A perfect illustration of the City's mistrust of advertising arose last week. Presenting BSkyB's annual results, James Murdoch, its chief executive, outlined plans to increase its £43 million above-theline spend by between 40 per cent and 50 per cent.
This is to be part of a £450 million injection over four years that will include an increase in Sky One's programming budget of up to 20 per cent, as well as investing in customer care and back-up facilities.
Growth in subscribers has stalled, creating the problem of diminishing returns, so a long-term strategy of spending more money to bring in new customers has begun.
The City didn't like it. Despite Sky's operating profits of £600 million, Murdoch's indication that there are barriers to Sky growing its subscriber base of 7.4 million didn't go down well. Share price fell by close to 20 per cent to 499p, though it rallied later in the week.
Yet there is still a great opportunity for Sky if you buy its argument that pay-TV will eventually be bought by 80 per cent of homes. This level has already been reached in the US, while the UK level is 43 per cent.
Murdoch said the marketing task is to "reintroduce Sky as a brand". He hopes to emphasise Sky as a fun entertainment offer, moving away from the view of it as a technology company offering sport and films.
The man faced with the task of marshalling Sky's new marketing strategy is Jon Florsheim, its managing director (sales, marketing and interactive). Florsheim is a former Dixons marketer who, during ten years at Sky, has held various marketing jobs, as well as the role of managing director at the illfated interactive venture Open.
An abortive move to BT apart (Florsheim landed a senior role, only for a restructuring to remove the post before he even took it up), he has remained loyal to Sky. As a reward, he now has responsibility for all commercial aspects of Sky's operations with the exception of Sky Media, its ad sales arm, which reports to Sky Networks' managing director, Dawn Airey.
Florsheim has a reputation for being cut from the traditional Sky cloth - tough, hard-working and very hands on. Although Sky has a marketing director, Charlie Ponsonby, Florsheim is said to attend any important agency presentation and is heavily involved in the creative process.
He has led Sky's charge down the "sell, sell, sell" route of marketing that seemed appropriate when subscribers were coming through in large numbers, but Florsheim is now singing off the same hymn sheet as Murdoch in putting the case for a different approach.
Hitherto, Sky has been marketed like a retail brand - this plays to Florsheim's strengths, according to agency sources. He is said to be particularly hot on linking all marketing to subscriber numbers and developing the shrewd introduction of offers at the right time to drive numbers up. But now he faces the task of breaking down the defences of potential subscribers who are resistant to Sky, with a mix of the new brand work and a more tightly refined direct marketing strategy to target specific sectors.
New advertising will break in the autumn, by HHCL/Red Cell, and Florsheim has no plans to review the account at the moment. Last week, Sky moved its media planning and buying account into MediaCom from Universal McCann.
Florsheim says: "The first thing to mention is that we are particularly satisfied with the way we have marketed our products since the launch of Sky Digital five years ago, but to sustain growth we are going to look at the strategic direction of our marketing."
There is also a problem with the overarching Sky brand. "Sky can be seen as a heartless place, so the first part of the job is to get people to reassess this by putting some strong images in front of potential customers," he says.
The Sky+ commercials, featuring the likes of Ronnie Corbett and Alice Cooper, went some way to addressing this but these were targeted at existing Sky customers.
Florsheim says the second part of the job is to "dig further down" into its potential customer base because generic messages will not work for everyone. It has partnered with dunnhumby, the data specialist behind Tesco Clubcard, to build a database to help it target potential customers with different messages based on their attitudes.
The task ahead is not an easy one for Sky; it has pledged to reach ten million subscribers by 2010 (and to do this will need to improve on its recent growth of 85,000 a quarter). But Florsheim is up for the fight. As a source at one Sky agency puts it: "He has got a good eye from the creative perspective and by 7.30am he's in the office and has read all the newspapers."
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