26 October 2010 | Lindsay Clark
Virgin Atlantic took the daring step of embarking on a high-profile advertising campaign during recession. Lindsay Clark examines the role of procurement.
When a recession hits, cut spending, right? Well, perhaps not. If no one else is buying, there might be other options.
This was the philosophy of Virgin Atlantic when it looked at its TV marketing spend during 2008. Hardly known as a corporate shrinking violet, the global airline brand decided the recession was not a time to back off its advertising.
Andrew Walker, head of procurement, says purchasing had a role to play in challenging the business, in particular marketing, to persuade it of the case to go after more value in a deflated market. “It was an interesting little case study. Procurement was stepping over lines it had never stepped over before, in a proactive way, generating and causing argument in the building by giving a well informed view, saying: ‘You know what guys? You can achieve your current objectives in that space on this budget, based on these facts.’”
After some debate, the two teams worked towards a conclusion, he says. Looking at the market they discovered the competition was slashing its budgets by 20 per cent. “We decided that by maintaining our expenditure we could get 30 or 40 per cent more value out of it,” he says.
The result – combined with a lot of creative juices – was that Virgin Atlantic launched a stunning series of TV ads, including the time-shift piece featuring 1980s iconography and a Frankie Goes to Hollywood soundtrack to coincide with its 25th anniversary.
Walker says: “I would never want to say that procurement has enabled the business to deliver that type of marketing. Our marketing activity of the past couple of years, and this is not a procurement thing, has been hugely successful.
“For me, looking inwardly, it was a great example of where procurement added value to the process because we made conscious decisions to do things differently and get better outcomes. It was not about, ‘can we save some money and put it on the score card please?’”
According to media buying agency ZenithOptimedia, the worldwide market for TV advertising fell from $181 billion (£114 billion) in 2008 to $167 billion (£105 billion) in 2009 as the global recession caused companies to cut back on spending. This year, however, the firm expects it to be back to around $180 billion once more. So Virgin Atlantic took an opportunity to get value that may now be shrinking.
When Rob Douglas, chief procurement officer at DSG International (DSGi), spoke to SM earlier this year, he said that the focus when working with marketing was return on investment (ROI), not just savings. “We help them in some cases calculate ROI in some areas where they have not traditionally measured it.”
The two teams worked together to improve ROI on consumer buyers’ guides, which customers can access in Dixons and Currys stores, which DSGi runs. “Our hypothesis was that while they were useful, they did not necessarily have a return on investment and they needed to find an alternative way of producing those.”
Working through this DSGi moved from paper-based to electronic buyers’ guides, in emails or online, which offered sponsorship opportunities, more up-to-date product and price data and improved information on customer behaviour. They were also a third of the cost, Douglas said.
Procurement can find marketing spend tough to crack, particularly if it only talks about savings says to Guy Strafford, client director with consultancy buyingTeam. In September he asked this year’s CIPS Conference: “Have you ever thought about the world from the marketing director’s perspective? It is a classic example where procurement tends to have a lot of problems. The marketing director’s primary objective is not to save money.”
Focusing on value is the key to unlocking the relationship, he said. It certainly worked for Virgin Atlantic, which has got more bang for its buck and shown the world some glamour in the age of austerity.