Ritson on Brand

Phelps will not go to pot

2009-02-13T15:42:00Z

Open the big book of celebrity endorsement scandals, it's time to make another entry. Swimming star Michael Phelps was just having a bit of fun last November while visiting his girlfriend at the University of South Carolina when, along with all the shots and beer he consumed at a house party that week-end, he also had a toke on a bong that was being freely passed around.

Phelps had probably forgotten all about this week-end until the photo of his bong hit appeared on the cover of the News of the World last weekend.

The reaction was immediate. USA Swimming banned Phelps from competition for three months and the media reported that his lucrative sponsorship deals would almost certainly dry up.

That predict-ion came true as Kellogg announced it would not renew its tie-up with the star. The reaction of Kevin Adler, founder of Chicago sports marketing firm Engage Marketing, was typical of the expert commentators. 'Athletes are brands. If you do some-thing that runs contrary to your brand image, it will affect your ability to monetise that brand image. It really is that simple,' he concluded.

No, it really is not that simple. For starters, Phelps is not a brand. He is an athlete who, through association with brands, can confer meaning. People, no matter how famous, are not brands. Yes, they have symbolic meaning, but so do road signs and mythological gods, and no one is confusing them with brands.

It would also be a mistake to assume that Phelps' actions will damage his reputation. Outside of the pool, he is just an average 23-year-old kid from Baltimore. One of the joys of his victories in Beijing was the laid-back and normal manner in which he handled himself. I spent many of my formative years at US universities, and bongs were pretty much the norm at every party. Smoking a bong at a college party confirms, rather than contradicts, Phelps' everyday image.

If we know anything about celebrities, it is that they often go off the rails only to re-emerge after a period of reflection, bigger and more endorsable than ever. It was only a year ago that Britney Spears was committed to a psychiatric hospital, but her latest video, for the song Circus, shows her decked in Bulgari jewellery as part of a multimillion-dollar endorsement.

Celebrities screw up, but the effects are usually temporary. Indeed, in many cases, screw-ups and the recovery that follow may well increase the attractive-ness of the celebrity for future endorsement by adding notoriety and a fighting spirit to their allure.

Phelps is a case in point. What none of the media reported last week was that after he won six gold medals in Athens in 2004 he went home and was charged with drunk driving - a far more serious crime than pot-smoking. The scandal did not harm his appeal four years later in Beijing, and this latest minor infraction is equally un-likely to have much long-term impact.

In truth, even the short-term implications of Phelps' actions are not materialising. Aside from Kellogg, his major sponsors such as Hilton, Omega and Subway are standing by their man. In any case, Kellogg's condemnation is hardly a major blow. It had a six-month contract with the star that was coming to an end. Severing its endorsement a few days early in such a public manner was simply a smart (and, arguably, cynical) way of generating positive PR.

So let's close the book on Phelps. He can get back in the pool and we will see him next in London - covered in gold medals and in a sea of sponsorships.

Behave like a rat and prosper

2008-04-18T08:38:18Z

I have just started working with a new client and we have just completed the Day One briefing. This is the moment after all the non-disclosure agreements have been signed when you get a full and frank overview of the company, its brands and strategies. My client is in awesome shape. It has five key brands and I spent the day learning about each from its respective brand manager.

As I learned about them and the opportunities ahead I got more excited - until we got to the final brand. It was projected to generate healthy sales in 2008, but the more I poked, the more I started to think that, unlike its sister brands, this one should be shut down. It had limited growth options and was in a very tough category. For an hour I argued that this brand should be killed.

It may sound bizarre to suggest a brand that is selling well should be axed. It may sound even stranger to spend your first day as a brand consultant trying to kill off one of your client's brands. But marketing has changed. We no longer celebrate brand extensions and brand creation as we once did. Today, the emphasis is on 'less is more'. If you want to help a company, don't encourage it to expand its portfolio - help it to reduce it.

Look at the big boys. For the past five years, they have been dramatically reducing the number of brands in their portfolios. Kraft is in the middle of a deal that will see it sell Post Cereals (which has sales of $1bn a year in the US) to Ralcorp Holdings, a private-label manufacturer. Unilever recently sold much of its frozen-food business, including the Birds Eye brand, to private equity group Permira. Meanwhile, rumours abound that Procter & Gamble is seeking buyers for three brands that each exceed $1bn in sales - Pringles, Folgers and Duracell are all tipped for sale in 2008.

Why sell big, profitable brands?

The brown rat is an amazing creature that originated in China but now thrives all over the world. One of the secrets of the species' success is infanticide. A typical brown rat litter consists of between six and 12 pups. It is common for the mother rat to kill, and eat, several pups in their first hours. Research suggests that the mother identifies the smallest and weakest for slaughter.

This apparently abhorrent act is actually the action of a superior animal and also points the way for modern brand managers. If the mother rat tries to wean too many pups, she risks underfeeding all of them, thus leaving herself and the brood vulnerable to predators. By reducing the number she has to feed, she also rebuilds her reserves to ensure that her remaining pups get the maximum possible support.

Too many marketers grow attached to the brands in their charge and fall into the trap of assuming that every brand deserves life. As a result, all the brands in their portfolio, the holding company and the marketer's career will struggle. The growing challenges of private label, rising costs and global markets all pose strong arguments for getting more from fewer brands. If the big corporations are slimming down their portfolios because they do not have the resources to support lots of brands, you have to assume that most other organisations should follow suit.

You have limited time, money and expertise. Focus these crucial resources on as small a group of brands as possible. You have to be even more cold-blooded than the brown rat. Your question is not which brands to kill, but which are worth keeping in the first place. If that means killing off the old, the young, the weak brands, so be it. In marketing, every year should be the year of the rat.

No miniskirts? But hotpants were OK...

