Karan Chadda

Global digital marketing and communications leader

Corporate

Do you know if you’re capex or opex?

The brutal logic used in accountancy is a useful tool for understanding where you fit in your clients’ eyes. If you understand how you’re seen, you can deliver a better service and achieve greater growth.

Take the concept of breaking expenditure down into two buckets: capital expenditure (capex) and operational expenditure (opex). Broadly speaking, capex is money spent buying, building or maintaining assets, and opex is money spent on running the company.

Why are these two definitions useful? They help you understand what a client sees when they buy your services.

Advantages and challenges

For instance, if you’re a law firm that specialises in mergers and acquisitions, then a client might see the money they spend on you as capital expenditure. It’s money they only spend because they’re building their business. If they stop investing in growth through acquisition, they’ll probably stop using you. If they delay investment plans, then your planned fee income will be delayed too. The advantages of capex are that it normally has specifically identified budgets associated with it and there is a clear business objective (e.g. buy that company).

However, if you’re a public affairs specialist working with firms in heavily regulated industries, you’re probably operational expenditure. Your clients will need a dialogue with legislators and regulators, either through you, your competitors, a trade association, internal capacity or some mixture of all of these.

The big advantage from opex is more stable and cyclically defensive income; you’re a necessary expense for the business. The challenges typically come from greater or more constant scrutiny: why does this service cost this much? Where can savings be made? Efficiency gains in opex tend to accumulate over time. If costs can be cut by 10%, then future costs have also been cut. It is a perpetual saving.

P&G’s $100m saving

Let’s take a real world example, Proctor & Gamble (P&G) recently cut its digital ad spend by more $100m and claimed to see no detrimental impact from the move. At the same time, P&G’s CEO said the company was investing in new digital capabilities.

In effect, that $100m is an opex efficiency saving, meanwhile capex on digital marketing continues. So some agencies will be growing their business with P&G, others will have lost a lot of income.

How do clients see your firm and how are you using that knowledge to plan and grow a stronger business? Contact us to have a chat about capex, opex and how marketing can help.

Four points of note from the CAP’s report on gender stereotyping within advertising

A lot has been made of the ASA’s announcement that it will more strongly regulate gender stereotypes in ads. Here are four points worth noting from the report.

1. Extending existing work

The report advocates an extension of the ASA’s existing work on gender. At the moment, ads that objectify or inappropriately sexualise women can be banned. The CAP report proposes formalising the framework in this area and extending it to look at gender in terms of:

  • Roles
  • Characteristics
  • Mocking people for not conforming to stereotypes
  • Body image

2. The public believes brands have a responsibility to ensure ads aren’t offensive or harmful

Reading through the qualitative research part of the report is a reminder that people are aware of the ubiquity of advertising and its power to normalise stereotypes and body image.

One participant is quoted as saying, “If you are seeing it all the time, you just get used to it… it becomes the norm doesn’t it.”

There is particular concern among the public in the way children and young people can be affected or even harmed by advertising. It is an issue brands should take seriously.

3. That responsibility extends to social media

The concern for children and young people extended beyond advertising into social media. Again, the qualitative research part of the report is revealing.

This comment, by a 15 year old girl in York really stands out, “Singularly, no but put together and seen on a daily basis then yes. Let’s say you follow Topshop on Instagram and you check it every day. You see that kind of picture every day. Then you get into that mindset that this is what you’re meant to look like. Especially if you see it from a young age. “

It’s a powerful reminder that the daily repetition of images and messages not only sells products, but also leaves a lasting impression on people.

4. It’s not censorship

While the mooted changes will alter how the ASA assesses ads, they don’t affect the process. People will still have to complain about an ad before the ASA will review it and issue its decision. The days of controversial ads are not over.

Why you don’t get leading potatoes

What consultancies can learn from potatoes

Buying a potato is simple, right? You go to a shop, pick up a spud, pay for it, and you’re done.

But that’s how it always happens. Sometimes you buy one potato. Sometimes you buy a bag of them. Sometimes a sack. Then there’s variety. Some people buy plain old baking potatoes. Others will buy Maris Pipers or King Edwards. Foodies might opt for heritage varieties, or different coloured ones, or sweet potatoes.

And still we’re not at the end of the choices available. You might buy oven chips instead of potatoes. But what kind? Fries or chunky chips? Wedges? Peeled or skin on? Curly fries? Smiles? Alphabites? Or why bother with an oven at all? Why not get microwaveable chips? Or just go to the chippy and buy steaming hot, fresh out of the fryer chips?

There are many more potato options, but let’s stop here. The point is that for whatever type of potato product you want, it’s out there. Someone is producing a potato in whatever form you want.

Producers will tightly specify the types and form of potato they’re selling and then market them very specifically. They’ll talk about the benefits, whether that is crisper chips, better flavour or convenience. By clearly defining their offer, they make it easy for customers to understand what’s being sold.

But consultancy isn’t potatoes, is it? It’s bespoke. Consultants treat each client differently, providing a solution based on a client’s needs. You can’t define it like a potato.

Well, it’s true that services can be harder to define. But harder doesn’t mean impossible. You can define which sectors you support. You can say which services you offer. Many consultancies think they do this, but what they actually do is list every possible sector they could work in and every conceivable service a client might want.

Many consultancies, whether they’re offering PR or legal advice, shy away from tightly defining what they do because they’re scared of losing potential clients. But this fear leads to an opaqueness that deters customers.

