Aquascutum: shielding a brand from financial storms

Aquascutum scarf, showing its club check
Image via Wikipedia

Aquascutum, venerable maker of stylish raincoats for over 150 years, is in administration. As this is the second time in almost as many years that it is in stormy financial waters, it may be said that they are better at shielding you from water than they are at protecting themselves. At time of typing, YGM, the Hong Kong based owners of Aquascutum’s Asian rights are exploring the possibility of buying the entire brand.

Sadly, one suspects this may result in downward pressure on quality in order to restore margins, and a general exploitation of the brand. As an owner of Aquascutum raincoats and overcoats, I would personally regret such an outcome. But are there any other possibilities? And why has Aquascutum been unable to be profitable?

The latter issue is fairly easy to understand. Aquascutum has always been an mid-to-upper market player, heavily focused on the rainwear segment. That is the model that kept in business for so many decades but it is no longer sustainable for two very simple reasons; fewer men wear raincoats regularly and the middle-market in general has been squeezed in favour of a polarisation of sales towards either niche high-end luxury brands or bargain basement low-cost retailers. This reflects the current development path of our societies in general. Aquascutum has been stuck in a no-man’s land.

It has tried various strategies to escape this trap, but they have been highly contradictory and poorly followed through. For instance, it spent a lot of money developing non-rainwear lines, but never marketed them aggressively. And it attempted to position itself as a luxury brand while having more discount outlets in its portfolio than it has proper shops, not to mention the less-than-stellar concessions it has in too many middling department stores.

It has never been able to decide what it really wants to be, diluting the brand’s identify in the eyes of consumers across the world.

A rescue strategy will have to make some fundamental decisions: do they want to take Aquascutum upmarket? Or do they want to make it a mass market brand?

In my opinion, it would find life as a mass market brand impossible. Theoretically, production could be aggressively offshored, more lines added and an attempt made to milk any latent value in the brand to the general consumer by having a small halo line of top quality products above a large range of far less impressive merchandise. This is the Burberry school of brand development. It has worked for them (more or less), but it is expensive and risky, especially with Burberry already a large presence in the same marketplace. I fear Aquascutum has simply left it too late to compete with them in this arena.

It would be better served by shrinking and focusing on a pure luxury identity. Keep production in England, focus on rainwear/outerwear/related items, drastically reduce the number of discount outlets & department store concessions, and ensure the one or two full retail locations that remain exude quality, brand pedigree and personalised service. Turnover would be a lot lower, but margins could be restored and the brand might have a fighting chance. Aquascutum now needs to be aspirational luxury to survive.

Are there any other options? Has Aquascutum simply left it too late? And is there life left in the middle class, mid-market segment generally?

Changing Minds, Changing Worlds

It’s an old existential argument to suggest that everything we believe to be real is filtered through our own human perception, making it impossible to be objectively certain that reality exists. What is less frequently remarked on is Man’s ability to change the world around him by changing our shared perception of reality. Which brings me to the Six Ads that Changed the World.

Those are not necessarily the advertising campaigns I’d pick (though I think De Beers and Nike certainly deserve their places) and I felt obliged to rectify the paucity of meerkats when choosing an illustration for this post. But it made me think about the power of an advertising campaing to change minds and influence people.

Advertising is far more complex than most people realise. Overt advertising that simply aims to get you directly interested in a product at the time of watching is nowadays restricted to children’s advertising (parodied beautifully here) and time-limited sales or special offers.

More commonly, advertising now is about brand management. Maintaining a market presence by ensuring a certain image of the product and company is embedded in the target demographic’s psyche.

Commercial advertising campaigns therefore do the same thing as political parties, or different philosophical schools. They attempt to alter the way we look at the world by applying consistent directional pressure on our patterns of thought. By repeating and reinforcing this underlying  message through many different channels, minds are gradually moulded. Everyone thinks themselves immune to advertising, but the bottom line rarely lies, and advertising expenditure regularly results in increased revenue.

