Michael Smith is managing director of The Marketing Centre, a long-established firm consulting on strategy in Perth. He is a past president and national director of the Australian Marketing Institute. He is a recipient of the patron’s medal (HRH Prince Philip) for services to marketing. He is also chairman of Barking Gecko Theatre Company and the West Coast Eagles. He is on the boards of Scotch College and Zipform Pty Ltd. He is also a director of 7-Eleven in Melbourne.
AIM: What are the biggest challenges in marketing now?
Smith: To have a basis of meaningful difference, and sustain it. To understand the value of your brand and how that might be leveraged. And attracting and keeping good marketing talent.
AIM: Why are brand strategies so often regarded as an afterthought in Australia when few managers would disagree that they need to understand customers?
Smith: Because too many companies tend to build their offer for a contestable market from factory capability forwards. So, often, branding can be like putting lipstick on a pig. A winning game plan really starts with what the market wants, and where there is a gap that can be filled at the cost of a competitor.
AIM: What are the other main shortcomings of marketing in Australia?
Smith: Boards don’t take enough notice of what the brand is worth or the efficiency of marketing investments. Lloyds now rates the second-biggest business risk as being destruction of brand value. Boards have got little ability to control that because they suffer from poor information, poor reporting and poor lines of accountability running through to the board. So it starts at the top.
AIM: Is there a problem with measuring intangibles? Does that influence the way that marketing is perceived in an organisation?
Smith: Yes, there is a problem measuring intangibles, although the percentage of market capitalisation taken up by intangibles has grown dramatically. Also, as a consequence of that, the value of brands and other marketing assets is now occupying – in the best marketing companies – between 25% and 35% of market capitalisation.
AIM: What should an organisation do to turn brand into the central plank of its strategy?
Smith: First, understand the winnable part of the contest for them. Second, build and sustain an offer that will meet that opportunity. Third, have the market understand and support that offer.
AIM: What effect is new technology having on marketing?
Smith: It is increasing the rate at which products mature and, therefore, is putting pressure on product development cycles. It is also producing a confusing and expensive picture of the way to go to market. Because of the spurt of growth in the internet and the crash of the dot-coms, it is about not being sure how much one should invest in digital branches and distributing electronically. It has also made it easier for customers to switch. Technology has also had a huge effect on brokerage-type business. Now that brokerage is often handled electronically, technology has destroyed lots of value in conventional brokerage models.
AIM: What do we need to do to boost research and development in Australia?
Smith: A better link between R&D, investment and commercialisation. That means greater acceptance of risk-taking, but also a greater ability to turn risk investment into success.
AIM: You are the chairman of the West Coast Eagles. Are there parallels between business and sport?
Smith: Absolutely. Elite sport has a lot to teach business about competitiveness and winning game plans and understanding how to defeat someone and changing strategy quickly. Business has a lot to teach sport about focusing on objectives and making the allocation of effort accountable. There are lots of parallels.
AIM: Coles Myer is repositioning itself. How do you see its future?
Smith: I think it has a good future, because its business portfolio spans most of the meaningful parts of the retail market. Its difficulties are more to do with execution of strategy than strategy itself. And the moves it has made recently seem to have resolved that.