Lucian’s blog

…but, of course, it hasn’t.  Somewhat to my surprise, I’ve just been dumped by Capital One:  they’ve sent me an “It’s not us, it’s you” letter explaining that since I haven’t used my Capital One credit card for such a long time they think I’d be happier without it cluttering up my wallet.

It’s true I haven’t used it for a very long time, and the reason for that is that I hate them.  I hate everything about them.  I hate their horrible contrived unfunny advertising (in fact, my hatred of it was the subject of my second-ever blog nearly three years ago).  And I hate the horrible manipulative credit card cheques they’re always sending me, and the rip-off ASU insurance (which in fact I don’t think they offer any more) and the rip-off penalty charge if my payment is held up a day longer than usual in the banking system.  In fact, I can’t think of anything they’ve ever done which I’ve ever not hated.

This is odd for two reasons.  First, you’d think that they’d have tried a bit harder, over the ten years or so that I’ve had the card, to make some money out of me.  I’m a heavy user of credit cards, and at times I’ve run large balances from month to month.  Also, during the period I’ve been a Capital One customer, I’ve been involved in choosing company credit cards on two occasions, and also choosing first cards for both my teenage children.  Capital One know nothing about any of this, because they’ve never asked me anything or found out anything at all about me.  If they had, I’d have been happy to tell them a great deal - not just about these personal circumstances, but also about more attitudinal stuff like my hatred of those credit card cheques.

And second, I know Justin Basini, Capital One’s outgoing Head of Brand Marketing, slightly, and he’s one of the most intelligent, thoughtful and progressive financial marketers I’ve ever met, if not perhaps the most intelligent, thoughtful and progressive.

Which raises three questions.  How can an organisation which depends for its success on its ability to build good customer relationships be so hopelessly, uselessly bad at it?  Bigger picture, what the hell happened to that wonderful world of personalised, customised, relationship-based one-to-one marketing that we were first shown, as a not-far-distant promised land, in books, speeches and articles by various direct marketing gurus fifteen years or more ago?  And smaller picture, how could anyone as smart as Justin preside over the crude fumblings of such a lousy organisation?

I can’t answer any of these questions, and I’d be very pleased to hear from anyone who can.  All I can say is that actually, I’m delighted to have been dumped by Capital One - I don’t think I’ve ever had a less rewarding relationship.

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There’s one category of client for whom agencies do better work, try harder, offer better value for money and usually overservice.  This category, perhaps unamazingly, is made up of clients we like.

At the opposite extreme, there is also a category of clients for whom, try as we might, we really can’t find the motivation to do anything special for.  We’ll do what we’re contracted to do, but no more.  The stuff will be ordinary, the service sluggish and so far from going the extra mile, we’ll rarely manage an extra yard.  This category, obviously, is made up of clients that we hate.

There’s a whole other blog to be written about why we love some clients and hate others.  For now, let’s just say that it’s for more or less exactly the same reasons that we love or hate anyone else - reasons ultimately to do with what sort of people we think they are, and how they behave towards us.

But the point I want to make now is that if I was you - especially if I was you in this cash-strapped climate - then for entirely professional reasons I’d be working quite hard to climb up that likeability league table.   

Ultimately, agencies have three motivations to work for clients:  to make money, to do great work and to enjoy ourselves.  In a perfect client relationship, we achieve all three.  We’ll settle very happily indeed for two, and actually we’re pretty satisfied with one:  but if the relationship really isn’t delivering against any of them, then it’s only natural a) to wonder a bit why you’re doing it, and b) to do it with less than 100% enthusiasm and commitment.   

It may simply be impossible to make your account profitable at the moment.  It may - although I have my doubts - be impossible to get great work through, especially if your firm has particularly complicated and bureaucratic approval processes.  But it’s never impossible to make life more enjoyable - and, I promise you, for every extra unit of enjoyment you can bring to the proceedings, you’ll get back ten units in creativity, energy, commitment and service.

So, in short, my advice to anyone who wants a better agency is, quite simply, to try being nicer to the one you’ve already got.  And, yes, of course, I can see that the same advice applies in reverse to me and all my colleagues on the agency side whenever we long for a better client.

