Lucian’s blog

FMCG brands, what are they good for?

As Edwin Starr said, absolutely nothin - or next to nothin, anyway, as far as figuring out how to build financial services brands is concerned.

I spoke at a conference last week about the way that ideas about brands and how to build them have changed over the years.  It was one of those speeches where I hope what I said was surprising and thought provoking for the delegates, but it was definitely surprising and thought provoking for me.

If I think back to my early days in advertising working on textbook FMCG brands - notably Mars confectionery products - some of the most important things we all believed unquestioningly were that:

-  Building brands is a very long-term business.  They take 30 years or more to establish.

-  You do it mostly with advertising.

-  The advertising should be focused on a clear and unique proposition, expressed in a memorable strapline.

-  Strong brands are better able to survive scandals, disasters and setbacks.

-  Brands are managed and controlled by brand managers.

-  Brands are very malleable things, which can be rethought and reworked at any time.

-  Strong brands are much more trusted than weak brands.

-  The best brand-builders work in FMCG.

None of these ideas really stands up any more.  Building brands isn’t a long-term business:  the likes of Google, Facebook and You Tube needed more like 30 months than 30 years.  Advertising often has little or nothing to do with it:  ever seen an Amazon ad? Brands need a clear purpose, but the whole business of unique propositions sounds almost comical these days: what brands need is not a USP but an EAP, an Extremely Attractive Personality.  After Arthur Andersen, we stopped believing that strong brands can survive scandals, but just in case anyone was still dubious a whole bunch of financial brands from Icesave to Lehman Brothers have just re-emphasised the point.  More and more brands are managed and controlled by their customers more than by brand managers, especially on the Internet:  it’s really interesting to see, for example, how studiously bland and characterless the Facebook visual identity is, presumably on the grounds that the brand is all about what the users bring to it, not what it is in itself.   Whereas FMCG brands are indeed pretty malleable and redefinable, service-sector brands clearly aren’t:  I’ve been arguing for some time now that it’s demonstrably daft to keep on believing you can conjure up a new, clear and different sense of what, say, Barclays stands for, when the truth is that it doesn’t stand for anything at all.  In financial services, if “strongest” means best-known, then generally the strongest brands are the least trusted.  And finally, we’ve gradually come to appreciate that since brand-building in big, complicated service businesses is to brand-building in packaged groceries as chess is to noughts and crosses, even though we’re far from perfect at it we’re about a hundred times better than people dealing with nice simple passive malleable groceries.

So what I’m saying, in short, in that last far-from-short paragraph is that actually none of those pieces of received wisdom from the world of FMCG branding 30 years ago stands up today in financial services.  And I reckon that’s about 25% because things have changed over the years, and 75% because when you come to think about it service brands and FMCG brands are and always have been incredibly different species.

All of which, I hope, goes to explain why I get so incredibly cross when people say - as they still surprisingly often do - “Financial branding?  Just like baked beans, innit.”  No, actually.  It really isn’t.

It’s the morning after, and I’m still annoyed.

They say that one reason why London’s public transport and the National Health Service aren’t better is that senior politicians travel around town in Jags and go private. 

I’ve never really believed this.  Even without first-hand experience, how hard can it be for politicians to imagine the way things are for people who do depend on these services?  They don’t even need to imagine:  they just need to meet someone like my auntie Anna, who is old, has cancer, doesn’t drive and lives 15 miles and four bus journeys away from the hospital where she has to go for her twice-weekly treatment.

Last night, though, I decided that maybe I’m wrong about this.  It’s one of my sitting-next-to-someone-at-an-industry-dinner stories, and this time we were talking about the standard of living that ordinary people can expect in retirement. “It’s very simple,” the other chap said, “these people just need to be told that they’re going to have to work for a lot longer than they thought.  Certainly 70, maybe 75, maybe even later:  otherwise they’re going to be very poor indeed.”

I fear he may be right.  But that’s not what I’m cross about.  I’m cross about the utter failure to imagine what that means for people.  You’ve spent the best part of 50 years as a truck driver or a factory worker or a hospital cleaner;  although you’re in good health you’re tired, it’s getting harder and harder to get up in the morning, and you’re not as strong as you were.  Now you find that you have to keep going for ten years or more longer than you thought.  And, very likely, ten years or more not doing the job that you’ve mastered and that gives you your sense of self-worth:  it’s unlikely that you’ll be strong or fit enough to be taking 44-tonners up and down the motorways to the age of 75 and beyond, so what you’ll need to do is see if you can get a job sweeping out the yard. 

