Top Centaur executives Wilmot and Potter fall on their swords

May 15, 2013

Geoff WilmotIt’s a dry, spare document. But beneath the dense, printed undergrowth of Centaur Media plc’s Interim Management Statement 7464E – out on City desks first thing this morning – lies a rich speculative mulch.

Take this, for example:

Geoff Wilmot is stepping down as CEO but has agreed to remain with the business until the end of the financial year in order to implement a smooth handover to Mark Kerswell, who is now interim CEO.

Tim Potter, MD of the Business Publishing division has decided to leave Centaur. The process to appoint his successor has commenced.

Wilmot (above) has been the CEO since 2006, a relic from a bygone era called Print. Kerswell is the group finance director, imported relatively recently from rival publishing house Informa. And Potter? He’s been at Centaur almost as long as I was – which means forever. Or to be more precise, over 25 years.

The clue to the Centaur story is in the departure dates and the word “interim”. This is no carefully planned succession strategy, but a hastily cobbled boardroom putsch designed to appease the moneymen’s ire once they discover (as they now have) that all the high falutin’ promises of earnings growth predicated on Centaur’s transformational but risky £50m acquisition of Econsultancy last summer will not come to pass. Not, at any rate, in the near future.

Here’s another understated gem from the selfsame IMS:

May and June represent two of Centaur’s most important trading months, typically generating in the region of 45% of full year EBITDA.  Visibility of advertising revenues for this period still remains limited and delivery of corporate training revenues is also volatile.

Or put another way, an earnings disaster is on the way. No wonder Centaur’s share price troughed from about 47p to just over 31p this morning on receipt of the news. At all events, we doubt the dip was because share-traders were in deepest mourning for the two departing executives.

What’s gone wrong? Well, undoubtedly Econsultancy, the paid-for content acquisition, has failed to delight. Investors were promised digital steroids. What they’ve got instead is brewer’s droop: some mealy-mouthed excuse about losses in overseas operations.

Tim PotterMore seriously, disappointment over Econsultancy has formed a deadly cocktail with calamity in the print division, which is Mr Potter’s (left) peculiar fiefdom. The wheels have been coming off this vehicle for some time. No amount of penny-pinching and management delayering has been able to disguise a simple truth: the emperor has no clothes, or for that matter, coherent strategy. The promised uptick in print advertising, particularly cycle-sensitive recruitment advertising, is stubbornly refusing to come through. Scarcely surprising, really, given that the economy is dancing around the abyss of a triple-dip. But that’s no consolation for Messrs Wilmot and Potter, who must now play the role of official scapegoats.

Wilmot will be allowed to retire gracefully, through the front door, around the end of June. Potter, however, has been forced to scuttle with immediate dispatch through the dark hole of the tradesman’s entrance, clutching his P45 and the no-doubt-handsome rewards of failure. Such is corporate life.

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Why Aberdeen Asset Management wants to be the Intel of financial services

May 7, 2013

Piers Currie - Aberdeen Asset ManagementWhat’s the biggest, most successful, company you’ve never heard of? Impossible to say, of course. But a good candidate would be Aberdeen Asset Management.

It’s in the FTSE-100; it’s genuinely global. And it’s very profitable indeed, judging from its latest interim figures. Just to make the point: profit before tax increased 37% to £223m; earnings were up 43%, while the dividend increased 36%. And it manages financial assets of £212bn.

Yes Siree, the people at the top of this company are heading for deferred bonus payments that will make Sir Martin Sorrell’s look like a storm in a teacup. And, do you know what? There won’t be a squeak of dissent from shareholders.

Anonymity – outside the global capital markets – has served Aberdeen well these past 30 years. It has had little need to trumpet its wares through the megaphone of mass-media publicity, since what it does – trade in equities, fixed income instruments, properties and multi-asset portfolios – is mainly aimed at the wholesale financial market (other people sell the product on), and has little resonance with the punter on the street – unless that punter happens to be reasonably wealthy in the first place. True, Aberdeen has spent some trifling amount on a corporate ID (it looks a bit like a mountainous ‘A’) and does dispose of a £20m annual global marketing budget (peanuts for any equivalently-ranged consumer products company). But most of that money goes on getting a word in the right, expert, ear – via the rapier of PR and that trusty old ambush-marketing technique, the roadshow, rather than the blunderbuss of advertising.

