February 16, 2007
Research on retail flyer publishing
As a retail marketing manager, I found it difficult to find information and advice about flyer advertising, despite the $20 billion spent on this form of advertising in North America. Anything I did not learn from watching colleagues, I had to suss out for myself.
That is the impetus behind our decision to launch a series of studies on current practices in the retail industry. Areas that will be covered over the course of this research include:
- Financial Management Processes
- Product Processes
- Creative & Production Processes
- Media Management & Distribution Processes
- In-Store Processes
Please click here for more detail on the topics included in each of these areas.
By carrying out studies on the current practices of the industry, we hope to develop a body of knowledge that will help current practitioners to improve their flyer programs and provide guidance to new publishers as they define their processes.Those who will be helped by this research will be individuals who find themselves in the same place I was: trying to stretch their advertising budget while meeting the demands of stakeholders ranging from the vendors who supply co-op advertising funds, to the store managers and franchisees (who are the direct link to customers).
If you would like to participate in the research or receive a copy of published reports, please send an email to retail@kingmarketing.ca
Posted by kenking at 10:55 AM | TrackBack
March 17, 2006
All the stuff I would have liked to write about, Part II
I came across the idea last year of using the occasion of the new year to clean the slate and publish all the notes contained in draft posts. In fact, there was so much stuff hanging around in draft form that I couldn't get a summary post out in a timely fashion - hence part II. ;-)
How Loyalty Cards Can Cost You Sales
Loyalty programs are generally engineered to reward your best customers and to reap the benefits of tracking their activity. However, some retailers have done too good a job of selling the benefits of their program.
There's no question in my mind that having the card influences my buying decisions – although I probably would buy almost as many books without it, I have definitely picked up titles because of members' only promotions in the store. However, the flipside is also true - I'm much less likely to pick up books that don't have a hefty members' promotion.
And that sense of entitlement can damage the relationship altogether: I tend to buy books in batches, and in a quick tour through the store had about $150 worth when I went to the counter. As usual, I'd forgotten my loyalty card at home, but in the past cashiers had always looked it up for me. This time, however, I was informed that the store had instituted a policy of not doing so anymore. I abandoned my purchase and left because I felt cheated out of my discount. To make matters worse, I found out from another location that the policy was not chain-wide, but simply the decision of the specific store's manager.
Big Egos Are Good For Business
Being full of yourself is good for business, according to researchers at the University of Maryland. BusinessWeek interviewed Brian Wu about how Ego Makes Entrepreneurs? The key point in this is that entrepreneurs see risk differently than most people - if something is dependent on your own abilities, then the risk is simply in your own ability to execute, and having an inflated sense of your own ability allows you to overcome risk aversion.
I think there's a related issue here too - entrepreneurs deal with a constant stream of negativity. Mention to someone that you're starting a business, and they'll quote stats about how many businesses fail, express their doubts about the market potential for your idea, and generally try to convince you that you're crazy. Having a strong ego helps to get you through all of that.
Logo Development Process
This article on creating a business logo provides great insight into the communication process between designer and client.
The Dunbar Number
Christopher Allen tackles a popular misconception about the Dunbar number being the average size of of a successful community, when it is actually posited as the maximum size. There are a bunch of good examples in the article, along with some cool charts and graphs.
Most importantly, there's some thoughts on the effect that group size has on company effectiveness, especially the pain that comes with growth. I've deliberately set out to keep my business at a small size precisely because I want things to stay personal.
Posted by kenking at 9:33 AM
January 26, 2006
All the stuff I would have liked to write about, Part I
I came across the idea last year of using the occasion of the new year to clean the slate and publish all the notes contained in draft posts. So here we go:
Managers, Not MBAs
This NYT article on George Bush came out at the same time as I was reading Henry Mintzberg's Managers, Not MBAs. There were lots of interesting things spinning through my head, so many that I never wrote the post. ;-)
"Bush has been called the C.E.O. president, but that's just a catch phrase -- he never ran anything of consequence in the private sector. The M.B.A. president would be more accurate: he did, after all, graduate from Harvard Business School. And some who have worked under him in the White House and know about business have spotted a strange business-school time warp. It's as if a 1975 graduate from H.B.S. -- one who had little chance to season theory with practice during the past few decades of change in corporate America -- has simply been dropped into the most challenging management job in the world." - The New York Times Magazine > Without a Doubt
Store Design
Store design makes a big difference - although you want to make maximum use of every square foot of expensive retail space, it's also important to ensure the design delivers the desired customer experience.
