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Time to rethink the business model of some NGO brands?

By Mark Di Somma

Brands like Toms with their “one for one” shoes programme have proven that companies can be both profitable and philanthropic. So why do so many NGO brands stick with a funding model that relies on, well, charity?

Peter Salmon, MD at social innovation company NextPlays, certainly has his doubts about models based on grants and donations as opposed to “financed” business practices. Here are some of his thoughts on why “cause” brands need to stop begging for money and start putting up business cases for financing social change.

The current models of financing social organisations are through philanthropic grants, equity investment, or conventional debt financing, he says, but the dominance of foundation and philanthropic grants creates an ineffectual social innovation sector that delivers poorer outcomes.

1. Both financing and grant approaches require well researched documentation but a grant application requires a proposal, whereas financing requires a business plan. These may seem like subtle differences, but one is far more open to innovation than the other. Grant applications are often judged to fit within already pre-determined social development agendas, such as child poverty, or education. So organisations looking for grants end up tailoring their submissions to fit within the scope of the funding rather than focusing on how to get to the real outcomes. Financing has no such agenda. It judges the business plan on the quality of the value proposition, character of the entrepreneur and the likelihood of enterprise success. Financing doesn’t pre-select approaches, it determines likelihood of success.

2. Grant based social development agendas can also foster duplication of effort. This results in the funding of a number of proposals all loosely working in the same area of development, with each striving to achieve at times similar goals with similar structured organisations, resource and funding requirements. Finance applications by contrast are judged on the likelihood that the business plan will succeed. This requires the plan to clearly articulate the unique characteristics of the venture compared to its competitors aiming to serve the same customers or beneficiaries. Proving an enterprise worthy of financing is tough, but toughness requires innovation.

3. Grant based applications place emphasis on well researched understanding of the problem and likely solution, that if successful, leads to operational design of that solution. The process looks like this:

Problem ➔ Solution ➔ Grant ➔ Business model

This is counter to modern approaches to innovation. Larry Keely of Doblin Group has statistically measured that ‘98% of all innovations continuously improve known solutions’. That is, they don’t try to create new solutions outright, but improve on what we already have. He goes on to state that some of the greatest innovation breakthroughs have come from using networks in new ways, and rethinking business models.

If this is the modern reality then Salmon says we need to take new approaches to social innovation and funding. More like this:

Problem ➔ Solution & Social Enterprise Model ➔ Financing

Organisations can’t leap directly to solutions without considering how that solution or enterprise will function. More time needs to be spent considering the social enterprise model prior to any form of funding application and what role the community plays within the business.

4. Finally there is the issue of financial sustainability. Grant funded not-for-profit brands can only keep working as long as the grant itself, so they spend a good deal of resources on continually seeking new grants and other fund-raising activities at the expense of focussing on the outcome they seek. A recent survey by Grant Thornton on ‘Financing Non-for-Profits’, stated that financing was one of the three greatest challenges facing the Charitable sector, and achieving their stated social goal ranked on average at seven.

Successful social enterprises, Salmon says, have the ability to generate income alongside achieving their social mission or outcomes, and profits generated beyond that can be reinvested into expansion or future development.

So why aren’t more brands interested? After all, this approach makes the business case for change that more and more sponsoring brands are asking for in their dealings with community organisations.

I suspect it’s because social innovation falls between the cracks.

For the more traditional NGO sector, who are often motivated by their cause, money is the means to what they perceive as the realistic goal, which is progress. This is also a sector that struggles at times to put commercial metrics around their work – so the social enterprise model looks suspisciously like commercialisation (read perhaps exploitation) of a situation. Such a model is highly disruptive to the philanthropic approach they are used to and geared for, and could therefore be seen as unnecessarily distracting in terms of its priorities.

For the for-profit sector, social enterprises aren’t created with commercial profit in mind, but rather for social outcomes – so that means returns don’t fit a conventional risk/reward curve, putting them at odds with the expectations of most investors. Many brands in this space believe their CSR work is commitment enough.

