WPP boss Martin Sorrell talks global brands
Martin Sorrell: "Even German food retail customers like brands"
As parents of little children will confirm, the simplest questions are usually the hardest to answer. Put this question to an academic and he will bore the pants off you, ask a consumer goods manufacturer and you will be ladled with PR.
Some cultural philosophers regard brands as lodestars providing shoppers adrift on a sea of information with points to steer by. Others even claim that premium brands have replaced religion in our modern consumerist world. But even agnostics might jib at the idea of Coke as a spiritual substitute for Jesus.
Who then can one ask?
Sir Martin Sorrell, founder and CEO of WPP, the world's largest advertising company by revenue, built his empire by providing marketing services to brands. The sheer size of London-based WPP, comprising agencies such as Grey, Ogilvy & Mather or Young & Rubicam, makes it a bellwether for global economic trends. Last year the advertising holding company posted revenues of €14bn in a total 111 countries.
As WPP makes nearly a third of its sales in the online arena, Sorrell is also in an excellent position to judge the e-commerce challenges facing brand manufacturers. These include heavyweights Procter & Gamble, Unilever or Nestlé.
So what does a man who has been dubbed "the world's most powerful advertising executive" have to say about the guiding stars of the consumer goods industry?
"Brands tell stories"
Sir Martin, when does a product become a brand?
A product becomes a brand when it is not a product! This is when consumers are willing to pay more for something which offers either a tangible physical benefit or service and/or an intangible emotional or psychological one.
How then would you define an A-brand as opposed to a B- or a C-brand?
An A-brand, such as Apple or Volkswagen, is one that earns any such differentiation or pricing premium to the greatest degree.
Own label is growing in many fmcg product groups. How big a threat is this to classic brand manufacturers?
Own label indeed grew for many years, especially when unemployment was higher in the recession after the collapse of Lehman Brothers and the world banking crisis. But consumers always like brands, whether you are talking about automobiles or holidays. This is even true in Germany where they are obsessed with the price of food!
How are fmcg brands reacting to today’s low-growth environment?
In order to achieve their objectives, clients are trying to cut costs rather than build revenues. This is reflected in the rise of finance and procurement and in the emphasis on payment terms.
But isn’t cost-cutting a primary business virtue?
Thinking about it logically and very simply, there is no limit on growing revenues until you get to 100-per-cent market share, but there is a finite limit to cutting costs. Excessive cost cutting also works to the detriment of innovation.
So could top brands become a niche?
No, I think that brands will become even more important in the current low-growth, price-oriented environment because they are the key to success. But they have to earn their premium, which means more R&D and innovation to get tangible differentiation, and doing more to build the psychological and emotional relationship with the consumer.
One recent trend is for brand manufacturers to launch umbrella corporate campaigns rather than advertise individual products. Does this make sense in regard to building a relationship with the consumer?
Yes, because we are all now so connected. In the old, pre-digital, social and mobile world it was possible to communicate with one audience geographically or functionally to the exclusion of any others. That is no longer the case, and everybody knows the various brand names belonging to a big consumer company.
What happens if a company markets brands a, b, c, d and e, but has a big problem with brand c? Won’t that negatively affect the rest of the corporate brand stable?
Consumers don’t worry as much as they used to about the connection. However, most umbrella corporate campaigns are initiated by high-quality companies such as Unilever, P&G, Ford or Nestlé who offer consistent brand strength throughout their portfolio.
WPP works for many top brands, including Pantene, Dove or Kit Kat. Could you name one international fmcg brand which really impresses you as an ad man?
All our clients! But I am not allowed to pick any specific brand we work on.
Traditionally brands have always had to tell a story, but has this now become a cliché in today’s digital world?
No, building a brand is still very much about telling a story, and our business is about telling stories. But we have to do this in a much more sophisticated way than when there was only TV and print. We now have to tell different stories in different media, and the medium has almost become as important as the message itself.
What will be the major brand trends in the future?
They are inextricably bound up with key global trends. We see a shift in the centre of the world from America to the East, the South, and the South-East; greater government involvement, post-Lehman, and not just as an investor or regulator; consolidation and significant overcapacity in most industries accompanied by a shortage of human capital where companies “dis-intermediate” competitors with business models more attractive to talent; the growth of retail power, counter-balanced by the rise of e-commerce;
Urbanisation will also increase and soon 70 per cent of the world’s population will live in cities, making proximity retailing more important than Big Boxes; internal communications will grow in importance so that CEOs & Chairmen will have to engage staff audiences as much as external ones; global companies will need to become more responsive locally; companies wishing to build long-term brands will have to make Corporate Social Responsibility their strategic core.
Wow! Taking up just one of the trends you see, could nimble-footed local brands steal the action from major international brands leaving them to look anonymous and lacking identity?
Clearly, if you have a global company like Coca-Cola, which has operations in 220-odd countries, how can it know what is really going on in each one? Many of our global fmcg clients still think that competition is the other global fmcg players. However, they are beginning to understand that regional and even country-led companies are their most powerful competitors because these often have more awareness and better distribution.
So what do you advise your global clients?
To develop the differentiation we have just talked about because it is their lifeblood and to invest more in communication and advertising.
Related in German: Interview by Mike Dawson in Lebensmittel Zeitung, no. 44, 31.10.2014