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Analysis: Retailers’ evolving communications strategies

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Retailers’ evolving communications strategies have sparked reviews of the creative agencies they work with.

Retail might be confronting the rise of digital and a lingering recession, but the industry’s competitive nature and drive to get ahead of the game is prompting radical change across brand communications.

Evolving retail propositions have been the driver of a number of agency changes and pitches in the past year, as retailers including Tesco, Boots and Shop Direct have sought fresh thinking and new creative partners to match their ambition.

Shop Direct unveiled a new bill of above-the-line creative and production agencies in June. The agencies will deal with TV, radio, and billboard advertising, and any other advertising aimed directly at consumers, as opposed to direct mail and other below-the-line activity. Agencies St Luke’s and Contagious Content were appointed to oversee its three core brands – Littlewoods, Very and Isme. It is thought the aim behind the change was to streamline the number of agencies the retailer works with to ensure greater consistency across the business.

Both Boots and TK Maxx kicked off searches for agencies with strong digital credentials this year. Boots, in which US pharmacy chain Walgreens bought a 45% share in June, is thought to be seeking an agency to provide a unified digital strategy. The retailer, which has about 2,500 UK stores, plans to launch a mobile platform. It has also been piloting pharmacy-specific smartphone apps to help it stay ahead of supermarkets’ expanding health and beauty offerings.

Boots is seeking a strategic digital agency

Boots is seeking a strategic digital agency

Value fashion retailer TK Maxx appointed Ogilvy & Mather (O&M) as its sole digital creative agency working across social, mobile and web content. O&M will build on digital campaigns that include social media to support TK Maxx’s sponsorship of the Alexa Chung-fronted Channel 4 fashion show Frock Me, as well as online efforts to engage mums with its a range of nursery products.

TK Maxx chose Ogilvy and Mather to oversee digital

TK Maxx chose Ogilvy and Mather to oversee digital

Perhaps the most high profile of all the changes was Tesco, which in July teamed with maverick agency Wieden + Kennedy.

Internal recalibration

According to John Lewis head of brand creative Paul Porral, what has been noteworthy about all of the advertising changes this year is that retailers are shifting gear to a more emotional approach. He adds that economic uncertainty is driving this rethink. “There’s a lot of insecurity, which leads retailers to ask if they are working with the right people and to the right budget,” he says.

At times of uncertainty, retailers look for the best possible value from agencies, adds Neil Henderson, managing director of St Luke’s, which also works with Majestic Wine.

“By formalising the relationship, a retailer creates commitment [with an agency]. It often means they can have a ‘deal’ in place and not have to negotiate for every project,” he says.

Agency reviews

Big moments in a retailer’s history often precede a roster review – a rethink of every creative agency across the retailer’s network – according to Sanela Lazic, client director at retail design consultancy 20:20, which has worked with retailers including Liberty, Waitrose and Debenhams.

For Tesco, poor sales growth earlier in the year and resultant headlines were a factor in advertising changes. Lazic says: “It’s not a surprise that the focus is on having a different dialogue with the customer.”

For Boots, Walgreens’ investment will mean new opportunities, as well as openings into the US market. Lazic says: “This requires a lot of thought on how to make the brand travel or how to speak to new customers. Changes in agencies come as a result of these things – pivotal moments in a retailer’s history driven by factors in the market.”

The fast pace of change in the industry is driving retailers to build propositions that can stand the test of time. This new requirement can mean that incumbent agencies, which already have a contract or formalised partnership with a retailer, are too busy dealing with day-to-day creative issues to have the objectivity required for left-field briefs.

Lazic says retailers need creative work that is future-facing and perhaps wider in scope than previous efforts. “They’re casting their eye to where things are going and to 2020 – it seems to be a bit of a milestone – and introducing work streams for the next five years,” she says.

Charlie Carpenter, managing director of agency matchmaker CreativeBrief, says that, historically, brand communication agencies working in retail have approached briefs from a product or cost perspective. This is now shifting to focus on brand and proposition.

“There are many more briefs that are focused on the longer term. Retail has traditionally focused on product and price, and invested less heavily in brand advertising but now it’s front of mind,” says Carpenter.

Porral points out that retail is a more complex animal in terms of brand communications than ever before, because of the mix of short and long-term projects. He explains: “Seasonal changes, new lines, product launches and price changes all need to be set against a consistent, long-term view with a solid proposition that will resonate with consumers and stand the test of time.”

While Porral works with several agencies, including Pentagram and Fitch, there are no long-term contracts. This allows for flexibility when considering new ideas or whether specialist skills are required, as was the case last year when John Lewis overhauled brand communications across fashion to up its credentials.

