Article first appeared in Marketing Week, written by Niamh Carroll.
After a post-pandemic slowdown in sales, Laithwaites used a regional testing approach to prove the case for brand building in a business that had been largely focused on direct selling.
Very few brands have the luxury of huge budgets or decades of brand advertising to build on. In these businesses, marketers can face an uphill battle when it comes to asserting the impact of brand building.
Yet this was exactly what was achieved by Laithwaites, which successfully proved the value of brand building to its business, all achieved against an extremely tough consumer backdrop.
The 55-year-old family-owned wine business was founded as a traditional direct seller, communicating with consumers via post to sign up for subscriptions and orders.
But as technology has developed and the way consumers purchase has changed, so too has the way Laithwaites trades. The brand has, largely, pivoted to an online model, with consumers able to order or subscribe online.
Like many online businesses, Laithwaites saw a significant uptick in sales during the pandemic. Off-trade wine in general boomed, as consumers drank more at home and as a direct-to-consumer brand, Laithwaites was particularly well-positioned to take advantage.
We recognised, when we took a step back, that some of our longer-term value indicators, like brand health and familiarity and likelihood to shop weren’t changing, and in fact, were starting to fall away. James Morrison, Laithwaites.
Between December 2019 and March 2021, sales rose by around 55% in value terms and its market share jumped more than 30% in one year.
Of course, post-pandemic came a cost of living crisis, which saw consumers cut down their discretionary expenses. The total wine market, as well as the money consumers were spending online contracted.
Laithwaites had invested in some brand advertising when sales were booming during the pandemic but began to cut this spend as the environment became more challenging. However, the brand’s sales began declining, dropping 22% between June 2021 and March 2023.
Both head of brand James Morrison and commercial director Matt Knight joined the brand in the post-pandemic period, in August 2021 and June 2022, respectively.
For the two marketers joining the business, it became evident that it wasn’t just a short-term, temporary sales dip that needed to be addressed, but rather there was some fundamental brand-building work that needed to be done.
“We recognised, when we took a step back, that some of our longer-term value indicators, like brand health and familiarity and likelihood to shop weren’t changing, and in fact, were starting to fall away,” Morrison tells Marketing Week.
Value not promotions
Lockdowns and consumers being forced to stay at home benefited DTC businesses and the off-trade during the pandemic.
During this time, Laithwaites sought to win against rivals by deploying increased promotional activity. The proportion of volume sales sold on promotion rose from 60% in its fiscal year 2018/19 to 80% in fiscal years 2019/20 and 2020/21.
While this paid off and drove sales during the pandemic, as most marketers know, relying on discounting is not a sustainable strategy for any brand. It can act to commoditise your brand and also create an environment where rival brands end up in a race to the bottom on pricing.
In the wine category in particular, a focus on the lowest price can end up as something of a lose-lose for both brand and consumer, says Knight. Given the taxation and duty on wine, competing for the lowest prices means that the quality of the product will need to be compromised.
“The more you are depressing your prices, actually you end up just saying, well, you’re just basically buying a bottle of tax,” Knight says.
The direct-to-consumer wine industry remains something of a promotional category, with introductory offers and deals some of the most prominent communications coming from Laithwaites’ rivals.
Promotions remain an important part of the brand’s strategy, says Morrison. But it needs to strike a “balance”.
Time to brand build
As two experienced marketers, both Knight and Morrison were aware that to build long-term value, brand building was needed.
This was particularly true for Laithwaites, which despite being a 55-year-old brand had low levels of awareness and even lower levels of “familiarity”.
Even among existing shoppers, there was a level of “unfamiliarity” around Laithwaites, says Morrison. While the brand might have been recognised for the place from which a parent bought wines, consumers lacked understanding about what it stood for.
Knight and Morrison teamed up with agency partners Adam&EveStudios and Medialab Group to meet this challenge.
The goal of familiarity was particularly important for Laithwaites, Adam&EveStudios planning director Jay Thom says, due to its product offering.
We believe in this, but we also understand we have to show you, we have to show the board, we have to show the finance team. Matt Knight, Laithwaites.
Laithwaites does not stock the wines consumers are used to seeing in the supermarket, preferring to work with smaller, family-run wineries. While this often means the brand can bring consumers great quality wine at a good price, it also means that consumers lack familiarity with the bottles the brand stocks.
Wine is often shared as a group, and people buying a new bottle of wine may feel pressure to ensure it’s a nice bottle to drink with family or friends.
“It’s an emotional thing. Do I believe that this brand would sell me bad wine? No, they wouldn’t, because it’s Laithwaites. That’s the kind of feeling of trust that we needed to build,” says Thom.
Making the case
The Laithwaites marketing team and its agency partners were convinced the brand needed to invest in the long-term to drive sustainable growth. But in a relatively small, family-run business, every investment must be carefully considered.
This was particularly true given the culture of direct selling that had existed within the organisation.
“Even before the era of law of online sales and loyalty data, Laithwaites has always had a lot of data,” says Knight, pointing to the model of sending out catalogues and phone order, in a way that meant sales are easily attributable.
“There is very much a culture in the business of understanding and sort of knowing that, okay, marketing works, we do it and we see a result,” he adds.
There had been efforts to do brand-building work for the wine retailer during the pandemic; however, this had not been measured. Particularly given it’s relatively small size he business wasn’t able to invest in what it couldn’t trust in.
Knight says he and the team recognised that they would need to build the case for brand building.
“We believe in this, but we also understand we have to show you, we have to show the board, we have to show the finance team,” he says.
Medialab chief data officer Will Davis stresses the importance of being able to measure the impact of any brand-building activity in a business with relatively small budgets.
