We’ve heard that Burberry chairman Sir John Peace did his very best to persuade Angela Ahrendts to continue as Chief Executive, knowing full well the likely adverse impact on the share price. But the joint lures of Apple and homeland were too strong for him and her. Christopher Bailey is to be promoted to the new role of Chief Creative and Chief Executive Officer and the share price duly fell amidst City scepticism.
No doubt one of the first big challenges the new man in charge will face is the spectre raised by Ahrendts in one of her last public statements as Burberry CEO. In it she expressed concerns to newspaper Les Echos that China’s slowdown could be more than just a passing phase for the luxury goods sector. Given the importance to Burberry of its business in China this would undoubtedly put pressure on the short term balance sheet.
This has echoes of another high profile departure from a luxury goods brand. In June 2013, Emma Hill, who had been pivotal to Mulberry’s success, stepped down from her role as Creative Director. She quit amid rumours of ‘disagreements with management over creative and operational strategy’, and her departure followed Bruno Guillon’s appointment as Chief Executive in 2012. He said at the time that he wanted to work towards getting the ‘right balance’ between Mulberry’s long-term aspirations and its short-term performance.
But it’s not just luxury brands like Burberry and Mulberry which have this dilemma. Many businesses face it because it results from the conflict between short term sales needs and building a long-term reputation. So often business people focus too much on the former and neglect the latter. Yes, it’s true that discounting and other price-led special offers can generate turnover quickly, but very often it’s unprofitable business. And won at the expense of the long term interests of the company.
If you have this dilemma you’re by no means alone and if you err on the side of short-termism, join the crowd! Data from the respected Bellwether Report shows that action-oriented media such as direct marketing and sales promotion represent over half the market at 54.9%. So over half the brand communications money is being allocated to what can be described as ‘scheme’ as opposed to ‘theme’. That leaves just 27.1% for main media, but even this doesn’t represent pure ‘brand’ expenditure, with an ever-increasing proportion of these include a strong call to action.
But is this the right balance?
According to two people who have made a big impact on the advertising and marketing communications industries, Les Binet and Peter Field, the answer is no. Too much money is being committed to short term tactical activity (‘scheme’) as opposed to long term brand building (‘theme’).
The key findings from their latest investigations, based on an analysis of 1,000 IPA Effectiveness Awards cases – the IPA is the Institute of Practitioners in Advertising, the trade association which represents the UK’s leading advertising and media agencies – and the results have been published in an IPA report ‘The Long and Short of It’. This analyses the difference between the short- and long-term effects of campaigns, and discerns which was the more profitable and why.
Binet and Field’s statistical analyses prove that campaigns which combine brand building and brand activation are twice as effective as brand building alone. Moreover they argue that there should be a new approach to sales promotion: it should be hard wired into the brand idea, which itself should have a powerful emotional core. It’s all about ‘promotion with emotion’, and shows that integration succeeds where there is a core idea working across every platform. And their recommended balance between ‘theme’ and ‘scheme’? It should be about 60:40.
So when you’re constructing the advertising programme for your business do make sure that there’s a consistent proposition to your customers which can be presented both as a long-term reputation builder, and used as a vehicle for short term tactical promotions. Tesco’s ‘Every Little Helps’ and John Lewis’s ‘Never knowingly undersold’ are both good examples in the retail sector and I love O2’s current campaign ‘Be more dog’ which makes me smile, and sells hard too.
In my view the balance in the luxury goods market needs to be far further towards brand building, and brand activation should be kept to the minimum. People are buying into an aspirational set of associations that are all too easy to tarnish. Let’s hope Christopher Bailey, the acknowledged creative genius behind the resurrection of the Burberry brand, finds support from his Chief Financial Officer Carol Fairweather in holding the line. They’ve come a long way in ten years and should be very cautious about deviating from a successful path.
Felix Hall is Managing Director of 23red.