2007-09-25T08:41:19Z

It was a blazing hot day when 23-year-old student and part-time waitress Kyla Ebbert left her San Diego campus for the airport. She had a doctor's appointment in nearby Tucson and had a flight reservation with Southwest Airlines.Ebbert handed her stub to the flight attendant and took her seat. But as the crew started the safety announcements she was approached by a safety officer, who asked her to follow him off the plane and onto the connecting skyway. Once outside the officer told her she was dressed in an inappropriate manner and would have to return home to change before she could take her flight. Ebbert, who was wearing a tight turquoise sweater and white denim mini-skirt, was dumbfounded. 'What part of my outfit is offensive?' she asked the attendant. 'The shirt? The skirt?' The attendant frowned and said 'The whole thing.' The passenger stood her ground and eventually was allowed back on the plane on condition that she pulled down her skirt, pulled up her sweater and wore a blanket over her lap during the journey. If you work in PR, the beads of sweat have probably already started to form on your forehead; this is, of course, a brand crisis in the making. Ebbert complained first to her mother, then the local radio station and finally the story started to make the national press. The final circle of media hell was achieved last week when Ebbert, clad in her now-infamous outfit, did the Today show followed by Dr Phil. Then a second woman, Setara Qassim, came forward, claiming she had been forced to fly Southwest wrapped in a blanket after her halter-neck dress was deemed too low-cut by flight attendants. The problem for Southwest was threefold. First, it had treated two women who were dressed normally by current standards extremely badly. Second, Southwest has a strong reputation in the US as the fun and approachable airline. Its treatment of the women was not just inconsistent but directly contradictory to its positioning. Third, and perhaps worst of all, the airline looked hypocritical. In the 70s it used the strapline 'Sex sells seats' and dressed its stewardesses in hotpants that made Ebbert look like Auntie Edna at Christmas. Blogs began to erupt and the media to circle; a strong brand was in trouble. There is an almost legendary move in marketing called the Tylenol 180. It happens when a company handles a crisis in a manner so consistent with its brand that it not only recovers from the crisis, it builds brand equity and market share as a result. The move was named after painkiller brand Tylenol's ability to not only survive a tampering incident but emerge more trusted due to the way it handled the situation. In the nick of time Southwest chief executive Gary Kelly executed this very move. Live on Dr Phil, an upset Ebbert was read a statement that apologised to her and offered her two free tickets. But the manner of the apology won the day. Kelly declared: 'From a company who really loves PR, touché to you, Kyla. Some have said we've gone from wearing our famous hotpants to having hot flashes at Southwest, but nothing could be further from the truth. As we both know, this story has great legs, but the true issue here is that you are a valued customer, and you did not get an adequate apology. Kyla, we could have handled this better, and on behalf of Southwest Airlines, I am truly sorry.' The same day, Kelly recorded national radio ads announcing extra-low 'miniskirt' fares.

Crisis averted, brand restored and sales increased. A fully executed Tylenol 180 is a rare, but beautiful, thing.

Northern Rock has eroded its equity

2007-09-18T09:40:10Z

It's A Wonderful Life is one of the greatest movies ever made. In a pivotal scene, the hero George Bailey, faces a run on his family bank from worried investors convinced they are about to lose their savings.

By making an impassioned speech about community and trust, Bailey persuades most of his panicked customers to believe in the bank and not withdraw their money. At 5pm, with a single dollar left in the safe, he closes the door and saves the day.

Alas, there is no Bailey on hand at Northern Rock. Instead, worried staff were forced to call in the police on Friday, while chief executive Adam Applegarth spent Monday reassuring customers all was well, with the startled look of a man on the edge.

The financial explanation for the plight of Northern Rock is simple. Since going public, the bank has grown by cutting back its operating costs, offering low-interest mortgages to price-sensitive savers, and borrowing heavily from other banks to fund its transformation into the UK's fifth-biggest mortgage lender. There is no doubt that Northern Rock's initial problems were caused by changing credit markets, which forced it to approach the Bank of England last week. But what is really interesting is why it has fallen from grace so quickly.

It was only last Thursday morning that rumours of problems began to emerge. Within 24 hours, lines were forming and phone lines were jamming. Barely five days later, the bank and its share price were in free fall. An almost total absence of brand equity meant that when they were faced with even the smallest indication of trouble, too many customers attempted to empty their accounts completely.

Northern Rock has no reservoir of brand equity because it is a victim of its own success. Applegarth is proud of transforming his company into 'the most cost-efficient bank in Europe'. But by cutting back on branches and personal service, and encouraging customers to bank online and by phone, he also destroyed brand equity. Northern Rock was no longer Diane the bank clerk at the branch on the high street, it was a flickering cursor on a computer screen or a recorded menu choice at the end of an 0800 line.

While it's true these approaches are far less expensive to operate, they are also far less likely to build trust. When the cursor stopped flicking this week and the phone lines went dead, panic erupted.

Northern Rock is also a victim of its own successful targeting strategy. The bank has been able to grow by tempting customers to re-mortgage through its low-interest loans. This price-sensitive segment is easy to attract, but also easy to lose and reacts badly to crisis. These customers moved their mortgage to Northern Rock not because of emotion, history or relationships, but because it was cheap. Those who had banked there for decades and believed in what it stood for would have been more accepting of the credit squeeze.

The irony for Northern Rock is that, after years of destroying its brand equity, it has achieved its goal - it is trading at a huge discount to its tangible net assets. Unlike brands that add value through the intangible asset of brand equity, Northern Rock's brand is worth significantly less than the sum of its parts. One of the big banks can now acquire it for less than the value of its loan book and infrastructure, and make a significant profit in doing so. The Northern Rock brand name, of course, will be discarded. By now the only brand equity it possesses is likely to be negative.

Applegarth should be pleased. He has created a bank so lean that it will soon no longer exist.

