Subjects: Snapchat, what the best companies have in common, licensing fees roadshow, the cues from Tesco
Authors: Martyn Cornell, Chris Edger, Paul Chase and Darren Tristano
Why brands should be hiring 14-year-olds for their marketing departments By Martyn Cornell
Your granny is on Facebook. Your dad is on Twitter. Your mum is on Pinterest. There are not many places in the world of social media where a young teenager can feel free from an adult looking over their shoulder. One, however, is Snapchat, the app that lets users send images to their friends, images which are deleted forever ten seconds or less after they are viewed. Snapchat’s main demographic is aged 13 to 23, and while the company behind the app refuses to release any user figures, one estimate late last year suggested it had at least 60 million installs, and 30 million regular users, with at least 16.5 million people using it at least daily.
That’s an awfully large number of teenagers ripe for reaching by any brand that can get a handle on what, at first, seems a distinctly advertiser-unfriendly medium. If your ad disappears after ten seconds or less, that makes delivering a worthwhile message tricky, at the least. This – and Snapchat’s slightly dodgy reputation, with users supposedly “sexting” risque, if short-lived, pictures of themselves to each other – is presumably why very few brands indeed have gone in for marketing campaigns through Snapchat. One company that has now joined the so-far small number of passengers on the Snapchat bandwagon, however, is McDonald’s. And if that’s not a signpost for the future, then McDonald’s isn’t the biggest hamburger chain in the world.
McDonald’s has been using Snapchat’s new Snapchat Story facility, which allows for rather longer messages, in the United States to help promote its new Bacon Clubhouse product, which launches on March 10. Each snap added to a story stays viewable for 24 hours, with each added story snap playing in order. Snapchat users who friended McDonald’s got an exclusive video of behind-the-scenes views of the making of the ad for Bacon Clubhouse, which featured the basketball superstar LeBron James.
In similar style, last autumn Taco Bell promoted its new Snapchat account through Twitter, and then sent its Snapchat friends a picture advertising the launch of the Beefy Crunchy Burrito. That, however, is so deeply dull a use of the medium – it certainly wouldn’t have impressed many 14-year-olds – it suggests Taco Bell hasn’t much of a clue about what it should be using Snapchat for.
In fact, the impermanence of Snapchat makes it ideal for certain sorts of promotions. The New York frozen yogurt chain 16 Handles, which has some 25 or 30 outlets, picked Snapchat in January for a “Snappy New Year” coupon promotion. The campaign asked the brand’s Facebook fans to send in a Snapchat photo of their frozen yogurt, and in return they received a coupon via Snapchat worth either 16%, 50% or 100% off. 16 Handles used Snapchat rather than Twitter or Facebook because it meant that people were unable to share the vouchers’ codes with friends. As the discount messages disappeared after ten seconds, recipients had to wait until they were at the counter to reveal the level of the discount to the cashier.
That is one of the few examples of Snapchat-based marketing, however, where the results can be counted, unlike using Twitter or Facebook, where brands have a record of the number of retweets or likes they get. Snapchat-based campaigns are much more likely to be about rewarding your most loyal users rather than evangelising to the not-yet committed.
However, while Snapchat marketing is still currently mostly product-based, for hospitality brands, the possibilities for “venue marketing” are enormous. Unlike Facebook or Twitter, which are not that different from traditional broadcast media, Snapchat automatically feels much more personal, more one-to one, and the consumer’s involvement with the brand can be made to feel more personal, too. A busy night in the bar? Send out a snap to the bar’s Snapchat friends showing what fun everyone is having, to encourage them to get down and make it even busier. A special event coming up? Send out exclusive Snapchat pictures and videos. Something super on the menu? Send out a snap, and follow it up with a discount offer that, like 16 Handles’, can be shown just once to the waitstaff before disappearing. Snapchat Story what’s going on in your kitchen, behind your bar, front-of-house, down in the cellar. If you’re a brewer, Snapchat Story what’s going on in the brewhouse. If you’re a chef, Snapchat Story what’s going on down at Billingsgate Fish Market. Involve your fans and followers. Something like Snapchat makes it so much easier.
