Institute of Practitioners in Advertising Gold and Grand Prix, IPA Effectiveness Awards, 2012 www.ipa.co.uk

John Lewis: Making the nation cry...and buy Principal authors: David Golding, Adam & Eve; Helen Weavers, Real World Planning; Paul Knight, MG OMD Contributing authors: Sam Veitch and Lesley Turnbull, BrandScience

Introduction Few people would dispute that in 2012 John Lewis is one of the most talked-about and admired advertisers in the UK. But it's easy to forget how recently that wasn't the case and how rapid the turnaround in the brand's communications effectiveness has been. This paper tells the story of how a bold decision to use highly emotional advertising, in a very challenging economic climate, has delivered a highly impressive £1074m of incremental sales and £261m of incremental profit since Christmas 2009. Not only has the John Lewis business benefited greatly but so have all the Partners, who share an annual bonus based on profits. This paper proves how emotional advertising has directly enriched the lives of thousands of people, and brought a tear to the eye of millions.

About John Lewis The first store bearing the John Lewis name opened in 1864, but the brand as we know it today was born in 1929 when John Spedan Lewis inherited the business on his father's death. John Spedan was a visionary thinker who believed that commercial success would result from putting the happiness of workers at the heart of everything the company did. He created a Partnership structure in which every permanent employee is an owner of the business. While the idea at the heart of John Lewis was radical, in other respects John Lewis has been a very conservative organisation. It wasn't until 2005 that all stores were open 7 days a week1. It wasn't until 2007 that all but two of the stores took full John Lewis branding2. There are still only 36 stores, compared with almost 350 for M&S3 and more than 150 for Debenhams. And, unusually for a retailer, the company has been very reluctant to spend significant amounts of money on marketing and advertising. John Lewis is an inherently modest organisation. Between 1997 and 2006 it spent an average of £5.7m per year on advertising, compared to £26.4m for M&S and £12.9m for Debenhams4.

Setting the scene Our story covers the period from early 2009 to the end of 2011. Throughout this period life has been very difficult on the UK high street. The financial downturn has driven consumer confidence to record lows (Figure 1) and the housing market has collapsed (Figure 2), particularly impacting on retailers with reliance on home-related categories.

Figure 1: Consumer confidence measures5 Source: Nationwide, in partnership with TNS-RI

Figure 2: Mortgage approvals and average house prices Source: Bank of England, Nationwide As a result retail sales growth has been very muted or non-existent through this period (Figure 3) and numerous retailers have been forced to announce closure or administration (Figure 4).

Figure 3: Sales growth (like-for-like) amongst UK non-food retailers Source: British Retail Consortium6; John Lewis

Figure 4: UK retailers in John Lewis categories announcing closure/administration Source: Press coverage

John Lewis in 2009: a retailer suffering more than most After years of solid growth, John Lewis was under intense pressure. Gross sales were -0.1% and like-for-like sales -3.4% for the financial year ending Jan 2009. Operating profit had dropped by 26% and the annual Partner bonus was the lowest for five years (Figure 5).

Figure 5: Media coverage of John Lewis financial results 2009 For all but two of the previous 18 months, like-for-like sales had been negative and often more so than the British Retail Consortium's average (Figure 6). John Lewis wasn't just suffering in line with the rest of the market, it was suffering more.

Figure 6: Sales growth (like-for-like) amongst UK non-food retailers vs. John Lewis prior to mid 2009 Source: British Retail Consortium; John Lewis As Andy Street, the Managing Director (and Partner since 1985), said at the time: "Last year was probably the most tricky in my time at the Partnership ... The year ahead is going to be equally difficult, if not harder."7 While John Lewis had been making steady progress to make its business more competitive and appealing (stores had been refurbished, the website was receiving investment), the brand overall remained a bit of a sleeping giant: it kept a low profile and was respected rather than loved. It was considered more for functional items than for emotional ones (Figures 7 and 8). For some it seemed expensive and out-ofsynch with the times.

