NEW INNOCENT LABEL

Lots has been written about the selling out of around 20% of Innocent to Coca-Cola for £30m.

I found this on the internet which is prototype for their new line “Not so” innocent. Click on it to read the text – I love the “We sold out 20% of our company, and 100% of our values. We’re working on the rest!” OUCH! Their faux, down to earth copy has always grated on me so I enjoyed this label.

Given they have positioned themselves as “innocent” and “pure” then selling out to a major multi-national who makes highly calorific and artificial drinks is somewhat of an interesting move. Many of their consumers clearly feel let down. It is worth reading David Taylor’s Brandgym blog entry on the issue which makes this point well. They have destroyed a significant basis of trust in their brand and ethics of their company.

Whether you agree or disagree with their decision it is clearly a PR disaster which they have seemingly managed poorly. Despite the acres of comment they have not been actively defending their decision which is strange because they are good at managing positive PR – maybe in their hearts they know they have sold out. You can read their letter on the Innocent website.

Here are a couple of paragraphs:

“Basically, we’re dead excited about the investment. The funds raised allow us to do more of what innocent is here to do – get natural, healthy stuff out to as many people as possible. And the money raised is going into the business to fund our European expansion, so we can get innocent out to more places (none of the cash is being paid out to the shareholders; that desert island will just have to wait).

The three of us who set up the business will continue to run and manage innocent. We will be the same people making the same products in the same way. Everything that innocent stands for, remains in place – to only produce natural, healthy stuff; to push hard for better quality, more socially and environmentally conscious ingredients; to find more efficient and environmentally friendly ways of producing and packaging our drinks; to support charities in the countries where our fruit comes from; to have a point of view on the world, and to not take ourselves too seriously in the process. In fact, this deal will simply allow us to do more of these things.”

Apart from that ingratiating tone, the thing that I think the founders don’t get is that in many ways their decision to take Coca-cola money changes our perception of them fundamentally. They might be the “same people making the same products” but whereas we all thought before they were a values led company that had set out on a mission to be (almost) an “anti-Coke”, we now see a more accurate view of their motivations and how far their principles and values go. And unfortunately whilst we are left with a more accurate view of the “same people”, its not what they set out to convince us they were and that’s disappointing. We feel misled, and let down. Ultimately I want to know the truth about people and hold accurate perceptions so I feel better that I know that Innocent is not as innocent as they purport to be – it probably won’t stop me buying their drinks but will make it a less satisfying purchase and opens up the way for a company who really “walks the talk” to steal my purchase from Innocent.

Feel free to share, tweet, follow and comment.

Have fun.

Justin

http://www.basini.com/

http://www.justinbasini.blogspot.com/

www.twitter.com/justinbasini

The Big Trust Debate – “This house thinks that restoring trust between consumers and financial services providers is a lost cause.”

Financial Services Forum Members Conference: 25th March 2009

This speech sent me on a journey to ultimately writing my book about brands, business, trust and social capital. 

Why Should Anyone Buy From You? Trust in business and brands

 

The Big Trust Debate: Opposing the motion

"This house thinks that restoring trust between consumers and financial services providers is a lost cause.”


Thank you to the team at The Financial Services Forum for organising this debate, and for the privilege of opposing this motion. I’d also like to thank Ian for his spirited, if misguided, defence.
 

DEFINING TRUST

So trust – what exactly is it? Do you trust me to make this speech? Do I trust you to look after my money or investments? As an industry what is our reputation, as trustworthy, reliable bankers or evil, scheming, wankers?
 
I believe resolutely that we must reject the motion that “restoring trust between consumers and financial services providers is a lost cause.”
 
I’d like to explain why I believe this motion is flawed from two perspectives: the conceptual – that trust is so important to our economy that we cannot let it go; and from a very practical perspective that there is much we can do to improve trust in our industry and so it is far from being a lost cause.
 
Defining trust is a complex issue. It is hard to measure. I don’t agree with defaulting to the overly simplistic, dictionary definition that Ian used in his opening remarks. Adam Smith knew that trust was a key economic currency; it wasn’t luck that The Theory of Moral Sentiments, in which trust is writ large, enabled the Wealth of Nations
 
There are many models of trust: some behavioural, some transactional, some genetic. But what I believe is that we need a practical and pragmatic view of trust that we can apply to our industry and businesses – a model that can help us drive positive solution- oriented action at the tactical and strategic level.
 
I’d like to define three words today: Trust, Trustworthiness and Reputation.
 
Firstly Trust.Trust depends on the existence of risk – if something was certain there would be no need to trust. Trust depends on interdependence between actors – if there is no dependence there is no need to trust.
 
Therefore I would like to define trust as a relationship.
 
I trust someone in relation to a specific action or situation. For example, I may trust Ian to conceive a terrific advertising campaign for me, but if my heart fails I do not trust him to perform heart surgery on me.
 
Secondly, Trustworthiness which I will define as: The intrinsic absolute value of how someone will act in given specific action or situation.
 
