Unilever's Paul Polman on why 'advertising' means nothing to him, plus his vision for magic, not metrics
By Rachel Barnes, marketingmagazine.co.uk, Thursday, 10 May 2012 12:30PM
He doesn't like the words 'digital' or 'advertising'. So what does propel successful brands, according to the Unilever chief executive?
Unilever chief executive Paul Polman does not like advertising. Or, at least, he does not like the word 'advertising'.
'If I project ourselves out five or 10 years, then I don't see Unilever as an advertiser, I see us as a solutions provider. I see us as a co-creator, with the consumer, of mainstream sustainable living. Neither the word, nor the accounting line of "advertising", means anything to me,' he says.
This is indicative of the style of leadership and culture that Polman has brought to the £37.7bn global business, which he joined in 2008, following a stint at Nestle and 26 years at Procter & Gamble.
It is no exaggeration to say that when Polman speaks, outlining his ambitions for the company with a style that is evangelical in tone and delivery, his audiences are rapt.
In a speech at the Cannes Lions Festival last year he called for agencies to refocus around the consumer, not the client, and to shift their centre of gravity toward the East. It grabbed headlines, but Polman downplays his attendance at the event, adding: 'I was only there for a few hours.'
As a business leader, working in 190 markets across the world and spending 70% of his time travelling, a schedule comprising a meeting with Marketing in the morning, followed by phone calls with US government representatives to talk about the upcoming G8 summit, before delivering the annual lecture of The Marketing Society in the evening, is all in a day's work. It will be 10.30pm before Polman, a keen marathon runner, finally indulges in a glass of red wine at the post-speech dinner.
While sustainability is just another buzzword for many businesses, Polman speaks with conviction when he describes the Unilever 'Sustainable Living Plan', set out in 2010, as 'probably the most audacious plan that exists in the world'. The aim is to double the size of the business while reducing its environmental footprint.
The plan is bold in more ways than one, as it was not put through any testing, and Unilever will be held to account if it does not meet these self-imposed targets by 2020. To delay action for the benefit of testing would have resulted in a 'sinking ship', claims Polman.
This comment reflects his desire to pull back from the obsession with numbers, forecasts and spreadsheets that prevails elsewhere, an attitude encapsulated by the strategy set out by senior vice-president of marketing Marc Mathieu last year to create 'more magic, less logic'.
Polman is vociferous in his opposition to short-term thinking. He has shifted the business' focus away from short-term appeasement of shareholders to a longer-term operating model. Gone are the quarterly updates to the City, the knee-jerk reactions to 90-day sales of Flora, and the quick-fix cuts to marketing budgets.
When it increased its ad and promotions (A&P) spend last year by only £120m, to £5bn, commentators were quick to note this was significantly below the £300m added in each of the two previous years. Polman explains this away as the thinking typical of people obsessed with a sixor 12-month reporting period. He argues that the £800m Unilever has added to marketing spend in the past three years is the 'biggest and strongest' in the company's history.
Marketing caught up with the Dutchman at the company's landmark London headquarters, Unilever House, to find out how the company and its marketing is changing under his stewardship.
Marketing: Can we start with your attitude to short-termism in business? How does such thinking affect the process of marketing?
Polman: It's easy to make the numbers by cutting your adspend. In marketing, we have all seen that, and, frankly, as a company, we have at some point in our history been guilty as well.
Traditionally the numbers need to be made in the quarters, as you're managing the City's expectation on a quarterly basis. However, it takes time to build brands and connections with consumers. These are long-term investments, and any time we have been guilty of that (short-termism), we have also short-circuited shareholders at the same time.
Consumers are looking for bigger solutions than politicians or companies - where trust is equally low - can provide. They are looking for brands that not only give them the product benefits, but also make positive contributions to society.
You don't have friends for a quarter, you make friends for life. That's why we call it 'Brands for life' in the relaunch of our marketing function and capabilities.
Your marketing department must have been relieved when you shifted it away from the mindset of 'live or die by the quarterly update'.
It has been incredibly liberating, not only for our marketers, but for everybody in the company, including me. If you have a strong philosophy to want to do the right thing (in the) long term, then you have to provide the environment for people to operate for the long term. That's why we abolished guidance, quarterly reporting, and changed our compensation system.
It did provide some space for people to make better choices, and we have seen it in our results. Not surprisingly, our share price has gone up nearly 70% (since 2009). So even our shareholders understand that.
Still, every six months we have a little discussion and a checkpoint to ensure we're making progress - that's important as well.
You've reduced agency fees and redirected spend back into media. What is your view of how hard marketing budgets need to work?