It’s all right for the Bloke Sitting Next To Me.  Delaying his retirement probably means moving it back from 50 to 60, and for the duration of those extra working years he can very likely hang around on the senior executives’ floor;  if not, he can set up on his own and take on some agreeable consultancy projects from the Neville Johnson office newly built in the room above the garage with the Merc in it.   

It’s not easy for workers on the line in Japanese-owned car plants, or hard-hat construction workers with a lifetime’s experience of scaffolding and aggregate, to secure agreeable consultancy projects.  And it’s not easy to keep yourself going in a job like that till you’re 70, 75 or even more.  It may be the best prospect we can currently offer to people.  But if that’s the reality of the world we’ve spent our careers building, we might at least have the decency to show a bit of regret about it. Â

“Ah, Mr Blond, or Mr Band, or Ms Dond, I’ve been expecting you.”

When the only information that a direct marketing company has about you is your name and address, then putting a message on the mailpack’s outer envelope that there’s a bunch of free name and address stickers inside is quite a smart way of getting you to open it.

Provided, of course, that the mailing house gets the name and address fields right.  The labels in the pack from a leukaemia charity that I received yesterday will come in very useful if I ever decide I’d like to start calling myself Mr L Clamp.

I’m starting to wonder if the media may not be entirely trustworthy.

Actually, rather more than “starting,” but it’s a better headline.

You know the way that when TV or the newspapers cover anything that you really know about, you find yourself shouting at the screen or the article that the’ve got it all wrong and it isn’t really like that at all?  There’s a particularly extreme example of this in the press coverage of football matches which you’ve actually been to, where it’s almost always the case a) that somehow all journalists on all papers all have exactly the same view of what happened in the match, and b) that their collective storyline is very different from your own.

Without wanting to bore non-football-fans (or football-non-fans?) too much, I was at the Spurs/Liverpool game on Saturday.  The media version of events is that we (Spurs, of course) were a goal down at half time, but the manager made a couple of shrewd substitutions at the start of the second half and we were able to fight back and win with two goals, the second in the last minute.

In fact what happened was that the half-time changes were absolutely disastrous.  We lost our shape so completely that no-one will ever understand how Liverpool failed to score a second goal in the first twenty minutes of the half.  Our defence was such a shambles that all around me all I could see was fans covering their eyes with their hands, not wanting to see the second goal when it went in.  Then, somehow, we managed to hold the ball for six or seven seconds and win a corner, and astoundingly their centre back Jamie Carragher scored an own goal, and after that some semblance of equilibrium was regained until we scored a lucky winner at the death.

But none of the papers saw it that way - all they saw was a lucky win with a couple of substitutions doing just enough to make the difference.

Of course this doesn’t matter in the slightest.  But it is a little disconcerting to find that even when reports of an event are completely clear and consistent across half a dozen newspapers, they can still be largely or wholly misleading.

“Minds over markets”? More like vice versa.

It’s churlish to quibble about the copywriting in any of the pitifully few investment ads appearing in the current climate, but I must say I am struggling quite a bit with Jupiter’s latest effort (headline as in my headlne above).

I have in front of me Jupiter’s one-year performance figures.  All 29 of the funds on the list have fallen in value over the period.  Three have fallen by singe-digit percentages, but 10 have fallen by over 25% and the worst by just a shade under 50%.

It may well be that in relative terms Jupiter’s performance is pretty good over the period, even to the extent that perhaps the headline “Minds over markets” can be justified.  But as that great fund manager Nils Taube famously, if a little cryptically, said, “You can’t eat relative sandwiches”:  investors who have lost a quarter of their money in a year aren’t hugely impressed to hear that this is in fact a relatively good outcome.

We are now in a world where the only performance claims available to 99% of funds and fund managers are of the “our investors have lost less of their money than average” kind.  Claims like these, it strikes me, are hollow at best and - as Jupiter aptly demonstrates - very irritating and counterproductive at worst.Â

When you say “the long term,” just how long do you want?