Read more | Posted in Advertising, Agencies | No Comments »

All this online blogging, tweeting, messaging and chatting can get awfully circular.  I’m writing this, for example, to draw your attention to a discussion that I just contributed to in a group run by Magnus Spence on LinkedIn, and having resolved just yesterday to try to make more of Twitter I probably ought to go on to write something there drawing your attention to this blog.

Still, somewhere deep within this digital message-storm, there is a point I actually want to make - you’ll find it here in Magnus’s discussion:  http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=4655332&gid=1912019&trk=EML_anet_qa_ttle-cThOon0JumNFomgJt7dBpSBA.

If you’re put off going there by the frightening length of the address, allow me to summarise.  In passing, in a debate on another topic entirely, a big cheese at an investment firm wrote that as he sees it, in FMCG markets consumers choose leading brands simply because they have famous names which in some vague way inspire confidence, without knowing why or understanding what makes them better:  he chose P&G’s Pampers as an example of this brainwashed, zombie-like behaviour. 

My reaction, you’ll be unsurprised to hear, was more bull-confronted-with-giant-red-rag than zombie-confronted-with-well-known-logo.  Why oh why, I wrote in response, won’t fund managers start to understand that the brand isn’t a separate, arm’s-length construct built and maintained by the marketing department, but is rather a construct that’s built and maintained out of the totality of the target market’s experiences and perceptions of the product, service or business in question - including, first and foremost, their experiences and perceptions of the fund managers themselves, and the funds they manage?

The widespread and continuing refusal to recognise this obvious truth leads to some bizarre outcomes.  Some years ago, I worked for the marketing team of a very large and well-known retail fund management company who decided, on the basis of an admirably market-focused planning phase, that their firm’s brand should stand for the concept of “accessible expertise.”  The only slight problem was that at the time, the fund managers themselves, who presumably owned most of this expertise, were so arrogant and aloof that no-one else in the company was actually allowed to get out of the lift on their floor without first making an appointment.  It’s difficult to imagine less accessible expertise:  but, unbelievably, neither the fund managers, nor the senior management, nor indeed even the marketing team, saw any difficulty with the disconnect.

One reason why so many people in investment companies go on living in this fantasy world is that the alternative - a world in which the investment managers have to understand, buy into and positively contribute to the brand positioning the firm is aiming for - is too different, and too difficult, to contemplate.  In a good FMCG company, the people who are closest to the customer have the greatest strategic power to affect the direction of the company, and everyone else within it.  In asset management, the reverse is true:  the people who are closest to the retail customers have little or no strategic power, and the fund managers who have the most strategic power know little or nothing about the customers and often care less.

They say that people who lead deeply abnormal lives often assume - quite wrongly - that they’re perfectly normal and everyone else lives more or less as they do.   In describing a world in which Procter & Gamble’s brands are not built on any real understanding of consumers’ needs, are not concerned to deliver superior performance against those needs and aim only to build a kind of false and groundless trust that cheats people into making bad purchase decisions, the correspondent in Magnus’s discussion group tells us nothing at all about the way Procter & Gamble works - but a great deal about his own industry.

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Met up with an old friend this morning who was made redundant from a corporate job a year or so ago and since then has built up an impressive blend of non-exec, consultancy and other fee-charging Schedule D activities.  I asked him how he’s liking it.  “The best thing,” he said, “is that it’s so much less risky than a corporate Schedule E job.”  “Less risky?” I asked, surprised.  “Sure,” he said.  “These days I have a total of eight different organisations helping me pay my mortgage and look after my family - if any one terminates our relationship, I still have seven left.  When I was made redundant from xxxxx last summer, my income fell to nothing almost overnight.”

When you put it that way, it sounds perfectly sensible.  But among all the advantages of a self-employed, freelance model that people might have cited over the years, I don’t think that greater security would have featured very often.  It just goes to show how much perceptions - and indeed the reality - of so-called “permanent” employment have changed.

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No, I’m definitely not about to bite that hand which, from time to time at least, feeds, waters and entertains me so generously.  Over the years I’ve had plenty of thank-you notes to write - to Nationwide for great nights at the football, to Brit Insurance for the cricket, to PPP healthcare for an epic England vs France encounter at Twickenham, to Blackrock for the masters tennis at the Albert Hall, and so on and so on.  And this coming Thursday I’ll be penning a note of thanks to AEGON, who have very kindly invited me to Wimbledon tomorrow.

