Transcription
I want to get some rules, um, some advice from you then. So, I'm, I'm launching a, uh, a brand soon, and it's an apparel brand. And we've been working very hard on it over the last year or so, maybe a bit too hard on it when it comes to delivering that apparel brand to the world and making it, um, it's actually an extension of this podcast, so it's called "DoAC: Diary of a CEO." Um, what advice would you give me as it relates to delivering that product to the world to make sure that it is inherently valuable and that people, you know, one, one piece of advice in any form of, uh, e-tail? Two, two forms of advice, actually.
The two, Mr. and by the way, I think marketers spend too much time focusing on the addition of positives when a lot of time needs to be spent on the removal of negatives. One thing is, answer the phone, okay? And do not hide your phone number. I, I find that so, what seems to happen in most e-commerce is you have what you might call the sales area, which is everything that happens up to and including a point of purchase, and everything there is glorious and attractive and, you know, and slick, okay? Assuming, by the way, you don't have a weird question to ask. Um, but I would argue one, what then happens is if something goes wrong with your experience, either the delivery of the experience or you need to cancel something, as soon as you deviate from that very narrowly preconceived sort of purchase funnel, you enter a world of pain.
And the two things which are, I think, grossly under, underinvested in, uh, in terms of e-commerce are: one, giving, what what tends to happen is once, once the marketing job is done because the person has clicked "buy," the responsibility for that customer is now handed over to people whose metrics are anything but customer satisfaction. Their cost reduction. How can we make sure that nobody phones us up? How can we make sure that every phone call is as brief as is feasibly possible? And how can we minimize the cost of delivery and distribution? Now, one of the things I think is a grotesque mistake that most e-commerce providers make, not all of them, but many, is not offering you a choice of delivery couriers, for example. Okay? Now, I know why they do that. They want to put everything through one delivery courier so they can maximize their rebates through volume economies of scale. Actually, I think, you know, I think many, two problems happen there. One, if you don't get to choose how your item's delivered, if anything goes wrong, you blame the company. You don't blame the delivery company or yourself. If I'd chosen to have it delivered by Royal Mail and it went missing, I'd blame Royal Mail. If they insist that I have it delivered by, you know, without singling out UPS, DPD, whatever, and it goes wrong, I blame them. Um, secondly, you know, people have various preferences. You know, your liking for, every used to be called, um, uh, Hermes, okay, varies enormously depending on which postcode district you're in because if you have a very good local driver, it's incredibly good. And if your local driver is off sick, it's a disaster in some cases, okay? Um, and by not resp, not respecting the, the fact that the person is paying for delivery should choose who delivers it, yeah, strikes me as a fundamental failing. The business of hiding the phone number so that anybody who has a problem is effectively treated like a second-class citizen. So you have this very characteristic thing which I think is a problem with e-commerce, which is when it goes well, it's miraculously good. Okay? But the second anything out of the ordinary happens, you enter a world of pain. You know, and I think that is, that's a fundamental failing. This is a customer service point. The importance of customer service, right? A few people, I mean, Selfridges, Selfridges do it pretty well, okay? Um, other things I do is I would offer a kind of Amazon Prime equivalent where if you pay a few pounds for delivery, you get free delivery for a year. That seems to be a, you know, fairly obvious brilliant idea because why should loyal customers pay, you know, inordinately more for, you know, delivery than one-off customers do? Um, I think, you know, I, I think you can make an effort around how the thing is delivered and packaged and presented, which some people do well and some people don't bother to do it at all.