It will be interesting to see who starts building the bridges between these traditionally-different approaches first: NGOs looking to put their organisations on a more reliable business footing; or profit-motivated brands looking for new ways to engage with politicised consumers?

Don’t be disappointed: why price underwrites the brand experience

By Mark Di Somma

What’s the difference between a budget airline and a pig? Pigs fly more often – and on time. Harsh perhaps, but it’s a reminder that in a market, there is always a price to pay, and the price is not just about money down.

Some people will be happy with budget. It’s worth a cancelled flight or two for the savings they make. For others, that’s far too high a price to pay for a few dollars saved.

Years ago, I was in a workshop where three people in the group were asked to make the business case for luxury over economy. The team made their case in a pointed and dramatic way.

First, they invited the wider group into a huge open sunny space, where sofas were laid out. Each person was escorted to a sofa and provided with bubbles and canapes. There was a sign on the wall that read $3000. Then, we were invited into a second room. This room was smaller, and instead of couches there were seats. Each person was asked to sit where they wanted and they were provided with a cup of coffee and a magazine. The sign on the wall read $1000. Then we were pushed and hussled into a third room. It was dark and small, with no outside windows, and instead of chairs we sat at school desks all bunched together in one corner of the space. Each person was told where to sit and all they were given was a glass of water. The sign on the wall read $500.

When we returned to the workshop meeting room, there was a simple question waiting for us. It read: Which room would you rather pay to spend 12 hours in – and why? Then we were asked: Which room would you rather pay to spend 2 hours in – and why?

You can imagine the discussion.

Each person will trade off what they get vs what they pay as they see fit. Some would rather fly on the plane and stay in an economy hotel no matter what the length of the journey. Others will want the reverse. And that model transposes almost everywhere you look. The main cinema vs the gold lounge. The budget burger vs the gourmet burger. Supermarket vs deli. The cheap perfume vs the eau de Cologne. Environmental vs irresponsible.

And no-one will do this uniformly. The days of the holistically budget buyer or luxury buyer are gone. Depending on what’s important to us, we’ll shift between budget, standard and luxury in most of our purchases.

That makes understanding what we are getting for our money even more important.

The key point for brands is that they need to make it very clear to their customers what the trade-offs are. Most don’t. They don’t carry storylines that explain why consumers are paying what they’re paying and why they’re getting what they pay for. They sell an aspiration – which of course is a key aspect of marketing – but it is an uninformed aspiration because they often don’t position price as an expectation indicator. They still see it, and treat it, just as a cost.

In the context of branding though, price is more than what goes in the till when the product walks out the door.

Price, when it is talked about, should be the clear and present underwriter of the experience. Chanel shouldn’t ever seem cheap. If it is cheap, it’s a fake. Walmart shouldn’t seem expensive. Neither should Coke.

If your price is right, your story is clear and your service is delightful, appropriate and framed to that price, no customer should ever walk away from the brand disappointed. They may walk away for another reason – because they’ve shifted their priorities or they can’t afford what they once had – but if they walk away disappointed, there’s only two conclusions.

People didn’t get what they thought they were paying for.

And if you don’t set that expectation, they will – which means, it may not align with what they’re actually getting.

Everything to no-one

By Mark Di Somma

Great question by Paul Dunay: Is sentiment making brands stupid? As the writer points out we are increasingly obsessed with using monitoring tools as virtual tea leaves to try and read the sentiment of the markets towards our brands. Mentions have become the new money – and machines now break those mentions down into chunks of data and attach a ranking to them that brand managers read as gospel.

But, Dunay argues, the premise is a false one because “most people can’t agree on the spirit or intention of a tweet anyway and they never will”, meaning brands could be giving greater credence than warrented to metrics that are easily lost in translation.

