The delusion of mergers hurts the brands

Posted on Posted in Beloved Brands in the Market

6-merger-slide1-304-1M&A (Mergers and Acquisitions) talk around the Kraft-Heinz deal has dominated the business news. For most of us outsiders, it seemed like a surprise. We knew something was up with Heinz after the purchase by 3G Capital private equity group. But for Kraft, it seems like there has already been 30+ years of mergers starting with Kraft and General Foods in 1989, then adding Nabisco and Cadbury only to then split those two companies back out into two separate companies: Kraft and Mondelez. Since the split, the Kraft business is flat, the Mondelez continues to decline, likely both companies hurt by the changing diet of consumers as they cut high fat, high sugar products from their diet.

During my 20 year career, I went through three mergers. Each mergers used a different “merger” rule: one went fast, one went slow and one went clumsy. They say it takes 2 years for a merger to work. From my experience it takes longer.  Prior to the merger, everyone wastes a lot of time speculating what is going to happen, lots of lunch table chit chat and good people leave in anticipation. Headhunters are now pouncing on the people at Kraft. When the merger finally hits, you spend a lot of time on things not related to growing the brands. You have to train senior leaders above you and sales people beside on the “new” brand. Usually, everyone is trying to appear as smart as they can, but in reality for the next year, they ask the most elementary questions. As people jockey for power, some the brightest and best people I’ve ever worked with turn into school children–gossiping, maneuvering, changing their personality to fit in with key people, and some feeling/appearing demoralized and defeated.

Most M&A research studies estimate that the overall failure rate is at least 50 percent. In surveys with executives conducted in recent years, the percentage of companies that failed to reach the goals of the merger was 83 percent. With those statistics known, you would expect leaders to avoid the M&A activity, yet the trend of mergers and acquisitions has been constantly increasing over the past 20 years. Moreover, the number of mergers and acquisitions and the sums of money invested in them have shattered the record almost every year! Even though acquisitions cost billions, the purchase is much easier to do than executing merger. We see the lack of planning, the realization that synergies are not what you expected, the major differences in the culture becomes clear, negotiation assumptions and mistakes prove costly, and quick decisions made impact the overall motivation.

