Marketing Direct’s Green Marketing Conference presentation – Moving to a multi-channel, integrated marketing model

This was an important presentation to Marketing Direct's Green Marketing Conference sharing the progress that Capital One had made on creating a more sustainable, more effective, integrated and multi-channel marketing model.

Marketing Direct's Green Marketing Conference 2008 presentation on sustainable marketing model at Capital One

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.

‘It’s fascinating work’ interview in the Independent when working for Added Value, the marketing consultancy

'It's fascinating work' Interview with Justin Basini, brand development, the Indpendent