journal of record for Marketing effectiveness. It also provides reach, because this is a pretty impactful piece of research that we all should be using.

The feedback has been phenomenal but; many have said they cannot access the article because it’s behind a paywall. I cannot post the article here in full because of copywrite (and neither would I) but there are certain principles that i can and will. Thats what this post is about!

So what is the metric?

Which might seem a bit uninspiring!

And that with a few small tweaks in EXCEL (or other common garden spreadsheet package) you could open up a world of relative performance analysis and contextual understanding for your brand or business vs its competitors in category!

So first step is to work out who the number 1 player in your market is and in Google Trends type that one in first. This is your BASE and is the brand against which all the others will be measured. Then add in your brand and the other competitors in market.

You’re limited to 5 at a time so just make sure you download the data before changing your brands BUT remember to keep the BASE (biggest brand) in.

The next part is some simple manipulation in excel. You’ll have c180 cells per brand if you use the “go back to 2004” option and this may “jump around” a bit. So to smooth it out turn that data into a 12 month moving average.

So what you should have is 168 data points per brand now but it’ll show a smooth line for each over time. Total this number for each Month (that represents 12 months average) – Still with me?

Simple maths here. Divide each brand by the total of that month. When i’m in excel I have the months down the side and the brands at the top. You can then just stack the various calculations without losing anything.

So this is the BIGGY now

Yep you’ve discovered Share of Search……………………………………………….. and when i use it in this sense i don’t mean like you would in PPC or SEO. This isn’t Share of Search as an input its Share of Search as an OUTPUT. This is important because THIS Share of Search (SoS) is a proxy for something quite important and in reality its a pretty simple calculation to do.

And why is Share of Search (SoS) important? Its because its an accurate proxy for Share of Market (SoM)

Thats a good observation but what is the INSIGHT?

To those who question whether people search for FMCG products, well i’ve got news for you. They do. And even if the volumes aren’t as great as say Nike or Apple they will display “relative patterns” i.e. bigger brands have more searches!..

So this is good and I’ve validated multiple times. Here are a few examples but for more the WARC paper has them and a full list of the categories analysed.

Now. I know the quants amongst you may be getting twitchy now. At a category level the simple linear regression certainly looks decent (and strong) but at a brand level there are some outliers. The key here though is that whilst there is some variance the trajectory movements are pretty accurate.

Which means that you have a mid-to-long term proxy of business performance relative to the competition AND it’s also available to everyone. Now, I’ve noticed that some have suggested this is predictive. It kinda is and kinda isn’t. The use of a 12 month average means that any single month has a limited impact on the rolling figure, ironing out the kinks. This means that performance MUST make enough of a splash over a number of months to register (changes in Market Share are slow moving after all) but it also has to do that relative to all the other brands and the category. So if the impact is BIG enough to shift the 12 month dial then obviously the impact will remain in place for a period (so its kind of predictive but not really) i.e. positive or negative trajectory is “fixed” for a period.

Its worth thinking at this point too about buyer behaviour and the known models/laws such as NBD-Dirichlet, double jeopardy, buyer moderation etc like any good strategist would to make sure we know what’s going on with the human beings engaged in buying behavior because like any analysis you have to engage the brain. If something looks odd then investigate it and hypothesise an explanation. When House of Fraser was in the process of going bust its SoS went through the roof and we know that was nothing to do with revenue generating actions!

Obviously I go into this a lot more depth in the WARC articles as this also opens up a wealth of analysis techniques and methodologies I hope to share some of these in subsequent blog posts.

Why the BooHoo story tells us more about e-commerce than we’d like to admit, plus other inconvenient truths…

It seems that covid-19 has reinforced the thought that e-commerce IS the saviour of retail as we know it and that the future (or today for some commentators) is purely an e-commerce world (i’m being extreme here). The implication being that if you don’t have that capability then you’re dead (again extreme). DTC brands “dominate” the world and the old fusty shops (and brands that utilise them) are dying a death. Hopefully this post will clear all that up or at least provide a clear point of view backed up by some recent events and data to suggest that, like with many things, it depends….

So lets begin, to start with, its clear that e-commerce has benefitted from Covid-19 (if you can call e-commerce a separate “thing”). Many retailers went 100% e-commerce during the period but; its worth remembering that their physical retail was closed…. so obviously… The following chart does show that covid-19 has sped things up quite considerably (US of course but there is reason to suggest it is little different to the UK) and this is the key, things have sped up, in the direction of an un-predetermined end. We don’t actually know what that end is yet (some people think they do) but i’d hazard a guess that 100% e-commerce is neither appropriate for most OR desired by many still. It should also be noted that through necessity, lifetime penetration of e-commerce services has increased, new people have used it and some barriers are likely to have fallen as a result. This means that we won’t go back to the levels of pre-covid but how far will we slip from an almost perfect situation?

