This week, entrepreneur Lord Sugar, host of BBC One’s The Apprentice, headlined the Festival of Marketing to tell the industry how his relationship with marketing and advertising has changed over the years, from his early days as founder of computer manufacturer Amstrad to his current guise as outdoor media owner, peer of the realm and face of British business.
Ahead of his talk, Marketing Week organised a conversation between Lord Sugar and the advertising industry’s most prominent figure, WPP CEO Sir Martin Sorrell. There was no shortage of opinions on offer from either side.
Sir Martin: It seems as though you have changed your tune on the value of advertising and marketing. You famously said you’ve written books on advertising – chequebooks – and have given the impression you aren’t very keen on advertising.
Lord Sugar: No, no, no. That’s not correct. Advertising was [critical] to the success of my business in the 1980s [computer hardware firm Amstrad]. All I used to say to people when they explained their expertise is ‘you don’t have to tell me about advertising; I’ve written books on advertising – chequebooks’. That’s all I meant, because I’ve spent a fortune. There’s nothing wrong with advertising, other than it’s too expensive these days.
Sir Martin: It has got considerably cheaper, as you well know, since you’re now in the advertising business. You [are chairman of digital out-of-home company] Amscreen.
Lord Sugar: What’s changed throughout my career making and selling products is the method by which you get the message across. [In the 1980s,] we bought huge amounts of television and national newspaper space and a little bit of radio. That was how we advertised and sold our products.
Of course, now there are so many avenues where money can be spent. National newspaper [circulations] are falling; they’re not as popular as they once were. Internet advertising – subtle adverts appearing in the corners of websites – are where a lot of advertisers are placing their money. I haven’t got a clue how they’re supposed to work but nevertheless the advertising fraternity doesn’t care. It says ‘never mind, we’ll take your money – we don’t know how it works either’.
Sir Martin: That’s a little bit cruel.
Lord Sugar: Well, it’s true.
Sir Martin: You’re saying you would buy lots of TV, newspaper and even radio ad space but never really know [the effectiveness]?
Lord Sugar: No, we would know. Be under no illusion, we would know. I wanted results immediately and even in those days – we had what are considered to be archaic principles today – but we would tag all our adverts in the [national newspapers]. We would get responses [from people who were asked to] quote a reference number [linked to] where they had seen the advert. If the Daily Mirror didn’t stack up, it didn’t get money next time. It’s as simple as that. But there’s been a big change in the past 40 years in where people spend their money.
Sir Martin: [Does that mean] if you were going to own a medium, you wouldn’t buy a newspaper or a TV channel? You’re gloomy on their prospects?
Lord Sugar: Not TV, no, [but with] newspapers one has to be fairly gloomy on their prospects. You can see that News Corp is spending a lot of time trying to enhance its internet presence and to convince as many readers as possible to go online rather than into a newsagent. It has a big presence on platforms like Twitter, YouTube and Facebook; it teases people with a bit of a story [to get them to subscribe]. They’re smart people. You can’t underestimate the Murdoch clan.
Sir Martin: Yes, you underestimate them at your peril. What about radio? Do you think that has a future?
Lord Sugar: The most popular commercial channels have a future. There is, of course, the BBC, which has a [portfolio] of radio channels throughout the country. It’s a group of people that you can’t ignore. The radio channels are very popular but, as we know, they’re not commercial.
Sir Martin: Going back to digital, do you think spending is more effective because of online, social and mobile?
Lord Sugar: No. I feel sorry for manufacturers and for smaller companies. Pushing the Coca-Colas and Samsungs to one side for the moment, [the question is] where should your money be spent? If you have got £1m to spend on marketing over the Christmas season, where do you spend it? If you put it on television, blink twice and it’s gone. In a national newspaper, well, it’ll swear on a stack of bibles that you’re getting the best rate for right-hand pages and all that type of stuff. Then there’s a whole host of other places to spend it.
Sir Martin: Do you think it’s confusing?
Lord Sugar: It’s very diluted. Maybe I’m getting to be a bit of an old fart but I don’t get it with Facebook nor Twitter; where is all the money coming from?
Sir Martin: How do you feel about out-of-home?
Lord Sugar: Out-of-home is an excellent form of media. The problem with it in England, and I say this cautiously, is that it’s a closed shop. A very narrow group of people decide where clients’ money is being [spent].
Despite the fact Amscreen, for example, has modern-day methods, including cameras in screens to tell advertisers [who has] actually looked at the advert – which I thought would have been gold dust – the fact of the matter is some people just manage clients’ money without reference to these things.
Find out more: Outdoor advertising’s digital transformation
Sir Martin: You’re having a go at us then?
Lord Sugar: It’s not you. I don’t want to mention any names but you know very well who controls where the money goes in outdoor [media]. I think there was once a government investigation but it got dropped. A [brand] will come along and say they’ve got X million pounds to spend on outdoor and it will go to certain people. I’m not talking about anything illegal; I’m talking about kick-backs of extra percentages and discounts. It’s a very tough market.
Sir Martin: We should sit down and figure out a way of using that data – because we have a big data company – to make your out-of-home sites more effective. Because you sound frustrated.