Each of us have different absolute levels of trustworthiness intrinsic to our being and the situation we find ourselves in. Finding a £20 note on a bus, for example, some of us might pocket the money, others might hand it in. Therefore as trustworthiness as an absolute, intrinsic quality, it is separate from the perception for trustworthiness which is an aspect of reputation.
 
I am sure we all remember the recent problems that the House of Lords has undergone with certain members being accused of taking inducements. Previously, the Lords has a reputation for trustworhiness that has been shaken. But importantly their intrinsic trustworthiness, be it high or low, has not changed, we have just readjusted our perceptions in the light of new information.
 
These three concepts inter-relate to guide the decisions that we make as people to place our trust within others.
 

THE ROLE OF TRUST IN OUR ECONOMY

So keeping these definitions in mind let’s take a step back and look at the role of trust in our economy, business and brands.
 
Adam Smith believed that certain virtues, such as trust and a concern for fairness, were vital for the functioning of a market economy. The very basis for enlightened self-interest, through division of labour and the specialisation, and ultimately the professionalisation of tasks, is built upon our ability as human beings to trust and be trusted.
 
Before the rise of the free-market we would have grown the grain, then ground the grain and then baked the bread for ourselves relying on our own ingenuity and skills. But now we trust in the farmer, the miller, the baker, and with industrialisation, across national and global markets, we trust evermore in concepts, often called brands, because these professionals are strangers to us. What allows this system to work is our ability to trust not blindly but intelligently not just in those performers but also the system that monitors their trustworthiness, and ultimately allows them to build a reputation for good or ill.
 
This trust is good. It facilitates free-trade, lowers transaction costs, and creates employment. It feels good – inspiring loyalty and building morale. It is built most powerfully through personal interaction and familiarity. And is it fragile and asymmetrical taking a long time to build but can be broken by one quick act.
 
Professor Christine Ennew, from the University of Nottingham has shown through the work of the Financial Services research forum, that trust is alive and well in the way customers think. And given our economic model this is surely unsurprising. In the Trust Index survey many institutions were well trusted with a mean score of 72%. Banks and other financial services providers were amongst the most trusted institutions, scoring more highly than the NHS who scored 55% and the BBC who scored 58%.
 

DIFFERENT LEVELS OF TRUST

TRUST IN FINANCIAL SERVICES

Now to us working in the industry this might seen counter-intuitive but should it be? Well, I think most of our customers trust us to do the basic, commodity functions of our businesses well. The ATMs work, statements mostly arrive on time, salaries get paid in, bills get paid, savings are safe; when you crash your car the insurance nearly always pays up; when you get a small piece of plastic out of your wallet to pay it almost always works perfectly.

Unfortunately however given the recent issues in the global financial market cracks have appeared at even these most basic levels of trust. Witness the run on Northern Rock and those customers queuing didn’t even have this very basic level of trust. In the actions that the government took with Northern Rock and more recently, RBS and Lloyds TSB, trust in the system has had to replace trust in our individual businesses.
 
However even if you believe that we are still trusted at some basic level this feels inadequate. These feelings, I believe, come from our need to be respected, perhaps, a craving for deference long past, we want our customers to see us as trustworthy.
 
But the average UK consumer, doesn’t think we are trustworthy. For many, if not most consumers, financial services providers are seen as a “necessary evil”. How many times have we heard in focus groups – “better not to move because better the devil you know.” The average consumer thinks that if the average banker can have one over on him, he will.
 
Is our poor reputation for trustworthiness deserved? Is Fred the Shred the exception, and actually our industry is just a story of hard- working, decent, ordinary folk?
 
At a surface level, especially for those of us that are marketers or responsible for communications, we have a lot to answer for. We spend much of our advertising budgets either pillorying each other or trivialising. My recent campaigns at Capital One have been about parodying the uncaring “bank manager”; Nationwide’s advertising has more famously featured the stupid and dishonest bank manager leading the consumer to the conclusion that trusting a bank would be madness. We see the flim-flam of a Barclaycard Waterslide or Halifax pushing a shallow inducement to switch bank accounts for no other reason than a £5 a month cashback.
 
But are the issues that undermine trust more than surface communications? We need to ask the toughest question: is our poor reputation for trustworthiness actually a reflection of the truth. The consumer sees:
 
Personal pensions mis-selling, endowment mortgages that don’t cover original principles, Equitable life, PPI fines, split capital investments,
125% mortgages, call centres moving off shore, exposes on pressure selling in bank branches, Sir Fred Goodwin taking his pension, Lloyds TSB paying out bonuses. The list goes on and on.
 
Bad practise cannot hide, and will be magnified by an unbalanced media. Transparency and access are the largest consequences of our information rich age. The internet and modern communications has delivered a level of transparency, speed of information flow, and access never before encountered by our businesses. Our customers have many more ways to interact with us, find out about what we are doing and share this information. We have taken the cost-savings, that
the information age has offered: internet and telephone banking, has replaced the bank manager, application forms for credit signed in front of representative of the lending institution have been replaced by “one minute response” internet advertisements and web forms. All of this has depersonalised banking and broken many of the human relationships between our businesses and our customers.
 
