Agency: Grey London
By Rachel Barnes, marketingmagazine.co.uk, Thursday, 20 October 2011 10:30AM
Sir Terry Leahy never admits his mistakes. The former Tesco chief executive, who was named by The Guardian as the most influential non-politician in Britain in 2007, claims to have had more failures than successes. He just won't tell you what they are.
Failure is to be embraced as an essential part of risk-taking, he argues. 'I never over-focused on mistakes - you can't rewrite history,' said Leahy, as he addressed a sold-out room at The Marketing Society last week. 'Don't punish people for making mistakes. It is a tragedy if people in your businesses are frightened to try anything.'
While he is tight-lipped on the particulars of his mistakes, his successes speak volumes. In Leahy's 14 years as chief executive, he took Tesco from being a 568-store UK chain with pre-tax profits of £750m to become a global retailer with a domestic dominance that seems unassailable. The 55-year-old retired from Tesco in March, leaving a company with 2482 UK stores, 2500 abroad, and pre-tax profits of £3.5bn. 'If you cut me in half, I'm all Tesco,' he told Marketing last week.
During his tenure, he launched Clubcard, led Tesco's assault on non-food categories and was even responsible, as a 24-year-old marketing executive, for Tesco's first value range.
Leahy refers to himself as a 'marketing CEO', and, as he took to the podium, he shared his wisdom with a room full of senior marketers. His status is such that most of the audience were scribbling notes as they hoped to learn from a true world leader in business - and marketing.
While Leahy acknowledged that times were difficult for everybody, he dismissed a challenge from a member of the audience that the timing of his departure, coming as it did six months before incoming chief executive Philip Clarke (see box, opposite page) was forced to reveal Tesco's worst UK sales in 20 years, was anything but coincidence. He claimed he left simply because it was his 14-year anniversary. However, the recession was not to be seen as all 'doom and gloom', he said. In fact, these could be 'the best of times' for marketing.
'When times are good for everyone, it is easy to do well, but it is quite difficult to distinguish yourself. It is in the difficult times that a brand and a person can make more relative progress,' he added. 'To do that, you have to break out of a straitjacket, one that is slowly wrapping around you in your organisation; how you see yourself, the world, business, customers, competitors. You're framed by habit, by the budget, comparison with last year, last month, last week, meeting sales targets. These can all slowly suffocate you and your ability to see things fresh and new.'
Instead, Leahy contended, marketers should seize the opportunity in front of them. Now is the time to 'shake all of that off and start out again with a clean sheet of paper'.
'You should take a fresh look at the business, yourself, your customers and, above all, the opportunity,' he said.
Here are eight opportunities Leahy identified for marketers to reinvigorate their brands.
- What excites you about marketing today that you wish you had when you were marketing director?
Obviously, it is the internet. You can learn so much more about people.
You can communicate so much more readily, which means you can have a much richer experience and relationship with that one customer. For me, social media is another tool, like any other. It is a little early to say what its full impact will be. I am still learning what the role of a company should be within a social network.
- What is the biggest risk you've taken?
As a young marketing executive of 24, I launched a range called 'generics', which were reinvented as value lines 10 years later. I put on a big display, but Ian MacLaurin, the managing director at the time, came in and said: 'Take all this junk out, we're trying to move the business upmarket.' All the management quickly said: 'Yep yep, get them out.' I told them that was not a good idea and that customers needed it. Looking back, that was a very serious career risk. If I'd said it to anyone else other than Ian, I would have been fired.
- What advice do you give to marketers drowning in data?
It is terribly important for businesses to develop skills to be able to work with data. You have to bring that information, which is the voice of the customer, into where decisions are being made - the boardroom.
There is a danger that we know more and more about less and less. I have seen mistakes made with the best of intentions where people read a piece of data, then drew a conclusion that was too literal.
- You also had commercial roles. Should marketers move around to get that perspective and credibility in the boardroom?
I would encourage everybody to get wide experience of an organisation; spend time in operations. I sent Tim Mason (now deputy chief executive) out to run stores when he was very young; Richard Brasher was also a store manager. It helps you to develop an informal network of friends, which is terribly important.
- How did you pick the companies that you have been working with since leaving Tesco? And would you only ever choose a business that would never face competition from Tesco?
I have tried to have tiers of investment, some big funds, some private equity and some personal investment. I like start-ups because it is pure business.
I like people with energy and ideas, to whom I can offer help and advice. Quite a lot are technology-based, internet-based or using the internet infrastructure, as that is an area of growth. I don't think they are likely to compete with Tesco any time soon. They are around the orbit of Tesco, but there is a big world out there and plenty of businesses to help along.
In the same week that Sir Terry Leahy addressed marketers, more than 800 retailers and brands gathered in London for the annual grocery convention, hosted by the IGD (Institute of Grocery Distribution). While the bosses of the big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - took to the stage to highlight their business successes amid a backdrop of recession, Marketing caught up with each of them to ask about their marketing priorities and the view from the boardroom.
