I founded Ella’s Kitchen nearly five years ago: we produce healthy food for babies and young children. Our brand is all about being a real family. We were the ninth fastest-growing private company in the UK last year, and this year, we were named Food and Drink Brand of the Year, beating Cadbury’s, Doritos, Hovis and Walkers.
It wasn’t always easy. But in the (scary) early days, I believed that if we concentrated on consumers’ needs, our business would succeed and the numbers would follow. This had some great unexpected effects: at least half our team were first motivated to get in touch through being a passionate consumer. In fact, the three people who run our customer care team are all mums. Their ability to listen to, empathise with, help, support and thank consumers makes a real difference to our bottom line and the building of our brand.
Over the past few months, I’ve thought a lot about whether there are public policy ways to encourage more small firms to build their business around their customers. As it stands, the better you understand your consumers, the better your brand and the more consumers will buy into your products, which increases your profits – but also the tax you pay.
I believe that successful consumer-focused SME brands could be encouraged through tax relief in a similar way that R&D tax relief encourages innovation.
My proposal is that we offer 150 to 175 per cent allowances for defined investment in “consumer insight” (including quantitative and qualitative research; market data-gathering and analysis; customer care support; consumer database-building and social media consumer interactions). Such a scheme could be structured just like R&D allowances, providing the additional relief of cash-back if the business is still making tax losses (again an extension of the established R&D principle).
The idea should be attractive to government. It will help UK SMEs gain a competitive advantage in the global market – producing better brands – and will standardise the principle that to best compete globally, investment in brands is vital.
British brands – such as Lovefilm, Green & Black’s, King of Shaves and Ella’s Kitchen – needed investment and focus to become world leaders. Tangible IP assets have been created out of R&D investment and tax credit support; the intangible IP asset of brand value should be treated in exactly the same way. The best brands will be bigger businesses, generating more employment, more transactions with suppliers and underpinning a stronger economy.
“Customer excellence relief” would benefit the UK enterprise economy as a whole. It would iron out the inherent disadvantage that early-stage firms face when competing with established brands for consumers’ hearts and wallets. It would encourage more competition in markets, and give SMEs a better fighting chance to create the best, consumer-focused brands. Customer excellence relief would be a fiscal carrot for entrepreneurs to create their brands.
Consumers would have more brand choices, and would be offered better products, reflecting their needs. And increased competition would ensure price benefits.
What’s the worst that could happen? We get better-informed, more active and empowered consumers; create employment opportunities and more knowledgeable, better trained employees, thanks to the 175 per cent tax allowance for customer care training costs.
As President Hoover put it: “Competition is not only the basis of protection to the consumer, but it is the incentive to progress.”
Paul Lindley is founder of Ella’s Kitchen and founding member of the Consumer Forum.
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