At the start of February 2004 the newly merged ITV plc unveiled a blueprint for the future that claimed to put customer care centre stage.
Conscious that the creation of a sales point with 50% share of TV ad revenue was viewed with suspicion by advertisers and agencies, ITV promised it would move from hard-nosed negotiation to customer focus. Gearing up to lead the charge was the management team: Charles Allen, chief executive; Mick Desmond, director of broadcasting; Graham Duff, sales director; Nigel Pickard, director of programmes; and Justin Sampson, the director of customer relationship management. So, six months on, what have they achieved?
The architect of ITV's cultural shift is Duff, who argues that it now offers a one-stop shop and a coherent approach to beyond-the-spot advertising. Most importantly, he says: 'ITV Sales is now totally aligned with scheduling and commissioning. In the old ITV, sales was never that close to the product.'
Duff's other key message to advertisers is that the relentless pursuit of market share is over. No longer hampered by internal warfare between ITV companies, his vision is one in which the network's 'market-leader responsibility' is the promotion of TV. The goal? To siphon off £100m a year from rival media.
Duff calls this 'a new body language' for ITV. 'There is no question that ITV was a negotiation-dominated culture in the 90s,' he says. 'There's still a key role for strong negotiators, but we need positive engagement with advertisers.'
To prove he meant business, Duff brought in Sampson, a smart strategic thinker from the Radio Advertising Bureau, as director of customer relationship management. Sampson reports to Duff, which puts him on an equal footing with head of sales Gary Digby. That's a sign, says Duff, that ITV is changing.
Sampson, who joined at Easter, reiterates the view that ITV 'behaved as if advertisers needed ITV more than ITV needed them. There's been too much complacency about stating television's case when advertisers have many more marketing and communications channels to choose from.'
In practical terms, Sampson is seeking to address this problem through a new advertiser relations team that will open a direct dialogue with clients: 'It's already 12-strong, but we have just appointed two account handlers with agency experience, which is a sign that we want to provide advertisers with an approach akin to consultancy,' he says.
A significant shift is greater emphasis on planners and clients. 'Historically, the main focus of ITV's effort was the implementational, attritional end of the media negotiations,' says Sampson. 'We need to be involved at an earlier stage of the planning process; 95% of our business is based on spot ads, but we want to demonstrate that we can do more.'
Of course, anything ITV says right now should not be taken at rate-card value. Having pulled off the media heist of the decade, the Granada/Carlton combination is keen to avoid upsetting advertisers for fear of a regulatory backlash. Indeed, it is prevented from exploiting its market muscle by the Contract Rights Renewal (CRR) system that, in crude terms, gives advertisers and buyers the right to renew contracts on terms no less advantageous than those they now enjoy.
It's not just fear of provoking media regulator Ofcom that has ITV on its best behaviour. While audiences are down year on year, the network has done well on the commercial front, with ad sales at ITV1 up 3.7% year on year for January-June. That lags behind the overall TV market (up 5.9%) but it is supplemented by a 74% increase in ad revenue on ITV2 and savings from sweeping cost cuts. When reports that Ofcom may permit an £80m-a-year cut in ITV's licence fees are factored in, it is clearly a good time to make friends and influence people.
So has anyone noticed the difference? Procter & Gamble media chief Bernard Balderston thinks not. 'ITV's senior management is showing a greater interest in advertisers, but I don't see much difference in day-to-day operation yet.' That's not too surprising, he adds, as Sampson has not had long to get to grips with the enormity of his new challenge. 'It would be unrealistic for ITV to have a major CRM blueprint in place by now. But I'd expect some tangible proposals by mid-autumn.'
MindShare investment director Nick Theakstone agrees it is too early to see changes, but the clock is ticking. 'They've said the right things, but now they need to deliver,' he warns.
Doing the groundwork
Sampson accepts there's an urgency. 'It will take two or three years to achieve enduring change,' he says. 'If we are to keep the patience of our clients, we need to put out signals. The account handlers are one, another is that we are about to audit advertisers, buyers and planners on the quality of our service. I'd hope to discuss actionable learning with my team by September.'
Sampson's work at the RAB suggests he has the right skills. But some observers warn he is now dealing with a very different beast. 'The RAB is a think-tank,' says one, 'whereas ITV is an aggressive commercial organisation with a poor track record of delivering on CRM. If there's a danger of ITV not fulfilling obligations to shareholders, the City will be all over it.'
Another observer believes pressure on profits represents Sampson' biggest challenge - particularly since the worst-case scenario suggests CRR could cost ITV £100m in untapped revenue over the initial three-year period it is in operation. 'ITV1's future is about the long-term decline of its audience,' he says. 'The test of ITV's resolve will be how close it sails to the wind on the next round of CRR. While it can't draw regulatory attention to itself, it will make every effort to maximise revenues.'
Mark Trinder, chairman of ISBA's TV Action Group and head of marketing communications at Woolworths, also views the next round of CRR as ITV's first real test. 'Last year's negotiations were a rollover. I expect far more debate this time.'
The heat of the debate will depend in part on the level of support for clients from Ofcom ITV adjudicator David Connolly. Connolly's message seems to be that he's keen for clients and agencies to be more vocal in reporting apparent abuses and challenging controversial rules interpretations of the rules by ITV. So it could be an interesting autumn.
That said, Trinder welcomes Duff's new creed. 'Nobody should lose sight of the fact that advertisers are all in favour of a strong ITV. But 2005 is the big year. I'm looking for more creativity, less duplication of the role performed by my agency and real signs of innovation in the TV schedule.'