Figure 7: Qualitative research summary of the strategic challenge for John Lewis Source: The Nursery qualitative research, Jan 2005

Figure 8: Analysis of drivers of 'bonding' (a measure of loyalty) Source: BrandZ/Millward Brown 2008, base department store/John Lewis last 12 month shoppers at bonding level The marketing team was convinced that communications could play a significant role in re-energizing the brand and business. However

they faced an internal challenge: John Lewis had recently significantly increased its investment in advertising8 ... but to little apparent positive effect. The various campaigns in TV and print across 2007 and 2008 had been product-focused and lacking in consistency. They had struggled to cut through, were poorly branded and had failed to impress Partners. Their average Awareness Index was 29. In March 2009 the marketing director left. Marketing magazine said "Whether Inglis [Craig Inglis, head of brand communications] has inherited a poisoned chalice is open to debate. He certainly faces a considerable challenge, given that weekly sales at the upmarket department store have been sliding since the beginning of the year."10

The communications solution A new communications approach was required. The team felt that the emphasis needed to be far more emotional, to make existing customers more conscious of what makes John Lewis special. John Lewis serves people at some of the most emotional times in their lives (moving into or refurbishing a home, getting married, having babies, preparing for Christmas) yet the brand had never brought to life the emotional role it plays. Analysis of previous IPA effectiveness cases had demonstrated the power of emotional strategies to drive significant business effects11, and learnings from neuroscience were demonstrating that the most effective role for communication is to plant positive emotional memories in people's minds, so the time felt right to try a more emotional approach. The primary objective was to encourage existing shoppers to visit a little more and spend a little more. On a secondary level it was hoped that communications could get those who hadn't shopped at John Lewis recently to see the brand in a fresh light and decide to visit again or for the first time. There have been two main strands of communications (both led by TV advertising), plus a continuation of support (mostly in press) for topics like Clearance12 and fashion.

i. Christmas Christmas 2009 became the first test of this new strategy. Christmas is hugely important to John Lewis sales13 so the stakes were high. At Christmas most retailers showcase gifts and emphasize how easy and fun they will make Christmas shopping. Celebrities, sparkle and over-excitement are involved. However John Lewis chose to position itself as the home of thoughtful gifting, celebrating those who put more care into what they choose and how they present it. The Christmas 2009 commercial 'Remember the feeling' (Figure 9) showed children unwrapping adult gifts with undisguised delight. It used a well-known moving track re-recorded by a contemporary artist, a model which all subsequent commercials followed (Figure 10).

Figure 9: 'Remember the feeling' TV ad and other Christmas 2009 communications

Figure 10: Music tracks used in the TV ads In Christmas 2010 the campaign was spearheaded by the TV ad 'For those who care' (Figure 11) and for Christmas 2011 'The long wait' was created (Figure 11).

Figure 11: 'For those who care' TV ad

Figure 12: 'The long wait' TV ad and other Christmas 2011 communications

ii. 'Never knowingly undersold' John Lewis's commitment to 'Never knowingly undersold' was introduced by John Spedan Lewis in 192514. He intended it not just as a price promise but as a total trading philosophy, meaning not only that if a customer can find the same product cheaper elsewhere John Lewis will refund the difference, but also that all products will be the best quality for the price and expert advice will add additional value. However 'Never knowingly undersold' had been allowed to become rather recessive and purely price-focused in meaning (Figure 13).

Figure 13: 'Never knowingly undersold'communication pre 2010 As the recession continued it was felt that the time was right to return to the broader meaning of 'Never knowingly undersold' and put it back at the heart of the brand. A new mark (Figure 14) was introduced on all products and touchpoints, and there was a desire for communications to highlight the refreshed philosophy. But how to do that within an emotional approach?

Figure 14: New 'Never knowingly undersold' communication from 2010 The resulting commercial 'Always a woman' (Figure 15) was an emotional demonstration of John Lewis's constancy through the key moments of a customer's life, implying that in a world that now felt very changeable John Lewis remains a beacon of stability, offering permanent and multi-dimensional good value.

Figure 15: 'Always a woman' TV ad, May 2010 In Autumn 2011 John Lewis decided to again support the 'Never knowingly undersold' promise but this time focusing on one of its three key 'directorates': Electrical & Home Technology. The price-matching commitment had been recently extended to the John Lewis website and to matching competitors' online prices, which made John Lewis more competitive. However John Lewis wasn't always seen as somewhere to go for the latest technology products and desirable brands. The commercial 'Through the ages' (Figure 16) cleverly continued the 'passage of time' idea but using the insight that people enjoy reminiscing about entertainment products that have played a big role in their lives over the years.