On almost all these occasions, I’ve been a minor beneficiary of what has in fact been a big, long-term commitment to a particular sponsorship activity.  Things have been changing recently, of course, but up till a year or so ago, you’d be surprised if any big financial institution was spending less than, say, £10 million a year on sponsorship, and very surprised indeed if it was less than £5 million.

That’s big money, and the botheredness in my headline is partly to do with the fact that it’s so impossibly difficult to figure out what the sponsors are getting for it - and even more difficult for an organisation planning a new activity to make any sensible assumptions about what it can expect for its money.

But that, in turn, leads to a bigger worry.  Frankly, it seems to me that if any one major chunk of companies’ brand, marketing and communications spend is so completely impossible to judge by any objective criteria, then so is the totality of companies’ activity as a whole.   Would it have been better to spend twice as much on sponsorship?  Or half as much?  Or nothing at all?   Should we have diverted money to or from other activities?  Or found more money?  Or spent less?  We don’t know.  If direct marketing represents the hardest, most quantifiable end of communications expenditure, then big-ticket sponsorship represents the softest, fuzziest, most opposite end.  And simply by existing, it casts doubt over everything else.  That’s why it bothers me.

This isn’t to say that I think it doesn’t work or it’s a waste of money.  I think it is sometimes, but often I think it probably works well and provides excellent value.

What makes the difference?  Well, my guess is that it’s to do with the workings of an invisible and little-understood phenomenon which I’ve mentioned before in the context of advertising.  Here, as I wrote a couple of years ago, there is some kind of mysterious and still more or less unrecognised force which plays a big part in determining whether or not your advertising actually changes the way people think about your brand. 

It’s not about whether the advertising is good or bad, or does or doesn’t have cut-through, or is or isn’t well-branded.  In the piece I wrote, I quoted the examples of Honda and Skoda, both of whom have excellent advertising with very high cut-through and good branding, and I argued that for some reason Skoda’s advertising has been hugely influential in changing the way that people think and feel about Skodas, whereas Honda’s advertising - lovely though it is - has absolutely no effect on the way you think and feel about Hondas, which are still overwhelmingly associated in our minds with very small, very elderly gentlemen sitting hunched over the steering wheel proceeding at a rock-steady 25 mph alongside the sort of white-haired old lady known to the traffic police as a dandelion in the passenger seat.

Anyway.  This same phenomenon - call it “connectivity” if you like, the ability of the communication to connect with our perceptions of the brand - also seems to apply in sponsorship.  To take an obvious example, does Renault’s very, very expensive and very long-term involvement in Formula 1 have any effect at all on the way you see the Clio, Megane and Espace?  Thought not: but, going back a few years, did the rallying success of the Quattro affect the way you thought about Audi?  You bet it did.

On the basis of that single example, you might think it’s just a question of the degree of relevance:  Formula 1 car = nothing to do with pottering around in a Clio, Audi Quattro = quite a  lot to do with bombing around in an Audi Quattro.

But it’s not as simple as that.  In financial services, few if any sponsorships have any kind of relevance.    But I would argue that somehow, Nationwide do get more out of football than Barclays do, even though I suspect Barclays spend more;  that Skandia got more out of Cowes Week than Aberdeen ever did out of the boat race;  and that actually, AEGON will get more out of tennis, and the Queen’s tournament in particular, than Stella did, even though on a hot day the relevance of Stella is a million times higher.

I’d like to know more about this connectivity thing. It’s a bit like black holes, which affect the behaviour of objects around them even though they can’t be seen through a telescope:  I can only demonstrate that it exists by pointing to its effects, but it does exist all the same.

Meawhile, I’m looking forward to my day at Wimbledon tomorrow.  I do hope that in some way I can’t exactly put my finger on, the money AEGON are kindly spending on me will prove well spent.

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Charles Pooter is the fictional author of one of the funniest books ever written, George and Weedon Grossmith’s brilliant Diary of a Nobody.   Pooter makes terrible, hopelessly unfunny jokes and utterly unilluminating witticisms in his daily life, and proudly shares every single one of them with us in his diary.