It has been said that much traditional advertising is consumed less by the uncommitted and more by the committed, those who have already bought but need reassurance that they have made the right choice. The rise of “brand journalism” is a direct response to the opportunities that modern social media give for brands to increase dramatically the amount of reassurance they can give, to make their buyers and consumers feel even more part of a family, a tribe, united by involvement with the brand. So far, very few brands in the UK have picked up on Snapchat as a way to increase that consumer involvement, although you can put money on brands with strong interest in the teenage demographic – did anyone mention Nando’s? – looking very hard at what they could be doing with the app.
Martyn Cornell is managing editor of Propel Info
What the best have in common by Chris Edger
For the past 23 years, Professor Mike Brown of Birmingham City University has run the Britain’s Most Admired Company survey, or BMAC (the last 20 in conjunction with Management Today magazine). This survey, which now covers 26 business sectors in the UK, locates the top ten companies in each sector by capitalisation/scale and then distributes a survey to company leaders and analysts requesting them to rank their perceptions relating to nine key characteristics about the ten listed companies on a 1-10 Likert scale (including, in the case of company leadership, their own!)
The key characteristics that are assessed in this largely “peer-based perception” survey are quality of management, financial soundness, quality of goods and services, ability to attract and retain talent, value as a long-term investment, capacity to innovate, quality of marketing, community and environmental responsibility and efficient use of corporate assets. The central premise of the survey is that of reputational measurement, which is garnered from peer groups/experts who have deep tacit knowledge of the intangible strengths of both themselves and others. Reputation is important. As JD Wetherspoon’s Tim Martin told Propel last September: “You haven’t got a brand, you’ve got a reputation. That’s far more fragile.”
In December 2013 the latest annual BMAC results were announced at the customary award ceremony attended by the great and the good at Claridges in London, with Diageo picking up the top company award and Justin King being voted (in a separate survey) Britain’s Most Admired Leader. But what do the rankings in the pub and restaurant sector tell us? I would argue that the overall results, intriguingly, reveal four distinct clusterings, where organisations share distinctive business models/properties. What are these clusters and commonalities?
Cluster 1: Single-scale brands (McDonald’s, JD Wetherspoon, Domino’s)
In this cluster all three organisations coalesce around a single, hard branding (useful for attracting mobile customers) and have reached a high degree of scale and value segment concentration/penetration (in fast food, high street pubs and pizza delivery respectively). Their relentless focus has created “category killing” formats that defeat/degrade any sub-scale/standard competitors in their local environ. In addition they all possess some form of (currently) inimitable advantage, namely: McDonald’s (freehold property ownership), Wetherspoon (new site licensing) and Domino’s (digital ordering/marketing). Essentially all three will also attract value “repertoire customers” dependant on occasionality and have the advantage that their positioning and “true north” (that is, what they stand for) is understood by all stakeholders (owners, management, staff and customers). Importantly, two of these organisations are heavily franchised operations permitting rapid system growth through utilising the energy and capital resources of external agents (that is, single or multiple franchisees).
Cluster 2: Vertically integrated companies (Greene King and Marston’s)
The second cluster includes two organisations that have experienced a remarkable rise up the BMAC rankings since 2000 (from number 9 and number 10 respectively). What are their commonalities? First, they combine upstream drink production and downstream pub retail within their business models, something that was deemed inefficient and outmoded 15 years ago during the pubco revolution! What this has granted them is a balanced portfolio of assets, combined with a high degree of authenticity. Second, both organisations, akin to Cluster 1 above, having developed formidable retail skills, are attacking the suburbs with category-killing formats (Hungry Horse for Greene King and Milestone for Marston’s). They are both also actively repositioning their portfolios by selling off non-core retail sites in order to redeploy their capital into suburban new-builds, a strategy that mirrors the Wetherspoon high street model.