Not any longer, however. This week Aberdeen is launching a global corporate branding campaign – its first since 1983. “Simply asset management”, the strap line, may not sound like rocket-science but, in fact, it is shrewdly timed. And for that, presumably, we must thank Aberdeen’s long-serving head of marketing (now group head of brand), Piers Currie (pictured above).

At a time when interest rates on deposit accounts are near zero (after inflation is factored in, you effectively pay the bank, not the other way round), investors are finding it increasingly difficult to gain a reasonably safe return on their financial investment. They must therefore turn to more risky asset classes – fixed income instruments and, more fashionably, shares. Who to trust in this treacherous financial world, however? Certainly not the universal banks – discredited bancassurance conglomerates that were yesteryear’s financial toast – who have comprehensively fleeced us of our savings, through rank incompetence, downright fraud or a combination of both.

Aberdeen’s modest proposition is that it is a narrow specialist; but within a field where it has gained great expertise and evidence-based returns. Stuff that isn’t going to be lost in the miasma of a bank’s balance sheet, and is there for all to see – should you wish to. There’s been an element of luck here, but also a good deal of judgement. When chief executive Martin Gilbert set up Aberdeen (it was a management buyout from an investment trust, which owed its name to its physical location in Aberdeen), he deliberately targeted emerging markets, and in particular the Far East, as the company’s area of fund management expertise. At the time, ‘emerging markets’ were the financial equivalent of  the Wild West. Today, they’re mainstream. Anyone without a decent chunk of his or her portfolio in China, Brazil, India, Hong Kong or Singapore is probably suffering from asset imbalance.

Aberdeen’s sweet-spot won’t, of course, last forever. But while it does, it has – on the evidence so far – a reasonable claim to being regarded as the Intel of financial services.

Which is what this corporate makeover seems to be about.


Age cannot wither them, nor shareholders vote them off the holding company board

April 16, 2013

David-Jones---Havas-007Whoever said advertising was a young person’s business? The conventional wisdom is that at 40, most ad executives would be advised to investigate a second career. And at 50, they’ll be positively clapped out and  have “post-economic” freedom foisted upon them whether they like it or not.

Superficially, membership statistics for the Institute of Practitioners of Advertisers (IPA – the UK adman’s trade body) bear this theory out. When I last looked (which was admittedly a while ago, but I doubt the demographic profile has improved), the number of members surviving their 50th birthday was a vanishingly small 6%.

But these are just the worker bees. Look at the nerve centre of the hive – the main board of the world’s leading advertising holding companies – and you’ll find that gerontocracy has never had it so good.

I was forcibly reminded of this the other day by Marketing Services Financial Intelligence editor Bob Willott.

Willott has done a demographic survey of the Omnicom main board and found the average age to be an astonishing 70. In his own words:

The oldest of the 13 board members is the chairman and former chief executive officer Bruce Crawford.  He is 84 and has been a director for 24 years. His successor as CEO John Wren is a sprightly 60 and has served on the board for 20 years.

I have yet to do the arithmetic upon the board composition of other global holding companies, but the most superficial of surveys suggests a similar age-profile, if their chief executives are anything to go by. At WPP Group, there is an evergreen Sir Martin Sorrell – still incontrovertibly ruling the roost at 68; and likely to do so for a good while yet unless shareholders go nuclear over his annual pay review. Interpublic Group chairman and CEO Michael Roth sails imperturbably on at 67, despite repeated attempts by the media to unseat him or sell his company to a rival. And at Publicis Groupe we have the grand-daddy of them all Maurice Lévy – 71 – with no successor in sight, despite repeated attempts to pretend he has found one.

All this looks terribly good for that comparative whipper-snapper, David Jones (pictured above). At only 46, the global CEO of Havas can anticipate at least another 25 years at the helm.


HSBC’s £400m global review that never was

March 9, 2013

Chris Clark HSBCSo, what was all that about? HSBC’s group marketing director Chris Clark calls a review of the “£400m” (actually rather less these days) global account late last year. Well, not exactly a review. More a series of private meetings that happen to take in the incumbent agency’s rivals at Omnicom, IPG and Publicis – just in case they have any bright ideas. No fundamental discussions take place on either strategy or creativity, because none are called for, even from the incumbent JWT.

