Matthew Freud and the rise and rise of PR

April 30, 2010

The other day, I noted the CMO Council’s belief that management consultants such as Deloitte and Accenture are invading traditional ad agency terrain, thanks to their superior grasp of customer data capture and manipulation.

But in truth, it’s a pincer movement, in which the PR industry provides the other arm. I’m indebted to my old chum Stephen Foster for drawing attention to an interview with Matthew Freud, the doyen of PR and founder of the eponymously-named PR outfit, in his trade paper of choice. Here are some interesting excerpts:

So can we say that PR has finally moved up the marketing food chain?
“Ten or 15 years ago CEOs used to know the head of their advertising agency, but now our peer group has emerged as the strategic advisers of choice in marcoms. Clients are also now saying the best idea wins, rather than simply accepting their advertising shop as the lead agency.

“For many of our clients we are now the lead strategic or creative agency. We were certainly the lead agency for Nescafé – three TV campaigns in a row were our ideas. For Walkers, its most successful consumer-facing campaign – Do Us a Flavour – was conceived by us in conjunction with film director Paul Weiland. The ad agency AMV BBDO played no real part in the strategy or idea creation.”

AMV might have something to say about that.

Freud’s basic contention is that PR is better set up to deal with clients because it has more “rigour”, thanks to its daily dealings with cynical journalists. In his own words:

“PR – in terms of reputation management, third party endorsement, crisis management – is about as core a function as any company currently has. Reputationally there has never been a time when you can divide companies more easily into the f***ed and the nonf*** ed. There is total consumer transparency, extraordinary media scrutiny and a massive collapse of public trust in companies, governments and institutions. Reputation management is a firewall around your business. If you don’t have it, you are likely to fall over.”

Freud, the agency, is (just) majority owned by Publicis Groupe and it’s amusing to note Freud’s admiration for Publicis chief Maurice Lévy and his unvarnished contempt for both WPP and Omnicom (to whom Freud, the man, previously sold his business):

“When I did the Publicis deal, I didn’t want to repeat the mistakes I had made in the past [AMV/Omnicom]. I sold very few of my own shares and as far as I’m concerned it’s still my company… I have enormous respect for Maurice Levy [Publicis CEO]. If you compare him with his peer group, he is head and shoulders – quite literally in some cases – above them. He is my friend and partner.”

Full interview, by PR Week editor Danny Rogers, here.

Rumbol and Sleight departures flag up threat to UK-centric marketers

April 28, 2010

Are the imminent departures of high-profile marketers Phil Rumbol and Cathryn Sleight, from Cadbury and Coca-Cola GB respectively, by any chance related? In one important respect they most certainly are: both are casualties of globalisation. The corporate circumstances may be different, but the underlying cause has been the same.

Cadbury had its destiny decided for it by the deus ex machina of corporate takeover. A successful global company with a premier-league set of brands and high-octane growth prospects in emerging markets, it nevertheless had significant vulnerabilities – particularly in Europe – which Kraft was able to exploit with the seductive promise of greater efficiencies and economies of scale should the two companies “merge”.

Coca-Cola has reacted to similar cost inefficiencies in its mature European operations by embarking on an internally generated “rationalisation” programme which will reduce its ten existing European business units to four. Coke is in no way a potential takeover target, but may well be reacting to investor pressure.

In the words of Dominique Reiniche, president of Coca-Cola Europe: “The changes we are making will simplify the way we operate in all areas of the business. This will drive efficiency by enabling us to be faster to market and to increase the scale of our activities across Europe.” He does not mention shareholders, but we can be pretty certain they will be gratified by the extra margins generated. Perhaps coincidentally (given his hostility to the Cadbury bid), Warren Buffett – near enough the world’s wealthiest man – is a significant investor in both Kraft and Coke.

One side-effect of both company restructures has been to subordinate national marketing units to a new pan-European marketing management team. As will be seen, that has implications for ambitious UK marketers – not all of them positive.

In the Kraft/Cadbury case, things could have turned out well for Rumbol had he chosen to toe the new corporate line. Far from being made redundant (unlike many senior colleagues), he was slated for promotion to a new pan-European marketing role. The only problem was (so we are told), Rumbol’s new job would be based in Zurich and he did not wish to relocate his family there. So, he hasn’t… What may also have troubled him was that the new role was in some ways more narrowly defined than his present one. Its remit was chocolate (now under the auspices of former Cadbury executive Tamara Minick-Scokalo), to the exclusion of the gum and boiled sweets sectors.

