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By Kevin Wheeler
I was intrigued when I saw last week’s announcement by Slater & Gordon that they were launching a £1m advertising campaign across a range of media including TV, print and digital advertising, in what the firm hopes will be a "major step towards us becoming a household name" in the UK. My first thought was that this seems a relatively small amount of ad spend for what is a huge aspiration.
The challenge of creating a consumer legal brand
Let’s face it, in the UK we do not have a strong national consumer legal brand; in fact, does any country on the planet? The market has historically been highly fragmented, and based around a few small practices on each town’s high street, for a “distress purchase” which most of us will only turn to a few times in our lives, usually when we are buying/selling a house or dealing with a death in the family. When we have need of such a legal service we tend to ask family and friends for a recommendation or go with the familiar firm that we regularly walk past when doing our Saturday shopping. Using a “national brand” would be a new departure for most of us.
But trying to create such a strong national brand is the gamble that many of the new, post-Legal Services Act entrants to the UK legal market appear prepared to take. Will they succeed? I think not, and here’s why.
Using advertising to create a strong consumer brand
Let’s assume that advertising is the most effective way to build a consumer services brand in the UK today. This is a big assumption and one which could be the subject of its own blog. The premise with mass market advertising is that the constant broadcasting of your company’s message to a large number of people encourages sufficient of them to purchase your service, such that the revenue you generate more than compensates for the ad spend and other costs of producing that service, leaving you with a healthy profit.
If your service is one that consumers use regularly, say, banking, the large revenues that flow from this business mean that you can invest relatively large amounts in brand building and maintenance through advertising. Companies usually spend a proportion of their revenue on advertising – so, the more your turnover, the greater your ad spend. This is why the big five UK banks all spend more than £25m a year each on advertising (see table).
Current annual UK advertising spend
Source: Financial Mail on Sunday, 31 August 2013
But this spend is just to maintain the banks’ position in the market. If you are a new entrant to a market or, arguably in the case of the likes of Slater & Gordon, you are looking to create an entirely new market, you need to spend even more just to build awareness of your brand up from a base of zero.
The Wonga comparison
A good comparison in the UK market might be a brand like Wonga, the payday loan company. This company was nowhere up until a few years ago but driven by the recession, which has forced many into taking our short-term loans, demand for Wonga’s services has increased dramatically with the company’s profits now exceeding £100m.
The company operates in a highly fragmented sector, much like the legal market, but through clever advertising (and a lot of negative PR it has to be said) its brand is one that is now recognised widely among the population. It has become a strong consumer services brand.
To achieve this it has spent huge amounts on TV advertising. Figures compiled for The Mail on Sunday by leading market research firm Nielsen revealed that the amount spent on advertising by Britain’s top five payday lending brands rose 26 per cent to £36.3m in the 12 months to June compared with the period to June 2012. Nielsen will not release individual figures for each advertiser citing commercial sensitivity, but aside from Wonga the others in its list of top five payday brands are thought to be Payday UK, Payday Express, QuickQuid and Pounds to Pocket. Wonga is thought to account for the lion’s share of the advertising spend.
So, the message is clear, if you want to create a new, strong consumer brand, you need to spend big when it comes to advertising, especially at the launch.
Legal advertising spend is too low to make a material difference
So far, none of the new entrants to the UK legal services market appear willing to make this necessary large investment in advertising to make a breakthrough.
The first out of the blocks in March 2012 was Quality Solicitors which launched with a £15m TV campaign spread over 12 months. There have followed campaigns from Irwin Mitchell, Claims Direct (a Slater & Gordon sub-brand), Co-operative Legal Services and others, mainly focusing on personal injury claims and directed at the day-time TV viewer.
Compared with the banks and Wonga, the ad spends have been small, which explains why none of these brands has really made a breakthrough to become a strong national consumer brand. In fact, my local Quality Solicitors “franchise” operates from a first floor office at the grottier end of our high street, a position that hardly screams out “quality” to me.
If Slater & Gordon is serious about creating a strong, national legal consumer brand, offering among other things personal injury, employment and family law services, I suspect that they will have to spend a lot more than £1m and probably into the tens of millions on advertising to have the desired impact.
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