The frightening, or is it liberating, thought is that maybe the much discussed “collapse of trust” in our society, is actually a re-calibration to a more accurate view. If our politicians, our churches, or ourselves aren’t worthy of trust then why should we expect it to receive it. The age of blind faith has been destroyed by the information age.
 
Sadly however the result of this transparency, information flow, together with an unbalanced media, often leave the consumer in the worst of all possible worlds, confused, unhappy and dissatisfied but still dependent.
 

RE-EXAMINE OUR BUSINESSES

In order to restore trust we need to re-examine the way that we run our businesses. The complex basis upon which we have generated profits, built on capital markets and financial engineering, will I suspect be less favoured going forward. What I hope can replace it is a return to the fundamentals. Understand your customers needs and wants, build a business model that makes you money when the customer uses the product to fulfil that need, communicate in a compelling way and deliver on what you say you will deliver. This is the basic formula for trust in any market. If we do it the consumer will trust us more.
 
We need to look as an industry at a commonsense regulatory framework which is easier for the consumer to understand. For example going back to a separation between consumer finance and investment banking would make sense to the consumer in a world where they don’t want bankers “gambling with my money”. This will help restore trust.
 
I hope that we can work with our regulatory bodies, our customers, perhaps even the media, to forge a new concept of communication that leverages and manages the information rich age we now live in. We should put the consumer back into a relationship where they feel more comfortable and happier with the products and services they use, understanding of both their opportunities and limitations, empowering them to make good decisions for themselves in an open and transparent market. Whatever you think of Martin Lewis and his Moneysavingexpert.com, he has proved that with compelling content targeted at a key need – saving money -engagement in understanding financial products can move into the mainstream, according to his website his weekly email covers nearly 1.5m people.
 
I think we also are seeing more positive changes that will help to rebuild trust. For example the trend in call centres moving offshore has become more balanced with many more of us choosing to repatriate or invest in new UK facilities such as Abbey, Esure and HSBC.
Or changes in the way that we communicate, there are many more attempts, irrespective of whether you think they are good or bad, to present positive benefits, such as the recent Natwest Employee based campaign or the Co-operative talking overtly about their values.
 
Some have said that actually we should ensure that financial services providers are not trusted so that it will keep us on our toes. But actually I think this drives a negative “gaming” approach to making a profit where the consumer feels like they need to game the system and we are forced to create business models where loyal customers pay for those that game. This is well exemplified by the Balance transfer market where customers who stick around effectively have to pay in higher interest rates to pay for those that switch constantly.
 
The trust rejectors say reduce everything down to price, then leverage the comparison tables on, for example, Moneysupermarket. Here lies the path to fully commoditised financial services with little or no ability for us to generate a fair return for servicing customers well and
earning their trust and loyalty.
 
An alternative might be to work together as an industry together with government and the FSA to build an approach that can step change the level of customer empowerment. Moving to a more open and transparent dialogue; investing as an industry to support an educated, empowered consumer. Starting to build back in a face-to-face relationship with our customers that allows trust in us as individuals within an enterprise, rather than just the faceless brand.
 
And for those brands that succeed in restoring trust, perhaps winning some respect and a reputation for trustworthiness, a more open and transparent market will deliver increased preference and ultimately greater demand.
 
Attempting to address these big issues as an industry in concert with others will help to restore trust and clearly indicate that it is not a lost cause but rather a source of profitability for the coming years and decades.
 
So in conclusion I believe that I have outlined to you why I believe that restoring trust is fundamental to the strength of our industry; and given concerted and co-ordinated action, whilst not denying that it will be difficult, it is certainly not a lost cause. Therefore I would strongly urge you to reject the motion before us here today.
 
Thank you
 
 

Closing speech: 5 minutes (3 minutes written, 2 min for specific rebuttals)

I am struck as I have listened to today’s proceedings by the genuine sense that we are at a turning point in the development of our economy and our industry. It is undeniable that trust is an important source of support to our free-market economy. When trust goes out of the window, as has happened over the past couple of years, the system comes under threat of collapse.
 
However we must recognise that today we live in a flatter society. The age of deference has gone. Whether we like it or not, transparency and the view of the man on the street is more important than ever. We are seeing a democratisation of everything from information, to tools, to access; and this includes financial services.
 
And so in the confusing and changing world how do we respond? In my opening speech I hoped to give you a sense of some of the, perhaps difficult, but commonsense, moves that we could make to restore trust and therefore conclude it is not a lost cause.
 
But over and above these steps I think we need to reframe the challenge from the fatalistic and somewhat lazy – “is restoring trust a lost cause?” into one that puts restoring trust as an imperative to a new conception of the role of financial services providers in our society.
 
Through the crisis we are currently experiencing we have an opportunity to recast the financial services industry as a creator of social good, not just through tax contributions, and profit to pension funds, but directly through our innovation.
 
The issues facing us today as a globalised society are bewildering: climate change, peak oil, water crisis, natural resource depletion, all underwritten by uneven wealth distribution, poverty, crime, conflict, increasing urbanisation. These issues are moving more quickly and in a more interrelated way than ever before – it is often frightening.
 
