TRUST MATTERS

5 reasons why trust matters in business:

1. The economy runs on trust. Market failures, like the recent global financial meltdown, generally occur because somewhere trust has failed.

2. Cost is a consequence of mistrust. Without trust, your interactions with your customers, your suppliers, the media, your colleagues and even your boss, become more difficult and more expensive.

3. At the heart of every brand is trust. Those brands that are more trusted get bought more regularly and are proven to win in the market.

4. Society needs trust as social capital. Trust is a vital element in the cohesion of communities and people, without it we atomise and turn inward.

5. Trust makes us money. Whether that is through more profitable relationships or a stronger more vibrant economy trust is an essential.

For the complete guide on how to create trust in your businesses and brands get your copy of Why Should Anyone Buy from You? BUY NOW

DID BRANDING KILL THE MARKETING STAR?

Ask most people in and out of business about branding and they will tell you its the name, colours, and logos of a company. Ask them about marketing and they say it is about flogging more stuff. But surely CEOs and other senior managers don't think this do they? They must understand the strategic importance of positioning and segmentation as we brand a company. Or the complexities of consumer insight, proposition development, and pricing as we create consideration and preference, generating ROMI, as we market.

Actually in most businesses I think the strategic understanding of these opportunities and processes is poor even at the highest levels. And we, as marketers, do a bad job of communicating these differences; we are supposed to be experts at getting ideas to spread – yet we can't even do it with our own profession. This is compounded by the modern obsession with branding and brand value.

Go back to the 1930s and marketing was a pretty basic process of simple advertising shifting more product. Sure Procter & Gamble were "managing brands" but most marketers were just flogging stuff that they didn't have much of a hand in developing. Most of the interesting work was happening in PR. Following the Second World War and strategic marketing starts to take off. I insisted that anyone who worked for me read the classic Theodore Levitt HBR paper Marketing Myopia (if you work in marketing and haven't read it shame on you). Levitt made the case for marketing to move beyond a sales stimulation function to one that created value through owning the process by which a company could tap into consumer needs and create branded propositions which became long term profitable assets.

Marketing was doing OK during the 1950s and 60s. The post war growth in consumerism proved the case day after day that this strategic approach to marketing worked. The marketer was a respected member of the team. But then something started to breakdown. Whether it was the oil crises of the 1970s putting the break on consumption or cost cutting in the 1980s, or the rise of the services sector in the 1990s, marketers seemed to lose the strategic agenda. Suddenly brand was the asset we were all managing. The marketing process seemed to lose its magic at creating tangible value and was replaced by intangible value. Companies started investing in their brands – there was money to be made, and value to be built, through the name and logo. Run a few workshops, develop a few names and designs, and then implement. Even better that the CEO was prepared to attend some of the workshops! This was much easier than working in the strategic marketing salt mines. This focus on the surface was conveniently supported by the prevailing Zeitgeist of the 1990s and 2000s. Fashion and celebrity was what caught people's attention.

I think we are at a turning point once more. The worst recession since the 1930s has broken something again. We are still in the eye of the storm but opportunity comes from thinking about the long term impacts. It's ironic that in all major recessions innovation and entrepreneurship actually increase despite the economy tanking. Talent comes out of big businesses and capital chases new ideas as returns wither elsewhere. The successful innovative start-ups disrupt markets and steal share from incumbents. They are closer to their customers, deliver better value and find profitable niches.  In turn this means that the incumbents need to raise their game. Richard Lambert, the Director General of the CBI, said at the RSA on Monday night that the last 20 years had been an aberration of business and capitalism. The link between access to capital and risk was weakened and seemingly "leverage" (or debt to you and me) was seen as an almost guaranteed way to make money. The broader impact of businesses on society and humanity was subsumed by the out of control growth obsessed markets. We now see it was all so unsustainable.

Forgetting humanity when humanity is your route to productivity, customer satisfaction, and even investment was clearly never a long term winner. This gives marketers the biggest opportunity for decades to re-engage and move away from the surface obsession with branding and go back to creating extraordinary value by leading the charge of putting humanity back into business. That's what a marketer has the potential to deliver on the board. Combine this with creative vision and an ability to communicate and we might just see the re-emergence of strategic marketing and marketers as long term value creators.

What do you think? Do you think that marketing needs to reclaim a strategic agenda? What's your experience?