Cluster 3: Multi-brand retail (The Restaurant Group, Mitchells and Butlers, Spirit and Gondola)
This cluster is populated by urban casual dining and pub-restaurant companies which own brands/formats that address a multiplicity of demographics and occasions. While it is difficult to generalise across such a broad group, commonalities include the ownership of premium/mid/value formats, modest brand scales (Gondola’s Pizza Express being an obvious exception to the rule), a reliance on direct management rather than franchise and (with the notable exception of the Restaurant Group) challenging debt profiles. This means that management is running a multiplicity of formats in “simultaneous flight”, all with their own idiosyncratic demands and life-cycle positionings which (sometimes) might lead to complexity, cost and sub-optimal resource deployment/decision-making. While each organisation possesses outstanding brands/formats that are doing well, peer perception might conclude that some of the parts of these organisations are more desirable than the whole.
Cluster 4: Leased adhocracies (Enterprise)
The final cluster contains a pubco business model that operates a vast number of unbranded units (predominantly through single traders) across several segments. To this extent it can be termed an adhocracy; a form of business which relies on individual initiative and self-organisation to accomplish tasks (the diametric opposite of bureaucracy). This inevitably means that while some assets are “sweated”, others are “slack”. The matching of appropriate/willing operator-to-site fit is a complex process to achieve over such a large estate, threatening the main tenets of retail, namely, quality, consistency and dependability.
Of course the 2013 BMAC results are merely a snapshot in time, and it is hard to generalise from one set of results. However, looking back over the results (where certain companies led the table then fell away, departed the sector – Whitbread to Leisure and Hotels for instance – or went bust!) one company has remained at the top of the rankings since 2000, when it was ranked number one, through sticking relentlessly to its business model and distinctive properties. That company (read the quote at the beginning of the article again) is an organisation that to its peers exemplifies both “value and values” – JD Wetherspoon.
Professor Chris Edger is the author of Effective Multi-Unit Leadership (2012), International Multi-Unit Leadership (2013) and Professional Area Management (forthcoming, 2014)
Locally set licensing fees - Home Office Roadshow by Paul Chase
This week saw the first of four Home Office “roadshows” on the thrilling subject of locally set licensing fees. Around 40 people came along to the Victorian splendour of Manchester Town Hall to gain an insight into this latest manifestation of the government’s “localism” agenda.
There are some nine different types of licence application that can be made under the Licensing Act 2003, from simple applications for personal licences to the more complex premise licence application, and everything in between. The fees for these applications were set by central government and applied from when the 2003 Act went live in November 2005, and they haven’t changed since. So, time for an upwards revision of the fees. This exercise is being conducted against the background of the Elton Review of the licensing fees set under the 2003 Act. The coalition government has decided that in the future the setting of licensing fees should be done on a cost-recovery basis and determined locally by each licensing authority. The government will set the framework, but licensing authorities will set the fees.
The Elton Review stated: “In our interim report, we reflected that a range of stakeholders were supportive of the current national, unified system and said that centrally set fees removed the inconsistencies in fee levels that previously existed (particularly for public entertainment licences), creating a fair and level playing field across England and Wales. Whilst some acknowledged that non-domestic rateable value (NNDR) did not provide the ideal mechanism for calculating fees, this classification could be applied across premise type, and they recognised that there may not be a better model on which to determine the fee scales. Others firmly considered it was not the best mechanism for calculating fees for the different types of applicants. However, no universally applicable alternative solution was supplied at the time.”
