Revenue management hitting the strategy sweet spot.

Best Super Bowl ads – Understanding the deeper purpose.

mopondobizlifesmarts — Tue, 12 Mar 2024 15:02:12 +0000

Just like Christmas, the time when the Super Bowl ads are rolled out, comes every year. We avidly watch and evaluate the “best ads” of them all. But are Super Bowl ads really the best ads? Or are they like a Paris fashion show; all the haute couture that can’t be worn by the common (wo)man?! So, let’s use the small sample of some of the best ads of 2024 Super Bowl to give a perspective on good advertising.

The background on best super bowl ads

The ads

Master Lock 1965_1974

Apple TV ad_Title 1984

https://www.youtube.com/watch?v=pk8BBGV2ypI

https://www.youtube.com/watch?v=ErwS24cBZPc

I believe that Super Bowl advertising, as we know it, began in 1984, with Apple’s ‘1984’ TV commercial. Prior to this, TV ads ran during the Super Bowl, just like any run of TV advertising. In the Master Lock ad we see an example of earlier ads. These ads focused on the product, and were not based on current issues, nor social consciousness centred. The Apple commercial, that ran to qualify for a best ads awards competition for 1983, in my view, was the advent of advertising to drive a social agenda.

It was around this time, that Super Bowl ads began to be more of a beauty pageant, than effective advertising. The rates for Super Bowl advertising spot buys then began to increase exponentially. These rates were around $37,500 per 30 second spot in the 60s. These rose to $1 million in the 90s, $4 million to $5 million in the twenty-teens, hitting $7 million in the twenty-twenties.

When you factor this in against advertising spot buys of $100,000 to $700,000, outside of the Super Bowl, it is quite an expense. But remember…this is a beauty pageant. Don’t you for a second think that everybody is going to run basic 30-second spots. There are those brands who decide that they want a mini movie production. 60-second spot buys run for $14 million; 90-second spot buys run for $20 million. https://www.forbes.com/sites/rogerdooley/2024/02/09/how-to-not-waste-millions-of-dollars-on-super-bowl-commercials/?sh=154d2eb452ea

So, not only are these long ads an extravagance for spot buys, but then we come to production costs. The 2024 Super Bowl ads were heavy on celebrity features, often with the characters clouding out the product. So, let’s give the decision makers the benefit of the doubt. The captains of industry of multi-billion dollar corporations can’t be doing this simply for ego. There must be a deeper rationale on investing such insane amounts in Super Bowl advertising, without a calculable ROI (Return on Investment), nor ROAS (Return on Ad Spend).

Before we address the issue of the rationale behind these Super Bowl ads, let’s go back to advertising 101.

The half-time show

College marching band_1967

1st celebrity halftime show

Music superstars_2000s

American football has since inception been associated with marching bands. Marching bands are as American as apple pie, and are still prevalent in college football. But in 1970, the National Football League (NFL) began celebrity performer half-time shows.

I won’t spend a lot of time on this, but suffice it to say, they reflect the commercialism of the whole event, and the ads created for, and run during the Super Bowl. In 2024, Usher received no payment to perform at the Super Bowl half-time show, but used it as a platform to gain exposure, and promote the new album he launched 2 days before.

The Super Bowl money game

Beyoncé, who has on previous occasions been a halftime performer, used her role in her Verizon ad to promote her new album, Rennaissance II. https://www.youtube.com/watch?v=ilGUh4Wn1VQ

Not only that, but she got paid $30 million for the Verizon spot, as well. She has mastered this Super Bowl commercialisation game. That gives us a good segue on whether the product owners running the Super Bowl commercials have mastered this game as well.

Only the product and the customer matter – the rest is noise.

Learn from the best

The wrong way

The right way. Source: Product Marketing Alliance

Getting your product to the right consumer must always be central. Let’s not lose sight of the fact that sports and music are some of the biggest income sectors for individuals in the U.S. economy today. https://bizlifesmarts.com/sports%20and%20music%20icon%20brands

What Madonna, Michael Jordan and Jay-Z have always understood is that they control, and are masters of their product, but always listen to their customers. Madonna is still the material girl, drawing crowds at 65. Michael Jordan retired from the NBA 21 years ago, but understand that he is still a basketball icon. Jay-Z, otherwise known as Hova, should have retired, or faded away in his youth, like so many rappers. But Jay-Z controlled his brand from the outset, and has used his brand partnerships to grow, while keeping his music at the cutting edge. https://www.cnbc.com/2017/06/30/5-strategies-that-helped-jay-z-build-an-800-million-career.html

It’s not about expensive, glitzy production budgets

Kanye West https://www.youtube.com/watch?v=_BWYyRicB8w

What exactly are the “best” Super Bowl ads trying to do?

At the end of the day, running ads is a means to an end. What matters is what impact did they have off the field and off the screen? https://www.adweek.com/brand-marketing/a-definitive-list-of-super-bowl-58s-top-performing-ads/

Kantar’s and System 1s’ ad testing tools, checked for the effectiveness of 58 Super Bowl ads. We should note that 56% of these top ads leveraged celebrities.

Kantar criteria were impact, enjoyment and brand equity. System 1 criteria were characters, celebrities, cultural references and comedy.

