Are you spending time and money on the right things?
A few of you may have read the book ‘Moneyball’ by Michael Lewis or watched the film starring Brad Pitt. Moneyball tells the story of the Oakland Athletics baseball team and their general manager Billy Beane.
The central premise of Moneyball was that the collective wisdom of baseball insiders (players, managers, coaches, scouts) over the previous century was flawed. That, the things that were traditionally used to gauge player performance – e.g. stolen bases, runs batted in, batting average (don’t worry, we don’t understand most of these things either!) were overrated.
In contrast, factors such as on base and slugging percentage, which were much more predictive of success, were underrated. Billy Beane and his team used statistical analysis to identify the players that performed well on these underrated measures and built a team around them.
These players didn’t look like winners. Most baseball insiders thought that they had no hope and predicted failure. But the team went on to equal the record for the longest winning streak in American league history. Baseball insiders hated it. It challenged everything they thought they knew. But a few years later, most of the big teams adopted a similar approach. Indeed the Boston Red Sox won the 2004 World Series using the model pioneered by the Oakland Athletics.
We are seeing something similar right now in the English Premier League. Leicester City are on the verge of winning the title. They are doing it by showing that the things that ‘experts’ thought were key to success – % possession, squad rotation, wage bill – may be overrated. And the things that had become unfashionable – counter attacking, consistency of selection, no star names – are probably underrated.
Why are we talking about this? Well, we think there are parallels to the FMCG and retail industry. There are things that are overrated, in terms of their impact on shopper behaviour, and things that are underrated. And because some things are overrated, we tend to spend lots more time and resource on them, at the expense of some of the things that are underrated.
So, what are some of the things we think are overrated and underrated? Let’s take what we sell;
Overrated = More Range. Underrated = Less Range. More range in bigger stores was thought to be better, until Discounters started proving it wasn’t. This shouldn’t be a surprise – often when a category reduces its range, sales actually increase. Shopper perception of choice increases. There is less there, but they can now see it. It is easier to choose.
Overrated = New Products. Underrated = Existing Products. In many companies a lot more time and money is spent on launching new products than supporting existing products. Which is ironic as the existing products have proved to be successful – otherwise they wouldn’t still exist. Whereas, the majority of new products fail. Yes, some NPD bets come off. And some come off in a big way. But most don’t. What if you didn’t launch any NPD for 12 months? We suspect you’d come up with some pretty creative things to do with your existing products. Perhaps more creative than a piece of NPD?
Overrated = Funky Flavours. Underrated = Core Flavours. There is definitely a place for new and on trend flavours. Ride the right wave and you can drive a lot of sales. However, the money is, and always will be, in the core flavours. It is going to be vanilla in ice cream, cheese & onion in crisps. Having a better vanilla than the competition is always going to matter more than having a better apple & blueberry. Fight the battle where the battle is being fought.
Overrated = Beauty. Underrated = Practicality. We all want to have packaging that wins design awards. And it’s great when you do win them. But in a retail, particularly grocery, environment, beauty doesn’t always win. What often determines whether you win is whether you can be seen. Whether your pack is easy to access, pick up and carry. Whether your pack can be easily resealed and stored. If you can do beauty and practicality – brilliant. But if you are making calls between the two, err on the side of practicality. You might not get the award, but you are much more likely to get the sales.
If you’ve got 5 minutes to spare, try a little exercise. Think about how much time and resource your Business spends on things that are, perhaps, overrated. And how much on things that are, perhaps, underrated. You might be surprised, and a little worried, by the answer.
But don’t worry too much. Your competitors will be in the same situation. And if they are, it means there is a competitive advantage to be had.
Don’t underrate the opportunity.
Feel free to forward. Have a great weekend and speak to you next week.