Direct attribution measurement would not capture brand-building activity. Econometrics or market mix modelling can be an effective way for organisations to measure the impact of their brand advertising, but it is an expensive investment and would take time the business did not have at its disposal.
The approach Laithwaites decided to pursue instead was regional testing. This, essentially, involved the business investing in brand advertising in one region and looking at a comparable region to see what impact it had.
It was a test that was appealing due to its “simplicity”, says Davis.
Creating an airtight test
The team was aware it was only going to get one shot at testing how successful its advertising was Although the experiment would be relatively small in scale, it still represented a considerable investment to a business that was seeing falling sales in a post-pandemic lull.
“We were thinking, what are all the things we need to be controlling for here? What are the things that could happen that would skew the test or mean that post-campaign, somebody within Laithwaites or someone at board level could point to that and say, “but that skewed the test”,” says Medialab’s Davis.
The team decided to use ITV regional television to test its brand-building efforts. Initially picking two comparable regions in the North of England, before then repeating the same process in the South. This was to avoid suggestions that it would be an easier test in the North as the brand has fewer customers there.
It also had to consider that some households in these ITV regions were in overlap areas and exclude those who caught TV from both transmitters from the test.
The team also had to make sure it had the correct amount of scale behind the ad in media spend to see an effect, without spending more than it had to.
Another aspect of only getting one shot at the test was that the team had to ensure the creative for the ad was up to scratch, or else its investment in media would be pointless.
The team had a relatively short period of time in which to prove the impact of brand-building to the rest of the business. This kind of work is best done over months or even years, but the team only had a matter of weeks to make the case, which added to the challenge.
The creative, therefore, had to “work super hard”, says Adam&EveStudio’s Thom.
There were three principles the creative had to meet. The first was simplicity. The ad would only have six weeks on air. Consumers would need to get it. Secondly, Laithwaites wanted to ensure it wasn’t in any way exclusionary, with one of its key goals recruiting as many consumers as possible.
Even though we’re small, we couldn’t look low budget either, so we had to make something that really looked great. Jay Thom, Adam&EveStudios.
Thirdly, the team wanted to “brand the crap out of this ad,” says Thom, and make it undeniably Laithwaites in every frame. But it also wanted to do that in a way that the consumer would permit and not find overly jarring.
The team decided to bring to life a version of founder Tony Laithwaites story in the ad, who started the business by travelling around, in search of the best wine. The creative that emerged tells the story of a man who travels across the globe, up mountains and through rainforests, all in search of great wine.
Throughout the ad, the character is shown clutching a branded Laithwaites crate, the team’s way of ensuring the brand is present in almost every shot.
There was a need to be efficient with budget, but particularly on TV, brands can’t afford to look like they’ve scrimped. “Even though we’re small, we couldn’t look low budget, so we had to make something that really looked great,” says Thom.
Managing expectations
As the decision to invest in brand building was made against a backdrop of falling sales at Laithwaites, the marketing team wanted to ensure the rest of the business understood the need for investment, to make sure it didn’t seem as if it was “building a swimming pool” while “the house was on fire”.
While some businesses might think declining sales is a reason not to invest in brand, Morrison suggests this is exactly why Laithwaites needed to do it.
“It’s just as much how can we afford to do this [as it is] can we afford not to? And as soon as you put it in that frame, this becomes a very different type of conversation,” he says.
There is plenty of evidence from recessionary periods suggesting that businesses that invest in brand marketing fare much better than those that don’t. Knight says the team was able to point to this when making the case to the rest of the business.
Ultimately, it looked to drive results; however, it was also extremely important to manage expectations and not oversell what the investment could do, particularly in the short term.
The team made it clear at the outset what good looks like at each stage of the journey.
Slight leap of faith
Given the impressive results that won the team a gold effectiveness award and an award for best use of a small budget at the IPA awards, there was perhaps little need, in the end, to manage expectations.
Davis notes that the team behind the regional test began to see results quicker than they had expected, with sales going up versus the control regions within four weeks.
The first phase of the regional test saw increases in spontaneous and prompted brand awareness, emotional proximity, engagement, and actual orders.
Phase two saw the team carry out the regional test again, this time at greater scale. Similarly, it increased brand awareness, consideration and drove sustained incremental sales in the test regions versus the controls.
In many ways, the regional tests produced results in line with how effectiveness literature and cases studies would predict for an excellent piece of sustained brand building work.
The brand campaign increased both penetration and loyalty, but with bigger increases in the former, as Ehrenberg-Bass would predict.
Incremental orders generated in test regions were of higher average value than the combined average order values in the rest of the country and control regions, supporting Binet and Field’s assertation that emotional advertising drives profitability.
While decades of effectiveness case studies suggested Laithwaites’ regional brand building test would deliver for the business, Knight admits it was still a bit of a “leap of faith”, with a significant amount of investment as well as the team’s reputation at stake.
“You can never be 100% confident,” he says. “But actually, working with these partners gave us as much confidence as we could have, the fact that we had a world class creative agency and a world class media partner to be able to do something that is as good as it could be.”
With advertisers like Coca-Cola or McDonald’s are often held up as golden examples of effectiveness, sometimes brands with small budgets can think that received wisdom around effectiveness does not apply to them, notes Adam&EveStudios’ Thom.
But Laithwaites’ success shows investment in brand building is a powerful tool for growth, even without a huge budget.
Knight’s advice to other smaller brands is to “have confidence in yourself” and make the case to launch something with the scale it needs to succeed. Sometimes forays into brand building can fail because a business goes too small, but as Laithwaites’ example shows, there can be power in backing oneself.
As for Laithwaites’ future plans, it is creating a bigger, national campaign in 2025, having successfully proved the pay-off that brand building can have.