Simple, a bit sloppy, but not stupid

2007-09-04T10:31:12Z

If you are a good marketer you've already heard of the Net Promoter Score (NPS). If you are a very good one, you know what your NPS is. If you have no idea what I am talking about, read the definition at the bottom, and then meet me at paragraph two.

NPS is a rather bold little calculation. Its inventor, Fred Reichheld, argues that a single question and its resulting score is the only metric you need to measure satisfaction. He also claims a correlation between a high NPS and future revenue growth.

And the metric has taken off. Online forums have sprung up, full of managers keen to discuss it. High-profile chief executives have publicly praised NPS and added it to their management systems. Even finance people have taken note, with several institutional investors asking for the score as part of their due diligence. But two audiences are genuinely unhappy with NPS.

The first is market research firms, which make their money from long-winded analyses of the market that are so complex they require lots of researchers to explain the findings to befuddled clients.

Clearly, one number that your mother-in-law could compute is a direct threat to market researchers and their business. As a result, many have been hell-bent on showing up NPS as being not all that it is cracked up to be. Even Nigel Hollis, one of the biggest and fairest brains at Millward Brown, concluded: 'The jury is still out. We need to see more compelling proof that NPS actually does lead business performance before we adopt it as the sole benchmark of success.'

The group even more appalled by the apparent over-simplicity and over-exposure of NPS are marketing professors - particularly those who study customer satisfaction. Publicly outraged that sloppy statistical methods and clear research bias were being accepted at face value, privately they were probably pissed off that their complex statistical analyses, which have had next to no impact on real marketers, were being superseded by a single score and percentage from an ex-management consultant who did not even have a PhD. Reichheld enraged them further by admitting his lack of interest in statistics. He calls his method 'common sense' and claims the business leaders he targets have 'little interest in advanced statistical methods'.

The top peer-reviewed marketing journals have published a slew of anti-NPS research in recent months. Most notable was the publication in July in The Journal of Marketing of a statistical analysis of Norwegian customer data. The paper, 'A Longitudinal Examination of Net Promoter and Firm Revenue Growth', shows that NPS fares no better than other measures of service satisfaction in predicting business growth. The paper tetchily concludes: 'We find no support for the claim that Net Promoter is the single most reliable indicator of a company's ability to grow.'

Who is right? Usually this column concludes that everyone bar your humble columnist is completely mistaken. But, in this rare case, everyone is right. Market researchers and academics are correct to question the lazy analysis and over-selling of NPS. But I still side with Reichheld. It may not be all it's cracked up to be, but I have seen more non-marketing executives - managers with real power - quote NPS in the past 12 months than all the other marketing concepts put together. This concept is making senior people think about where the money comes from. Not balance sheets, products or sales, but what really drives the business: the customers.

And anything that gets managers to think about customers and their needs is a step in the right direction. Even if that step is a little sloppy and its effectiveness exaggerated.

Net Promoter Score definition:

The concept was developed by Fred Reichheld, a consultant, strategist and author on loyalty. His books include The Loyalty Effect, Loyalty Rules! and The Ultimate Question.
Introduced in December 2003, Net Promoter is a metric derived from survey responses to a 'how likely are you to recommend...' question. Respondents who provide a rating of nine-10 are 'promoters'; those who give ratings of six or lower are 'detractors'. The NPS is found by subtracting the proportion of detractors from the proportion of promoters.
Reichheld's research among 4000 companies showed NPS to be 100% accurate in indicating whether a firm would grow (more consumers championed its service or product) or shrink (more were denigrating it).
NPS has been adopted by companies including Microsoft and American Express; many report their score to investors.

iPhone orgy enlivens stale industry

2007-07-04T11:27:20Z

The iPhone has arrived. Friday's scenes of frenzied shoppers in Apple stores across the US spoke volumes about Apple's ability to confound the sceptics and create excitement in the otherwise predictable world of consumer electronics.Only a fool would question Apple's ability to launch products successfully.

Nobody does it better. But, although all the initial pre-launch excitement has paid off in an orgy of launch publicity, Apple now faces a much tougher strategic question: will the iPhone meet its sales targets?

Apple chief executive Steve Jobs very clearly laid out the expectations for the iPhone when he said: 'We've got two strong legs on our chair today: we have the Mac business, which is a $10bn business, and music: our iPod and iTunes business, which is $10bn. We hope the iPhone is the third leg on our chair.' To become that third leg, Apple needs to sell 10m iPhones by the end of 2008. That means gaining a 1% global market share in just under 18 months.It's a very ambitious target. To put it into perspective, the BlackBerry has yet to reach the 10m figure globally, despite having been in business considerably longer than 18 months.

There are many people who doubt Apple can achieve such an aggressive goal. Edward Snyder, an analyst at Charter Equity Research, says: 'Implementing a cell phone is more difficult than anything Apple's done to date... I don't think its going to be a big player in this at all.' This is a conclusion shared by media agency Universal McCann.

So far, however, the market appears to be responding positively. Early figures from -research firm M:Metrics suggest that 9% of the US market and 16% of UK sub-scribers have a strong intention of -buying an iPhone. More than 1m consumers signed up at the Apple website to be notified when the iPhone was available. Although Apple has not officially announced how many handsets were sold over the launch weekend, most estimates suggest it was between 400,000 and 500,000.

To some extent, these sales were -almost guaranteed: a fervent congregation of tech-savvy Apple -devotees were always going to snap up the iPhone the moment it appeared in-store. The interesting sales data is likely to come in -August and September as the more discerning early majority replace these early adopters of the iPhone. These later consumers will make or break iPhone's ambitious market goal.

The iPhone already appears to be making a dent in the competition. Ed Colligan, the chief executive of Palm, told Reuters last week that sales of its new Treo smartphone could 'stall' in the short term as people trial the iPhone.

