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£1.7bn global ad review is creative solution to Johnson & Johnson’s money problem

July 25, 2012

It would be nice to think that Johnson & Johnson’s newly announced review of its £1.7bn annual advertising spend was driven by a need for greater creative consistency. But it isn’t.

Money’s the thing – saving it that is. J&J may be one of the world’s biggest brands, but it’s also a company in trouble. Since 2009 J&J has suffered numerous recalls in the US, mainly of its over-the-counter drugs like Tylenol and Benadryl; but the prescription and medical devices businesses have also been hard hit. All in all, it’s said to have lost $1bn in sales, partly through bad luck and mostly through sheer incompetence.

At first it was the staff – including the marketing department – who paid, by being made surplus to requirements. Now it is the spend that’s being trimmed. Judge for yourself from the officialspeak: “Johnson & Johnson is conducting a global agency review and consolidation to build greater value and deliver innovative and fully integrated solutions for our consumer brands.” Well, they wouldn’t want less innovative solutions would they? And they could hardly be less fully integrated than they are at the moment.

In truth, there’s an easy win here for the new kid on the block, Michael Sneed – who became J&J’s top marketing (and PR) officer at the beginning of this year. There could hardly be a less efficient way of running your global marketing services than the one that exists at the moment. Uncle Tom Cobbleigh and All are at the advertising trough. It would be simpler to name a global marcoms group that isn’t on the roster.

WPP has business through JWT and AKQA; Publicis Groupe through Razorfish; Interpublic through Deutsch, Lowe, The Martin Agency and R/GA; Omnicom through DDB and BBDO; and Havas through Euro RSCG. That leaves, er, Dentsu and MDC off the list.

Sneed is a company lifer who, at various stages of his J&J career, has shown considerable sensitivity towards advertising creativity. It will be interesting to see whether this natural instinct gets overridden by the all-powerful imperative of saving the company money. Don’t expect a self-aggrandising Ewanick moment – Sneed seems too modest for that. Do expect a financial deal, of the “Team WPP” or more likely “Commonwealth” variety, that dresses up financial expediency as a coherent creative solution.

The most interesting thing about this review may be the losers. If Interpublic is among them, perhaps group CEO Michael Roth will at last seek to do a deal with Publicis Groupe. The air is certainly thick with rumours to that effect at the moment.

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J&J, Hollywood and Toni & Guy – JWT hides its hat-trick win under a bushel

December 1, 2010

JWT has racked up a hat-trick of significant ad account wins on the sly recently – perhaps it’s time for that achievement to be more widely known.

One of them is the global Toni & Guy business. ‘Global’ might sound a tad hyperbolic, in view of T&G’s origins as a trendy London hair salon in the Swinging Sixties. But, hey, it’s a worldwide franchise now, big enough to sell its hair product business to Unilever for a cool $411m two years ago. Which is what we’re talking about here.

Then there’s the Kraft Euro haul. Kraft-owned Hollywood is France’s biggest chewing-gum brand. It’s a little-known fact that the French are the biggest consumers, per capita, of gum in the world – Americans excepted. Like the Coca-Cola habit, the French acquired it fairly recently, after rubbing shoulders with ‘visiting’ GIs during the Second World War.

Besides leading the chewing gum market in France, Hollywood is exported throughout Europe, to Africa, China, Madagascar, South America and Canada. Its factories are located in France and Denmark. Ironically, Kraft first acquired the Hollywood brand in 1961, but later sold it to Cadbury in 2000. It’s fair to say  the high-margin Trident gum business, to which Hollywood is aligned, was one of Cadbury’s principal attractions as a bid target. Interestingly, Kraft has just opened a new SwF14m research and development centre at Eysins near Geneva, dedicated to gum and ‘candy’. And maybe just in the nick of time, because trouble is brewing for the $23bn industry, in Europe at least. The anti-social gumminess of the discarded product is causing serious concern – serious enough for the Spanish government to decree that manufacturers change the formula. Unfortunately, the new unsticky stuff is no less controversial: it contains all sorts of chemical nasties such as co-polymer acetate – more commonly associated with glues and emulsion paints.

