Client Budget Review
Getting through the last business year was like crossing the South Pole in your undies, particularly for marketeers. Everybody shivered in the harsh climate, some suffered from over-exposure, and some stepped from their offices muttering the immortal Oates-ism “I’m just going into a meeting, and I may be some time,” never to be seen again.
Given such treacherous conditions, and the corresponding marketeer mortality rate, what do you think your average marketing director would wish to see in the coming year? More ‘results-orientated’ creative strategies perhaps? A greater recognition of the importance of their department to the business? Well, not according to Phones 4u boss, Julian Neal. His answer – “Cat Deeley naked.”
Now, apart from indicating that Mr Neal is obviously disarmingly honest – and has an impeccable appreciation of the female form – what else does his answer reveal? Well, if his casual insouciance is anything to go by, it’s probably that he must have had a pretty bloody good year. And indeed he has.
“We started the year with 200 shops and will close with over 325,” he enthused. “As our brand has grown in popularity so has our market share in both pay-monthly and pay-as-you-go markets – beyond original forecasts. Phones 4u has been one of the few mobile retailers to experience growth during this period.”
Lucky him, I hear you say. But it’s not just Mr Neal who will be looking to the future with desire rather than dread (particularly if his dream comes true). Many more of the North’s top marketeers have fallen into the same economic excrement we all have in 2002, but still come up smelling of roses. We thought we’d try to find out why:
Our Phones 4u friend is the first to admit that’s it been a tough twelve months for most, and especially so in the mobile sector: “It’s been a difficult year for mobile phone retailers and a number have disappeared, due to tougher trading conditions and an increasingly competitive high street.” He continued, “With the market now approaching saturation, sales have come increasingly from upgrades to new handsets with improved technology such as picture messaging, coloured screens and polyphonic ringtones, rather than new users.”
Given such tricky territory to operate in, how has Neal reached these consumers without coming a cropper in the mobile mantraps that have ensnared so many of his competitors? Investment seems to be the answer.
“We have substantially increased our investment for 2002, investing circa £20 million in an across-the-board campaign including national TV, press and cinema advertising, sponsorship, PR and in-store support.” He cites their “ashamed of your mobile” creative as the core driver of the burgeoning Phones 4u brand awareness, stating, “The creative has been very well received by the target audience of 18- to 34-year-olds. They’re talking about our commercials and even asking what we’re going to do next. It has helped us build the brand, overtaking The Link on awareness measures, and now the current market leader, Carphone Warehouse, is clearly within our sights.
“We’re a credible second,” Neal concluded, “and amongst our target audience I believe we are the brand of choice. This achievement from a standing start 16 months ago is remarkable.”
Few would argue with that. But also few would have £20 million to spend on a marketing budget. How have those marketeers with slightly leaner wallets coped with the travails of the industry’s very own annus horribilis? Sue Nelson seemed like a good person to ask.
As marketing director of environmental charity Encams, Nelson is called upon to work communication miracles of biblical proportions. Forget the feeding of the five thousand. Our intrepid marketeer has to preach to the 50-odd million, and instead of turning water into wine she’s got to make a thousand tonnes of dog dirt a day disappear. What’s more, she and her band of disciples have a distinctly limited budget, meaning every campaign has to be an immaculate conception. So how was last year for her?
“The charity sector as a whole is becoming increasingly competitive,” was the answer, “as funding and charitable giving is getting harder to find.” However, despite this, as she relayed, Encams had a good year:
“Compared to the private sector it was very buoyant for us. Our overall marketing budget has remained static and this will continue for next year too. But a substantial amount of our turnover is from the government and they have been spending heavily in the areas in which we work this year – for instance, anti-social behaviour such as litter and graffiti, etc, and neighbourhood renewal.
“Any increase in budget has been through individual projects requested by government, which come with extra marketing spend. As an example, we’ve been asked to campaign on neighbourhood noise nuisance next year, and this comes with an attached ring-fenced budget.”
Nelson and her acolytes may have benefited from a bit of much needed government munificence, but this hardly amounts to a carte blanche and she fully accepts the need to show a return on that investment. Something, she acknowledges, that all spectrums of the industry must be aware of in 2003:
“There’s more and more emphasis on proving that marketing spend is really having an effect on the bottom line, or contributing towards general corporate objectives. Marketing is increasingly having to stand up to rigorous analysis and make a good business case.”
She went on, “Departments are going to have to prove that they are worth their marketing budgets in tangible ways – intangible benefits of marketing spend just don’t wash with the finance directors or chief executives any more. I guess the real driver for that is marketing is expected to do more with less money.”
A sobering slap to the chops that connects with every ‘client’, from those working for charities, to those sitting in the sweetest corporate positions of all – people like Andrew Harrison from NestlÃ©, for example. Harrison commands a marketing budget up in the firmanent, around the £70 million mark. With 28 household brands to oversee, the going is understandably tough but, as Billy Ocean would observe, that’s when characters like Mr Harrison get going.