Market leader Nokia has downplayed the potential impact of the iPhone on its smartphone sales. Bill Plummer, vice-president of Nokia's multimedia group in North America, cited new products such as its catchily named N95, and disagreed that the iPhone would -fundamentally change the market. The iPhone, he argued, 'is an evolution of the status quo'. It's an intriguingly -stupid response from a firm that prides itself on a strong brand and market leadership but has, thus far, not had to contend with a 'power brand' such as Apple. It's one thing to achieve a 36% global share when competing against the likes of Motorola, quite another to defend that share against a brand of Apple's status. Of all the incumbents, Nokia has most to lose if Apple's iPhone proves successful.

Despite the bold 10m target, no one, including, I suspect, Apple, really knows what will happen with the iPhone. There is a delicious lack of rigour and a mischievous zeal behind Apple's every move. From Jobs down, this is a company that seems to relish shaking up established categories and taking on new competitors. Whatever happens next, the iPhone has already served its purpose. The mobile phone market is interesting again.

Big Mac or Coke: who's got it right?

2007-05-30T08:16:35Z

A Big Mac and Coke. Two stellar brands of the 80s that seemed locked in each other's orbit, linked by simple usage occasion, power-brand status and shared origins in US consumer culture.
The two brands even supported each other, with McDonald's selling only Coke drinks brands in its restaurants since 1955. But being the world's number-one carbonated beverage isn't all that it once was as consumers turn to healthier, more natural drinks. Similarly, McDonald's position as the ultimate fast food is secure, but of questionable long-term value as consumers turn to healthier and greener alternatives. The fascinating issue now is not whether Coke and McDonald's need to change, but which company has chosen the best strategic transition, given that the two have opted to take very different paths.

Coca-Cola has, internally at least, accepted that the writing is on the wall for carbonated beverages, including its flagship Coke. While the iconic brand will always have a place in the hearts of millions, the company is diversifying its portfolio and growing sales with new and acquired brands. Last Friday's $4.1bn (£2bn) cash deal for vitamin-enhanced water producer Energy Brands, and its star water brand Glaceau, is the latest in a long line of acquisitions and creations that includes Powerade and Nestea iced tea (a joint venture with Nestle).

Coca-Cola's portfolio strategy makes a lot of sense. Multiple brands allow the company to offset Coke's gradual decline with newer, more appropriate brands while removing potential future rivals by acquisition. The strategy also allows Coca-Cola to maintain a relatively big share, irrespective of how the market changes. Coca-Cola doesn't need to predict future trends with this portfolio approach, just develop a core competence to identify and acquire niche brands as they emerge. Acquisition can also prove a lazy way to support the share price, with the financial market placated by an ongoing injection of new products into the portfolio.

McDonald's is faced with the same crisis of changing tastes and established brand equity. Until recently, most analysts predicted that it, too, would adopt the portfolio approach to compensate for a potential decline in its core brand. The company established a broad portfolio in the 90s that included Chipotle Mexican Grill, Donatos Pizza and Boston Market in the US and Aroma caf?s and a stake in Pret A Manger in the UK.Recently, though, McDonald's has performed a U-turn. In 2002 it sold off the Aroma chain to Caff? Nero, sold Donatos Pizza back to its founder in 2003, and last year spun off Chipotle. McDonald's chief executive Jim Skinner was candid in explaining the latter decision: 'Attracting more customers to McDonald's remains our greatest opportunity for long-term profitable growth. We believe that now is the time to further sharpen our focus on Brand McDonald's.'

McDonald's believes its brand can be revitalised for the 21st century. It is a more ambitious, risky strategy than Coke's approach, but confers genuine strategic advantages if it can pull it off. A single branded house means greater marketing focus, a stronger employer brand and optimum economies of brand. Rather than blowing profits on acquiring upstart brands, McDonald's will devote $2bn (£1bn) this year to updating its existing restaurants and opening 800 new ones.

Throughout the last century Coke and McDonald's exemplified similar approaches to building global brand equity. Now the two will use divergent strategies to avoid becoming retro-clich?s. So which has got it right? Rejuvenation or diversification? Branded house or house of brands? Big Mac or Coke?

Brand Lost in Private Equity Haste

2007-03-14T07:31:00Z

The trade unions hate them.

Investors love them.

The German Government refers to them as "heuschrecken" or locusts.

The Economist describes them as a “superior model of capitalism”.

They own big brands like Iceland, Kwik Fit and United Biscuits and they may soon get their hands on even bigger ones like Sainsbury’s and Boots.

Private equity is suddenly everywhere.

The concept is relatively straight forward: a partnership of business brains raises a load of investment capital from pension funds, wealthy individuals and their own pockets. Then they go out and buy companies, often taking them private in the process. As soon as possible they then sell the company or float it on the stock market and make a sizeable profit for everybody involved. The term private equity simply connotes the fact that the acquired companies are not publicly listed on the stock market, but rather privately owned with money raised from investors. The absence of public shareholders also means that the industry is notoriously secretive about its aims, operations and profits.

Essentially, there are two different types of private equity. The first, venture capital, focuses on buying a stake in a small business and then injecting extra capital and expertise into the organisation in order to grow its value. But it’s the other form of private equity, in which a fund acquires a large existing company, which is currently making all the headlines.

Central to any private equity acquisition is the premise that the purchased company can be sold for more than it was acquired for in a relatively short amount of time.