Please comment and share your view below. 

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Justin

Mail me: justin@basini.com

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MORALITY & BANKING

Yesterday I attended a talk at the RSA by John Lanchester who has recently written a book called Whoops! about the credit crunch.
The talk and subsequent questioning was mostly about the role of culture and regulation in banking; with the audience and speaker exploring how to develop a system that might be more sustainable.
I wrote a blog called Banking and the Common Good a while back which explored how the concept of common good could be placed as a central focus of a financial institution. Today’s blog picks up on some of these concepts.
The question is how we create a banking system that actually balances commercial objectives with social objectives that deliver benefit to the common good. I believe that a new language of responsibility needs to be imposed on the banks. Nearly all banks will tutor their leaders in Business Ethics; all banks have values statements that will include some version of “doing the right thing”.
But despite these words and intentions we still have a system that doesn’t in aggregate and from a macro-economic perspective deliver “the right thing” and act ethically in its impact. The frustration is that there are very few financial institutions that deliberately act in a clearly unethical way decision by decision, action by action, but in aggregate the effect is destructive.
The heart of the issue for me is one of what banks, especially investment banks, markets focused institutions and bank leadership more generally, value. And that is money, to this everything else is subservient. This is why banks are so successful, they have created extremely efficient systems for maximising profit to the exclusion of virtually all else. This creates inattentional blindness, which is the psychological phenomenon of being “blind” to anything apart from that which you are concentrating on, add hubris and you have a system that builds risk and is narrowly focused on one immediate outcome.
This valuing of one outcome only, with little assessment of second and third order effects and impacts, allows for a culture to become devoid of morals. And that moral bankruptcy turned into financial bankruptcy.
So what to do? Remembering that business ethics and values were taught and “on the wall” at our big financial institutions and offered no protection.
I would advocate a complete reversal of the incentive systems at our banks. We need an incentive system that puts most emphasis on demonstrating moral action and joined up thinking rather than seeking risk for greater return. This should be in an overtly, openly discussed moral framework. Leaders in these organisations need to become expert not just in maths and playing the markets, but seeing the impact of their business on different stakeholders and balancing this for commercial and social return.
Morality is at the very heart of our economic system. Adam Smith’s conception of markets was built on predictable outcomes between buyer and seller. The foundations of these predictable outcomes, in a time when regulation and rules of commerce were much less regimented and established than they are now, were moral action from individuals. I don’t think it is surprising that The Theory of Moral Sentiments, that Smith wrote 15 years prior to The Wealth of Nations and the majority of the books in The Wealth deal with how individuals living in society should conduct themselves. In order for the invisible hand, specialisation and the market dynamic to work as a value exchange there needs to be trust and in Smith’s conception this comes from morality.
This morality will need to be imposed. Major financial institutions have regressed back to the status quo, as John Lanchester said yesterday “the system is as risky as ever”. They will never voluntarily accept any balances to their earning power. So this will need to come from changed systems of regulation.
But this creates a paradox in that regulation, with its rule based approach, enables a moral vacuum by replacing human judgement with an attitude of “if we stay within the rules we are acting responsibly”. Ironically the FSA (the UK bank regulator) knew this. Over the past few years anyone working in a UK bank will be familiar with the pre-crash mantra of “principle based regulation”. No longer were we to work just within the “rules” but to their spirit. It didn’t work because it stayed at the surface, and people’s behaviour doesn’t change, in many cases the people need to change.
By changing what is valued in banks this will change who progresses within the organisations. This will be a key to unlock a new system. Let’s open up board positions on banks to a wider audience. What’s clear from the past two years is that having a career in banking behind you doesn’t give you any special insight or understanding so let’s have a more diverse group from environmentalists, to community leaders, to customers, having a real voice in the running of financial institutions.
It has been said that markets are amoral. That maybe true but they don’t work unless their participants act morally. Creating moral financial institutions working for commercial gain and the social common good is the challenge.

Please comment below and share using the social bookmark icons. Thanks as ever for reading.

Justin

Mail me: justin@basini.com
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ALREADY DESTROYING VALUE? THE CADBURY-KRAFT MERGER

 



This morning Cadbury, the UK multi-national confectionery manufacturer, and Kraft, the US based multi-national food conglomerate, announced they had agreed the much contested takeover bid for £11.5bn. I am a consumer and shareholder of Cadbury.

