Blaine Callard is the CEO of Freedom Furniture Australia. Previously, he spent 24 years at Harvey Norman, an organisation that famously does not work with agencies wherever possible.
In a wide-ranging and energetic discussion, Blaine and Ellie talk about perceptions of marketing from a CEO, what marketing teams need to do to influence the C-Suite, the power of modelling and what to do (and what not to do) when trying to implement it; the importance of properly understanding AI, whoever you are in a business; and the challenges and opportunities inherent in working with agencies, good and bad.
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It’s been seen as a holy grail that does sort of pull apart some of the negative stuff that we talked about earlier. And it does allow for all sorts of enhancement to budget planning, commercial planning, and other applications in marketing.
Transcription:
Ellie:
Welcome to Managing Marketing. My name is Ellie Angell, and Managing Marketing is a podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
And remember, if you are enjoying the Managing Marketing Podcast, please either like, review, or share this episode to help spread the words of wisdom from our guests each week.
Now, today, I am joined by Blaine Callard, who is the CEO of Freedom Furniture Australia.
Welcome, Blaine. Thanks for joining me.
Blaine:
Thanks, Ellie. Thanks for having me on.
Ellie:
So, I’m going to jump right into it. I am always, always interested in a CEO’s perspective on the topic of marketing influence and marketing within an organization, because we don’t always get to talk to CEOs in this much depth.
My observation is that in some businesses, there does remain a degree of, I’m going to say negative perception about marketing around the c-suite table, the perception of marketing as a sunk cost being one of them, rather than something that is truly attributable.
Concerns about brand marketing and its impact on a business, sometimes a degree of confusion about the remit of a CEO (today’s CMO), and the sense that sort of anyone can do marketing, amongst other things. This is what I come across in some of the work that I do.
What’s your perception of how influential marketing should be in an organization. And in your career, what have you seen marketers do to build strong influence within their own four walls?
Blaine:
Wow, big question.
Ellie:
It’s the big ones where –
Blaine:
There’s a lot in there. Look, I think fundamentally, the challenge of marketing has been … I mean, since we’ve seen the emergence of sort of structured marketing as having a seat at the senior table in the ‘60s and the ‘70s, the challenge that marketing has had has been around its measurability.
Because at a shareholder and at a finance driven level, and for some CEOs, that measurability is critical to understanding the suitable level of investment in the function.
And that includes the level of investment in the talent, the level of investment in media, the level of investment in brand activity. And so, this measurability challenge has been at the heart of the uncertainty around the question you’ve asked.
And so, there are really two schools of thought. And I think that ultimately, (and this is a bit of an old-fashioned answer) it comes down to the experience of the CEO or the senior team.
Those of us who have been retailing for a very long time understand that marketing works. We’ve seen it work; we are believers. And we have seen when it works, and we’ve seen when it doesn’t work.
And this is not necessarily data driven, although this is big data driven because we’re taking into account 30 years of experience, tens of thousands of data points from our everyday working careers. And we are feeding that into some kind of model in our own brains. And we’re going, “Okay, this works.”
And then you have people who are less experienced in the space, and that can include other functions in the c-suite. And then they’re looking for more of a measurability metric. What’s my return on investment? If I spend X what will I get? How do you know I wasn’t going to get that anyway? So, there’s the biggest issue.
Ellie:
Where’s the baseline? Yes.
Blaine:
Yeah. What’s the baseline? And then being able to even measure it. You can’t even measure it in reverse because typically, with most marketing activity, it compliments other strategic change, which is going on in the business.
Other tactical change, other operational change, other environmental change. And so, actually normalizing all that out to form a view of what the contribution of the marketing investment is, is very difficult.
I came up through a brand where significant over investment in marketing was just what you did. It was axiomatic. You did not challenge this idea that huge over investment in marketing drove results and drove strong ROI.
And that was just a belief in the hallways, in the boardroom of that business. And so, I came from that background. So, I am, I guess by definition, a believer. But there’s measurability challenge.
And so, then that’s going to flow down into the culture of a place. Is the culture of a place where marketing has a senior seat at the table, or is the culture of the place where marketing is a cost?
And that’s going to be cultural led by the CEO and their career experience and led by the CMO and their level of influence, their ability to influence or not to influence.
So, that’s sort of a preamble. I mean, for me, brand is product and product is everything. So, I work in consumer, I’ve always worked in the consumer space. And that’s everything from experiences to products. But brand is product.
I mean, at a most basic level, and this is a little reductive, but brand is packaging. I buy the Apple product, but I’m buying the Apple brand. I’m buying the ZIMMERMANN dress, but I’m also, buying the ZIMMERMANN brand. And so, not just literally packaging, but metaphorically packaging, it is an extension of the product.
And so, if we take the view that the retailer or the consumer brand with the best product will win, then we have to reach the logical conclusion that the best product means the best combination of physical product or service, and the best brand wrapper.
Which is really the whole experience. It’s not just the food. Great food in a bad restaurant is never as good as great food in a great restaurant. It’s all part of the experience.
And I mean, it’s a throwaway line that retail is experiential, but as retail becomes even more about how I feel rather than what I need then brand is taking even more of a central place beside product as a huge determinant of success or otherwise. And CEOs that don’t look at it this way, I think do so at their own peril.
Ellie:
I mean, that was a pretty comprehensive answer. I want to pick up on a couple of things that sort of inherent in what you talk about.