Brands, businesses (and consumers) all over have certainly changed to embrace new opportunities and safe guard their futures which is why i think this innovation under pressure has actually benefitted the economy in the mid-term as it puts it in a better place , due to the expansion of physical and digital availability (both recent blog posts here).

TL:DR, essentially the supply capacity of the market has increased through a shift in the curve leading to a higher potential equilibrium point vs pre-covid 19. To put it another way, is your local coffee shop going to stop offering take-out burgers on a Friday night? Probably not. It allowed them to earn whilst shut and there are only operational costs associated, what is the margin on burgers after all (don’t ask GBK although this seems to be due to onerous leases and too rapid expansion).

Anyway, i think we can agree that e-commerce as an offering has increased during lockdown and has also seen an increase in consumer uptake (and penetrations ) through necessity but; is it a replacement and are we going to see a permanent change at this level? I think there is plenty of evidence that suggests no (at the levels seen vs an elevated level vs pre-covid) and whilst also pointing to an unwelcome element too, the first place to look is in the good old UK grocery market.

We’ve just had Q1 results for Sainsburys and Tesco https://theeqplanner.wordpress.com/2020/07/06/tesco-sainsburys-q1-a-good-covid-response-but-underlying-challenges-persist-hankinshottake-retailweek/ and Ocado came out this week with a blockbusting 27% revenue growth (retail only) with UK retail Ebitda rising a whopping 87%! However let’s deal with Tesco and Sainsbury. They both posted remarkably similar figures for the growth of e-commerce i.e. doubling. Its worth remembering that grocery penetration in the UK for online grocery shopping pre-covid was only 5% so with the similarity (the two biggest players totalling over 40% of the market) we can hypothesise that its now about 10%.

Each brand was up roughly 8-9% yoy with much of that driven by a reduction in discounted items (we’ll return to this point in a bit) plus a tiny bit of stockpiling (and it was tiny, most supermarkets run on JIT and market planning so even a small deviation can cause havoc, just 3 extra days shopping is nearly 50% extra in the basket!). So far, so category effect. No one really changed shopping brands, some changed how (if they could) but we’re still talking 90% of grocery done in store, thats quite a lot of physical shopping still.

Ah, i hear you gasp, what about Ocado, those figures are way up. Well yes, but also something else is going on. Ocado stopping accepting new customers. So all that revenue growth was from current customers and they maxed out capacity. Bigger shops and fewer drops increased efficiency which is good but we missed the key point. They were at capacity and couldn’t grow anymore. £200m extra and that was it. Admittedly they did grow 0.2% market share over the period but we’re not talking earth shattering and that’s because its expensive to scale if you’re tied to distribution centres which have a clear physical limit that can’t be scaled easily (I suppose they could’ve done a Tesla and built a production line-esque development in 168 days or less). This vs. the combi store picking/dark store model of the big supermarkets which can be scaled very quickly indeed (Tesco hired 4000 extra temp drivers) and it’s no wonder that Ocado are looking into positioning themselves as a tech fulfilment business!

So lets continue the story. Part one is that e-commerce isn’t as scalable or flexible as people think, fulfilment is really tough to do well and there is a BIG player whose business sets precedents that are hard to replicate (thanks Amazon!). It’s so tough that Sainsburys spent £1.3bn on Argos’ “hub and spoke” distribution model (you didn’t think they just paid for the general merchandise element did you?) just to buy in expertise. It’s also really expensive to run this fulfilment engine. In fact Simon Wolfson has talked about this at Next. Online sales actually have lower margins despite selling more full priced goods. Yep that’s right, Next sell a greater proportion of full price goods via their website https://www.nextplc.co.uk/~/media/Files/N/Next-PLC-V2/documents/2019/annual-report-and-accounts-jan19.pdf. The problem is it costs them more to run and do the distribution. Thats not ideal is it. Especially when e-commerce is the future because its “more efficient”!

Then this came around on twitter which shines a beautifully powerful light on the whole situation (note that Ocado are building out their Micro-fulfilment centres and you can see why!)

So actually all this e-commerce stuff is really really expensive (and tough to do well & scale). Back to clothing and we can see why Primark, despite a £650m a month black hole, still refuse to get involved with e-commerce, although there are some tentative noises about Click and Collect in the pipeline. For Primark it just doesn’t make financial sense. Even with C&C you can imagine the additional costs of having to having to hire store pickers to fight their way through the “jumble sale” like floors to source clothes and then they have to reserve an area in store for C&C and staff it permanently plus the digital infrastructure that needs to patch into the current merchandising systems so that stock is replenished. This is from a brand at the lower end of the market competing with price points such as TU, F&F and George. They simply don’t want to be giving away margin needlessly, especially as it’s the star of Associated British Foods (all their other activity is commodity led)

Quick summary again. E-commerce is difficult to scale, its complicated to do well and its expensive and margin draining. OK, so what’s this all got to do with BooHoo? Well BooHoo, after posting some very healthy numbers, Revenue up 30% in the UK and 45%+ globally, they got into a little bother with their suppliers, based in Leicester (note the firewall and the legal complaint made against the Times).

