The real health of the Tesco brand

Dave Lewis, Tesco chief executive

 

We saw recently that Tesco announced a quite staggering £6.4bn loss on trading. A huge headline figure, but in reality a total myth to allow the business the time and money to restructure.

The loss was caused by £7bn of one off write downs including a property write down of £4.7bn. Now, I’m no accountant, but if my maths are anywhere near right, this will meant they can reclaim at least £1.4bn in tax on their profits they paid last year and maybe claw some back from previous years too. So rather than lose £6.4bn, they have actually made £2bn in actual cash profit in the last 12 months. With me so far?

On the day that Tesco made the announcement, their share price fell by 5% to 223p. But in reality it had been at a low of only 150p during that same year and it is a huge growth in actual value over the same period. It’s at around 216p today. Hardly the sign of a business in crisis in the eyes of the market.

The disparity in their profit is far stranger when you consider how they got away with such a HUGE property write down when Helical Bar, the (mainly) London based Property Developer announced yesterday that their portfolio had increased in value by 27% in the previous 12 months?

Each of the other supermarkets seems to have followed suit with huge portfolio write downs, which only goes to confirm that it is another corrupt accounting practice each of them is employing to claw back tax.

Jack Welch, the former GE CEO said in a famous interview that with bad news, you have to get it all out fast, as it’s going to come out anyway. This feels to me what Tesco have done. They have painted a picture that is even worse than reality to shock the expectations lower.

This will give them the time, money and opportunity to take stock and rebuild the brand by putting in front line staff. They need to rebuild relationships with suppliers and build trust with customers. They need to listen, adapt and listen some more. And then they need to action their ideas fast, before the market moves again.

The Tesco brand is not dead, it’s just sleeping. It’ll be back and hopefully with a little more grace and a desire to please customers rather than only focus on the profit.

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Saving your brand reputation in the media

I’ve been catching up with some of my Podcasts over the holiday period and this one by Jack Welch seemed to be good advice for all sorts of situations from MP’s expenses to any bad publicity your brand faces.

In his PodCast on 31/10/08 The Welch Way, Jack Welch, the former CEO of GE explains what he thinks you should do if you are getting a mauling in the press.

1. Get the whole story out there immediately. Their job is to deliver the whole story and you can rest assured they will find it, whether you like it or not.

2. Be consistent in the way you tell the story to which groups. Don’t tell them what you think what they want to hear. These inconsistencies will be reported and you will be well and truly caught out.

3. Be proactive. Tell your story by taking it into your own hands. You can’t change the coverage to your liking, but you can get the last word via your own websites and blogs. As long as your site has a reputation for being truthful/soul searching rather than propaganda you can still win in the end.

All of this applies to a news story as well as the way you manage any brand. Tell the whole story truthfully and consistently and you will win if the product is good enough every time they come into contact with it.

Your logo should say who you are and not what you do

One of the biggest changes for any organisation that is considering a new logo, is top accept that the logo doesn’t need to say what you do, and just concentrate on letting it say who you are.

Look in the yellow pages and you will see many, many ‘logos’ where there is a person with a hammer or spanner or pipe wrench next to the name of their company. These don’t say who you are, just what trade you practice. They make it impossible to extend into another area without causing confusion, but they still proliferate in ‘trade’ markets.

The really rather excellent Mr Plumber logo - A role model for any designer

By removing the ‘what you do’ element, you have to work harder to explain this, and so the second option is to introduce the strapline to attempt to explain the services offered, or the ‘what you do’.

There are hundreds of examples out there.

‘Britain’s favourite retailer’ by Tesco

This line allows them to say what they do without having to say underneath the name on the front of the shops.

It is very rare to see a logo out of context anyway. You would normally see a Tesco logo on a store, a pack a vehicle or an advertisement, so the logo is simply an identifier to say that it is ‘one of theirs’. The branding work comes in saying what can be expected by choosing a Tesco product over any other one.

A strapline is quite different to a campaign slogan such as
‘Vorsprung durch technik’ that Audi have used since the 1970’s. This was already on the wall of the factory when their German design agency MetaDesign went for a factory tour. They saw that it summed up what the business was all about and their living the brand ever since has been part of the reason for their growth to become one of the biggest car makers in Europe from their humble roots as the fabulously mad little NSU luxury car brand and their hugely innovative but incredibly unreliable RO80 Wankel engined car of the late 1960’s.

Their chosen phrase actually means ‘Advancement through Technology’ and as such, does not actually explain what the business does. The slogan therefore just adds a little more layering to the brand by way of an advertisement theme.

The big brands such as Tesco become known for ‘what they do’ because of their scale, visibility on the high streets and the (omni)presence delivered by big marketing budgets.

But when Tesco lunch into another country, they invariably work under another brand name or with a local partner. Jack Welch, in another of his Podcasts argues that it is ALWAYS more effective to buy local talent in the target market than it is to try and import it, citing their plastics businesses opening in China as a real life example.

When Tesco went to the US, they started under the brand name of Fresh & Easy, launching a much smaller format store to those they are known for in the UK and starting out from California. They therefore face the same issues as any start up. They may be better financed, but they still have to prove and refine their offer in order for them to begin to roll it out nationally. Even Tesco don’t have deep enough pockets to attempt this with a flawed or unpopular concept.

It is often argued that smaller companies can’t go down the ‘who you are’ route because they don’t have the marketing budgets of the likes of Tesco. We would argue that they could make their smaller budgets both more cost effective now and more valuable in the future, by concentrating on the ‘who you are’ now.

Focussing on a one or very few key message will always make marketing more effective and make what you do spend work in a more focussed way.

Without the ‘who you are’ you can only sell ‘what you do’. This limits the growth and expansion possibilities of your brand.

Potential customers who like what they see in the ‘who’, will go the extra mile and find out more about you, what you do and what you stand for. This creates devoted customers who both love and understand your brand.