This is not just advertising, this is Your M&S advertising

This is the story of how communications changed the public face of a very public company. M&S is a national institution and speculating on its fortunes is a national pastime.

Back in April 2004, things were looking down at M&S. Consecutive sales declines and continual negative PR had led to a total loss of confidence in the brand. Two years on, and M&S smashed City expectations by announcing Q4 sales growth of 9.1% against a backdrop of total March 2006 UK high-street sales down 1.4% on the year.

This article explores the role that communications have played in that turnaround. We will show how, as one of the fastest levers new management could pull, communications first acted as a public declaration of corporate intent. We will then show how, as product started to improve, communications changed the lens through which the public (including journalists and City analysts) viewed the product, by restoring confidence in the M&S brand.

Our story begins in July 2004 as Philip Green's Revival Acquisitions makes a proposed final offer for Marks & Spencer of 400p per share, as part of his second attempted bid for M&S. Unusually for a corporate takeover bid, this story made front-page headlines in both the tabloids and the broadsheets. In fact during this period, Marks & Spencer was the subject of around 1,000 press articles a month.

Given that this was never a formal bid and the price was deemed to undervalue the company, the M&S board decided to deny Revival Acquisitions access to company accounts and Revival ultimately withdrew its proposed offer. There was, however, a feeling in the media that Green would come back to the table if the new management failed to deliver. A BBC poll conducted outside the 2004 AGM found that over two-thirds of small shareholders supported Stuart Rose. This support did not, however, translate into increased custom for M&S. In fact, the first set of results that Rose presented to the City showed continued sales declines. The City was willing to forgive in the short term, but the clock was ticking.

STUART ROSE'S VISION FOR M&S: 'A MARKS & SPENCER SEEN THROUGH ROSE-TINTED GLASSES'

At his inaugural AGM, Stuart Rose acknowledged that the old Marks & Spencer had simply not been 'delighting the girls', promising, 'we are going to give M&S back to its customers'. This entailed a return to the core principles upon which Marks & Spencer was founded, and which are still relevant today.

Citing a previous lack of integration, 'our business units have been operating as if they were standalone businesses' – Rose promised that Marks & Spencer would once more add up to more than 'the sum of its parts'.

He then placed womenswear at the heart of his recovery strategy: 'I believe womenswear is the key to the whole brand.'

The importance of changes at store level must not be underestimated. Clothes were becoming more stylish, opening price points were lowered in line with the competition, service had started to improve, and stores were beginning to be refurbished. Without these changes, communications could never succeed for, as Bill Bernbach said, 'A great ad campaign will make a bad product fail faster. It will get more people to know that it's bad.' In other words, the 'Twiggy effect' would not have been the same had Twiggy been modelling any old cardigan. Likewise, we wouldn't have been able to get the nation drooling at the thought of just any old food.

There are some things, however, that only communications could have achieved. As the public face of the organisation, and the fastest lever it could pull, communications needed to serve as a public declaration of M&S's confidence and commitment to change. The perceived threat of a new takeover bid meant that word of mouth alone could not be relied upon to spread news of the changes quickly enough to make them count. Instead communications needed to accelerate awareness of change among lapsed shoppers, increasing reappraisal, consideration and footfall. Critically, communications needed to change the lens through which the public viewed M&S products, by turning the tide of negative PR.

Because of the ubiquity of Marks & Spencer (there are five M&S's within the square mile and Vogue House is a stone's throw from the flagship Marble Arch store) these audiences inevitably overlap and cannot be treated discretely. We needed an over-arching brand idea that could appeal to the whole nation.

 'YOUR M&S' GIVES MARKS & SPENCER BACK TO ITS CUSTOMERS M&S needed to galvanise the business behind change. 'Your M&S' was the perfect rallying cry, fulfilling a number of vital criteria:

• directly acknowledged the rightful ownership of M&S by the public
• big enough, and true enough, to be relevant when selling anything from a crème brûlée dessert to a man's Autograph suit
• applies to all audiences – customer, shareholder, journalist, City
• meaningful for staff and employees
• colloquial ('Your M&S') not corporate ('Your Marks & Spencer').

In design terms the new identity needed to feel contemporary and iconic, premium yet accessible.

Importantly, 'Your M&S' was flexible enough to unify product-specific campaigns. This gave us the opportunity both to continually surprise the nation with 'new news' and to tap into category motivations.