Now traditionally many of the big clothing manufacturers looked to the far east and the Indian subcontinent for garment supply but this makes responding to trends in an Insta-friendly world pretty hard because of the supply chains. Inditex (the worlds biggest clothing manufacturer including brands such as Zara and Massimo Dutti) subverted this norm and pioneered a local approach in Spain with 54% supplied via the region surrounding A Coruna, the rest are from Portugal, Turkey and Morocco (all very close nearby). Boohoo and the private (and recently loss making natch ) MissGuided have copied this approach in the midlands (over 50% is supplied) allowing them to grow rapidly and face off against the older (but bigger) ASOS (i’ll look at ASOS another time) and steal a growth march.

In BooHoo’s case they have also been buying up other brands such NastyGal, PLT, MissPap and a raft of distressed assets which point to a desire to broaden their base to include an older more affluent audience via Karen Millen, Oasis, Coast and Warehouse.

Its an interesting strategy as it’s clear that they are trying to avoid the audience growing (and earning) their way out of their “brand stable”. This is a phenomenon that has plagued Shop Direct over the years (Very and Littlewoods now but i’m sure some will remember Kay&Co and Marshall Ward if you’re of a certain age) , you can’t be 21 forever!

Anyway, i digress. The issue is that to deliver the clothes on time and on budget it looks as though Boohoos supply chain management protocols have forced them into a scenario where oversight isn’t what it could be. A whopping £3bn was wiped off their value in a couple of days in early July (not long after they’d announced a huge £150m bonus for their leadership) due to this issue, whilst big brands that sold their product (next and ASOS) distanced themselves (lets forget that less than 5% of their clothes are sold this way, it’s the point that counts) and this leads to the another issue with e-commerce. The need for the low low prices and the rapid turnarounds demanded can lead to some unfortunate circumstances. You can’t beat the system and in some cases it looks as though someone needs to be cheated to get it to that level.

To hammer home this point some fine chap on Twitter looked at that the financials of Gym Shark, the cool e-commerce led brand of sexy gym wear. The suggestion was that it had over £50m in the bank. I mean, its possible for a brand that makes £14m per annum but it only started 2012 so its been putting away a tidy amount every year since (still possible, just. although remember the cost of e-commerce!) but; its a lot of money and closer inspection by the analyst suggests that with Accounts payable stipulated at 163 days plus accounts receivable at 30 days plus existing inventory stock we have a business that is essentially holding cash for a significant amount of time. Great for Gym Shark but pretty awful for their suppliers whom i imagine are in a pretty inelastic situation when it comes to what they can do with such a large party requesting their goods. Some will argue that this is business but surely if some businesses are waiting 1/3 of a year for payment then its not quite fair (especially as the money is available).

Once again someone loses out in a pretty bad way to fund this e-commerce only jaunt.

This is becoming a long post so i’ll wrap it up now. Essentially e-commerce isn’t the be all and end all. Its hard to do, expensive and difficult to scale , lowers profitability (if you can even make it pay, i may do a DTC post on the make-up market at a later date) and in some cases doesn’t just work on its own unless you try to game the system (don’t tell Prof Galloway). This isn’t, of course to say that e-commerce isn’t a major part of the future, its just to put some perspective out there. Its not a quick fix, at least doing it properly isn’t. It requires thought and a proper strategy. In addition to the growth of platforms like Shopify (only half an e-commerce solution) An interesting development is the emergence of “Fulfilment to let” systems. Inditex and IKEA are to begin offering it but essentially its the usage of their distribution platforms. A neat new opportunity in market for them to earn revenue and a quick way of piggy backing on a well made and well run logistics platform. Either that or buy a ready made solution, like Sainsburys. The key thing to remember here is that delivery drivers are still Key Workers too.

So, what do you do? Well, i hate to say it but Omnichannel is still a thing and in the purest sense its about spreading risk and maximising physical and digital availability so that people can buy (profitably) wherever they can, even Amazon are opening physical shops now. Develop an approach (that should properly included some e-commerce functionality however its executed) and build out with the above elements in mind, eyes open. You can’t just magic e-commerce success into being (even with seemingly simple off the shelf solutions), the financials of retail make that difficult. I know i sound pessimistic and i’m not say we’re going to reverse to pre-covid levels (almost certainly not) but its worth adding a bit of realism to the debate and i’m not the only one. Raconteur published this over the weekend (with specific relevance to DTC brands), it says basically suggests that BIG brands will benefit more from this shift, if they respond well, due to their in-built Omni-channel and mixed model and THAT, i believe, is the future. Simon Wolfson and Next have an interesting model (and having made c£750m profit over the last few years they really are worth looking at) and if you’ve got 30 mins or so this document paints a picture of the next 15 years.