I recently visited a store specializing in storage and organization products - plastic bins, shelf dividers and the like. The reason for my visit was to find products that would help to reduce clutter in my home (including my home office) and thereby reduce stress. I presume that my goals were similar to those of many other shoppers.
The in-store experience was anything but serene. The aisles were narrow, and oriented across the store so that, once I'd progressed halfway down the store I no longer could see the exit. It was visually overwhelming and claustrophobic, exactly the opposite of the solution I sought.
It seemed that the design was intended to give the impression of a massive selection. On that front it was successful, but only to a point: with the product categories split into short aisles across the store width, one was only able to see 1-2 categories at a time. A longitudinal design would have allowed customers to view the entire selection of the store at once from the doorway, and would still have provided exposure to the broad product selection.
Team Building
I'm constantly amazed at how little effort most organizations put into giving people teamwork skills, especially since they simultaneously put a ton of emphasis on working in teams. I will probably come back to this point again, as I see the consequences every day.
The Fallacy of the Golden Rule
One of the most common mistakes made is managing by the golden rule. "Do unto others as you would have done unto you" may be good social behaviour but it falls short as a management philosophy.
This article in Fast Company addresses a specific way the golden rule can steer you wrong. However, I think the story here is more about dealing with differences in relative power, which I may address at a future date.
The article did remind me of a more general problem: it's still relatively rare for first-time managers to receive much in the way of training. Sure, most companies will include some task-specific training such as payroll processes and maybe even some touchy-feely techniques. But from talking to a lot of people about their first time as a manager, it's become clear to me that the first mistake everyone makes is to manage by the golden rule.
The problem is that everyone reacts to different stimuli - for example one member of your staff may need frequent praise, while another may devalue the praise because of its frequency. Depending on which camp you're in, you're not going to get the best out of the second person. Enlightenment comes when you realize that you need to do unto others as they would have done unto themselves. This of course takes a lot more work, but it's also very rewarding.
Business Plans
Dave Taylor published an article about why you should "never outsource your business plan", some of his reasoning being as follows:
Why would this be the case? Because it's the process of creating the plan that's important not the end document. When you share your business plan with an investor or venture capital firm, they want to see something coherent and learn about a smart business, but just as importantly, they want to know that your team can sit in a room and hammer out a single, unified vision of your company, one that covers all the major bases, from marketing to defending your intellectual property, cost of sales analysis to partnership ideas.
I think it's even simpler than that - even if you aren't trying to raise a ton of money, the process of writing a business plan forces you to think through your options, and make choices. And when some of those choices turn out to be wrong, you will be up shit's creek without a paddle if someone else wrote the plan. If you did the work yourself, on the other hand, you'll know the assumptions that went into the choice you made, and will be in a position to retrace your steps and take the road not travelled.
Investing in Personal Relationships
Roger McNamee said it better than I could - this is why I go way out of my way to maintain relationships and form new ones. Enlightened self-interest aside, though, it's just fun to have a pint with an old friend.
A J-curve runs through the New Normal. That’s when you invest more than you reap in the early stages, but in the long run you get paid huge dividends. You won’t be able to predict when a relationship will be valuable to you—or even if a particular relationship will be valuable to you—but if you invest in enough relationships, the payoff will be huge. - The New Normal - Invest in Personal Relationships
Protecting the Workgroup
A short article in Fast Company about protecting the workgroup reminded me of the going away party when I left my first management gig.