What do you think the secret is there to doing a good job with packaging? And, um, possibly there's a little bit of costly signaling involved. I mean, if you order something from Selfridges, um, the inside of the box is actually yellow with the Selfridges logo on a kind of shiny backdrop, and there's a little bit of tissue paper, okay? So you're never left, um, that will have a halo effect on your perceived value of the product, by the way. You know, I know we don't like it, but actually packaging is, to some extent, packaging is where a product first becomes a brand. It's where it first takes on a personality and identity, uh, you know, um, you know, a kind of an implied target audience. And so, in, in this thing, now, the interesting thing is how are you going to, uh, what's your shtick? Do you have, for example, scarcity? Is the clothing available? Yeah, so limited runs. We actually, we actually sold some before when I did a tour of the UK and you had to come to the tour to buy it. And every single night on the tour, we did nine, nine nights, three nights at the London Palladium, took it up another country, sold out every single night, every single item, to the point that we sold the ones on our backs. Yeah, and we'll give them away, but, um, every single item sold out and every single size on the tour. So this is like the second drop of it. Everyone's well aware that the first, the first run of it all sold out. Um, we have a very limited line, uh, so we have a limited amount of items again this time. And I think the key thing with this, um, release is we've just agonized over the story of the piece. So it's like it really looks more like art than it does clothing. And we've worked with artists, and there's this big movie that I'm releasing with every single item to explain the meaning of the piece. And then we've put a lot of effort into the packaging, the unboxing experience. So it is limited. It will honestly probably sell out in the first day. And, um, I don't even think we're gonna make money from it, but that's not really why I do it. It's more because I just love the, I love the process. But, um, probably will, you probably will make money. I mean, merch is, um, I'm just really not bothered by making money from it. It's not the thing in my life. Same with a tour. Like I spent every penny I could on on the bloody tour because it wasn't really why I was doing it. There's probably more of a bra, a wider brand play, yes, to doing it, which is like, it's, it's bringing our audience closer to us. So it's maybe a lost leader in terms of the financials, but in the broader engagement.
No, I mean, this is, this is actually the great curse of a lot of modern business, given the title of your, um, podcast, which is that people generally over-obsess about things which are immediately quantifiable and under-invest in things which are valuable but hard to actually put a figure on. Yeah. And so things like engagement or loyalty, of course, I mean, it's worth noting that customer loyalty is much, much slower to measure than, for example, conversion. Yeah. And so the extent that money is invested in performance marketing or the bottom of the funnel relative to, let's say, wider brand fame, yeah, it's a widespread problem in the whole business world, which is that the money isn't necessarily being spent in, in the channels it is because it's more effective there, but simply because it's more, it's easier to prove that it has an effect. The truth of the matter is the world will always be too uncertain for us to know who our customers are in advance. And therefore, since, you know, 97% of the potential customer base aren't in market at any given time, and therefore won't be uncovered by search or, you know, remarketing or whatever, spending money on the 97% of people in advance ahead of time is still a very effective thing to do. The reason people do too little of it is that it's hard to quantify.
On that particular point, then, having worked in the advertising industry, this is a conversation we have all the time with clients, which is, so you'll meet a certain type of client who is very, uh, who's, they're religious about the bottom of the funnel. They're really, if it, if I can't track it and I don't know exactly, I won't do it. I won't do it. Then you'll sometimes meet the opposite, which is, yeah, someone who just loves to spend on brand. And I don't know, they're both wrong. Yeah. I don't think they should. Yeah, I mean, I mean, Mark Rits very good marketing professor, always talks about the importance of both-ism. And he says it's vitally important that when I actually speak about the importance of brand marketing, that you do not interpret this as denigrating digital marketing. In fact, I go a bit further and say the bottom of the funnel, in many respects, is the thing you have to optimize first because there's no point in actually, uh, if there's a bottleneck at the bottom of the funnel, if there's some constraint or a problem or a failing, you know, if you have very poor conversion, okay, there's no point in spending money on advertising because you'll just introduce more people to a disappointing experience. You're wasting money. So you've got to get the back end. And I would argue the first thing in theory you should optimize, if you're being an absolute purist, is repeat purchase because