July 6, 2010
Marketing
Ideas, Man
Originally published in NZ Marketing March-April 2010, page 10
Creatively focused leadership, creative marketing and a concurrent period of extraordinary financial growth walk into a bar … James Hurman crunches the numbers and discovers this business triumvirate is not just a happy coincidence
In an era of accountability, where return on investment is king and campaign measurability is demanded, the notion of creativity, an amorphous, nigh-on-indefinable and often promiscuously used term, often seems to be treated with a degree of suspicion by some in the marcomms community.
Sony PlayStation 2
But it’s not just advertising agencies extolling the virtues of a more ‘artistic’ approach to marketing so they can continue to make big-budget TVCs and win industry awards for their novel thinking. Marketing as a whole, despite the best efforts of those who would like to make it a science, is an undeniably creative industry.
And, even with an arsenal of hard data, market research and consumer insight on hand, it can also be an unpredictable one. For example, according to a study on quantitative pre-testing by Peter Field, “pre-tested campaigns generally perform significantly less well in business terms than non pre-tested ones and the gulf becomes overwhelming if you look at the profitability results”, with one reason being that emotional campaigns are often filtered out during testing, despite typically delivering the best return on investment.
In every case, the companies most tenacious in their pursuit of creativity have been the ones outperforming the stock market and enjoying historic periods of financial prosperity
So is it just a happy coincidence that the recent creative path of Air New Zealand (see sidebar on page 14), where a culture of innovation and risk-taking has flowed down from chief executive Rob Fyfe and his management team, resembles that of the past ten winners of the highly coveted Advertiser of the Year Award at the Cannes Lions International Advertising festival?
Over the past decade, each of the winning companies or company products have ticked the same three boxes: creatively led management, a distinct period of creative marketing and a concurrent period of extraordinary financial growth. So, while the financial value of creativity is notoriously difficult to quantify, it’s intriguing to see how often this supposed ‘coincidence’ occurs.
Annus mirabilis
Volkswagen
The 2009 Cannes Advertiser of the Year award was presented to Volkswagen, a perennial darling of the Côte d’Azur with nearly 150 Lions to its name, including five Grand Prix and the Cannes award for best commercial ever for Bill Bernbach’s 1963 Beetle ‘Snowplow’. The award recognised a particularly fertile 2008 for Volkswagen and its agencies DDB and Almap BBDO: no less than 15 separate campaigns for the brand were awarded at Cannes, D&AD and Clio, including the Golf ‘Night Drive’, ‘1974 Product Recall’ and DDB New Zealand’s ‘Finance Director’.
In terms of advertising creativity, it was by all measures an exceptional year for the company. But that wasn’t the only remarkable thing about its year. In a record year of trading for what is now, after sealing the deal with Porsche in 2009, the world’s biggest automotive group, Volkswagen’s share price swelled 89 percent to close on an all-time new year high of €283.
In 2007, when many of those award-winning campaigns ran, its stock market performance was similarly impressive, with 74 percent growth.
Over the past decade, Volkswagen’s average annual share price rise has been 46 percent. But during the period of its most abundant creativity, the gain was almost double at 82 percent. During that same period the S&P 500, the most widely followed index of large-cap stocks after the Dow Jones, fell nearly 17 percent, illustrating how brightly Volkswagen outshone the market.
It would be far-fetched to claim those award-winning campaigns drove the share price rise. But it’s interesting to observe Volkswagen’s most prolific period of stock market success coincides precisely with its most prolific period in terms of creativity. Those two successes also happened under the stewardship of chief executive Martin Winterkorn, a creatively ambitious leader who joined Volkswagen at the beginning of 2007 and, prior to that, was responsible for Audi’s design-led renaissance.
Witness the creative triumvirate in action: a creatively focused leader, a period of exceptionally creative marketing and a concurrent period of extraordinary financial success.
Lion’s share
P&G's Tide.
In 2008, the Cannes Advertiser of the Year was Procter & Gamble (P&G). The story of chief marketing officer Jim Stengel’s creative ambition for the company is legendary, culminating in 14 Lions in 2007 for an organisation historically pilloried for its conservatism and unoriginality.
On 12 December, 2007, P&G hit its all-time share price high of US$74.67. Two months earlier, Cosmetics International magazine reported that “declining consumer spending, a jittery US housing market and rising interest rates might worry some companies, but not Procter & Gamble. The share price of the personal care giant has hit almost US$70, up 20 percent from under US$62 a share back in July”.