Harrison sees the confectionery sector as “fairly resilient to recession” but he admits that even Nestle have to keep their eye firmly on the ball and spend those marketing millions wisely. As in the case of one particular, unnamed, product sector.
“We’ve seen a category over the last couple of years that’s been about flat,” he admitted, “after many years of modest growth – so growth is slowing down.” A development that’s been the catalyst for some finely tuned brand tinkering:
“That’s leading us to increase emphasis on building value back into the category – putting that ‘specialness’ back in. That means more premium products, greater attention to packaging, looking at higher value lines and in general making confectionery special for British consumers again. We don’t want it to become cheapened and commoditised, as has happened with some other categories, such as biscuits and bread.”
The fact that Harrison can maintain the image that something that costs 35p is a ‘luxury’ is a testament to the marketing skills on show at NestlÃ©, and indeed some of its competitors. But what happens when you have to persuade consumers that something that may cost thousands of pounds is a staple product for just keeping up with today’s pedal to the metal society. That’s the challenge facing Richard Millman, marketing director of PC Business World.
Millman, as with the other members of this feature’s cast, has performed well this year on an increasingly hostile global stage. We’ll let him explain as he takes a bow: “It’s been a very tough year for the business-to-business IT sector, full stop,” he concedes, “and not just in the UK. The reasons behind that include the continual fall-out from the end of the dot com era, the state of the US economy and an overall slowdown in the rate of IT expenditure.” But this wasn’t always the case:
“Over the last six to seven years the IT sector has enjoyed double-digit growth globally. But that wasn’t something that was endlessly sustainable, and now, over the last year to 18 months, that growth has really started to slow down to a level that’s more indicative of other, established, business sectors. That’s particularly true when you consider the medium- and corporate-sized outfits, businesses that may have IT budgets running into the multimillions; those businesses have increasingly scaled down their IT expenditure.”
Which doesn’t sound like the sort of fertile economic ground to grow a business in, so how has PC Business World fared nurturing its brand?
“Well,” he said, as a smile broke down the phone line, “what’s happening in the broader industry isn’t applicable to us, particularly as the SME sector is still quite strong and we operate heavily in that. Putting it into perspective, five years ago in the B2B IT sector PC Business World ranked as the thirtieth biggest supplier. Today we’re the third. We’re still enjoying double-digit growth year on year, and this year our growth rate is running in the high teens. We’re maintaining an aggressive growth in what is a very, very tough market place.”
Similarities with our Mr Neal spring to mind – both part of major business groups (Dixons and Caudwell), both retailing technology, both punching above their weight in markets seemingly getting weaker and weaker. Surprisingly enough (or not as the case may be), both also attribute part of their success to the business’s appreciation of the power of marketing.
“We know where we want to be with this business,” muses Millman. “We’re determined to work towards getting there, and we’ll continue driving our marketing to achieve that. Over the last year we’ve increased our marketing spend – it was a conscious decision to invest in the brand during a difficult time for the industry, and it’s really worked for us. It wasn’t a decision that was taken lightly but we’ve managed the business accordingly and we’ve reaped the rewards.”
The increased size of Millman’s marketing wallet hasn’t diminished his hunger to get the cash working even harder, pound for pound, to realise the business objectives. As such, his tactics have evolved with the marketplace as he attempts, as we all do (with varying success on my behalf), to ‘work smarter’.
“We’re constantly evolving our marketing mix and in particular we’re now investing in our ability to understand the power of our customer database. In the last year 400,000 businesses have bought from us, out of a national business community of 2.1million – that gives us a powerful contact database to exploit. We’ve increased the frequency of our direct mailing campaigns (no doubt much to the joy of RedC) and we’re making them much more specifically targeted to certain customer groups.”
“We’ve also invested heavily in press and press inserts to drive customer acquisition and we’re putting more emphasis on marketing our internet proposition to increase online purchasing.”
Despite the changing face of the firm’s marketing mix, an enduring feature remains their 15,000-product-strong catalogue, which Millman insists he will continue to invest in in 2003 and beyond. Illustrating that no matter how approaches evolve and economies change, if it ain’t broke, well then, it obviously works.
Of course, for every healthy performance from Millman et al this year, 2002 has had a handful of walking wounded, shell-shocked from one of the worst marketing recessions on record. But dodge the bullets, be careful not to step on potential mines and, as our interviewees illustrate, it’s clearly possible to negotiate your way out of no-man’s land and into safety (and, as Sue Nelson shows, not only for those protected by the security of a multimillion pound marketing armoury). 2003 does appear to promise a marginally easier ride, so maybe there is room for optimism out there ... although perhaps not quite as much as Julian Neal seems to possess.
Which, finally, leads us nicely on to his hopes for what 2003 holds for marketeers at large – Julian? “Big pay rises!”
Now there’s optimism for you.