Adaptomy Bulletin 21st June 2022
Issue No.5 by Geraint Holliman and Will Wright
PRESSURE ON BUDGETS IS BACK
What to do with commercial budgets when inflation is high and recession looms? Some reach for the short tern tactical leaver and start cutting back, first to go - marketing, brand building and a campaign or two? Well not for market leaders, that is businesses that have had the opportunity to take time and prepare during the pandemic. In fact there are a number of things which we highlighted in a previous post, 'Sense. Rethink. Activate. Renew' about preparing for the challenges ahead. Not least amongst them was adapting to 9 facets of a 'New Normal':
Building resilience and adaptability
Adapting to new markets and new customers
New work-life balances
Disconnection and dissonance
Remote, low contact commerce
New economic and social policy
New forms of differential advantage
The only one of 9 that hasn't really emerged to the extent we thought, is new economic and social policy. That's still needed, but doesn't seem like there's any semblance of a plan coming any time soon. All these are facets part of a 'new normal' and part of preparing for the economic and social challenges that are taking place right now. Of course each downturn and recession is different, each has it's unique combination of challenges, and the challenges now, coming out the back end of a pandemic are perhaps some of the most challenging. As HBR said in 2009, 'How to market in a downturn':
During downturns, marketers must balance efforts to pare costs and shore up short-term sales against investments in long-term brand health. Streamlining product portfolios, improving affordability, and bolstering trust are three ways of meeting these goals.
But, back to budgets. Now is not the time to slash commercial budgets, now is the time to ensure long term commercial investment in brand awareness and customer relationships is protected and short term expenditure is wisely targeted on convertible prospects and existing customer spend. That means maintaining marketing spend, but ensuring it's targeted and driving the right commercial outcomes. It's about tailoring strategies and tactics, and positioning for recovery, just as it was through the pandemic. This in turn means that the right metrics and measures need to be in place to assess commercial impact. As Mark Ritson explained in his Marketing Week article 6th April 2020:
The best marketers will be upping, not cutting, their budgets - It may seem like a paradox, but recessionary periods actually provide fertile grounds for marketers to grow their brand's market share if they're prepared to think long-term.
Byron Sharp and the Ehrenberg-Bass Institute for Marketing Science agrees to a large extent, see 'A Marketing guide: What to do in a recession' highlighting resilience of consumer behaviour, pricing strategy, advertising spend and new product lines as potential sources of 'relative gain'.
The bottom line...
It's impossible to have a discussion about commercial metrics and measures
without reference to the modern day godfather of marketing metrics, Tim Ambler. According to Wikipedia 'Tim Ambler is a British organizational theorist, author and academic on the field of Marketing effectiveness. Ambler featured on Marketing's list of the 100 most powerful figures in the industry. He is cited by the Chartered Institute of Marketing as one of the top 50 marketing experts in the world'. We met a couple of times many years ago to discuss early models of marketing discipline, process and measurement that ultimately led to Adaptomy DNA.
In a seminal work: Marketing and the Bottom Line, (FT Prentice Hall, first published in 2000), the marketing metrics to pump up cash flow, Tim Ambler explains how to create the measures of success. If you are a marketer, or a commercial manager and you have not read this book, get a copy now and read it. It clearly show how marketing is connected to financial operations, revenue and cash flow and management of many of the intangible and intellectual assets of a business. It also explains the need to connect internal and external marketing efforts.
From the very beginning of the book, in the executive summary there is a clear challenge: Is your metrics system good enough? In our experience the answer to that question is more often than not, no. It's a sad indictment of current commercial practice that performance and or impact metrics and measures are all too often seen as scorecards, tables and spreadsheets rather than systems, disciplines and processes. More often than not, it's not clear what's being measured, which disciplines and processes, or why we are measuring, what objectives, which outcomes, or how to balance long and short term measures of success. There's a lot more to commercial metrics and measurement systems than the metrics and measures themselves.
Even in today's data rich, digitally soaked marketing, the book provides guidance toward the metrics and measures that really matter to the business, no vanity metrics, just solid connection to financial operations and quantified business models.
Stuff we're thinking about
Just a few things from recent blogs, our 'nudges', thoughts on value and growth and the kind of stuff we're thinking about, an endless stream of topics and points of interest...
Thoughts on Value and Growth (#TOVAG):
No.7: Need for Quantified Value Propositions, QVP's
In what must be the most unsurprising news of the week, US-based free grocery delivery start-up, Fridge No More, shut down yesterday. Offering free delivery of any grocery item, or items, regardless of order size, anywhere in New York City it started up in October 2020 and within 18 months was gone. Taking untold investor millions with it, no doubt. https://lnkd.in/esaQVCTX
Accused of having "no pathway to profitability" by one supply chain expert, who also called rapid grocery delivery “the worst business model ever created”, Fridge No More was clearly funded on simply a hit and hope basis. They were too eager to please, without understanding either the value of what they delivered (literally, in this case), how customers put a value on it nor what they’d be prepared to pay for it? To quote my favourite Jurassic Park character, Dr Ian Morris (Jeff Goldblum) “they were so preoccupied with whether they could, they didn’t stop to think whether they should.”