The direct risk from such an approach is that brands essentially treat social media as polling booths for their strategy, and are then unduly influenced in their thinking by the flood of opinions ebbing and flowing across the social universe.

It’s important to listen, we’re all agreed on that, but if brands then look to appease everyone and to compromise and tailor their offerings to suit, they will risk becoming everything to no-one.

How brands lose sight of customers

By Mark Di Somma

Interesting observation in a meeting yesterday from Richard about service organisations, and specifically large service organisations and why they often lose sight of the customer and the shifting demands of a dynamic market.

Everybody says they’re in business to serve the customer, but the people who are actually customer facing and customer serving are often those with the least experience, the least knowledge and the least authority because that lowers cost-per-serve. Unfortunately, it also lowers quality, depth, flexibility and engagement, compromising the brand experience and making service a commoditised set of processes that frontline staff are judged on their ability to conform to.

The situation should logically resolve itself as people become more valuable to the organisation, and therefore gain what has been missing when they were on the frontline – experience, knowledge, authority, influence and networks. But what actually happens is that those people are shepherded into talent programmes that promote them further and further away from a direct relationship with customers – which is an increasing juxtaposition in itself – and their focus moves. It becomes more and more introverted.

Market-based innovation then becomes increasingly difficult, because the people now empowered to make change decisions are locked into an internal bubble that seals their own market impressions firmly in the past. They are also fighting battles and priorities that actually have increasingly little to do with where the money comes from.

Intersections

By Mark Di Somma

At dinner the other night, the conversation turned to carpet ads. Why, someone asked, do retailers keep advertising carpet ads when most people only buy carpet once every 7 – 10 years?

Because, they don’t all buy them at once, I reminded them.

A brief explanation of interruption theory followed. Because so many retailers have neither the inclination or the resources to build and sustain relationships with their diverse customer bases, they basically rely on a marketing approach that pivots on informed chance.

Reach and frequency advertising models depend on reaching a profiled consumer at a specific moment when that consumer might have an interest and a need for the product. It’s a scatter-gun approach (despite what the media planners might tell us) that relies on a machine-gun barrage of noise and repetition. Most of the time it has the majority reaching for the remote control to turn off the noise because whatever’s being talked about is “N/A” to their needs right now.

But brands keep beaming ads in the hope that one day customer and brand will meet at a random intersection of supply and demand.

So what can brands with long sales cycles or infrequent purchase cycles do to lift their sales? The most common response is to lift the noise levels even higher by advertising even more – using ever more urgent ads. But a much better way to increase the chance of intersections in my opinion lies in convening an holistic product range that people intersect with more frequently.

So instead of only selling something occasionally, brands need to introduce products and services into their range that people want more frequently. That way those customers have more reasons to intersect with the brand across a range of timeframes – some occasional, some regular.

Apple carries this model out to perfection. Consumers might only buy a laptop or a new phone once every few years. But between those purchases, Apple encourages them to make smaller investments in things like an operating system, and micro-purchases like songs or apps at just a handful of dollars each. And in between those activities, they dot presentations and announcements to maintain buzz. (Which, incidentally, is another important point about intersections – they can’t just happen at purchase time if they are to retain value.)

Apple stays in touch with customers, and keeps them in touch with the brand, through multiple intersecting moments at various price points and – this is important – non-price points. As a result, the brand feels dynamic, exciting, rewarding and habitual – and consumers cultivate strong loyalty and interest.

Multiple intersections raise awareness, offer multiple access points and bring brands to life.

So if it’s a long time between interactions for your brand and customers, rethink your intersections. Give people more things to buy, more reasons to buy them, more timeframes within which to buy them, more price points to buy them at – and stagger and scaffold those offerings so that they feel coherent, consistent and desirable.

"Why do they only look like that in the ad?"

By Mark Di Somma

You want to tell the best story you can, to showcase your product in the best light, to prefer you over others. So you show the optimistic end of what you deliver. The burger looks generous and juicy. The staff behind the counter are attractive and smile. The car corners beautifully on endless, empty roads. The child in the trolley in the busy but not overly crowded supermarket is gorgeous, and the product is lit up like Christmas.

