Brent Smart, CMO of Telstra, has said that under its bespoke agency model, +61, the telco is moving away from its previously “overweight” focus on performance, or “trading” as he called it, for a 50-50 split between brand and performance dollars.
Smart, of course, is known for his love of a big brand campaign and he told B&T as much during an interview for the CMO Power List.
“For me, it’s not a question of ‘Or’ it’s a question of ‘And’… You have to be great at both [performance and brand building],” he said.
“Marketing must deliver and contribute to winning the trading war, week by week, month by month, quarter by quarter… Traditionally, our split has been overweight towards what we call ‘trading’. That’s retail, offer-led stuff because telco is a hyper-competitive market.”
While many would assume that Telstra’s main rivals are Optus and Vodafone, Smart explained, again, that its rivals were a question of “and” not or.
“We’re competing NVNOs, like Aldi, Woolies and other brands that are providing low-cost mobile services. We’re also competing with when it comes to selling a handset, JB Hi-Fi and Harvey Norman, both pretty aggressive retailers. It’s a very competitive marketplace driven by offers and deals so you have to be competitive,” he explained.
“Ultimately, we want to get to a 50-50 balance. We’re not quite there yet. But we’re on that journey.”
Crucial to that journey was Smart’s dispensing with Accenture Song’s The Monkeys as Telstra’s creative agency. In its place, he appointed Bear Meats Eagle on Fire and TBWA to handle creative work and reappointed OMD as part of its new bespoke +61 model.
“They’re [The Monkeys] are a great agency and they’ve done great work and I respect them a lot. But it was really about the opportunity to build something unique and work in a unique way,” he said.
Moving forward, however, Smart believes that doubling down on Telstra’s branding will lead to benefits in the long run, though it might be tough at the start.
“I went on a similar journey with NRMA in my last job,” said Smart, who has since been replaced at NRMA by fellow CMO Power List member Michelle Klein.
“The thing about going on that journey is that it doesn’t look great in the first year. It starts looking good in year two and three because brand building is a long-term exercise. But you start getting a cumulative effect of consistently brand-building and then it’s great. Your CPAs look better when the brand is strong, you convert better when the brand is strong and your trading and performance stuff works better when the brand is strong.
“We need to build confidence that we’re driving long term growth and future demand. You can’t just be fighting in the same demand pool. You need to be growing the demand pool. The business will see the benefits, they just won’t see them right away.”
Fortunately for Smart, Telstra’s CFO, Michael Ackland, used to run its consumer business and will realise the significance of what Smart is trying to achieve.
“He understands brand, he understands the power of marketing,” said Smart.
What Ackland might enjoy more, however, is the “premium” that Smart reckons Telstra will be able to charge once its branding efforts are underway.
“There’s no doubt that building a brand will help all the myriad products and experiences we offer at Telstra. That’s why we must build a brand. If you focus on single products, you’re not getting that beautiful halo that brand gives to everything,” he said.
“What we don’t talk enough about as marketers is that building brand well lets you charge more. The great brands have a premium which becomes incredibly profitable for a business.”
But in that “hyper-competitive” marketplace he described, does focusing on brand and its ability to charge more make sense during a cost of living crisis? So far, Telstra’s bumper half-year profits would show the business has little to worry about just yet.