Lord Sugar: It is frustrating. My team has spoken to your people many times. There’s no point naming names, but you know who I’m talking about; they control out-of-home. They are under pressure to bring in extra bonuses and things that they get from certain media owners [so] the money can’t come to us because they have to spend it with them in order to reach certain goals. That’s where the entire system is flawed.
Sir Martin: The market in China exhibits most of the characteristics that you have described and yet [digital] outdoor sites have been much more successful. I [don’t] think it is quite what you’re saying; it’s not about rebates but has to do with the fact that there are traditional ways of doing things – this is not a traditional way so it takes time for people to understand it.
Let me come back to something more general for a minute. Manufacturers are under tremendous pressure; very little growth, little inflation, no pricing power and therefore they are focused on cost and marketing budgets are being squeezed. Do you think that’s a good thing or a bad thing?
Lord Sugar: With the exception of brands such as Samsung and Apple – Apple’s margins are huge, as we know – but generally speaking margins are not enormous any more because there is so much competition on consumer products. If you look at the textile industry, the model is absolute volume. If they can generate volume, they can generate a marketing budget but the smaller manufacturers have a very limited budget. And as you said earlier, even if you can eke out a little bit of budget, where do you spend it? That is the dilemma.
Sir Martin: What we see is crowds that are far too focused on cost; you’re not going to be able to cut your way to prosperity or success, you’ve got to grow the top line. That’s the thing that worries me the most because you see people completely focused on the short term because of the disruptors like Airbnb and Uber. Then you have the zero-based budgeters, companies such as [3G Capital, a key investor in brewer AB InBev], and then there are the activist investors [which] force people to be very short-term. You refer to companies such as Apple and Samsung because they’ve grown their top line and have innovated.
You have also mentioned Rupert Murdoch and Steve Jobs – who else do you admire?
Lord Sugar: You’ve got to go a long way to top Rupert and his mob; they are really switched on. They are top of the list as far as media is concerned. Steve Jobs was a great fellow for innovation. My other friend Bill Gates, who we used to do business with in the 1980s, is another one who is very innovative and look where [Microsoft is] today. It controls the computer world.
Sir Martin: Talking about influence; you might not know how Twitter works but you have 4.6 million followers.
Lord Sugar: I might be an old fart but I do know how it works. I don’t know how the ad model works or the financial model.
Sir Martin: Neither do they by the way. They’re constantly trying to monetise it. But do you think CEOs should use Twitter? Why do you use Twitter?
Lord Sugar: I use it to my advantage. First of all, it’s to promote things, no question of that. To advise people that my TV programme is starting next week, for example, or that my new book is [being published] or about any of my other businesses. It is absolutely shameless promotion of my businesses and then on top of that I have a bit of fun.
Lord Sugar on…
First of all, the BBC is tremendous value for money. When you consider the new age we live in, everybody has an internet connection that costs £30 a month, everybody has a Sky or Virgin [TV] subscription at another £50 a month. What you’ve got from the BBC for £12 a month is an amazing supply of content. There are four television channels, a wonderful website which is very informative, and a mass of radio stations.
But are they efficient? I say this very respectfully but if I were in charge of the BBC, I wouldn’t want to reduce the licence fee. I would say let me have that licence fee but I will give you greater programming – a lot more programming, fewer repeats and all that type of stuff. [I’d also] maybe have a think about some of the departments within the organisation that might need a little bit of shaming.
I have many followers on Twitter, so when certain sections of the media that are known to be my enemies write rubbish, I’m able to hit them straight back; not just the media but the journalist. It shames them when they get something wrong, so I love it. I ask my followers to read what the idiot has written and then I tell the truth and ask [my followers] to perhaps express their opinion to that fool. Surprisingly enough the media have left me alone for the past few years.
At home with Lord Sugar
Martin Sorrell: Do you have a Facebook page?
Alan Sugar: Yes I do but I think that’s more of a personal thing. I don’t find it as powerful as Twitter.
Martin Sorrell: What about Instagram?
Alan Sugar: No, I leave that to my seven grandchildren. I don’t get it but someone – one of the kids – will explain the difference to me one day.
Martin Sorrell: Do your grandchildren use Snapchat?
Alan Sugar: I haven’t got a clue what they do to be honest. All I know is their faces are glued to their mobile phones.
Martin Sorrell: Do they watch TV as well as being glued to the mobile phone?
Alan Sugar: I don’t think they’re big TV watchers. If they want to watch something they watch it on a catch-up situation like iPlayer or online. The viewing habits of youngsters are completely different.
Martin Sorrell: Do you use Netflix? What do you think of it?
Alan Sugar: Yes, I do. I think its quite good [especially as] they actually make some of the content themselves.
Martin Sorrell: They do. They have one of the biggest production budgets in the world. It’s amazing.
Alan Sugar: I watched [a few] series last year on Netflix. I watched House of Cards, and I think the most recent one I watched was Narcos about a drug dealer in Colombia.
Martin Sorrell: Do you watch Breaking Bad?
Alan Sugar: Oh yes, I watched that. But that was before Netflix. I was watching that right from the very beginning.
Martin Sorrell: What was your favourite series on Netflix or on that type of medium?
Alan Sugar: It would have been House of Cards. Narcos was very good also. True Detective was also a good series when it first came on but [I didn’t enjoy] the second series [as much].