Food brands are all about trust, and chocolate even more so because it is an emotional category. Cadbury is an iconic British brand with a rich and socially aware history. In its early days Cadbury was a major employer of women and had a paternalistic attitude to its employees (in a good sense) investing in their welfare. Cadbury is one of the most trusted brands especially in the UK regularly coming in the top 10 of brand trust surveys. Even this morning on it's website the headline graphic was "values led, performance driven". 


Is Cadbury's history of commercial success in a social context important or relevant anymore? 


@urbanfly tweeted this morning "There's a romantic idea that Cadbury is a Birmingham company. They're a global corporation who buy out other companies". 


Whilst Cadbury is a global corporation I believe that history is an important part of the embedded value of any company. Brands are created by people and their actions. And the mythology of a company is important as an implicit guide for those making decisions, providing a different perspective or a pause for thought. 


Of course there is another side of Cadbury. They benefited hugely from the British Empire, but more recently have been a huge buyer of FairTrade commodities especially in West Africa.

A descendent of Cadbury's founder called the takeover "a horror story" according to the BBC. Felicity Loudon, George Cadbury's great-granddaughter said, "Every single iconic brand is going – we sell out everything." Of course this isn't important in of itself but I think it is the attitude that many will feel as we see this great British company consumed.

The takeover has been justified because the companies want to secure growth and save cost with now warm words between the parties saying how the best of Cadbury will be retained. But I doubt this will happen. I've worked on both sides of the fence being acquired and acquiring in my corporate career. Cultures rarely merge well. The company taking over inevitably dominates and imposes its values and decision making processes.

What all this means is a challenge to the very logic and price paid for the takeover by Kraft of Cadbury. Another reload of the Cadbury website this morning proclaimed "creating brands people love".

And here is the rub….of the £11.5bn paid a major part of this will be goodwill. A major part of this goodwill will be the intangible value of the Cadbury brands. From the reaction on Twitter and in the press the destruction of this goodwill has been palpable already. The provenance and corporate background of brands is increasingly important to people. In our transparent society information on the companies that make the brands "we love" is so much easier, we know their stories and a sense of where they come from. The fact that Cadbury has been promoting its use of FairTrade in advertising is all about proving they are true to being led by their values.

Given the arguments over the deal, the context of the UK economy and the shameful collapse in manufacturing in the UK's manufacturing base over the past 20 years this takeover will get a huge amount of coverage both now and in the future. The result for consumers will be the perception, even slight, that their bar of Dairy Milk is less satisfying than it was before. Even if the taste of the chocolate stays the same (a big topic on Twitter!), the "taste" of the brands will be tainted for ever.

There is no doubt that a great British company and brand died this morning.

What's your view? Do you think the takeover will destroy or create value? Comment now!

Thanks

Justin

Mail me: justin@basini.com
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Here is a  live feed of comments on the deal from Twitter:



THE NEW LANDSCAPE OF BRANDS

A quick post to share a presentation that I put together for the UK Marketing team for Carlsberg. An old friend of mine (Ian Hannaford @ihannaford) is now a Marketing Manager at Carlsberg and he kindly extended an invitation to talk through some thoughts on brands and marketing with the team.

It was great to meet the team and I really enjoyed the session. Some really interesting ideas surfaced which provoked lots of discussion. I learnt alot about Carlsberg including the fact that it is run as a trust contributing to Danish projects and the top board is scientists and artists. How differentiated is that?

I was impressed that the team was open to hearing ideas and thoughts from other marketers and categories – I wish all teams were as open. Thanks also go to the Director of Brands Paul Davies for allowing me a slot at his meeting.

Do you want me come to your team meeting and provoke some thinking and discussion? Email me – I might just take you up on the offer!

As ever – if you have any thoughts, disagreements, energy and passion to share about brands and marketing then please comment below or drop me an email.

Update on Battle of the Big Thinking (for those that have been following my frustrations on Twitter) – I finally have a stable draft of the presentation. If you are attending see you there and if you aren’t you will be able to take part because I’m going to extend an invitation for you to join the debate!

Hope you are having a great day!

Justin

Email me: justin@basini.com
My website: http://www.basini.com/
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TRUST IN BANKING

I’ve been thinking about Trust again as I pick up my book writing after a summer break.