The stars: Booking.com (Tina Fey & others); Reeses (no celebrity stars); Popeye’s (Ken Jeong); Doritos (Jenna Ortega & others); Squarespace (directed & featuring Martin Scorcese); Toyota Tacoma (no celebrity stars); Microsoft Copilot (no celebrity stars).

Good try, but left it on screen: Michelob Ultra (Lionel Messi, Jason Sudeikis & Dan Marino); Dunkin’ (Ben Affleck, Matt Damon, Jennifer Lopez & Tom Brady); State Farm- “Like a Good Neighbaaa” (Arnold Schwarzenegger & Danny De Vito);

What were you thinking?!: NFL – “Born to Play” (no recognisable personalities); Uber Eats (Jennifer Aniston, David & Victoria Beckam & David Schwimmer); and Google Pixel 8 phone ad (no celebrity stars).

The end game (pardon the pun)

The winners

The herd

So, after the Super Bowl of ads really shouldn’t be a catwalk. The marketing directors of those companies and products strutting and preening need to fired – just like losing National Football League coaches.

The best ads are those that win both on the screens and off the field, in the marketplace. The basement cost of $7 million for just airing a 30″ spot, is too high a cost for vanity.

For the winners, the returns are not just in the multiples that come in incremental sales, but in the increase in brand value from the best ads, which is immeasurable. These are just a few lessons for brands dipping deep into their pockets, and planning to run ads at Super Bowl LIX.

To enhance your business’s bottom line with strategic advisory rooted in unique insights, contact us at bizlifesmarts@sageconsulting.co.ke.

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Kenya’s tourism & the gathering storm

mopondobizlifesmarts — Fri, 08 Nov 2019 08:59:47 +0000

The digital age has completely changed the face of modern travel. The collapse of the Thomas Cook travel company a couple of months ago should not have come as a surprise https://www.business-live.co.uk/enterprise/thomas-cook-collapse-finance-happened-16964473. If Kenyan travel companies didn’t wake up to it at that time, they need to do so now. Thomas Cook (TC) is the closest analogy to the Kenyan tourism sector; a 19th and 20th century business model, that couldn’t survive in the 21st century.

TC’s inability to adapt to modern travel needs

The trajectory of the Thomas Cook saga was evident from 1994. That it would collapse, should not have come as a surprise, given the patterns of the last two decades.

Table 1: NOT a 21st century travel company

TC’s series of blunders since 1994, were when they started selling off their profitable travel management and financial services businesses. This in favour of consolidating their wholesale tour packages business. Kenya’s tourism industry has similarly clung onto a tour package model, controlled by overseas wholesalers and local destination management companies (DMCs), despite all the signs of changing needs of the modern travel industry.

Kenya’s tourism trends

So, will Kenya’s tourism industry keep its head in the sand, like Thomas Cook, or wake up to the urgency to adapt to modern travel trends and needs? Let’s take a look at some of Kenya’s tourism numbers over time.

Table 2: Real or “creative” growth?

I’m sure you’ve all heard the saying, ‘Something’s rotten in the state of Denmark’. Kenya’s tourism statistics made sense up until 2011/12. A fishy smell then began to emerge in 2012/13. I have a simple philosophy with numbers: when they start to depart from the norm, or from common sense, just know that they have been “massaged”. For the first 3 decades that I’ve tracked, the correlation between tourist arrivals and tourism sector earnings were consistent and in sync. Then strangely, in the last 7 years tourism sector earnings have somehow made a quantum leap. This is not the issue to dwell on in this piece, but more importantly a symptom that the underlying dynamics of Kenya’s tourism sector are being covered up. So, let’s compare another set of variables for verification and deeper insight.

Kenya tourism’s perfect storm

Sebastian Junger’s 1997 novel, The Perfect Storm, and Wolfgang Petersen’s movie version of the same name in 2000, best typified a perfect storm. It is a particularly violent storm caused by the coming together of a combination of adverse meteorological factors. Kenya’s tourism faces a similarly perfect storm in that context of election cycles, terrorism incidences, an archaic industry structure, a lack of industry proactivity in responding to global trends, and declining hotel bed occupancy.

As the storm builds…
…will Kenya’s rickety, old boat survive?!

Table 3: A tourism industry vulnerable to a perfect storm

Kenya’s travel industry focuses on the election cycle effect, and both actual and potential terrorism attacks as key impediments to Kenya’s tourism. However, you must question a country’s data, when conflicting patterns are evident. Questioning doesn’t mean you’re saying they are wrong. It’s more so the need to unearth the real truth, in the context of the deeper story. Would you be confident in a business model that has shown such a long term decline in occupancy percentage of total beds?

And it’s not too late to make a change. I believe there is ample evidence of the first two factors not being fatal to a country’s tourism. However, it is the last 3 that are killers. Let’s look at each one.

Election cycles

Kenya can learn from countries like Thailand and India, which have volatile election cycles and consistent political conflict. That they are still able thrive comes from a clear tourism strategy, globally desired attractions, perceptions of tourism being valued and government goodwill. https://www.dailymail.co.uk/travel/article-2550899/Thailand-travel-advice-Violence-mars-Bangkok-elections-tourism-chiefs-say-business-usual.html

The commitment and seriousness of government to insulate its tourism from politics, makes its tourism product resilient. From diverse, beautiful destinations away from political hotspots, to magnificent hotels, historic temples and mouthwatering cuisine, there is a lot to make the destination worth it, despite the politics.