Sniffing a rat, McCann (IPG) and BBDO (Omnicom) pull out. Late yesterday (a good time to bury news) it trickles out that WPP has, er, retained the account. But there have been a few twists of the kaleidoscope. Most salient is that outsider Saatchi & Saatchi (Publicis) will now handle the small-spending (relatively speaking) retail banking and wealth business across Europe and in Latin America. JWT is still at the epicentre, with the global brand business, but will now share the rest of the account with its WPP sister agency, Grey London.

Is this a classic piece of agency punishment meted out by the client? We still like you, WPP: but you’ve gone a bit flabby. So, just to make sure you’re on your toes, we’ll keep you on tenterhooks for a few months and then award a chunk of business to one of your rivals – to see how hungry they are.

Was it simply an exercise in cheese-paring the fees, as JWT officially likes to see it, on the part of one of the world’s wealthiest institutions?

Or is this Chris Clark desperately trying to justify his job as CMO (in all but name)? A marking time exercise, while he and his boss, HSBC chief executive Stuart Gulliver, dream up a successor to the faded strap line, The World’s Local Bank?

Because, of course, it isn’t anymore. If you rolled the market capitalisation of Barclays, Lloyds Bank and RBS together, they wouldn’t add up to that of HSBC – which remains by far Britain’s largest bank. But internationally, Gulliver has been busy rolling back the borders, with the divestment of businesses from as far afield as Argentina, Russia and Singapore. The proceeds of which were one contributory reason for the humungous profits the bank was able to declare only last week.

In the recent past, Clark has talked up the need to spend more marketing pounds on the product side (i.e., the separate bank businesses) and less on the corporate brand. One reasonable interpretation of this stance is that banks, in these bonus-bashing times, would do well to get their heads down to providing some basic customer service, as opposed to extravagantly boasting about their global expanse.

Another (they are not mutually exclusive) is that Clark and his colleagues haven’t got a clue what they should do. “In the future” doesn’t quite do it, does it? And in any case, as Clark himself once quipped, it’s more of a start than an end line.


The man who didn’t cause the world’s most infamous marketing disaster dies

March 8, 2013

edselsThe death late last month of Roy Brown Jr, aged 96, is a timely reminder of that old adage: success has many authors; failure but one scapegoat. The reality, as we shall see, is not uncommonly the inverse.

Brown was Ford’s top designer during the Fifties and it was his misfortune to be saddled with historical responsibility for one of the greatest marketing disasters of all time. The Ford Edsel was conceived in 1955, born in the 1958 model year and unceremoniously euthanised in late November 1959. In that time it had cost Ford a record $350m, the equivalent in today’s money of about $2.8tr.

Critics rounded on the controversial “horse collar” or “toilet-seat” chrome grille, in which some amateur psychologists even descried a vulva, as the car’s killer feature. Admittedly, over 50 years later, it’s hard to regard that grille as an aesthetic triumph – but, with hindsight, it’s surely no more than a fairly conventional attribute of the overblown fin-styled float-boats of the time. In any case, Brown was not ultimately responsible for the grille. His concept was a much more restrained vertical opening, perhaps à la Alfa; it was overruled by Ford engineers, who deemed it too narrow for radiator-cooling efficiency.

The wider truth about the Edsel – and the calamity that engulfed it – is that it was not just an automobile style, not just a car, but a range of cars, a new manufacturing division and, most disastrous misconception of all, a market segment that never existed.

In reviewing the consumer boom in 1950s America, Ford market “research” had concluded the car manufacturer was in need of more careful market segmentation. Its top end range – Lincoln and Mercury – was found to be competing – horror of horrors – with more downmarket marques such as Oldsmobile and Buick at General Motors. Solution: push Lincoln further upscale with the new Continental marque, which would compete more credibly with Cadillac. And introduce a new mid-market marque, the Edsel, which would slot in just below Mercury and just above Ford.