having gone through the expense to acquire these customers, and actually, that's the, that's the metric that always fascinates me because we were talking earlier about electric cars, and I said, the question about electric cars isn't how many people are buying them, okay? It's not what percentage of the new car market in the UK in July were plug-in vehicles. Now, the only question worth asking, really, in the long term, is does anybody who buys an electric car go back to buying a gasoline car? Because if the answer that is hardly anybody, then okay, you don't know the exact shape of the S-curve, but you know the growth is going to be pretty spectacular. And so the thing to understand, I think, in a market is to what extent does your, uh, product actually convert someone to something, and then the lifetime. So you'd start with repeat purchase, then you go to conversion, and then you'd work your way up. But what tends to happen is that when people are obsessed, are obsessed with quantification of everything, okay, it's worth noting, by the way, that all big data comes from the same place: the past. All right? So there's a limit to how much big data, particularly if you've had some major event like a pandemic in between, how much big data can actually tell you about the future. In any case, um, as David Ogilvy famously said, you're not advertising to a standing army, you're advertising to a moving parade. People are coming in and out of market all the time. And so you're absolutely right, you get some people who are just fame junkies. And by the way, I suppose there are brand categories where that's appropriate. If it's sold through retailers, you know, in other words, if it's mostly sold in the physical space, you might, you might argue to an extent, you know, for, let's say, a Burger King or a McDonald's, that's not a totally crazy position, although it is now because suddenly they've got to think about delivery and and whether people order through the app or order through an intermediary because it has a major bearing on their business. But, but at the same time, yeah, I mean, the tragedy is this idea of this false dichotomy between brand advertising and what you might call performance or digital marketing, as if you have to be in one camp or the other.
Where is the balance though? And how does one go about it? Is it just intuitive? Is it just, there are figures on this? So if you look at the work of, um, Les Binet for example, and Peter Field, the ratio shifts a little bit, but generally they'll stipulate a figure around about the 60/40 mark in favor of what you might call brand mass media, uh, expenditure because they have a mutually beneficial relationship. Obviously, my first 20 years of my life was spent in direct marketing, and actually, you know, because direct marketing was unfashionable, we spent a lot of time denigrating advertising spend because they got much bigger budgets than us, not necessarily rightly, but they were also, you know, much more indulged than we were because they didn't have to prove effectiveness down to the same sort of level of statistical significance. But we came to realize pretty quickly that actually, first of all, there's nothing harder than direct marketing a product that nobody's ever heard of. Yeah. And that every time, just to give an example, every time American Express went on television or advertised big in mass media, the response rates to direct mail would not quite double, maybe, but they increased pretty significantly. You had to work less hard. And you had to work, it's that wonderful phrase which comes from a book by, uh, let me get his job right, his name right, um, I, I think it's Matt Johnson who's just written a book called, um, "Brands That Mean Business," and his wonderful line is, "Having a great brand means you get to play the game of capitalism in easy mode." And that's, and what, what is true is fame, to some extent, brings a load of benefits which aren't necessarily sales-related. For example, you can, uh, your customers will be more forgiving. Okay? Take the example of Apple. I mean, on a couple of occasions, Apple has produced products which had fairly major flaws, which might have proved pretty fatal to lesser brands. You know, the famous phone where if you held it in the wrong way, it didn't make phone calls, for example. And given the reality distortion field around the Apple brand, people have passed over those incredibly rapidly. And so there are all, you know, people are less price-sensitive. That's not easy to measure, by the way, as well. It's very easy to measure the extent to which something has an effect on sales, but the effect to which something has an effect on price elasticity and the extent to which you can command a premium because it's a great brand, because it's a great brand, it's harder to measure because you don't have the counterfactual. You know, when you sell something, the counterfactual is that you assume that you wouldn't have sold it otherwise. But if you sell something for a high price, you can't, in fact, determine that without your advertising, you wouldn't have sold it for, you know, for that, for that premium price. So it's, to some extent, this quest for perfect measurement to reduce marketing to a kind of Newtonian physics is a bit of a false god.
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