My team gave me something that's still one of my favourite gifts ever - a custom-made certificate for "excellence in buffering", reflecting the fact that I spent a great deal of my time dealing with all of the office BS so my people could focus on doing their thing. It is also reflective of my philosophy that you work for the people "below" you - if managers spent their energy on figuring out how to help their direct reports to do better work instead of currying to every whim of their bosses, they might actually achieve something.
Posted by kenking at 8:52 PM
November 22, 2005
Casting call for Canadian Web 2.0 entrepreneurs
Michael McDerment has put out a call asking people to help build a list of Canadian Web 2.0 companies - go to the article and add your favourites by commenting.
Posted by kenking at 9:50 AM
October 16, 2005
Marketing Enablr
I posted yesterday about the rapid developments surrounding Enablr, our new web communications services business.
We haven't done much in the way of marketing thus far, so I was astonished at the speed with which our site got noticed. All I did when the site was ready to go was send a note to Rob May at Business Pundit and to Charlie O'Donnell, whose post about converting e-space to meatspace inspired me to get off my butt and do something.
Rob gave us this shout-out and Charlie posted a follow-up on his blog in which he expressed his regrets for not having a "don't try this at home" disclaimer.
Shaun Inman checked out the site and blogrolled us after getting a tech support email from me about his fantastic website tracking application (Mint).
Since then, a bunch of other sites have linked to us, with mainly kind things to say:
I'd just like to say thanks to everyone who's linked to us so far, and that I'd love to get your advice on our next steps in getting the word out.
Posted by kenking at 8:47 PM
September 8, 2005
Distinguish yourself: ChangeThis manifesto
Rajesh Setty has been publishing a series of tips on ways to distinguish yourself on his blog, and has now compiled 25 of them into a ChangeThis manifesto.
They're all interesting thoughts, but 3 in particular stood out to me because of personal experience:
#1 Care as if it's your own
The best endorsement I ever received was when a client introduced me to her new subordinate by saying "Ken isn't a regular supplier, it's like he works here." Don't buy into the objectivity trap - business is intensely personal and you will stand out from the crowd if you clearly care about what you're doing and the outcome (which, co-incidentally, are related to tips #2 and #13 in the manifesto, respectively).
#20 Lead a volunteer effort
My management style was greatly influenced because I cut my teeth as Editor-in-Chief of my college paper. In an environment in which your team can quit at any time, you find ways to tap into each individual's intrinsic motivations.
#22 Learn to sell
When I first tried to get my graphic design business going back in 1996, the idea of selling scared the hell out of me, and I tried to hire others to do the sales. It didn't work, and I went back to full-time employment after running the business for a year. After taking on a sales management role at Hip Interactive, I realized that selling is just talking to people and helping them solve problems, two things that I love doing.
Posted by kenking at 7:04 AM
August 26, 2005
Business Idea Assessment, Part 1: Demand
This is part 1 of a series of posts about assessing early-stage business ideas.
Demand is the single most important criterion to me. If I don't agree with the entrepreneur's demand estimates and can't come up with better ones myself, I wouldn't even look at the rest of the plan. A great idea without a market is useless. Besides, at its essence a good business idea is about recognizing unmet demand for a good or service.
Rather than looking at the bottom line of projected financials, the focus should be on the business plan's market definition and estimates of sales potential within the selected market(s). At this stage, it's not about crunching numbers - it's about questioning the assumptions. Even the most sophisticated data model is useless when your financial inputs are fiction: garbage in, garbage out.
On the other hand, it's entirely possible to question the logic behind the entrepreneur's assumptions, as well as assessing the quality of their insight based on their personal experiences in related fields. It's pretty easy to see when someone is tapping a deep vein, and when they're just quoting stuff they found in a google search.
Hard data is useful, but is often not available for, or applicable to, truly new ideas. In this situation, data would be most useful for disproving the hypothesis - I'd be very skeptical about stats that purport to "prove" that a market exists for a product or service that hasn't actually been put up for sale. I think this is the hardest thing for entrepreneurs to understand - we spend so much time trying to come up with financial projections rather than doing only what's needed to get the product to a market trial so we can actually see whether our idea will part people from their money.
