- Brands on the turn: Find out what HSBC, BlackBerry and Tesco are doing to change direction
- The U-turns the backfired: What we can learn from Coca-Cola, Gap and Ryanair
- Rob Rees has made a career out of being an interim marketing director, often drafted in to help companies turn their businesses around, read a Q&A with him here
- Philips’ chief design officer Sean Carney talks about how the brand is applying new strategy to many of his lines, read the case study here
Some brands are shifting down a couple of gears and taking their business strategy in a new direction. Banking, retail and technology brands are among those performing the business equivalent of a U-turn. But can such a dramatic manoeuvre ever really work?
Tesco’s turnaround strategy has seen it overhaul its basic Value range to a more upmarket Everyday Value selection of products as well as investing in its stores in an attempt to halt falling sales. BlackBerry is targeting early adopters of new technology and well connected people in an attempt to appear more relevant, while HSBC has turned its back on its ‘world’s local bank’ strapline to better reflect how the business operates.
History teaches us that some businesses will execute their manoeuvre with the grace of a ballet dancer, while others will enter an uncontrollable spin.
One classic turnaround was performed by car brand Skoda back in 2000, shortly after Volkswagen took a 100% stake in the unfashionable make. Skoda had been the butt of jokes for years until VW hired agency Fallon to produce a campaign that used humour to communicate the message that Skoda’s build quality had dramatically improved.
In contrast, Coca-Cola is used as an example in marketing textbooks to show that making drastic changes to your product is not always a good idea. In response to losing sales to Pepsi back in 1985, Coke changed its recipe and launched New Coke, which resulted in a consumer backlash. Coke quickly retreated.
Investing in strategy U-turns must be done for the long term, and not at the whim of a new marketing director, warns Rob Rees, who has made a career as an interim marketing director, most recently at Dairy Crest. “Some marketing directors come in, fire the agency and try to rebrand the company. But [turnarounds are] about delivering real results against real problems,” he says (See Q&A, below).
Ditch unsuccessful parts of the business
Kodak is one brand hoping to become a successful U-turn case study. The business, which invented the digital camera in 1976 but decided to stick with producing film because it was more lucrative at the time, has until February next year to prove that it can be a functioning business again.
Investment bank Citigroup has granted it bankruptcy protection until then, by which time Kodak is aiming to phase out the consumer camera side of the business and focus on the more lucrative business-to-business arm.
Make sure there is regular communication so people can see the progress you are making – the light at the end of the tunnel
Former Kodak chief marketing officer and vice-president Jeffrey Hayzlett says to pull off this U-turn, the management and staff must believe that its best days are ahead of it, rather than focusing on the glory days of the ‘Kodak moment’ – the strapline that helped the business to profit from film and printed photos.
“The brand has really become a B2B company, yet it has not wanted to shed some of the consumer aspects. Now I think the bankruptcy is going to force it to do so,” he says.
Hayzlett believes that Kodak has a future if it gets rid of the loss-making businesses. “That will mean a smaller company that has an opportunity to turn itself into one of the most iconic brands once again,” he says.
He gives IBM as an example of a business that sold its less profitable PC arm to Lenovo in 2005, and says that companies need to be brutally honest about what parts of the business need to be shed to secure their long-term future.
A new audience?
While Kodak is in a change or die position, other brands are making changes to their business in an attempt to maintain or grow their market share. Mobile phone brand LG is targeting a new audience. Its new L-Series handsets have been designed to appeal to women looking to upgrade to a smartphone, rather than trying to target its traditional ‘pub geek’ bloke.
“There is a large market of younger consumers looking to migrate from feature phones to affordable smartphones. The L-Series focuses on style, functionality and value, which are important to this demographic,” according to Steve Gater, the consumer electronics marketing director for LG.
While Gater doesn’t see this move as a complete U-turn, he does concede that the new handsets represent a greater focus on affordable style. The brand is spending £4m marketing the L-Series range, including a partnership with Vanity Fair magazine.
Hayzlett says LG’s new strategy will work if its products match up to its brand promise. “A brand is nothing but a promise delivered. It is one thing to say we are going to target this group or that group, but if the product fails at the point of delivery, then you have an issue.”
Back to basics
Having a renewed focus doesn’t have to mean selling off part of a business or targeting a new audience. It could be as simple as going back to basics, according to Emma Benney, group marketing director at hotel business Malmaison and Hotel du Vin.