Table 4: Thailand visitor arrivals.
Source: Thailand Dept. of Tourism

Destination Thailand has a modern travel marketing and structural approach. Its https://www.tourismthailand.org/home portal is modern, interactive and gives the traveler confidence in planning their trip, without gatekeepers.

Terrorism incidents

Egypt’s terrorism has been more of a threat to its tourism than Kenya’s, in that it predominantly targets tourists. Be it Luxor, Sharm El Sheikh or the Sinai Peninsula attractions, it has been one tourist attack after another. The Egyptian government response has been more serious, both in security and infrastructural action, but also in monetary investment in the recovery process, to renew visitor confidence. https://www.wttc.org/about/media-centre/press-releases/press-releases/2019/travel-and-tourism-in-egypt-shows-immense-strength-and-recovery-in-2018-says-new-research-by-wttc/. We can now see that their recovery has recently been exponential and returning back to their peaks. Their reported numbers are also more consistent, giving all more confidence. It’s simply building confidence upon confidence, despite the setbacks.

Table 5: Investment leading to a resurgence to almost peak levels.

Table 6: Egypt tourism earnings tally with their arrivals trends.

Kenya’s terrorism incidents alternately have more frequently and devastatingly been against its regular citizens. Scores more Kenyans died in attacks like Mpeketoni, Westgate Mall and Garissa University, than tourists in the Kikambala and Dusit D2 hotels attacks. However, what is instructive throughout, was the Kenya government’s response. They looked at best inept, and at worst incompetent, uncaring and corrupt.

Archaic industry structure

Kenya’s industry structure mirrors the Thomas Cook trajectory of the past 2 decades. An overdependence on overseas wholesalers; ageing, crumbling resorts; outdated adjustment to the digital world; and uncompetitive dynamics in buying its product. The bread and butter business has been provided by TC, Tui, Virgin Holidays, Tauck and Cox & Kings, amongst other overseas travel wholesalers. While Kenya continues to put all its eggs in this outdated basket, the rest of the world has moved on to the likes of Expedia, Bookings Holdings, American Express Travel, AirBnB and direct flight and hotel bookings. https://www.inboundreport.com/2018/07/24/the-top-20-companies-that-dominate-the-world-of-travel-agencies/. Holding on to this model is remaining analogue, while the world goes digital.

Failure to adapt to global trends

Young travelers seeking adventure take control of their travel.

Related to this, the world has moved on from tourists to travelers. Tourists were almost like cattle; bundled into tour groups, to be herded around the world together. Travelers are more independent, and hold the power of determining their travel, at their fingertips. Millenials and Gen Xers have become the leading travel age groups. They use digital platforms to book their travel and are even increasingly showing the way for Baby Boomers. https://groupstoday.com/business/404-travel-trends-by-age-demographic. The Kenyan milk run model of being held captive in a hotel or lodge, being kept idle for most of the day, only being entertained by kitsch traditional dancers; then being stuffed with sumptuous food and drink, just isn’t appealing to the new traveler.

Declining hotel bed occupancy

As illustrated in Table 3 above, for bed occupancy to drop from 59.1% to 31.4% in a span of less than 30 years, would be a serious concern for Kenyan tourism investors. It simply isn’t a good look. And this against the backdrop of the growth of Airbnb. Granted, additional hotel beds have grown from about 10,000 to just under 27,000 over the last 15 years. However, take note that this beds growth is across all bed classes, with true 5 star beds being limited to Nairobi, Mombasa and a few, spotty safari lodges, and not numbering more than 1,000 beds.

Table 7: Kenya hotels beds occupied versus available.

The concerning thing for any potential investor is the fact that, real numbers of beds occupied has remained stagnant at about 5,000 over this period. And that is the state of Kenya’s tourism – stagnant. And many of those hotels need to be mothballed. Or as the head of one of tourism companies once said, ‘Hollywood and Bollywood need to be invited to use many of these hotels as sets for their, shoot ’em up, bomb ’em up movies’.

The keys for future sustainability: modern travel

So the keys for Kenya’s future tourism sustainability are simple:

Election cycles: Learn from Thailand and India. But NOT with politician benchmarking trips, and endless, actionless talking-shop conferences.
Terrorism mitigation and recovery: Learn from Egypt. Ditto.
Archaic industry structure: Simply change alongside the world, become digital, and make it easy for the new travel company leaders to sell your destination and products.
Adapt to global modern travel trends: Understand the new travelers, offer what they need/ want, become digital, and make it easy for Millenials and Gen Xers to buy your destination and product.
Bed occupancy viability: Put real hotel classification standards and quality in place, mothball all the obsolete hotels and introduce more iconic hotels and lodges.
And some final food for thought can be found at https://bizlifesmarts.com/biz-built-to-last.