As for the role of Coca-Cola GB marketing director – Sleight’s fiefdom since 2006 – it has been axed. The function will now be folded into a broader role operating out of NWEN, the new pan-European unit consisting of Iberia, Germany, North West Europe and “Nordics” headed by Sanjay Guha. Guha will assume the title marketing and Olympics director, NWEN; currently he is Coca-Cola GB president. Sleight is expected to leave the company.

As it happens, I don’t think either casualty will have much difficulty finding another job. Sleight has been credited with the UK launch of Coke Zero, the company’s most successful piece of carbonates new product development in over two decades; and has also superintended the fortunes of Glaceau Vitamin Water (which, for all my reservations about its positioning, has done quite nicely thank you).

As for Rumbol, he had already made a name for himself as the Stella client, at a time when that brand still produced great advertising. What he has since done at Cadbury will, however, have immeasurably increased his credit. He helped to launch the confectionery giant’s first foray into chewing gum (ironically, one of the reasons that margin-hungry Kraft began showing an interest). And he has been the impresario behind some of the most noted advertising in recent times, to wit Fallon’s “Gorilla” and “Eyebrows”. Move over Simon Thompson (who presided over a run of great advertising at Honda, a few years ago).

I’m less sanguine about the prospects of home-loving UK marketers in general, though – especially if working in large corporations. The tide is against you, unless you’re prepared to wield your passport more freely.

PS. Rumbol may have opted out of a new life at Kraft Cadbuy, but Ignasi Ricou, president of Cadbury Europe, is to stay on. He will be president of sales, Kraft Europe, with special responsibility for gum and candy.

Maurice Lévy on course for jackpot of over £30m when he steps down

April 23, 2010

I note that Publicis Groupe chairman and chief executive Maurice Lévy has used his first quarter earnings call to confirm what we knew all along: that he is stepping down at the end of 2011. However, details about his preferred successor and his continuing relationship with the global marketing services empire he has built up remain elusive; any interested readers may wish to visit my previous post on this subject.

With more certainty I can throw some light on his likely severance payment, thanks to information that has come to hand. Lévy does not receive a pension from Publicis. Instead he will be given what is called a “deferred bonus” and sometimes “deferred conditional compensation” in company documents.

What this boils down to is a two-part payment. The first part is linked to annual bonuses received since January 2003. A sum equivalent to their gross total is benchmarked against performance, calculated by taking the average for the last three years’s bonuses and comparing it with the average achieved since 2003. If the figure is less than 25%, Lévy gets nothing; if it’s 75% or above, he gets everything; if in between, it’s a sliding scale. Still with me? Because there’s a second element. When Lévy steps down as chairman, he gets an additional 18 months’ worth of base salary, plus maximum bonus.

How does all this translate into millions of euros? Lévy is currently paid €900,000 a year, with a maximum bonus of 300% of his salary. Most years he has achieved, or very nearly achieved, this maximum. So, on current showing, that would make the second part of his severance deal worth €5.4m. The aggregate bonuses, according to Publicis, so far total just under €12m, but outside estimates put them far higher at €17.6m – and of course, there is still 2010 and 2011 to go. In 2009, Lévy – along with the rest of the Publicis executive board  – waived his bonus (notionally maximum, even in a recession); but for the purposes of the final deferred payment, it will still be counted. So waiving it hasn’t been quite the unalloyed gesture of socialist “solidarity” it appeared at first sight.

Short of using a crystal ball we cannot be sure of the performance element. But it seems likely, given the general recovery and Publicis’s sparkling Q1 figures out this week, that Lévy will comfortably achieve, or nearly achieve, the maximum. In rounded terms, adding the two elements together, that could mean a jackpot of over €35m (£30m).

Did I also mention 60,800 shares, worth about €2m at today’s values, vested in a long-term investment plan?

Seismic after-shock for Ryanair as the ash clouds clear

April 22, 2010

Now that the volcanic dust is settling, we’re beginning to see some explosive fault lines developing in the travel business. Packaged holiday companies, TUI Travel and Thomas Cook chief among them, are irate at the way the budget airlines have apparently been trying to wriggle out of their legal responsibility for repatriating stranded British tourists – while they themselves are left to bear the financial and logistical burden.

