Marketing bonanza pays off for buoyant Marks & Spencer

The headline in this morning’s Financial Times may have reported that M&S chief (Marc Bolland) eyes tougher times ahead but, in fact, the bellwether UK retailer has reported buoyant sales in the quarter to October 2.

Like for like food sales rose for the first time in ages, by 3.7 per cent, with ‘general merchandise’, chiefly clothes, up a scarcely believable seven per cent. And the reason? Good old marketing and advertising.

Ever since former CEO Sir Stuart Rose took over at M&S six years ago he, with the considerable help of long-time side kick marketing director Steve Sharp, has spent heavily on marketing and advertising including high-profile TV campaigns through RKCR/Y&R featuring 1960s model Twiggy and a bunch of glamorous but girl-next-door chums.

This autumn a campaign featuring UK TV presenter Lisa Snowdon helped the company shift 2,000 military-style coats a week and it has also increased women’s boot sales by 50 per cent despite weather which, by UK standards, has been positively tropical.

On the food front M&S seems to be fending off the attentions of John Lewis-owned Waitrose which has taken aim at (among others) M&S’s relatively well-heeled customers.

Its ‘dine in for a tenner’ offering two meals and a bottle of wine began as a two-week promotion and has now been running for over a year. It has also started selling 400 basic brands from other manufacturers like Marmite and Keinz Ketchup, at Tesco prices, a move Waitrose has recently copied.

So why is Marc Bolland, who used to be the CEO of supermarket chain Morrisons and before that a marketing whizz at Heineken, so downbeat?

Well actually all he said was that there were headwinds in the UK economy with the coalition government’s supposedly draconian cuts due to be announced on October 20 (although it looks like some nervous government members would like to backtrack a bit) and VAT set to rise to 20 per cent in January next year.

He also pointed out that M&S’s older customer base, relative to other clothes retailers, was standing it in good stead as many such people still had money to spend.

And he can hardly stand up as the newly-minted CEO and say everything in the garden is pretty rosy so I’m just going to carry on doing what Stuart did, although this will probably be the case.

Rose fell out with the City of London when he decided to run the company as executive chairman without a CEO for a couple of years. Rose steps down as non-executive chairman next year and he’s far too polite to tell the City he was right all along, although he was.

Bolland, meanwhile, made rather a rod for his own back by promising he would conduct a ‘strategic review’ on taking up his lavishly-rewarded post (up to £15m in salary and share goodies) six months ago. Well he had to do something to justify all that money.

But why change a formula that’s evidently worked extremely well? About the most he can do is promise to increase the pace of M&S expansion overseas but Rose, who always felt the company should never have withdrawn from foreign markets, was doing that anyway.

He may also trumpet a drive into home deliveries, where Waitrose scores strongly, although Morrisons under Bolland turned its face against this.

Under autocratic boss Sir Richard Greenbury M&S made profits of just over £1bn in 1998 and 1998 but, even then, you could see the penalties of under-investment, pricey products and dull stores. Profits fell to £145m by 2001 and the company was almost snapped up by Sir Philip Green of Top Shop fame before Rose and co rode to the rescue.

This year it’s on track to make at least £700m but Bolland would be wise not to pursue the magic billion too hard in case the same thing happens again. He reported yesterday that operating costs in the quarter had risen by nearly five per cent, chiefly due to the heavy spend on marketing.

And it is costly of course. But, as the top line figures show, it also works.

You May Also Like

About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.