Porral will also hand strategic one-off projects to agencies for fresh ideas and insight, as well as maintaining a strong in-house department. “It’s important that the intellectual property and the brand thinking is kept long-term with the business. But it’s also useful to have an agency like Pentagram undertake strategic work and draw on its knowledge and take a different approach,” he says.

Henderson points out that with the rise of digital, there is an ‘always on’ relationship with consumers, and retailers are often looking for one agency with ‘the big idea’ and another that has implementation skills across multichannel – from social media to mobile, online and press ads.

The big idea needs to be about the brand, he says, and not product or price. Creative agencies working in retail need to be able to think in this way.

Building relationships

Little about the process of finding an agency has changed significantly over the past five to 10 years – networking and informal relationship building, formal pitch processes and matchmaking services are all well-trodden routes.

In formal pitch processes, a ‘request for information call’ is still used to engage agencies, which then respond with credentials and are screened and filtered before meetings.

According to marketeers and retailers, relationships are still a major factor in a retailer reviewing or appointing an agency. Staff turnover across both agencies and retailers means that a relationship that was perfect two years ago might not be the same today. Incoming marketing directors often want their own stamp, and bring their own networks, while the creative brains that once made an agency distinct may have left for another.

How incumbent agencies engage with each other, too, is an important consideration.

But this process of renewal shouldn’t be reserved for when a formal review is called, says Porral. There must be constant effort to ensure a good network of up-to-date skills, capabilities and thinking, so this can be drawn into the business when necessary to address the changing demands of the retail market.

Matchmaking – using a third-party company to help find the right creative agency for the job – often comes into play when the pitch is high profile and could be a lengthy process.

While matchmakers can provide active involvement and be influential in the process, others, like CreativeBrief, focus on providing intelligence to retailers about agencies, their mix of designers, their thinking and their work.

“Different retailers require different levels of service, but our raison d’être is to ensure they spend their budget in the most effective way and that they know why they are looking to review their agencies and what the process is trying to achieve,” says Carpenter.

While 2012 has been a year of patriotically-inspired marketing, 2013 will require fresh thinking. With most retailers already considering the next direction for their marketing campaigns, agencies are anticipating yet more change.

Pitch of the year - Tesco’s £110m account

Tesco’s poor sales growth earlier this year was a factor in advertising changes

Tesco’s poor sales growth earlier this year was a factor in advertising changes

One of the biggest brand communications accounts put out to pitch this year was Tesco, worth about £110m.

In the lead up to the review in April, Tesco’s favour with consumers had fallen dramatically and its ‘value perception’ rating had fallen 12 points in a year to 28, according to YouGov’s BrandIndex. At the same time, its rivals retained broadly flat scores.

In January, Tesco issued its first profit warning in a decade – a catalyst in deciding that investment in the shopping experience and improving brand perception were vital.

Group marketing and digital officer Matt Atkinson, who oversaw the pitch process, said at the time: “The way brands and consumers engage has changed and it seems to be a good opportunity for us both to step back and take a fresh look.”

With such a high-profile search, agency matchmaker Oystercatchers took on the job. The incumbent agency, Red Brick Road, which came up with Tesco’s strapline ‘every little helps’, was invited to re-pitch but later pulled out of the process.

Oystercatchers compiled a long list of agencies including JWT London, McCann London, SapientNitro and WCRS – then whittled down to a shortlist of three: Wieden + Kennedy, TBWA\Manchester and VCCP.

Wieden + Kennedy, known for its groundbreaking above-the-line work for Honda and Nike, was appointed on a retained basis as lead creative and strategic agency because of its “strong thinking, brilliant teamwork and creativity”, said Atkinson.

2012 Agency changes

May Boots kicked off a search to find an agency that could provide it with a unified digital strategy and view. Its above-the-line agency, Mother, was unaffected.

June Shop Direct appointed St Luke’s and Contagious Content to work on above-the-line creative and production services for its three core brands. St Luke’s was appointed to Very and Littlewoods, and Contagious Content to the Isme brand on a 12-month contract.

August Bedroom furniture retailer Dreams was near the end of a pitch process for its £24m advertising account. The Leith Agency, MWO, BJL Group and Now were all vying for the business, with matchmaker The Observatory overseeing the review.

August Luxury fashion house Louis Vuitton launched a review of its global advertising account, held by Ogilvy & Mather Paris. The pitch is being led from France and Ogilvy & Mather is expected to re-pitch for the account.

Current B&Q plans to consolidate marketing activity, including CRM, direct marketing and digital, into one consultancy. Karmarama, BETC London, WCRS, Dare and incumbent McCann London are all thought to be pitching for the £40m account.

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