You’ll note that physical stores are still present but they are smaller and leases are a lot closer to residential or office space (we’re seeing this equalisation at the moment). It makes sense if 80% of returns come that way and adds incremental revenue opportunities once you have them in store, so have fun and hopefully this has been interesting.

We need to talk about Byron Sharps availability issue

Yes, that is a little bit click-baity and this could be a blog post about how we should call out unpleasant behaviour, views and general rudeness (having a different opinion is fine though) from those in positions of influence but; its not (well that bit was, just a little). Its more about his contribution to the world of marketing science and that is a point that is inarguable. Yes there are elements in HBG that were originally discovered by Andrew S Ehrenberg but Mr Sharp reminded us of them after the industry seemed to forget it all for 20 years.

The other thing that Sharp did was create the simple heuristic couplet of Mental and Physical availability to sum up How Brands Grow. Every Tom, Dick and Planner throws these words around with aplomb and as much as i’m sure many would prefer these concepts to just fade into the background they are here to stay and a good thing too, in my humble opinion.

But (there is always a but), whilst Sharp “hates” behavioural economics and is highly scornful of the work of Khanaman and Tversky and Thaler and Sunstein its worth applying some BE thinking to these two (very) broad categorisations because they can be problematic to those who don’t truly understand what is meant by them.

That’s what this blog post is all about. The unintended consequences of their general labelling for the vast majority of people who could and should be using them to help grow their businesses and brands. What this post aims to do is add an element of nuance and easy directional language to improve these concepts and their understanding and consequentially their application.

I am well aware that Mr Sharp would hate this and dismiss it as pandering to the ignorant. He may even point such individuals to his book and suggest they read it because if we look at the precise definitions, there is NOT MUCH WRONG.

First lets start with those definitions –

They are pretty precise and all encompassing, so far so good. But, in my opinion it’s the Physical Availability categorisation that i believe has a Framing problem and its the use of the word “Physical”. It conjures up physical stuff, like stores and retail and bricks and mortar but; it means so much more and this is a problem because this is where confusion can potentially start.

Think about PPC (generic terms) or Affiliates. Both are often considered advertising and for the uninitiated they could be classed as driving “Mental Availability” (clue: they’re not) but if you consider that you, the marketer are using Googles shop or Awins network of affiliates to sell your product for you, what is the difference between them and Tesco? The phrase “digital shelf” is bandied around and whilst it has specific relevance to e-commerce listings and SEO optimisation its worth considering what we’re saying when we use that term. PPC and Affiliates aren’t about improving the probability of a consumer remembering your brand, they’re about breadth and depth of distribution. As a marketer you’re putting your product up for sale in more places, they just happen to be digital.

At this point you can see where i am going. These are Physical Availability channels but aren’t always considered as such because of the Framing of that word Physical. I propose a build and the build is an additional categorisation called “Digital Availability”. Some (including Byron, probably) will rail against this as admittedly the original definition is broad enough to include digital distribution but; we’re in the communications industry and words are powerful. By adding a subset and finessing the definitions themselves we become more precise and its easier to understand.

So what is Digital Availability? Well its the obvious things such as an e-commerce website, its media channels such as PPC (generic) and Affiliates (as previously stated), its SEO and online supermarkets, its anywhere digital where you are placing your product for sale. Its distinct from Physical Availability because of the framing effect and its more directional and precise. It helps us communicate with clients and ultimately the best way to Help Their Brands Grow is to make our recommendations crystal clear.

One BIG implication is on budgets and structural issues. Physical/Digital Availability has much more in common with Merchandising. Thats a different skill with different outcomes and requirements. Would you take budget from Physical store merchandising to invest in TV? The same with Digital Availability. You cannot compare a Google Shopping link or an Amazon listing with a TV advertisement. Whilst both under the auspices of Marketing (in the 4 P’s sense) they’re not even in the same ballpark. This isn’t Long vs Short even , its discipline and specialism vs discipline and specialism.

As to proof of concept I’ve been using this for a couple of years with clients and it helps them distinguish what they’re doing and manage stakeholders effectively internally. Its also helped with budget management and ring fencing. It does work, even if some may prefer it not too. Its worth remembering that we’re trying to make these concepts understandable and useable in the real world not just in “planner world”.

#Tesco #Sainsburys Q1 A good covid response but underlying challenges persist #Hankinshottake #retailweek

So; this is the first of what i hope will be many “analyst style” notes that i will produce. I’ve tended to publish under the #HankinsHotTake label. Its a bit corny, i know that, but its an attempt to cut through some of the “fluff” out there and provide a little insight into what can be quite dry, sometimes vapid content. The last week has been particularly busy and the ambition is to get these notes out a bit quicker and contemporaneous, couldn’t be helped but; to that end I’ve bundled Tesco and Sainsburys together. I don’t do every update and whilst i skew Retail, Tech and Media i do sometimes look at other businesses that interest me. There is also a UK focus typically although I will mention International implications if relevant

I like to follow a simple format

Headlines – These are the topline performance figures taken from various reports. Its easy to find this stuff so i don’t dwell too much

Statement – This is a digest of the various accompanying news excerpts of validating information

Implications (the HOT take) – This is my view on the strategic implications and context of the headlines and the statements.