This dichotomy in the industry between habit and evolution. Where you talk about, look, it’s been done, you mentioned the overinvestment in marketing. And that’s the way it’s always been done, so it wasn’t questioned. Of course, the question that you could ask is, well, could it be done better, in different way?
Blaine:
Yes. Or more efficiently?
Ellie:
Or more efficiently. And I think, I mean, I’ve always found it quite interesting that people obviously are worried about change for all sorts of reasons, and people do rest on what has always been done in the past.
But within the marketing community, there’s a big focus on the bright, shiny new thing all the time. And so, there’s this constant sort of push and pull between I want to go and do this media first versus whoever. And in outside of marketing saying, “Hang on a minute, we’ve always done catalogs, and therefore we should continue to do it.”
How’d you get around that without a model to … I mean, I guess it’s a culture. Again, it comes down to culture. It’s a culture of innovation and allowing some experientiation and bravery.
Blaine:
Look, I think that innovation is important. The shiny new toy thing is real. I mean, when did you last get an Amazon package delivered by drone? Well, they announced that to the market 15 years ago. How’s that store going in the Metaverse?
I mean, I don’t know how many highly paid professionals sat in front of me and told me we needed to open a store in the Metaverse.
The shiny boggle is a real thing and highly intelligent people go chasing the next toy.
We’ve seen as soon as it became apparent to boards and shareholders, that digital marketing was measurable to a degree and that brand and traditional media was much more difficult, if not historically impossible to measure, what did we do?
What did so many brands do globally? They rushed to the bottom of the funnel and over indexed on the measurable part of their marketing, because it was measurable.
And so, we’re doing all this micro activity at the bottom, and what did we forget? We forgot about the brand. And typically, who were the leaders in rushing into that space? They were the technology brands.
So, the online pure play retailers rushed to the thing they knew, which was digital marketing. And by the way, it’s measurable. And aren’t we clever because we’re a data driven organization? And that was great, but that took them to a cul-de-sac.
And the cul-de-sac was that actually you couldn’t build brand awareness through that no matter how much you threw at that. And then what did we see? We saw Google running TV ads, we saw Amazon running TV ads. We see Temple & Webster on billboards.
Digital brands came back. I mean, some of them came back to this epiphany that they needed to play. I mean, we use this language of up and down the funnel, but they had to play at the brand building on some of the more traditional channels.
So, the shiny toy can be very distracting. I think that there is an allure to trying to put a data model around marketing that I get. And I think that I’ve said this before, that data is necessary, but never sufficient.
So, we all need more structured return on investment metrics around our marketing investments to inform us better. But it will always be a combination of that experience and that intuition combined and informed by the data that’s going to lead to the best outcomes. So, I think it’s a hybrid.
I just want to make another point there as well. And that is this, ultimately, all these decisions are about strategy. And one of the ways that you asked me about CMOs and how they can be more influential on the c-suite.
The best CMOs I’ve seen take a position that they own strategy, or that they are a shared owner of strategy, not that they’re an owner of the marketing strategy because that’s not the same thing. So, marketing should follow strategy, strategy shouldn’t follow the brand. The brand should follow the strategy.
So, I think when a business has strategic clarity around what it’s trying to achieve, I think that helps it to understand these challenges around measurability versus experience, versus brand, versus bottom of the funnel. And where to place its investment, and what ROI, and what is the actual objective? What is the objective of the brand as determined by the strategy of that brand.
And I think a lot of senior teams get very lost in this space and don’t have the strategic clarity. And so, they don’t understand what role is media and marketing investment supposed to be fulfilling.
Ellie:
We see that all the time. We see a lack of even the definition of what strategy is. And you’re just touching on it. And marketing’s role in that as opposed to being a means its own end. We do see that a lot with very, very smart people and very, very good businesses.
It’s just that trying to find that balance I think has always been challenging. The comment about the digital marketing, bottom of the funnel, race of the funnel.
The other point I’d make there is that it wasn’t just about, oh, isn’t measurability great? Like are you even measuring the right things? What are your metrics of success in digital advertising, for a long time, got that completely wrong.
And it ended up disappearing up its own backside because suddenly you had people like Marc Pritchard CMO of P&G ripping millions of dollars out digital advertising and seeing no change because it was all based on click through rates and just different things that were not truly-
Blaine:
Well, this is my point about the strategy. If you’re not clear on what outcome you’re chasing and you let the model tell you what the outcome is, and then you just chase that, that can lead to an absurd place where you’re over indexing on some particular activity to drive a particular outcome because you’ve become very output obsessed.
Ellie:
I think agencies have had a lot to do with that in the past as well. I think people have been advised by agencies to look at certain things, or agencies have defined success, particularly in media as being certain things. And that becomes a drug.
And if I’m coming to you as a CEO and saying, “Actually, I’ve got this wrong for the last five years, we really need to be flipping this on its head.” That’s a hard conversation for a marketing lead to have.
So, there’s this fear of getting it wrong or being … and we’ve seen it in the mire of programmatic media advertising, all of the dollars that apparently have been wasted through fraud, and even the definition of ad fraud and how that’s affecting things. It’s all coming from what we measured.
Blaine:
So, the fraud’s got all measurability. So, that was the fool’s goal of digital measurability. Yeah.
Ellie:
Yeah. And its effect has been quite profound, as you say, because the top of the funnel was not being … I know it’s an old-fashioned term, but I don’t care, the top of the funnel wasn’t being filled up and television advertising is not dead.