The years Stengel’s Lion-winning campaigns ran, 2006 and 2007, were record years for P&G in terms of business success and stock market performance. Like Volkswagen, it beat the S&P 500 and, in those two years, eclipsed its decade average of 4.7 percent with an average of 10.9 percent share price growth.
Stock market performance of Cannes advertisers of the year
| Year | Brand | Share price growth | Decade average growth | S&P 500 Index |
|---|---|---|---|---|
| 2009 | Volkswagen | 81.5% | 46.0% | -16.5% |
| 2008 | P&G | 10.9% | 4.7% | 10.6% |
| 2007 | Honda | 24.4% | 4.7% | 10.4% |
| 2006 | Adidas | 35.3% | 10.1% | 7.9% |
| 2005 | Playstation | n/a | n/a | n/a |
| 2004 | BMW | 15.6% | -15.9% | 28.7% |
| 2003 | Nike | -6.6% | 10.7% | -17.0% |
| 2002 | n/a | n/a | n/a | n/a |
| 2001 | Anheuser-Busch | 11.2% | 10.8% | 6.0% |
| 2000 | Sony | 109.6% | 20.0% | 24.8% | Average across two years preceding AOY award | Average across ten years surrounding AOY award | Average across two years preceding AOY award |
Creative waves
At the end of 2006, six months before Cannes crowned Honda the 2007 Advertiser of the Year, the Japanese carmaker hit its highest recorded share price of US$38.50.
Inspired by the imagination and creative passion of founder Sochiro Honda and engineer Kenichi Nagahiro, a series of extraordinary campaigns in 2005 and 2006, including ‘Cog’ and ‘Grrr’, drove a turnaround in perceptions of the Honda brand and a 22 percent increase in UK sales.
Adidas
And, just like Volkswagen and P&G, Honda’s Advertiser of the Year award was preceded by two years of remarkable share performance, growing 24 percent against its decade average of 4.7 percent and an S&P 500 increase of 10.4 percent.
Adidas’ 2006 Cannes Advertiser of the Year colours came at the end of a period of 35 percent share price growth. This was a record result for Adidas and far outstripped market growth.
‘Impossible is Nothing’, the brand campaign for which Adidas won Advertiser of the Year, was the result of a change in approach by new chief executive Herbert Hainer. In an attempt to improve the creativity in the brand’s marketing, Hainer shifted Adidas’ global marketing functions to the USA, named creative powerhouse TBWA/Chiat/Day as its global agency and refocused the brand around younger consumers.
The result was a wave of exceptional creative work, followed by an 11 percent sales lift in the US and the most vigorous stock market per fkertiser of the Year. As a sub-brand of Sony, it doesn’t exist as an independent financial entity, so there’s no stock market performance to report. However, the years leading up to 2005 were instrumental in the PS2 becoming the world’s best-selling games console.
Weathering storms
In 2004, BMW received the Advertiser of the Year award for, among other campaigns, the BMW Films work of Fallon. The films had been produced after a brief from BMW’s vice-president of marketing James McDowell, the creatively zealous marketer who became subsequently famous for the launch of the new Mini and the campaigns that supported it.
Following a 12 percent sales increase after the first series of the films, BMW’s share price grew 16 percent in 2003, reversing its decade average of -16 percent. Peculiarly, the ever-bullish Nike at first appears to be the one that got away. It suffered an uncharacteristic share price drop of seven percent over the two years preceding its 2003 Advertiser of the Year victory.
However, closer inspection shows the drop in a slightly different light: the US market suffered significantly from the 9/11 attacks, falling 17 percent during the ’01/’02 period. So, at seven percent down, Nike was still well ahead of the game. And, in those same years, Nike maintained five-percent annualised revenue growth despite growing accusations about the brand’s manufacturing ethics.
Nike has always had creatively ambitious leadership, but in its case, the years of its most prolific creativity coincided with a financial performance that weathered the ravages of 9/11 far more hardily than most.
The two year before an agency of the year award
Rebel yell
It appears to be impossible to find pre-2003 share market data for Swatch, the 2002 Advertiser of the Year, so you’ll need to draw your own conclusions about the world’s number one watchmaker. But data for Anheuser Busch is easy to find and, just like the others, its 2001 Advertiser of the Year award was preceded by two years of share price rises that beat its decade average and eclipsed the S&P 500.
The award was given to August A Busch IV, the rebellious marketing head known for producing the Budweiser ‘Frogs’ campaign against his father’s wishes and buying the 2000 Cannes Film Grand Prix-winning ‘Whassup’ TV spot.
