Wednesday, August 03, 2016

Political parties as brands - Labour is failing

A brand is a combination of characteristics possessed by a product or service that identifies it and distinguishes it from its competitors. Identity is part of this (the brand name, colour scheme, symbols etc.) but the key elements are product quality, performance and value. It is not sufficient to have an attractive brand image. That image must stand for something that the consumer values when they experience it. The reverse also applies. If you have a good product but fail to communicate its benefits then you will fail or underperform compared with a competitor with an equally good product who does communicate effectively.

Political parties and politicians are brands. They conform to all the brand realities in the paragraph above. Brand loyalty (the propensity to favour a brand through good times and bad) is probably stronger with parties than it is with consumer products or services. In Britain the Conservatives and Labour can usually rely on around 30% of loyal support - how they add to this determines whether they achieve office, or not. And that process is all about Brand Management. 

The idea that political parties and politicians are brands stretches back a long way. In Britain certainly to Gladstone and Disraeli, if not earlier. The Liberals and the Conservatives in Victorian times were arguably not that different. But Gladstone and Disraeli were chalk and cheese! Even without mass communications the voter made his choice based on his perception of these two very different brand offers.

In modern times the first truly marketed brand was that of John Kennedy in 1960. In "The Making of the President" Theodore White describes how all the newly modern techniques of brand marketing (think "Mad Men" !) were used to promote JFK. There is no doubt that better brand management won the day (very narrowly) against the better known Vice President Richard Nixon. 

In Britain the most successful brand relaunch was that of the Labour Party in the run up to the 1997 General Election. This ticked all the boxes. The core product was changed. The Left Wing baggage that had made Labour unelectable was jettisoned - especially Clause 4 that Achilles Heel that committed Labour to seek the common ownership of assets. The visual identity was also changed to position Lablour as more classless rather than (just) being the choice of the C2DE social classes. A conscious attempt was made to position Labour as pro Business. The name was changed and it was "New Labour" that was promoted as the brand name overtly signifying change. And above all a Leader was chosen who visually stood for these changes. Tony Blair was the most important combinations strength of New Labour. Young, good looking, articulate he commanded the media who lapped it all up. Even Rupert Murdoch backe Blair and Labour in 1997 - the grey man John Major stood no chance. It was a landslide.

Everything that goes up must come down and so it was with New Labour. But Blair won three General   Elections and only a combination of a far weaker brand presence in 2010 (Brown was no Blair),  a recovered Conservative Party and what Harold Macmilan called "events" lost Labour power. Since then Labour's position as a credible brand has gone from bad to worse. In 2015 it looked for a long time that the Coaliiton would lose office and that it would be a Labour Government with a majority rather than a Conservative one which would replace it. In fact the opposite happened. The Labour brand was not strong enough, Ed Miliband as its principal communicator lacked sufficient credibility and the media was mostly hostile. And some new entrants (the SNP, UKIP, the Greens) stymied the chance of Labour regaining power.

Post 2015 the political scene in Britain has become toxic. The principal reason for the this was the EU referendum where the brand which best reflected the public mood, "Brexit", won the day. That public mood was anti-politics - a plague on all their houses. The Brexit case was (a) That all is not well in the KIngdom of Britain and that (b) The reason for our malaise was the EU, our not controlling our own governance, and the fact that we let too many foreigners into our country. Marketers know that you can sell snake oil once and "Brexit" was all snake oil. But the sale was made and we are stuck with it.

In this toxic world Labour has imploded. The choice of Jeremy Corbyn as Leader could not have been more damaging to the brand. One of the interesting elements of brand management is the niche brand proposition. In this a marketer decides to launch a product which is aimed at a very specific niche target group. Mercedes has such a product with their "Smart" car. The endorsement of the Mercedes brand helps (as does that of BMW in the case of the Mini) but in no way is the Smart car the new Mercedes! Jeremy Corbyn is the same. His (very) Old Labour positioning has brought people to the Party as his rallies show. But this is a niche group. Not everyone in Labour was happy with New Labour or with Tony Blair but the New Labour brand was sufficiently strong to marginalise this internal opposition. Corbyn was part of this opposition and now he and those like him have taken over the party. The support for Labour under this regime seems to be less than the core 30% from which you start to build a credible case for power. There is no chance whatsoever of Corbyn and co reaching out to the floating voter as New Labour did. In other words there is no chance of Labour gaining power under his leadership.

Brands flourish when they meet the needs of consumers and wither when their offer is no longer offering benefits which match these needs. Labour today is a niche brand which like all niche brands has loyal and enthusiastic support. But it it needs to be a brand with extensive popular appeal across class, gender, locale and many other demographics. Unless and until it realises this it has no chance of power.

Friday, April 01, 2016

What is "dumping" - and are the Chinese doing it ?

Economists, businessmen and politicians would probably see the whole question of what "dumping" is slightly differently. Are the Chinese dumping excess Steel production at below cost? Let's try and analyse what "dumping" is.

Any manufacturer incurs fixed and variable costs in producing products. The fixed costs include labour (usually), rent, other asset related costs (e.g. Business rates), maintenance and repair, licence fees and so on. These fixed costs are not production level dependent. The variable costs include consumables, raw materials, energy, transport etc. Essentially the higher your production the higher your variable costs.

In China the  Steel production is around 820m tonnes (49% of world total) and Steel consumption around 710m tonnes (46% of world total). In other words China is a net exporter of steel - the largest in the world by far - as well as being the largest consumer and producer. 

Let's say that "China Inc." covers all of its inland demand and allocates all of its fixed costs to this demand. A reasonable thing to do. Then, within its capacity capability, it produces further steel which it exports in order to make a further positive contribution to its operations. The key point here is "positive contribution". Obviously the income stream from the exports must exceed the variable costs of that production. Otherwise every exported tonne would lose money. That would certainly be "dumping". But it is, in my view, not dumping to allocate only variable costs to that part of your production you export (less than 10% in the case of China). Others may disagree ! 

The enormous scale of China's steel industry (70 times that of the U.K.), its modernity and its comparatively low fixed costs (especially labour) gives it a huge competitive advantage in world markets. It is not primarily focused on exports at all though and can therefore afford to sell at prices which only as a minimum cover the variable costs of production. As I say my contention is that the Chinese could only be accused of "dumping" if they sell at prices below these variable costs.