Why SPA Ceased Trading
To stay afloat, many consultancies shed staff in recessions, growing again when better times return. For SPA, the good times just left it too long. Blame the Bankers if you like. Blame George “Butter” Osborne if that’s more to your taste. In reality, it was my fault: I took my eye off the ball. I let SPA become over-dependent on market analysis and targeting projects for major clients which were commissioned via advertising agents – a work pattern giving us no direct route to potential customers who needed our services. When that work evaporated in 2008, I should have sought out new opportunities. But my wife was ill and I didn’t. Then things started to improve. It looked as if I’d got away with it: “business as usual” was just around the corner. In fact it was the “double dip”.
A business based on projects commissioned by ad agencies risks losing focus: anything that the client wants is “in court”; as the recession bites, anything else looks like an unnecessary expense. In this context, it matters enormously what contacts you pursue and which new ideas you try to develop. I tried taking SPA in new directions. But here I made some bad calls – trying to develop services for shopping centre managers and local authorities when neither was spending real money. My mistake was to focus on what I would like to sell, not on what the market wanted to buy. My new ventures weren’t working. And, I was suffering one of the major penalties of being a one-man-band – not having anyone else around to provide their ideas or question the wisdom of mine.
Worse still, my heart wasn’t in it. As time went by, I began to realise that any big relaunch would need to succeed unfeasibly fast to produce a worthwhile return on the investment before I retired: and that’s just “not on” if your heart is not in it. So I decided to try something different – something less overtly commercial, something more socially useful, something my heart was in! See Plan B for where that has taken me, or read on to hear about SPA’s “Big Idea” that could have been a winner big time…
The One That Got Away
Most of SPA’s work was about serving clients – analysing their data, telling them what it said, helping them explore what it meant for the business, and often setting things up so that the analysis could be done more quickly and cheaply next time. But out of all this work, we did develop one product which I believe was truly innovative – indeed the paper describing it won an award – and I am very disappointed that we couldn’t turn it into an ongoing commercial success.
That product was Segmentz. And with the Apple Mac going great guns, a logo based on segments of Oranges seemed perfect for our own “Big Idea” – because Segmentz is all about segmenting the market opportunity opened up by different retail sites. Which branches were best for “posh” and which for “chav”? Is this branch better for “cool” or “classic”, “premium” or “value” lines, fine wines or basic beers? And some of our work caused waves – even questions in the House of Commons.
Over the years, SPA had a lot of outlet segmentation for clients in many different retail sectors. The idea was we simple. We’d classify all the outlets in the chain into types reflecting different market opportunities, so that our client could then tailor their offering – the product mix/merchandising, marketing, service level, etc. to reflect the market opportunity at each branch location. We did this for pubs – lots of pubs, for clothing & fashion shops, for off licences and chemists, for furniture & furnishing outlets, for convenience stores, for petrol stations, for DIY shops and sheds, and even for building society branches and funeral directors.
Every client insisted that their business was “different”. Each, therefore, wanted a bespoke segmentation carefully crafted to reflect the different trading opportunities across their own particular branch network. So we listened to what was required, and tried to get as close as we could to the key factors that differentiated individual outlets one from another in the client’s chain. Each segmentation analysis was bespoke and unique, and was priced accordingly.
But as we did more and more projects of this kind, we found that 80% of the work was the same. Could we perhaps develop a standard retail segmentation system for all clients? Could we make it work across all retail sectors? Crucially – since each client invariably gave us the details of all their branches – where would we get the outlet lists that we’d need to develop such a universal segmentation system? No sooner had we asked the question than we knew the answer. Retail Locations Ltd maintained exceptionally up-to-date outlet lists for all retail sectors from banks and car hire to supermarkets and wine merchants. And Segmentz was born!
Of course there was then a huge amount of work to do:
- assembling geodemographic and other data around the hundreds of thousands of UK retail outlets in the Retail Locations database
- classifying the outlets into types
- experimenting with different variables to see what worked, what didn’t, and what was best
- and so on.
What emerged was pretty simple. Segmentz classified each and every Retail Location outlet in the UK into types on each of three different dimensions:
- Geodems – reflecting the kinds of people living nearby – with separate results for radiuses of 0.5 miles (local retailing) and 2 miles (larger catchments)
- Workplace – reflecting the numbers and kinds of people working within 0.5 miles. This was very useful in gauging the type and scale of the opportunity for lunchtime trading for pubs, cafes, and sandwich shops, but was also very useful for a wide range of other retail sectors.
- Retail – reflecting the types of retail environment present in the local area. Areas dominated by small independents offer very different opportunities from retail parks with their outsized supermarkets and DIY sheds.
Conceptually, we also envisaged a fourth dimension that would be unique to each specific client: Competition – reflecting the presence or absence of those competing retailers that were relevant to the client concerned.
In all our experiments, Segmentz worked very well indeed. It wasn’t quite as good as the bespoke solutions we had produced for past clients; but, being wholly standard, it could be provided almost instantaneously and at a fraction of the cost. And if that wasn’t enough, the standard Segmentz solution could be tailored with competition and other overlays to bring it virtually up to the level of the bespoke solutions of the past. What is more, Segmentz was also ideal for competitor analysis, and for quick-fire new site evaluation for clients in acquisition mode.
When we demonstrated Segmentz to clients, they loved the idea. It was a brilliant way of visualizing what they were likely to get from retail segmentation.
But generally it was no more than that. To most, it was the “come-on” – the quick demo to illustrate the principle – not the finished solution pressed and ready to wear. So, virtually all wanted their own version of Segmentz based on additional data and bespoke definitions. And this undermined the cost model on which Segmentz was based, taking us back to the one-off bespoke product that we had before we started here. In fact, while the economy remained buoyant, Segmentz became a selling tool for high-end one-off retail segmentation analysis.
This left us with a problem. Updating.
We updated Segmentz about a year after its launch, and again about 18 months later. But if very few clients actually bought Segmentz itself, was there any point in keeping it up-to-date? And if we didn’t update it, how could we introduce incremental enhancements so that Segmentz remained the best we knew how to make it?
The recession changed everything: we couldn’t afford to update Segmentz – end of!
Ironically, it was at this point that we had our first contact with McKinsey’s. Their kind of consultancy isn’t ours. We may take weeks and often build bespoke solutions from scratch. They take days – and then only if they can’t do the job faster. But Segmentz is ideal for the instant overview, for insight in an instant – or at least it would be if it was up-to-date. As McKinsey’s became regular users, Segmentz gradually grew older and older – to the point where we eventually pulled the plug and said that it had been withdrawn from the market.
What might have been, by definition, wasn’t! Even multiplied ten times, McKinsey’s usage alone could never have supported a fully updated Segmentz.
But still, with Segmentz, I think we were onto something.