Here’s a list of the top mergers in history

M&A

The reasons most M&A’s happen is the same reason they fail

  • Our business is struggling, their business is doing well: So if your business is struggling, you need a turnaround, not the distraction from a merger. The effort undertaken during a merger will only make your business struggle even more. And you acquired a high growth, which means you’re likely buying high at a price premium. That will be hard for you to realize. This premium is generally so high that even successful management activities after the acquisition do not provide ROI (return on investment) and do not remedy the valuation “error.” The only thing left to do is to cut costs, both in people and marketing usually resulting in the struggling business doing even worse and the newly acquired business starting to flatten out.  
  • Allow us into new markets (new categories, new channels, new geographies). Yes, now your newly merged company will be in new markets, but it doesn’t necessarily translate that your brands will gain easy entry into those markets. At the shelf, retailers may hold your companies share of shelf so that means if you want your new brand in, you have to take out skus of your newly acquired brand. All that means is that as your brand takes time to gain any momentum in the new market it is entering, any gain is offset by a dramatic loss of sales of the brand you took off the shelf. A second risk to entering into markets is the merger may have cost the talent with the knowledge of the new market–and now inexperienced leaders are making decisions about markets they know very little about. With the Heinz-Kraft deal, 60% of Heinz sales are beyond North America, but 2% of Kraft. They have already tried to spin this great myth that this opens up new markets for the old Kraft brands. I want to see them try to sell Velveeta, Jello or Cheez Whiz in France or Italy. Sounds good on the books, but not in reality. 
  • Imagine the power of us together: the size, clout and efficiencies. In a business driven or dominated by retail, that power can certainly help. Where there are large manufacturing or union costs, the efficiency can be leveraged for lower costs. layoff-in-newspaperBut when all you have is efficiency, it becomes obsessive and you look everywhere to cut costs in order to pay off the merger. The first round is easy: close redundant plants and warehouses, eliminate duplicate sales people. And you see results. But since every business must show incremental profit to show the merger a success, the second round of synergies that are harder to show. Now you cut brand support–reduce marketing spend, starting re-organizing teams to reduce people, squeeze suppliers for cost reduction. It can work in the short term, but while the organization becomes obsessive about synergies, who is focused on the growth? If the top-line doesn’t grow,you will eventually run out of places to cut. And becoming this huge conglomerate can make you slow to respond, stodgy, risk-averse and ripe with bureaucracy. This starts to sound like the old Kraft General Foods of the 90s and early 2000s, who closed successful businesses, got rid of some great talent through the years and are known as one of the most risk-averse conglomerates around. My big worry about the new Heinz-Kraft is how to make sure the new company can move with the agility needed in this ever changing marketplace. 
  • We will acquire a technology or expertise we don’t have. At first, it makes sense that you can buy the technology or expertise of your competitor, but likely it comes at a premium with no guarantee for success. If it’s a technology buy, you can certainly use it in your own product since you bought it. But we like to say that brands have four choices:  better, different, cheaper or not around for very long. Now you’ll have both brands appearing almost the same. It’s very challenging to run two brands in one category–I know from experience. The biggest issue is that the two brands start to resemble each other to the point of duplication–if this worked here why won’t it work there. The same technology under the hood, the same distribution strategies and the same ad agency produces similar ads. The best case study for this was when Ford bought Mazda and used identical parts for cars yet tried to appeal to different targets at different price points. On the other case, when you acquire talent, you also acquire a distinct culture you need to make sure you continue. There are many cases where companies purchased an innovative R&D team and failed because that team was mis-managed and lost that innovative spirit. Case in point was Ford’s purchase of Volvo, almost destroying the brand’s spirit of innovation in safety. Both the Volvo and Mazda brands did much better after escaping Ford. Oddly enough, is it any coincidence that the Ford brand is now one of the best performing brands in the market?  It will interesting to see what happens with Apple and Beats by Dre as that deal highly favored Beats, and it’s Apple’s first real attempt at M&A. 
  • Ego Play: Many times the personal interests of senior management are not always aligned with those of the stockholders. The CEO and management team see personal advantages in the merger, such as greater empowerment and control of a larger organization, improvement of the social-management status, and higher salaries and benefits. With wide-eyed optimism, they convince themselves that they can do a better job managing the brands they acquire, they tell themselves they can find more growth and cut costs at the same time. Ego can get in the way of good strategic thinking. Companies can get in bidding wars and corporate ego sees the price get out of hand. They get so deep into the deal, they have to have it–at all costs. In any transaction, when things get emotional the seller wins.
  • Our cultures are a perfect match: Very rarely do we hear this as the primary reason. Yes, we hear it in the press release and at the opening day rally, but as many of us have gone through a few of these, we know that 5 senior leaders meeting 5 other senior leaders and working out a deal is not usually a good indicator that the cultures are a good fit. Even if they say so. Business culture is an odd thing and should not be under-estimated. Usually a merger never allows the due-diligence to find out about whether the cultures fit.  

mergers-acquisitions-22744864Who benefits from Mergers

  • The brands don’t benefit. And the consumer misses out as well. With a distracted company sorting through the merger and trying to make the numbers, it’s usually innovation that gets delayed or cut. With demand for synergies, production costs/warehouse costs likely impacts ingredient choices and freshness options. Sadly, many times the product just isn’t the same as it used to be. 
  • Brand Leaders don’t benefit. They have to re-work and re-work plans for new management. And usually the discussions are a step back in the degree of strategic challenge the first year or two. You get questions like “so tell me how this brand works?” or “have we always done it that way?”.  As synergies happen, we see options like re-structuring the marketing team to group brands together. That means less attention can be paid to each brand or the details beneath. Brand budgets are scrutinized and cut–usually sticking to the safest options in the plan and eliminating creative ideas that that carry risk.  
  • The HR team doesn’t benefit. While they are seen as the “evil group” in a merger, they are usually under the most pressure to cut head count and deliver the bad news, while coincidently being challenged to find a new culture from these two companies that don’t fit nicely together.  This group bears the brunt of the merger. 
  • Shareholders: The statistics show that the shareholders of the seller benefits more than the shareholder of the buyer. Considering, mergers can come out of nowhere fast, this is just a crap shoot as to which company stock you hold. But it really does speak to the premium paid in these deals. As they say in Real Estate, never buy high. 
  • Investment Banks and McKinsey Consulting: At the whim of the leaders, both groups receive huge fees for doing the deal and executing the merger plan. Oddly enough, neither group seems to be at risk or on the hook if the deal or the merger go bad. They just keep moving on to the next deal. 
  • Senior Leaders in the short-term. With the approval to move forward, they increase their status within every touch point–with retailers, with peers, with agencies and in the business community. They likely benefited financially from the merger–either higher salary bump or bonuses. In the longer term, they are on the hot seat to make this deal pay off, and with a 50% failure rate, they likely won’t last. 

Yes mergers are as much of a reality as baseball trades. Like in baseball, managers think we can do more with that asset (brand or player) than they are doing. But more and more, just as the best sports teams are winning because of the organic development of their players, the same holds true for brands. Focus on growing your brands, choosing the right consumer driven strategies and executing with intelligence and passion. Stay focused on your own business instead of drooling over others.  