“This year, we have turned our strategy on its head,” she says. “Rather than [marketing] being about going with a gut feeling and the look and feel of the brand, we examined the raw data to discover who exactly is using our hotels.”
History teaches us that some businesses will execute their manoeuvre with the grace of a ballet dancer, while others will enter an uncontrollable spin
While Benney says the look and feel of the brands is very important, she admits the company had not previously done much segmentation of its customers. “Hotels are notoriously bad at segmenting and profiling their customers. It is one area you need to invest a lot into to get the best out of it.
“It is understanding [through data and segmentation] where the good opportunities are and where we can manage those accounts better and we will see sales and marketing having a more unified approach,” Benney says.
She is looking to position Malmaison as an innovative brand and is trying to engage with a younger clientele through tie-ups with Universal Music to produce music events.
Making an emotional connection
While Malmaison’s marketing has been done partly from an instinctive, emotional point of view, electronics brand Philips has been much more rationally focused. But it is now trying to turn that strategy towards the emotional benefits of its products.
It is using an internal rallying cry of ‘Choose Philips’ to apply to every piece of activity it does and hired Sean Carney as chief design officer from HP last year, to try to create more of an emotional response to its products (See Philips case study, below).
“We are very good at the consumer push, but we haven’t yet focused enough on the consumer pull to really leverage how our products are experienced,” UK marketing director Joanna Elliott told Marketing Week earlier this year.
The key in any turnaround is that staff understand it, and believe in it, Hayzlett points out. He argues that companies able to adopt new business models are best placed to overcome their difficulties.
“The key for any brand or strategy is not to build it and hope they will come, but rather put the customer at the centre of everything they want to do and base the development of that strategy on capturing data.”
So, whether your brand needs to find a new direction or is part-way through a U-turn, the key to any strategy change is to make sure everyone is on board and fully focused on reaching the final destination.
The brands on the turn
HSBC quietly dropped its strapline ‘The world’s local bank’ earlier this year and announced last month that it will lose 2,200 UK staff. It declined to comment on the strapline U-turn, but consultant marketing director Rob Rees says it is a reflection of the fact that HSBC wasn’t ever really ‘the world’s local bank’. “The world’s local bank will only get you so far, and that starts to be irrelevant to the people in the UK and other markets. You really need to start acting more locally because the issues that consumers face and respond to in each of the markets are going to be quite different.”
Parent company RIM posted a $125m (£78.5m) loss in its latest quarter and is looking to save $1bn (£636m). It is hoping it can turn the company around by focusing on business-minded people rather than consumers and has used the line ‘Think different, act different’ – a direct reference to the ‘think different’ line originally used by Apple.
But research seen by Marketing Week shows that it is ninth in a list of preferred mobile and tablet brands for UK consumers with a household income of more than £40,000. Russell Feldman, associate director of YouGov, which is behind the BrandIndex study, says: “BlackBerry just isn’t sexy. When organisations give senior managers a choice of company handset, the iPhone is the one people go for. BlackBerry is relegated.” No one at BlackBerry was available to comment.
The supermarket has posted a third consecutive quarterly dip in sales, following a relaunch of its own brand Everyday Value range. But this is a U-turn in progress, which includes hiring an additional 4,300 staff at 700 shops and revamping more than 100 stores. Chief executive Philip Clarke said this month: “We are rapidly implementing our six-point UK plan. Our customers are seeing the evidence of the changes we’re making and they’re telling us they like what they see.”
The U-turns that backfired
A classic U-turn was performed in 1985 when Coca-Cola changed its recipe to produce New Coke in response to Pepsi getting the upper hand on sales. But consumers didn’t like the new taste and the company had to reissue the original formula, branded as Coca-Cola Classic – which then outsold New Coke and Pepsi in the same year.
The clothing retailer redesigned its logo in 2010, but it was trashed by consumers on social media, with tweeters making up their own @GapLogo and @NewGapLogo handles. Gap then asked its Facebook fans to suggest their own logos, before reverting to its original branding within a week.
Marketing Week columnist Mark Ritson said at the time: “In a remarkable seven-day period, Gap has gone full circle from old logo to new logo to crowdsurfing to apology to old logo. One week later and it’s right back where it started – except now with major consumer confusion and question marks over the capabilities and decision-making of [Gap North America president Marka] Hansen and her team.”
