Extending Value in a Troubled Economy

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First of all, I think no-one can be amiss that caution seems to be everywhere. All the headlines in the press, all around us, say that we are now potentially in the doldrums of an economic recession or slump. Even people like Michael Grade of ITV have said that we are talking ourselves into recession. What does all this mean? It means that although it hasn’t actually happened yet and we may all cross our fingers that it doesn’t, it has profound implications for the way that we do business, and also for the way that we as consumers in society operate. Because it seems to me now, that we are on the cusp of limiting our budgets for the coming year or more, in terms of what we think is possible, and that will have an effect in terms of how we continue to project our online businesses and engage with those customers that we so dearly want.

However, it’s not all necessarily doom and gloom – for example, if you look at the spending post-Christmas; although most people said it wasn’t as good as it should have been, HMV, Boots, John Lewis and Sainsbury’s have all done relatively well. So it’s not all bad news yet; even though Tesco only made 3.1% profit, 2.2% below their forecast, they still made something of what was a very cautious kind of climate.

The most interesting thing out of all this is that the retailing online continued to rise, to at this point 4.4%, which kind of leads us on to the view that actually being online is now becoming quite important, especially in a troubled economy or economic period, which we are potentially finding ourselves in. I think this is a really interesting point for us because it starts to make the case for why we should continue to invest in our digital interactions with those customers, because I think as customers, our habits are inevitably changing. They have been changing for five or ten years, especially with the prevalence of the internet, in terms of how we now search out and seek products and services and so on, to engage with. Now what’s going to happen is that we will prolong, or if not halt, our buying decisions. And in that we want more convenience utility and better evidence of value. It also means, which keys in to what Richard said - that we also want more evidence of credibility, detail and transparency for when we do actually interact with businesses.

What it really says to me is that the digital space is one of the places where these needs, especially the need for value, can be worked out, more than anywhere else. In one respect it means that we can market ourselves in a cheaper manner, but it also comes back to the fact that online is really the frontline of doing business. There are so many cases where you start off by searching on the web, or perhaps listening to what anyone else has said, before you make a real buying decision. It’s within that context that I think we need to really try and investigate how we can start to maximise what we do digitally. What it really means in terms of some of the facts and figures is that post-December, some figures came out that revealed that 84% are now tending to shop online who are actively out hunting a bargain. And they want more communications, more contact with the brands and companies that they’re interested in, in as many ways as possible – so they want to receive more email communication, notification of discounts, special offers and so on. Because people are now very interested in ‘the deal’, the discount, and they are much more prepared to prolong their buying decisions in order to get that.

And so, consequently what’s interesting for us now is that actually, only 44% or a minority of customers, are actually believing what companies are saying about what they do or what they provide. And this is a really telling and important statistic for us because it means that actually, to engage our customers and make them buy and make a decision when they want to do the opposite, we have to spend more time investing it making ourselves a more credible and viable service or product. To ‘do more’ is the theme I want to pursue in the next few slides – in trying to expose or describe, in as many ways as possible, to make ourselves credible and to create a better sense of value.

Conversely, it still remains that the majority of people when they go out on the high street – I’m predominantly referring to retail – shop from preferred retailers. They still shop from the people that they know exist on the high street in the real world – and that also points to another thing to really develop. The ones with the strongest brands are the ones that are going to do the best - which means that the ones with the weaker or moderate presence have to do a lot harder. So what is it that you have to do to catch up and open the door when customers are more likely to go where they usually go, where they typically prefer to buy from? This is another question to prompt us to think about what we can do digitally to try and open those doors, where currently they might not exist. So just to recap, I’m sure that a lot of the things here you’ve read yourselves - that digital is very much the frontline of doing business.

What I mean is that obviously not all business is online – it couldn’t be – however, it’s probably the first place that people look when they are searching to buy a service, or business to business, its where you start to do your initial research in order to investigate, because it’s easy, its ubiquitous, it takes no effort, and hopefully if the company provides enough detail in return, it will really start to encourage further investigation. An interesting thing though, that I’d like to pursue over the next few slides, is that what is happening in this digital space in the period of a downturn, is discussion about how we can better spend our budgets online – in terms of search engine optimisation, masses of discussion about online banner ads, and on advertising. This is all fair enough – this is all part of opening the door to get people in because they searched for you via Google or because they searched for you on social groups and Facebook and so on.

What I also really want to say is that part and parcel of the whole discussion is that we need to use digital to extend level of service and extend the utility of those products and services that we currently own, this is something that we can do online that can continually add value to the things that people buy from you – to raise expectation about what they can achieve with a brand, and to prolong the relationship, similar to many of the things that Richard was talking about. So what I really want to argue is that although we should keep spending on marketing, on advertising, on search engine optimisation, investigations in social media and so on, I also think we have to balance the equation out a little bit more in terms of providing other means to equate value. In my old-fashioned sense of the word, it really means innovation. Of course that’s not always possible, but at least to try and invest in extending more product services, in terms of their utility, their functionality, and how to capture people’s imaginations when they do arrive at your front door.