It manifests itself in two ways. One is the long list of services and sectors on consultancy websites. These lists are supposed to show clients you work in their sector, but actually they’re just hard work. Who wants to look through a list of 20 things to see if what they want is on it?

The second manifestation is bland language. We’ve all seen consultancy websites dripping with industry-specific jargon. The tell tale sign is often an opening line describing a firm as “leading”. A potato would never be described to customers as leading because a potato knows what it is.

Kumbaya Capitalism

Modish proponents of Purpose have distilled snake oil from a worthy idea.

From its noble beginnings, Purpose has fallen. Like Corporate Social Responsibility (CSR), good intentions have not become good deeds. But, whereas CSR was misused as a way to polish up a company’s image, Purpose is bandied around as the solution to everything from lack of trust in corporations to avoiding the hard truths of business.

The idea that businesses have a wider duty than to generate returns is nothing new. Quaker founded businesses such as Cadbury and Rowntree were thinking about their workers as well as the bottom line back in the 19th century. That thinking wasn’t limited to Quakers. In India, Jamsetji Tata helped not only to build India’s industrial base but its culture of corporate philanthropy too.

The current trend towards having a purpose began with brand consultants talking about companies having a noble or higher purpose. The idea being that you work on something greater than yourself and, in doing so, you create a brilliant company (i.e. we don’t make cars, we help people see the world). For those developing brands, this was a great idea. Brand development is all about what a company is and how it goes about doing what it does.

Responding at the speed of emotion

But then purpose started to trickle into the hands of marketers and PRs. Conversations went from being about having a purpose to demonstrating purpose. Latching on to the vogue-ish idea that emotion sells, purpose was used to anthropomorphise corporations. All of a sudden companies cared deeply about you, wanted to know you and wanted you to love them.

The touchy-feely stuff is great but it ignores two fundamentals of business. The first is that businesses cannot respond at the speed of emotion. It’s all well and good being loved, but when it turns out you’re ripping down forests or involved in sweatshops or underpaying staff, you can’t fix that problem faster than people will stop loving you. Relationships require an instant response and most businesses aren’t set up to deliver that.

Purpose before profit?

The second problem is that the markets don’t buy emotion. Unilever, the standard bearer for a new way to do business, learned this lesson the hard way. When Kraft Heinz came in with an offer to buy the firm, management had to offer shareholders a lot of concessions to avoid being sold, including greater cost cutting and a sharper focus on profitability. The brutal truth is that whatever your purpose, you still need to make money.

Simon Sinek and other modish TED talkers will glibly tell you to, “start with why.” But that advice is delivered out of context. Because along with your why, are other whys. Your investors’ why might be to get a good return on their investment. Your customers’ why might be because you’re the cheapest or most efficient or coolest. You can’t run a company in a vacuum.

Google famously seeks to organise the world’s information and make it universally accessible. A noble goal. Imagine how far it would have got if it didn’t make mountains of cash by dominating digital advertising. Too many people talk about putting purpose before profits, but by weird coincidence most of the companies used as examples of purpose make a healthy profit and have been doing so for quite some time.

And there’s the rub. Corporations are like wealthy city-dwellers going to minimalist retreats, singing kumbaya and being mindful, all the while ignoring the inconvenient fact that their expensive spiritual weekend was paid for by selling things for money.

So beware the snake oil salesmen with their kumbaya capitalism. True purpose must run through every fibre of your firm. It should inform what you do and how you do it. Those decisions are made in the boardroom, not the PR department.

Diversity in PR: access and progression

Last week, the CIPR announced its board for the coming year and the next day PRCA published its annual report. I won’t dress up my observation. Take a look at either the CIPR board or at the PRCA’s board of management and you’ll not see an ethnic minority.

In announcing its board, the CIPR said, “Board members represent the full spectrum of the UK’s public relations workforce…” Really? It’s depressing the CIPR believes that.

You might ask why this matters? It matters because these two organisations not only represent public relations, they also shape the profession’s conversations about itself. In fairness to the PRCA and CIPR, the majority of these positions are elected; they’re not in a position to appoint who they like (although the CIPR President co-opts two members).

Slow progress

At this point, we should recognise the progress PR has made on a number of diversity-related fronts.

Back in 2005, I was a small part of the Interns’ Network, a now defunct group that campaigned for paid internships. I even spent some of my then meagre marketing budget to host a parliamentary reception with w4mp to highlight the issue. Fast-forward six years to 2011 and the PRCA began asking agencies to commit to paying the minimum wage to interns, they’ve now got 189 agencies signed up. Since then, the PRCA has broadened the campaign and led the way on apprenticeships and a number of other initiatives. Its work has materially broadened PR’s intake and increased the pool of talent available to employers.

Specifically on ethnic diversity, the Taylor Bennett Foundation and Creative Access have helped ethnic minority candidates begin their careers. Ignite, a now closed diversity in communications networking group, pushed for change and created a space where diversity could be discussed openly. Also, the CIPR’s Diversity and Inclusion Forum has been working to progress diversity on a number of fronts since 2009.

Access isn’t enough

All these initiatives have begun to make PR more diverse but my concern is that diversity seems limited to the lower rungs. There is a world of difference between access and progression. When you look at those managing agencies, for ethnic minorities role models are few and far between.

The work to widen access must continue, but alongside it we need to look at progression. If we don’t do that, a lot of the work around access will be undermined. You won’t attract the best if middle management’s the furthest they’ll reach.