The same principles can be used in daily life by individuals, on a smaller scale. It is possible to define your own personal brand through consistent management of the impression you create on others. This requires some degree of insight, forethought and willpower. But if you don’t expend that effort, your subconscious will create a brand for you anyway. It just may not be a particularly helpful one to you under all circumstances. Modifying the brand to suit changing conditions, while remaining true to yourself, is the central challenge.

Turn Adversity into Success

Q. What separates the successful from the desperate?

A. A willingness to acknowledge the challenges that life throws at them, an ability to assess the situation rapidly and then to not only identify an escape route, but also a way to creatively turn the adverse situation to their personal advantage.

This requires a strong sense of self, with a keen awareness of one’s strengths and weakness, allowing one to have pride in one’s successes. Allied to a proactive sense of initiative and creativity, almost any situation can be turned to long-term advantage. What is good can be extracted, and what is harmful set aside and left behind.

The advertising poster to the left, running in the Financial Times this week, is an untouched photograph of Bernie Ecclestone, Formula 1 impresario, showing the injuries he received on being mugged last month. He lost £200, 000 worth of jewellery during the mugging, including a personalised Hublot watch.

The very same day, he contacted Hublot boss Jean-Claude Biver, suggesting that the company run an advert featuring his prominent injuries, with the tag-line: “See what people will do for a Hublot”.

Advertising at its inventive best, and a great example of Ecclestone’s famous hubris being channeled towards identifying an opportunity for profit even in a personal crisis.

Selling Feelings

I recently suggested that in any interpersonal interaction there is a superficial socially-driven interaction, and a deeper more subconscious conversation that can only be understood by reading non-verbal cues and thinking about what is not said. I mentioned that this is a skill practised not just by psychiatrists but by other professionals, and that people working in these roles can sometimes come across as manipulative.

There are some professions where manipulation is absolutely the name of the game. For example, Advertising. Advertising is an industry that has achieved a recent resurgence of notoriety by being featured in the Mad Men TV series but good commercials have always exhibited far shrewder psychological insight than the TV programmes that surround them. The limited time of a TV spot means that advertisers work hard to first capture attention, and then ingrain a clear psychological impression of the brand on the viewer.

Good advertisers do this by manipulating social conventions and assumptions, and they apply a large dose of psychological pressure to ensure success. Let’s examine three very different recent adverts, united only by being at least partly set within airports:

First, T-Mobile:

It’s a follow-up to a similar ad earlier this year. The main challenge that telecommunications companies face is distinguishing themselves from their rivals. We all use them regularly, but tend to be very reluctant to change from one network to another. Their advertising tends to be more about cementing market share and making small incremental longer-term gains from competitors rather than stellar overnight gains in subscribers.

The advert implicitly acknowledges this. It does not try to directly tell you anything about the brand, it doesn’t try to give you a rational argument as to why its product is different from other networks. This advert is all about brand management: it tries to give an overall emotional impression of what it means to be a T-mobile user: spontaneous, fun, connected and adaptable. The vehicle used – an apparently spontaneous interactive exciting event in a location that we associate with making connections with others – reflects precisely those personality traits, making the advert highly effective and memorable.

Here’s another recent one:

While I love it primarily for the use of a specially recorded version of Only You by Alison Moyet (based on the original hit she sang as part of Yazoo in the 80s) it also hits a clever psychological note by applying a gentle twist to the theme of lovers being reunited. The advert is not trying to manage a well-known brand, but instead works hard to get viewers unfamiliar with the company to acknowledge it exists. The engagingly simple music track, combined with the mildly humorous twist, serve to create a warm and romantic mindset that disarms our more jaded nature, and so allows the commercial message to be driven home strongly at the end.