Figure 16: 'Through the ages' TV ad and other electricals communications, September 2011

The media approach John Lewis's media approach has worked hard to optimise the emotional strategy and ensure an integrated approach. The two main channels have been TV and press (Figure 17).

Figure 17: Media plan

i. TV TV is central due to its unparalleled ability to engage large audiences emotionally. Timelengths have been long (at least 60" for the lead version of each commercial) and airtime bursts brief, making the ratio of production cost to media spend high. However at John Lewis communications are seen as a customer touchpoint just like a new product line or store opening, so they must reflect the brand's quality standards. TV buying has ensured that the ads are experienced within emotional programming (e.g. X Factor/Britain's Got Talent, dramas, soaps) and that as many people as possible see the ad for the first time within a short period (since this is when word-of-mouth and sharing are most likely). While the typical John Lewis customer was not an early adopter of social media it became clear in 2009 that people were talking about the advertising on Facebook and Twitter. Since Christmas 2010 the TV ads have launched on the brand's Facebook page the day before they first air on TV. By Christmas 2011 TV buying was prioritizing the programmes seen to be highly 'sociable' (provoke a much higher number of Tweets within 24 hours than you'd expect from their coverage levels - Figure 18).

Figure 18: Analysis of 'sociability' of TV programmes Source: Data Science The horizontal axis takes account of how long a programme is, since this affects how likely it is to generate Tweets

ii. Print (press/outdoor) Print channels are important to add more rational messaging about products, prices, stores and Clearance periods to the emotional story told on TV. However even here a more emotional approach has been developed using richer colours, stylish photography and more

emotive copy (Figure 19).

Figure 19: Examples of more emotional print communications A consistent look and feel has created a strong tonal 'handwriting' for the brand across all product categories and types of message. This improves branding and communications efficiency, contributing to media spends remaining far lower than those of key competitors (Figure 20). M&S's annual TV spend is greater than John Lewis's entire annual advertising spend15.

Figure 20: John Lewis above-the-line spend and share of voice Source: Nielsen AdDynamix

The results The John Lewis campaign has become one of the most popular and successful marketing stories of recent years. We will review the impact of the communications in a number of ways. i. ii. iii. iv. v. vi. vii. viii. ix.

The communications were noticed and enjoyed The communications were sought out, talked about and shared by consumers The communications were talked about by the media and entered popular culture Brand perceptions improved Penetration, frequency and average spend increased The business grew and outperformed the competition The communications directly contributed to significant sales and profit uplifts The communications had other indirect business effects The communications made Partners very happy

i. The communications were noticed and enjoyed and triggered Tracking shows that existing customers, our primary audience, have noticed the advertising to an extent previously unseen (Figure 21) and have really enjoyed it, with the music contributing strongly to appeal (Figure 22).

Figure 21: Total brand communication awareness and TV ad awareness Source: Millward Brown tracking amongst John Lewis shoppers16 in catchment areas (rolling 8 week data) Gaps represent breaks in fieldwork

Figure 22: Advertising enjoyment and music enjoyment Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas As intended the ads triggered positive emotions amongst customers (Figure 23).

Figure 23: Emotional response to ads Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas (These questions weren't asked for Christmas 2009 and there isn't a norm) We also have evidence that memorability and emotional engagement extend beyond John Lewis customers to a wider audience. In Campaign magazine's Punter Appeal research'The long wait' achieved the highest rating to date for a private sector ad (Figure 24) and in a Daily Mirror poll (Figure 25) the John Lewis Christmas 2011 ad was strongly preferred.

Figure 24: 'Punter Appeal' scores17 Source: Campaign magazine

Figure 25: Daily Mirror poll A more sophisticated piece of evidence is from a neuroscience study (Figure 26). The brain activity of an all-adult sample was monitored while watching 'Always a woman'. This revealed very strong 'memory encoding', which correlates highly with subsequent purchase behaviour, driven by very high emotional engagement.

Figure 26: Neuroscience tracking of 'Always a woman' Source: Neuro-Insight

ii. The communications were sought out, talked about and shared by consumers Not only were the communications noticed and enjoyed at the time of viewing but people talked about them, looked for them online and shared them, thus greatly amplifying the effect of the bought media and implying an active engagement that is more likely to lead to behavioural change than merely passive consumption of paid-for airtime. First the evidence for our primary target audience of existing customers: tracking shows that they were unusually likely to say they've talked about the advertising (Figure 27), they contacted John Lewis in large numbers to praise the advertising (Figure 28) and many following John Lewis on Facebook commented, shared the ads and even formed groups to champion them (Figure 29).