Last, and most enigmatically, JWT seems to have scooped a very large chunk of Johnson & Johnson’s Western Europe consumer business – worth up to £300m my sources tell me. Enigmatically, because earlier this year Omnicom roster agencies BBDO and DDB were making all the running with J&J business wins. If rumour is to be believed, the JWT windfall will be dire news for J&J’s other roster agency, Lowe – it now retains little more than the femcare creative business in London. Scarcely a consoling thought for Lowe London’s new management buy-in team from DLKW, which itself has just lost the core £25m Halifax account.


Too much marketing at the expense of quality control?

August 10, 2010

As the old adage has it, you can have Speed, Quality and Price, but only two of them at any one time. Some leading brand-owners seem to have forgotten that eternal verity and attempted to have the best of all worlds at once – with disastrous results, according to a thought-provoking article by Jack Neff that appeared in Advertising Age this week.

The gist of Neff’s thesis is that a number high-profile brand catastrophes over the past year – such as those afflicting BP, Toyota and Johnson & Johnson – are essentially attributable to management’s decision to spend too much on marketing and too little on quality control. He contends that the savings on so-called “operational efficiencies” and slashed R&D budgets are ultimately suicidal, because disasters of the above magnitude can undo – overnight – years of patient brand-building, perhaps irrevocably.

Not everyone (by any means) agrees that the fundamental cause of these disasters was the diversion of necessary funds from product enhancement to the marketing budget. For example, J&J’s baffling series of product recalls, and the corporation’s manifest incompetence in righting them swiftly, arguably has more to do with the acquisition of pharma giant Pfizer in 2006 and the botched restructuring that followed than the rechannelling of excessive funds into marketing.

Nevertheless, the article poignantly highlights the limits of marketing when unaccompanied by due managerial diligence.

BP spent five years, and colossal sums of money, building itself into “Beyond Petroleum” – the greener alternative among oil companies – only to cause one of the world’s worst man-made disasters. How much managerial incompetence was at the root of the disaster remains to be assessed, but the suspicion is plenty.

Toyota, which built its brand reputation upon reliability and quality, has now had to recall over 9 million vehicles. It has lost ground, perhaps permanently, in consumer brand quality rankings and done great damage to its corporate integrity by engaging in a series of unappetising cover-ups designed to hoodwink its customers out of legitimate redress.

J&J was once a byword in textbook crisis management, after it brilliant handling of the 1982 Tylenol cyanide scare. Today, it faces federal hearings over its mismanagement of much lesser recalls. Its shiftiness in addressing an avalanche of quality problems has been a gift to the own-label OTC drugs, personal and household sectors.

These are merely some of the most prominent examples. Procter & Gamble itself has been experiencing a significantly heightened number of product recalls (albeit not of the same order) at a time when its main response to intensified competition has been to increase the global marketing budget by a massive $1bn to $8.6bn. Wall Street was not amused by the announcement.


BP brand plunges from Deepwater to Ground Zero

May 11, 2010

I’m beginning to feel sorry for Andrew Gowers. Having had an exemplary career at the Financial Times, he had the misfortune to become its editor. In the wake of a complex and expensive libel case, he was ‘let go’  by senior management in 2005. With contacts like his, why worry though? A glittering future in PR beckoned.

And so it proved when he became head of communications at blue-chip investment bank Lehman Brothers London. How was he to know that, in two  short years, he would be at the epicentre of the global financial meltdown? Never mind, pick yourself up, dust yourself down and move on to…BP. Weeks later, the Gulf of Mexico explodes into uncontrollable life.

Avoiding reference to Jonah, I’ll confine myself to the observation that, for a man with Gowers’ peerless experience of crisis management, he seems to have been pretty slow on the uptake. Yes, he’s been indefatigable on the airwaves, mainly pointing out that it’s not all BP’s fault. Which it isn’t: try the Swiss-based company which leased the rig to BP, and the US maintenance outfit which passed the defective shut-down valve as fit for purpose. Also, BP is only a two-third investor in the oil well. But no one wants to hear about that; certainly not President Barack Obama and the American people.