Tesco Logo transparent PNG - StickPNG

First up is Tesco

Headlines = +9.2% up as a group. +9.1% (UK and Ireland) +6.1% Booker. Like for likes were up 8.7% in the UK whilst Booker was up 0.6%

Statement = A positive update, bursting with can-do attitude and CSR nods in line with the prevailing cultural winds. Big outtakes include positive switching from ALDI for the first time in a decade, a significant shift away from promotions (28% to 14%) and a clear split between Food (+12%) and GM (-20%). Worth noting that incremental costs are expected to contribute some additional -£300m (when business rates relief of c£500m is taken into account)

The Hankins Hot Take = It all looks rosy for Tesco at the moment in the final months of Dave Lewis’ reign. The near 50% increase in delivery is certainly impressive and this was done without the help of the urban distribution centres that are currently under development. The positive shifts against ALDI are also to be welcomed although this is probably as much a function of ALDIs weakness in e-commerce and a store set-up ill suited to social distancing than anything fundamental by Tesco. In fact when looking at Kantar Worldpanel data its clear that Tesco actually lost share during the period going below 27% for only the second time as far as this data goes back with this slipping to the smaller players.

The shift to “everyday low prices” is an interesting strategic choice although it fits the simplification approach that Dave Lewis has applied to the whole business so is to be expected. It will certainly help in the next few months if the economy slips further rather than V-bounce in line with the BOE estimates. There should also be concerns about the Booker business. The majority of its growth was driven by acquisition and whilst its wholesale business was up, supplying as it does the local store network of brands (Budgens etc) that witnessed positive share growth in lockdown. The catering business, perhaps unsurprisingly was down significantly.

With all this in mind Ken Murphy is likely to come in with a few jobs on his hands. Accelerating the ongoing distribution capex is the big one, whilst the other the shorter term impact of the flight to local which was the biggest impact on share. The discounters aren’t going away and have a significant slate of openings planned and with no such expansion for Tesco there needs to be a concerted effort to drive demand and maintain the net movement switching from them into the mid term.

Media tool kit – Sainsbury's

Headlines – 8.5% up and 8.2% LfL. Grocery sales up 10.5%, Online sales up 87% and Argos up 11%

Statement = Another positive update (like Tesco) with some remarkably similar figures. Doubled e-commerce (this aligns with a category doubling), a large cost implication of £0.5bn broadly covered by business rates relief and some positive shifts in price perception. This being Simon Roberts first real chance to communicate there is an argument that it couldn’t have gone much better.

The Hankins Hot Take – The immediate thing to notice is the negative trajectory that has been reversed for Sainsburys. Last year was a bit of a shocker for the business with profit and sales down along with significant declines in share. This was reversed at Christmas and the Covid effect on the category has benefited all. The jewel in the Sainsburys crown so far has been the significant growth of ARGOS. Its telling that whilst Tescos saw a decline here, even with stores closed, ARGOS performed well. Its renown “hub & spoke” distribution network eminently suitable for lockdown.

I suppose the BIG insight is that nobody seemed to fcuk up in grocery over the covid period. All have pulled out the operation stops and delivered meaning that no-one has really outperformed the market. Even the estimated costs are proportional to size meaning they’ll all have the same “asterisks” attached come full year. What this means is that the same challenges persist. Sainsburys has a clear strategy to utilise its square footage but how to guarantee growth? Mike Coupes gambit with ASDA failed and hes now gone. There are no attractive other mergers on the horizon and with L4L’s under pressure last year I’m sure we’ll see that return. Sainsburys typically do well at Christmas as a function of the “scale-up” phenomenon, they are a seen as a step up from Tesco and the discounters but they need to create a clearer proposition in consumers minds to stand a chance of growing.

Mapping a macro economic path via the impact of Covid-19 using simple Demand and Supply curves

A few weeks back i wrote a blog about the “high wire” shape that i predicted we would see as a function of pent-up demand and the unique set of circumstances covid-19 has created. There was much debate on twitter ( https://twitter.com/JCPHankins/status/1252953834797912065) and references to a thread i’d started a few weeks on March the 31st (https://twitter.com/JCPHankins/status/1244922813489844230) prior to that , about why the use of “spend during a recession” advice by many in the marketing fraternity was inappropriate.

As lockdowns have progressed a ripple has swept through the industry with many now agreeing. Mark Ritson, JP Castlin and very recently even Les Binet have set out the same thinking. To take things on i now think its time to begin contextualising what is actually happening/happened using the wonders of Demand and Supply curves. We’re a pretty poor bunch at using techniques such as these to map out categories and positions but hopefully this could also be a simple tutorial to get people thinking about expanding their repertoire of critical thinking tools and mapping capabilities.

