Body Shop changes strategy on public relations
Friday 14 October 1994
The deal with Chiat Day is a radical departure for a company that had insisted it would not fritter away customers' money on advertising.
It also marks a new emphasis by the company's increasingly professional management, led by the managing director, Stuart Rose, on heightening awareness of the Body Shop brand in its mature domestic market and in its increasingly important foreign markets.
In the past Mrs Roddick relied on promoting Body Shop with colourful window dressing and a love affair with the media. She shocked American retailers in 1990 by refusing to advertise, establishing instead a community care department and an environmental projects department.
'I'm not interested in seducing the consumer with expensive images,' she said at the time. 'We've got better things to do with the money.'
Since then the company has suffered a number of blows to its confident image. After 200 shops had been opened in the US, Mrs Roddick's researchers found that shoppers across the Atlantic could not distinguish the Body Shop from competitors such as Bath and Body Works and H2O. This marketing failure was partly blamed for the disappointing fall in like-for-like sales in the US of 1 per cent in the six months to August 1994 compared to 1993.
In Britain managers have complained that the domestic market has matured and say they need additional promotions to pull in new customers. Finally, this summer, its free media publicity, once valued by Mrs Roddick at pounds 2m a year, dried up after a US magazine, Business Ethics, questioned Body Shop's ethical credentials. At the same time American Express advertisements shown in America featuring Anita Roddick were judged a great success by the company. News of the marketing initiative was accompanied by the appointment of two non-executive directors, the first in the company's history. They are Penny Hughes, president of Coca-Cola Britain and Ireland, and Aldo Papone, formerly an executive at American Express. Gordon Roddick, chairman, said further non-executive appointments would follow.
Yesterday shares in the company were initially buoyed by better-than-expected interim results, hitting 230p, but fell back as analysts digested the news. They closed 2p better at 225p.
The results showed worldwide retail sales up from pounds 175.8m to pounds 208.1m. Pre-tax profits rose from pounds 10m to pounds 12.3m, slightly ahead of City expectations. The net dividend increased from 0.75p to 0.9p.
The performance was slightly brighter than expected, Julie Ramshaw, retail analyst at Morgan Stanley, said. A 5 per cent increase in profit from British operations was particularly encouraging.
In the US, however, like-for-like sales fell by 1 per cent. Total sales, including the new stores, increased by 31 per cent but margins were squeezed by competition and operating profits rose by only 15 per cent. The company blamed poor management in its east coast division, but Mr Roddick said the problem had already been rectified.
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