Media Choices as Confident as 'Your M&S'

The first step was to redefine the media architecture and unite investment behind a brand-led approach in 'mass' public media. High visibility was essential in giving people a sense that they could have as much confidence in M&S as the company was beginning to have in the product. In total, Nielsen reports that M&S has this year spent £45m on advertising.

'Your M&S' was unveiled to the City in August 2004, then publicly launched through a high-profile poster campaign.

Demonstrating Value in Clothing: Your M&S for Less

Revising the pricing architecture particularly at opening price points was one of the first changes made, so value was the first area where communications addressed negative impressions.

Demonstrating Quality in Food: Not Just Food, Your M&S Food

M&S Food had always been irresistible, so while the clothing team was working behind the scenes to improve product, it made sense to proceed by focusing on the quality of M&S Food. The fact that the supermarkets' premium ranges were beginning to catch up on perceptions of quality added an increased sense of urgency. 'Your M&S' when applied to food meant that M&S understands exactly what gets your taste buds going. The quality difference was summed up as 'Not just food, Your M&S Food'.

Demonstrating Innovation in Style in Womenswear: What's Your M&S?

By September 2005, confident that womenswear was now beginning to be stylish enough to tempt 'every woman, every time', the moment had come for communications to showcase the clothes to the nation.

Since women had been coming into M&S 'wearing the wrong glasses', we needed to give them a fresh lens through which to view the clothes. This lens needed to be technicolor enough to blow away the cobwebs of negative PR, making women proud to wear M&S again.

Supermodels were the perfect embodiment of M&S's growing confidence in product, but careful casting was key to finding a balance of women who could appeal to our broad church of customers. Twiggy, in particular, was the perfect metaphor for a national treasure making a spectacular comeback.

Reinforcing Trust: Look behind the Label

Once food and clothing campaigns had created a strong sense of change at M&S, the time had come to reinforce M&S's on-going commitment to ethical sourcing.

SO WHAT HAPPENED?

PR

While product PR has improved over the past year, M&S has a policy of not PR-ing advertising, preferring to let communications speak for themselves. None the less, recent campaigns have attracted huge amounts of PR coverage. Since September 2005 communications have generated press coverage that would have cost over £2m to buy as advertising space.

Given the implied endorsement, most PR companies assign a multiplier to ad cost when assessing the value of PR. The actual multiplier varies but can be up to triple the ad value. This positive press could therefore be worth over £6m. In addition to measurable column inches, communications have spawned a national catchphrase: 'this is not just ...' and become a shared cultural point of reference: 'as lavish as an M&S ad'. Communications have also inspired a sketch on Bremner, Bird & Fortune and two sets of BBC idents.

This volume of press could be regarded as a simple virtue of being in the public eye. However, past advertising had itself fallen foul of negative PR. In particular, a 2001 M&S womenswear television ad featuring a naked female hill runner had provoked a barrage of negative press coverage. By contrast, a key achievement of the recent advertising has been to provide a focus for much needed positive PR coverage.

Footfall

Improvements in footfall have brought in an additional 18 million customer visits over the course of the year. Footfall peaks in September and November as womenswear and Christmas campaigns start.

Sales

On 11 April 2006, M&S 'smashed expectations' by announcing a fourth-quarter increase in UK sales of 9.1% on the year. Food sales were up 8.4%, while sales of general merchandise rose by 9.1%.

Impressively, these results were achieved against a backdrop of mounting gloom on the high street, with March 2006 sales 1.4% lower than in 2002. Recent like-for-like (LfL) sales trends at rival Next show sales tumbling around 9%, while Green recently warned that operating profits at BHS are likely to be down 30% this year.

On the back of these sales results, Stuart Rose gave initial profit guidance for year ended April 2006 of between £745 and £755m.

Share Price

At the time of writing, the M&S share price is 595.5p, vindicating the City's faith that M&S was worth much more than Revival Acquisitions' proposed 400p per share offer.

WHAT PART DID COMMUNICATIONS PLAY IN AFFECTING THESE CHANGES? In each instance we have been able to show:

• what other factors must be taken into consideration
• that people saw the communications
• that people took out the desired messages
• that communications were persuasive among occasional and lapsed shoppers
• that items featured in the advertising were runaway bestsellers.

(The full submission documents each of these points. They are summed up briefly here.)

Items Featured in Advertisements were Runaway Bestsellers

A cream three-quarter-sleeved blouse worn by Twiggy in the February execution has sold more in one week than any other product in the history of M&S. Even the travel bags which the girls carry in the ad, which retail for £119, have had to be re-ordered to cope with demand. Sales of products from the first execution were equally impressive.