Obviously these are simplistic tools but they are useful in providing a theoretical base for a narrative and enable critical thinking and planning to begin. Without a model of the potential future how can you begin to create a strategy to take advantage?

Step 1 is the simple Demand and Supply curve pre covid-19 lockdown (in the UK)

We see the market in equilibrium (ceteris paribus) with price and quantities at P1 and Q2. Now lets see what happens next when Covid-19 begins to have its first impact on Supply chains globally as China gets affected first.

Supply is reduced pulling the model out of equilibrium, moving down the supply curve from a to b. In real terms the price is unlikely to have gone down as movements with D & S happen very quickly (however as we will see there is negative pressure on inflation in the real world) but you can immediately see the problem we have because Demand is still stuck at a. Too much demand vs.supply and shortages of goods.

What happens next is interesting because usually the demand curve would just shift into equilibrium as follows

Demand shifts with reduced quantities (D1 to D2) and as suggested earlier further negative pressure on prices (this is why inflation has been so low). However; because of lock-down we then had an external impact on demand and further negative impact on supply D1 – D3 via D2, essentially two demand curve shifts.

This shift in demand to D3 leads to new price and quantity positions Q2 and P2 . Supply has also seen a further negative shift due to the impact on availability (sliding down that S1 curve). Physical and digital availability are constrained not just by supply chain issues but the simple fact that people cannot actually buy the goods from various platforms. It’s a point worth reiterating though, supply problems are physical availability problems (in the Ehrenberg-Bass way) .

At this point demand is down, supply is down and the economy is shuddering to a halt. This was probably April/early May in the UK, when we saw the economy shrink by 20%+

To me, this is the bottoming out of the economy, the worst it gets and the reason for this is that at this point there is a glimmer of hope in the rise of e-commerce and ingenuity of business owners. Answering the question how to get products to people if they are stuck at home/pivot exactly what their offering is…

The Ehrenberg-bass institute will tell you about physical and mental availability and how its “how Brands grow”. I’ve evolved the physical availability element a bit (apologies EB) to include “Digital availability“. This is because, whilst the EB definition is perfect, human beings aren’t and if you say “Physical” they think bricks not clicks. Digital availability as a sub-section of physical means maximising digital channels such as PPC, affiliates and e-commerce channels and establishing fulfilment (getting products out and delivered) services to support these channels.

In all the chat about advertising during a recession most people forgot one thing. Its a weak force. Yes, if you can afford it great but; for many short term activation creates instant cash. We know that brand building delivers only 50% of its cash benefit in year 1 which is great if you’re going to be around in year 4 to collect the other half but no good if you’re going to go bust before then! That’s why necessity is the mother of invention. This affects the model as we see a shift in the supply curve (s1 to S2), an increase in physical and digital availability!

This, i think, is where we are now. Point D (there or thereabouts). Demand has increased from the depths (but in real terms only marginally), supply has increased due to improved availability but we’ve seen a significant drop in price (the sales are going to be something to behold and inflation should stay low for a while) whilst quantity has shifted up a notch to Q3 from Q2 lows.

Its worth pointing out that due to the shift in the supply curve its likely that post recession the potential for the economy will be greater as demand shifts back through D2 to D1 along the S2 line you can see a greater potential equilibrium position driven by this shift in physical availabilty.

Now what’s great at creating demand? Marketing. 🙂 However maybe thats a blog for another day.

So; what to do at this stage? Obviously this is a simplistic method of analysing the situation at a macro economy level. It will be different for different categories and using this simple methodology to understand your specific positioning would be very useful. Like many things this is just one model and you’ll need to diagnose specific problems and benefits but hopefully it shows that we have more tools than we think at our disposal and simple high school economics models can still paint a picture that can add to the discussions around the table.

Anyhow, this is a theoretical exercise but one worth going through i think. It help paints a picture and its not something that we (in the industry) tend to do. Mental models help and when they correspond and support real world examples then they can only be a good thing. Like Mark Pollard is always saying “strategy is your words” well for me “strategy is my models (and sometimes my words”

#Pent-up demand and the “High wire”

As a “seemingly early voice against the whole “advertise during a recession” debate (see my twitter @jcphankins ) it does now look as though the dialogue has flipped, which is good. However in keeping with trying to stay ahead its now worth detailing what i think will happen as restrictions are relaxed. I flagged it on twitter a few weeks ago but now i’m going to extend it with a little tutorial. Admitedly i’m reusing something i produced over a year ago as part of my quarterly economic update that i do for my business and also media owners (tap me up if interested in seeing 1hr 30 mins of economic goodness) but its worth it. In addition and new to this debate is my predicted shape of the short term recovery (for most categories) as a concept. Obviously different categories will respond slightly different but i believe the universal shape will be defined by the “High Wire”, a peak followed by a dip and a return to peak. I’ll explain….