Marketing: How important is social media?
At what point will Facebook become a greater customer medium for communication than TV? I don't know whether that will be in one year or 10 years, but at some point it will, if the rate of change continues. I know from my kids, they go online to check everything before heading to a store. We all have to be interested in social media, not because it's a 'nice thing' but because we need to understand it.
Tesco now has an everyday low prices strategy, similar to Asda.
Is this the end of price promotions as we've known them?
Price transparency is becoming evermore important and gimmicks around pricing will take a secondary position. Where people gain real value is knowing how much things actually cost, not waiting until the checkout to find out.
High-low pricing - when the price today is this, tomorrow it is that, next week it is different again - creates customer confusion about the cost of shopping. The Bogof, the buy-one-get-two-free, that level of kidology is an old way of managing pricing.
What is the impact of Sainsbury's 'Brand Match' activity on Asda?
Interesting that it is only on a proportion of the offer; it is not about the basket, but brands. Sainsbury's is not talking about fresh or private-label here. We feel the right solution is basket pricing. So far, 4m people have used our price guarantee.
What's ahead in the run-up to Christmas?
I don't think we'll see any sudden shift down, but it is going to be very challenging. Customers will look for even more value. Whether you're selling a TV or a turkey, it is going to be tough. Through our own measures, we know people have £14 a week less to spend.
Marketing: How important is the marketing department within the overall Tesco business?
It is central. Marketing turns insight into action by working with the trading teams and people who run the stores. Marketing then turns insight into strategies that address customers' needs. Our marketing teams also have strategic responsibility for management of space, so there is lots of analytics involved.
It's unique really, as at Tesco you get to decide the creative, but you are also in the engine room. That is why some of our marketing people go right to the top. In the 90s, I was the customer marketing director.
What really excites you about marketing at the moment?
People underestimate the importance of Clubcard. It is launching this month in the US, so it will be live in every business we have from Los Angeles to Kuala Lumpur. Clubcard is a little thankyou to customers, but, a lot more than that, it takes out the mystery of how people behave and how they are changing their patterns over time. Through Dunnhumby, we have huge analytical capabilities. Do not underestimate Clubcard - there is still much more we can do.
What assumptions is Tesco making about the economy?
The 'Big Price Drop' - this is my big assumption. Our UK bricks-and-mortar retailing will not grow profits in the second half of the year. That is very unusual for Tesco, but we've concluded that it is the right time to make a very significant investment.
Sometimes you have to put aside just the pursuit of profit in the market in order to get back in tune with the nation, which is what 'Big Price Drop' and other things that are coming in the second half of the year (are about).
A very scary statistic we have is that in the first half, Tesco customers spent £750m more putting fuel in their petrol tanks. Imagine what else that would have been spent on?
Marketing: How is the role of marketing changing?
Our spend is still mainly on press and TV, but that is evolving as we significantly increase expenditure into digital. For 'Live well for less' we have joined above-the-line media with online more than ever before. Every campaign we run is now integrated.
Will digital become more important than the big TV ad?
Virtually every campaign still needs TV activation. If we were a specialist brand, it might be appropriate to move away from TV. But we're mass market - the big X Factor slot still hits our target consumer. It is difficult to envisage not doing big TV ads in 10 years' time. However, ads will be adapted for small media, like iPhones and iPads.
How is Sainsbury's using social media?
I go on our Facebook page every night - that is now my primary source of market research. Whatever big things come out from research, you'll pick up strands of that on Facebook first. It may only be one or two comments, but you get a glimpse of what's going on.
Everyday low prices or discounts?
Customers are more promotion-savvy than ever. It would be naive to think that dynamic will change in the foreseeable future.
Marketing: How important are emerging marketing channels?
Marketing is critical and at the heart of everything we do. We use the press extensively, but it is increasingly about the social phenomenon. We've just opened a pop-up restaurant in London, which isn't branded Morrisons at all. We want to see what happens when opinion-formers blog about it.
How is Morrisons' own-brand relaunch going?
Sales were up 23% on the range in its first week and that was without any media campaign behind it. It really is M&S quality at Morrisons prices. A lot of the products, like the Pan-Asian range, we didn't have before. Our customers were going elsewhere for those. Now they don't need to, so what does that mean for 'elsewhere'? Also, as we manufacture so much of what is in these products, we can offer killer prices.
Will you follow Tesco and Asda in favour of everyday low prices over promotions?
We're not seeing this yet. We've always been promotionally led, with about 30% on promotion in-store. We'll sit there until there's a need to change.
How are your preparations for Christmas going?
We brought back celebrities in our ads earlier this year, so watch this space. We always do a big price push - we pride ourselves on winning Christmas.
This article was first published on marketingmagazine.co.uk