Simple, eh? Except Ford senior management then went on to commit a series of textbook marketing errors. The research was fatally flawed: by 1957 middle Americans were tightening their belts as a mini-recession beckoned. If anything, they were looking downmarket, at more value for money. Speaking of which, Ford then committed error number two, it got greedy with its pricing. The new segment competed nearly head on with Mercury, undermining the latter’s perceived value. At the same time, the bottom end of the Edsel range overlapped Ford’s better-equipped and better-value-for-money Fairlane 500.

Error number three was the name. No one had a clue what it should be, so the task was delegated to Edsel’s agency, Foote Cone & Belding – which duly obliged with no less than 6,000 paralysing suggestions, none of which quite did the business. True, four of them – Citation, Corsair, Pacer and Ranger – ended up as model names. But that still left the awkward issue of the umbrella brand unresolved. What then happened almost beggars belief. While Ford chairman Henry Ford II – a known sceptic of the whole brand segmentation idea – was abroad, the board took it upon themselves to name the marque after his father, the oddly-named Edsel – in honour of the Ford family. An unintentional hostage to fortune if ever there was one.

All things considered, the Edsel actually had a reasonable launch. It undershot expectations, but still managed to be one of the biggest model launches to date. From there on in, however, it was rapidly downhill. As the recession bit and sales stalled, the vultures began to circle. Some actually thought the styling and layout of the vehicle (which shared a platform with other Ford marques) was too conventional (!). Others criticised the range for coming up with innovations, such as the Teletouch automatic transmission selector, which were too complex for the consumer of the time. And certainly there were reliability and after-market problems.

robert_mcnamaraGetting the picture? Biffed on all sides, sales tanking; enter Robert McNamara – Hank the Deuce’s axeman. Better known to history as the man who, as Secretary of Defense, thought up the “body-count” as a means of conjuring defeat in Vietnam into victory, in the late Fifties McNamara (left) was a whizz kid consultant at Ford, who shared his chairman’s deeply-held conviction (or was that prejudice?) that Ford was over segmented, and would do well to get back to core brand values. It was death for the new but massively underperforming marque by several strategic cuts – cuts in the marketing and advertising budget; cuts in the production budget and cuts in the management overheads. The separate Edsel division was soon dissolved, but the Edsel itself limped on for a while as rebadged, retrimmed and overpriced Ford models in all but name.

And Roy Brown, the man who got blamed for it in the popular imagination? He lived to fight another day, as chief designer of Ford’s first world-car, the Cortina. Not only that, he kept faith with the Edsel, an immaculate example of which he continued to drive until his dying days.

For Brown’s estate, at any rate, the Edsel will have proved a good investment. Showroom-condition models now achieve prices in excess of $100,000.


Supermarkets should remember the consequences of the Perrier scandal

February 18, 2013

Malcolm WalkerDuring the early part of 1990, health officials in North Carolina, USA, made an alarming discovery. Some Perrier bottled mineral water, whose purity was so legendary they had used it to benchmark other water supplies, was found to be contaminated with minute traces of benzene.

Benzene is a natural component of crude oil. Ingested in sufficient quantities, it can cause cancer in humans. Of course, there was no question of that happening in North Carolina. As a Federal Food and Drug Administration official drily observed at the time: “At these levels there is no immediate hazard. Over many years, if you consumed about 16 fluid ounces a day, your lifetime risk of cancer might increase by one in a million, which we consider a negligible risk.”

But no one was listening to the FDA’s voice of reason. Panic broke out all over the USA – and not just there. Perrier, at that time world leader in the mineral water category, was obliged to withdraw its entire global inventory of 160 million bottles. Brand integrity was further compromised by the discovery that the “natural” bubbles in the bottled potion were actually added back later. Perrier never fully recovered: it lost its leadership and became just another branded mineral water, albeit still a famous French one. Commercially, the crisis was if anything even more disastrous. The independent Perrier bottled water company was, within two years, sold to Nestlé.