In 2010, Ryanair chief executive Michael O’Leary famously denied the existence of climate change when he said in an interview with the Independent: “The climate has been changing since time immemorial. Do I believe there is global warming? No, I believe it’s all a load of bullshit.”
Cut to 5 June 2012, and Ryanair proclaims itself “the world’s cleanest, greenest airline”, citing research by Brighter Planet and the Dutch Consumer Organisation.
The budget airline also says it has reduced CO2 emissions by 50% but does not state over what time period. Ryanair declined to comment.
Rob Rees has made a career out of being an interim marketing director, often drafted in to help companies turn their businesses around
Marketing Week (MW): Do strategy U-turns ever work?
Rob Rees (RR): Yes, but if it is just done on the whim of the marketing director then it could fail miserably. Some people do it purely for their own career aspirations and if the board isn’t that marketing-literate they buy the bullshit. But then other times, there is a real need to do it because the strategy is starting to get tired and not working with consumers, or perhaps a brand is getting lower recall and needs to inject a fresh perspective
MW: How can marketing influence a switch in business strategy?
RR: Marketing can be instrumental in driving the innovation brief through the business. That is the hard bit. The easy bit is then turning that into marketing communication. Ultimately, marketing is responsible for being the voice of the consumer in the business and it should analyse what the opportunities are.
MW: How do you plan a successful U-turn?
RR: You have to have all the stakeholders aligned. For a lot of people, change is very uncomfortable. But if you haven’t got the top people on board, you are wasting your time. Make sure there is regular communication so people can see the progress you are making – the light at the end of the tunnel.
Sometimes you find people who are not fit for purpose and you try and redeploy them into other areas. Sometimes they are just not up for the new vision [of the company] and you have to move them on.
MW: Why have you made a career from turnarounds?
RR: Because I get bored by a role at a company that is growing by 3% a year, managing the status quo and the process. I like to be in situations where urgent action is needed. Some people come in, fire the agency, try to rebrand the company and then move on to the next role within 18 months – but that is not serving the business.
MW: How do you make sure the changes you’ve made to a business are stuck to after you leave?
RR: You have to take the executive board with you – it is not just about marketing, it is about the whole company. Any glib marketing director coming in trying to change things is not going to find it that easy because it is part of a broader strategic framework. Secondly, you do it through your team and make sure they are aligned with the new vision.
Case study: Philips
Chief design officer Sean Carney joined Philips last year from HP with a brief to make the brand fulfil its potential. Philips is applying new strategy to many of its lines – starting with audio and moving on to health and lighting – by focusing on the emotional appeal and benefits of products.
“What appealed about Philips was its history of design and the fact that it has one of the largest design teams in the world,” says Carney. “It has been first to market in many innovations and technologies. But before taking the job, the chief executive told me that Philips seems to have all the right building blocks, but is still not reaching its full potential.”
Carney is helping the business work in a more co-ordinated way. He explains: “We have formed internal online communities where we co-create new solutions. We pose questions in these communities about some areas of interest, then we let the dialogue take on the shape of the participants.”
While Carney is encouraging departments to talk to one another, he is also looking at how Philips can help people in a broader way than simply selling a product to a consumer or business customer.
In hospitals, for example, it examined the experience patients have before reaching a treatment room and now projects calming images onto the walls of MRI and CT scanning rooms so that patients – especially children – feel more soothed by the environment.
The company also carried out research into how children felt before arriving. “We had to understand their reactions prior to arriving at the hospital and making sure that we give them insight into what to expect,” explains Carney. “We had a more holistic focus on the entire customer journey, looking at the cycle from initial diagnosis through to how you educate them.
“We are dealing with parents too, coaching them on how they should react so you think about that total experience.”
Carney claims that, in some cases, this has resulted in 30-40% fewer children having to be sedated when going through an MRI or CT scan.
In a separate move, Philips has also produced Lifeline, a monitoring device that can tell when someone has fallen over in their home, and automatically sends a trigger to hospital or care staff. Carney sees this as not just designing a care product, but developing ‘ecosystems’ that look at how people feel before, during and after hospital visits.
It is now looking at how it can send data from its electric toothbrushes to a dentist or hygienist to facilitate better oral healthcare.
The materials used in its oral health products are also chosen to trigger a more emotional reaction, according to Carney. Philips uses a glass case for its DiamondClean toothbrush, for example. “We have focused on the quality of the materials and the finish, so when you see it on the shelf it is not just another chunk of plastic; you can feel the weight and finish,” he says.