When Labour came to power in May 1997, the FTSE was at about 4400.  It’s now rather more than 10% lower. 

Once upon a time, when we said that equity investment delivered better returns “in the long term,” we used to show 5-year figures as the basic unit of currency (in fact, that’s still what the FSA insists we do).  Then those figures started showing hopelessly negative returns, so we moved to 10 years.  Now those figures are showing negative returns too, so we could move to 15 years:  but actually there isn’t much point, since although the 15-year returns are positive they’re not very positive and nothing like as good as cash, so really it looks as if we’ll have to go straight to 20 years.

I don’t know about you, but I don’t think I can sell an investment that’s unlikely to outperform cash until you wait 20 years.

Don’t blame me, mate, I just make the stuff.

Manufacturers of financial products are not alone in trying to shrug off the blame when their products are badly used.  Glue makers resist taking the rap for sniffing.  Motorcycle manufacturers assert that their machines are perfectly safe when ridden sensibly.  Gunmakers say it’s people who cause shootings, not guns.

But sometimes, I must say, the self-justification of financial product providers is particularly hard to take.  At a conference recently, I saw a presentation from one of the largest manufacturers of Payment Protection Insurance (PPI).  This disgraceful product is, basically, the way that providers of personal loans have made big profits over the last ten years:  the loans themselves make a bit of money, but extortionate premiums for rubbish PPI cover that’s more than likely not to do what the borrower expects are the way they really cash in.

Basically, the thrust of the presentation was that PPI is in fact a good and useful product which has been ruined by greedy, cynical and incompetent distributors.  According to the speaker, these distributors - mostly banks making personal loans - have charged far, far too much for it, and provided useless and completely inaccurate advice about it partly by accident, because their staff are untrained and incompetent, and partly on purpose, because if people understood how rubbish the product was they wouldn’t buy it.

The speaker expressed the hope that maybe, under pressure from a huge range of bodies from the FSA through to large numbers of MPs, the OFT, Citizens Advice and the Consumers’ Association, these wicked distributors may see the error of their ways, reform and usher in a new golden age in which PPI is fairly priced and properly sold.

I think I can honestly say that this was the most astonishing, infuriating and despair-inducing presentation I have ever heard.  

Of course there are dodgy fifth-rate manufacturers of crap products who join with fifth-rate crap retailers to conspire against the public in every industry - take, for example, those Chinese baby milk companies who’ve apparently been cutting their product with melamine, which turns out to be not, as I thought, a kind of plastic which you use to make picnic crockery, but a very nasty poison.  But this presentation was from a division of a leading global financial services company, which has been distributing its PPI through many, if not most, of our High Street financial institutions.  And while nothing that the latter do to shaft their customers surprises me any more, I’m still naive and idealistic enough to be astounded by the see-no-evil attitude of the manufacturer.

I’m not even going to bother to make a point about the ethics of turning a blind eye to the uses that people find for your product - no melodramatic analogies with land-mine and cluster-bomb makers here.  I just want to make a point about brands.

Among the major players in every other sector of the global economy, where else could you possibly find a manufacturer who cares so little - in fact, who cares not at all - about the effect on its brand when its products are hideously badly retailed?  If Coca-Cola found that its eponymous product was being sold for £20 a can as a miracle plant fertiliser, don’t you think they might express a hint of dissatisfaction to the retailer?  If Mercedes-Benz found that their smallest car was being sold for £100,000 as a heavy lorry, do you think they might review their supply arrangements with the distributor in question?  If iPods were being falsely sold as microwave ovens, do you think Apple might choose to intervene?

These organisations care about their brands, and they realise that bad retailing is one of the greatest risks to their brands that they have to manage.  This PPI manufacturer - although a global corporation of not dissimilar size and scale - couldn’t be more dissimilar in its attitude towards its brand.  It knew perfectly well that its product was being overpriced by several hundred per cent and mis-sold and misdescribed to customers - and it happily carried on providing its distributors with the product until the authorities effectively banned its further sale.  

I know that one of the things the FSA most wants to do is to find a way of preventing manufacturers of financial products from being able to wash their hands of abuses perpertrated by their distributors.   I do hope they find a really good way.  Really soon.

Honestly, has no-one smashed that bloody glass ceiling yet?