The problem comes when you begin to explore exactly how this profit can be realised. In some cases, notably New Look or Travel Lodge, the private equity fund actually recognises that the brand has a lot more potential than its current owners appreciate. Money is invested into the brand and the company grows. Unfortunately there are also other, frankly more reliable methods, to make a profit on your newly acquired company. You can identify a big brand like the AA which has lots of overhead and infrastructure and a relatively captive consumer base. You can then fire 3,000 staff without having any immediate negative impact on sales but a very positive impact on profitability. You then make an enormous performance based profit and even more money when you off-load the newly streamlined company which may or may not prosper in the future. I

t really is a tale of two equities. On the one hand private equity can represent a very beneficial force for brand revitalisation and investment. On the other it can resemble the old asset stripping era of the 1980s. Confusingly, most private equity funds can play either role depending on which will deliver the most profit. There are no black hats and white hats in this game, just lots of grey suits.

I’ve worked for private equity firms several times during big brand acquisitions. I can happily report that, like every other major player in the corporate finance world, they pay extraordinarily well and have not got the faintest clue about branding or brand equity. Indeed, whenever the dreaded ‘B word’ comes up noses wrinkle and eyeballs head skyward. Pace is the big danger for brands in this new era. The success of private equity depends upon rapid acquisition, fixing and divestment. Often the whole process can take a matter of months. It’s all too easy to forget about brand equity during these frenetic ownership cycles.

Our challenge is not to debate the relative merits of private equity ownership. Let’s leave that to the unions and the politicians. Instead, let’s help our new masters appreciate (in both senses of the word) the value of the brands that they have acquired.

PE starts to PR before things get FUBAR

2007-03-12T21:46:22Z

With government and union antagonism growing the private equity funds, traditionally a silent industry, are on the PR offensive.

Private equity firms try to buff image in Europe

By Julia Werdigier

Monday, March 5, 2007

LONDON: European private equity firms are trying to rescue their reputation.

Under attack by politicians who called them "asset strippers" and "locusts" and by trade union leaders accusing them of cutting too many jobs, private equity firms are offering to hold meetings with their fiercest critics and have contributed £5 million, or $9.8 million, to set up a foundation to share part of their wealth.

In the latest effort, a group of European buyout firms said Thursday that David Walker, a former chairman of Morgan Stanley in Europe, would lead a task force to draw up a code of conduct for disclosure. The unstated goal, analysts say, is to prove wrong those who say there is too much privacy in the private equity world.

The stakes for the industry are rising, particularly with rumors circling about bidding for the British retailer J Sainsbury. There is also said to be interest in some Airbus factories, and firms are looking at Continental, the tire maker based in Germany, and Vodafone Group, the telecommunications company.

Some analysts and bankers add that support from trade unions and politicians is vital for the private equity industry to continue to raise record levels of money and finance takeovers, which totaled $234 billion in Europe last year.

"Ignoring the debate would make it seem private equity firms are insensitive," said Scott Moeller, a professor at Cass Business School in London.

Paul Kenny, who leads the British trade union GMB, put the industry under new pressure last month, demanding that the firms be more open and calling on Gordon Brown, chancellor of the Exchequer, to clamp down on a tax benefit GMB says is available to buyout firms.

The union represents about a thousand people who were laid off at the Automobile Association, the roadside car-repair company in Britain, after the private equity firm Permira bought it. In Britain, about three million people, or 19 percent of private sector employees, are working for companies controlled by buyout firms.

The calls for stricter tax laws have worried some private equity executives.

"The outcome that would concern the industry is if the playing rules change to the extent that it would reduce our ability to produce returns," said Colin Taylor, head of DLJ Merchant Banking Partners in Europe.

With France holding presidential elections in April and Prime Minister Tony Blair of Britain preparing to step down before September, some private equity executives have become alarmed that they could become scapegoats in a political debate in Europe.

Private equity firms turned to Walker, who has held senior posts at the Bank of England, the British Treasury and Lloyds Bank, now part of Lloyds TSB Group.

About 25 private equity firms have signed on to the disclosure initiative, including Blackstone Group, Kohlberg Kravis Roberts and CVC Capital Partners. The three firms said last month that they were considering a bid for J Sainsbury. With a market value of £9 billion, J Sainsbury would be the biggest leveraged buyout in Europe and the first takeover of a company in the FTSE 100 index.

Damon Buffini, head of Permira, and others worry that the private equity industry's success has made it a target, and they acknowledge the need for outreach. "We recognize that the industry's success has led to growing and legitimate interest in its activities," said Rod Selkirk, chairman of the British Venture Capital Association.

Analysts have criticized buyout firms for cutting too many costs and laying off too many employees at companies they own to make the books look good ahead of an initial public offering.

Some point to the example of Debenhams, the department store operator. CVC led a group of private equity firms that bought Debenhams for £1.7 billion in 2003. They delisted the shares, added debt, sold stores, cut costs and jobs and then went public last May, making 3.5 times their investment. For those who bought Debenhams shares, the investment has been less lucrative; shares have dropped 14 percent since the May initial public offering.

Private equity firms argue that they create value. According to their industry association, the number of employees at British companies backed by private equity firms has risen about 9 percent a year in each of the last five years, compared with an average 1 percent increase at publicly traded companies that are part of the FTSE 100 stock index

Private Equity Parent

2007-03-12T21:41:57Z

Here's the Telegraph's list of the 10 biggest brands owned by private equity funds. Did you know all of these were in the hands of PE?

Top 10 private equity-owned firms in UK

Last Updated: 1:21am GMT 27/02/2007

Private equity firms beat the Revenue

Turnover	Operating profit/loss	Interest charge	UK corp tax/credit	Accounting period
Booker	£3,037,400,000	(£111,400,000)	£27,000,000	£6,200,000
Brakes	£1,628,300,000	£7,800,000	£19,400,000	£5,100,000
Iceland	£1,727,223,000	(£25,819,000)	£16,798,000	£4,717,000
Vetco*	£1,269,995,415	£41,440,652	£82,630,157	£2,505,000
United Biscuits	£1,266,900,000	£202,600,000	£194,000,000	£22,100,000
Linpac	£1,132,100,000	£43,100,000	£74,300,000	£1,000,000
New Look	£866,000,000	£107,600,000	£81,500,000	£10,700,000
Kwik Fit	£266,900,000	£23,100,000	£26,000,000	£1,300,000
Lucite	£780,000,000	£64,000,000	£62,000,000	£0
Gala Coral	£583,486,000	£103,665,000	£184,630,000	£1,134,000
Total	£12,558,304,415	£456,086,652	£768,258,157	£11,078,000

Here it Comes....The Shift to Digital (and PR!)

