Welcome to our newsletter for May- July 2006

This issue focuses on what drives Australian consumers purchasing decisions and successful sales force performance.

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Dianne Davis
Principal and Managing Director

www.davismarketing.com.au

• In late 2005, Davis & Associates conducted comprehensive qualitative and quantitative research amongst Australian consumers aged 18+ on behalf of a major consumer information organisation into the seminal question of:
  
  What Do Consumers Consider Important in Purchase Decisions?
  
  Research participants were asked to nominate what they placed most importance on when making a purchase decision. Across the sample:
  
   
• When probed, “Value-for-Money” equated to receiving value (i.e. reliability, durability and good service) for the price charged, as distinct from the cheapest/lowest price; “Quality” was commonly defined as product durability and reliability, plus a combination of good functionality and design; while “Brand” related to brands that were well-known and trusted.
  
  Quantitatively, the value-price equation was rated by 89.4% of the sample as the most significant factor, with quality (incorporating product-service features) at 83.2% being the second-most significant.
• Other factors mentioned included: clarity of information, safety, and independent feedback / independent endorsement.
• Following on from what is considered most important in making purchase decisions, research participants were then asked what were their:
  
  Main Motivations for Undertaking Research-Information Gathering Prior to Making a Purchase.
• For the sample as a whole:
  
   
• Other ‘motivations’ that rated a number of mentions (or rated particularly highly with some segments) included: “Enjoying Doing Research”, “Feeling in Control / Feeling Empowered” and “Controlling Interactions with Salespeople”.
• In summary, getting value for money and understanding a product’s functionality (especially product reliability) feature prominently in Australians consumer behaviour and motivations.

A Booz Allen Hamilton study (December 2005) on the status of marketing - “Australian Chief Marketing Officers Study” - focuses on how marketing functions can exert a stronger influence over revenue and profit growth.

The study’s key take-out is:

“While many Australian marketers do great work, it is not necessarily the right work – it is often misaligned with the overall business agenda. There is, therefore, an opportunity to reconfigure the role of marketing to unlock latent organic growth potential... re-synching the marketing function may just deliver the next step-improvement in business performance that many emterprises are seeking”.

For a copy of the full report contact Booz Allen Hamilton.

According to McKinsey, the 10 key trends to track in 2006 and beyond, include:

1. Centres of economic activity will shift significantly
   
   Within the next 20 years, Asia will catch up with Western Europe in terms of contribution to global GDP.
2. Public sector activity will burgeon
   
   The aging of populations (especially in the developed economies) will drive demand for greater public sector efficiency and innovation; invariably, private sector approaches will be increasingly employed in the delivery of core social services.
3. The consumer landscape will change and grow
   
   One billion new consumers in emerging markets will enter the global marketplace over the next 10 years; between 2006 and 2015, consumer spending in these markets will grow from $4 trillion to over $9 trillion.
   
   In addition, the impact of aging populations and growing consumer empowerment via access to information will also significantly impact the consumer environment.
4. Technological connectivity
   
   “We are working not just globally but instaneously. We are forming communities and relationships in new ways” (e.g. 12% of US newlyweds in 2005 met online; 9 trillion emails were sent last year; and more than 2 billion people use mobile phones).
5. The war for talent will change
   
   For organisations and governments, talent attraction and management will become a critical issue – and the developing economies will be a major source of supply (e.g. the 33 million university graduates from the developing world is more than double the number in developed ones).
6. Big business’ role & behaviour will be heavily scrutinised
   
   Business leaders will need to argue and demonstrate more vigorously the “intellectual, social and economic case for business in society”.
7. The demand for natural resources will grow and the environment placed under further strain
   
   “Innovation in technology, regulation, and the use of resources will be central to creating a world that can both drive robust economic growth and sustain environmental demands”.
8. New global industry structures
   
   In many sectors, “barbell-like structures are appearing” – (i.e. a few giants on top, a narrow middle and a plethora of smaller, agile players on the bottom).
   
   As well, corporate borders are increasingly blurred, as new networks of suppliers, producers and customers emerge.
   
   Successful organisations will be those best able to capitalize on opportunities flowing from these new structures.
9. Management moves from art to science
   
   Today’s business leaders are employing “algorithmic decision-making techniques and…highly sophisticated software” to drive business decisions.
   
   “Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game”.
10. Access to information is changing the economics of knowledge
    
    Knowledge is increasingly available but also increasingly specialised; new models of knowledge production, access, distribution & ownership are emerging.
    
    Organisations will need to carefully leverage the ‘knowledge universe’ to avoid being overwhelmed by too much information.

The 2005 McKinsey Customer & Channel Management Survey identified four key practices of organisations with top sales force performance:

1. Concentrating resources on a small group of customers; on average, the top performers serve half as many customers than their competitors through key account teams, but assign almost a third more salespeople to each account team.
2. Actively using 3rd-party sales and merchandising agents to undertake lower-value back-office activities (e.g. order processing – 43% for the leaders versus 12% for the rest).
3. Organising key account teams along cross-functional lines to better serve customers. Sales force leaders were more likely to include not just sales force personnel but specialists in product management, customer marketing, finance and supply chain. By contrast, lower performing sales teams were made up almost exclusively of sales people and product managers.
4. Tailoring services to meet individual customer needs. Sales force leaders not only called on key customers more often but routinely sent their most talented sales and customer service people to work with these customers.
   
   Moreover, collaboration was more likely to extend to the customer’s senior management; top sales force performers frequently held planning meetings between their top management and those of the customer. Such collaboration was found to actively foster:
   
   
   • A joint commitment to robust, regular customer research
   • Differentiated service offerings
   • Development of relevant new product offerings.

According to the surveys’ authors, the quality of talent an organisation assigns to key customer accounts will become even more important in the future.

However, the surveys’ findings suggest that many organisations are simply not managing their sales talent effectively – up to one third of organisations surveyed, for example, conducted no formal reviews of their sales force.

By contrast, sales force leaders reviewed their salespeople “carefully and regularly” – with two thirds conducting reviews quarterly or semi-annually, and the other third annually.  

The authors note in conclusion:

“…as the relationship between suppliers and retailers continues to evolve, and the demands on manufacturers increase, top talent management is one way a sales force can differentiate itself from the pack”.

Dianne Davis was quoted in the Australian Financial Review (17 March 2006) on law firms and branding.

On July 13-14 in Brisbane, Dianne will address The Australian Council of the Arts 2006 Marketing Summit on how to build and sustain a differentiated brand in the Australian arts.