Here is a chart that looks at the last recession and the bounce back as a result of pent-up demand. Pent-up demand is basically demand that is held back until confidence returns. This data is official Nat Stats data. Key point to make but the area under the curve is not matched until several years after (the bounce back is NOT the same size as the original dip). This works because households DO have some money and are just delaying discretionary purchases. In the case of covid-19 its not even as though they are actively reducing buying, they literally can’t. The impact on motor and home purchases is the most striking of these shifts because there are rarely fewer than 1 million houses sold per annum (people always need to move) and 3million private sales is about median for a post 2008 world. These happen no matter what (unless you live in lockdown).

So what we have is a lot of delayed demand. People who want/need to move and people who want/need to buy a car (me amongst them). But; we can’t do it now.

That brings me on to the “high wire” shape. This is how i believe the short term “pent up” demand pattern will play out

The initial rise will be due to all that immediate demand that has had nowhere to go. Households will rush in spend money and demand will spike. This will diminish over the next few time periods as the remaining “demand hungry” HH’s enter a little bit later, return to work etc. But; what about the second peak? The thing to remember is that purchase cycle has been damaged for many people. Anyone who would have normally entered the process will have stopped or deferred. That means that they have to start and this is going to take a period of time, to push people through. Initially a large number of people will start the process as we go back to normal and this will emerge as the second peak as HH’s move through that process and will be governed by that categories purchase “pathway” average time.

That’s how you can easily plot this. If it takes 1 month on average then that “high wire” line is going to be a month long if its 3 months (house buying) then ergo the line will be roughly 3 months long. The “dip and rise” is because that purchase pathway time is variable, some are quicker some are shorter. I have spoken about purchase pathways on this blog previously here https://theeqplanner.wordpress.com/2020/03/05/a-quick-history-of-the-path-to-purchase-consumer-pathway/. Its been edited to include my favourite worst innovation the “infinity curve” (but thats another story).

When putting in place plans for investment for business it would be wise to acknowledge this as acquisition costs will change rapidly and busiensses need to hold their nerve as demand drops off again after that initial bounce. It will return of course 🙂

Anyway this sets out a simple concept for brands and businesses to predict the likely flow of demand as we return to normal-ish. The pent-up demand “high wire”. A double peak with early demand and then a build up due to allow for the purchase pathway. The width of this high wire conicides with the time length to go through that process (on average). As to the initial peak, don’t be surprised for it to happen very quickly.

A quick history of the path to purchase/consumer pathway

A chance mention on Twitter led me to dump this presentation into my blog. It was designed as a discussion piece and is not exhaustive in terms of the history of pathways. The original client this was produced for was a financial brand but the techniques and applications are universal (and i’ve since applied it to other categories effectively).

My view on pathways is the presence of common stages that represent the fixed “nodes” of a model however the way an individual navigates between these nodes is up to them. The natural implication is that there will be some pathways which are very important (most pass through them) and others where fewer people wander. As with all there is a strategic decision to be made on which to concentrate on…

The classic AIDA model

The wonders of AIDA – Dis-proven in a majority of cases, its over 100 years old (not that old things are bad) but the existence of multiple evolutions suggests it doesn’t quite do what we need it to do

Lavidge et al – Hierarchy of effects = Awareness→ Knowledge→ Liking→ Preference→ Conviction→ Purchase

Modified AIDA = Awareness→ Interest→ Conviction →Desire→ Action (purchase or consumption)

AIDAS Model = Attention → Interest → Desire → Action → Satisfaction

AISDALSLove model: –Awareness→ Interest→ Search →Desire→ Action → Like/dislike → Share → Love/ Hate 

Image result for awareness marketing funnel
This bloody thing

It’s linear. You skip from stage to stage and everyone does it. Conceptually useful to a degree but not in the least bit representative of real life. The use of “conversion” measures to detail how many move from stage to stage also brings with it huge problems as you get analysts making ridiculous statements like “you need to increase awareness by x% to increase consideration by y%”. Also do you really go from Advocacy to Awareness?

Ummm – where is the influence of communications? I don’t want to overstate the impact but comms in all its guises must have some sort of impact? no?

Surely this is just a new way to sell a product? And by product i mean Googles ad product

Another google product but missing a very important stage….

At least the passive stage (out of market) gets mentioned here. It is where most of the time is spent (unless you are a milk brand or maybe bread)

Taking advantage of low involvement processing (Heath) is key when it comes to communications.