Figure 27: Talking about the advertising Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas

Figure 28: Examples of direct feedback from customers Source: John Lewis

Figure 29: Facebook response to Christmas 2011 ad There is also a wealth of evidence of active engagement by a broader audience beyond just existing customers. Searches for 'john lewis ad' or similar vastly exceeded searches for 'm&s ad' or similar, or 'comparethemarket ad' or similar during this period (Figure 30).

Figure 30: Consumer searches for advertising Source: Google Insights for Search18 The numbers on the vertical axis don't represent absolute search volume numbers but relative ones: the data is normalized and presented on a scale from 0 to 100; each point on the graph is divided by the highest point or 100. Huge numbers of people have viewed the John LewisTVadson YouTube (Figure 31), with many spoof versions created and shared too.

Figure 31: YouTube viewing of ads Source: YouTube, 2.4.12

Several versions of these ads exist on YouTube: views for all non-spoof versions have been combined People continue to come back to the ads months after they have aired, debating which is the best and asking about the tracks. Many of the comments mention the ads making viewers cry

Figure 32: Example YouTube comments Source: YouTube The John Lewis ads are particularly likely to be watched to completion on YouTube (Figure 33), whereas the dropout rate for many ads is high.

Figure 33: YouTube viewer retention throughout John Lewis ads, relative to films of a similar length Source: YouTube Such was the Twitter interest in 'The long wait' that it trended- globally - within six hours of it being launched online, even before it had been on TV (Figure 34). This is a phenomenal achievement given John Lewis is a UK-only chain of 36 stores and it was Armistice Day. On the day the ad launched on TV Twitter mentions of John Lewis were up more than 1500% (Figure 35). Even celebrities expressed their

enthusiasm to their followers (Figure 36).

Figure 34: Twitter worldwide trending topics on the day 'The long wait' launched on Facebook Source: Twitter, 11.11.11

Figure 35: Tweets mentioning John Lewis pre and post 'The long wait' launch Source: Analysis by Precise (media monitoring company) of Twitter 'storms' in 2011

Figure 36: Celebrity tweets about 'The long wait' Source: Twitter

It is unlikely that the extremely high levels of online engagement above could be achieved if only existing customers were involved. Indeed some of the comments bear that out (Figure 37).

Figure 37: Examples of comments from non-customers Source: Email to John Lewis; Facebook

iii. The communications were talked about in the media and entered popular culture All the John Lewis ads have been frequently discussed in the media (Figure 38), again ensuring that a limited budget went much further and extending the likely impact of the campaign beyond existing shoppers. The estimated 'advertising value equivalent' of all the coverage is £4.2m19.

Figure 38: Example press coverage 'The long wait' was spoofed by Channel 4 to promote Gordon Ramsay's Christmas show and by Sky to promote Soccer AM (Figure 39), and became inspiration for cartoonists (Figure 40).

Figure 39: Soccer AM spoof of 'The long wait'

Figure 40: Daily Telegraph cartoon of George Osborne 'Always a woman' was the subject of 'Thought For The Day' on BBC Radio 4's Today programme20 and an exam topic for AS Media Studies. 'The long wait' became an official subject for church sermons and school assemblies: over 7000 schools (teaching over a million pupils) downloaded an assembly guide devoted to the ad21 (Figure 41).

Figure 41: Assembly guide involving 'The long wait' Source: assemblies.org.uk The music has been an important part of the advertising's entry into popular culture. The tracks have charted after the ads launched and featured heavily in radio airplay (Figure 42). Ellie Goulding's 'Your song' was even chosen as the first dance at the wedding of the Duke and Duchess of Cambridge.