As described in a post about market sizing on Coyote Blog, this process is about logic:
"I have been a marketer for almost 20 years, and one of the classic mistakes in marketing is to rely too much on your own experience and preferences..."
"The key to successfully completing the [market sizing] exercise was to break the problem down into cascading assumptions, each of which could theoretically be researched and checked."
My associate Mark got obsessed with golf tees recently, and mucked about with this market sizing method to come up with an estimate for the demand for wooden golf tees in Canada.
Using the golf tee example, begin by defining the annual canadian market for wooden golf tees as being equal to the number of tees used per round multiplied by the number of rounds played by canadian golfers each year. To get to this result, you can use the following formula:
Canadian Population x Percentage of Canadians that Golf x Percentage of Canadian Golfers that Use Wooden Tees x Average Number of Wooden Tees Used Per 18 Hole Round x Average Number of 18 Hole Rounds Per Year
Now that the model has been established, its time to plug in some estimated numbers and begin working towards the final goal of calculating the actual market size.
The point is not whether these numbers are correct or not (at least not yet): the point is that he's defined a way to get to the correct numbers, or close enough to make decisions anyway. Once you've laid out a logical framework for estimating demand for the product, you can set about looking for numbers - filling in the blanks. On the other hand, if you're presented with numbers and no logical explanation for their existence, you're probably best to walk away.
Oh, and if you're reading "we only need to capture 1% of this $X billion market" you should run away.
Next up: Competition
Posted by kenking at 8:19 PM
August 16, 2005
Ideas are a dime a dozen - which ones should be pursued?
The business idea selection process we're undergoing with The Business Experiment reminds me of some thinking I did on idea assessment while doing my MBA, in particular the need to have a framework for assessing qualitative information (which is pretty much all you have at an early stage).
Time is a crucial factor to any entrepreneur or investor. Success depends on the ability to quickly make decisions about which opportunities warrant further exploration.
I've started four small businesses, and frequently take time to flesh out thoughts that occur to me in the course of other activities. I desperately needed a way to assess ideas quickly and decide whether to fish or cut bait.
I made the development of such an analytical framework a secondary goal of my business planning process. Over the next little while, I'll be posting a series of entries outlining the assessment criteria and methods that I've adopted for my own purposes.
Overview
In the early stages of opportunity analysis, qualitative factors and gut reactions are crucial counterparts to any financial analysis that is pursued. In most cases, these factors should be given more weight, especially when dealing with projections prepared by those seeking financing. Much advice given to entrepreneurs pushes towards financials built from the bottom line up, resulting in projections that serve only to support the desired outcome without necessarily being grounded in fact.
While larger-scale ventures may be operating with more resources and experience than in the micro-business environment, the same problems are inherent to the process. In order to succeed, entrepreneurs must doggedly pursue their objective in the face of naysayers and fear-mongers, overcoming adversity through sheer determination and belief in their idea and their ability to see it through to completion. Although this trait is mostly positive, it's unlikely to lead to reliable financial projections.
The criteria I use to assess business ideas are listed below. Each of these will be discussed in a separate post in this series.
Assessment criteria
- Demand
- Competition
- Profitability
- Value Proposition
- Fit
- Deal Breakers
Posted by kenking at 7:46 AM
July 13, 2005
More open-source enterpreneurship
After signing up for The Business Experiment last night, it came to my attention that Stephen Castellano (Reflections in Equity Research) described the launch a similar project on his blog back in April.
His post describes how Maverick Society Investment Research will use open source collaboration to create tools for investment research, and the goals of the project, which include experimentation with form:
In any case, I think what will make Maverick Society Investment Research a success is our true passion for practicing and learning more about equity research. Even if it "fails" I think it will be a lot of fun and a great learning experience for everyone.
The two projects are similar in taking advantage of collective brainpower, but differ in that The Business Experiment is taking a collective approach to everything, including selecting what business to be in, while Maverick Society Investment Research seems to be following a benevolent dictatorship model: the partners have defined the business they're pursuing and will retain a relatively large chunk of any resulting equity.
I'm sure more differences will emerge over time - I hope I can contribute to both efforts so I can see them first-hand.