We have the opportunity to move away from an age of naked consumerism to something more balanced and sustainable perhaps putting individual happiness first.
 
Imagine a world where a conversation in the bank, with a bank manager, could actually assess whether a credit card to fund that new purchase, or a stretching mortgage to buy that bigger house, were actually discussed in a holistic context putting individual happiness at the heart of the discussion.
 
On the strategic level how do we use the unbelievable talent of our financial innovators to contribute to the solution of world problems whilst also turning a profit. The European Carbon Emissions Trading Scheme and the futures markets for protection of Amazon land, are all examples of financial markets contributing solutions.
 
Old and new models that are more sustainable and built on trust are being actively explored. Alastair Darling has signalled in favour of mutual societies and credit unions. Grameen Bank, banking for the poor, has built a healthy business in Bangladesh, built on trust, accountability and creativity.  Zopa, the internet marketplace for loans from individual to individual, has created a growing business built on a new model, bypassing the banks, which sees lower charge offs for a given risk because of the accountability and trust they have built in their system.
 
And whilst this broader call to arms might seem ambitious and demand too much change, we have no choice but to change, for the model we have run over the past 25 years has delivered crisis and collapse. The choice is what to change into.
 
After all is said and done what our customers will trust are organisations that have values communicated through their actions, run by accessible and open people, businesses that value their loyalty, and seek to create profit by creating products which meet their needs transparently. They will trust brands that communicate openly and positively about the many benefits we provide. They will move from basic levels of trust when our businesses start to play for higher goals.
 
Far from being a lost cause, we have the exciting opportunity to respond to this crisis by putting trust at the heart of our actions in the coming years, both tactical and strategic, balancing both the practical and the pragmatic with new concepts.
 
The first step in what will be a long journey is voting against this motion before us here today.
 
Thank you.
 
 

TRUTH IN ADVERTISING

This is a fabulous video which is worth kicking back and watching for 10 minutes or so (not when you should be working!).

Of course its not true. This is not how the process works – is it? Hopefully not in my team at least! Others may correct me!

Comments welcome as always!

Justin

www.basini.com
www.twitter.com/justinbasini
justinbasini.blogspot.com

WHY DOES MARKETING LACK CONFIDENCE

Spoke at a conference this morning for the IBDG. This was a conference for Marketing Directors from different industries and sectors. Humbling to address. Enjoyed it as always.

Title of my talk was a little wierd:

Delivering a clear ROI and being taken seriously by the business

In my preparation came across a few nice videos:

“how not to get ahead in marketing” – Hugo Gaines style (thanks to David Taylor at BrandGym for creating this – although it is not him in the video!)

Overall clearly marketing (defined holistically as discovering consumer needs and meeting them) is important now and in the future. I closed with this chart which gives a sense of what the good marketer could do more of….

Good luck to all the marketers out there – I know it feels tough but keep the faith!

Comments welcome as always!

Justin www.basini.com
www.twitter.com/justinbasini
justinbasini.blogspot.com

Defining the future of direct marketing in the UK

 

Speech at the “Profiting from Green Policies Conference”  – 9th November 2007 – London, UK

Speech starts:

I'd like to start with a test.
 
OPEN WITH GORILLA VIDEO ON DVD.
 
Purpose:
 
The effect that some of us have just experienced is a psychological phenomenon called “Inattentional blindness” and it is caused by over focusing on objects and therefore missing a major element of the picture. This is a neat introduction to the challenges facing our industry: there is a gorilla passing through our game and we need to see it.
 
I believe we are at a defining moment in the future of the direct marketing industry, our industry. We are a vibrant part of the marketing landscape of the UK. We have a lot of which to be justifiably proud but after 10 years of growth, we need to consider now how we secure and define our destiny in the next 10 years. I believe we have an opportunity in the next 12 months to do this for ourselves.
 
This is a leadership moment for me, for you, for our businesses and organisations. We need to re-orient ourselves away from threat, and fear, towards innovation and opportunity.
 
Not a focus on the status quo, but on the concept of sustainability. Compelling Need:
 
SLIDE: Consumers think we should be concerned about protecting the environment

 

As an industry we have made some progress on environmental issues but we need to do better. I believe we can’t “hold back the tide”. It is clear that the public understanding of environmental issues and associated threats has “tipped”. This is creating a ripple effect across all industries and indeed our whole society. But as we all know these issues are far from easy, both in definition and in solution. Consumers want us to take these issues seriously.
 
SLIDE: Junk mail
 
However, chopping down trees, printing marketing materials, shoving them through letter boxes, often when they are unwanted is an easy equation for consumers to understand and they react negatively. We can argue about the whys and wherefores, our use of sustainable paper sources, suppression lists and the mail preference service but ultimately the consumer is a whole lot less interested in our industry than we are. They reduce it down to its most basic.
 
These consumer concerns are having a direct effect. They force government to look at the issues with fresh eyes and look for solutions. Taking action against “junk mail” is a vote winner. If we have been slow to react to these pressures, now is the time for us to recognise this and unleash the awesome power of our creativity to solve these problems.
 
Otherwise, I believe, that we will be legislated against and continue to face growing consumer resentment of what we do. And that’s despite the fact that people will still buy things through direct marketing.
 