I’ve just spent an agreeable and rather unusual 16 hours or so taking part in a meeting of The Women’s Insurance Network.  (Yes, yes, obviously, I know, I’m a bloke, but they let me in because I was speaking at it.)

It was a good session, with some thought-provoking presentations.  And it was cleverly structured so that some of the subjects discussed were very gender-specific, but equally quite a few weren’t.  Which is all good.

What did surprise me a bit, though, was the nature of the discussion in the sessions that were about gender issues, and especially the ones about gender-in-the-workplace and gender-in-the-consumer-economy issues.

I don’t want to be rude, but it really was such a time-warp.  If I compare what I’ve just been hearing with the things we used to hear way back in my long-distant student days, when women’s issues were a much more mainstream part of social and political consciousness, it honestly feels as if nothing’s moved on at all.  As far as the workplace is concerned, that bloody glass ceiling is still alive and well,  and the key issue is still that male-defined corporate hierarchies and career progressions still don’t sit well with women who want much more flexible and less linear ways of working.  And as far as the consumer economy is concerned, there’s still the same cake-and-eat-it attitude that used to irritate me 40 years ago, that on the one hand we’re rightly furious when we’re patronised and belittled, but on the other hand when we’re buying a car what we really want to know is whether it has heated seats, cup holders and a place to put our handbags, not whether it’s petrol or diesel and front- or rear-wheel drive.

I could hardly have been more amazed by this flashback to the debating subjects of the 60s and 70s if, say, I’d been invited to a meeting of the Football Association and found they were still arguing about the rights and wrongs of dropping Jimmy Greaves during the 1966 World Cup. 

Which isn’t to say that I think the group was wrong to be focusing on these much-debated questions.  If they’re still unresolved, it’s important to keep focusing on them.   But in this switched-on, high-speed, fast-tempo, low-attention-span society, it is absolutely bloody incredible how long it still takes to actually resolve anything important.

Welcome to the mad factory.

People in creative agencies understand some clients’ businesses better than others.  Naturally, the ones we understand best are the ones that are most similar to our own.  And in financial services, that means, first and foremost, fund managers:  fund management businesses are very similar indeed to creative agencies.

In what way?  Well, principally in that they’re both businesses in which serious, sensible, disciplined people try to build a stable and sustainable corporate structure around a completely unstable and all too often unsustainable core.  This being, of course, the “factory” of the business in question:  the creative department in an agency, and the investment department in an asset management firm.

The fact that both of these are populated by overpaid, difficult, egocentric prima donnas isn’t the major problem.  The major problem is that they’re populated by such erratic and unreliable prima donnas.  There are only a few creative people who deliver consistently excellent work, and only a few fund managers who deliver consistently excellent performance.  Naturally these small minorities are much in demand, and if you’re lucky enough to employ one or more then there’s a constant threat of losing them:  if you’re not lucky enough to employ any, then unless you can poach one or two from your competitors, you have to build your proposition around some very much less important dimension, like quality of service or strategic thinking.

There are, of course, quite a few other kinds of business with mad factories.  Football clubs, record labels and publishing companies come to mind.  Managing any of these is no job for the faint-hearted:  or for the person who likes an orderly and predictable working life.

Is saving in banks better than saving in pensions?

I mean “better” in the sense of socially, or maybe even morally, better - more to be encouraged by society as a whole, and by Government in particular.

I only ask because it seems that in the current financil crisis, bank savers are being treated so incredibly much more kindly than pension savers. 

Compare, say, an interest-rate chaser who put £100k into an Icelandic bank, and a pension saver whose adviser chose a fund that invested the same amount in the same bank’s shares.  Every penny of the rate-chaser’s money is safe, whereas the pension saver has lost everything.  Yet the fact is that the rate-chaser must have know that the higher rate on offer signalled a higher risk, while the pension saver may well have depended entirely on the judgement of an adviser and/or a fund manager and made no personal choice at all.

This seems a) so obviously unfair, and perhaps more importantly b) so incredibly discouraging for pension saving, that it’s almost impossible to believe it’s a sustainable position for the Government to adopt.

Almost, but not quite.  There are so many weird things going on in the financial world just now that it may be a long time before qualities like logic, balance and consistency make an appearance.   In fact, it may be a very long time indeed.