Figure 42: Popularity of music tracks from the ads Source: Record companies 'Sweet child o' mine' single sales for month 1 only To our knowledge no-one has quantified the business benefit of advertising tracks achieving radio exposure, so we have attempted to do so (Figure 43) and suggest an 'advertising value equivalent' of about £14.6m. Given the TV media spend was only £17.7m, this free coverage almost doubles the investment and demonstrates for the first time the considerable value of advertising using music that gets radio airplay. Figure 43: Estimate of the value of the music from the John Lewis advertising receiving radio airplay The tracks will have been played on both national and local stations, both BBC and commercial, and we have no information about dayparts so can only approximately estimate the likely coverage achieved by the tracks. Taking Heart London as an average station that played the tracks: One airplay of a track would achieve about 132 impacts (coverage of 132k adults) so 123,225 airplays would achieve 16.3m impacts. A national average Cost Per Thousand for a 30" radio ad is about £1.50 so the CPT for 3 mins (the length of a track) would be £9.00. Therefore the advertising equivalent cost of the radio airplay is about £146.4m (16.3m impacts x £9.00). Making a conservative assumption that John Lewis is thought about perhaps 10% of the time the tracks are played, we get a value of £14.6m for the radio airplay. Source: MG OMD with guidance from the RAB In November 2011 John Lewis released a charity album of the tracks from the ads22 (Figure 44). 17,349 copies have so far been sold23.

Figure 44: John Lewis album of tracks from the TV ads, in association with Save The Children

iv. Brand perceptions improved The key question here is: do customers now find John Lewis more emotionally relevant? Unfortunately we don't have a direct postadvertising equivalent of Figure 8 but we do have tracking evidence for some of the emotional affinity measures mentioned (Figure 45). Trust and perceived modernity have improved markedly over the period of the campaign (with more rational measures such as 'better quality' and 'better service' also increasing).

Figure 45: Agreement with brand image statements Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas (rolling 12 week data) Gaps represent breaks in fieldwork Customers are prepared to directly attribute the advertising with making the brand more appealing and making them feel good about shopping at John Lewis (Figure 46).

Figure 46: Brand 'feel good' generated by the advertising Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas (The 'feel good' question wasn't asked for Christmas 2009 and there isn't a retail norm) With particular respect to the 'Never knowingly undersold' strand of communications, awareness of the promise has grown every time these ads have been on air (Figure 45), implying greater appreciation of the all-round value that John Lewis offers.

Figure 47: % aware of 'Never knowingly undersold' Source: Millward Brown tracking amongst John Lewis shoppers in catchment areas (3 month rolling data)

v. Penetration, frequency and average spend increased We have seen that perceptions of John Lewis have changed during the campaign period, but has behaviour? Our primary objective of getting existing shoppers to visit more and spend more has indeed been achieved (Figure 48). While increases of 3% may seem small, combined they mean that average annual spend has grown by 6% (Figure 49), and for a retailer of John Lewis's scale that has a massive impact.

Figure 48: Average number of visits per year and average spend per visit (indexed on 2009) Source: John Lewis analysis of payment card data (not possible prior to 2009 because EPOS system not in place)

Figure 49: Average annual spend per John Lewis customer Source: John Lewis analysis of payment card data (not possible prior to 2009 because EPOS system not in place) Furthermore our secondary objective of increasing penetration has also been achieved (Figure 50). The ability of the advertising to actively engage a broad audience (apparent in the earlier social media evidence) has resulted in John Lewis acquiring 10% more customers. This makes the frequency/spend growth more significant, since you would expect marked increases in penetration to result in lower frequency and spend, since the customer base contains more new and occasional shoppers. The implication is that existing customers increased their visiting frequency and spend per visit by significantly more than the 3% overall figures.

Figure 50: Number of John Lewis customers Source: John Lewis analysis of payment card data (not possible prior to 2009 because EPOS system not in place) Some penetration growth will be due to new stores opening, but the new stores were mostly the smaller John Lewis At Home format and in existing catchment areas. We demonstrate later via modelling the limited impact that new stores have had on sales growth, distinct from the effect of communications.

vi. The business grew and outperformed the competition Following a difficult 2008 where sales declined slightly, John Lewis returned to growth from 2009 onwards (Figure 51).

Figure 51: John Lewis gross sales Source: John Lewis financial reports (John Lewis financial years run Feb to Jan but have been taken as equivalent to the relevant calendar year) Like-for-like sales growth has become positive again (Figure 52), although 2011 was a particularly challenging year for John Lewis in line with the rest of the high street.

Figure 52: John Lewis like-for-like sales growth

Source: John Lewis financial reports (John Lewis financial years run Feb to Jan but have been taken as equivalent to the relevant calendar year) Focusing on the pre Christmas periods so crucial to retailers: John Lewis's December sales have been particularly mpressive since the new advertising began, outperforming most of the rest of the high street (Figure 53) and setting new internal records every year.

