We have written a paper on business models, and most who write on the subject today focus on how business models are changing, often due to technology. Famously disruptive business models include amazon.com, airbnb, Netflix, Uber, etc. And sometimes changing business models get blamed for the demise of a business, and perhaps invalidly.
We concede that Blockbuster was displaced by Netflix and offer the observation that Blockbuster could have adapted to also offer the video by mail service, which is now morphing to video streaming, and Netflix is on top of it too.
However, while all this is going on Family Video is pulling in $400MM+ per year with fixed location video rental stores and making 10% at the bottom line. According to a recent article on the company in Forbes, the CEO of Family Video says that blaming the demise of Blockbuster and Movie Gallery on flawed business models is accurate, but not for the reasons most believe.
He says it wasn’t the migration to video but rather that they weren’t well run businesses. They had too much debt, poor leases and a flawed revenue sharing model with the studios. He has built a flexible and adaptable business model that succeeds in today’s world for his customers. This includes owning the real estate so he is able to adapt his stores to their changing markets; creating a place where locals want to come for the customer experience and not sharing revenue with the studios.
Is this a niche business? Sure, but 10% profits on $400MM is nothing to sneeze at. To succeed in today’s world you need flexibility, adaptability and the processes in place to facilitate that for you.
A recent article in Ad Age suggests that it is past time for mid-market companies to embrace data to improve decision-making. We agree. In fact we have written three papers on the subject.
Granted the primary source in the Ad Age article is SAP a large provider of data analysis tools, that does not make their assertion untrue. While we aren’t big fans of their solutions, especially for mid-market companies, there are lots of useful and cost-effective tools on the market now.
If you entered a career in marketing to avoid math, well it isn’t going to work anymore. However, the good news is the math geeks can help you and the economics make sense today. Read our papers to learn more.
If you take a look at the CMO category on this blog you will see that I have posted about the short tenure of “CMOs” for a while. It won’t take you long to see my point about why that is true: CMOs can be sacrificed when a c-Suite exec needs to be sacrificed without really messing anything up. The reasons are noted in the various posts.
The most recent research on this subject from Korn Ferry International notes the average tenure is up to 4.1 years and still the shortest of any c-Suite executive. The gist of the reason for short tenure, according to Korn Ferry is best summarized from this quote:
“Today’s customer-centric CMO role is exceptionally complex and requires the right balance of left as well as right brain skills, and very importantly, a differentiated set of leadership competencies,” said Caren Fleit, senior client partner and leader of Korn Ferry’s marketing center of expertise. “CMOs with this unique profile are in high demand and are often recruited to lead the next transformation. Also, in some cases, short tenure can be attributed to the organization not being well aligned behind the change that the CMO is tasked with leading.”
Sure if you like, but I stand by my premise that two things are true;
- The CMO is an undefined term and the real authority does not remotely match a “transformation” responsibility
- When the CEO needs to make a c-Suite move to satisfy the Board or investors, the CMO is the best sacrificial lamb.
Apparently the 12th Annual Accenture Customer Loyalty Survey found consumers/customers are less loyal today despite billions of dollars spent on loyalty by companies. How does that happen?
Maybe because, as is often the case, most companies are spending on the wrong things, like loyalty programs. Loyalty programs don’t, and never have, created loyal customers; unless you consider ‘bribed loyalty’ to be loyalty. Companies spend a fortune on these and similar programs that do not move the loyalty needle because that is easier than doing what matters.
#1 on the list for consumers/customers: product experience. Well how tough is that to fix in most companies? And can marketing actually fix it, assuming they even wanted to try? Probably not because most companies define marketing only as the back-end of marketing (promotions, advertising, digital, social etc) and not the comprehensive role of marketing, which is to align the capabilities of your company with the current and future needs of your customers, which clearly includes customer experience.
What other evidence do we see that this is true? The creation of a Chief Customer Experience Officer that does not report to the CMO.
If you want to create loyal customers create products and services and a ‘doing business’ experience that is uniquely valuable. Buying loyalty doesn’t work. If you’d like to see a tangible difference, look at the loyalty mainstream US supermarkets have (or don’t have) and how much they spend on their loyalty programs. Then look at the loyalty Trader Joe’s has with its customers and how much it spends on its loyalty program. (I’ll save you the trouble, it’s $0 because they don’t have a ‘loyalty program.’ They have the Trader Joe’s experience.)
I was visiting an ice cream store in Minneapolis (that’s one of my pastimes) and I walked by a store with this sign out front.
Upon a quick look (the first pass), I assumed it was a junk store and continued on. When I looked in the window while walking back to my car, it did not look like a junk store. I then read the rest of the sign.
I have no idea how this sign helps business. Your thoughts?
The answer of course depends what you mean by work. As with any activity, including marketing activities, you need to define an expected outcome before embarking on the activity, or how can you know if it was worthwhile. While we can’t know what outcome was expected by any of the Super Bowl advertisers we can note, based on work by YouGov BrandIndex, some outcomes that were achieved.
Based on an article in Advertising Age, purchase intent was not improved for any Super Bowl advertiser. That seems an important outcome, but maybe not. However, buzz and word of mouth did increase for some, as noted in the article.
This seems a trend over several years now that there is no movement in purchase consideration, but they do get people to “talk.” Does “talk” ultimately and eventually lead to purchase? Don’t know, but then I don’t need to know. The brands do, or at least they should.