I say “apparently” because Ryanair – the largest short-haul European airline and budgetdom incarnate – has set itself up nicely by falling into its natural default role: pantomime villain. Last night we were treated on our television screens to the extraordinary spectacle of spokesman Stephen McNamara telling us that Ryanair could not, and would not, pay compensation to stranded passengers (other than the miserly £4 they might have forked out on an air fare) and it was just plain unreasonable to expect them to do so. Instead, we should blame the Civil Aviation Authority, who inflicted this phony lock-down on us in the first place, and from whom, by the way, we can expect Ryanair to extract “rapacious” amounts of money in due course for the inconvenience experienced by its shareholders over the past week.

Ryanair is a brand leader that likes to play the maverick. Its “irreverent” positioning makes me-toos, like Coca-Cola’s Glaceau Vitamin Water, look rank amateurs contending with the real McCoy. Who else but Ryanair boss Michael O’ Leary could get away with forcing his passengers to spend a penny by the simple expedient of reducing the number of on-board loos by two and persuading the airframe manufacturer to fit a lock on the one that remains? What a chuckle! And it fits the penny-pinching brand image so well.

But this time Stephen went too far. He was actually suggesting that Ryanair could break an inconvenient law – a quantum leap beyond O’Leary’s merely unethical behaviour in driving his Mercedes “taxi”  down Dublin bus lanes. That simply would not do. By this morning, O’Leary himself had announced a humiliating, if begrudging, volte face: Ryanair would be fully complying with the law after all.

However, I digress slightly. The Eyjafjallajökull volcano crisis and Ryanair’s reaction to it has opened some clear blue sky between tour and budget airline operators which astute marketers in the war-weary travel market may be able to exploit. Relentless price-cutting, which extends to hire cars and hotels as well as airline tickets, has enabled the budget airlines to turn “value for money” packaged tour deals into an endangered species – one that can’t compete on price. But, as events have proved, there’s more to a holiday than heavy discounting. Peace of mind comes at a price, and it’s one that’s enshrined in the ABTA and Association of Independent Tour Operators’ (AITO) charters, which binds all subscribers to provide a financial and logistical safety net for their clients.

If you’re flying with a budget airline, you’re on your own. That, at least, is the message Ryanair was sending out loud and clear – until the lawyers gagged it.

Two cheers for advertising agencies

April 19, 2010

Mixed messages for the advertising industry in two influential reports out today.

First the good news. Recession is definitely behind us and advertising spend poised for significant growth, according to the latest IPA/BDO Bellwether report. For the first time in two-and-a-half years, a majority of UK advertisers are predicting a return to growth in their advertising budgets. That’s not confined to digital advertising, either. Traditional media is set for a boost, although sales promotion and direct marketing continue to trail. At last, a mentality of cost-reduction seems to have given way to the notion of top-line growth.

More chilling – for ad agencies at least – is the message from the CMO Council’s annual State of Marketing survey, which sifts the opinions of 5000 senior marketers who control a collective budget of over $150bn. Apparently, clients are very disillusioned with traditional agencies’ failure to get to grips with online, viral and mobile marketing skills. So much so that they are now concentrating on bringing data capture in house, or using more specialised agencies. In the words of Donovan Neale-May, executive director of the CMO Council: “You’ve got to look at the difference between the ability to create nifty interactive campaigns and actually having customer data, which underpins everything today…Whereas before the agencies had a huge amount of influence, now the companies are going to have the insights about the effectiveness of these campaigns.” He goes on to note that the likes of Infosys, Deloitte and Accenture are moving into the gap.

So, top-line growth, but not for those with an analogue mindset.

Interpublic’s solution to Lowe London? A Wall of money

April 19, 2010

Who will put Lowe London out of its misery? The loss of its principal accounts seems an everlasting litany. To Stella Artois, John Lewis and Nokia N-Series should also be added the Beck’s account. All that’s propping Lowe London up is international business from Unilever (barring Peperami, which went last year) and Johnson & Johnson. According to Nielsen, 2009’s already depleted billings of £91m shrank to a minuscule £53m.

How to attract top talent in such circumstances – the talent that will draw in vital new business? It’s a vicious circle, from which there are only two ways for a once famous agency to extract itself. Call it a day, as Lowe alma mater CDP did long after it should have. Or buy something that will enthuse new talent and new enthusiasm.

Not surprisingly, it is the latter course that Lowe Worldwide chief Michael Wall has embarked upon. Evidence of his enthusiasm and determination may be deduced from approaches to Creston plc (owner of Delaney Lund Knox Warren); Rapier; and Dye Holloway Murray. So far, it would seem, the overtures have been unrequited. But we should not underestimate the charm of a man with an open cheque book in these straitened times; nor the forcefulness of someone who has managed to persuade cash-strapped Interpublic to cough up.