While the grass always looks greener on the other side of the fence, make sure your own business is in good shape.

 

To see a more in depth presentation please read the powerpoint presentation below which is a Workshop to show brand leaders how to create a beloved brand so they can generate more power and profit for their brand.

Beloved Brands: Who are we?

At Beloved Brands, we promise that we will make your brand stronger and your brand leaders smarter. We can help you come up with your brand’s Brand Positioning, Big Idea and Brand Concept. We also can help create Brand Plans that everyone in your organization can follow and helps to focus your Marketing Execution. We provide a new way to look at Brand Management, that uses a provocative approach to align your brand to the sound fundamentals of brand management.

We will make your team of Brand Leaders smarter so they can produce exceptional work that drives stronger brand results. We offer brand training on every subject in marketing, related to strategic thinking, analytics, brand planning, positioning, creative briefs, customer marketing and marketing execution.

To contact us, email us at graham@beloved-brands.com or call us at 416-885-3911. You can also find us on Twitter @belovedbrands.

 

Beloved Brands Graham Robertson

How severely damaged is the Toronto Maple Leafs brand?

Posted on Posted in Beloved Brands Explained

leafs-badI think the Leafs should be a little worried about the health of their brand. While they have been bad for the entire century so far, this year feels even more disconnected and puts them at risk, if things are not fixed. There are major signs of brand health issues, which usually shows up in advance of any issues with brand wealth. But I think with a quick shot of the optimism drug over the summer, the crazy Leaf fans will be hooked again.

Here’s the brand health issues that should raise concern:

  • Leaf game not shown on TV?  Last Saturday, Hockey Night in Canada decided not to air the Leafs game on the main network for the first time in forty years. With TV media, there are so many games on TV and on-line, that the big Saturday night game is not the same. In fact, the biggest risk now is that I can see 82 games of any team I want.  
  • No sell out? This past Monday, the Leafs failed to sell out for the first time in 15 years. While giving up a little revenue for not selling out, the bigger risk here is that if tickets are going for $30, then it takes away the mystique of going to the game. The good news is the Leafs have announced they won’t raise ticket prices. I love that they actually felt compelled enough to announce this, which shows the true power of the brand.  
  • Fans cheering for the Leafs to lose: Not only are the Leafs tanking this season to get a good draft pick, the fans are cheering for the opponents so that the Leafs do lose. If the Leafs are bad again next year, the fans may again cheer against the Leafs.  If this goes on for 5 years, do these fans go find another team?
  • Fans are mad at the current team: Fans are so enraged at the current crop of Leafs that they continue to boo the best players and have thrown sweaters on the ice in dis-respect of the team. The players took it upon themselves to “not salute the fans” as their retribution. It’s never good to go to war with the fans, when the only thing you have is fans. 

The Leafs brand is on pause this year. The fans are on hold, waiting to see what happens next. I believe if the Leafs get rid of a few players, draft a big name (even if it’s not McDavid) and get a big name coach, they would create the perception that they are moving in the right direction. As we discuss below, the Leafs are not really focused on winning the cup, but rather giving the illusion and optimism that they “could” win the cup. 

The success of the Leafs brand defies logic

When we look at the most valuable sports franchises around the world, whether it’s Ferrari, Manchester United, Real Madrid, New York Yankees, Los Angeles Lakers or New England Patriots, they usually have one thing in common:  THEY WIN.  And in most cases, they win a lot. We’ve never really found out what happens to those brands when they lose.  And then there’s the Toronto Maple Leafs who recently joined the ranks of the most valued brands, now worth an estimated $1.2 Billion. 

  • The last time the Leafs won a hockey championship was 1967, when Lyndon Johnson was President, The Beatles were releasing the Sgt Pepper’s album and Wal-Mart only had 24 stores (all still in Arkansas). It was even 8 years before Justin Bieber’s mom would be born.
  • The Leafs have made the playoffs once since 2004. None of their current players were even in the league in 2004. And they are the only NHL team not to make the playoffs during those years.
  • There were two major work stoppages in the NHL in 2005 and 2012–one wiped out an entire season, the other a half season. In both of those years, the value of the Leafs jumped up. And yet, since 2004, the value of the Toronto Maple Leafs has gone up from $280 Million to $1.2 Billion.

So clearly for the Leafs, actually playing and winning the games doesn’t really matter to value of the Leafs brand. Yes, Apple’s market value has gone up at a faster pace, but they’ve launched iTunes, iPod, iPhone, iPad and the Macbook during that time.  

Most great brands have a vision for the future: what’s the Leafs brand vision?