But more than the threat of legislation, the compelling need, is a values based issue – unless we secure the sustainability of our industry we will not be doing the right thing. The right thing for the environment, for our organisations, for our businesses, for our employees and for ourselves.

 

This is a leadership moment for all of us. Relevant gratefulness:
 
SLIDE:Uk Direct marketing is large and vibrant
 
Direct marketing is vibrant and sizeable in the UK. It’s a growing industry with some of the most creative and innovative minds understanding how to connect with consumers in new and exciting ways. The industry is estimated to be worth around £8bn to the UK economy, employing 182,000 people, generating £125bn of sales.
 
Consumers still use direct marketing. When a targeted offer comes through it is useful and they respond. As we all know response to direct marketing has been falling but certainly has not disappeared.
 
I am constantly amazed by the wonderful ideas in our industry. The deep understanding of how consumers respond and the ability to deliver breakthrough ideas are skills which many other areas of marketing, indeed other industries, could learn a lot from.
 
If we need to demonstrate leadership we can see many examples.
 
I thank Noelle McElhatton and Marketing Direct for seeing the opportunity to drive discussion and thought leadership through this conference and the materials that they are going to produce from it. I believe it is a significant contribution just to bring us all together.
 
I’d like to credit The Direct Marketing Association and its current Chair Rosemary Smith, for their work leading our industry and opening up dialogue with government.
 
Also I would like to express my personal gratitude to Keith Jones from Axciom for his leadership, vision and ideas, much of which I have used in forming my presentation here today (with his permission!).

 

And I’d like to thank all of you for giving your time to engage and take the debate onto the next level – the drive to action. Many of you will have made changes to the way that you market – reducing volumes, improving targeting, leveraging online channels, looking at different types of paper and inks – all to become more sustainable.
 
Finally, I must credit the leadership that my team at Capital One have shown, which has been a humbling and an awesome thing to see. They are driving true changes in line with our values as a business and team.
 
Value: I think there are three values upon which I believe the leadership that we need to show is founded and it is important to focus on these before we move to the action that I believe we as an industry need to take and how we Capital One are responding.
 
SLIDE:Values
 
1. The first value is one of responsibility.
2. The second value is one of accountability.
3. The third value is one of excellence.
 
Responsibility – it is important for us all to recognise and understand the impact that our actions are having in the round including, but not limited to, the environment.
 
I also believe that all of us in this room have responsibility for the decisions that our business and organisations make. There can be no more room for looking left and right, up or down, when the questions are asked.
 
Accountability. This is the area where I believe we, as an industry, have been weakest. We need to be clear on who is doing what and hold ourselves to account. When we have committed to targets we have not been clear on accountabilities, consequently we have put the achievement of these targets at risk.

 

Finally, we need to maintain our high levels of excellence in order to ensure that direct marketing continues to be a profitable marketing channel.
 
Initial piece of evidence: SLIDE:Landfill
 
The attitudes of all us, away from our jobs, are driving the changes and pressures that we are seeing. We have never been more aware of the impact of our actions on the world around us.
 
Even five years ago not many of us worried about recycling, how much waste was going to landfill, how to compost our vegetable peelings. But this has fundamentally changed.
 
SLIDE: Direct mail headlines
 
And this is the driving force behind the headlines, the government action, the movies, the Peace Prizes. In a way it is incredibly heartening that collective views are changing the world for the better.
 
And so within the context of these rapidly changing consumer perceptions our industry sent 4bn pieces of direct marketing.
 
SLIDE: Household waste chart
 
According to the National Refuse and Waste Foundation this constituted around 3-5% of UK household waste, between 750,000 to 1.25m tonnes of waste per year. About half of this was addressed direct mail with the other half being free newspapers and flyers. Paper and card contribute 18% of all household waste and as you can see is one of the bigger constituents. Of this nearly all is recyclable but the majority currently ends up going to landfill.
 
SLIDE: Forest and trees

 

Given the relatively low levels of post consumer recycled paper in current direct marketing these volumes mean up to 500,000 trees are felled to create the paper upon which marketing messages are printed. Many of us, including Capital One, have for many years used renewable paper sources which is a real step forward. However could we go further as we explore new less impactful ways of servicing our paper needs.
 
Shared context:
 
Whether we are a creative agency, a business or an organisation, these trends are important. Why? Because we have profited from the growth in our industry and we now stand at the edge of the next period of profitable growth.
 
The pressure has built but we are well placed to take action together. These trends that we are seeing are not going to go away they are building and changing the political landscape and the very society we live in.
 
I also think that making changes on a significant scale to answer such pressing concerns is a privilege not afforded to many. I am not a brave Greenpeace activist or a political campaigner. What I am is a business person but I believe that this is an opportunity for me, and for you, to make a real difference to something that really matters.
 
Credentials and Vulnerability:
 
What I am not is a committed environmentalist. My wife will tell you I have struggled with our orange recycling sacks and the whole concept of sorting rubbish. My compost heap was an unmitigated disaster.
 
I was sceptical of the case for global warming. I’m still not sure who to really believe.
 
