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Tax Added Value

As the UK government takes measures to boost the economy, some quick-thinking companies use the opportunity to demonstrate that the season of good will is well and truly upon us.  But, as Matt Powell discusses in his latest Thursday Night Insight, customers have certain expectations that must be met, and if a company doesn’t quite get it right, they can end up damaging – rather than differentiating – their brand.

As most people in the UK are undoubtedly aware, the Chancellor of the Exchequer Alastair Darling reduced the level of VAT from 17.5% to 15% on the 1st Dec, in a bid to boost the ailing economy.  It remains to be seen whether or not it will actually do any good, but it has certainly made for some interesting PR opportunities.

When the announcement was made on 24th November, a number of retailers saw an opportunity to pounce on the story and offer the reduced VAT rate ahead of its scheduled 1st December implementation.  Most notably, DSG International (the owner of Currys and PC World) offered the reduced rate less than 24 hours after the rate reduction was announced.  Other retailers such as Amazon, Tesco and Sainsbury’s followed suit soon after, along with a raft of others.  Of course, they would have to pass on the reduced rate regardless a few days later, but then so would everybody else. TV adverts, and print campaigns were hastily concocted and implemented – and the weekend before the change, TV advert breaks were packed with advertisements from retailers enticing consumers into their stores a few days early to spend.  

By leading the pack, and taking a slight hit on their profits for the few days ahead of the change, the companies that were quick off the mark had taken the opportunity to stimulate a feeling of good-will around their brands.  By offering the reduction ahead of the 1st December, it was in fact the retailers who had offered the cut to the consumers, rather than the Government.  In some respects, thanks to some quick thinking, they had stolen some of Mr Darling’s thunder.   

Other organisations have also taken an active approach in publicising their reduced VAT rates.  Manchester United has made quite a point about the fact that they will be refunding season ticket holders with the difference in price.

Many organisations made good use of the news and found a way to boost their brand image, as well as drawing in more sales over a busy Christmas-shopping weekend.  But what of those that did not offer the cut in advance?  Of course, they would not be losing out by changing their rate on the 1st Dec – it just would not have been such a positive PR opportunity.    

O2, one of the leading mobile telecoms provide in the UK, let its customers know that it would be passing on the VAT reduction to its customers via text message.  The only problem is that it missed the boat somewhat in terms of being quick of the mark.  I received my text message on the 8th of December.  Although it was only a week late, and only seven more windows on an advent calendar had been opened since the day of the cut, the impact of using the VAT rate reduction as positive PR had all but gone.  In fact, it seemed a bit ridiculous to be creating any kind of PR around the change so far after the change. 

In market research we speak of how certain elements of an organisation’s performance can impact on the said organisation’s overall satisfaction score.  Issues are usually grouped into two main categories – ‘Hygiene factors’, and ‘satisfiers’. 

‘Hygiene factors’ are elements of service/performance  that are expected – those that do not boost the overall satisfaction score higher if they are met, but they can lower it if they are not met. 

‘Satisfiers’ are issues or elements of service/performance that correlate closely with overall satisfaction and can drive the overall satisfaction score higher.  These issues can be differentiating features that separate an organisation away from its competitors. 

Issues can change over time in importance as to whether they are hygiene factors or satisfiers.  This can be for a number of reasons: an issue may have been a differentiating feature that competitors have since caught up on, and has now become a hygiene factor.  It could be that through a successful marketing campaign, an organisation has changed perceptions of an element of its service that was once a hygiene factor, so that it is now an issue that drives satisfaction.

The message that I received from O2 telling me about the VAT reduction made me realise that a similar thing had happened with the PR stories that surrounded the 15% VAT level.  By exceeding peoples’ expectations and staying ahead of the competition, the companies that had dropped their prices early had created an opportunity for themselves to potentially boost satisfaction levels and create good will around their brands.  After 1st December, the 15% VAT level PR opportunity changed from being an issue that could be considered a satisfier, to an issue that was a hygiene factor.  The impact had diminished, and is the reason that O2′s message – despite the good will behind it – was greeted (by myself anyway) with a level of indifference.