Like any sports team, the Leafs will state their vision of “we want to win the Stanley Cup”. It sounds good. It’s what you’re supposed to say. Proof for what the real vision might be in the fact that for past 15 years they were owned by a pension fund and they rewarded their President financially, not for how the Leafs did on the ice, but how well the Leafs did off the ice. And now they are owned by a media conglomerate who sees the Leafs as content to get the millions of insane Leafs fans watching in person, on TV and on-line. I believe a more appropriate Brand Vision for the Leafs is “to be the most beloved sports franchise” or even a stretch “to be the most valued sports franchise in the world”. 

Does winning matter?  Yes, but it’s a strategy to help the vision of being the most loved or most valuable sports franchise. It’s the “how” you get to the vision, but not the vision itself. The hook is to appear that you are doing the right things to try to win the cup–enough to keep the fan base engaged.

Holding the Leafs up to the principles of a beloved brand

I once had an economics Professor who said “economics proves that what happens in real life can actually happen in theory”. Well, I usually use the Apple brand to prove how the theories of Beloved Brands work, but let’s take the Leafs brand on a test run and see how they line up.

First, we believe that consumers connect with brands based on a “big idea”. That’s the tough question for the Leafs: what is their big idea? Is it the heritage/history, being the home team of the biggest hockey market or the great underdog story?  At times, it’s been the “loveable losers”, where the mediocre/good players like Palmateer or Vaive become legends in the community. But that’s still not enough to make the brand that connected. The big idea during Steinbrenner’s Yankees was “we we will do whatever it takes to win–at any cost” where as the Montreal Canadiens are all about “we maintain the pride and dignity of history and we’ll do what’s right in our pursuit of victory”. It’s hard to truly see a big idea to connect with the Leafs. While most fans have this nagging feeling in the back of their mind that the Leafs will never win in their lifetime, I believe they cheer for the Leafs “to stay engaged enough just in case there is that once in a lifetime chance to win the cup”. So the Leafs are more like a potential “once in a lifetime eclipse” that fans want to see or even a lottery ticket. The only other sports brand like the Leafs are the loveable Chicago Cubs.  If the Leafs are that “eclipse”, I’ve always debated that if they ever do win the Cup, would more people keep watching or would people stop watching. The Toronto Blue Jays may prove that once they won the World Series, the Toronto fans were like “great, so what’s next” and moved on. My guess is that I’ll never know the answer to this question, as I don’t expect the Leafs to ever win the cup.  

Once you have the big idea for your brand, you need to map out the 5 Brand Connectors to help deliver that big idea: the brand promise, strategy, brand story, freshness of Innovation and a culture that helps deliver the promise.  

Slide1

Arguably, the Leafs might be defying all 5 of these sources of connectivity. 

  • Brand Promise: Most beloved sports teams can say “we promise to deliver an on-field team that will always be competitive enough to win a championship”. The Yankees, Man U, Ferrari, the Canadiens and Real Madrid can easily say that. The Leafs promise to “win a championship” feels hollow. If that was their promise, the brand would be a complete failure. Fans would walk away and the value of the team would fall. Well, at least for a normal team. When fans get excited about the Leafs, the world feels better, they are happy and optimistic for the future. The real promise for the Leafs is “we’ll make you feel good even if the pursuit of victory is greater than the victory itself.” Maybe if you have that underdog spirit in your own life, you see hope in the Leafs where no one else sees hope. But the problem for this year is that when they lose, that optimism comes crashing down. A friend of mine who is a Leafs fan had a baby a few weeks ago, and posted on Facebook “when do you break it to the kid that the Leafs won’t win a Championship in his life time?” Sadly, that kid will be a Leaf fan. He now bleeds blue. And will pay thousands of dollars towards the leafs coffers over his life time. 
  • Strategy: In terms of players, the Leafs have relied the last 15 years on signing free agents. But in managing the brand, they focus on hyping up the players, they build up the optimism at the beginning of each year and keep the fan base engaged with constant communication and stay reasonably competitive to at least give hope for getting in the playoffs. The Leafs manage to keep the fan base hooked by constantly feeding them optimism. The problem this year is that they’ve fallen so far out of the playoffs the talk of re-build has the fans confused. Those players they’ve hyped turned out to be jerks, who won’t salute the fans, refuse interviews and don’t even try on the ice. It’s hard for the Leafs to hype players that aren’t well liked. 
  • Brand Story: As I was growing up, the Leafs always successfully connected the past (Johnny Bower, Bobby Baun or Daryl Sitler) to the current team. The stories stressed the values of toughness, hard work and how the underdog always over-achieved in the face of adversity. That story fit nicely to the Leaf teams of the 90s with Doug Gilmour, Wendel Clark and Felix Potvin who went to the semi finals in back to back years. However, today’s current Leaf teams are the opposite:  over-hyped, over-paid and under-achieving players like Kessel and Phaneuf, certainly not aligned to the values of toughness and hard work. 
  • Freshness: For a sports team, freshness comes through the signing of new players and then building optimism around those players. The problem is the salary cap and the current roster has the team trapped. The tanking to get a draft pick has been a good strategy as it will provide someone (McDavid or even Strome) that they can build around. You will see this summer that the Leafs will build all the optimism of a rebuild around the youthful team. And fans will buy into it.   
  • Experience: There are only two ways to experience the brand–either in person or on TV. Going to a Leaf game has a buzz and excitement to it. The tickets are usually so expensive that it is so rare for the average person to get to go. The TV games are rooted in history: “Hockey Night in Canada” at 7pm has been one of the highest rated TV shows since the 1950s. And so this year, we’ve now seen two things happen. Last Saturday, for the first time since the early 1970s, the Leafs were not shown on Hockey Night in Canada, with the CBC choosing the Montreal Canadiens game. It’s all about ratings, even though the network that shows the games owns the Leafs. And this past Monday, the Leaf game wasn’t a sell out, and on StubHub you can easily get tickets for $25. So while this is your chance to finally go to a game, no one really wants to even go.