Humour is used frequently for this purpose in advertising. Get someone laughing and their psychic defences are shattered. The advertising message can then be inserted without resistance. When allied with nostalgia – another way of undermining resistance with warmth – it can be a very powerful tool. Time to jet off again…

Virgin is a well-known international brand, but has always prided itself on being an underdog offering something unique to the airline market. This advert is designed to reflect that pride, while including a couple of subtle little digs at its biggest competitor in the transatlantic market, British Airways. The most obvious BA gag would be the snooty staff in dull blue uniforms with their hair done up in buns (an image associated more with librarians than the excitement of going on holiday) but there’s also a cute little dig at Maurice Saatchi when his doppelganger near the end says he needs a new job. Maurice Saatchi founded the advertising agency Saatchi and Saatchi… which was responsible for British Airways advertising in the 1980s.

That last visual gag is unlikely to have been noticed by those without a passing familiarity with the advertising industry, but the more general effect of the advert is to emotionally disarm the viewer with nostalgia and humour, allowing Virgin to remind them of their individuality.

Three very different adverts, but all examples of how a strong psychological message can be delivered within a minimal timeframe if music, images and other non-verbal cues are combined together to manipulate the viewer’s preconceptions. Advertisers understand that rational argument is rarely the most effective way to sell a product; managing emotional responses is far more effective. They do this by going beneath a superficial conversation to identify the emotional dynamic that underpins it, and so effect a change in behaviour.

Just think about how much more effective your interactions might be if you started looking at the world in this way.

(Aid) Money makes the world go round

One of the smaller budgets reviewed in last week’s Comprehensive Spending Review to reduce the  deficit was that of the Department for International Development. It’s the only departmental budget to have escaped real-terms spending restrictions and will instead benefit from funding increases. By 2015 it will spend about £12bn, up from the current approximately £7bn, which will drive the share of GDP spent on overseas aid up to 0.7% from the current 0.5%.

The idea of increasing the amount of money we send to other countries while restricting the amount we spend on our own population has led to some raised eyebrows, and I suspect the average man on the street feels the burden of spending cuts should fall on this budget as much as (if not more than) other departments.

This is to seriously misjudge the value of the DfID. Moral advocates of the aid will doubtless use heart-wrenching individual stories of poverty to justify the spending. This is always a shaky argument, as there are heart-wrenching individual stories of poverty closer to home as well. I have a rather more realpolitik reason to support increasing the international aid budget.

This money is not Bleeding Heart Charity Spending. It is the UK’s Venture Capital & Advertising Slush Fund. Money buys influence and opens doors, and this century will see a range of developing countries industrialise rapidly, with concomitant increases in the wealth of their populations. That economic development makes them important and growing markets for UK businesses. Spending money now on their populations and governments buys goodwill for years to come and those embedded interests will then enable the UK to profit further down the line.

Other countries understand the vital importance of greasing the right palms to secure economic and political influence. Only this week we heard how Iran directly supplies the office of Afghanistan President Hamid Karzai with “bags of money”. As well as Iran, Russia and China pour money into Central Asia, in a modern incarnation of The Great Game.

This all leads to much concerned tut-tutting in the West, but it’s worth noting that the DfID will be increasing its spend on Afghanistan by at least 40%. Naturally, the UK government would claim that this is an entirely different form of spending; that it is more open, transparent and targeted towards the needs of the Afghan population. That’s probably true. But the effect of the spending is not dissimilar. Like all good advertising, it catches the eye. The UK’s brand is enhanced, which buys political capital and thus opportunities for British businesses. It’s telling in this regard that the British Council (effectively the UK’s international PR agency) has had its funding shifted from the Foreign Office to the DfID.

In the past, the UK spent far more of its money on the oiling of the gears of international commerce, and was not shy about it. It’s possible to plausibly argue that the British Empire was founded on judicious bribery, and the Napoleonic Wars won by financially supporting other countries. Free-flowing British Gold was responsible for shaping much of the world in the late 18th and early 19th centuries and secured revenue streams for decades to come.