I think you know where I’m leading with this. Fast-forward 23 years, to a full-page ad that appeared in yesterday’s national newspapers. It was inserted by Malcolm Walker, founder and chief executive of  leading UK food retailer Iceland. Its purpose was to divert responsibility for the horse meat scandal now engulfing our supermarkets by pointing the finger of blame at cheapskate procurement in local government, the National Health Service – and its equally unscrupulous counterpart in the catering industry – which has connived at bringing down processed food costs to their lowest possible denominator. Doubtless, judging from the ensuing squawks of indignation, the Iceland boss has a point – though how exactly his tirade exonerates the supermarkets from their own ruthless manipulation of supplier lines is not entirely clear. However, Walker does not stop there. Having scored some points on behalf of his sector, he then goes on to trash it by adopting a “holier than thou” approach:

“Iceland does not sell cheap food. We sell high-quality own label frozen food that is good value. We do not sell – and never sold – ‘white pack’ economy products.” Unlike, he carefully does not add, Tesco and Asda. And, just to ram the point home, he goes on to claim that “no horse meat has ever been found in an Iceland product”.

Well, almost none. At the bottom of the ad there is a mealy-mouthed admission that 0.1% of equine DNA was indeed found in two Iceland Quarter Pound burgers. But these don’t count, because the test, carried out by the Food Safety Authority of Ireland, was not an “accredited” one, and the discovered traces of horse were “well below the current accepted threshold level” of 1%. So, yaboo sucks to any critics.

Nice one, Malcolm. You’ve managed to spread, or at least smear, the blame far and wide, and thrown into the processor just a hint of xenophobia. Ireland, Romania, France – these horse-eating monkeys, they’re not like us – not to be trusted, whatever their professions of rigorously adhering to EU-wide standards. But, leaving aside the lowly populism of his message, Walker, in waxing eloquent about the infinitesimal amount of contamination in his own burgers, has committed a revealing tactical blunder.

Perrier logoThe current food scandal is not about parts per billion contaminants found in horse meat; it’s about trust in the brand. Just like the benzene found in Perrier all those years ago, consumers would have to ingest an awful lot of horse burger infected with “bute” equine painkiller (over 500 250 gram ones, to be precise) before experiencing any appreciable side effect. But that won’t prevent them passing summary judgement on those august brands – at the head of the supply chain – that have allowed this scandal to happen: namely the UK grocery multiples.

Possibly with devastating consequences for future sales.

One interesting aspect of this scandal is that its ramifications have now moved on from cheap lines of processed meat – in short, “poor people” – to ready-made meals. In the other words, the sort of thing consumed by affluent and articulate members of the middle-class. That’s bad news even for elite purveyors, such as Waitrose and M&S.

In all probability there’s nothing to worry about. But that’s not the point, is it? My local butcher tells me business has gone gang-busters over the past couple of weeks. And for good reason. In the past, there was a perception (false, as it happens, in many cases) that local businesses could not match supermarket fresh meat prices. Now, understandably, people seem a lot more concerned about local provenance. If you must have lasagne, it’s as well to see the meat being minced while you wait, rather than trusting the word of some supermarket about the integrity of its supply line.


Neogama loses Bradesco, Omo to Interpublic – and 40% of its revenue

January 30, 2013

alexandre-gamaNot all fairy tales have a happy ending. One such is the marriage of convenience between Brazilian hotshop Neogama, its micro-network affiliate BBH and Publicis Groupe. Readers of this blog will recall that, a little over six months ago, Publicis chief Maurice Lévy bought out the 51% of BBH PG did not already own. A useful by-product of the deal was that he acquired not only BBH’s 34% stake in one of Brazil’s hottest agency properties, but the majority shareholding of its founder and creative supremo, Alexandre Gama, at the same time. Neatly, Lévy solved the creative succession crisis at BBH with the same stroke of his pen – by appointing Gama as BBH’s global creative chief, replacing Sir John Hegarty.

Alas, the deal has worked out somewhat better for Gama than for Lévy and Publicis. Gama managed to bank his cheque, but Neogama has just lost about 40% of its revenue, and two of its principal clients. Or so I hear.

It is common knowledge that one of the reasons Gama was hawking his majority stake in the first place was that he feared his agency was too reliant upon a single account, that of Brazilian bank Bradesco. Indeed, rumours soon began to surface that the bank was about to review. Well, now it has: and placed the account with McCann.

For Interpublic, McCann’s parent, Neogama’s plight is, however, a double joy. Another major – this time multinational – client has also fallen into its lap. I mean Omo (“Dirt is Good”), which has moved to Lowe.