Now’s the time for you Coke folk to take a sickie

April 19, 2010

Unabashed by a reprimand from the Advertising Standards Authority last autumn, Coca-Cola’s Glaceau Vitamin Water is again courting controversy, this time with an on-label promotion encouraging employees to take a “sickie”.

Surprise, surprise, it has garnered quite a bit of “edgy” publicity – in the fun-loving tradition of the brand. Most of it courtesy of those stuffy people at the Forum of Private Business – representing self-important SMEs – who have got themselves in a lather over the £12bn that lost working days cost the UK economy annually. Even lawyers have shown an interest – proof positive that this one should run and run.

But don’t worry, all this carefree irresponsibility in the service of “irreverence” doesn’t mean a thing. We have Coke’s word for that. “This is clearly a tongue-in-cheek reference, very much in keeping with the humorous tone that Glaceau Vitamin Water has adopted with consumers right from its launch…We are not seriously suggesting people should call in sick when they are not and, on pack, we state, ‘taking a sickie is very, very naughty.'”

So that’s all right then: complete exoneration from responsibility. I’m sure the ASA will buy that one when someone contacts it with a complaint. And just to check that Coke really does see the joke in the same enlightened way as the rest of us, I have a modest proposal. Why don’t some employees at Coca-Cola GB test the water, so to speak, by reporting in “sick” over the next few days? After all, they’ve got the perfect excuse. All this atomised volcanic ash descending from the upper atmosphere could be playing havoc with our health, especially if we’re a bit asthmatic. And the beauty of it is, no one’s going to know whether we’re telling the truth or not. Just like the ever-elusive ’24 hour bug’ handily recommended on the Glaceau Vitamin Water label! That should give HR a laugh.

Silly idea, eh? Not unlike the brand’s “irreverent” posturing.

Is Asda right for Mark Price?

April 14, 2010

The two names most frequently mentioned as successors to Andy Bond – outgoing chief executive of Asda – are Asda trading director Darren Blackhurst and Waitrose managing director Mark Price.

Price would be an inspired and City-pleasing choice, given his performance at Waitrose, but I wonder whether such speculation is wide of the mark (so to speak). Let’s leave aside the fact that the ceo shortlist is very much biased towards insiders (for instance chief operating officer Andy Clarke and Wal-Mart’s David Cheesewright have also appeared on it) – and that an internal candidate would be in the Asda tradition. What would Price have to gain from such a move? Well, all right – recognition, a broader challenge and, of course, a bigger pay packet. But he could gain that anyway, if he hangs on a little longer at Waitrose. The key thing he lacks at John Lewis, and what he would also lack as a Wal-Mart employee were he to be offered the Asda job, is plc experience.

The plc issue seems to have been a catalyst in Bond’s own ‘surprise’ decision to stand down as Asda ceo after five very successful years at the helm. To be sure, relatively poor trading by Britain’s second-largest grocer during the Christmas period may have caused a bit of friction with Wal-Mart top brass as well. But if anyone thinks that was the real reason for Bond’s decision – after a preceding 15 consecutive quarters of unblemished growth – I cannot do better than quote Planet Retail analyst Bryan Roberts back at them: if Bond is leaving as a result of Asda’s recent trading “then Tesco boss Terry Leahy should be scared.”

Signs of frustration with Wal-Mart have long been apparent, for those who cared to read them. Like former Asda star Justin King – now heading Sainsbury’s – Bond was linked with the role of chief executive at Marks & Spencer; unlike King, Bond took his time in denying any interest. There has also been a suggestion that Bond resented Wal-Mart’s bone-headedness in refusing to provide the financial firepower that would have enabled Asda to better compete with Tesco through an acquisitions programme (embracing, for example, Matalan or Homebase).

As it is, Bond seems to have nicely parlayed himself into a three-day-a-week job as chairman of the Asda executive committee, from which he can consider at leisure his options in the wider business world. These include the Archie Norman/Allan Leighton portfolio route; or the more direct plc path favoured by the likes of King at Sainsbury’s and Richard Baker at Boots. One things is for certain: Bond won’t be short of offers.

Which brings me back to Price and plcs. Price, like Bond, has spent much of his career working his way up one organisation; even longer, in fact, than Bond’s 16 years at Asda. As much as anyone can be – as its first marketing director, now its managing director – the self-styled Chubby Grocer is Mr Waitrose. If he’s going to jump ship from John Lewis after all this time, he should set his sights higher than Asda.