2007-03-03T23:48:13Z

Th 4 A's Conference is the biggest gathering of the Year for US communications agencies. Its been the site for some almighty speeches over the years and this year was no exception. Mich Mathews, senior VP-central marketing group at Microsoft, announced that the vast majority of their half a billion annual marketing spend will be digital within 3 years.

According to Advertisijng Age (see below) Mathews signalled a shift to digital channels by 2010 and.. and here is the interesting part, a bigger emphasis on PR.

It appears that the plurality of the communication space is finally increasing big clients attention towards PR. In the global pie chart of marketing spend 2010 we will almost certainly see PR and interactive/digital increasing at the expense of traditional advertising and direct marketing.

LAS VEGAS (AdAge.com) -- It may be dumping hundreds of millions of dollars into an old-school TV campaign for its latest operating system, but Microsoft expects it

will move the majority of its ad budget into digital channels within three years.

"We're actually pretty confident that by 2010, the majority of our media mix will shift to digital," Mich Mathews, senior VP-central marketing group at Microsoft, said in an address at the American Association of Advertising Agencies Media Conference and Trade Show here.

Already big web spender
In 2006, Microsoft spent $447 million in measured media, according to TNS Media Intelligence. The media-spending tracker said 18% of that was spent on internet advertising -- far and away above the national average. Still, it laid out $69 million on network TV, $33 million on cable, $118 million on magazines, $67 million on business to business and $29 million on national newspapers.

Ms. Matthews said the shift is simply an effect of following consumers, who are spending more and more time on the web and becoming more important in deciding how marketing messages are distributed. She followed Procter & Gamble Co.'s Jim Stengel in citing the importance of consumer control to the marketing process, calling the epoch the "Era of Customer Participation."

As proof of how much consumers have inserted themselves in the marketing process, she cited the hundreds of mash-ups of a popular ad for the hot-selling "Gears of War" video game for Microsft's Xbox system.

More collaboration
Ms. Matthews said the key to navigating all the change is getting collaboration among various disciplines. "I want everyone in the room at the same time, including the PR guys," she said.

Her speech was notable for its many mentions of public relations, not something you'd expect at a media conference. In pointing out the importance of earned media, she mentioned Dove's much-ballyhooed "Campaign for Real Beauty," which has been expert at amplifying ad executions with PR by tying them into news events.

But I Thought they Were Crap? HBOS. RBOS. Barclays. Lloyds TSB.

2007-03-01T14:42:43Z

Compare the results of the recent Millward Research on the Net Promoter Scores of some of Britain's biggest banks with their profits and you are in for a shock.

All the worst performing banks are reporting the biggest profits. Eh?

The reason is BAD PROFITS.

Over the last few days we have seen some of the big British banks announcing very impressive profits. On Wednesday HBOS, the bank formed by a merger of Halifax and Bank of Scotland, reported a 19% rise in annual pre-tax profit to £5.71bn. Their namesake brand The Royal Bank of Scotland did even betterl with a 16% increase in profits to £9bn.

We also had Barclays achieving a 35% rise in pre-tax profits to £7.14bn. Meanwhile Lloyds TSB's profits were up 11% to £4.25bn.

But if you were reading Marketing last week you would have discovered that all these brands were featured among the VERY LOWEST when it comes to their Net Promoter Scores. This all important metric provides a single score (out of 100) for how positive its customers are about the company and its offerings.

In the case of RBS (+15), Halifax (+12), BOS (+10) Lloyds TSB (+8) and Barclays (-3) all five were among the lowest 20 net promoter scores in Britain. One quarter of the worst performing marketing orientations, poorest customer focus, service delivery. Barclays was actually dead last!

If you know anything about Net Promoter scores you will know that the scores are very strongly correlated to business performance. And yet in the case of our three banks we apparently have low Net Promoter Scores, and very big profits. How is that possible?

The answer is what Fred Reichheld (below), the inventor of Net Promoter Scores, calls Bad Profits. When a company makes too much money for its shareholders by extracting value from its customers it makes a lot of money - in the short term. But sit tight. Screwing value from customers, rather than making value for the company by making value for customers, will eventually come back and get you.

Lets come back and check the results in 5 years time. By then the poor service, unhappy customers, acquisition costs, bad word of mouth, and customer churn that go hand in hand with low Net Promoter Scores will kick in.

Unless some of these companies take some of their enormous profits and return them back to their customers, the people who pay for everything, in the form of better products and services. Not advertising or a swanky new brand campaign - more service staff, lower charges, better value.

Watch this space.

Top 20 brandsUK brands by Net Promoter Score
2006	2005	Change
Cafédirect	82	74	8
Google	78	n/a	n/a
Waitrose	73	53	20
Toyota	70	75	-5
Vodafone	67	56	11
Virgin Mobile	67	66	1
O2	66	54	12
Olay	64	59	5
Volkswagen	61	79	-18
Douwe Egberts	60	69	-9
Sensodyne	60	54	6
Nokia	60	65	-5
Microsoft	59	37	22
Clairol Herbal Essences	58	46	12
TRESemme	58	59	-1
Samsung	57	69	-12
Lucozade	57	43	14
L'Oreal	56	46	10
Colgate	56	53	3
Starbucks	56	38	18
Bottom 20 UK brands by Net Promoter Score
Royal Bank of Scotland	15	20	-5
Halifax	12	18	-6
Jet	12	16	-4
Bank of Scotland	10	15	-5
McDonald's	10	15	-5
Somerfield	10	-3	13
McAfee	10	20	-10
Esso	10	11	-1
Maxwell House	9	16	-7
Imperial Leather	9	16	-7
Abbey	8	11	-3
Lloyds TSB	8	22	-14
Total	6	16	-10
Palmolive	6	10	-4
Lexmark	5	20	-15
Co-op	3	0	3
NatWest	3	9	-6
Texaco	1	7	-6
Spar	-2	n/a	n/a
Barclays	-3	-3	0
Source: Millward Brown

McDonalds Repositioning???

