Gone are the days when I ran a large company and used Arthur Anderson as our accountants, and had lunch in their boardroom, and had access to large company information. Gone too is Arthur Anderson. For a small company, one of the huge benefits of association membership is the information you get access to. So a month or more ago, as a Fellow of the Institute of Direct Marketing, it was off to a seminar at Deloittes for a session on growth in a post-recession economy. The two speakers were from Deloittes and The Trajectory Partnership, and the main content was based around some recent research by Deloittes.
Investment is rising. Companies with £1 billion plus turnover will invest £200 billion in growth in 2015, and generate £486 billion from foreign markets. Most won’t use cash piles to finance this, but will use cash flow and borrowing with interest rates so low. The big activity areas in 2014 are Healthcare and Pharmaceuticals (maybe not now with Pfizer withdrawing its offer for Astra Zeneca) but 2015 will be Energy and Financial Services – but the really big growth will be in companies that are properly and effectively digitally enabled.
Growth is expected to be 56% organic and 44% M&A, but this will fluctuate widely depending on the country of growth. Developed countries will be predominantly organic; less developed, high growth economies will be more M&A. And the main driver will be the ambition and culture of a company to get it done. Pete Drucker once said “Culture eats strategy for breakfast” and this was adopted by Ford as its mantra and that underpinned its renaissance.
So the overall take at a macro level is that things are improving rapidly and the rate of improvement will increase.
At the consumer level though, there is much more of a curate’s egg. Globally, there are 2.8 billion people earning $2-10 per day who are defined as middle class in their countries, and a further 2 billion earning less than $2 per day. So the expectations of consumer driven booms in export markets to “middle classes” may be a bit overblown. And the birth rate in Asia is falling to a replacement level so there won’t be anything like the population growth of the last 40 years, except maybe through longevity.
There are 3 different scenarios for the UK economy:
- We are heading for boom times, automotive sales are vastly up and jobless claimants are down.
- There’s a cost of living crisis, with energy costs rising, pension rip offs and static wages.
- Seven more years of austerity, 144,000 more public sector jobs to go, more council budget cuts.
All are true in different sectors. The downturn has been nearly as deep as the 1930’s and has lasted a lot longer. There is a growth variation by region between 1.6% and 2.7%, but by individual areas it’s between zero and 3.0% or more. Some of this is quite localised, so for example Leeds is growing more quickly than West Yorkshire as a whole; Harrogate is growing more quickly than Richmond; Kensington & Chelsea is growing more quickly than Lewisham. In other words it’s very patchy and that leads to different attitude changes by area beyond political persuasions. Most people still feel worse off than pre-recession, and only a third think we are over the downturn. Most hope there are better times to come in the medium term. But all this has led to a new morality, with less social responsibility and more about “me”. 27% of consumers are defined as compromised and lacking in any confidence about the future. Some are doing fine just now and see things improving, others believe 2015 will be better.
The recent elections at both local and European levels may be seen in this context, but that’s not the purpose of this article. It’s more to do with how it affects marketing and particularly direct marketing. And for the next year, it looks as if B2B should strengthen as all that investment filters down the supply chain. It takes a while, but it’s already started and the pace of growth is surprising most people month on month.
We don’t have a £1 billion turnover. So where do we come in? Big businesses are now positively developing their value chain, so their growth will benefit suppliers more positively than in the past (this excludes Halfords’ request for 10% rebates on turnover from all suppliers, but that seems to be the exception not the rule).
For consumer marketing, it was always a case of the haves and have nots, but there appear to be more in between stages now than there ever have been and confidence and attitudes overriding all in a post recessionary phase, probably to the end of 2015 and beyond. This makes the timing of the UK 2015 general election very interesting, although again, this isn’t about politics.
What is clear is that consumer marketing into areas with good growth and avoiding areas with low growth makes more sense than ever before because of changing attitudes and levels of optimism. It is interesting that the 2 major lifestyle profiling companies have recently re-launched their profiling systems – Experian with Mosaic and Call Credit with Cameo. This isn’t a plug for one over the other, although I did attend the Cameo launch a few weeks ago. But both now have more sophisticated analysis and differentiation, more inputs and links to other data sources. For example, Cameo has input from YouGov, which may be best known for political polling, but I believe also does a lot of attitudinal work. I will be looking at how to break this down at a town/city level given the information above on growth and attitude, before applying standard profiling to areas. Put simply, there have to be lessons for both targeting and creative treatments in this – I just need a client or two to come along with me!
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