How the Leafs make money

Like any brand, there are really only 8 ways to make more money:  premium pricing, trading up on price, lower cost of goods, efficient spending, stealing share. getting loyal users to use more, entering new markets and finding new uses for the brand.

Slide1

Pricing: Ticket prices for the Leafs are the highest in the NHL–an average of $375 over 42 home games, which is three times the average ticket price for Detroit Red Wings or even six times the price for Tampa Bay. Getting tickets to a game is nearly impossible for the average fan. Every game is a sell-out. It’s a 40 year wait for Leaf seasons tickets. These end up in people’s wills. The ACC also uses strong luxury box and platinum ticket sales to trade the business consumers up on price–so not only are they paying $1,000, they also have to order enough food and drinks to support a luxury box. If the Leafs look at an extended downturn on play or even a 5-year turnaround, it likely won’t impact average price but it may impact the # of sell outs–especially as the Leafs just experienced their first non-sellout in 15 years.  

Costs: Control of costs works in the favour of the Leafs. The NHL has a salary cap that holds teams to $60 Million per year, which is 6% of the team’s brand value. For the other hockey teams worth $200 Million, that’s 30% of their brand value. That’s a huge competitive advantage for the Leafs–still defies why they can’t win. There’s no real need for “marketing costs” as every game is on TV, with normal exceptionally strong ratings. While the ratings are only in Canada, they are such a dominant ‘country brand’ that it makes the local market all of Canada, which means it has access to 30 Million people.The Leafs receive added earned media with 2 sports TV stations, 3 radio stations and 3 major Newspapers constantly covering every move the team makes. Both sports stations hold a daily live show at lunch time. 

Share: The Leafs dominate the media landscape but end up sharing that revenue with the NHL. It’s estimated that 70% of the league revenues come from Canada–my guess is that most of that comes from the Leafs. For the Leafs merchandise sales are very strong. The Leafs announced it was changing its third jersey to be a replica of the 1967 jersey. Which means all those fans have to go out and drop another $129 on a new jersey. This past year, the Leafs have added a sports bar to the ACC, just outside the arena that has hundreds of TVs and seating for two thousand people. With a roster currently filled with unpopular players, the Leafs need a few popular players for the fans to put a name on the back to really drive up the merchandise sales.

Market Size: The Leafs have expanded the size of the market by driving sponsorship and even creating Leafs TV. The team’s sponsorship drive is incredible–carrying an astounding 50+ sponsors on its roster–including separating out the banking category into Core Banking, Wealth Banking, Credit Card banking, which allows them to get money from three separate banks. Sponsorship is a money machine. The Leafs TV expands the brand for the most loyal followers to connect even more. The Leafs have also launched a bar attached to their stadium that holds another 2,200 fans who drink and eat during the 2 and 1/2 hour game. If the crowd shrinks or the Leafs lose early each time, this bar will be clearing out by the 2nd period. 

Income statement: In 2011 with the world facing a global recession, following up on a 29th place finish in the standings, the Leafs revenue went up ELEVEN PERCENT!!!  And then they raised ticket prices. Because of the player strike a few years ago, player costs have gone down from $69 million to $57 million. Revenue up, costs down–that’s a P&L the people of Price Waterhouse dream about. A lot of the value is now connected to how much money will be made in the future.  The NHL just signed a 10 year labor contract giving the Leafs cost certainty and a 5 year media deal giving the Leafs revenue certainty. While I still don’t think the Leafs will win a championship in the next 10 years, I would bet they will hit $2 Billion.  