ITV's ability to deliver CRM in the face of pressure to drive revenues depends very much on ITV1's share of audience. In 2004, the network has shed housewives with children, adults in the 16-34 age bracket and upmarket viewers. While Euro 2004 gave it a strong finish to the first half of the year, is there any evidence that the autumn schedule can stop the rot?
Duff thinks there is, flagging up a strong slate of drama (including a new Miss Marple series), a new series of I'm a Celebrity, the launch of Simon Cowell's X Factor, the recruitment of Michael Parkinson, the Champions League, more soap story hot-spots and emphasis on family shows such as Heartbeat.
Theakstone, however, has yet to be convinced. 'ITV had a bad first half to the year and I haven't seen much evidence that it has found the answer.' His view is echoed by another executive on the client side, who says: 'ITV has lost its way. Autumn looks like a maintenance schedule, rather than being innovative.'
There are those who think that ITV needs to do more than just pump its shows. 'ITV has been moving in the right direction,' says Amanda Mackenzie, BT's outgoing director of marketing services, 'but what's missing is classic integrated marketing. Reassuring us about programmes is one thing, but there hasn't been enough effort to win back lapsed viewers. ITV hasn't worked out how to rebuild excitement around its brand.'
Mackenzie's view is shared by Jerry Hill, chief executive of media agency Initiative Media,who spent years on the inside of the ITV sales system.
While reserving judgment on Duff's CRM strategy, he argues that 'the big challenge for ITV is to raise expectations. TV is at an incredibly exciting stage because of digital. ITV has a pivotal role to play, but I'm not sure that it has yet presented us with a bold, insightful vision of the future.'
How hard ITV works ITV1 airtime depends in part on the success of digital channels ITV2, soon-to-launch ITV3 and ITV News. ITV2, available on Sky Digital and Freeview, has been ITV's prize pupil, with spin-offs from Hell's Kitchen and I'm a Celebrity driving audiences and revenue.
Currently ITV estimates that each programming pound it spends on ITV2 is paying back double in ad revenue. Not surprisingly, then, it is doubling ITV2's programme budget to £48m next year and targeting US acquisitions, movies and drama brand extensions.
With another £12m for ITV3 (an upmarket classic channel aimed at older viewers), the goal is to boost revenue to £150m in the next three years.
Unilever Bestfoods media manager Edwin Sharpe admits his company has a vested interest in ITV getting its act together. 'Unilever has built its business on ITV's ability to deliver big ratings, and a strong ITV1 that delivers a consistent audience delivers rapid awareness build,' he says. Yet CRM is not top of his agenda 'because we're big enough to have had a customer-focused relationship with ITV since 1989'.
Instead, his focus is on whether CRR jeopardises ITV's competitiveness.
'ITV's multi-channel strategy is good, but CRR isn't just capping the money it can spend on ITV1. As CRR doesn't cover ITV2 or ITV3, the temptation is to divert money (to them so it can grow audience on those channels).'
Duff accepts ITV has some way to go to convince its doubters. But he believes the focus on CRM will benefit both sides. 'There's always likely to be some conflict in airtime negotiations, but an effective dialogue is a way of lowering the temperature,' he says. 'My goal is to remind people just how exciting TV is instead of us all getting bogged down in detail.'
TIMELINE - ITV
1955: ITV launches.
1968: First ITV franchise shake-up sees LWT replace ATV London at weekends and Thames formed by ABC and Rediffusion for London weekdays.Granada takes control of North-West.
1982: ITV franchise changes again. Channel 4 launches.
1983: ITV breakfast broadcaster TV-am launches.
1989-1990: Launch of Sky TV. ITV shareholders make their first unsuccessful foray in pay TV with BSB. Sky and BSB merge to form BSkyB.
1993: Thames, TSW, TVS, and TV-am give way to Carlton, Westcountry, Meridian, GMTV.
1997: Channel 5 launches.
1998: Sky Digital launches, quickly followed by ONdigital. ONdigital (later ITV Digital) lasts until 2002 and costs Granada and Carlton millions.
2003: Ofcom takes over media regulation.
2004: Merger of Granada and Carlton is complete. With the exception of Scotland and Ulster franchise holders, ITV is now a unified broadcaster.
TOP ITV SHOWS
Euro 2004 England vs France: 17.8m viewers, 66% share. A big success for ITV, even though it had to share event coverage with the BBC.
Tonight with Trevor MacDonald Specials Millionaire cheat (16.1m, 56% share) and Michael Jackson (15.3m, 55% share) specials aired in 2003, drawing huge ratings and providing ITV1 with great brand exposure.
Coronation Street 16.3m, 58% share. The figure quoted is Corrie's peak audience so far this year, but the show is dynamite, accounting for 10.5% of ITV1's commercial impacts (number of viewers per ad) in 2003.
I'm a Celebrity 14.9m, 56% share peak. The last run (2003) of Celebrity hit 12.7m and a 50% audience share.
A Touch of Frost 13m, 51% peak this year. In 2003, Frost attracted 5.7bn impacts, making it ITV1's sixth-most important show for advertisers.
TV AUDIENCE SHARE
2004 2003 2002
1st half 1st half 1st half
(%) (%) (%)
Multichannels 25.0 23.3 21.7
BBC1 24.8 26.0 26.2
ITV 23.3 23.8 24.6
BBC2 10.3 11.0 11.2
Channel 4 9.8 9.3 9.8
Five 6.8 6.4 6.4