Question: what do Andrex, Pepsi and American Epress all have in common? Answer: in each case marketers came to believe their own hype and are now desperately struggling with the consequences.
Last week executives at J Walter Thompson went ballistic at their unceremonious dumping by the new owners of Andrex, Kimberly Clark. But the fact is, the best emotion-tugging ads in the world can’t dig you out of the hole created by previous owner Scott’s greedy, misguided strategy. On the back of that little puppy, the company pushed prices to exorbitant levels compared with the rest of Europe, took an after-you approach to innovation, and treated the trade as poor cousins.
This left its cuddly, soft, underbelly wide open to attack from rivals offering better value. The puppy alone has proved unequal to its task of defending the brand: Andrex has lost a third of its market share.
Likewise, for decades Pepsi has traded on “cola wars” hype and heavy image marketing. But to what effect? Across Europe it commands only a seventh of the cola market. Last week’s announcement of far-reaching reorganisation and rationalisation was an admission that reality must take over from mythology. Pepsi can only take on Coca-Cola’s gargantuan distribution networks and marketing budgets by retrenching, prioritising and focusing.
Amex is much further down the road. Its latest global ad campaign is a public statement that “we’ve changed”. It’s the culmination of a marketing reappraisal which followed its belated realisation that exclusive image alone is not enough to fend off the likes of Visa and Mastercard if they offer a wider, more convenient range of products at lower cost while rapidly closing the service gap.
New products (such as credit cards), new alliances, new distribution channels and new merchants (such as Sainsbury’s), are all part of the Amex fightback – it is completely re-engineering itself.
Next question: how many more brands out there still believe their clever marketing can defy gravity? Answer: we’ll find out soon because marketing re-engineering is only now really hitting the agenda.
It’s raising its head in many ways. Last week, for example, guru of marketing gurus Philip Kotler used the Chartered Institute of Marketing’s Annual Lecture to declare it’s time to “re-engineer marketing”. And the recent Marketing Forum was dominated by the issue of accountability: a code word for the ultimatum “prove you can deliver added value”.
Researchers are producing evidence that radical change is indeed possible. At the Marketing Forum, for example, O&M’s Garth Hallberg wowed assembled marketers with statistics like this: only eight per cent of households consume 84 per cent of Diet Coke – and you think you are wasting only half your marketing budget?
Last week, James Womack and Daniel Jones, authors of The Machine that Changed the World – the book that rammed home the implications of Japanese manufacturing methods – published Lean Thinking.
If you can transform the whole value chain rather than focusing on just parts of it you can cut about 50 per cent off production times, lead times and costs, they claim. What’s more, they add, the lean thinking treatment should be applied to other departments such as new pro duct development (npd), sales and marketing.
Meanwhile Gary Davies, professor of retailing at Manchester Business School, has been asking apparently naive questions like “why does the price of margarine vary so much between different outlets and brands?” One finding: that some brand manufacturers’ cost structures are four times higher than competing own-label suppliers which produce parity products – where parity is defined in terms of product ingredients and consumer blind taste preferences.
Some companies, such as Procter & Gamble, are taking these lines of thought very seriously. When vice-president of advertising Robert Wehling outlined the company’s Marketing 2000 strategy (MW
February 23), he pointed out that after some “very painful” cost cutting (over the past four years P&G has cut 2bn off costs and is now gunning for another 1.3bn), “we’re at the point where marketing support spending is the biggest area of cost disadvantage versus private label”.
P&G is leaving no stone un-turned in what must be one of the most fundamental rethinks of marketing practice.
Initiatives include a shift from brand to category thinking; every day low prices (EDLP); efficient consumer response (ECR); ruthless cutting of the number of stock-keeping units; rethinking media buying and agency remuneration; specifying which production companies ad agencies must use; and even globally recycling creative ideas like the Daz knock on the door.
In short, it’s doing all that it can to achieve its aim of matching own label on cost and reducing marketing costs from 25 per cent to 20 per cent of net sales.
This sort of re-engineering mentality is, at one and the same time, grandly strategic and mind-numbingly detailed. One part of Amex’s marketing re-engineering, for example, was centralising media buying and direct mail across Europe. This, says its head of international consumer marketing John Crewe, has created “tremendous efficiencies” with media costs falling by 20 per cent while improving reach and frequency.
The detailed overhaul of marketing processes on the other hand, revealed numerous little gems such as this: the new cardholder’s welcome pack – which cost 3 to produce and post and was often filed in the bin – was less effective in encouraging card usage than a welcome phone call that cost 50 cents.
It’s fashionable to dismiss re-engineering as a fad that failed to live up to its promise. That’s wishful thinking. Andrex, Pepsi and Amex are all prime examples of brands where the philosophy of image and aspiration marketing became inextricably, and suicidally, linked to uncompetitive costs and organisational structures. Companies like P&G are now demonstrating the mirror image: that marketing strategies based on the delivery of superior value may have radical implications for how marketing companies, and departments, work.
As Wehling told P&G’s regional managers: “The world of marketing is changing very rapidly.” Some companies are taking his advice “to get out in front and lead these changes.” Are you?
See Cover Story, page 46