You’re playing in an ever-diminishing return. And everything you’re talking about regarding brand being essentially a set of intangible values in the mind of the consumer linked to the product is lost if all you are doing is driving in quotes “performance” at the bottom of the funnel.
And so, yeah, I mean, I think all of these things are linked. I think all of these things take bravery and courage. And your point about culture is not lost. I mean, there has to be a culture of being able to have those conversations and make those changes. Otherwise, it just will continue in perpetuity.
Blaine:
Yeah. The bottom line is that strategy is about how you will win. Strategy is your plan to win. And winning in retail and consumer means taking money off your competitor, having the customer spend it with you and not with them. Your immediate competitor.
And so, it is your plan to be different and be better. Which might be to be cheaper, or it might be to be better. I mean, strategy comes in many forms, but it’s essentially your plan to win.
Unless everybody’s aligned on that, how can you put a marketing strategy around that? Because ultimately, once you understand how you will win, or why a person should shop with you and not someone else, and you are really clear that that is your secret sauce, that is your competitive differentiation, then the role of marketing is then to go out and make sure that the consumer understands that.
Ellie:
Yes. It’s a pillar supporting
Blaine:
Yeah. So, otherwise, what are you telling people? If you’re not telling them how you’re different or why they should shop with you and not someone else, what are you telling people?
So, I’d just go back to this point, that strategy underpins all of this. And strategy will help to steer these investments of resources and attention into marketing.
Ellie:
And bright shiny things, where does AI fit into? I mean, we’ve both been around long enough to see the bright shiny things come like Metaverse. Yeah, I mean, that’s thriving. But where does AI fit into that, do you think?
Blaine:
No, I actually don’t think AI is a bright, shiny thing. So-
Ellie:
It’s been heralded a little bit. I mean, you can see the hallmarks in terms of how it’s been communicated and talked about in the media and stuff. But-
Blaine:
Well, look, the one piece of advice I would give to anybody in this space is you need to have a deep understanding of AI, and you need to have it quickly. You need to be fluent in it. You need to understand what it is; you need to have played with these models.
If you haven’t created a video from a text prompt, you don’t understand AI. If you haven’t played with these image generators and manipulated images yourself, regardless of your role, you don’t understand AI.
If you haven’t fed a 10,000-word document into Anthropic’s Claude and then asked it to reedit it into a 5,000-word version, or used it to help you ideate when you’re creating another written doc.
If you haven’t played with these models, if you can’t articulate why the new version of ChatGPT is better than the one from four months ago, if you don’t understand the natural language abilities of the new voice model, and that it understands emotion when you speak to it out loud.
If you don’t understand what these different models are better and worse at and how they work to a degree. It’s not that you need to be a mathematical scientist. But if you are not understanding this technology, then you’re not in this conversation because yes, your view is formed by what other people have told you.
So, fundamentally, if it matters to you to have a really informed view about the importance of otherwise of AI and how disruptive it will be — well, I don’t like that word. Transformative it will be, you better be fluent in it.
I mean, there are essentially two types of AI. There’s these large language models, and we have machine learning. And people get confused between the two but they are essentially the same thing. And these are an extension of maths that emerged after 2000.
These are regression models, these are detailed, complex mathematical models that create predictive algorithms that can be used and harnessed. And they’re so elaborate and they’re so complex. They work in ways we don’t understand. So, even the people that build them don’t understand. They have emergent functionality that’s not readily explainable.
So, this is sort of like alien technology. And if you’ve played with it, you’ll have had a goosebump moment where you understand that this is alien technology.
And I don’t say that to overhype it. What I say is that you must start by understanding this is not the Metaverse. If your view of this is formed by others, you will not understand why it’s important. You must have firsthand experience with this. So, go and drink the water at the well before you can form a view. So, be fluent in it.
And I think that AI’s not going to replace jobs. People that are fluent in AI will replace people that aren’t. Jobs will be taken by people that are … so, even CEOs that aren’t fluent in AI and don’t understand it, if you can’t be at a high level of conversation with your CIO about AI, it’s a problem.
So, I mean, I shudder to think how boards are going to get their heads around this, particularly board compositions that we see in most typical companies. But it’s incumbent on leaders to understand this technology.
I think that if we think about the large language models, then there’s enormous possibility here. These are extremely intelligent models for sifting large amounts of unstructured data.
So, give me a 200-word summary of this 10,000-word document. Read this entire book, and then tell me how I might interpret this brief. I’m about to do a presentation, here it is. What if I take a contrary view and tell me what a conservative director with this kind of a background might challenge me on?
So, these can be ideation partners. So, they’re great for creative. Not to be the foundation of that creative, that’s still going to come from humans. But to help ideate around that creative. Where are the blind spots? What haven’t I thought of? Challenge this, edit this. A great copy editor.
So, this is going to be hugely disruptive in the space of copy and creative. If creatives aren’t using this tool because they have some sort of, “Oh no, I’m anti AI because humans won’t be replaced by AI.” You’re kidding yourself. You obviously haven’t used these tools because they’re incredible.
Give me 105-word copy ideas for this concept. And then 30 seconds later, you’ll have them and you can then scan through them looking for insight, looking for inspiration, looking for nuggets of gold. And you may then come up with something even better.
Because even today, these models still produce relatively anodyne content. It’s not going to offend anybody. It’s not going to hurt anybody. It’s not going to surprise anybody. It’s not going to inspire anybody. It’s not going to make anybody laugh.
It’s not going to meet that best creative test. It’s not going to be that novel you can’t put down, or that Malcolm Gladwell idea that blows you away because of how that makes you think and gives you a fresh insight.
