Mark Lowe on brands

Founding Partner at Third City, writing about how brands are coping in the social age.

11 October 2012 - 9:42am | posted by | 0 comments

Loads of Wonga for Newcastle, but its new sponsor still has a huge PR battle on its hands

A controversial new sponsor for NewcastleA controversial new sponsor for Newcastle

After paying £24m to sponsor Newcastle United, which included the right to rename the club's stadium, controversial loans company Wonga pulled off a PR coup by declaring that the ground would revert to its historic St James' Park name. But while Wonga might have won some new friends on Tyneside, it still faces a huge battle to earn credibility in the eyes of the wider public, writes Mark Lowe.

It’s been hailed by some as a stroke of PR genius, but the most telling comment about Wonga’s Newcastle Utd deal came from @thejamesdixon on Twitter yesterday:

Wonga are to pay £24million to sponsor Newcastle over 4 years. If they lent that @ their typical APR over 4 years they'd have to repay £4bn

But who cares? We’re told that a majority of Newcastle fans approve of the deal, which sees the club’s stadium revert to its original name of St James’ Park. And boss Alan Pardew toed the line hard for the new sponsor: "As manager of this football club I can only say that to have the best sponsorship deal we've ever had is a good thing."

Wonga’s chairman Errol Dammelin knows his limits and the debate about launching the ‘Wonga Stadium’ will have lasted less than a nanosecond. But even if it occurred by default, this was a clever PR stunt that established the brand as a people's champion for the credit crunch.

As a result, ninety thousand Newcastle fans now love Wonga, but it still has a huge battle on its hands to bring itself in in from the margins of acceptability.

This drama has a colourful cast, with the Machiavellian Dammelin on one side and on the other the ambitious young Walthamstow MP Stella Creasy, who has built her political reputation on a fight to bring payday lenders to heal.

Wonga’s success will depend almost entirely on its ability to convince the public of one central argument - that the market confers it legitimacy. People want us and need us, they say, so what we are doing is good.

This ‘ends justifies the means’ idea is similar to that of Pardew and Newcastle chairman Derek Llambias, who say that their Faustian pact with Wonga is the only way to match Qatari cash and push Newcastle into the top tier of clubs.

The counter-argument is equally simple. It frames Wonga and other companies with ‘innovative’ business models like Amigo Loans as quasi-Medieval money-lenders exploiting the poor and marginalised.

I’m told by those in the know that Wonga’s customer base is surprisingly upscale; that they happily service thousands of young professionals unjustifiably frozen out of mainstream credit. Certain well-respected journalists, for instance the Independent’s Simon Read, have accepted this with qualifications, saying that there is a place for payday loan companies.

But there is no doubt that a good chunk of Wonga’s customer base is either poor, or has fallen on hard times. This impression is reinforced by stories of customers using their loans to pay off gambling or drugs debts.

It is through these human stories that the Wonga’s name will live or die. Social media make it almost impossible for the brand to cover up sharp practice and Creasy has built a powerful lobby that will not waste any opportunity to move against the lender.

Mark Lowe is a founding partner at Third City. Follow him on Twitter @markrlowe

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