In retrospect, we can see this was an accident waiting to happen. As is well known, PG is a Procter & Gamble agency group, and Omo is owned by Unilever. Under the status quo ante, Neogama had an element of protection from client conflict, in that BBH – itself a major Unilever network – was still majority-owned by its founding partners (i.e., Nigel Bogle and Hegarty). All that ring-fencing was swept away by the Lévy deal.

8027388763_a9feed3b19_zIt will interesting to see who gets the blame for this cock-up. My money is on Jean-Yves Naouri, the once but not future king of Publicis.

One thing you can be sure of: it won’t be the Silver Fox himself, who now seems comfortably ensconced in a permanent chairman role, despite recent protestations that he was – at 70 – on the point of retiring.


Cameron The Brand Slayer

January 25, 2013

BorgIf it weren’t for the fact David Cameron watches so little television, I would be forced to conclude he has been modelling his recent behaviour on Borg, the Viking Himbo now fronting Tesco’s advertising.

How else explain his assault on multinational brands in recent days – which has all the subtlety of Thor laying about him with his hammer after a particularly drunken binge?

Last week, it was Coca-Cola that got stomped all over, when Cameron told the House of Commons that he regarded it as his solemn paternal duty to prevent his children consuming “excessive” amounts of the sugary beverage.

This week he was at it again, telling the World Economic Forum in Davos that brands which avoided paying their fair share of corporation tax needed “to wake up and smell the coffee” – an unvarnished reference to Starbucks and those other egregious “tax dodgers” Amazon, eBay, Facebook, Google (and, er, Coca-Cola). And the tirade didn’t end there: so sick and tired is the British public of the multinationals’ fiscal chicanery that Cameron has decided to make clamping down on corporate tax-avoidance a central plank of our G8 Group presidency later this year.

Whoa, Dave. Is this your idea of a soft close? Britain shut for business before you oblige us to pull out of the EU?


Witch-hunt against corporate tax dodgers can damage jobs, as well as brands

December 3, 2012

StarbucksThere’s a grave danger that the witch-hunt against global brands who fail to pay their “fair share” of UK corporation tax will boomerang on the political class that has instigated it.

Google, Amazon and Starbucks have been chief whipping boys in an excoriating grilling by the powerful parliamentary Public Accounts Committee, headed by former Labour government minister Margaret Hodge. They are but the frontline of a phalanx of household multinational names – eBay, Facebook and Ikea prominent in the second rank – which are being prepped for humiliation in the court of public opinion. And behind the PAC’s bullying is a fully complicit Treasury – its head, George Osborne, desperately aware that falling corporation tax is contributing to the ruin of his re-election strategy.

Of course, what these brands are up to is hardly ethically defensible. To quote but a few examples, and bearing in mind that UK corporation tax on larger companies is currently levied at 24% of profits: Google claims to have a global profit margin of 33%, but its UK unit paid only £3.4m in tax last year; Starbucks paid just £8.6m on 13-year UK turnover of £3.1bn; Amazon’s UK tax bill last year was £1.8m on reported sales of £207m; and in 2010 eBay paid £1.2m in tax on UK sales of £800m.

Not the stuff of sincere corporate citizenry, and – consumer brands being peculiarly vulnerable to criticism – these companies are deservedly squirming as the rock is lifted from their unedifying activities.

But because we don’t like their behaviour that doesn’t make it illegal. Tax avoidance is something we would all get up to, if we had an army of tax accountants at our disposal. And maximising profits is one of the fundamental tenets of capitalism, as germane to the micro-entrepreneur as the multinational corporation. What hurts is the unfairness of it all. We small folk must contend with HMRC harassment, escalating fines and a brutal bailiff when we don’t pay our tax bills; big corporations, by contrast, merely cut a highly advantageous deal with the UK tax authorities who, to all appearances, are sycophantically grateful for anything they are given.