“Passive assimilation” = The default state of consumers not in the “purchase pathway”. An out of market conversation aimed at building memory structures in order to pre-empt in-market and post-trigger moments in a brands favour (hang on, isn’t that the role of branding comms in general :))


PWC attempt to wrap this all up neatly but what happens when you purchase? No “retention”/customer comms opportunity (this may not be a problem though, thats for the brand to answer)


Mckinsey build a feedback loop but little in the way of that important “passive assimilation stage” (or active if your brand is strong). Also uses the word Loyalty which always sticks in my throat…

Which brings me to this one. The infinity loop

Customer Journey: Funnel or Continuous Loop? | Fridge

Many agency groups have “developed” this one so they can plot all their services and also to suggest that the process is never ending, continuous (constant investment required, natch) but as a mental model its worth remembering that, like the debunked “funnel” ITS STILL A LINEAR PROCESS! Really winds me up this one. Conceptually incorrect and factually incorrect too.

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My initial stab including stages of commonality with some elements of natural chronology but as with western literature you read it left to right (no feedback loops) which can lead to the classic linear fallacy of pathways

Authors own

My current model = The interconnected nature of the hexagon and the various connections between allows for the complex nature of the journey to purchase to be articulated. I hesitate to call this modern as its probably always been this way! The number of “stages” or nodes can be varied by category to become representative (as can the labels) but; the concept remains the same. If developing into a tool/technique then this can also be quantified using both quantitative research (if you have the time and money) but also qualitatively in a similar way to many diagnostic strategy tools. From a representation perspective the importance of the lines (based on volume) could be thickened, bigger lines = more important. There is also the fixed and linear nature of some of the pathways e.g. purchase is always followed by post-purchase which could be enhanced by a “one-way arrow” vs the two-way nature of some of these routes. In this way prioritisation can be made on what pathways to invest in to drive the most difference. If you are able to do comparative analysis vs. a competitor or category you can then benchmark relative performance as an additional prioritisation technique.

The rise of the smaller players #retail #kantar @kantar_uki

A few weeks old again. Must get better!

The kantar Worldpanel data landed this morning and it makes sobering reading for the BIG 4 with all 4 posting declines although in a market that was only marginally up this was perhaps expected.

  • Tesco – -1.5%
  • Sainsbury – -0.7%
  • Asda – -2.2%
  • Morrisons – -2.9%

So using this data you would call Sainsbury the winner at Christmas with a significant increase (7%) in their online sales.

The real joy comes at the bottom of the market with Lidl, Aldi, Co-Op and Ocado seeing growth. 

  • Aldi – 5.9%
  • Lidl – 10.3%
  • Co-op – 3.0%
  • Ocado – +12.5%
  • Iceland – 1.3%

The Hankins Hot take – Like the last few years the “discounters” have made inroads at Christmas however in line with the suggestion yesterday I think we are seeing the rise of specialists with distinctive propositions finally seeing the benefits.  They are never going to be the biggest but they could be highly profitable entities alongside the big 4 serving particular needs.  The rise of online shopping is another evolving picture.  Christmas is perfect for this as no-one likes to trundle round the crowded supermarkets fighting over the last Gluten Free pack of Mince pies, much better to book your slot in September and do it all online!  M&S will be looking at this with delight due to the growth at Ocado whilst Waitrose will be worrying about the financial impact next year with only 3 months to “restock” the online shopping larder.  As to Co-Op and Iceland their trajectories seem secure as they reap the benefits of their recent transformation plans.

#Greggs are my new favourite on the #highstreet #retail

Many of you will be aware of my continued evangelist role for Next but there is a growing competitor for my corporate love and that is the home of the vegan sausage roll (and slice), Greggs.

With its 4th!!  Profit upgrade of the year the business is performing exceptionally well with product innovations driving a significant uptick in penetration and combined with a broadening of physical availability, the business is currently reaping the rewards of its strategy which is underpinned by a simple ambition “to create a business able to fulfil 2000 outlets).  Their annual report isn’t out for a little while but by announcing they are to pay out a £7m bonus pot to staff they’ve signalled their rude health.

Hankins hot take – As a QSR (quick service restaurant) up against the might of McDonalds, the mid-market coffee and food shops and the supermarkets Greggs are in a hyper competitive sector but have succeeded through a focussed pursuit of a clear strategy.  At the heart of this success is an interesting “quirk” of an ambition.  I’ll explain.  Many companies will say they want to grow to a certain size or number of outlets, the difference with Greggs is that their ambition was to build the capability to fulfil first.  It sounds simple enough but in the graveyard of modern retailing its not hard to find businesses that have grown too big too quick.  The impact of Amazon on changing consumer expectations is all about quick, easy fulfilment being a pre-requisite of modern retailing.  Greggs have executed this is spades.  They are likely to reach their target of 2000 outlets in the next year or so, the next challenge will be on  finding additional environments to target (they are rolling out in petrol stations and services stations as we speak), maybe we’ll see stations and airports becoming part of the mix soon!?!

Greggs are one of the most successful modern businesses out there are the moment.  I’ve compiled a simple list of the 5 requirements of a successful high street chain / retailer taking evidence from a variety of players and will look to get some time in to present to the various teams soon.  If you or your clients are interested in hearing more then please give me a shout.