Lapsed Shoppers Re-engaged

It could be argued that sales increases could be accounted for purely by existing customers spending more on better products. Research shows, however, that we have successfully re-engaged lapsed clothing customers.

The Case for Payback in Clothing

Given the likely effect of improvements to product and price on existing customers, the fairest way to assess payback in clothing is to look only at the value of lapsed shoppers who re-engaged with M&S during campaign periods.

Fashion Trak data tell us that over the autumn 2005 period in which the What's Your M&S? campaign aired, an additional 1.4 million people claim to have shopped for clothes at M&S. Like most retailers, M&S does not disclose average basket size or customer frequency, so in order to assign a value to these customers we will have to make some educated estimations.

At the most conservative estimate, communications can only ever fully take the credit for people's first visit, as all subsequent visits will be influenced by their initial experience, so let's assume that each of these people only came in once.

Even Verdict does not have access to an average UK clothing retail basket size. However, Paul Mason, the chief executive of Matalan went on record in 2002 to say that he wanted to raise the company's average basket size above £20. So let's imagine that an M&S shopper's average basket size is the same as a Matalan shopper's was in 2002.

That would give us 1.4 million people coming in once, and each spending £20, which is the equivalent of £28m worth of incremental sales in autumn alone. Again, M&S does not disclose a clothing margin, but Deutsche Bank's model estimates it to be in the region of 53.3%. This suggests that the extra customers would have generated an incremental £14.9m worth of profit over this autumn period alone.

Clothing media spend for this period was £5.7m, suggesting an estimated ROI for the launch of the clothing campaigns of £2.61 per £1 spent on media.

The Impact of Communications on Food

M&S has not yet published full year revenue figures, but applying City forecasts to the percentage swings above we estimate the value of incremental sales over the campaign period. If the Q4 04/05 trend had continued into financial year 05/06, LfL performance would have declined −3.1% rather than risen an estimated +3.6%. LfL improvement using the estimated 6.7% swing from −3.1% to an estimated +3.6% implies a benefit of circa £230m.

M&S does not disclose a food margin, but Deutsche Bank's model estimates it to be in the region of 32%, which gives us an estimated incremental profit figure for food of £73.6m. On a food media spend of £17.6m we would have to assume that communications have contributed only 24% of incremental sales to pay back at a category level. We have seen that communications have been persuasive among lapsed, occasional and regular shoppers, and that since the launch of the campaign M&S has regained the high ground from the supermarkets on key quality measures. Given that the only other changes to have happened over the campaign period are the Cook! relaunch, re-packaging of sandwiches, and the EAT WELL scheme, M&S is more than comfortable that communications contributed more than 24%.

The Impact of Communications on City Analysts

City analysts are frequently reticent about attributing the financial success of the companies they monitor to marketing. However, here is what Rod Whitehead, senior retail analyst at Deutsche Bank UK, has to say on the matter of payback at a total business level: 'We estimate that M&S has spent an extra £15m (20%) on advertising over the last year. This has only taken advertising from 1% to 1.2% of sales, and will only have needed to generate an extra £35m of sales (0.5%) to pay for itself, which we believe it has comfortably done.'

Increasing Shareholder Value In the absence of modelling it would be naive to attempt to estimate communications' potential impact on share price. However, if you believe that the incremental sales and PR stemming from communications have played any role at all in raising share price, it is worth considering what this means in terms of shareholder value.

If, in a hypothetical world, shareholders had accepted Revival's proposed offer of 400p, and re-invested their money back in an averagely performing UK retail stock, those shares would now be worth 461.4p, representing a growth on investment of 15.5%. By contrast shares in Marks & Spencer are now worth 595.5p, representing a 48.9% increase on the proposed offer of 400p.

In addition to this growth, since July 2004 M&S shareholders have received dividends worth 16.9p per share.

SUMMARY

Looking back on where M&S was in April 2004 and where it stands today, it is clear that communications have been key to changing the public face of the organisation. Furthermore, in the course of this article we have proven the following:

• that communications helped turn a vicious PR circle into a virtuous one
• that communications combined with the associated PR changed the lens through which people see the M&S product, reminding everyone just how irresistible M&S Food is and making lapsed shoppers confident enough in the style credentials of M&S to be happy to shop there for clothes again
• that City retail analysts have taken marketing communications into account when assessing M&S's potential to deliver sustained growth.

This article featured in Market Leader, Spring 2007.

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