What Gowers, and his colleagues, conspicuously failed to do was mobilise their chief executive fast enough. The oil rig explosion took place on April 20. BP may not have known the leak’s rate of flow, but it certainly knew this was a very serious industrial accident indeed. Yet it was not until three days later that the company released its first statement from group ceo Tony Hayward and, as far as I can make out, not until May 3 that Hayward himself made a broadcast public statement.

Did it really take that long to determine this oil spill is quite possibly the worst man-made ecological disaster to date? Not in the minds of journalists who – like nature – abhor a vacuum, and fill it with speculation. And not – crucially for any crisis management specialists these days – in the social media space, where any half-way decent speculative theory gets magnified a gigafold. Does Gowers or BP viscerally understand this? I suspect not. Until very recently, if you had looked up “BP Oil” on Google you would have found hundreds of references to the incident – on blogs, Twitter, YouTube and the rest, but almost none seeded by BP itself. Does BP imagine its investors take no notice of all this? £19bn knocked off the share price suggests otherwise: they will get their information wherever they can.

Credit where credit is due, Hayward is now cleverly framing the disaster as a common threat, with BP in the front line of resistance. His language has an appealing Churchillian ring to it. But the initiative may already be lost.

Of course, from a corporate standpoint, BP’s caution is entirely understandable. Make light of the disaster while it is still unfolding and it projects an uncaring image which will do endless damage to the brand later. Rash admissions, on the other hand, will expose it to years of litigation, with its toll on management focus and corporate profits. No one knows this better than Hayward, who has spent three years cleaning up the company’s reputation and settling claims after the March 2005 explosion at  BP’s Texas City refinery, which killed 15 workers and injured about 170. Corporate negligence ill fits the image of a company that has struggled hard to position itself as environmentally friendly with a cuddly logo and a $4bn alternative “Beyond Petroleum” energy initiative.

And yet all that misses the point. The speed of mass communications these days no longer permits – if ever it did –boardrooms to dictate the pace of events. Another fine example of crisis mismanagement, admittedly on an infinitesimally smaller scale, reinforces the point. Johnson & Johnson is rightly considered a model in consumer marketing circles for the way it dealt with the 1982 Tylenol scare, in which seven people died after some pain-killer capsules were laced with cyanide. But now it has come a cropper, after the US Food and Drug Administration warned that some of its proprietary over-the-counter medicines for children (including Tylenol) had too much active ingredient in them, and thus failed to reach the acceptable public safety benchmark.

Although there is no evidence of anyone being harmed, and J&J acted promptly and efficiently in organising a voluntary recall, it failed to explain itself to anxious parents, who have become increasingly restive. They quickly availed themselves of Twitter, Facebook and various parenting blogs to express their frustration at not being able to get a straight answer out of the company about what was going on. This is only the latest of a number of poorly explained recalls, which could have catastrophic knock-on effects for the company’s reputation. As one parent, quoted in the New York Times, put it: “Another recall for baby Tylenol. Well no more baby Tylenol, back to generic brand.”

Although J&J can scarcely blame the forces of nature for its self-inflicted disaster there are, nevertheless, parallels with the BP situation. In both cases, the companies seem obsessed with procedures and asserting internal control, which conveys the unfortunate impression that cover-up rather than communication is the ultimate agenda.

As I commented in my blog post on the Maclaren baby pushchair crisis last autumn, a bunker mentality is the default company reaction in these situations, and it’s actually disastrous. True, some crises are worse than they seem; acting upon them could aggravate their severity, whereas left alone they may quietly subside. But can you really afford to take that risk? Suppose this is the big one, the corporate reputation-wrecker?

Whatever you do, don’t hide behind PR flunkies and hope it will go away. Get the chief executive out there early, personally engaging with the media. Maclaren didn’t do that, with disastrous results for sales in its main market, the USA. BP and Toyota eventually did, but I bet they wish they had wheeled them out earlier.


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.


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