So if you imagine, here’s a product – Ladyshave – I’m not quite sure why I picked that! One problem you’ve got, that I think Richard has talked about, is about how you ensure that piece of content - that product, that brand - escalates up the food chain. So you can see, this site is Kelkoo – so how do you make sure that this product compares favourably with all the other thousands of products in that category? It’s really quite a difficult task. And similarly, when you go to sites like, for instance, E-opinions, and it gets discussed in the broader network or what have you, again how do you make sure that product, that value, that description, survives all that criticism, to the point that you might actually start to buy it on Amazon? And it’s had to deal with third party reviews and so on and so forth – that’s one part of the equation that we do need to think about, how to get the message out, but similarly, what happens if you want to go through all of those steps, and you want to come back to the brand or product and say, “what can you do for me to improve its use, value or utility long-term?” Does it have updates? Does it have software I can download? Does it have things that extend its importance to me as a brand or product long-term?

So often, the way it’s going in the downturn, or at least the pretence of one, is that we’re concentrating all the way up on the marketing of this. But similarly, I can always contend that value can also be established if we can bring people back to here, to a brand, a product, or a company, and start to discuss new ways that online can start to extend the service. Now, obviously, if you’re lucky enough to be Apple, you can innovate – so one of the things I always say in public is that we should innovate. Now I realise that it’s not always possible for everybody to think like that. But even so, Apple is a completely interesting lesson to learn from, because if the economy does turn sour, we actually need to think quite hard about what we do and use it as an opportunity to toughen up, because what Apple did at the height of the dotcom boom -this is Nasdaq, which actually went from 800 points all the way to 5000 points by March 2000 – it crashed on the 10th March 2000 and it went all the way down to 1500 points. But all the competitors in this market place (retail) all sat on their laurels, they all said “what do we do now?” It’s a real tough situation. But actually, what you need to do is seize the opportunity, because with Apple, when the going got tough, the tough got going. Apple were the only ones who managed to innovate successfully, bringing in a completely new product set, in the height of a downturn. That has meant that they open themselves up to incredibly big markets, new opportunities, and pretty much shaped our music listening activity or way of life.

And the same applies to everyone here really – either you succumb to the pessimism and the caution and think “there’s nothing I can do” – or you use it as an opportunity to rethink your ideas, rethink your approach and seize the moment. Because so often it will be the case that your competitors will do exactly what you expect of them -to pull back and probably concentrate on one small area in which they think they can eek out a value, whereas you have the opportunity to jump ahead. As I said, it’s not always possible – at least in terms of creating new products and services, but certainly (with a few more slides) you can do things like Vodafone does really well. I’m not saying this is revolutionary, this is all new – of course it’s not, but I’m trying to make the point that we need to make the most of what you have, especially now, because this is what customers will inevitably really want from you, and again it provides a way of extending the value of your product or service even more, using digital. So they do brilliantly the whole idea of bills, account management, the ability to draw you back, to then sell to you through better messaging, different upgrades and products and so on and so forth. What people really want is something that’s easy to use, makes complete sense, and is no barrier to their interaction with what they’re doing day to day. If you do this really well, they’ll become your friends more so than if you don’t.

Secondly – I don’t know if anyone’s heard of this product – it’s called a Sonos Wireless Music System. I’m not going to brag but I’ve got one, and it’s fantastic! But anyway – basically what it does is link your music system to your whole house. So you can have stereos in every room and it all runs seamlessly and you can access Rhapsody and radio and Napster, and it’s great. Anyway enough about me! If you can’t innovate, if you can’t necessarily extend the utility of your product or service, what else can you do? You can do what they do so well - which is to develop your online customer service. There’s nothing new in this, but if you do it seamlessly and so well, as this demonstrates, again you have a better chance to retain your customer base, to sell in a downturn when you can’t do other things that you’d like to. And also it means that if you want to think about purchasing (which I did) I want to know that I’m not going to buy a dud, that I’m not going to buy something that’s going to last for a short period of time and will be a real pain to install or migrate or update or god knows what.

So again, people are going to become more cautious, more reticent about spending their hard-earned pennies. So you have to give them every opportunity to understand exactly what you do. And similarly, to labour the point, if you get the product spec right on your page, the message right on your page, then it means there can be less opportunity to reinterpret or mix up what your thing is all about when it goes further up the food chain. If you set the standard and provide the best specs, the best explanations, the best scenarios, the best way of using etc, then it means that customers have less opportunity to get confused or mixed up when they discover you elsewhere on the web.

Finally, I just want to talk about how not to do it – so, as someone who has been looking for houses and has now stopped, I’m quite familiar with Foxtons and I’m sure quite a lot of other people are. The thing is, if you go by Foxtons today, they’re quite quiet. No surprise, because the housing market is pretty unstable. But what is it that Foxtons don’t do? What is it that they don’t seize upon in this climate? Everyone knows that no-one’s really going to buy right now, but what they don’t do is stick on their site, or find other ways of doing it, is to develop expert opinion, expert analysis of the market – ways of understanding or interpreting it, or why you should hang around with us for the next three months, until things start to get better. To me this is like a no-brainer, and again this is a way in that as a brand, as a business, you start to think about how to capitalise on the doldrums and think how to keep my customer base, or my potential customers, interested. So I would expect these guys to tell me what’s going to happen, why you should wait, and where the opportunities might lie in the future. I know it’s a guessing game but at least do something, whereas at the moment they just expect you turn up and to be a normal buyer like in boom-time, which is quite unrealistic. So again, to me it’s a missed opportunity about how we can use digital to at least engage prospective customers or existing ones, even when times are hard.

So really my message is, now is actually the time to invest. I sound like a City boy, but after all, it’s what your customers expect, because they do want a detail, an evidence of value and service, even when times are hard – and so that’s really the message that I want to leave you with.