For strategic advisory that will leverage uncommon sense and drive your bottom line, get in touch with us on bizlifesmarts@sageconsulting.co.ke

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The ever elusive S.M.A.R.T. objectives

mopondobizlifesmarts — Tue, 08 Oct 2019 12:43:21 +0000

I remember observing some of my schoolmates’ reactions when unexpectedly called upon in class, back in the day. They’d sink behind their desk, and wish that they could sink even further into the ground. It’s the same with being challenged on S.M.A.R.T. objectives. It makes you feel like you’re under interrogation. You may even begin to have heart palpitations. However, it is an essential part of business and it’s the successful companies that stick to the discipline.

For clarity, let’s look at the elements of S.M.A.R.T. objectives. https://www.youtube.com/watch?v=1-SvuFIQjK8

Specific

Direction setting

Some managers and organisations suffer from the malady of simply expecting their teams, and particularly more junior staff, to instinctively know what to do. They either expect it to trickle down by osmosis, or for teams to figure it out as they go along. Goals and guidelines must be specifically well defined under S.M.A.R.T. objectives, with clarity and unambiguity, just as with a road map. This step is essential to getting team buy-in.

For illustration, let’s look at the example of a successful sports team. I was watching analysis of the New England Patriots, arguably the most successful football team of the last 15 years. The analyst, who was a former player under Bill Belichick gave some insight regarding how well the coach gives instructions to the team. He described how every instruction, goal and hand signal had remained unchanged, clear and consistent for the last 15 years. Team members go against that specificity at their own peril, as it risks compromising the team’s success. Because the goals are so clear and specific, there is zero tolerance to any player going against them. Even the great Tom Brady, who is arguably the greatest quarterback of all time, is no exception. This is why the Patriots are perennial champions, no matter the odds. https://bizlifesmarts.com/experiencevsyoungtalent.

Measureability

Measureable goals.
Measurement of results.

There are two facets to measureability. We must measure both goals and results. I was once taught that if you don’t measure it, it doesn’t get done! Walk into the back room of a fast food restaurant or retail store, and you’ll see their list of sales goals for the day. Additionally, they measure everything, down to portion size. And then you must review the results. Companies can do this weekly, monthly, quarterly or annual. The fast food restaurants and retail stores do it daily, weekly and monthly. They are then able to take corrective action, or manage other levers of the business, based on these results. It’s a tedious process, but good leaders will tell you that it needs to be done if you are going to be honest about success.

Actionable, Achievable or Agreed

Cannot be pie-in-the-sky.

This S.M.A.R.T. objective is about there being a plan, the tools to execute the plan, and it not being a pie-in-the-sky plan. Too many companies set what they call “stretch objectives”. The problem with these is that they are never achievable and simply contribute low team morale. Planning is key to goals being actionable and agreed. A clear, achievable action plan also gives teams confidence about being able to deliver in a S.M.A.R.T. objectives, accountability atmosphere. This is the essential step in eliminating the fear of the whole measureability and accountability requirements. We’ll talk a bit more about fear later.

Relevant or reasonable

Avoid the bottom two quadrants.

How many times do managers leave their staff frustrated that their are being asked to do things that distract from their tasks at hand? At the outset, a team needs to be focused on the top two quandrants of the Eisenhower matrix of importance and urgency. Stay away from the bottom two quadrants!

Let me give another example. If you are holding your team to sales goals and targets, why make them spend 70% of their time in meetings and administrative tasks? It’s a no-brainer. It is insanity to try and focus on delivery of results, and yet you occupy all their time in internal meetings and calls. The mantra I too often hear nowadays, almost every moment of the day, particularly from managers is, ‘I have a meeting’ or ‘I have a conference call’. When the number of “important” meetings you attend becomes the company’s measure of your productivity, it is no wonder that everyone runs away from S.M.A.R.T. objectives and delivery.

Time-bound

A specific end date for final review.

Setting a clear time period and/ or end date for the performance period, allows the team to set key milestones, and monitor progress. It also supports the agreement and buy in to the goals, as nobody is ambushed by periodic reviews and end period evaluation.

Conclusion

The outcome of diligently following the 5 steps.

Fear is what induces employee aversion to adhering to the S.M.A.R.T. objectives process. I’ve observed executives literally break out into a cold sweat when challenged on S.M.A.R.T. objectives. Fear leads to a lack of confidence, which leads to low morale, which leads to poor performance. By following the 5 steps as outlined above, that panic will be taken away, there will be team buy-in and better teamwork and performance by everyone.

For strategic advisory that will leverage uncommon sense and drive your bottom line, get in touch with us on bizlifesmarts@sageconsulting.co.ke

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Private Label and the Future of Brands

mopondobizlifesmarts — Fri, 27 Sep 2019 06:35:20 +0000

What is private label branding about? Okay, that image up there may be a bit misleading. We’re not talking about setting up your own private branded clothing line…or we could be. Or could private labels be those aristocratic wines from some exotic vineyard? Okay, let me stop the joking around right there. This is a concept that, though simple, has however too often been misconstrued or mixed up with other terms. Private labeling or private label branding is simply when a retailer pays a 3rd party supplier to make a product for them. Private labels stand side by side, and competes, on the shelves with the traditional brands that the retailer also sells. So, to understand why this topic important, let’s go back to traditional branding.