Figure 53: Christmas period like-for-like sales growth Source: Published financial information24; BRC: British Retail Consortium Retail Index (non-food) As Neil Saunders of retail consultancy Conlumino said: "I think relative to the rest of the high street they've been doing very well. They've gained market share ... Their performance has been robust compared to others."25. Market share growth is indeed evident, both at overall department store level (Figure 54) and for the two of the three directorates for which we have market share information26 (Figure 55).

Figure 54: John Lewis share of department store sales Source: John Lewis gross sales (including VAT) versus Mintel's department store sector sales (including VAT) in 'Department Store Retailing', Mar 2012

Figure 55: John Lewis share of Home and Electricals categories

Source: John Lewis estimates using Verdict reports for Homewares, Furniture & Floorcoverings and DIY & Gardening; GfK In terms of sales growth versus the high street, during this period John Lewis has outperformed the British Retail Consortium average for every month except one (Figure 56). As Howard Archer of the economic forecasting organisation IHS Global Insight said: "John Lewis has been seen as a bellwether for the state of consumer spending, but it has been very much an outperformer in recent years"27.

Figure 56: Sales growth (like-for-like) amongst UK non-food retailers vs. John Lewis Source: British Retail Consortium; John Lewis

vii. The communications directly contributed to significant sales and profit uplifts It's clear that John Lewis's business did very well during this period, but the critical question is: to what extent are communications driving this, versus other factors? The sales of any large multi-channel retailer are affected by numerous variables and John Lewis uses sophisticated econometric modelling to isolate the contributions of different factors. The model distinguishes between factors which drive variation in base sales and in incremental sales. The effects of the number of stores, the weather, consumer confidence and growth in internet shopping are all observed at the level of base sales (Figure 57).

Figure 57: Model decomposition of the key drivers of base sales only (in-store and online) Source: Econometric modelling by BrandScience The numbers have been removed from the y axis for confidentiality reasons E-retail growth = IMRG Capgemini e-Retail Sales Index which tracks the overall growth in online retail, which exerts a negative effect on total John Lewis sales (while exerting a positive one on John Lewis online sales) Seasonality = Bank Holidays, weather effects, etc. SEO = search engine optimization Online SKU growth = the growth in the number of lines stocked byjohnlewis.com Of the factors which drive incremental sales, above-the-line activity is the single biggest component, accounting for £1074m (14% of total sales) from Nov 2009 to Jan 2012 (Figure 58). Online activity such as search marketing and emails have a significant impact, with changes to the store experience, promotional activity such as the Clearance sales periods and below-the-line activity playing smaller parts.

Figure 58: Model decomposition of the key drivers of incremental sales (in-store and online) Source: Econometric modelling by BrandScience The numbers have been removed from the y axis for confidentiality reasons Online activity = pay-per-click search, price comparison, other affiliates and emails BTL activity = direct mail, inserts, etc. The incremental revenue generated by communications translates into impressive incremental profit, since (as is typical) the brand's marketing contribution margin is far higher than its net profit margin (which includes fixed costs). In a little over two years John Lewis communications have delivered £261m incremental profit, meaning that for every £1 spent £5.02 is returned to the business (Figure 59).

Figure 59: Contribution of above-the-line communications to incremental sales, 2009 to 2011 Source: Econometric modelling by BrandScience For Nov 2009 to Jan 2010 only the TV advertising is included here (print is excluded), which is why the total incremental revenue figure of £1019m is lower than the figure of £1074m quoted earlier. The Christmas TV ads have been particularly hardworking, with the latest two delivering extremely high profit ROIs of over £9 (Figure 60).

Figure 60: Contribution of TV ads to incremental sales, 2009 to 2011 Source: Econometric modelling by BrandScience To provide some context, in the IPA dataMINE analysis of effectiveness case studies only 8% of those correctly disclosing payback achieved ROMIs of 800% or above29. Given the dataMINE work has demonstrated the higher effectiveness of emotional involvement campaigns we wanted to compare our results with that more demanding competitive set. Peter Field has provided us with previously unpublished data regarding ROMI levels for emotional campaigns (Figure 63). Against this tougher benchmark our Christmas TV advertising still ranks amongst the top 6% of cases.