It’s not easy being a Leaf Fan. Yet like a drug, it’s not easy to stop being a Leaf fan.

 

Slide1

To see a more in depth presentation please read the powerpoint presentation below which is a Workshop to show brand leaders how to create a beloved brand so they can generate more power and profit for their brand.

We make Brands better.

We make Brand Leaders better.™

We offer Brand Coaching, where we promise to make your Brand better by listening to the issues, providing advice that challenges you, and coaching you along a strategic pathway to reaching your Brand’s full potential. For our Brand Leader Training, we promise to make your team of Brand Leaders better, by teaching sound marketing fundamentals and challenging to push for greatness so that they can unleash their full potential. Feel free to add me on Linked In, or follow me on Twitter at @belovedbrands If you need to contact me, email me at graham@beloved-brands.com or phone me at 416 885 3911

Slide19

You deserve better advertising

Posted on Posted in How to Guide for Marketers

Slide1While that’s a very famous tongue-in-cheek quote from David Ogilvy, it should be a kick in the butt to clients. It suggests that if you suck as a client, you will get advertising that sucks. It’s likely true. As I’m coaching clients on advertising, I like to ask a very difficult question: If you knew that being a better client got you better advertising, would you actually be able to show up better? When it comes to advertising, the role of the Brand Leader is to consistently get good advertising on the air, and equally consistently keep bad advertising off the air. So what is it that makes some brand leaders good at advertising?

Before we figure what makes someone good at advertising, let’s figure out what makes someone suck

Theory #1: you blame yourself

  • You never find your comfort zone: You are convinced you’re not good at advertising. No experience, feel awkward or had a bad experience. You think you’re strategic, not tactical. You are skeptical, uptight, too tough and too easily annoyed.
  • You don’t know if it’s really your place to say something: You figure the ad agency is the expert—that’s why we pay them—so you give them a free reign (aka no direction). Or worse, you give them the chance to mess up, and blame them later.
  • You settle for something you hate, because of time pressure, or you don’t know why: You don’t really love it, but it seems ok for now. The agency says if we don’t go for it now, we’ll miss our air date and have to give up our media to another brand.
  • You can’t sell it in to management: you need to make sure if it’s the right thing to do, you are able to sell the idea in. Tell them how it works for your brand—and how it delivers the strategy.

Being a good client takes experience, practice, leadership and a willingness to adjust. Don’t write yourself off so quickly. Learn how to be a good client.

Theory #2: You Blame your Agency

  • You hate the brief: Agency writes a brief you don’t like—or you box them into a strategy. If either of you force a strategy on the other, then you’re off to a bad start.
  • Creative team over sells you: you get hood-winked with the “we are so excited” speech: You’re not sure what you want, so you settle for an OK ad in front of you—the best of what you saw. Ask yourself what’s missing before you buy an ad.
  • You lose connection with the agency: Keep your agency motivated so that you become the client they want to make great work on, rather than have to work on.
  • You lose traction through the production and edit: Talent, lighting, directors and edits—if the tone changes from the board to edit, then so does your ad.

An OK agency can do great work on a great client. But a great agency will fail with a bad client. Next time you want to fire your agency, maybe focus on yourself for improvement, because you’ll bring the same flaws to the next agency.

Theory #3: You Blame your Brand

  • The “I work on a boring Brand” argument. You think only cool brands like Nike, Apple, Ikea etc. are so much easier to work on. However, think again, because your boring brand has so much room to maneuver, it should be even easier.
  • You are too careful and think we can’t swing too far: Good ads either go left or right, not in the middle of the road. Consumers might not notice your “big shift”.
  • Advertising roulette: Where brand managers haven’t done the depth of thinking or testing, briefing is like a game of chance. Brands go round and round for years.
  • Your strategy Sucks: You figure if we don’t have a great strategy, a good ad might help. A great strategy makes an ad, but an Ad will never make a great strategy.

It’s one thing to be a “fan” of advertising in general, but we need to see you be a “fan” of YOUR advertising.

Be a better client

Here are eight ways to challenge yourself to show up better at every stage of the advertising process

  1. Do you develop a testable Brand Concept with rational and emotional benefits, plus support points that you know are actually motivating?
  2. How tight is your brief? Do you narrow the target and add engaging insights? Do you focus on the desired consumer response before deciding what your brand should say? Do you focus on one benefit and one message?
  3. Do you meet creative team before the first creative meeting to connect, align them with your vision and inspire them to push for great work?
  4. Do you hold tissue sessions to narrow solutions before going to scripts?
  5. At creative meetings, do you stay big picture, avoid getting into details? When giving direction, do you avoid giving your own solutions and but rather try to create a “new box” for the creative team to figure out the solutions?
  6. Do you take creative risks, and are you willing to be different to stand out?
  7. Do you manage your boss at every stage? Do you sell them, on your vision what you want?   Are you willing to fight for great work?
  8. Are you one of your agency’s favorite clients? Do they “want to” or do they “have to” work on your business? If they love you, they’ll work harder for you and do better work. They are only human. They will never tell you this, but I’m a former client so I will: if you want better work–it’s pretty simple–show up better. 