But what I do know is that we as a society seem to be consuming a lot. You see our consumption all the time. When I visit my local tip in the last

 

couple of years I’ve started to really think about the huge amount of stuff that gets thrown away. Over time I’ve come round to the point of view that we are putting too much stress on the system. We are wasteful.
 
Personal Motivation:
 
I believe passionately in answering these challenges. It really matters to me.
 
Why? Because I believe that there is great opportunity to be taken. Opportunity for my career, for Capital One’s business and for the customers that we as a business serve. Developing a sustainable approach to direct marketing has the opportunity to create even more wealth for the UK economy, our businesses and keep more people in jobs.
 
I want to be proud of the creativity and innovation in our industry and regain the positive praise of the UK consumer for presenting great offers to them in a direct and engaging way.
 
Acknowledgement of Resistance:
 
Of course there is always going to be much resistance to change. Most of the coverage we read is about the threat not the opportunity. Change across the value and supply chain of direct marketing will be far from easy. It will require concerted effort and years of focus.
 
But the risk of inaction is bigger than all the risks of change combined. We potentially lose the ability to regulate our own industry and lose the final vestiges of good will of the consumer. Plus I think we would lose confidence and creativity.
 
Future: Declare/describe/stakes
 
So how do we move to a sustainable model?

 

I’d like to share some ideas for your consideration, and then share what action Capital One is taking and why.
 
I believe what is called for is the whole industry to understand and unify behind a clear set of responsibilities and accountabilities, including all players: agencies and clients, the supply chain, government and the representative groups such as the IPA or DMA.
 
For those businesses that use direct marketing I believe that the responsibilities are asymmetric and that we should apply higher expectations of leadership to the top 20 players. The top 20 direct mailers in the UK, and this includes Capital One, are only 0.2% of all users of direct mail in the UK but represents 26% of all volume. We, as top mailers, have the greatest responsibility and ability to affect change across the whole value chain.
 
SLIDE: Responsibilities of business
 
The responsibility of businesses should be to consider carefully their activities with respect to sustainability. Firstly to demand creative that is less impactful on the environment; secondly to ensure that the materials used are sustainable, for example using more post consumer recycled waste, friendlier inks and windowless envelopes; thirdly to drive increases in effectiveness so that volumes can reduce; fourthly, to actively promote the recycling of direct marketing through direct consumer behaviour and other ideas yet created; and lastly to share experiences and data openly to encourage others to follow our lead. Taking an active part in initiatives like the proposed Environmental Standard for direct marketing will be important signals of our action.
 
SLIDE: Responsibilities of agencies
 
The responsibility of agencies should be to ensure that they become technical and creative experts in the sustainability of ideas and materials. To maintain the highest standards of environmental design in their creativity and innovation; and to make the case for change by demonstrating effectiveness both through response and cost.
 
SLIDE: Responsibilities of supply chain
 
The supply chain must respond proactively to the changes that their clients will start to demand and to invest now to cover this demand. For example there is not enough 100% recycled paper to cover the needs of the top 20 mailers in the UK at current volumes. We need the paper industry to respond to this and similar challenges at lower cost. The suppliers to our industry also need to work with us, share ideas and engage in dialogue as our industry changes. We need to work in partnership to ensure sustainability.
 
Government has the responsibility to hold us as an industry to account but also to give us a chance to demonstrate our leadership. And of course if we don’t rise to the challenge then they have the responsibility, and would
have my support, in taking action.
 
SLIDE: Role of DMA
 
Finally let’s think about the responsibilities of our representative bodies such as the DMA. It won’t be a surprise to many of you that I hear some frustration with the DMA and the state of our industry with respect to environmental issues. Some have accused the DMA of being a “talking shop”. Well I don’t buy this. The DMA is a representative body. If we as an industry don’t drive change then the DMA can’t do it for us.
 
I see a strong role for representative bodies such as the DMA. I believe they can make a major contribution to the change that we are going to drive, by providing a co-ordination point for action across the supply chain, to be a catalyst for innovation, to be a central communication point with government and to hold us all accountable. Of these responsibilities what we lack most, frustratingly for an industry with such creativity and innovation, is ideas to make our commitments a reality. How will be meet our recycling commitments? We need to generate new ideas to answer these challenges – the DMA can help us here.
 
If we were all to act consistently against these responsibilities I think it would be a huge signal to the government and, for me, more importantly, the UK consumer that we take our impact seriously.
 
I would also advocate that these responsibilities be codified into a long term plan to secure sustainability across the supply and value chain. This plan could run for 5 or even 10 years. And this plan should be our commitment to ensuring increasing improvements in reducing our environmental impact to as low as possible whilst ensuring that we improve our marketing effectiveness and respond to the changing challenges from consumers.
 
Action:
 
Capital One is taking action and I’d like to outline the actions that we are taking to respond to our responsibilities and our changing marketing model. What excites me most about these challenges is that I believe wholeheartedly in the ability of our associates to win in the market when given a constantly changing marketing landscape. Changes present us at Capital One with the opportunity to move faster and smarter than our competitors.
 