Cannes began the twenty first century by naming Sony its 2000 Advertiser of the Year, primarily for TBWA’s work on PlayStation. The award was given to Sony chief executive Nobuyuki Idei, the leader renowned for his insatiable appetite for technology innovation, a philosophy that also translated through to marketing. “At Sony we strive to be creative in how we communicate our messages and strategies to the market,” he told Campaign magazine in 2000.
Sony’s 1999 year was extraordinary. The share price increased a staggering 242 percent, ten times the S&P 500 and Sony’s decade average. On 28 February, 2000, Sony’s stock hit an all time high of US$149.72, a figure it hasn’t met since.
Creative = successful
It’s important to note that business success is not factored in when selecting the Cannes Advertiser of the Year award. It is based purely on creativity, “presented to advertisers who have distinguished themselves for inspiring innovative marketing of their products and who embrace and encourage the creative work produced by their agencies”.
But in every case, the companies that have been most tenacious in their pursuit of creativity have been the ones outperforming the stock market and enjoying historic periods of financial prosperity.
So, whether it’s causal or correlative, one thing is certain: creatively focused business leaders, truly creative marketing and exceptional business performance go hand in hand in hand.
Flying creative class
Due our nation’s diminutive stature, no New Zealand company has won Cannes Advertiser of the Year, but the local organisation that most closely resembles the creativity and business success of those that have is the national carrier, Air New Zealand.
This year, Air Transport World, one of the world’s leading aviation industry publications, named Air New Zealand its ‘Airline of the Year’ due to its commitment to innovation in technology and customer service and its strong financial performance during a peculiarly punishing period for the international airline industry.
And when you examine the past four years of Air New Zealand history, you find it wholly analogous with the Volkswagens and P&Gs of the world: creatively focused leadership, a period of distinctly creative marketing and a concurrent period of extraordinary financial success.
The folklore surrounding Rob Fyfe’s leadership needs little introduction. Likening the approach of other airlines to McDonalds, Fyfe has meticulously created a culture of innovation that has produced tangible differences in the customer experience.
A series of brand characters were introduced to Air New Zealand in 2005, encouraging staff throughout the organisation to act in a uniquely Kiwi way: ‘Can Do’ urges staff to get stuck in and make it happen, while ‘Be Yourself’ champions individuality in an industry symbolised by uniforms, regulations and protocol.
Air New Zealand has worked at a grass-roots level to free its culture from the shackles of its industry and create an environment that beats a path toward more creative solutions. And those solutions are many and varied.
Grabaseat, launched in 2006, revolutionised the way airline seats are sold, brilliantly crossing unsold inventory with budget travellers and creating a culture of spontaneous travel among New Zealanders.
In 2008, the overhaul of its domestic check-in technology brought Air New Zealand passengers a streamlined passage through the airport. Queues were greatly diminished and, once again, it led the world in airline innovation.
This year, long-haul travellers are awaiting the arrival of the airline’s new fleet of Boeing 777-300s, which come with the world’s first lie-flat option in economy class, possibly the single most exiting innovation in air travel since air travel itself. The new economy experience for once justifies a marketing department’s choice of the word ‘revolution’.
Of course, the creative thinking also extends to the advertising: the ‘Nothing to Hide’ campaign and ‘Bare Essentials of Safety’ video became two of the most watched YouTube clips in New Zealand’s online history; the ‘Cranial Billboards’ campaign achieved international fame after people’s bald domes were used as media to announce the introduction of the domestic check-in changes; and in 2008 the ‘Grabaplane’ campaign became one of New Zealand’s most successful online participation promotions ever as over five percent of the country attempted to win the use of an Air New Zealand plane for a day.
The culture, innovation and marketing at Air New Zealand have been indisputably creative over the past three or four years. So how are the numbers?
According to the International Air Transport Association, 2009 was the worst year the aviation industry has ever seen, with the biggest drop in passenger demand in the post-war period, less than half of all available freight capacity consumed and wildly fluctuating fuel prices leading to prodigious losses for most airlines. And yet, despite recording an understandable decrease in profits, Air New Zealand reported normalised earnings before tax of $145 million, positioning it as one of the top performing airlines globally.
The profit result is joined by a significant increase in positive customer feedback and measurable improvements in staff members’ connection with their employer.
It would be difficult to imagine such success without the creativity displayed by Rob Fyfe and his team of Air New Zealanders.