Posted in Customer Satisfaction, Economic Downturn, Matt Powell, Thursday Night Insight |
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Marketing works, whatever the weather

Matt Powell’s recent trip to the Glastonbury festival proved an unlikely source of inspiration for his next Thursday Night Insight.  As Matt was to witness, the economic forces and marketing techniques which play such an important role in the success of huge multinational corporations around the world, can be just as relevant to entrepreneurs in rural Somerset…

A few weeks ago I made my annual trip to the Glastonbury festival in Somerset, England.  For those that are unfamiliar, Glastonbury is one of the oldest, and largest, music and arts festivals in the world.  It was founded by a farmer, Michael Eavis, in 1971, and is still run by Eavis and his daughter on their farm some 25 years on. 

Each year 170,000 people make the pilgrimage to Worthy Farm to soak themselves in a diverse range of music and art and, of course, to be soaked by the rain.  Over the 5 days that the festival runs, the farm owned by Mr Eavis turns into a chaotic bustling town (Europe’s most densely populated area for the days that it is running), with its own values and economy, and then packs up and goes home, leaving nothing but some muddy footprints and a few rogue tent-pegs.

This year, I noticed how Glastonbury offers quite an interesting and simplified insight into economics and marketing.  Indeed, Glastonbury seems to have its very own mini-economy.  From the wellington boot seller who hikes up his prices when the heavens open, to the way that spare cans of beer and packs of cigarettes replace £GBP as the currency of choice by the end of the 5 days. 

The first time I noticed this microcosm of marketing and economics in action was when I was sitting opposite a row of stalls at this year’s festival.  Two of these stalls, that were side-by-side, both sold doughnuts.  One of the stalls had a large row of people queuing up outside it, whereas the other didn’t have a single customer.  “How can that be?” I wondered.  Surely no-one could have been to both of the stalls previously and found one of the stalls’ doughnuts to be more exemplary than the other?  And both of the stalls had the same prices for their doughnuts. Then I noticed the stall names.  The empty stall was branded “Doughnuts”.  Fair enough.  However, its more successful neighbour was dubbed “The best doughnuts in the world”.  I’m quite confident that they weren’t the best doughnuts in the world – probably far from it – but the owner had a message that resonated with his target market, and given the choice, why would anyone choose ‘doughnuts’ over ‘the best doughnuts in the world’?  Amusingly, the next day the ‘doughnuts’ stall was having a new sign installed (though I didn’t get to see what it said, I would hope it professed to at least be providing the best doughnuts in the universe) – its owner had realised that its marketing message had to be changed, and responded accordingly.

The second most notable bit of economics and marketing in action that I saw was to do, again, with a battle between two stall owners; a battle that highlights the influence of supply and demand quite well.   One stall owner sold rubber wellington boots, the other sold summery hats and sunglasses.  On one day the glorious sunshine had people flocking round the sunglasses and hats stall whilst the boot seller sunbathed on the grass outside his empty stall (that was sporting a ‘reduced’ chalkboard price sign).  Later that evening, however, the inevitable deluge struck, and as the heavens opened, the sunglasses stall owner ran for cover, whilst the boot stall owner kept increasing the price of his boots as his stocks started to deplete due to the high demand.  Of course, although both these vendors enjoyed high periods of sales, what they both really wanted was a steady stream of custom rather than the chunks of intense sales. 

The next day the rain had stopped, but the mud still remained.  The boot sellers of Glastonbury no longer had the hordes of people running to them waving their damp £20 notes above their heads; their market had dried up (pardon the pun).  This didn’t stop one clued-up boot seller.  The skies were blue and there was no sign of rain – so he knew he had to take his existing products to new markets.  He took some rubber boots to the crowds of people in front of the music stages – the places that were still swamped with mud from the night before – and started successfully selling his product to his captive market.  After selling his initial quota of boots, he returned a while later with more, and with a colleague in tow, who was carrying a box full of fold-out chairs.  Now his customers could keep their feet dry, and rest their legs!  Not only had the seller taken his existing product to a new market, he had diversified his product range and brought a new product to a new market. 

All of the above can be summarised quite neatly in the model of the Four-Ps.  The basis of the Four-P’s was devised in the early 1950s by Neil Borden, and was refined to the most well-known version by Jerome McCarthy in the late 50s.  The Four-Ps is widely used in marketing to assess and streamline the marketing mix in order to meet organisational objectives and create a higher value relationship with customers.  The Four-Ps are indicated below:

So how can we explain the Four-Ps in relation to the microcosm of activity that I witnessed at Glastonbury? Well:

• Product – Both the stall sellers had quite different products that were in high demand in polarised weather situations – one helped protect from the rain, one helped protect from the sun.  Maybe next year they will offer a mix of products so they have an offering whatever the weather??? 
• Price – When the rain came lashing down the boot seller took note of the increased demand and raised his price accordingly.  Likewise, when the sun came out and his demand dropped, he lowered his prices to ensure his product still sold.
• Promotion – The power of advertising was there for all to see as the bog-standard doughnut stall lost out to his ‘best doughnut in the world’-providing neighbour.  In reality, aside from the large signs above their stalls, the product offerings will have been pretty much exactly the same.
• Place – When the demand for the boots diminished along with the rain, the boots-seller took his products to the areas of the festival site that were still muddy.  If he had stayed at his stall he would have missed out on the new business that he found by taking his products to new markets.     

Posted in Market Assesment, Marketing, Matt Powell, Thursday Night Insight |
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Householders Have a Growing Demand for Security

A new survey by B2B International examines the increasing demand for security at the front door in Europe.

Friedland have been manufacturing door chimes, wireless security and security lighting since 1938 and their brand, especially for door chimes, is synonymous with high quality products.

Friedland’s main market is the buildings and construction industry.  This sector has been buoyed in recent years by strong growth, but faces a more challenging environment in the near future. The way buildings are constructed and periphery products (security, lighting) to the building are specified is also changing with the roles and responsibilities within the supply chain slowly becoming merged.

Given the continually changing market conditions in which they operate, Friedland commissioned B2B International to research the French and German markets for door-entry systems, security lighting and alarms.

The market for door chimes in Europe is in decline due to the increased demand for audio/video intercoms for door entry.

Installers are the key decision makers when it comes to deciding what doorbell is fitted in nearly nine out of 10 cases.  Quality, reliability and functionality are the key requisites that installers look for from a door chime.  Wired door chimes are preferred mainly due to the robustness of the system but also because many installations are replacing existing wired systems.

Friedland’s brand in the door chime market shows very high awareness with nearly all installers in Germany and three quarters of installers in France being aware of Friedland. 

In contrast to the door chime market, the market for security lighting and security alarms is in the ascendant with the heightened demand for greater security.  The annual market for these products is growing at between 3% and 5%.

B2B executive of this report, Matt Powell, says:

Posted in B2B News, Market Assesment, Market Research, Matt Powell |
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A Ringing Endorsement for Customer Satisfaction

This week’s Thursday Night Insight comes from Senior Research Executive Matt Powell, who this week reflects upon how customer satisfaction research can go much further than just helping a company better meet its customers’ needs

Earlier this week I received a phone call from my mobile phone operator, which caused me to think for a moment about the importance and impact of listening to what customers have to say.

I have been with O2 since back in my student days when they were known as BT Cellnet – over the years I have been on what could be mildly described as a ‘rollercoaster ride’ in terms of my customer satisfaction.  From the feel-good days of unlimited free texts at the start of the new millennium, to the dark days of endless (and extremely expensive) calls to customer services.  For many years it seemed as though O2 was resting on its laurels – content with having its customers tied to contracts, yet not listening to what they had to say. 

In 2005, after a few years of customer service levels that almost drove me (and most other people I knew with an O2 contract) to leave the network, O2 announced they were to invest £18million in developing the customer services.  In short, they started on the road to performing quite an impressive u-turn. 

You might be wondering where I am going with this quasi-nostalgia, but earlier this week I received a phone call from O2 which caused me to think about how much my perception of the company and my satisfaction levels had changed over the years.  The phone call I received did not contain the up-selling or phone insurance deals that I had wrongly expected – instead the attendant briefly said that she could reduce my monthly rate and increase the number of free minutes I had.  Of course, that is always a good thing, yet the attendant informed me that I would receive a short customer satisfaction survey on my mobile after the call, and expressed her gratitude in my filling it in. 

As I was completing the survey, I thought a little more about my answers and my satisfaction levels and realised that despite the odds, O2 had managed to turn me from a very disgruntled customer into a very satisfied one. This, in turn, made me reflect further on the impact of the survey I was filling in.  By asking me to think about how I feel about the company, and by spending time to dwell on my thoughts, O2 had effectively forced me to think about how good they had just been to me in reducing my bill.  If they had not done this, this positive experience might have slipped past unnoticed.

For me it highlighted that listening to what customers have to say is not only essential to improving a business (ensuring that needs are being met), it also pays for the customer to feel that they are being listened to.

Posted in Customer Satisfaction, Matt Powell, Thursday Night Insight |
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