I want to return to a theme that I discussed in a speech that I made to the Financial Services Forum conference earlier this year. You can download the text of the speech from my website. If you read my earlier blog on Banking and Common Good there are some key themes that emerge if banking is to regain our trust as consumers. As I outlined in that blog I believe we are a turning point but there is significant regression to the mean and that the old status quo is most likely to return. I read with interest in the weekend’s FT about the prediction of a bumper bonus season for the investment bankers.

As “masters of the markets” financial services can contribute market based solutions to the biggest problems. The issues facing us today as a globalised society are bewildering: climate change, peak oil, water crisis, natural resource depletion, all underwritten by uneven wealth distribution, poverty, crime, conflict,increasing urbanisation. These issues are moving more quickly and in a more interrelated way than ever before. The European Carbon Emissions Trading Scheme and the futures markets for protection of Amazon land, are all examples of financial markets contributing solutions.

Contribute proactively to a move away from an age of naked consumerism to something that priortises inidividual well-being and community cohesion. Imagine a world where a conversation in the bank, with a bank manager, could assess whether a credit card to fund that new purchase, or a stretching mortgage to buy that bigger house, were needed putting individual happiness at the heart of the discussion.

After all is said and done what we trust are organisations that have values communicated through their actions, run by accessible and open people, businesses that value their loyalty, and seek to create profit by creating products which meet consumer needs transparently. We will trust brands that communicate openly and positively about the many benefits they provide. Brands can move from basic levels of trust when their businesses start to play for higher goals.

What do you think? As always please feel free to share, retweet, comment and get involved.

Yours

Justin

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RT @tomfarrand What will be the biggest trend in marketing in the next 3 years?

For those of you that follow me on twitter (@justinbasini or http://www.blogger.com/www.twitter.com/justinbasini) or follow Tom Farrand (@tomfarrand or http://www.blogger.com/www.twitter.com/tomfarrand) you may have noticed Tom’s question about the biggest trends in marketing in the next three years.

This made me reflect. I like the question because of its relatively short term nature which is especially pertinent given the macro economic environment we are in.

Dominic Grounsell (@domgrounsell or http://www.blogger.com/www.twitter.com/domgrounsell) suggested technology and thrift which I agree with. The transparency and access that the information age has given rise to will continue to change the rules of the game. The move from push to pull to interconnected collaboration will continue apace.

And thrift will be an ongoing zeitgeist.

What I believe is that we are at a turning point that will pivot around how long the recession lasts. If we see a relatively rapid recovery, say towards the first half of 2010, and unemployment peaks at around 3m then I think we may we’ll return to a modified version of the previous system but with less excess and more regulation.

If we go through a more prolonged recession, say until end 2010, with unemployment peaking at around 3.5m, then I could imagine more significant change with a rebalancing of the economy away from financial services and more social unrest. The leaders of businesses and our politicians will come under intense pressure to drive sustained change, raise taxes for the rich, submit to increasing regulation, all in the context of decreasing trust and perceived incompetence.

Now the most interesting scenario, with potentially massive positive benefits and undoubtedly devastating affects would be a really deep recession lasting into 2011 with unemployment peaking over 4m. I think this scenario has the potential to cause massive change in our system because of the social upheaval (at all levels) that this will cause and the increasing acute perception of the “haves” and “have nots” leaving us with a feeling that the economic system is fundamentally broken.

This will require new leadership to emerge. Potentially the US have found their change agent in President Obama. We need a new political force to arise that can drive change and restore hope. This will be a burning platform if over 10% of the working population are unemployed, house prices don’t recover, deflation starts and businesses find it hard to compete.

It will require businesses to change and adapt to increased levels of consumer activism’ increasing defaulting and money flow as the system deleverages and the continued rise of suspicion and the rising belief that making profit is bad or only feathers the nest of the “fat cats”.

Many of these changes, ironically, will be good in the long term especially if a new, more balanced approach emerges. However I’m definitely not rooting for a prolonged recession – the collateral damage on individuals and families is too great.

My prediction for what it is worth is that we will land somewhere between scenario 2 and 3 with recovery starting end 2010 and unemployment peaking at around 4m. What I do hope is that the seeds can be planted both in our leaders and in our economy that will grow into a more balanced, more holistic approach that puts well being at its heart rather than fear and greed.

As always feel free to comment.

Justin

http://www.basini.com/
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