You’re not going to get that from an LLM today. You might in the future, but you’re not going to get it today.
So, you’ve got to understand where … you’re just writing it off because it’s anodyne, is not sufficient because it’s incredibly powerful in the ideation stage and obviously image editing. So, there’s so much in the marketing space where this is going to relate.
We get oceans of feedback from customers. We get vox pop from customers, “Oh, I like this.” “I didn’t like that.” “Your delivery guide did this.” “Your product did that.” What are you going to do with those hundreds of thousands of customer comments? How are you going to make sense of that?
Go back three years, Ellie, what were we talking about? WordClouds?
Ellie:
Yeah.
Blaine:
I don’t know the number of times I was given a word cloud. Here’s a word cloud of all your 100,000 customers. You’ve got a delivery. Yeah, oh wow. The word delivery is like the biggest word. No, shit. What were we doing? We were delivering to their homes. And what’s the next biggest word? Late. Okay, but what does this really tell us?
So, you give those 100,000 comments to an LLM and ask it to summarize up a cluster of insights and pain points. And now, you’re starting to get some power out of this.
These models are starting to become embedded in everyday applications that we use. Vendors are smart, they’re still building them into models, or we can use them in freeform.
And then there’s this machine learning, which is taking all these incredibly complex data points and trying to make patterns out of them, which is where the MMM is heading.
And that’s the AI that’s more in the machine learning. It’s under the hood. It’s not language based. It’s more data and mathematical based. But these models now, are incredibly sophisticated.
Ellie:
Well, as an aside, I know that your whole marketing team right now, is spending the whole day talking about AI next door. So, I mean, they’re living and breathing it. I mean, they’re doing exactly what you’re suggesting they do.
And you’re right. I mean, I’ve described it in … and I haven’t been in agencies literally on the seeing how they’re playing. I’m getting told how they’re using it. And I can see the delta between some agencies and others, and some marketing teams and others.
But I’ve described it previously as existential. I mean, in terms of how agencies and marketing teams need to adapt around this. Couldn’t agree more that this is not a shiny thing.
I think it is often labeled as such, which has led to some of that commentary that the pro in the end see and all of that. A lot of that’s media generated and it’s what people like to do. And creatives and copyrights and everything else a lot of them are resisting-
Blaine:
Protective of their turf.
Ellie:
And you like, “This is not going to go away.” I mean, this is not the Metaverse. It’s not going to go away. And I think-
Blaine:
I think we need to distinguish between overhyped and shiny, because some elements of it are overhyped because it is not yet capable of writing war and peace or painting the Mona Lisa. So, it’s not there. And it may never get there. But just because it has a limit, it doesn’t mean it’s can be discarded.
And I think that people that have a very black and white view of it, and people have rushed to polarized views on sound bites that they’ve heard from others. And I think that’s very dangerous.
So, I’ve made it my business in this building to know more about AI than anyone else in the company. And I’m going to try and stay ahead. And I’d love one of my team to catch up and surpass me. But at the moment, no one has.
Ellie:
Well, for what it’s worth, I think you’re in the minority of CEOs with that level of understanding. I mean, people really do need to catch up with this stuff. And I agree with a lot of what you’re saying.
I mean, the red thread running through all of your commentary has been that the ability of AI to improve human performance is profound, professionally speaking. Whether that’s in summarizing document.
I mean, it is fascinating thing about what’s the counter argument? How am I going to be challenged on this? It doesn’t take the human away. It’s going to improve human performance when they’re in the room, in the meeting, writing the copy.
Blaine:
It’s enhancement.
Ellie:
It’s enhancement.
Blaine:
Yeah. It is alien technology. These emergent behaviors in some of these large language models are extraordinary. And I meet people every day, intelligent senior people who have not had firsthand experience with it.
Ellie:
Look, it doesn’t stop me being scared of it actually as well. But-
Blaine:
No, well, that’s another whole discussion, isn’t it? The misuse of that technology.
Ellie:
Let’s bring it back to marketing because we’ve touched a couple of times on marketing effectiveness, MMM particularly and what and how marketing is measured in its role in strategy.
Building those quantifiable models that both define and predict the commercial effectiveness of marketing return. I mean, it’s been seen as a holy grail that does sort of pull apart some of the negative stuff that we talked about earlier. And it does allow for all sorts of enhancement to budget planning, commercial planning, and other applications in marketing.
I think there has been a boom AI field to a certain extent, but not all AI field booming in the ability and the range of specialist companies now, who are able to offer this.
But equally I see some organizations who’ve tried to build models or have them built only for those results end up gathering dust in the drawer for whatever reason. For well, a number of reasons we might discuss.
But my personal view is that there needs to be building blocks in place in an organization before you even contemplate doing this kind of thing.
What do you think needs to be in place? Or what are you putting in place in your own organization to bring this kind of thing to fruition and make it real as opposed to making it as sort of a-
Blaine:
A curiosity.
Ellie:
A curiosity or a just an analytical exercise.
Blaine:
Yeah. I call that botany. So, it’s really dangerous in business. It’s reporting for botany. It’s like, “Oh, that’s interesting. Look, it’s red, it’s blue, it’s green, it’s big, it’s small. It does this, it does that.”
I mean, that kind of botany and you get a 50-page report, which is cost you $100,000 and everybody thinks it’s fantastic and yeah, it doesn’t get action because it’s botany.
So, the goal is not to observe, the goal is to sense season reconfigure. It’s to understand something is happening, develop insight from that, and then turn that into action.
