When facts change, businesses that want to thrive have to change as well.
One new fact in the UK is the existence of a world-class exhibition and conference – the largest single gathering of produce executives on British soil.
This month, the second edition of The London Produce Show and Conference takes its bow. The event has served to pivot the attention of the global produce community back to the UK at a time when vendors from around the world were turning their focus to faster growing and less demanding markets in developing countries.
Many of the most progressive firms in the industry have seized the opportunity to utilise the event for their own marketing purposes. Others have engaged because they want to support our efforts to combine the iconic appeal of London, which has simply become a magnet for people of intellect, ability and enterprise from all over the world, with our unrivalled access to the best and brightest minds in the produce sphere, to create a unique event, combining education, networking and commerce.
Yet, it is also sad to see that some who could gain value from the event, choose not to. In analysing why this is so, it is increasingly obvious that many companies dramatically undervalue industry relations. They haven’t sat down and looked at the value of a customer, a vendor, an employee – and so they significantly under market their business.
The London Produce Show and Conference is a great example, because it is in the UK and it is this month, but the principle applies just as much to other shows as it does to advertising in publications such as PRODUCE BUSINESS UK and to marketing of all sorts.
In all businesses, determining the value of a customer is key. The value of a cable or satellite TV company is determined by assessing the value of each subscriber, which is the lifetime profitability of that subscriber, adjusted for the likelihood the subscriber will cancel at some point in time, discounted to the present day. Then this number is multiplied by the total number of subscribers.
Obviously there are many assessments to be made, and the reason there are differences in valuations is precisely because there may be disagreements on things such as the likelihood of a subscriber cancelling or how new technology might put pressure on profits.
The point is, though, that only by knowing this number can a cable or satellite company know how much it pays to spend to acquire a subscriber. This is the way a valuation is done for an acquisition and the way a marketing program is assessed.
Retailers, of course, also have to do this kind of customer profitability evaluation, but they have added complexity. Cable companies sell a few services, any one of the multiples sells thousands of products. For a long time, our analytic tools were not very good, so people assumed that the biggest customers were the best customers. More advanced techniques now allow retailers to assess customer profitability with more sophistication. Very often, the highest volume customer is a poor family with lots of kids; they buy a lot, but they cherry pick adverts and buy lower profit items. Sometimes a bachelor who doesn’t look at prices and buys a lot of high-profit prepared foods is a better – read as more profitable – customer.
Of course, cable subscribers and food shoppers are both small potatoes compared to large commercial produce operations.
And there’s the rub, for getting a new commercial scale customer is so valuable that virtually any trade marketing effort, sustained over very long periods, is very profitable.
Back in America, an advertiser once told me he was unhappy with our product. He had spent US$700 (£459) on a small ad and had not got a new customer. When I asked him what volume his average customer did with him each week, his answer was about US$25,000 (£16,406). Then I pointed out that this was over a million dollars in business each year and further demonstrated the wild disproportion in his expectations. For each US$700 expenditure in marketing, if he could get a million-plus dollar boost in revenue, his company would easily be the biggest in the world very soon.
The exhibit floor of The London Produce Show and Conference will again be at capacity this year, so we found enough visionaries to fill the floor.
But there are many more companies that can benefit.
What is needed is a focus on determining the lifetime value of a customer, vendor or employee, combined with a more entrepreneurial attitude.
In the run-up to the show, one successful founder of a young but significantly sized company told me how exceptional he thought the show was and, matter of factly, said that he hoped that one day he would be big enough to exhibit.
I was shocked at the attitude, though have since found it to be common in the UK.
It brought me back to the first cheque I had ever written when we were preparing to launch PRODUCE BUSINESS in America some 30 years ago. The entire company was capitalised at US$500. I immediately sent the US$500 to the Produce Marketing Association (PMA) as a deposit on a booth. Why? Because we were about to begin the process of building a reputation in the trade. We had to start marketing.
We didn’t sell one ad; we didn’t sell anything at the PMA Convention. We didn’t even try. But we began a process of putting our name before the produce industry, a process of decades-long marketing that eventually led our launching both The London Produce Show and Conference and PRODUCE BUSINESS UK.
These are now established institutions in the UK produce industry; they are tools to be used to make your organisation more successful. They are new facts, and 30 years from now the most successful players in the trade will be those who saw these new facts and seized on the opportunities they presented. The winners of tomorrow are those who best use these new industry institutions to their advantage today.