2007-02-27T12:09:21Z

Is McDonalds really repositioning itself successfully?

The textbook says no. The figures say yes.

Designer chairs, better coffee than Starbucks, ethical focus, environmental packagin, sales up....

According to the todays FT McDonalds are succeeding in the mother of all repositioning jobs.... I still think that they cannot pull it off but so far, their sales data is saying yes.

Burger, fries and a shake-up

By Jenny Wiggins

Published: February 26 2007 18:13 | Last updated: February 26 2007 18:13

The lime green “egg” chairs designed by Arne Jacobsen, the eminent Danish architect, would look more at home in a modish coffee shop than in a London branch of McDonald’s.

But that is exactly the impression Denis Hennequin, who is in charge of all the chain’s restaurants in Europe, wants to create.

“It’s very modern and contemporary,” the 49-year-old Frenchman says. “Much better than Starbucks.” With Howard Schultz, chairman of Starbucks, this month expressing concern over the encroachment of fast-food operations on his business, the timing is apt.

The chairs (called egg for the way they cocoon the body) can be spotted near the windows of McDonald’s branches on British high streets. They are part of Mr Hennequin’s grand plan for redefining the brand, which entails other changes in interior and exterior design and additions to the menu.

“I’m changing the story,” Mr Hennequin says. “We’ve got to be loyal to our roots, we have to be affordable, we have to be convenient . . . but we have to add new dimensions.”

These dimensions include putting iPods in restaurants in France so that people can sit and listen to music; making better coffee from fair trade-style beans; and introducing a “McDonald’s passport” so young staff members can work at any restaurant in Europe.

The changes seem to be working. Sales at McDonald’s European franchises are growing faster than in other regions. Last month, Europe (which accounts for about 36 per cent of annual profits) reported quarterly comparable sales growth of 7.3 per cent against 5.9 per cent in the US. And a survey in Consumer Reports magazine this month gave McDonald’s coffee a higher rating than that of Starbucks.

Worldwide, McDonald’s managers – who were lambasted in the late 1990s and early 2000s for their restaurants’ poor food, bad service and tacky decor – have been trying to update the image of their brand. The success of coffee chains such as Starbucks, which appeal as much to workers on the move as to students, has forced companies like McDonald’s to create a more sophisticated eating environment.

While its focus on costs sets limits on the quality of McDonald’s ingredients, healthier foods have appeared on menus and restaurants have been refurbished, leading to better global sales. Last month the restaurant chain reported record annual profits of $4.4bn (£2.3bn).

But it is developments in the European business that may provide the best guide to where the McDonald’s brand will go in future.

Mr Hennequin, a graduate of one of Paris’s top law schools who joined McDonald’s after deciding it would be more “fun” than being a lawyer, was appointed to run Europe after making a series of successful changes to its French outlets in the late 1990s.

He does not look like a typical McDonald’s executive. Unlike many of the chain’s American managers, who dress in white shirts and suits, he wears no tie and lets his blue shirt hang out over corduroy trousers. He carries a small backpack containing a black Apple Macintosh laptop computer. A self-confessed “brand freak”, he includes Apple among his favourites.

Nor does he act like most executives. In the 1990s, he established a design studio in Paris and started spending money creating more congenial environments in French McDonald’s. Visitors would be served by hosts in ties and jackets, and offered free chocolates with their coffee. The changes were risky, given that US management was trying to cut costs.

“At the time, I was swimming against the current . . . But our chairman at the time came over here and wanted to understand and in the end he said: ‘If it works for you, just do it.’?”

The investment paid off. Comparable sales in France rose consistently between 1997 and 2005. Now Mr Hennequin wants to emulate those changes elsewhere in Europe.

Asked if he thinks the McDonald’s brand has suffered because of its slowness to adapt to changing consumer tastes, Mr Hennequin smiles and looks up at the ceiling. “No comment.”

He argues that it is hard for large corporations such as McDonald’s to change. “It’s been such a successful business model that you’re always bouncing between ‘let’s do it because it works’ and ‘if it’s not broken, don’t fix it’,” he says.

He has a three-pronged strategy: improve the experience of customers and employees, make sure restaurants adapt to local communities, and be more transparent about how McDonald’s does business.

Getting rid of fixed plastic seating and replacing it with more comfortable furniture, including upholstered seating and imitation leather banquettes, have been the first steps in improving customer experience.

McDonald’s design studio has developed 11 designs that franchisees can choose from (64 per cent of its European restaurants are franchised). The most popular designs use low-hanging lampshades, wooden tables or long communal tables and poufs.

“When Starbucks is charging you £2.50 for the coffee, it’s not because of the coffee; it’s because of that casualness that you can build around your restaurant,” he says. “I think we can do that very easily.”

For his employees Mr Hennequin introduced the “McPassport”, which contains details of training and language skills and enables the holder to work in any branch in Europe.

The passport is designed to appeal to Europe’s mobile young. “One of the biggest aspirations of kids is to travel around,” says Mr Hennequin, who expects the passport to get a lot of use in countries such as Greece and Italy during summer.