The lock-down-your-brand model

11 secret herbs & spices
Technology locked tight
Secret formula secured

I’m not going to get into a dissertation on traditional brand strategy. You can read up on some of that at https://bizlifesmarts.com/brand%20sustainability. What I do want to provide a glimpse of is how these products epitomize the traditional model, where manufacturer brands hold sway in the retail marketplace. On top of these three being some of the strongest brands of all time, I have however chosen them for an additional reason. They have all held a stranglehold on their supply chain from manufacturing to distribution. Once they hand over their products to the retailer, they have had some of the strongest positions on how retailers sell their brands. There were times past when retailers could not sell any competitor product alongside products such as these.

Yes, KFC, Apple and Coca-Cola uphold the gold standard on brand protection, and demonstrate how brand value has traditionally been at the core of a manufacturer’s balance sheet. It used to be a cardinal sin to concede any share of space on the retail aisles. In essence, manufacturers negotiated with retailers and locked this down, as a key part of protecting their brand equity. Of course this is simplified; but this has been the traditional model of branding.

B.PLB. (Before Private Label Branding)

It all began with store brands

Decades before “Private Label” became the new buzzword, retailers stocked house or store brands of various products. A mother would buy these products as the cheaper alternative to fit her family’s budget. For the retailer, creating house brands on select products, mainly staple items, broadened their customer base. There was however a stigma attached to them, for the very reason that they were cheap (oops… the PC brigade will make me say ‘discount’). As a poor student, I remember that I’d look over my shoulder before buying a house brand; and make sure it was bagged as quickly as possible, before anyone saw me buying it. This 2010 article from cbsnews.com basically gave tips on how to shop for cheaper house brands. https://www.cbsnews.com/news/generic-and-store-brands-vs-brand-names/. And that was the primary purpose and perception of house brands.

I remember the house brand cornflakes being more like cardboard, the ketchup more watery and the baked beans more artificial tasting back then. But that, and a lot more, was about to change. Remember that I had earlier said that manufacturers had negotiated with retailers to protect their brand space in-store? What they did was to make them the gatekeepers between the products on the shelves and consumers. Now, we all know that retail store owners are shrewd businessmen, out to make a buck. So, what did they do? They figured out how to maximise their bottom line. But this is where we get things wrong people. We underestimate the people we are dealing with.

Retailers were shrewder than brand owners

Shrewd Retailers
Laid back Brand owners

So retailers began to study the mainstream brands they were gatekeeping. They watched which ones moved. They got to know their customers; knew why they bought and didn’t buy. They got to understand the retail psyche of a shopper better than any brand manufacturers ever could. While the brand owners were holding focus groups in their sterile corporate offices, retailers were observing and talking to consumers in-store. Unknown to brand owners, retailers better knew the numbers that matter: what price the consumer is willing to pay for each product, and how to make it fly off the shelves.

The first thing we saw, was retailers raising the quality of house brands, so that the cornflakes weren’t so cardboardy, nor the ketchup so watery. We also saw the more specialist retailers, like pharmacies, responding to consumer price sensitivity. This particularly, is a category where most products have a store brand alternative.

Pharmaceuticals and cosmetics

Pharmaceuticals, even the over-the-counter ones, are what could be called risk-averse products. That means, products with a high personal and emotional cost to them letting the consumer down; because of the need they must meet, for the price paid. One would pay a high price, both monetarily and psychologically, if they replaced their usual brand with the store brand alternative, and it failed to deliver.

However, what manufacturers failed to realise was that this is where the retailer was king; as gatekeeper! So, the way they would convert shoppers on a risk-averse product is this. Pete would see the great price on the store brand, and in his concern about whether it’s of poorer quality than his usual brand, he’d call the store attendant over. ‘Is this greatly priced product the same as my usual brand?’, he’d ask. Gatekeeper store attendant tells him, ‘Yes it is. If you’re not happy with it, you can always return it’. As easy as that, Pete was switched to the store brand. Brand owners should have known something was afoot when pharmacies changed their look.

Pharmacy: traditional medicine shop.
Store-brand led pharmaceuticals

Private label branding: The beginning

Just to recap. Private label branding has now gone through the phases of generic equivalents, store brand products and has now entered the phase of private label branding. What is the difference between store brands and private label brands, you may ask? I pointed out up front that people like to use buzzwords and confuse these terms. Again, to keep it simple, think of it this way. Store brands are when the retailer simply puts their logo on a popular product type, and offers it more affordably. These goods tend to be more of a commodity type, or products with easily sourced ingredients. Not much work required. Private label branding requires more analysis and ingredients review, so that the retailer can create their own equivalent of a profitable, branded product. The retailer, even if they only put their logo on it, will spruce it up to look more like a traditional brand.

Although, as is already evident, I don’t like to rehash the same old theoretical spiel, I guess I do need to address that simple pesky fact of why traditional brands cannot compete on the same footing with house brands. The price of traditional brands must cover R&D, marketing, advertising, distribution and all other overheads, before the product even reaches the retailer. House brands generally only have to cover ingredients sourcing, rent, labour and utilities. House brands thereby, can arrive on-shelf at a fraction of the cost of traditional brands. Okay, done with that piece of housekeeping.