Unlike many times in our history, over the past three years we have increased our total advertising and promotional (A&P) spend by almost EUR1bn (£800m). Again, this doesn't have to fall in an exact six or 12 months of the calendar. Equally, our company grew from EUR39.8bn to EUR46.5bn last year and is heading toward EUR50bn this year. So it's not surprising adspend has gone up.
Now, we know the consumer is hurting, and the UK is an example of that. It would be irresponsible for us to spend money in an inefficient way if consumers are hurting. We owe it to the consumer, if nothing else.
The other thing we have done with the agencies is become more performancedriven; we want the agencies to be equally responsible and accountable for the performance of this company.
If the performance is very good, then agencies can earn probably more than they did in the past. How much can agencies earn on a brand that declines? How much can you earn on a brand that cuts A&P because it doesn't make the profit forecast?
You spend 13% of your marketing budget on digital. How is that shifting?
When digital development started, there was a rush to say how much of every marketing budget needed to be in digital. The reality now is that nearly everything you touch has something to do with digital.
So I'm not a big fan of this whole word 'digital'. I'm not a big fan of saying to every brand that 15% of your budget needs to be on digital. For example, the bulk of Axe's marketing budget happens to be online globally, and that's a good model.
Magnum uses a lot of social media as it lends itself to it well - young target audience, dynamic, fun. You have to ask, what does your brand stand for and who are your consumers? What are the challenges you want to solve?
We are looking at more dynamic ways of involving the consumer and, no doubt, social networks are part of that. However, I don't think you want to make big statements. Otherwise, all of a sudden, everything is about Facebook.
TV is the tried-and-tested way to build a brand. Can digital gain your brand trust in the same way?
Absolutely. We have some brands that have been built, and taken off, only with digital. TV has a role to play and it will for a long time, but you first need to really talk about the brand, what it stands for and the message. To start with media choice is wrong.
You can have a big brand globally if you have a 5% penetration, such as our skincare brands, Simple or Pond's. These have tremendous potential, but you're not going to blast to 100% audience when you have 5% penetration.
Now digital and the social networks have a much better probability of reaching your consumers - and at a lower cost. Social media is going to be a much more effective tool for brand adoption over time than TV.
How do you measure that?
It's a little bit simple to sit here and say 'Oh, we need to develop all these models that help us make the decision'. I think that is abdicating responsibility as a marketing community. You have to do a lot of experiments and learn from those, then scale up.
Although I try not to generalise, there is too much logic (in marketing), too much trying to be rational, too many numbers, with marketing almost being run by the accountants. We can be better at (measurement), but it's not the Holy Grail.
With your marketing background, plus your early roles in finance, and now as chief executive, are you not demanding of ROI and making every pound work harder?
No, that's not as you make it sound. Discipline is the word, not just ROI. I'd rather that comes from a lot of experiments and testing, than from some consultant providing me with a lot of spreadsheets and analysis. I want our marketers to be closer to consumers to have a feel for what is going on there.
Most of our marketers come from the best schools, good families. They don't know what it is to go and live on a £25 budget and have to feed a family of four; they don't know what it is if you have three children and your husband has left you; they don't know what it is if you lose your income all of a sudden.
I travel 70% of the time, but rarely do I go to a country without going with a shopper, a real person. That is responsibility. Spend a little, learn a lot - what I call, 'failing cheap and winning big'. The time is over when you can say 'Oh, this looks good because my wife likes it'.
I think some marketers have lost touch with society. That's why everybody is suddenly surprised by the Occupy Wall Street movement. Well, if you are surprised, then, I hate to tell you, but you are out of touch with what's happening in the world.
Lord Lever is credited with saying, 'Half of our advertising is working, we just don't know which half.' Does this still ring true today?
It is hard for a company such as Unilever. The bigger the company, the more difficult it is, as it boils down to the issue of being riskaverse. You know we did no testing on the Unilever Sustainable Living Plan when we launched it, and it's probably the most audacious plan in the world. I don't know of any company our size that has put out these goals of totally decoupling their growth from environmental impact.
If we had tested the thing to death, we would have sat here until the end of the next decade - and the ship would be sinking.
Where you do spend your money, you have to be intelligent. Don't throw good money after bad. Fail cheaply, experiment and do intelligent risk-taking, and learn, learn, learn.
Given that you have spent 26 years of your career at P&G, how do you describe the differences between it and Unilever?
P&G has moved on since I left seven years ago. It will always be a very good company.
It is clear that it is going through a rough spell now - we've had that in our history. I'm also convinced that it has enough good people and good brands that it will come out of that, but, clearly, we are outperforming them in the marketplace.