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Be better at every stage 

  • When doing the strategy pre-work, dig in deep and do the work on insights, create a Big Idea and lay out the brand Concept. Even consider testing the concept to know that it motivates consumers. Never use the advertising process to figure out the brand strategy. 
  • Create a focused creative brief to create the box for the creative team, that has one objective, two insights, the desired response, one main benefit, two support points. 
  • Hold a creative expectations meeting to give a first impression on your vision, passion. Inspire and focus creative team. Do not take a hands off approach and avoid meeting the creative team, assuming your account team has conveyed EVERYTHING. 
  • Use a tissue session to explore ideas. Use this when you don’t have a campaign. Be open to new ways of looking at your brand. Focus on Big Ideas, without getting into the weeds. Be willing to push for better ideas if you don’t see them at the tissue session.
  • When in the creative meeting, be a positive minded client, focus only on big picture, give direction, make decisions. Avoid giving your solutions. No Details. Ask yourself: are you inspiring?
  • Use a feedback memo that is 24-48 hours after the creative meeting for more detailed challenges but without giving specific solutions. Use this to create a new box. Do not use this memo to say new thoughts that were not in the creative meeting or in the management meetings you had. If it is a new thought, pick up the phone and talk about it with your account person first. Slide01
  • If you use ad testing, you can use either quantitative or qualitative depending on time and budget. I always recommend that you use it to confirm your pick, not make your decision.
  • When gaining approval internally, sell it in!!!  That’s part of your role is to fight for the work you love. Be ready to fight resisters to make it happen. My rule of thumb is to bring the senior account person when that person has a good relationship with my boss and even use them to help sell it in (since they are better trained at selling) and then bring the most senior creative person when the creative work needs selling. 
  • Through the production stages, your role is to manage the tone to fit the brand. Think of this like managing the kitchen of your house–you have to live in it, so you have to live with every decision. Always, get more than you need so you can use it later. 
  • With post production, talk directly with and leverage every expert you come in contact with. The more you connect and empower them, the harder they’ll fight for what you need. 

Get the advertising you deserve

At Beloved Brands, we run a Brand Leadership Center to train marketers in all aspects of marketing from strategic thinking, analysis, writing brand plans, creative briefs and reports, judging advertising and media. To read more on strategy, here is a workshop on HOW TO THINK STRATEGICALLY, click on the Powerpoint presentation below:

We make Brands better.

We make Brand Leaders better.™

We offer Brand Coaching, where we promise to make your Brand better by listening to the issues, providing advice that challenges you, and coaching you along a strategic pathway to reaching your Brand’s full potential. For our Brand Leader Training, we promise to make your team of Brand Leaders better, by teaching sound marketing fundamentals and challenging to push for greatness so that they can unleash their full potential. Feel free to add me on Linked In, or follow me on Twitter at @belovedbrands If you need to contact me, email me at graham@beloved-brands.com or phone me at 416 885 3911

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What the #*$& is wrong with McDonald’s? Here’s five things wrong.

Posted on Posted in Beloved Brands Explained

imagesI’ve been confused about McDonald’s marketing the past year, mainly because it appears that McDonald’s is confused about their marketing. That coincides with poor business results, in a downward trend for each of the past 9 months, with February’s numbers showing a deepening issue–down 4% versus last year. “Consumer needs and preferences have changed,” the company said in Monday’s statement. “McDonald’s current performance reflects the urgent need to evolve with today’s consumers, reset strategic priorities and restore business momentum.”

McDonald’s are in desperate need for a RE-FOCUS, so they can get everyone focused on what matters the most. There needs to be an alignment of the team, a return behind their strengths and a return to the fundamentals. The issue with the culture at McDonald’s is that it’s very top-down insular culture with very little outside thinking–which is great when things are going well, but will be tough to battle through when things aren’t going so well.  

Here’s the top 5 potential things wrong with McDonald’s. 