The private-label game plan: bricks-and-mortar retailers

What private label branding entails today, is for retailers to pore over the data and identify the profitable, in-demand goods on their shelves. They can then simply go to any number of suppliers and copy or reverse engineer that product. Yes, they’ll make sure that there’s just a subtle enough difference for them not to get sued, but it will be of comparable quality.

So, here’s the game. Sam’s Supermarket has stocked Mike’s Energy Tonic for years. Sam is supplied Mike’s Energy Tonic at $2.50 a can, and sells it at $5.00 a can. Sam notices that Mike’s Energy Tonic is the main thing customers come in for before work, at midday and after work. ‘Hmmm’ Sam thinks, ‘what’s in this stuff?’. Sam decides to take a can of the stuff over to the pub and micro-brewery, where he meets his friends after work, one of who is the owner. The owner looks over the ingredients and says, ‘sure I can make that stuff for you’. To cut a long story short, Sam’s Supermarket then makes and launches Sam’s Power Juice. He get’s it made and packaged for $0.50 and sells it for $4.00. Sam’s Supermarket private-label energy tonic is born. Sam is making a $2.50 margin on the highly profitable Mike’s Energy Tonic, and an even better $3.50 on Sam’s Power Juice, which is more affordable and not much different in composition and taste.

Private Label branding: The future

Retail transformed.

According to Nielsen research, in 2019 in the U.S. $17 of every $100 of bricks-and-mortar retail sales are private-label products. https://www.nielsen.com/us/en/insights/article/2019/from-household-to-hygiene-products-private-label-is-upending-the-omnichannel-landscape/. It is similarly about 3% of online sales. Bricks-and-mortar private label products are more in a customer’s face at the point of purchase decision-making, with a greater number of retailers making inroads into the market. Thus, you see retailers from Walmart, to Target, to Whole Foods, to Trader Joe’s with not only their own store logo branded private labels; but they’ve even created private labels that appear to come from an independent supplier.

Target

Childwear by Target
Wines by Target
Sleepwear by Target

Target Stores has over 40 private label brands. Now, if you walk into Target looking for clothes for your kids, some wine or some sleepwear, aren’t you more likely to pick one of their well presented, well priced private-labels, than the more expensive product next to it?!

Whole Foods market

Olive oil from 365 Everyday Value
Raisin bran from 365 Everyday Value
Almond milk from 365 Everyday Value

Whole Foods market, or Whole Foods as we call them, have gone even further. Whole Foods built their brand equity on eco-friendly, organic and fresh credentials. This store is where citizens of the future shopped…or when you wanted to impress your boy/ girlfriend. You were actually willing to pay a bit more, because shopping at Whole Foods assuaged your conscience that you were doing good in this world. Back to the point. Their 365 Everyday Value private-label literally has hundreds of products in it’s line.

Watch this space. Whole Foods is setting the foundation for the next growing retail category; home grocery shopping. Outside manufacturers will soon lose all their power within Whole Foods. If the only products you will be able to order from Whole Foods delivery are 365 Everyday Value products, what brand do you think you’ll choose when you actually go into a Whole Foods store?! Oh by the way, Whole Foods is part of the Jeff Bezos empire.

Amazon

amazonbasics: You need to search for them
Baby wipes, diapers and vitamins
pinzon by amazon: linens and household items

It gets boring to keep using Amazon as a case study, but it’s unavoidable because they are so ubiquitous in the commerce of the future. Let’s not kid ourselves, it’s not Amazon.com, the online marketplace that we should be focused on, but Amazon, the human intuition mapping company! Amazon’s core product is data, information and understanding human behavior patterns. They could go the way of bricks-and-mortar retailers and replicate their biggest selling brands. However, this would alienate them from their leading brand partners, and upon them up to competitors. I believe that is why less than 3% of products on Amazon.com are private-label…for now!

Amazon is however using their data and buying analysis to identify the product categories they wish to compete in, and getting suppliers to create products for them in those categories. These products are then exclusively supplied to and only available on Amazon. The company is selective and careful which categories these are in, but I believe they are simply in the testing phase. Some of their private-label brands include amazonbasics general household items, pinzon by amazon linens and mama bear baby diapers and wipes.

Private-label-proofing your product

Private label is the wave of the future in branding. Yes, we will always have strong, stand-alone traditional style brands. However, those brands must now be more strategic in how their defend their brand equity and position. Some of the things you need to think about in order not to be as vulnerable to private label competition include the following:

Ensure that your brand has intrinsic added value, that cannot be simply replicated.
It sounds simple, but give consumers a reason to want to be associated with your brand. This goes beyond the functional attributes of the product.
Focus on consumer engagement and customer service. Some guidelines for customer service in the digital age can be found at https://bizlifesmarts.com/customer-satisfaction.
Innovation that leads consumers in a new direction, without alienating them.
Build a lifestyle brand with traction. There will never be a private label product to compete with Air Jordan shoes and apparel.
Be a luxury brand.
Steer clear of the Amazon universe.

Should I have titled this piece, ‘Jeff Bezos’ plan to rule the world?!’