And that then becomes that sort of feedback loop where you go round and round for continuous improvement. But if you don’t have that loop, you’ve just got botany.
So, I think there’s two things that you need if you’re looking to put in a mixed media modeling. I think you need firstly the hygiene factor, which is you need some level of data maturity within your organization.
And data maturity is not just about having data in the right cubes in the right spot, in a digestible format. We’ve all got challenges with data. I mean, data is pretty messy in most organizations, I think messier than people even realize. Most organizations struggle with this.
But there needs to be some degree of being able to pull out the basics. And you need to be at a level of readiness in terms of data extraction at a baseline level of readiness, so you really going to struggle to put this in.
But by data maturity I think there’s another aspect to that. And that is a data maturity in the senior team. That there needs to be a willingness to combine data with intuition to get the best outcome in the right mix. And there needs to be an acceptance that data can tell us things we don’t want to hear. And that data could prove us wrong.
Because we’re all walking around with confirmation bias and every other bias. So, the world is what’s worked for us is before is what will work for us tomorrow. And we’re all wired like that. And we tend to take information and be selective about that information that confirms our view of the world.
So, we need to be ready to be confronted. Data maturity is about an organization’s willingness to be confronted by data, which may tell them something that goes to the heart and or contradicts something that organization believes.
So, our readiness to embrace a model and understand that that may be confronting. And so, going in with the mindset that this is to remove blind spots, I think that’s powerful. That’s a powerful indicator of readiness for an organization to put in a model like that.
I think that leads on nicely to the second element I think needs to be present. And that is, at the senior level, there needs to be realistic expectations about what the model will do. It’s very easy to overhype these models in my view.
The model has the potential to be incredibly powerful, but only if it’s built correctly with the right inputs and the right outputs, only if it’s then interpreted correctly. So, it’s powerful if it’s used well, it could be dangerous for the organization if it’s not. And I think that there needs to be a clear-eyed expectation. The old saying of, ah, half my marketing doesn’t work. I wish I knew which half.
If somebody came in and pitched that that was the reason I should put MMM in, my radar would go up immediately. I mean, you’re going to solve some of that. You are not going to solve all of that.
So, I think that it’s really important we understand the model will improve the universe of information we have to make decisions, but it’s not a complete view. It’s not everything we need to understand where to put our marketing investment.
And why is that? And the reason for that is actually a brute mathematical reason. If you don’t have every input, these models are very sophisticated. They’re pretty good at causality. Due to timing differences, they’re going to understand you spent this today, you got X result tomorrow. You got X result in eight weeks, you got X result in three months.
They’re going to be able to detangle that you did that and that but actually it was the second thing that made the difference because here where you ran it or you changed the mix.
And we’ve explored all of that as part of our looking at this and really sort of tried to pressure test it. I think the model’s going to be pretty good at that. But what the model’s not going to do is not going to measure anything you don’t tell it.
Ellie:
Of course. We don’t get that but it’s true.
Blaine:
This is at the heart of understanding the risk in this.
Ellie:
People don’t get it. Yeah.
Blaine:
If you don’t give it a data point … so, you do all this marketing and you do all this stuff and the guy in retail ops ups the roster for that week because he knows it’s going to be a busy week and he puts on more staff.
And putting on more staff could have been the thing that drove a 10% sales uplift. And the model says it was all the other stuff because the model doesn’t know that you changed the roster.
Or the store put an incentive in, or the VM teams threw posters up on the outside of a store or in the foyer of a business without telling the marketing team. Or the digital team changed something about the site because they were doing an AB test.
Because see, these are live environments with micro innovation at scale in most organizations. And one of those could have made a material difference. I’m not talking about background noise, I’m talking about a large change not captured by the model.
So, ultimately what you’re doing in the model is you’re building a simulation of the real world. But that’s only going to work perfectly if you have everything that’s going on in the real world, which you can’t do.
So, did it rain? I mean, most of the models will take the weather. If you’re a retail and you’ve been doing it for a long time, you understand that rain has an enormous impact on your business.
If you sell outdoor furniture, rain is probably a bad thing. If you sell goods for the inside of your home, home retailers, durables will understand that rain drives shopping. But that depends on the country because it’s not the same.
In Ireland, it always rains. But so, the opposite happens. If it’s clear sunny weather in Ireland, (sorry to any Irish listeners) 1 of the 10 days a year you get clear sky and sun in Ireland, no one is coming into your store. If you get 10 days of sun and clear sky in Ireland a year, you go out, you don’t go under a roof in air conditioning.
So, it doesn’t matter if your MMM doesn’t have weather in it in Ireland, and then you have a week of great weather, the model doesn’t know what’s going on.
So, if we understand the limits of the model, and we strive to try to make sure it has all the inputs, we’ll get a better approximation of the real world going on inside the model. And so, we’ll get better prediction, but we need to be clear-eyed that it’s still going to be only as good as what we told it.
Ellie:
But everything you’re talking to is also, human overload. I mean, I’ve been working with these kind of models for 20 odd years at least. And the thing about the …
I mean, I came from the UK and I remember working with an electrical retailer in the UK in the year 2000 where we were building like an Excel based ad stock model. And the big innovation was weather. Oh my God, we’re going to get weather in it. And guess what, if it rains, then you get more people shopping for TVs because they want to watch TV.