Carter’s Digital Britain legacy may not be a wash-out

April 9, 2010

As predicted last year, the Digital Economy Bill – despite swaggering assurances to the contrary from culture secretary Ben Bradshaw – has proved a wash-out, with most of the contentious and significant proposals being axed after grubby horse-trading with the Opposition.

So, BBC executives can breathe a sigh of relief that all that bluster from Bradshaw about top-slicing the licence fee to subsidise an alternative to ITV’s depleted regional news services was exactly that, bluster.

More poignantly, the keystone in the arch has also caved in. What was the Digital Economy Bill really supposed to be about? Well certainly not intimidating a bunch of piratical file-sharers with a paper tiger of a law – both difficult to enforce and pregnant with legal prevarication over human rights infringements. But that’s all we seem left with.

If the Bill had any statesmanlike pretension at all, it was enshrined in former communications minister Stephen Carter’s cherished determination to guarantee that Britain had a first-rate digital superhighway through the imposition of a 50p a month tax on telephone land lines.

Carter: Gone, but not entirely forgotten

Like much else that Carter recommended in his landmark Digital Britain white paper published last summer, this proposal bore the hallmarks of a man who is a perceptive technocrat first and an artful politician only a distant second. Which might seem a curious verdict, given that he was chief executive of JWT by his early thirties and went on to serve (if briefly) as Gordon Brown’s strategy director.

Carter grasped that Britain’s early advantage in laying down an advanced digital infrastructure would be rapidly squandered if left entirely in the hands of the private sector. What was needed was a guiding, if discreet, hand from the state in guaranteeing the public benefits were shared by all, rather than a few shareholders involved in a squalid land-grab. A reasonably exact historical parallel can be drawn with the coming of the railways in 19th century Britain. Pioneers and entrepreneurs provided the vital impetus, but the extreme market fundamentalism adopted by governments of the day ensured that our early lead later bogged down in inefficient replication and a spatchcocked, poorly articulated national infrastructure caused by the over-competitive, under-regulated behaviour of the railway companies.

Whatever, a disillusioned Carter has contemptuously turned his back on UK politics and joined global telecoms supplier Alcatel Lucent as its marketing and communications director, based in Paris. Despite appearances his legacy as communications minister may not, however, be entirely deleted from the record. Both of the main parties have made pledges to subsidise super-broadband in unfashionable rural areas. The Tories say they will use a portion of the BBC licence fee to provide the funding, while Labour claims that, if returned to power, it will reinstate the land-line tax.

How game-changing is PepsiCo’s media alliance with InBev?

April 7, 2010

Cynics see in Anheuser-Busch Inbev’s decision to pool its US media buying resources with those of PepsiCo two wounded warriors propping each other up for support. Firepower is not the issue here; between them they spent $1.15bn on measured media (Kantar) last year.  It is their fighting efficiency which has been under par.

In other words, both parties to the deal feel they are paying the main media far too much and by doubling their negotiating clout they will extract a big dividend.

They may well be right. Media owners, from NBC to Viacom, certainly have reason to be apprehensive. Heretofore, A-B’s media buying performance – which is the responsibility of an inhouse team, Busch Media Group – can best be described as sleepy and would certainly benefit from an infusion of new energy, even if that does come from OMD – which has done an adequate, although hardly effervescent, job for PepsiCo.

The bigger question is where such co-operation might eventually lead. And it’s one for agencies, rather than media owners.

The current PepsiCo/InBev pact began only three months ago as what appeared to be a classic procurement ploy. Indeed, at the time, a PepsiCo spokesman was quoted as saying that “the consortium is not related to media costs or marketing”. Instead it would concern itself with “backroom issues” such as travel, office supplies and computers. As we can now see, the PepsiCo spokesman was not entirely candid, except in one respect. The follow-up media procurement exercise is not targeted at cutting costs so much as spending existing budgets more wisely – on such key events as the annual Super Bowl.

Assuming success in this latest initiative, what efficiencies will the consortium target next? Both companies have been at pains to exclude the possibility of advertising production or agency fees coming into its remit. But as the short history of this joint-venture already demonstrates, client assurances may not stack up to much.

Just as concerning for agencies, this trend might catch on elsewhere. Whatever next in the consolidation game? Coca-Cola and Diageo? General Motors and McDonald’s? Microsoft and Motorola?

Mind you, it’s just as possible that this new-fangled media collaboration will tumble at the first hurdle if, as may happen, Pepsi and InBev end up squabbling over prime-time precedence during the Super Bowl.

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