For strategic advisory that will leverage uncommon sense and drive your bottom line, get in touch with us on bizlifesmarts@sageconsulting.co.ke

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The Weaponisation of data.

admin — Fri, 01 Mar 2019 14:39:48 +0000

When I hear the word ‘weaponisation’, I think of the military and war. But data weaponisation not only includes the military, but all areas of our technology lives; business and personal. Today we need to think of data weaponisation as a real war in our lives. It is the new face of war, and we are the targets and the pawns. But let me take a step back for a moment. Let’s look at the traditional view of weaponisation, and at a particular path of what got us here.

The military

Superiority on land
Superiority in the air
Superiority on the seas

Traditionally, for most of us, weaponisation has meant military hardware on land, air and sea, and the historical arms race to be based on the accumulation of this hardware. The United States was the winner in this race, and the only super-power as we transitioned into the new millenium.

We then saw other nations develop their nuclear capability, to build their position as powerful nations. This was not only for their standing on the world stage, but also as a deterrent against U.S. aggression and that of their regional adversaries.

20th century atomic bomb
Ballistic missile launcher
21st century nuclear bomb

This nuclear arms race extended not only from the U.S., to Russia and some European Union states, but to a bunch of other countries. We suddenly saw countries including India, Pakistan, Iran, North Korea and China enter the nuclear arms race.

The evolution to data weaponisation

In the new millenium, the truly global military mega-powers, in terms of weaponry and nuclear capability, were the U.S., Russia and China. Most of us viewed the others possessing their nuclear capability simply as a deterrent, more than a real global threat.

U.S. Flag
Russian flag
Chinese flag

The U.S. kept to the traditional model of military hardware accumulation, while clamping down on the nuclear capability of other nations; however, we saw Russia and China follow a different path.

Realising that they couldn’t outpace or outspend the U.S. in military hardware and nuclear development, we saw Russia and China take an ingenious approach: unconventional warfare and data weaponisation! https://www.brookings.edu/opinions/china-and-russia-vs-america-great-power-revisionism-is-back/

I would be overly exhaustive if I went into the all the areas of trade, economic expansion, foreign aid and geographic expansion, and so I’ll focus on data weaponisation.

A conflicted America
Russia: The cult of personality.
China’s geographical trade & foreign aid expansion.

The U.S.

A conflicted America has continued it’s hegemonic approach with a conventional approach to warfare, however constrained by it’s libertarian principles. We hear the voices of liberty and fidelity to the Constitution cry out, whenever America acts along similar parameters to Russia and China’s aggression.

Russia

We have all watched with mouths agape, as Vladimir Putin’s cult of personality has driven Russia’s unconventional warfare. Indeed, his ruthless military aggression against his neighbours, combined with data weaponisation against the world, has left the everyone off-footed. However, Putin is playing by his own rules; by which the libertarian, democratic world cannot compete.

China

If you had told me 20 years ago, that we’d be using the words ‘China’ and ‘superpower’ in the same sentence, I would have looked at you sideways, albeit with a pinch of salt. China’s path to this status came initially through trade, and was then built upon through geographical expansion in foreign aid and technology. Moreover, in their closed and “big brother” society, they have become the experts in data weaponisation.

The data weaponisation war and business disruption come together

Disrupting conventional warfare
Narrow corporate view of data weaponisation

You must admire the ingenuity of Russia and China. As they realised that they could not take the U.S. head on, they pursued unconventional ways of disrupting the American military machine. We should have known that something was amiss in 2014 when Russian bravado escalated. Do you recall the story of a Russian Su-24 bomber buzzing the USS destroyer Donald Cook within metres, despite U.S. claims that this was pure fake news and propaganda?! Whether fake news, urban legend or whatever, our eyebrows should have risen, when further reports of Russian GPS jamming emerged in 2017. https://www.news.com.au/technology/innovation/military/gps-signals-jammed-norway-finland-warn-pilots-russia-may-blind-their-navigation-systems/news-story/ee28be793012e9b9e66d59ffba439242

However, between 2014 and 2017, there was a lot more happening, that should have given us pause. There was enough Russian chatter that something was afoot in the area of data weaponisation, albeit not fully confirmed. Before we go further, let’s revisit the definition of cyber crime.

Cy·ber crime[sahy-ber-krahym]. Noun: criminal activity or a crime that involves the Internet, a computer system, or computer technology: identity theft, phishing…

Government and the corporate world, had a narrow view at the time of cyber crime. They were focused on hacking, breaching of firewalls, virus injections, online identity theft and ransomware attacks. However, they underestimated the level of sophistication of the attacks.

Over the last 10 years, we have woken up to a new age of full-on data attacks that have gone beyond the shadowy-figure cyber crime of old. I find it interesting that 13 of 21 of the biggest data breaches, i.e., a full 62%, were technology companies. They should know better and have better online security and measures to counter such potential breaches! https://qz.com/1480809/the-biggest-data-breaches-of-all-time-ranked/

Full-on data weaponisation

Hooded, shady, young hacker
Cloak and dagger online breaching

Our mindset was previously of hackers being shady people living in the shadows. In our minds these were either young, errant computer wizkids in their bedrooms, or shady conmen from failing or failed states. In a nutshell, fringe members of society.