Every brand manager wants to tell that story. Because it’s safe, clean, positive and aspirational. It promotes the product benefits. It ticks all the boxes. Except one …

It’s untrue.

The actual experience of course is nothing like that. And everyone knows it.

In reality the burger is dismal and squashed, the staff don’t smile never mind talk, the roads are jammed with irritated souls who make getting anywhere miserable and slow, the supermarket smells of over-ripe fruit and you can barely see the product because the fluorescent tube overhead is on the blink (sometimes literally).

Right across mainstream media, brands are still making promises they know they can’t deliver on. And they continue to wonder why effectiveness is faltering.

As I’ve said many times, the most dangerous word in branding is … who?

But the most dangerous sentence is almost as curt – “I don’t believe you.”

Sure you’re social, but are you interesting?

By Mark Di Somma

Fans matter, but friends of fans matter more it seems when it comes to spreading the word. According to this article in FastCompany, just 16% of company messages reach users in a given week, and the solution to that is to reach the friends of fans. So while Starbucks’s 23 million fans is impressive, the bulk of the numbers are the friends of those same fans: 670 million.

In other words, you can tick all the boxes in terms of traffic and friends, but the real sphere of influence is actually at the next degree of contact – and the dynamic driving that is the somewhat old-fashioned notion of talkability.

You may recall, some time back, the discussion about how many degrees of separation have strength in the social universe. How far into the network of friends of friends of friends do you have to go before the signals fade along with the trust? What this piece indicates to me is that two degrees out the message can be even stronger than it was at the first point of contact if it makes it that far. And the reason is that people aren’t hearing messages from brands themselves, they’re hearing about those brands from their friends.

I suspect though that the dynamic forks at the next level out. There is either huge drop-off as the subject runs out of talk-time or your brand “trends” and the talkability continues to climb as word gets round.

Ultimately though the take-out from this research has nothing to do with social media at all. The thing is, if you’re interesting people will talk about you – and if you’re not worth talking about, your brand will only get as far as the fanboys.

Most people recognise that you can’t just start talking and expect to pull off a keynote. Some planning needs to go in. Equally if you want people to have conversations about your brand, what do you want them to talk about? Have you planned the talking points? Or are you just leaving people to talk amongst themselves?

So many brands it seems to me start from a premise that they must be fascinating because people like them. Yes, that’s true for the first circle. But how do you get pass-on? How do you appeal to people where your brand doesn’t have top-of-mind?

My suggestion: take a hint from the world of costing and start from a zero-base. Assume no inherent interest and look at how you will build interest into who you are, what you do, what you say, where you go … to reach a targeted level of interest amongst that bigger friends of fans group.

You’re only as interesting as you make yourself.

Is thinking a desk job?

By Mark Di Somma

Over at Conversation Agent, Valeria Maltoni asks :Where do you do your best thinking?” For me, it depends on the problem. And what I think and even how I think about something is directed by that. Here are my seven favourite approaches:

1. Sometimes it’s sitting somewhere quietly with a pencil and paper and just writing thought sequences down until something clicks. Usually that’s about rethinking the associations. Scrabble means charades with a touch of Pixar over a business model.

2. I read avidly for the same reason. It’s all about finding different lines of logic. Disrupting. That’s really good for new products or ideas where there is no precedent or if you need to put daylight between what normally happens and what will need to happen for the brand you’re working on. Read about a completely different situation, and then apply what you got from it. To find out more about this, read The Medici Effect.

3. Other times it’s a walk – to get sensory inputs such as eye contact, noises, colour, vistas. Good for getting into the emotions of a situation or problem. Take your phone, sing to yourself, absorb. Good for quiet days.