Today, our populations prefer that we be a bit more subtle in how we fund other countries. Rather than direct bribes from the Foreign Office, we like to cleanse our consciences by having the spin-off DfID targeting the spend towards impoverished populations instead of their rulers. How much this noble aspiration translates into practical improvements on the ground is probably somewhat questionable, but that’s not the point. Like most VC funds, there will be a lot of failed investments and few winners, and spectacular profits may take time to materialise.

But in the long-term, for the UK govenrnment to speculatively invest a mere 0.7% of its spending towards the high-risk, high-reward developing world makes a lot of economic sense.

Public spending cuts: bigger than you think

After all the hype and debate, today was finally George Osborne’s chance to stand up as Chancellor of the Exchequer and spell out how the UK intends to balance its books. £150 billion of borrowing every year, running at around 11% of GDP, was unsustainable and now the cuts have to be made.

I suspect he probably had mixed feelings as he stood up at the Dispatch Box to announce the detail. On one hand, no Chancellor of any party likes delivering bad news; it tends to result in lost votes, after all. And he must have felt frustrated to have been placed in this dire financial, and electorally unpopular, position immediately after the general election. It’s a very different position to the very benign macroeconomic landscape in 1997 when the reins of power last changed hands.

On the other hand, there’s nothing like being in control of the decision-making process, and the current environment does offer some rare opportunities as well as risks. The last 10+ years have seen ever-increasing public expenditure, with a corresponding enlargement of the public sector. To those who believe that the state should only do what the private sector cannot or will not, the massive and unsustainable budget deficit offers the opportunity to kill two birds with one stone: rebalance the books, but also rebalance the role of the state.

It’s worth noting that the average cuts of 19% across the five-year Parliament are actually not that different – even a touch less – than the proposed 20% cuts hinted at by Labour back in March of this year, before they lost the General Election, despite the howls of protest from their benches today. The difference is not the headline figure, but the nature of the cuts and their presentation.

In this light, the Comprehensive Spending Review and today’s announcements may allow Osborne, and the coalition government the chance to alter the accepted paradigm of British political thinking, in a similar way to Attlee in the post-war period or Thatcher in the 1980s. It holds out the prospect of effecting not just an economic change, but a sociocultural one too.

The cuts are necessary to balance the books. But the method of cutting and its presentation is about rebranding the role of the state versus the role of the private sector. It is a bold attempt to redefine the social and cultural framework of the country. As President Sarkozy is finding out in France, whenever politicians attempt to alter cultural paradigms in this manner there is usually a significant backlash from entrenched vested interests in the status quo. If politicians are to succeed in their aims, they must acknowledge the resistance by consistently and clearly selling their message directly to the general public.

Politics is not all that different to advertising; those with the most effective and convincing message tend to gain market share. And the reward of gaining market share in this context is not just a few transient extra votes in one particular electoral cycle, but altering the terrain of the battleground for many cycles to come. The post-war Labour government created the welfare state, nationalised industries, and in doing so, set the terms of engagement for the next 30 years. Margaret Thatcher in the 1980s, by taking on the unions and privatising industry, set the terms of engagement for the next 30 years. Tony Blair was forced to fight on her territory even while winning landslide Labour party victories in 1997 and 2001. Blair never fundamentally altered those terms of engagement during his time in office; he was too careful not to lose votes through risk-taking (with the sole exception of his military interventionism). Brown, being less attuned to the electorate’s sensitivities, may just have managed such a shift if he had won the 2010 election.

Instead, Osborne has the opportunity. It is a risky route to take; massive public unpopularity is almost guaranteed in the short-term, and if the budgetary medicine does not work to reverse the deficit by 2015, that unpopularity will be sustained, probably resulting in a change of government. But the potential reward is massive: restoring fiscal stability and a sustainable approach to government spending, and perhaps even more importantly, altering the basic sociopolitical cultural landscape for years to come.

Those on both sides of the political divide recognise this. Expect the fireworks from today’s announcements to last way beyond the 5th of November…