If start-ups, or any business, don’t set out with a clear, quantified value proposition then how will they begin to substantiate the value they want and expect customers to pay for? A properly quantified value proposition is also the fundamental basis for any systematic business plan and forms the primary input to every pricing plan.
No.8: Quantified Market Opportunities, QMO's
By now most marketers are aware that Quantified Value Propositions (QVP's) are key to understanding the exchange of value between suppliers and buyer, they're instrumental in pricing strategy and critical to brand building, positioning and ABM.
However, how many of these well-crafted propositions are based on Quantified Market Opportunities (QMO's)? In our experience not many. We're not talking here about TAM, SAM and SOM which should have some quantification, though the vagaries of TAM, SAM and SOM are another subject. No, we're talking here, about clear understanding of how much opportunity there actually is, who's actually willing to buy, when are they willing to buy, what will they pay, how much budget do they have, which budgets can be targeted, what are the costs to acquire (CAC) in specific segments, which sectors and segments are commercially viable, what the prioritisation strategies are, and why. We're talking about putting an opportunity value on each target sector or segment.
For example, are enterprise software companies of more value to your business than enterprise semi-conductor companies? Are larger customers worth more than mid-market or SME? Should you target MarTech or Demand management budgets in broadcasters or major movie brand development budgets? Effective quantification matters in all these circumstances.
We find, all too often, this work is not a sophisticated or complete as it needs to be, and that's a problem. If market opportunities are not quantified, it's difficult to understand how QVP's could be developed, even harder to understand how strategic priorities are being set, let alone downstream processes like brand building, pricing, GTM, and ABM.
QMO's are not 'a nice to have', they're essential. They cut the costs of strategy, GTM and down-stream processing. They focus resource and effort and help target the best opportunities. They help the business stay laser focused on customers and market dynamics and they enable QVP's.
Just by way of a footnote, QMO's aren't static, they evolve, morph and change like any market. They need to be continuously monitored and updated, they are an essential discipline of strategy and marketing. Unfortunately, not always baked into strategy, marketing and sales thinking as an analytical and commercial discipline as much as perhaps they should be.
Put pretty simply, if you can't quantify specific market opportunities, it's debatable if any down-stream processes are really working.
No.9: Nearly Ideal Customer Profiles, NICP's
There's something cathartic about going through a process to identify your Ideal Customer Profiles, (ICP's). There's value in the process itself, it's a process of discovery and learning, identifying truths, unmet needs and lots more.
However, prospects and customers that fit the ICP's are rare, like unicorns or pots of gold at the end of the rainbow. If you're lucky there will be a few.
What's arguably more interesting and important are the many 'Nearly Ideal Customer Profiles', NICP's, those prospects and customers that aren't quite ideal, slightly imperfect. The interesting and important part is how many of these NICP's can be engaged, converted and retained. Where are they in their journey, what are their needs, what would it take to get them on-board.
In our experience strategies and plans to address and or target these NICP's are under-developed. The first step of qualifying and quantifying just how far away these NICP's are from ideal isn't systematic, for example what are the relative Costs of Acquisition for each NICP segment? It's a kind of sub-segmentation or analysis, a prioritisation of prospect and customer opportunity that's really valuable but can be easily missed in the pursuit of ICP's. It's sometimes recovered in ABM and KAM, but that's too late in the process, potentially leaving 'money on the table' in target markets.
The stark truth is that customers and prospects that fit the ICP's, don't really need marketing and sales, they are already in the perfect position to buy, they need and love your products and services! They should be a breeze to acquire? They should have low CAC and significant LTV
NICP's aren't quite there yet, they need marketing to, and they need selling to, they are a little way 'off the line'. It might be that they don't have the need yet, they have the need but don't know you have solution, they're just not ready yet, it's bad timing - you've heard it all before. Businesses can win markets by understanding better than their competition, how to convert prospects and customers in 'close' NICP segments. The smartest businesses understand the relative CAC and LTV of NICP's compared to ICP's and use this as a form of differential advantage.
NICP's are more often than not your real prospects and potential customers, they are why you have marketing and sales, they are the reality, the main market, they are not ICP's and there needs to be a clear strategy to manage them as prospects and customers.
Growing pre-investment assessment and post-investment scale-up and growth
Our new approach to CDD - systematic pre-and post-investment commercial strategy and operations capability and capacity assessment is getting traction from VC|PE investors and their portfolio businesses as well as direct approaches from scaleup and growth businesses looking for systematic ways to drive commercial success.
We believe Commercial Due Diligence should be the accelerant to post-investment strategy and growth but too often it focuses on just historical risk and market sizing. We see commercial due diligence, as current and future state opportunity, strategy and operational assessment. It is the starting point for scale-up planning, integration, and growth - all delivered as one programmatic process.