Today I was making a presentation about the role of so-called “opinion leadership” in the marketing mix.  I said that to be in a position to engage people with your opinions, you need a combination of expertise and attitude.  “If you have expertise without attitude, you’re a bore,” I said.  “And if you have attitude without expertise, you’re a twat.”

Oh well.  It came across well in the meeting.  Â

Read more | Posted in Ramblings | 2 Comments »

First the Baggies were relegated, even though they played some really good football and proved to be by far the most attractive of the promoted sides last season, and now the building society has gone bust.

Well, actually I don’t think it has gone bust because a rescue package has been agreed, but it has imprudently mis-lent its way into a position where it would have been bust without a bail-out.

In this, it’s certainly not alone.  At the BSA conference in Harrogate a couple of weeks ago, I detected a pallor in the faces of a remarkably large number of the delegates which, I decided, meant that they weren’t expecting to be at the conference next year.  (It’s possible, of course, that the pallor simply indicated that their provincial home towns hadn’t seen much sun yet this spring.)

It hadn’t occurred to me before that there might be a correlation between the performance of towns’ financial institutions and their football teams.  If there is, it doesn’t seem to work in Scotland, because Dunfermline had rather a good season this year.   And I don’t think it can apply in Middlesborough, where the team has been relegated but I don’t believe there is much in the way of a financial services sector.  But as well as West Brom, it certainly applies to Newcastle, home to Britain’s previously-worst-run mortgage bank and currently-worst-run football team;  and things certainly haven’t been going well for Derby County or for that region’s now-rescued building society, or for the equivalent institutions of Scarborough. 

And then of course there is the enigma that is Norwich and Peterborough - Norwich relegated from the Championship, Peterborough promoted from League 1.   What are the implications for the building society?  Looks like it can expect some ups and downs.

Read more | Posted in Financial, Football | 2 Comments »

Could be Boots because its name isn’t in caps or an acronym, could be ASDA because it’s the only one owned by Walmart, but in fact it isn’t a trick question (or if it is, it’s a double-bluff trick question) and the answer is HBOS because it’s a financial institution and the other two are retailers.

Until very recently, many people - including me - would have been unhappy with this answer.  “Same difference,” we’d have said.  “What you have to understand - what we all have to understand - is that retail financial services is exactly that:  retail.  The more that High Street providers realise this, and the more they think and act like retailers, the better for all concerned.  Especially their customers.”

It was this line of thought, of course, which led to one of the most obvious similarities between the three organisations in my headline:  all three have appointed Andy Hornby to very senior management positions, the Boots appointment having been announced just a couple of days ago.

Hornby was hugely successful at ASDA, and I’m sure will be hugely successful at Boots.  But catastrophe overtook HBOS on his watch, and when it comes to figuring out why then as so often in life the simplest and most obvious explanation is the best one:  the retail approach didn’t work quite as well as we all thought it would.

It seems to me that it’s all down to that old favourite, the Law of Unintended Consequences.  True, in many ways a retail mentality makes perfect sense for a High Street branch-based business.  Adopting a sales-driven approach, and supporting it with the full range of promotional marketing techniques, seem like exactly the right thing to do.  Even more fundamentally, how can it be wrong to focus more on the customer, and his or her needs?  Surely any organisation whose main concern is to ensure that as many customers as possible come away from the store happily laden with as many full shopping bags as possible must be doing the right thing?

Well, actually, on reflection, probably not.  If it was possible simply to graft an in-branch retail mentality onto all the existing skills, values and practices of a well-run financial institution, then all would very likely be well.  But the trouble is, in prioritising the retail behaviours, you inevitably de-prioritise everything else - in particular, your compliance and your risk management. 

As virtually every High Street provider has found, it simply isn’t possible to adopt a strong selling focus without finding that you’ve also unexpectedly adopted a strong mis-selling focus.  The pressures to misbehave come to bear from the top down and from the bottom up:  from unscrupulous sales management pushing out poor-quality, over-priced and unfit-for-purpose products, and from anxious salespeople half-way through the month and way behind their targets. 

To some extent, of course, these are routine retail phenomena.  And it would be wrong to think that customers aren’t similarly mistreated elsewhere:  to choose an example that I noticed on my way into work this morning, I wonder how many of those “Free Brake Checks” promoted by tyre centres don’t result in a recommendation of expensive, essential and urgent remedial work.