4. Finding a picture of the situation works the same way. It can crystallise the situation and quite literally frame the argument. It’s not unusual for me to spend hours trolling National Geographics in search of an image that epitomises a situation or a relationship for me. I recognise that this doesn’t always look entirely productive to other people. Visual people get it. Others struggle.

5. Actually going to a place, sitting with a coffee and watching what people do in the real-life situation can be amazingly insightful. It almost always challenges your preconceptions because people don’t behave as you’d expect, and even knowing that, you can still be taken by surprise. A cross between playing detective, amateur psychology and thinking of a problem like a documentary. Very good when you need to change a habit.

6. Sometimes it’s good to talk – but not always about the problem itself. I have conversations with Gren, Alex and others that seem to cover everything but the issue. They work. I always walk away feeling everything has snapped shut. Everyone else seems to walk away in a state of bewilderment tinged with amusement. Synapsial. Good for lateral answers. Requires humour. May look like time-wasting to others. I think of it as the water-cooler comes to the meeting room.

7. If it’s a seriously knotty issue, it’s time for a bath – a habit I happen to share with one of my favourite authors, the late Douglas Adams. In a book about the making of the original radio scripts for Hitch-hikers’ Guide to the Galaxy, there’s a lovely story about Adams’ love of Chinese takeaways and baths, and his tendency to consume more and more of both, the closer he got to deadline. As a result, the more pressing the timeframe became, the cleaner and more replete the writer. May or may not work for you.

Out-take: Work doesn’t always have to look like work in order to work.

The vital (and ironical) difference between brand and identity

By Mark Di Somma

Are there such things as brands in much of the Government sector? I don’t think there are. That’s a good thing. And here’s why. I believe brands fundamentally require a competitive environment in which to actually work. I’m sure there’s an economic model that explains why – I don’t know it. But the reason why and when I believe brands work best has to do with the value I think they are intended to create: to drive preference; to encourage loyalty; to lift margin; to underpin and align a competitive and commercial business model with the people who believe in and buy from that organisation.

Brands have to work to help consumers to make choices. They need to stimulate recognition, preference and loyalty based on interaction and clear senses of expectation and delivery. Therefore you need to have both choice and competition available. There are of course parts of the public and local government sector that are contestable – and there the dynamics of brand work well. Equally in the NGO sector, one of the most competitive sectors of all in my opinion, there is huge opportunity to use brands to good effect, although many don’t. (We should talk about that some time.)

But where brands don’t work is where people have no choice and no competition. You can’t brand treasury functions for example or Inland Revenue. You can’t brand welfare. You can’t brand public health, airport security, food regulators (in fact regulators of any sort) etc. And you can’t brand local government either.

You can, and must, give those organisations identities so that they can be recognised and contacted but that doesn’t make them brands. An identity is not a brand.

Brands are driven by the need to create profit by delivering to customers. Non-brands are judged on their ability to frame, uphold and deliver on robust systems and processes.

Those are completely different frameworks – and rightly so. As the world has discovered on a number of occasions, bad things happen when you let brands run riot without market controls and equally when you ask public-good entities to suddenly adopt a commercial model when there are no competitive forces to keep them in check.

So to the irony. A brand always need an identity. But sometimes organisations with an identity work best if they don’t try to behave, or think of themselves, as brands.

Announcement: Now on Facebook

By Mark Di Somma

In a move that may surprise some after my recent posts, I’ve decided to make a move onto Facebook by starting a Mark Di Somma, Writer page.

The main reason is that, in addition to providing a place for those who prefer to go to Facebook to get their stories, some of the topics/developments that catch my eye have ongoing coverage, and I see this page as an appropriate place to carry on threads of conversation that fall between a post and a tweet.

For example, I’ve just linked to a story from Fast Company that concurs with my thinking around “war of the worlds” as it applies to the consolidation of social media. I’ve also linked to another story there about the growing awareness of CSR credentials for consumers and what that might mean for brands.

I hope you’ll join in.