SLIDE: The Capital One Marketing model continues to move from push to pull
 
We are cutting volumes and moving our response model to be much more integrated across the marketing mix. We are investing more in above the line communications and brand building to create medium term pull. We see response dynamics changing in the financial services industry much more towards internet and the inbound model.
 
SLIDE: Internet is now main acquisition channel for direct credit cards

 

We are investing in our internet infrastructure for both customer servicing and customer acquisition. We are setting stretching targets for ourselves to reduce our environmental impact by using electronic channels. The internet is already our primary channel for customer acquisition and will be our primary channel for customer servicing in the next couple of years with all the associated benefits of e-servicing such as lower occurrence of paper statements.
 
SLIDE: Media fragmentation.
 
We are exploring the changing role that direct marketing plays in our marketing model. Understanding the increasingly complex fragmentation
of media presents new opportunities to engage through integration. We are finding direct marketing still has a powerful role to play in acquiring customers however the role is subtly changing from an application channel to an information giving channel. We are actively exploring new pull
models of direct marketing rather than pushing.
 
SLIDE: Towards a sustainable model for Capital One
 
We have established a project to assess the environmental impact of our business in detail. This will report early next year. It will allow us to take action to move Capital One in the UK towards true carbon neutrality across our supply chain and with minimal use of carbon offsetting.
 
We have established an environmental council within the company globally tasked with raising the awareness of environmental issues within the company and with our associates. In a somewhat controversial move we removed all desk bins from our UK campuses and installed central
recycling stations. This has allowed us to cut our office contribution to landfill by 66%. In Nottingham we held our first environmental week about a month ago where 2000 associates could engage in thinking and action on environmental issues.

 

We are including recycling logos on all our printed materials as of Q1 next year and will establish monitoring of levels of recycling within our customer base.
 
Finally, I am delighted to announce, that we will be moving to 100% post consumer waste recycled paper on all our paper materials (internal and external) in Q1 next year. We have qualified these papers over the past year and the testing has been extensive. Working in close partnership with our print suppliers Williams Lea we have been able to make this move cost neutral with little reduction in quality. We tested the papers with
consumers in and out of market. We have seen no change in consumer perception of the quality of the packs and response to the move to recycled paper has been uniformly well received. We also saw an increase in response.
 
Once we have made the move we will be publishing a series of case studies where we will share much of our experiences and data freely to encourage positive change across the industry.
 
But this is just the start of our journey. We are also exploring radically different targeting models, new forms of direct mail, tighter channel integration and use of integrated media to build both our brand and get response. This will allow us to continue to use direct marketing in an effective and sustainable approach whilst winning in the market.
 
Action/ask:
 
So I’ve told you what we at Capital One are doing and I’ve outlined what I
believe are the values and approaches we should use to frame our actions.
 
SLIDE:Its up to us
 
What I ask from you is three fold:

 

Contribute ideas. Let’s use our combined creativity to come up with the answers to the searching questions that we are being asked.
 
Engage in the dialogue but always ask the question – what do we need to do.
 
Then Take action. Make changes to the way you develop and use direct marketing that make it more sustainable.
 
Close:
 
I believe this is a defining leadership moment for our industry. I believe we are presented with a huge opportunity.
A creative, vibrant, confident, sustainable future is our destiny; it is in our hands but can slip through our fingers; we must take action now to make our destiny our reality.
 
Thank you for listening and I am happy to take questions.
 
 

Moving from bands to brands

 

Has anybody noticed that the pop industry's music marketing has been getting clever, learning from the marketing big boys? 

Classical marketing and brand building – the not-so-ancient art (or is it science?) of creating consumer ‘pull’ in the selling of ever increasing numbers of essential products and services – is being employed more and more, to great effect, in creative industries. The music business is not generally known for practising these classical marketing techniques, instead relying heavily on promotion work and, for the bigger artists, formulaic merchandising to drive volume and incremental profit.  As we all know most groups fail but those who succeed tend to burn brightly and then fade into the obscurity. Only on those rare occasions where sufficient talent combines with effective marketing and hard promotional effort do enduring musical ‘brands’ get created and earn multiple hits.
 

There have always been the manufactured music brands 

Some of the Phil Specter bands, the Bay City Rollers, and the Monkees are examples, but since the late 1980s we have seen more of the charts dominated by bands whose music tends to be generic and whose differentiation, and hence competitive advantage comes from the brand associated with the band.  Certainly the happy coincidence of discovering a band of talented individuals playing in a garage or a church hall and turning them into superstars is less and less common. The days of content i.e. the music, being the most important element are long gone. And whilst context, i.e. handsome faces, cool style, and hip clothes, was always important, it is now undoubtedly the most important factor in the majority of sales in the industry.
 
The challenge is now moving increasingly from finding great content to inventing compelling brands. Put simply, an industry that was largely product driven has evolved into a market where differentiation of content is increasingly difficult making the brand more powerful. This means the skill set of the brand- building marketer has become a valuable commodity. Tried and tested approaches that have proved successful in other sectors now create valuable brands and make money, delivering shareholder value.
 