But it’s amazing to me that despite the tech innovation and the increase in understanding over that 20, 25-year period, the problems always remain the same. The trust level in the model is a problem. The level of validation is a problem. People just set and forget and then don’t validate. And the iteration is a problem, to your point.
But unless you iterate, it will never tell you truly what is going on. And all of that is linked to human overload because you can’t … otherwise, it’s just boiling the ocean and the expectation in around a c-suite table that this is just some sort of magic black box.
Blaine:
Oh, well, that’s a problem.
Ellie:
That is just a massive issue.
Blaine:
No. So, we can agree that this is definitely a strong additional bow arrow in our quiver. It is a powerful tool that is going to improve our ability to understand investment and where we make it, where we don’t, how we place it, how it’s shaped, and what the return on that is.
So, it’s going to aid that, but it is not going to replace current thinking. It’s going to augment it. So, that’s about the senior team buying into it.
I think it’s fascinating. I think it’s powerful. I think the maths is ready. I think businesses that use it will get competitive advantage. But if businesses over rely on it … the danger is the CFO suddenly thinks it’s the holy grail. And if I’m not getting the return, we’re not going to do it. And we are back to the problem at the start of the discussion.
Ellie:
Of course. If you’re having budgets cut on the basis of the wrong decisions. And you are having people being protective over their own budget and therefore not going with the model because oh my God, if we do that, then it’s going to show this. And it’s the fear of getting it wrong. I mean, all of these things are interlinked, I think-
Blaine:
So, it’s a powerful additional lens.
Ellie:
Yeah, for sure. Okay. I want to talk about agencies.
Blaine:
Alright.
Ellie:
I’d love talk about agencies with you because I mean, I’ve worked in agencies a long time before I was a consultant and I’ve worked with agencies a lot. But I was just spy on your CV and like 24 years at Harvey Norman. By my account where famous for no frills.
Blaine:
Yes. Harvey Norman does not use agencies.
Ellie:
Advertising. And I mean, my password is issuing of agencies, but does not use agencies.
Blaine:
Yes, that’s right.
Ellie:
In-house models. I mean, Harvey Norman is often sort of thought of as a really traditional retailer, but like it was a pioneer in in-house models and throwing agencies away.
What do you think about the current agency landscape? I mean, what do you see? I mean, we’re obviously not talking about any agencies that you’re currently working with. There’s no individual commentary. But what’s the state of the market, do you think?
Blaine:
Look, I think it’s evolved. I think the biggest concern that CEOs and c-suite executives have had is that the agency and the business don’t have aligned objectives.
And so, I think that the way that the structure’s changed over the years around commissions, and around transparency, and around cost plus models, fixed price modeling.
The way that the industry has adopted transparency, so that to the best degree possible, you can have alignment between an agency and the outcomes of a business. I’m talking media agency now. I think that has improved the situation enormously.
There’s nothing more toxic than understanding that your real estate agent (I mean, I’m being reductive) just wants a quick sale. Because actually if you get 100,000 more for your house, that really makes almost no difference to their pocket.
And so, a quick sale is much more important than an extra 100,000. And you’re an agent and … yeah. And so, intuitively we understand. And so, what we’re looking for is conflicts. I mean, historically this has been the stone in the shoe of those partnerships. And I think some of the emerging models have helped to allay that.
There is a lot of value in those direct relationships. And so, maybe coming back to my Harvey Norman experience, the power of the direct relationships cannot be understated.
Understanding the dynamic needs of a media channel, of a TV station, a radio station, a newspaper. And that’s a dynamic continually in flux strategic environment.
Being able to sit down with the senior executives in those organizations and understand what is their immediate need, what is your immediate need, and how can you put those two things together.
So, I think the best media agencies are going to be rapidly iterating intermediaries in that space and trying to align opportunity they see in the advertising houses with the opportunities they see in the business. But that requires having a deep understanding on both sides of that.
So, it’s got to be thin, as in it can’t be expensive as a layer. And it’s got to be incredibly proactive and all about seizing these moments. I think this building a plan for 6, or 12, or 24 months, this is highly problematic. I think agility is now, more valued than ever before.
And we see the media industry as being hugely disrupted. And as a buyer of media, I see that as opportunity. So, I want to know I can arbitrage the opportunities of a radio station that just desperately needs revenue to hit an end year goal. That’s meaningful.
Can the agency help me to capitalize on an opportunity like that and get better value for money by arbitraging those opportunities?
Ellie:
Oh, there’s so much we could talk about in this space. I mean, I’ve coached on this before. I mean, I’ve worked in agency a long time. I talk a lot about objective transparency with an agency.
So, what you’ve just said is fascinating because arbitraging, because of radio station taking advantage of marketing conditions, agencies should be able to do that.
However, if they’ve got a whole co level trade agreement with other, the demand share across the party and they’re actually directing your share to satisfy their own deal, that’s not objective transparency.
Blaine:
It’s problematic.
Ellie:
20 years ago, I’ve famously had, well, memorable arguments internally at agencies, and I’m not naming names here, we’re going back a long, long time, but where I was being pressured internally to sell stuff to my client.
Blaine:
Sell inventory.
Ellie:
And sell certain services or certain inventory, and me saying, “Well, I’m not a salesperson.” And being told bluntly by my boss, “You are a salesperson.” “No, no, I’m not. I’m here to-
Blaine:
Yeah. I’m a facilitator.
Ellie:
You are not. I said, “I’m supposed to advising the client objectively.” And that was something that I think agencies have got a lot better at that, but it takes …
Aside from all the capabilities, and aside from the way that deals are structured, and aside from cost plus models, and removal of commissions and all that kind of stuff, and also, removal of KPIs that are reductive. If you are pushing your agency to buy the cheapest telly, they’ll buy the cheapest telly. That still exists.