What struck me at this week’s roadshow is that those sentiments were still widely shared amongst the stakeholders present – some 30 local authority licensing officers, half a dozen operators, a bevy of lawyers, and me. The roadshow was well-run and gave those present a good opportunity to feed back their views on the alternatives, which were as follows:
1. Do nothing.
2. Revise central fees to reflect costs
3. Locally set licence fees based on rateable value bands
4. Locally set licence fees based on a flat fee for each category (the basis of the categories has not been decided)
5. Locally set licence fees, but with an additional discretion for licensing authorities to charge more for premises with a late closure time (between midnight and 6am)
6. Locally set licence fees, but with an additional discretion for licensing authorities to charge extra if the licensing authority judged that premises were used primarily for the consumption of alcohol on the premises.
7. A combination of 5 and 6 above: locally set licence fees, but allowing licensing authorities to charge extra for premises that closed late and that were primarily used for the consumption of alcohol.
The government’s preferred options were 5, 6 and 7. What was clear from this week’s roadshow is that those present overwhelmingly supported the retention of non-domestic rateable value bands as the basis for determining all the applications related to premises licences. And they did so in language remarkably similar to that quoted above from the Elton review – that non-domestic rateable value bands weren’t perfect, but that they were the least imperfect way of determining a structure within which to locate fees for the various types of application.
There was a lively discussion about how licensing authorities were supposed to calculate a cost-recovery fee for all of the licensing functions that they performed, with some saying they hadn’t given thought to it, but others saying they had, but they thought they would be much too busy to do the costings! It took a solicitor, the estimable John Gaunt, to ask the obvious question: why move to locally set fees when the current system of nationally set fees works well and has never been challenged – if it ain’t broke, why mend it? You could almost feel the shudder that went through the Home Office officials present – option 2 is not one of the government’s preferred options!
One of the licensing officers present also commented that moving to locally set fees would create an administrative nightmare, give rise to a mass of inconsistencies between one authority and another, and, as he succinctly put it, “open a can of worms.”
And then we came to the issue of central government putting a cap on fees to guard against anyone locally getting a rush of blood to the head and setting outrageously high fees. It seems to me that whoever set these caps in the Home Office should be given a prize for “Rush of Blood to the Head Person of the Year”! For example: the application fee for a minor variation is currently £89. The government’s proposed cap is £244 – an increase of 174%. And that’s the smallest differential. The application fee for a new premises licence for Band A premises is currently £100. The proposed cap is £2,400 – a whopping 2,300% differential!
Home Office officials were quick to point out that these were caps – not a recommendation for what the new fees should be. Now where have I heard that one before? Didn’t they say something similar in relation to university tuition fees? Perhaps more directly relevant is the fact that local authority licence fees in the gambling sector have been set, on average, at 80% of the government’s fee caps.
My own preference? Retain rateable value bands for premise licence-related application fees, but narrow the fee bands (currently between £100 and £1,905). And if fees must be set locally, then a cap for every fee band, not just one cap for the lot. We should look at what cost is actually involved in all the application fees, but base rises on all of them on the rate of inflation. And what about the so-called annual renewal fee – it’s not a renewal it’s just a charge and the only cost attached to it is writing a letter and banking a cheque. Get rid of the multiplier for large premises: many licensing authorities don’t apply it anyway. And retain central government as the setter of the system and of the fees. A lot of operators and a lot of licensing officers could then breathe a sigh of relief.
Paul Chase is a director of CPL Training and a leading commentator on on-trade alcohol and health policy
Taking cues from Tesco by Darren Tristano
The supermarket giant Tesco makes for an interesting case study in how foodservice brands can position themselves at the leading edge of important consumer trends. At a time of heightened competition for consumers’ attention, and their food and beverage spending, restaurants and retailers would do well to consider how the Cheshunt-based super-chain is aiming to show that it is attuned to what today’s consumers care about.
What follows are examples of how recent Tesco initiatives address a variety of trending topics and growth areas within the foodservice industry.