Posted by kenking at 6:06 PM | Comments (1)
Putting Ideas to the Test: The Business Experiment
I read a lot of business books, and often wonder if the ideas extend much beyond the authors' carefully chosen case studies. I also prefer rapid prototyping and real market experiments to exhaustive research and analysis. It's not surprising, then, that I found the news below very interesting and exciting:
Rob May at Business Pundit has created a public experiment with the goal of building a business using the principles outlined in The Wisdom of Crowds.
So I've built a new site called The Business Experiment where I propose we do just that.Yes, you heard correctly. Business bloggers and readers will test their cumulative business knowledge by collectively starting and running a business - out in the open.
Can we do it? I don't know. It seems crazy, and counterintuitive to everything that we think about business, but that is why I want to do it.
Read the rest of his announcement about The Business Experiment.
Posted by kenking at 12:36 AM
July 11, 2005
More on financial fiddling
Co-incidentally to posting my thoughts on fiddling with financials in your business plan earlier today, I came across Startup 101, a mini-site created by Dave Taylor and Stephen Fowler to provide entrepreneurs with some basic advice on building their business.
Their section on business plan financials includes the following comment:
Although the most critical element of your financials is your revenue projections, it might not be for the reason you think! Savvy investors and business people will study your financial information because they want to understand your underlying assumptions.
BTW, Dave Taylor is involved in publishing several other interesting blogs, including what I think is his main site, The Intuitive Life and a Q&A column that deals mainly with technical issues but also with business management.
Posted by kenking at 8:55 PM
Fiddling with Financials
I've been through two incubator programs for young entrepreneurs (back when I was a young entrepreneur), have been exposed to several other programs and have sought information from books, websites and other publications. In general, I have found the weakest link in advice to entrepreneurs to be that regarding financial projections.
Very little advice is given regarding realistic, market-driven projections. Instead, the tendency is for these projections to be based on desired profitability at some point in the future, which in turn is often based on the amount of financing being sought. This results in a circular process built largely on the entrepreneur’s belief in the project’s viability, and shored up by whatever assumptions and estimates are required to achieve financing.
This process is outlined below.
- Decide how much money you want to raise from outside investors.
- Estimate their desired returns over the timeframe you think they’re willing to wait.
- Do the math and plug that number into your spreadsheet X years in the future.
- Develop a defensible growth rate projection based on whatever data you can find.
- Plug in bottom line numbers for each year in your projected financials.
- Estimate variable costs as a percentage of gross revenue. Estimate fixed costs.
- Combine these estimates with the desired bottom line to calculate top-line sales revenues.
- Determine a market size that affords the venture enough share to achieve that sales target.
- Using this projection as the “conservative” estimate, create the “optimistic” pro formas.
This description is a little extreme (and hopefully humorous) but simply intended to illustrate why early financials are not very useful for new venture assessment. I believe that most entrepreneurs do their best to come up with realistic numbers – as long as they support their desired course of action. I also believe that the advice to work upwards from the bottom-line is partly in recognition of the difficulties inherent in measuring market potential for a new enterprise or product, especially for an organization or individual with limited resources.
The message for the entrepreneur is not to obsess on financial projections at an early stage, but to start the process of identifying revenue streams, costs, and assumptions. From there, one can subject highly sensitive projections and assumptions to deeper scrutiny – essentially using the hypotheticals in the early projections to guide and prioritize market research projects.
In addition to this sensitivity analysis, the outside investor should look closely at the assumptions underlying the projections, not the actual numbers. Before looking at the resulting projections, I'd want answers to the following questions:
- Is the entrepreneur making a reasonable effort to use realistic estimates?
- In which areas are the assumptions least defensible, and do these point to a weakness in management?
- Are assumptions and estimates clearly labeled as such?
- For bonus marks, was a sensitivity analysis included with the projections?
Most of all though, I think the key question is about #1 above - does the entrepreneur need outside investment at all? If not, they shouldn't waste their time going through the rest of the process, and should focus on bootstrapping their business instead.
Posted by kenking at 5:08 PM
