Was I right about Tesco’s folly on Saturday? Or was it just more Bird Blether?

You probably take a rest from the tyranny of the internet on Saturdays, but as a helpless motor-mouth I often find something to talk to thin air about.


Such was the case two days ago. There was a big brouhaha in the investment world when for the first time in 44 years Tesco issued a profit warning and their shares dropped 16%.

After my last divorce I have no money to invest, but I do follow what goes on. That’s because I have clients in this area, because I’m interested in almost everything under the sun and for a personal reason I mentioned at the start of my Saturday piece.

Anyhow in that piece I suggested Tesco’s sales drop was due to three crass errors, all to do with marketing.  You can see what they are if you look at what I wrote.

Eight days before the profit warning Tesco’s Chief Operating Officer (with others) sold a load of shares and made a tidy profit. Tesco say this was not illegal as he didn’t know what was about to be announced. All I can say is pull the other one: it’s got bells on it.

If someone at the top of a large sophisticated organisation doesn’t have the figures and projections at his fingertips, either he is incompetent or they are – or both. It is fifty years since I first worked on a retail account – the long gone Hope Brothers – and even as a humble copy group head I knew the weekly figures on my ads. 

If what that man did was not illegal, then it should be.  This is precisely the sort of thing that makes people build tent slums outside cathedrals. It is high time the people who run things in this country stopped treating us all like idiots. And more than high time the Financial Services Authority focused on the big things rather than poodling about with small details in direct mail copy so as to make it incomprehensible.

One of the best books about investment – and human nature – is Extraordinary Popular Delusions and the Madness of Crowds (1841) by Scottish journalist Charles MacKay. If you read that and Reminiscences of a Stock Operator (1923) the fictionalised biography of investment wizard Jesse Livermore you will know more about the subject than most investors.

You will also conclude that much investment is driven by hysteria, that the 16% drop is crazy and that Tesco is a good stock to buy. Tesco chairman Sir Richard Broadbent has just spent £100,000 doing so.

But be careful. A recent Which? survey gave Tesco a customer satisfaction rating of 46% compared to Waitrose with 83%, Aldi with 72% and Lidl with 68% followed by M&S, Morrisons, Asda and the Co-op, which was 46%. 

When I was drafting the first edition of Commonsense Direct and Digital Marketing back in 1982 I was very impressed by a an article by Gordon Grossman, former head of marketing at our client The Reader’s Digest. It was headed “If your customer won’t make you rich, who will?”

Your customer can also make you poor.

About the Author

In 2003, the Chartered Institute of Marketing named Drayton one of 50 living individuals who have shaped today’s marketing.

He has worked in 55 countries with many of the world’s greatest brands. These include American Express, Audi, Bentley, British Airways, Cisco, Columbia Business School, Deutsche Post, Ford, IBM, McKinsey, Mercedes, Microsoft, Nestle, Philips, Procter & Gamble, Toyota, Unilever, Visa and Volkswagen.

Drayton has helped sell everything from Airbus planes to Peppa Pig. His book, Commonsense Direct and Digital Marketing, out in 17 languages, has been the UK’s best seller on the subject every year since 1982. He has also run his own businesses in the U.K., Portugal and Malaysia.

He was a main board member of the Ogilvy Group, a founding member of the Superbrands Organisation, one of the first eight Honorary Fellows of the Institute of Direct Marketing and one of the first three people named to the Hall of Fame of the Direct Marketing Association of India. He has also been given Lifetime Achievement Awards by the Caples Organisation in New York and Early To Rise in Florida.

4 Comments

  1. Dave_C

    The autobiography of swindler Yellow Kid Weil is another excellent text on human nature.
    http://openlibrary.org/books/OL6027363M/Yellow_Kid_Weil

  2. Drayton

    Wow. thanks! Didn't know that one. 

  3. Mike Oldroyd

    Drayton,

    I love the book Extraordinary Popular Delusions and the
    Madness of Crowds. 

    I have a copy here on my desk at work. I make some of the
    younger folk read it as I know it’ll be a better education than any of
    them got at school.

    I particularly love this passage regarding the South Sea
    Bubble. It documents a whole series of copycat schemes created by dubious
    organisations and personalities in order to engineer huge profits in as little time
    as possible at the expense, and ultimate cost, of the witless general public.

    ….But the most absurd and preposterous of all, and which shewed,
    more completely the utter madness of the people, was one scheme started by an
    unknown adventurer, entitled, 

    “A company for carrying on an undertaking of
    great advantage, but nobody to know what it is.”

    Were not the fact stated by scores of credible witnesses, it
    would be impossible to believe that any person could have been duped by such a
    project.

    The passage goes on to establish that when this charlatan opened
    up shop to sell shares in his dubious venture he was immediately beset by
    crowds at his door. In less than five hours he’d sold 1000 shares, such was the
    mania surrounding his promise of profits and ingots of gold.

    He was philosopher
    enough to be contented with his venture, and set off the same evening for the
    continent. 

    He was never heard of again.

    Reminds me somewhat of the .COM bubble………and the
    pending .COM bubble 2.0

  4. Drayton

    I think my favourite was a project for the importing of jackasses from South America. Nowadays they could all have become marketing directors at banks

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