Over the past 5 years we have developed and implemented Adaptomy DNA, a model to systematically improve commercial strategy and operations. We’ve used it to shape Growth Roadmaps for Private Equity and Venture Capital companies and their portfolio businesses that are committed to systemic outperformance of the norm.
Our investment, scale-up, and growth advisory focuses on the systematic assessment of any business’s commercial opportunity, its capability and capacity to deliver projected strategic outcomes, and a 100-day runway plan to accelerate post-investment growth.
And, with a fully flexible, modularized approach and pricing model, that puts the investor in control, we can provide depth and scale across a variety of industries, timescales, and geographies to meet the needs of investments from £3million to £50 million.
Footnotes: things you might have missed
Commercial Due Diligence: adapting to the new landscape
A great piece from Unquote of the changing nature and resilience of CDD, and a great case for Adaptomy's more systematic, structured and integrated approach to CDD and post-investment scale-up and growth approach which consolidates rigorous pre-investment and execution.
In fact, it's harder to make a better case for our per- and post-investment scale-up methodology, adaptomy DNA and the diagnostics and tools that support it. Throughout the period in question adaptomy has delivered numerous CDD and post-investment acceleration projects across a wide range of businesses. In all cases we have seen the benefits of using systematic approaches that go well beyond the normal scope of market validation and commercial strategy to include structured assessment of commercial capability and capacity. We are now working with partners to develop a new form of DD, integrated from the ground up to eliminate inefficiencies in current DD practice.
The behavioural econimics guide 2022 - A review of emerging trends in self-control and goals, introducing the FRESH framework. A very useful, and free download of frameworks, applications and resources. For anyone involved in design, attention, decision and outcome economics, this is a useful document.
Is the key to the attention economy personalisation?
Great article in Forbes: Sick Of The Attention Economy? It’s Time To Rebel about the counter-attention economy. Interestingly it suggests that commoditisation of attention is not the answer, but personalisation might be. That's true personalisation, not generalist compliance to a persona or ICP, but personalisation developed through real understanding, perhaps dialogue, even. Imagine, developing real dialogue. We worked recently with one of our customers in this interesting area of 'engaging narrative', consumer-led narrative and personalisation through dialogue and content. Given the decline of cookies, these kinds of more sophisticated conversations between businesses, prospects and customers will likely develop further.
The State of Marketing Budget and Strategy 2022
Insights from Gartners Annual CMO Spend Survey 2022. The survey fuels CMOs and Marketing leaders with top-line marketing budget, marketing strategy and martech investment trends to watch for. Following record lows in 2021, this year’s marketing budgets as a percentage of company revenue have climbed from 6.4% to 9.5% in 2022 but still lag behind pre-pandemic spending, according to Gartner’s Annual CMO Spend Survey 2022. It outlines:
how CMOs are prioritising their marketing budgets in 2022;
which industries are seeing the biggest changes to their marketing budget;
how fiscal and geopolitical uncertainty is impacting overall marketing budget trends; and
how talent and capability challenges are impacting marketing’s resource mix
Quote of the moment...
Marketing metrics inspire certainty and confidence. Cannabis has much the same effect. Tim Ambler Have a fantastic weekend!
What we're reading
Winning the room by Bill Franks
Revolutionize your data-driven presentations with this simple and actionable guide. In Winning The Room: Creating and Delivering an Effective Data-Driven Presentation, analytics and data science expert Bill Franks delivers a practical and eye-opening exploration of how to present technical data and results to non-technical audiences in a live setting. Although framed with examples from the analytics and data science space, this book is perfect for anyone expected to present data-driven information to others.
The book offers various specific tips and strategies that will make data-driven presentations much clearer, more intuitive, and easier to understand. Readers will discover:
How to avoid common mistakes that undercut a presentation's credibility
Instructive and eye-catching visuals that illustrate how to drive a presenter's points home and help the reader to retain the information
Specific and actionable techniques to dramatically improve a presentation's clarity and impact
Ideal for anyone expected to present to managers, executives, and other business leaders, Winning The Room is required reading for everyone seeking to improve the quality and efficacy of their data-driven presentations and communications.
Selling value by Mark Stiving, Ph.D
Mark Stiving provides deeper insight into how to win more deals at higher prices. His book has 3 parts. The first part unravels the ambiguity of what value means. It explores how buyers use value to make decisions. Chapter 4 that describes value tables, a technique companies can use to document how buyers value their products.
The second part is about actions salespeople can take once they understand value. It introduces value journeys, how a buyer goes about learning about the value of your product in order to make decisions. Once salespeople can recognize the value journey their buyer is on, they are able to communicate more effectively by focusing on what’s important to the buyer. Understanding and recognizing value journeys will help sales in many of their activities.
The third part is about how the rest of the company can help sales. It provides many ideas for several different departments. Product people can build product with more value. Marketing people can communicate about value. Sales management can incentivize salespeople to hold prices, while still discounting when necessary.