That's not any point of celebration for us. Given how tough it is out there, I want everyone in this company just to stay focused ruthlessly on the consumer.
With P&G we only have an overlap of our business of about 30%. Where (P&G) seem to have pressure points, we don't really compete too much with them.
It's clear that people don't want to pay so much for a razor blade, or they want to use it two or three weeks longer. I use mine for three months, and it works perfectly.
P&G is getting enormous coverage through its sponsorship of the Olympics. Does it gall you to see your rival getting so much exposure around a feel-good, global event?
It has clearly made a choice to support the Olympics because it believes that is to the benefit of its brands. We have decided to spend our money in different places, which we feel is more effective. Part of that is undoubtedly a judgement call.
Take a brand such as (anti-dandruff shampoo) Clear as an example. In this case we have a whole season associated with a sporting event, F1; we feel this is a more effective place to spend our money.
I hope it works out for (P&G). The best thing for us is that everybody is successful. The more great companies can work to help consumers with the challenges we all face, then the more we can grow and create jobs, and in a sustainable way.
The more we can create strong categories, without putting pressure on the world's resources, the more we can all help and get young people employed, all the better.
P&G has put the money in the Olympics and that's its choice. I hope it works. We feel there are better opportunities for our company at this point in time.
POLMAN ON ...
The UK in recession
When (Walmart founder) Sam Walton was asked at the end of the 1970s what he thought about the recession in the UK, he said: 'I don't intend to participate in it.' That's my view.
Consumer vs marketers
Consumers are absolutely concerned about the state of this world. You see that on the social networks where companies get punished for misbehaviour; you see it with News Corp now. So, consumers are running ahead of marketers. It used to be that marketers ran ahead; they could provide the products that consumers hadn't thought about.
Global vs local
It's a mindset that what works anywhere (and) should work everywhere. This is how our operating model now works. We did not introduce Magnum into the US for 15 years.
Frankly, the reason was that Americans didn't believe in the brand. We introduced it about a year ago and it is now rapidly approaching $100m turnover.
We do fail sometimes, but, being a company in about 190 countries, we can allow that failure. The cost of not doing it would be much higher.
Promotions and discounting
The UK market tends to be more promotionally intensive than many of the other markets we operate in. We will undoubtedly have to stay competitive, but what is also clear is that these big promotions and deep cuts are not building brands and consumer loyalty. In many cases these promotions are turning out to be zero-sum games, down if you do and down if you don't. We have reduced our promotional dependency in the UK.
Lord Lever's legacy
When (Lord Lever) started his company (in 1885), the values he tried to bring alive are still those you would find here today. We call them integrity, pioneering, respect, responsibility. He would still recognise the company as the one he created. We refer to (Lord Lever's) philosophy as we continue to change the company. It is our duty and responsibility to keep that alive.
Before you become more global, more interconnected, more focused on brands and not vertical integration - all more than he would have ever envisioned - the social consciousness of the company must still be 100% there.
PATH TO CEO
- Various finance roles, rising to associate finance director, Belgium, Holland and France, P&G (1979-1986)
- Category manager and marketing director, P&G France (1986-1989)
- Vice-president and general manager, P&G Iberia (1989-1995)
- Vice-president and managing director, P&G UK (1995-1998)
- President, global fabric care, P&G (1998-2001)
- Group president, P&G Europe, Officer, P&G Company (2001-2006)
- Chief financial officer, Nestle (2006-2008)
- Executive vice-president and zone director for the Americas, Nestle (2008)
- Executive director and then chief executive, Unilever (2008-present)
Lives: Married with three children and 'lives globally'.
First job: Polman wanted to be a doctor, but under the Dutch lottery system, didn't get accepted. He also had early ambitions to be a priest and trained at a Carmelite seminary.
Hobbies: Running, climbing, travel and the arts, of which he says 'all best done with the family. It's not about managing time, but managing energy'. He runs one marathon a year and has held meetings during jogs. 'I recently took a group of analysts out jogging. It was interesting to see who tried to keep up.'
Extra-curricular activities: Chair of the global taskforce for the G20 on food security, and president of the Kilimanjaro Blind Trust. 'You have to get your oxygen from doing these other things, otherwise where do your ideas come from? I run marathons to raise money for this blind charity. If you don't do such things, then what's the purpose of life?'
Favourite Unilever brand: Conimex - 'superb Indonesian food'.
Favourite brand outside Unilever: Jaguar E-Type.
Biggest achievement: 'Marrying my wife, Kim.'
Turnover target: £65bn
In 2010, Unilever pledged to double its EUR39.8bn turnover, alongside its 'audacious' 10-year sustainable living plan
This article was first published on marketingmagazine.co.uk
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