Young IT wizard
Professional hacking
Young IT sorceress

However, the reality is that hacking and data weaponisation have been professionalised. States like Russia and China, and even North Korea and Middle East countries, have recruited these IT wizards into organised data weaponisation. The Russians hackers have perfected the art and can move from foothold to full-on breach in less than 20 minutes. https://www.wired.com/story/russian-hackers-speed-intrusion-breach/

Even while making it professional, the Russians have carried out their attacks in their inimitable, brutish style. These attacks continue to focus on political organisations like the DNC, political think-tanks, the military and corporate databases.

Political data weaponisation has been the area we’ve been most aware of. We were up in arms over the election breaches and manipulation in Kenya in 2013 and 2017 and in the U.S in 2016. Whether it was Cambridge Analytica, Wikileaks, the Russians or OT Morpho, they used both hacking and data weaponisation to influence these elections. We won’t go into the political aspects of data weaponisation, as the dynamics are unique in that sphere, but focus on the corporate side, which is more relevant to what we are speaking of.

The new sphere of battle

2014 Sony pictures attack
Identity & Intellectual property theft
Systems takeover & owner lockout

I believe that rogue nations, along with Russia and China, started getting ideas from North Korea’s alleged hacking of Sony pictures in 2014. As retribution for releasing the movie The Interview, the North Koreans locked Sony employees out of their network and stole all their data. Although the North Koreans didn’t achieve their objective of stopping the release, we saw data weaponisation in the corporate sphere escalating. https://www.usatoday.com/story/news/nation-now/2014/12/18/sony-hack-timeline-interview-north-korea/20601645/

The subsequent attacks focused on techology, pharmaceutical and defence companies, to steal research and intellectual property. In 2018, Russian, Chinese and Iranian hackers targeted more than 45 technology companies and government agencies, and research and intellectual property at more than 144 U.S. universities. https://www.telegraph.co.uk/technology/2018/10/09/china-ahead-russia-biggest-state-sponsor-cyber-attacks-west/

The U.S. is however not sitting idly by. Whether it’s arresting the Huawei CFO, or the ban on ZTE, the U.S. has responded firmly to the Chinese data weaponisation. https://thehill.com/policy/cybersecurity/369848-security-fears-spark-crackdown-on-chinese-tech

https://asia.nikkei.com/Economy/Trade-war/Japanese-suitors-look-past-US-crackdown-on-ZTE-and-Huawei

East versus West online defense mechanisms

Russia and China have put up their virtual “Iron Curtain” and “Great Wall” respectively. We see them use strict government censorship, required government access to corporate networks and strict policing of foreign technology infiltration. They even go as far as developing their own technology platforms, distinct from those of the West, and banning VPNs and social media from the West. I’m not advocating authoritarianism, but…

…organisations in the western world are complacent and reactive. The 2018 Hiscox cyber-readiness survey reported that 72% of companies are unprepared for cyber threats and attacks. In an age when we hear of these threats everyday, that is mind-boggling!

Some suggested defense measures

Companies must take data weaponisation as the greatest threat to their business, both in the micro and macro context in today’s world. Here are a few suggestions.

Cyber security strategy

I believe that every organisation must have a cyber security strategy, endorsed all the way to top leadership. We should adopt the German model where corporate strategies are endorsed up to the Board of Directors level.

Proactivity versus reactive crisis management

Currently there are two models that we see. The predominant “keep our fingers crossed, close our eyes and hope our anti-virus keeps us protected”model, and the visionary online security expert companies who see this as an investment and not just a cost model. The damage from an attack can wipe out the average company, or hobble even the most viable of companies for weeks or months. It’s wiser to be prepared than trying to recover and learn from an attack.

Dedicated IT security budgets

Most organisations invest less than 10% of their IT budgets – not total budget, but IT budget – on online security. The Gartner Research and Advisory Company estimates the average cost of a cyber attack to be US$ 5 million, and the Ponemon Institute breaks it down as follows.

Source: The 2017 State of Endpoint Security Risk Report (Ponemon Institute)

However, with examples of larger cyber attacks like the WannaCry virus and Equifax breach, each at US$ 4 billion, and cyber crime annual damage expected to hit US$ 6 trillion by 2021, having strategic and task-based IT & network security budgets is essential. https://www.varonis.com/blog/cybersecurity-statistics/

Beyond anti-virus

Anti-virus protection defends against attacks from sources such as file-based intrusions and viruses of known configuration. However, hackers can identify weaknesses in the leading anti-virus softwares and target these. We, as safety-conscious and responsible corporate citizens must put up additional lines of defense such as firewalls, intrusion detection and protection systems, encryption, biometric identification and network defense system testing.

Existing biometric
Evolving biometrics

Back-up & Recovery

Back-ups, back-ups, back-ups! It will save you money, time, stress and heartache, to have data securely backed up and recoverable, rather than have to reconstruct hacked/ stolen data. The heartache of reconstituting hacked data is bad enough, and it will also save the productivity and downtime costs of a cyber attack.

When will it end?

As we evolve from big data to apps and from on-premise to cloud, we’ll have more IT/ network security options in future. Just like the cold war, it will quickly become a choice of either destroying each other or learning to get along. I believe common sense and instincts of self-preservation will prevail. Or…if we don’t get wise to data weaponisation, China will achieve world domination and simply become the sole super power.

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