But aside from that, there is a skillset in agencies, particularly in account leadership, which I don’t think is trained for properly. And I think it’s still too much of a rarity that those people who can come in and sit and loosen their tie and talk about your business in that kind of way, and think about it in that kind of way strategically, that’s what I see still missing from a lot of media agencies.
The functional capability is all there, the tech is all there. Where are the T-shaped and whatever phrase you want to use, who can really pull it together strategically? I find that a challenge.
Blaine:
I think if I’m in a meeting and I feel that I’m being sold to by an agency, my barrier can go up immediately. There has to be a baseline level of trust between the agency and the customer in order to unlock all of that value.
And I think that’s the bottom line is that there’s all that experience in the agency around what works, what doesn’t, the history, data, all this knowledge that we don’t have.
And so, we have to have a relationship built on trust so we can leverage that properly and allow the agency to do what they do and not be overly prescriptive. And that requires a high degree of trust. So, if it’s a high trust situation, then that relationship can be incredibly productive.
Ellie:
Yeah. I do want to say agencies have got a lot better. I was being kind of generalist before in terms of, I do think that’s a skill set that’s missing, generating that trust. But also, a qualifying statement to a lot of what you’ve just talked through is that the client needs to empower the agency for that relationship to happen. It is a two-way street.
And it does frustrate me too many times. I see contracts or relationships, and I do assessments of this stuff all the time. Either financial, contractual, or operational that are just set up for the agency to fail. They’re just not given the right information. They’re not given the right access. They’re not given the right … and then these challenges arise as a result.
So, I do think it’s definitely a two-way street. And I think you get in what you put out to a certain degree. I don’t know if you agree with that or not, but that’s certainly been my experience on both the agency side and the consultancy side.
Blaine:
I agree. Leadership teams that are paying attention understand which partnerships are delivering them value.
Ellie:
Yeah. And that’s all that needs to be said, I guess. And it’s a shame that it doesn’t always exist, particularly because media is such a big part of a marketing budget, typically the largest.
But let’s talk about creative spaces because this is also, a huge sector of the market. Some sector that has faced various challenges just like media. How creative are creative agencies right now, in this country?
Blaine:
Yeah. Again, it comes back to objectives. I think that you’ve just — take the framing of your question. You’ve asked me how creative are creative agencies right now? I would reframe that question as how effective are creative agencies right now?
Because being creative and being effective, if we think about being creative in the abstract, as in coming up with something innovative that no one’s ever seen before. Jackson Pollock was really creative art. So, if we define it as coming up with something really unique rather than defining it as coming up with something really effective, we may go down the wrong rabbit hole.
Ellie:
Yeah, agree.
Blaine:
And so, I think that there’s got to be alignment between what the business is trying to achieve and what the agency is trying to achieve.
One of the views that I’ve had for a very long time is that there’s a built-in bias within the many creative industries to be clever. And the agency that’s the cleverest is the best agency. Oh, isn’t that clever? Oh, isn’t that clever?
And there’s a whole culture around awards and we’re going to go out and we’re going to win an award for a campaign. And yeah, you have to tick some return on investment boxes in that campaign. But ultimately, let’s face it, most of those awards come down to creative campaigns that are very clever, differentiated by the level of cleverness.
So, if it’s intellectual peacocking, because I’ve come up with a way to promote a furniture business that no one’s ever thought of before and ever seen. And I sometimes think the bar is set so high that it’s not …
I’m in the furniture industry, retailing home furniture and interiors, I need to beat my competitors in the local market. There are only about six of them.
But an agency is there saying, we need creative that stands out globally. This has got to be market leading. No one’s ever seen this before. We want the definition is breakthrough thinking, clean sheet of paper breakthrough thinking. So, this creates a tension between cleverness and effectiveness.
I don’t need my marketing to be globally innovative. I need my marketing to be locally effective. It needs to be better and more effective than my competitors. That might mean adopting some of what’s happening overseas as best practice.
Creative agencies can be very phobic of adopting or even referencing what’s happening elsewhere, because we’re looking to have something really different. Yes, but I don’t need something different to a US furniture retailer. I’m not competing with a US furniture retailer.
So, I’m repeating these three different ways, but there’s this tension between creativity and best practice that I think sometimes gets in the way. So, are we trying to be clever and win awards? Or are we trying to be effective and create good business outcomes?
Ellie:
Okay. So, I’m going to turn it back on you again because if I think about what clients want to see in a pitch, if I think about briefs that I’ve seen demanding a unique proposition or a different territory or something groundbreaking in category, how much have agencies naval gazed themselves into this cleverness? And how much of the clients forced it on them?
Blaine:
I agree. So, we’ve been complicit. So, marketing teams have been complicit in that.
Ellie:
Yeah, I couldn’t agree more.
Blaine:
Because let’s face it, most marketing teams within organizations like to think of themselves as innovative and creative. And they all go along and sit on the same table at the awards night. So, it’s the partnership that wins the award.
So, innovation, novelty, creativity, if it’s prized above … I mean, if the brief is hard written, it’s hard baked into the brief that we want to see an idea that no one’s ever seen before, and novelty is prized, then yeah, then as customers, we’re equally complicit. I want to see something that’s going to work. Right?