Mr Hennequin came up with the idea after friends in France asked him to help their children get work at McDonald’s restaurants in London. He realised the attraction the city held for young people. “Working in London was suddenly something cool,” he says.

But while he may be happy to see his employees shift countries, he wants the restaurants to retain local customs. “We’re not the United States of Europe,” he says. “We’ve got 41 countries at very different stages of development and we’ve got to respect that.”

He wants to bring in more franchise partners to help stimulate new ideas. “I strongly believe that new ideas and innovation come from the field,” he says. And he encourages restaurants to serve foods that locals like.

In Portugal, soup is on the menu and when Mr Hennequin is in London he eats the porridge that McDonald’s serves for breakfast along with McBacon rolls and sausage and egg McMuffins. “I don’t think it would work in France but why not, I’m trying it!” he says.

Then he confides: “To be honest, I’m not too excited by it. Every time I come to the same conclusion: the bagel and cream cheese is more my thing.”

Restaurants’ healthy outlook

McDonald’s, having for so long served as global shorthand for junk food, has had to grapple with society’s increasing distaste for unhealthy eating.

After introducing salads and sandwiches to its menus, the chain is still trying to make its food healthier. Late last year it announced plans to cut back on unhealthy trans fats.

In a bid to create greater transparency, McDonald’s has been running an “open doors” programme in which customers are invited to go behind the scenes at restaurants and suppliers. In Poland, 50,000 people have taken up the offer. The chain is also putting more nutritional information on packaging and sourcing foods from sustainable sources.

A new three-tier pricing strategy sells products at a range of prices for people on different budgets.

Another initiative involves introducing more McCafés – counters selling coffee and pastries inside McDonald’s restaurants.

Mr Hennequin says the group has more work to do in addressing consumers’ environmental and ethical concerns. He wants outlets to use less plastic and recycle more. “I’m going to redesign packaging for Europe,” he says.

The group is also sourcing more foods from sustainable sources and Mr Hennequin plans to extend the use of Rainforest Alliance coffee beans throughout Europe. The beans, which are certified by a non-profit group that monitors environmental standards and workers’ welfare, are currently used only in the UK.

In the long term, Mr Hennequin hopes his changes will transform McDonald’s image from a “fast food” restaurant chain into one known for serving “good food fast”.

Prince Charles attacks McDonald's over fast food

by Alex Donohue Brand Republic 28-Feb-07, 09:00

LONDON - The Prince of Wales has attacked McDonald's for its perceived negative impact on healthy lifestyles, claiming that banning the fast food giant holds the key to improving people's diets.

In a further broadside against McDonald's, the Prince is reported to have made negative comments about the restaurant chain to nutritionist Nadine Tayara and journalists during a visit to a medical school in Abu Dhabi yesterday.

He said: "Have you got anywhere with McDonald's? Have you tried getting it banned? That's the key."

The Prince, who is a strong supporter of organic farming and fresh produce, has restated his views on healthy eating but his remarks have been met with dismay by McDonald's, which branded the criticism "disappointing".

Nick Hindle, spokesperson for McDonald's, said that younger members of the Royal Family "have probably got a more up-to-date picture of us", referring to the Prince's son Harry being spotted eating at McDonald's in 2005.

Hindle said: "This appears to be an off-the-cuff remark in our opinion. It does not reflect our menu or where we are as a business."

A spokesperson for the Prince of Wales said: "[The Prince] was keen to emphasise the need for children to enjoy the widest variety of food and not to eat any particular sort of food to excess."

However, the criticism will come as a further blow to McDonald's efforts to reposition itself as a more health-conscious and ethical retailer ahead of Ofcom's restrictions on junk food ads, which will be introduced on April 1.

McDonald's signed a £1m in January to buy coffee from South and Central America farm co-operatives, in an attempt to improve its image as an ethical retailer.

Brand Jobs Even You Wouldn't Want

2007-02-27T11:19:46Z

There are always those strategic roles and consulting jobs that appear to be beyond the skills of even the greatest marketing mind.

Cue music from Mission Impossible. Teletext joins the list....

There have always been impossible jobs in marketing.

The head of corporate social responsibility for Exxon Mobil.

The head of PR for Ryanair (if they ever got round to having one)

Uk Marketing Manager for Dasani

Head of Interactive Division for HMV

But a new impossible mission has just begun. Teletext is launching an £8m revitalisation campaign designed to convince the market that it is not out of date. No, not at all.

The new positioning for Teletext: "Teletext. No blah blah". The idea is based on communicating that in a world filled with complex up to the minute advanced information sources, a slow, clunky, hard to access technology with bad brand equity is a wonderful opportunity.

Every Little Helps - Tesco in Brand Revitalisation

2007-02-27T11:06:49Z

Rumours abound that Tesco are undergoing a major brand review. What? Why? Who? When? Eh?

All the questions and none of the answers...

Its always been one of the hardest moments in my MBA course on Brand Management. We bow down and worship at the altar of Tesco's marketing, research, segmentation, private label, brand architecture, leadership and then comes the positioning problem.

There is no question that Tesco is, pound for pound, the greatest marketing company in the UK. And yet at the heart of its magical transformation through the 1990's, usurption of Sainsbury, and global emergence is one of the tattiest, most generic little straplines imaginable. Every Little Helps. And it sits squarely within the famous 'steering wheel' - see above that has guided Tesco for most of the last 10 years.

The best you can say for the ELH strapline is that it is tight, it does unite staff, and its a appropriately plain and simply approach for the famously tight, no-nonsense Tesco brand.

But finally, perhaps, the penny has dropped and Tesco are about to focus on a richer more complex positioning. Don't expect a BIG relaunch or lots of fancy wheels and traingles when Tesco eventually launch their new positioning.

But it will be very interesting to see what they come up with and (perhaps even more interesting) who they will turn to for help in developing it. Inhouse? The Red Brick Road? Landor?