McDonald’s is not aligned with the trend towards healthy eating. 51JW1207ZALThat’s obvious, but that was also equally obvious the past 5 years ago when they grew an average of 10% a year, even +13% the year after the “Super Size Me” movie came out. Also, there are a few examples of indulgent brands that have done well (e.g. 5 Guys), in countering the health trend, to use it as a regular escape from your diet.McDonald’s scored high marks for putting calories on their menu, but bad publicity when they fought NYC on the size of drinks they serve. So while this might be part of the decline, I’m not sure this is the main reason for the decline. McDonald’s should be able to still find growth in this market. 

McDonald’s lacks a product-identity of what it’s now the best at. I’m older so I still think of it as a fast-food burger & fries place. But the menu has become so diverse, I’m no longer sure consumers know what McDonald’s is all about. Without a main product identity where it can win, McDonald’s runs the risk of being second fiddle to everyone they compete against–second fiddle to 5 Guys on burgers, to Dairy Queen on Shakes, to Chick-Fil-A on chicken, to Starbucks on Coffee and Subway on sandwiches. A great case study for McDonald’s is what happened with Starbucks in 2009, where they closed every Starbucks for a day to re-train baristas and send a signal that they are a coffee place. Here’s what I wrote about the Starbucks Case Study: The Starbucks Come Back story: Losing their focus, only to regain it!!!  McDonald’s should re-claim the stake that they are the best burger. They should have done this the past 12-24 months before allowing 5 Guys to get to 1500 locations. They need to own the burger. 

Slide1No one wants to know how sausage is made. I know the internet is attacking McDonald’s all the time about using bleach in their burgers and pink goop in their chicken but we don’t really need McDonald’s mass media to tell us their burgers are made from 100% real beef and their chicken is made from 100% real chicken. I always assumed it was, but now that you bring attention to it, you’re kind of grossing me out. McDonald’s took it a step farther with this on-line video they produced.  Here’s what I wrote last spring: McDonald’s takes a wonderful Advertising idea…and makes a complete disaster out of it  While they might think this video works to explain what their brand is about, I find this video makes me never want a nugget again in my life. As CNN reports below, it’s not pink goop, it’s beige goop and it sure doesn’t make you hungry.   Looking at the options above, McDonald’s should be focused on the heart and the soul of their consumers. McDonald’s needs less attention on the product and more on the magic of the idea of the brand–as the fun little escape for lunch place. 

The experience is now slow and not really that cheap. Ray Kroc’s McDonald’s that grew so fast in the 1960s and 70s was vested in the strong values of quality, service, cleanliness and value. People were trained the McDonald’s way and as a customer you benefited from fast, friendly service and franchises were expected to keep a clean, well-run restaurants. The last few times I’ve been, the speed has been disastrous–you order and then wait 5-10 minutes for them to yell out your number. There is no way the service is friendly–as I rarely hear manners from a McDonald’s employee. Manners are free and can go a long way in making a difference.  

mccafe-headerThe McCafe branding and restaurant re-design. Here’s an article I wrote on McDonald’s launch into the coffee market two years ago: Can McDonald’s win the Coffee War? Not a chance. But two years later, it’s even more important to realize that not only is Starbucks winning, but the investment McDonald’s has put into the coffee launch has taken away from investing in their core fast food business. McDonald’s put major capital into putting fake fireplaces into most locations–major costs that still resemble a plastic play-land. The thing that drives me most crazy about the McCafe is they are hiding what they really are: the golden arches, Ronald McDonald’s, the Big Mac and french fries. While McDonald’s should keep a good coffee, it’s time to re-focus back on being a fast food destination. Get rid of the McCafe branding BS and just make it a product that McDonald’s has, not a separate brand logo that competes with the McDonald’s logo. 

As a new CEO takes the helm, it is time for McDonald’s to re-focus. There is a need for some creativity and investing back in creating a food experience that McDonald’s can win on. Re-train staff to be friendlier and faster for consumers Create magical brand advertising that bonds with consumers. My hope is that McDonald’s can get there–as it’s one of the hall of fame brands out there.

McDonald’s needs to find a reason for their consumers to love it again

At Beloved Brands, we run a Brand Leadership Center to train marketers in all aspects of marketing from strategic thinking, analysis, writing brand plans, creative briefs and reports, judging advertising and media. To read more on strategy, here is a workshop on HOW TO THINK STRATEGICALLY, click on the Powerpoint presentation below:

We make Brands better.

We make Brand Leaders better.™

We offer Brand Coaching, where we promise to make your Brand better by listening to the issues, providing advice that challenges you, and coaching you along a strategic pathway to reaching your Brand’s full potential. For our Brand Leader Training, we promise to make your team of Brand Leaders better, by teaching sound marketing fundamentals and challenging to push for greatness so that they can unleash their full potential. Feel free to add me on Linked In, or follow me on Twitter at @belovedbrands If you need to contact me, email me at graham@beloved-brands.com or phone me at 416 885 3911

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