Ellie:
But as it comes down to definitions, as what’s the definition of creativity and innovation in that context? Innovation could be something that actually works versus what you’ve been doing before. I mean, it doesn’t have to be a new thing.
But I do think, like if a head of a creative agency was sitting here, I could do almost hear the cogs kind of, well, what do you want then? Because everyone’s-
Blaine:
I want something that works.
Ellie:
You want something that works.
Blaine:
I want something that works.
Ellie:
And how do we know that it works? It’s the rest of the stuff we’ve been talking about.
Blaine:
Well, it communicates to people at differentiation.
Ellie:
Yeah. Well, but it drives commercial outcome is how it works. Ultimately, it has to drive some sort of commercial return, right?
Blaine:
Yes.
Ellie:
And that could be rooted in brand, it could be rooted in sales. There’s different-
Blaine:
I’ll give you a really pedestrian example. And I’m almost certain that what I’m about to describe is not the fault of creative agencies. So, you think about the small cafe, I drive around and about once a month, I have a laugh at somebody’s external branding on their building.
So, often small clients probably don’t have an agency. It was probably done in-house fine. But it illustrates the point.
So, if you’re a coffee shop and you sell coffee, the mistake a lot of companies will make is they’ll go and make their external branding and their breadboard that sits on the pavement, all about their brand they’ve fallen in love with, that they’ve invented. It’s Allison’s, Allison’s, Allison’s. And then come on in. Now open seven days a week, whatever.
You’re just a cafe. The biggest word on the side of your building should be cafe or coffee. But that’s really boring. So, what do people want to do? They want to make the brand bigger on the side of the building. Like that’s going to stand alone.
Like I’m driving past it at 80 kilometers an hour and you need to tell me this is where I can get coffee. This is a dry cleaner, this is a dry cleaner, this is a dry cleaner. Until it’s imprinted on my brain and I need a dry cleaner and I know there’s a dry cleaner there.
And I know this is pedestrian. I mean, this is not sexy. We live in an attention economy. You better get my attention because there’s thousand ads every day vying for my attention. And how many ads that you saw yesterday, Ellie, do you remember?
Ellie:
Oh, one. And it’s because it was very contentious.
Blaine:
There you go. And you are in the industry and 999 of them just flew past you. So, you better get my attention. But you better also, nail that key message. This shop sells coffee, this shop sells coffee, this shop sells coffee. So, sometimes we over complicate that.
And we’ve got to understand what is the fundamental business we’re in? What is our point of differentiation? What are we selling? And how can we effectively communicate that to the consumer? And if the creative brief is calling for novelty, I think that could be dangerous.
That doesn’t mean we don’t need something that’ll get cut through. So, this is the balance. We still need cut through and there is something powerful about something being fresh. We habituate to stuff that’s the same. I get it. There’s a lot going on here.
But I still would make the point that creative agencies need to make sure that they’re not over indexing on cleverness at the expense of brand clarity and effectiveness.
Ellie:
See, yeah, this is why this podcast is going to get way too long because you bring … I mean, there are all sorts of avenues off that diversity of people sitting in a media agency or a creative agency for a start. That has always been a challenge.
They’re all from a certain socioeconomic background, they all live in a certain place. And that leads them down certain ways of thinking. And it’s inescapable.
But I think some of the thing that … again, it is a different type of trust, but trust in the relationship between the market and the agency to extract, move beyond that and move to what is actually going to be effective can be a bit of a holy grail.
Your Harvey Norman’s background is coming through in some answers, which fair enough, I mean-
Blaine:
I mean, Harvey Norman’s marketing is incredibly effective.
Ellie:
Of course, it is. And it’s also, very consistent.
Blaine:
And it’s very consistent and it’s built up a brand over many years. So-
Ellie:
They’ve won where they can.
Blaine:
It won’t win an award, that’s right.
Ellie:
But I’m sure Jerry Harvey is not particularly worried about that.
Blaine:
No.
Ellie:
Tell me if I’m wrong, but if I had to guess, that’s-
Blaine:
No, I think the senior team at Harvey Norman are very happy with what they do and how they do it.
Ellie:
Look, and to be fair, there are some entities to who do stand on that hill of we just want to be effective. I mean, I’m thinking of Ted Hall in particular. Someone who’s been in this industry for 40 odd years. Famously his agency, Big Red, refused to enter rewards, always have done. They never enter rewards on principle because that’s not what it’s about.
Blaine:
Isn’t that interesting?
Ellie:
But I mean, to be fair, they’re kind of in a minority. And I think pressures of global whole codes and how agency leads are rewarded and KPI-d, but also again, comes back to pitching.
Blaine:
Sure. But-
Ellie:
Let me see your case studies with all your awards. Like we get asked that by clients and I’m forever sort of behind the scenes, trying to cancel the…
Blaine:
Well, I want to see your work. I don’t want to see your rewards.
Ellie:
Yeah, exactly right. And then judge it on its own.
Blaine:
I think cleverness is a slippery slope for agencies. So, putting a bow on all this, we’re back to trust and alignment. If there’s trust and alignment with the objectives of the business, I think those partnerships can be very fruitful.
Ellie:
I think that’s a good place to end, because I feel like I could talk to you all day. Listen, thank you so much, Blaine. I mean, it’s been great talking to you.
I love how forthright and opinionated you in a good way about the industry that we all care about. At the end of the day, this is all about caring about this industry and trying to make it better.
So, thank you again and all the best with your continued endeavors at Freedom Furniture.
Blaine:
Great. Thanks for having me on, Ellie.