But the trouble is, of course, that while fitting unnecessary brake pads isn’t going to hurt anyone, buying useless Payment Protection Insurance, or putting your savings into a high-risk fund that you didn’t want or understand and then finding your money reduced in value by 30 per cent in a month or two, or taking a loan that you can’t possibly afford to repay and wouldn’t have been offered if the counter staff hadn’t fiddled the application, can hurt very much indeed.  And what we now understand is that when these misbehaviours come to light, they hurt the institution that committed them at least as much, if not even more, than they hurt the customers on the receiving end.  And that’s why retail financial services isn’t really all that much like retailing. 

I suspect that sometime soon, some High Street players will probably make another, more balanced and more sophisticated effort - Retailing 2.0, so to speak - in which they’ll try harder to blend retail customer focus with the risk controls and prudent judgement of good financial practice.  I expect this second wave will prove a lot more successful, and a lot more in everyone’s long-term interest, than the first. 

But I’d be very surprised indeed to see Andy Hornby coming back from Boots to spearhead it.

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Yes, OK, OK, you’re miles ahead of me - it’s a simple substitution code where each letter is replaced with the next one in the alphabet.  Dbo = Can.  Zpv = you.  The message as a whole = Can you crack this code?

That’s an easy one.  But sometimes in the world of financial marketing communications, we receive coded messages that leave me completely stumped. 

Here’s a case in point:  a DM letter that I’ve received from some people called Close Credit Management today.  What do you think this is all about?

Dear Lucian

Establishing meaningful contact with customers at the right time…

Credit management in a recession is all about speaking to your customers at the right time, ensuring that you establish and keep in contact with those who are overdue and as a result of this you are able to get a realistic and sustainable promise of payment from those who are in a position to contribute.

Are you getting anywhere with this?  I’m buggered if I am.  What’s all this “at the right time” stuff?  What is the “right time”?  What would be the wrong time?  I suppose it would be the wrong time if they didn’t actually owe you any money, but apart from that?  And what is “meaningful” contact?  And what do they mean by those who “are in a position to contribute”?

What I think this may all mean is that in a recession, you have to be extra careful to make sure you get paid by your customers.  But that’s not what it says.  What it says is that “credit management…is all about speaking to your customers at the right time.”

No, it’s no good.  I don’t get it.  This is one code I really can’t crack.  Or pof dpef J sfbmmz dbo’u dsbdl.�

Read more | Posted in Financial, Ramblings | 1 Comment »

Ever heard of a bloke called Robert Arnott?  Me neither.  But you’ll find an article he’s recently written at www.indexuniverse.com/publication/journalofindexes/articles/149-may-june-2009/5710-bonds-why-bother.html which is almost interesting enough to make typing in that insanely long web address seem worthwhile.

Basically, Arnott hurls armfuls of graphs and statistics at making the point that over all sorts of time periods - 20 years, 40 years, for some reason 109 years, etcetera etcetera - investing in equities has delivered less capital growth than investing in bonds.  Over his longest period - the 109 years from 1900 - he claims that equities have achieved an average of 0.4% p.a. more than inflation, whereas bonds have achieved a slightly less pathetic 1.1% p.a. more.

Even I can see that there is a huge statistical conjuring trick at the heart of all this, because he strips out the dividends paid on the equities while including re-invested income on the bonds.  This is enough of a cheat to cost him about 98% of his credibility.  Still, even the remaining 2% does cast some real doubt over one of the biggest ideas - arguably the single biggest idea - that has informed thinking about investment in my lifetime:  that given a long enough period of time, equity investment will turn quite small amounts of money into quite large amounts of money.

Frankly, one of the reasons we believe this so strongly is that we need to.  Somehow the circle has to be squared:  if we’re going to enjoy a good standard of living through that ever-expanding period of our lives called “retirement,” the money has to come from somewhere.

But as Arnott argues, the days are long gone when we could happily assume that in the long run, the extra risk represented by equities would be rewarded by extra returns of something betwen 3 and 5% p.a. Increasingly, as markets become more turbulent and volatile, such assumptions become meaningless - sound and sensible for someone born in one year, hollow and nonsensical for someone born a year later.

They say there are lies, damned lies and investment statistics.  I’m sure that’s true.  But in a weird kind of way, Arnott’s statistics still add substance to a troubling truth.

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