Figure 61: Incidence of reported levels of ROMI (profit ROI) Source: 'Marketing in the Era of Accountability', Les Binet and Peter FIeld, 2007; Peter Field30 All the figures described above refer only to short-term sales impact. The TV advertising is very memorable with notably long adstocks (carryover rates) (Figure 62), meaning that there will be a significant longer-term effect, as in years to come memories of the advertising will continue to trigger brand consideration, and changed shopping habits will continue to provide incremental sales. A commonly cited study31 suggests a multiple of 2.5 be applied to short-term sales effects to estimate the longer-term impact. Given our total short-term sales contribution of £1074m, the longer-term effect might be as much as £2685m.

Figure 62: Adstocks (advertising carryover rates)32 Source: Econometric modelling by BrandScience

viii. The communications had other indirect business effects Beyond the direct contribution of communications to sales and profit we can identify some additional profitable business developments, believed internally to result partly from the effect of communications on a broader audience beyond customers. Since the advertising began John Lewis's desirability to supplier brands (especially premium ones) has increased dramatically (Figure 63). Brands that were previously reluctant to be stocked in John Lewis have sought to be distributed there and allocation of stock and exclusives has improved. These developments greatly increase John Lewis's competitiveness and are extremely valuable. They are largely due to the hard work of Partners and improvements to store environments, but the business believes the advertising has contributed to driving faster reappraisal by these premium brands.

Figure 63: Premium brands that have become available at John Lewis since 2009 Source: John Lewis Tangible evidence of suppliers' increased commitment to John Lewis is their greater preparedness to contribute to funding the advertising. Supplier funding has more than doubled since 2009 (representing an increase of almost £10m) (Figure 64). The modelling does not take into account supplier funding-i.e. the cost to John Lewis of the advertising is actually lower than stated, so communications are even more profitable.

Figure 64: Growth in supplier funding since 2009 Source: John Lewis

ix. The communications made Partners very happy The Partnership's overall stated purpose is "the happiness of all its members, through their worthwhile and satisfying employment in a successful business"33. This adds a unique perspective to John Lewis's definition of marketing effectiveness: in contrast to most businesses whose main ambition is to pass on more profit to a small group of often corporate shareholders, John Lewis truly desires to make its Partners happy. Communications have contributed to the fulfilment of this objective, not only by giving Partners advertising that they have enjoyed and felt proud of (Figure 65), but also by increasing the size of the annual bonuses they have been given. Figure 65: Partner feedback about the advertising Sir: I sat transfixed to the screen on Friday (23 April) at 7.45pm to what I can only describe as a very beautiful and touching advert. I think it has to be one of the best I have ever seen. The music was perfect, the way the story of a customer's life was shown with our products in her home updating was very clever. All in all it left me with a tear in my eye and a lump in my throat. Very well done! Yours, etc IMPRESSED PARTNER Firstly who do I congratulate on the most intriguing advertisement campaign recently aired on Television from John Lewis. I absolutely loved it, I understood immediately how the girl/woman interacted with the brand, I even recognised some merchandise from our shop floor myself. Gorgeous, sentimental, spell-binding and perfectly sums up a brand we have every reason to be proud of. Absolutely love it. I would firstly like to congratulate you on a truly fantastic and moving Christmas advert. The first time I saw it, I cried!

We have been watching the new advert in the Partners entrance - its lovely. You have nearly every woman in Wycombe in tears. I think we all started recognising our own daughters and then flipped to seeing ourselves in the advert. Brilliant! Just shown it, great reaction, tears and applause and huge thumbs up. Source: Letters to John Lewis Gazette, emails to Marketing department John Lewis is the UK's largest employee co-operative. The directness and scale with which employees share in the business's success is perhaps unique. Every March the board decides on a percentage of pay to be given as a bonus to all permanent employees regardless of position or salary, depending on the profitability of the Partnership overall. For the three financial years that this activity straddles both John Lewis and Waitrose have gone from strength to strength, so bonuses have been generous at 15%, 18% and 14% of annual salary (equivalent to 7 to 10 weeks' pay -an unprecedented level of generosity in retail)

Figure 66: Partners celebrate the bonus announcement, March 2011 Due to a need to keep bonus allocation confidential we cannot publish the direct contribution John Lewis communications made to Partner bonuses. However, we have already demonstrated the considerable impact John Lewis communications have made to the success of the business during this period, contributing over £1bn or 14% of total John Lewis sales and a substantial proportion of Partnership profit, and hence making a major contribution to the bonus pool shared by every Partner. It is very unusual to be able to make a link between marketing effectiveness and employee happiness, but it is a fact of immense pride to all concerned that we can, and we would hope to the founder of John Lewis himself.