Building successful pop music brands through effective music marketing

Building successful pop music brands is achieved through the ‘manufacturing’ of bands and musical content, and has increasingly become a methodical needs-based process. Brands such as Take That or the Spice Girls demonstrate that identifying and understanding a target market and creating a pop band with essentially generic content designed specifically for that market is a clear route to success in today’s pop world. 19 Management, responsible for many big brands such as the Spice Girls, S Club, and most recently Gareth Gates and Will Young, have accounted this year for 23% of all singles sold in the UK charts in 2002.
 
Interestingly this process is becoming ever more dominant as we see every Saturday night with 19 Management’s TV shows such as PopStars and Pop Idol. However the most interesting aspect of these shows is that it accentuates the ‘discovery’ of great singers and persuades us that the ‘talent’ resides in these voices and
bodies thereby legitimising the calculated ‘marketing’ effect of these shows. Clearly, the unearthing of a ‘new star’ is one of the least important aspects of creating success. Rather it’s the ability of these shows to hold our attention for an hour, binding us to the potential brands held within them that is the most important aspect in driving sales. A shampoo bottle is important, in that it holds the product, but it only has a minor part to play in whether a consumer picks it off the shelf. Likewise consumers might suppose that Gareth and Will are an essential part in the process but in reality it is the brand built around them that drives the sale.
 
Of course, that happy coincidence of discovering a talented band in a garage does still happen occasionally but marketers have realised that they can’t just rely on this in putting cash in the bank. There is simply more money to be made and at lower risk by understanding the market and its needs, and creating products that meet these needs.
 

Employing sophisticated marketing and segmentation techniques

So if stage one is the understanding of consumer needs, segmentation and developing product, then the pop industry is racing to use increasingly sophisticated brand and marketing techniques. For example, the success of the S Club franchise illustrates several key areas where growth has been achieved by applying the toolbox of the classical marketer. From their very creation in 1998 S Club was a manufactured band aimed at a mid-teen audience. The S Club brand represented happy, carefree fun and friendship, values that appealed to the band’s target consumers and their parents. And, with seven members of the band there was a ‘variant’ within the brand to cover every type of consumer within the target audience.  Clean living fun delivered by clean living, homely individuals – the Monkees without the bite.
 
Ironically, borrowing from the Monkees, the launch of S Club employed a multiple channel strategy through the creation of a TV series, a key element that allowed the target audience to connect with the ‘characters’ of the brand. The S Club website contained compelling multimedia content and is evolving all the time to get closer to its target. The music was completely generic, sounding like so many other less successful teen pop bands, but the marketing of the S Club brand has delivered nine hit singles and three Top 3 albums.
 

Driving sales with effective music brand and marketing

So with a successful brand where does the marketer’s mind start to wander to keep those sales figures growing? An classically trained shampoo marketer would think of several options, one of which would be brand extension into a new target segment. Never before tried successfully in the pop industry, the rise of the S Club Juniors in 2001 has been a breakthrough in evolution marketing within the pop industry. The core brand franchise has been extended into a younger target audience, pre- and early-teens, by the creation of a new variant made up of eight youngsters. Recruited via a television talent search the move has had several benefits on the overall brand franchise. The S Club brand has now connected even more powerfully with a larger section of the teen and pre-teen market, allowing cross- sell opportunities. Also the creation of the junior variant has allowed the original S Club to mature musically and aim at a slightly older, more sophisticated audience. Since launch, S Club Juniors have had three hit singles and a No 5 album, proving that brand extension, if done with enough thought, works in the music industry. Suddenly a whole new world of opportunities arises.
 
The creation of manufactured brands and the associated move from content to context, while worrying to a musical purist, proves that the tool bag of the brand-building marketer is alive and well, either consciously or unconsciously, the pop world and that bands have now almost completely given way to brands. The likes of Pete Waterman in the 80s and Simon Fuller and Nicky Chapman over the last decade are marketing and brand building superstars. And what’s more, the so-called classical brand marketers can start to learn a lot from them, such as the concept of brand lifecycle. Pop managers are used to creating a great brand, taking the profits while they are stars and then the discarding of that investment when the market moves on. Something which detergent and shampoo marketers still haven’t got to grips with as we witness with the perpetual succession of relaunch after relaunch.
 
Finally what is most interesting, and concerning to some, is that we, the consumer public, are becoming accepting, either consciously or unconsciously, of the role marketing has to play in creating brands that meet our needs in whatever sector we choose to spend money. We increasingly accept that content is less important than the feelings we get from the use of that product. The focus group after the film, in which the audience says they do not like one ending and would prefer another, results in the actual creative content being changed. We vote in our millions to decide whether we would prefer our pop music sung by a 5’6” blonde or a 5’8” brunette. This phenomenon horrifies some, but it is surely an acceptance from both the marketer and consumer that what exists is a symbiosis. Whilst the ability of the marketer to uncover our needs and deliver a brand experience that satisfies these needs remains, then consumers will continue to reward their businesses with purchases. This is the most simple of marketing paradigms and is a truth that spans across industries and sectors with great effect from washing powder to pop music.
 
Justin Basini, October 2002.