I’ve been thinking about utility brands a lot recently, mainly due to the extraordinarily high cost of heating and lighting my home at the moment. The thing about utilities is you only usually notice them when there’s a problem. The rest of the time they are invisible. The category trigger is usually a service issue like your broadband not working, boiler breaking or no power. So the brands involved will most likely be centred around service and recovery – if brand has been a consideration at all.
Yet, with gas and electric prices doubling and some energy firms refusing to take on new customers, the damage to their brands will be in inverse proportion to the size of the profits they will be generating. It’s the commercial paradox of our times. Why? With no competition, customer switching or need to invest in customer acquisition, the incentives to invest in their business for better service or to raise the brand’s profile are removed. There is no need to spend all that money on marketing, advertising or operational improvements. This is where cool hard finance, fixated on beating in-year targets, trumps brand building and long-term thinking.
Other non-brand businesses suffer a similar fate when market dynamics change. It’s a spiral of doom. Grow with the market, price with the market, don’t stand out from the crowd, be there to catch your share. But when the market crashes, down you go too. Cutting costs, focusing on efficiency (ROI), just investing in what you know delivers sales… pay per click, programmatic ads served at the bottom of the sales funnel. Boom. Those marketing teams will be lucky to survive in tact. It certainly won’t be fun.
I am constantly reminded how critical it is to compete in the good times, building a strong, distinctive brand, because you never know when disaster will strike.
As the tide goes out on our propped-up, low interest rate Covid economy, we are going to see a lot more wreckage on the beach of business failure.
Various marketing luminaries are already dusting down their one of their key arguments: the case for brand building in a downturn. And some lucky marketers will work in companies where that belief is shared. The evidence is strong for those who can afford it too. Continuing to spend the same, or even more, during the lean times should yield dividends in the longer term. It’s all about creating excess share of voice. But not every leadership team drinks from this fountain.
In the real world, marketers operate in businesses that are not strong brands, and never will be. Some businesses don’t even want to be a recognised brand, pouring scorn on what they see as money wasted on brand advertising in favour of short-term direct response sales. For marketers working in these companies – and there are thousands of businesses like this – the next few years will be uniquely challenging. Success will require pragmatism, commercial nous, creativity and boldness.
Basic principles of marketing
Back in 2008, working in financial services for a very large global brand, I remember my budget first being halved when the ‘credit crunch’ hit, and then, several months later, halved again. Yet, in that time we landed our most famous campaigns and transformed our marketing approach, doubling profitability in the UK. The secret was going back to first principles:
Study the P&L. Through understanding how we made money, we were able to focus on profit growth, rather than just revenue upside. We found that 4% of the business delivered 60% of the profit. Yet our marketing was pointed at the other 96% of volume. That had to change.
Listen to customers, and observe their behaviour. We spent time with our customers to understand their priorities in the tough times. We saw that all sorts of discretionary spend were reduced. Yet, some premium items became even more important. Focusing our brand on these categories provided great opportunities. It was all about understanding ‘what mattered’ to our category buyers.
Focus on a few big bets. With a quarter of the budget we had to focus our activities. We dropped several campaigns and put all our effort into one programme – with the aim of doubling that 4%. Not just for one push, but across a multi-year programme.
Invest in impact. Critically, every pound spent had to work hard. This changed channel selection and formats. Creativity and disruption became prime. Our work had to be famous – relevant, inspiring and memorable – so we could punch above our weight, and drive the behaviour change we needed.
Carry the business with you. We were open about the strategy, its commercial focus, what we wouldn’t be investing in anymore and the support we needed. We put the activity right up there as a key driver with the leadership team. We sought wide input and support from teams and partners.
Despite countless challenges and an extremely harsh trading environment, we managed to double the 4% in three years, winning countless creative and effectiveness awards in the process. But the most pleasing thing was achieving the commercial change we needed through marketing.
As I go around my cold and increasingly dark house today, constantly switching off lights, muttering about Shell Power, outrageous prices, no choice and encouraging the kids to wear three layers, I am constantly reminded how critical it is to compete in the good times, building a strong, distinctive brand, because you never know when disaster will strike. It is only then you learn what a wonderful crutch your brand can be to lean on.
Our anonymous marketer has spent years working for big brands in large organisations. They have seen what you have seen, been left scratching their head at the decisions (or indecision) of others, had the same fights. They have also seen the possibility and opportunity of marketing. In this regular series, our marketer on the inside will unpick the failings, articulate the frustrations and speak up for marketers everywhere.