Summary This paper tells the story of how, in a little over two years, John Lewis communications have propelled the brand into the nation's hearts, achieved a return on investment of over 500% and made every Partner better off. We have also offered some new perspectives on communications evaluation, with an estimate of the business benefit of music tracks from advertising being played on the radio, an illustration of the new insights that neuroscience tracking can provide and previously unpublished ROMI data for emotional campaigns.

Footnotes 1. 2. 3. 4. 5.

Traditionally John Lewis was closed on both Sundays and Mondays. Many stores retained their original department store names (e. g. Robert Sayle in Cambridge) until very recently. Peter Jones in London and Knight & Lee in Southsea still retain their original names. There are almost 350 M&S stores that aren't food-only (there are over 700 stores in total). Source: Mintel 'Department Store Retailing', March 2012. Source: Nielsen Media Research. The Consumer Confidence Index is an average of 1000 adults' appraisal of current economic conditions, expectations regarding

economic conditions six months hence, appraisal of current employment conditions, expectations regarding employment conditions six months hence and expectations regarding their total family income six months hence The Present Situation Index is an average of respondents' appraisal of current economic conditions and current employment conditions. 6.

7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

18.

The British Retail Consortium-KPMG Retail Sales Monitor is an accurate monthly measure of retail sales performance that acts as both a benchmark for participating retailers and as a key economic indicator. It measures changes in the actual value of retail sales based on figures supplied by about 70 participating companies. Source: Daily Telegraph, 11.3.09. Advertising spend had totalled £48.7m during 2007 and 2008. Source: Nielsen Media Research. Source: Millward Brown. Source: Marketing magazine, 27.5.09. Source: Marketing in the Era of Accountability, Les Binet & Peter Field, 2007. John Lewis has two annual sales periods called Clearance. The four weeks leading up to Christmas typically deliver about 20% of John Lewis's annual sales and about 40% of annual profit. Source: John Lewis. Prior to taking over John Lewis in 1929 John Spedan was the Managing Director of Peter Jones and instigated the 'Never knowingly under sold' policy there. Source: Nielsen AdDynamix. John Lewis's tracking has always focused on existing shoppers, 18+ ABC1C2. 2000 members of the public are asked to rate TV ads from a particular agency every month. The average rating is a combination of how impressed people are with the ad, how much the spot makes them like the brand and how likely they are to share it with others. Search terms used: John Lewis: john lewis ad +john lewis advert +john lewis christmas ad +john lewis christmas advert M&S: m&s ad + m&s advert + m&s christmas ad + m&s christmas advert + marks & spencer ad + marks & spencer advert + marks & spencer christmas ad + marks & spencer christmas advert Comparethemarket: comparethemarket ad + comparethemarket advert + compare the market ad + compare the market advert + meerkat ad + meerkat advert. Source: John Lewis PR department.

19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33.

Source: John Lewis PR department. Canon Lucy Winkett ofSt Paul's Cathedral, 29.4.10. Source: assemblies.org.uk. £2 from the sale of each album goes to Save The Children. Source: John Lewis. Weeks included in Christmas trading updates: John Lewis 5, BRC 5, Next 21, M&S 13, Debenhams 19, Argos 18, Comet 11. M&S figure is for general merchandise only (food excluded). Source: The Guardian, 2.3.12. John Lewis's share in Fashion is very small and robust share information for this category is hard to come by. Evening Standard, 13.4.11. Net profit is calculated using incremental revenue excluding VAT because the marginal contribution figures John Lewis use relate to VAT- exclusive revenues. Separate marketing contribution margins for store sales and online sales have been used. Source: Marketing in the Era of Accountability, Les Binet and Peter Field, 2007. A caveat here is that ROMI figures are heavily affected by the innate profitability of the sector and of the company. Source: How advertising pays back', Tim Broadbent, Admap 422, Nov 2001. Used in this way in the Hovis and Essential Waitrose papers of 2010, amongst others. An adstock of 85% means that 85% of the ad's effect carries over to the following week, then 85% of that effect to the next week, and so on. Christmas ads usually have shorter adstocks because their subject matter is time-limited. Source: John Lewis Partnership Constitution.

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