Prepared foods: In January, Tesco launched Tesco Healthy Living, a line of more-healthful packaged foods. The range, which replaces two previous Tesco better-for-you brands, features more than 230 products (83% of which reportedly are new or updated), including bakery items and ready-to-eat meals. Tesco recognises that consumers have differing interests when it comes to healthful eating, and varied definitions of what “healthful eating” means. The new health-focused line offers choices lower in salt, sugar, fat and saturated fat, and items are targeted at two specific groups of health-seeking consumers: those looking to make more balanced choices and eat more nutritiously overall, and those looking to lose weight. For restaurants, it can be difficult to ensure that items designed as more-healthful options resonate with a wide range of health-conscious guests. Offering easily customisable choices – a spaghetti marinara that can be made with whole-wheat or gluten-free noodles, for example – can help restaurants better meet their guests’ varying health needs. Prepared foods (and family-size ready-to-eat meals in particular) undoubtedly can be valuable business boosters for restaurants and retailers. Whether from a supermarket deli shelf or a restaurant grab-and-go counter, prepared meals present an exceedingly convenient option for always-on-the-go consumers. In fact, among consumers polled for Technomic’s 2012 UK Retail Foodservice Consumer Trend Report who said they had purchased prepared foods more often in the past year, 75% cited convenience as a reason for doing so. But restaurants and retailers should keep consumer health concerns in mind here, too: two in five consumers said the availability of nutrition information for prepared foods was important to them, and more than one in four said the availability of healthier prepared-foods choices factored into their increased purchase of these items.
Social responsibility: Tesco is one of six UK grocers that recently pledged to release regular reports on food waste, starting in 2015. Tesco disclosed that it wasted 28,500 tons of food in the first half of 2013; one company director said the chain will look at scaling back certain multi-buy promotions as part of its effort to combat the problem. Social responsibility is a multi-faceted issue, to say the least; it encompasses everything from sustainability-oriented purchasing practices to in-store energy use. The upshot of this for restaurants and food retailers is that there are many “points of entry”, so to speak, for establishing and expanding upon a brand’s commitment to being more socially responsible. (We talked last summer about Tesco’s Love Every Mouthful campaign and the chain’s work to establish stronger relationships with British farmers.) With a little research, operators can find local, low-cost ways to improve their sustainability profile and become a more socially conscious business. For example, food waste is a major issue for restaurants as it is for grocers: in London, groups such as Plan Zheroes are working to ensure that restaurants’ and hotels’ surplus food goes to charities and not trash bins.
Childhood obesity: Tesco last month announced plans to pour £15m into a programme targeting childhood obesity. In conjunction with its Eat Happy campaign and in partnership with the Children’s Food Trust, Tesco will develop “healthful cooking” classes to be taught by Tesco staff in primary schools. As reported by The Grocer, a recent Tesco-commissioned report found that a third of children eat burgers at least once a week, and many parents indicated that their children had little knowledge about food and cooking. Making over children’s menus to offer more-healthful choices is a top priority for many restaurants in both the limited and full-service sectors, but operators can address childhood obesity concerns in other (and highly visible) ways, too. On-site children’s cooking classes can be a viable option in particular for independent restaurants looking to establish their name and build their reputation in the community. Larger brands can look to sponsorship of children’s sporting events to show their support of an active, healthy lifestyle for children. Of course, for consistency’s sake, that message should be reinforced through the promotion of more-healthful children’s menu choices, rather than, for example, through a coupon for a free ice-cream dessert.
Finally, in that critical area of convenience, it is worth mentioning again Tesco’s expansion of the Click-and-Collect grocery service. Letting consumers order their groceries online and pick them up in-store or from temperature-controlled lockers at transit hubs represents a new level of convenience for customers. Tesco is not the only food retailer offering Click-and-Collect, but its steady rollout of the service demonstrates how nimble one of the UK’s biggest brands can be. Whether it is on convenience, menu flexibility or another leading consumer concern, restaurants large and small must be able to identify how they can compete with the type of rising competitor that Tesco represents.
Darren Tristano is vice-president of the insights and research business Technomic