Margaret HodgeSo, what politicians are doing here is stoking the politics of envy: pitting the grievance of the many against the privilege of the few. It’s an easy populist game to play and amounts to a form of blackmail. You, Amazon, Starbucks et al, pay up or we will whip up a consumer boycott against you. Already, Osborne’s deputy, Danny Alexander, is “abstaining” from Starbucks coffee (although, in fact, admitting to only drinking tea) and Hodge (above) has knocked Amazon off her Christmas shopping list. How they’re going to hit Google in the googlies I’m not too sure, but the elements of a national campaign are there. Starbucks, for one, is already buckling and (in the words of the inevitable headline) waking up and smelling the coffee.

But wait. Enormously satisfying though this condign corporate punishment may be, could it not become a little, well, counter-productive if the trend really takes wing? Corporation tax, even if levied at the notional statutory level, makes – or would make – a fairly small contribution to the Exchequer when weighed against the other, less high-profile, benefits these companies bring to the national economy. Profitable companies create jobs, and the people who occupy these jobs pay income tax and national insurance contributions, which are of vastly greater importance as tax receipts. Though no economist, I’m tolerably certain that anyone who did the modelling would find that  ”zero-tolerance” enforcement of higher-level corporation tax is inversely related to job creation.

As for stirring up a consumer boycott, it’s merely killing the goose that lays the golden egg. Politicians, have a care.


Greed not marketing to blame for lack of trust in banks

December 1, 2012

Rich-Ricci-barclay_2266097bMy eye recently alighted upon the following headline in Marketing magazine: “Marketing ‘to blame’ for lack of trust in banks”. The article went on to say: “Senior banking executives have argued that marketing is to blame for the breakdown of consumer trust in financial services brands.”

Extraordinary. Bank officials in self-inculpation shock. I read on, avid for fresh enlightenment about the real roots of the 2008 global banking crisis. And was disappointed.

It turned out that the subs, in their eternal quest for the succinct and memorable, had been a little too sharp with their headline. The only bank marketer actually shouldering any of the responsibility was David Wheldon, now rejoicing in the title of head of brand, reputation and citizenship at Barclays Bank: and he, in any case, is a recent import from Vodafone. Furthermore, what Wheldon actually said was pretty anodyne:

“Marketing has let financial services down… The voice of customers has not been ever-present in decisions, and marketing must bring the voice of society to the table. A brand is what a brand does, and how you behave in the wider world forms whether you’re seen as a good citizen.”

Nevertheless, I think the subs unwittingly raised a very good question. To what extent has marketing been responsible for the banking crisis?

Not very much, I would suggest, when compared in the scales with systematic mis-selling and its parent, corrupt corporate culture.

The paradox about bank marketing is that, despite the vast budgets put at its disposal, no one takes very much notice of it. There are a variety of reasons for this: among them, overblown corporate claims unsusceptible to real analysis; phoney discounted interest rates showered upon the bewildered would-be customer like confetti; the perception that banks act as a cartel and are extremely unlikely to break ranks for the sake of a genuine marketing initiative; and customer inertia, which makes bank management as resistant to change as their customers.

But perhaps the most compelling reason why bank marketing is a study in failure is that the upper echelons of bank management don’t really believe in it themselves. Despite the eye-watering financial packages senior bank marketers command (when compared to industry benchmarks), only half-jokingly are they referred to as “heads of flower arrangement”; in effect they are of middling rank in the bank hierarchy. Top executives have rather more important things to worry about than the latest lick of corporate paint or flowers in the shop window. Things like the international money markets, their bonus structure, and, er, Libor.

Much more insightful on the breakdown of trust between the banks and the public than Wheldon et al speaking at the Marketing Society conference is Richard Ricci’s recent performance before a parliamentary committee. Ricci (image above, doing a passable imitation of a spiv at the races) has just been appointed head of Barclays’ investment operation. His predecessor was turfed out over the Libor scandal (for which the bank was fined £290m last June) and he has been entrusted the hapless task of cleansing the Augean stables after all the horses have bolted. Pressed hard on why he thought the banks had failed society, he admitted that they been allowed to put too much emphasis upon employee incentives to the exclusion of all other considerations:

At the top of the house, the industry, and I would say at times Barclays, was skewed maybe too much towards the financial performance and not enough towards the other areas. And so one of the pieces of work we’re doing is trying to get that balanced scorecard right around appraisals, around reward, to get all those interests aligned properly.

Greed, not marketing. Enough said.


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