Wednesday, November 12, 2008
Federal Express Corporation (FedEx), founded in the 1970s, built its success on an innovative business model, offering the business world the first overnight shipping service. But savvy marketing also played a key role in the rise of the company. Just one year after becoming operational, FedEx released its first advertising campaign. Increased sales resulted, as did more advertising. In 1978 FedEx introduced the award-winning ‘‘Absolutely, Positively Overnight’’ campaign, which featured a fasttalking spokesman. It ran until 1983. Other memorable FedEx campaigns that followed were ‘‘It’s Not Just a Package, It’s Your Business,’’ which ran in 1987 and 1988; ‘‘Our Most Important Package is Yours,’’ which ran from 1991 to 1994; and ‘‘Absolutely, Positively Anything,’’ a 1995 campaign. Reliability and speed were at the heart of the message in these campaigns. Then, in 1996, FedEx released a campaign called ‘‘The Way the World Works’’ that emphasized the company’s position as a leader in global shipping.
‘‘The Way the World Works’’ was designed to communicate the idea that FedEx could help customers, particularly small businesses, cultivate contacts all over the globe. The company’s longtime advertising agency, BBDO Worldwide of New York, designed the advertisements, which showed customers in various countries using FedEx delivery and warehousing-inventory services to market their goods.
FedEx considered ‘‘The Way the World Works’’ to be one of its most successful marketing efforts. According to the company, it increased awareness levels of FedEx to new highs. Nevertheless, by autumn 1998 the company was ready for a change, and it returned to a more humorous approach with the ‘‘Be Absolutely Sure’’ campaign that followed.
When it began operations with 14 small aircraft in 1973, Federal Express was the first company of its kind to offer overnight shipping. At the time it delivered to 25 cities from New York to Florida. The next year the company launched its first advertising campaign with a budget of $150,000 and the tagline ‘‘Federal Express—a whole new airline for packages only.’’ After the first commercial was broadcast, the company’s shipping volume shot up from 3,000 to 10,000 packages a night. By the end of 1997 the company had a fleet of more than 600 aircraft and some 40,000 other vehicles, and it was handling 3 million packages worldwide every day.
Because it was the first company to offer express delivery services, Federal Express created its own market. Demand grew quickly, and Federal Express became the first company in the United States to achieve revenues of $1 billion within 10 years. Revenues mushroomed to nearly $35 billion by 1996, and, according to the company’s 1997 annual report, they were expected to reach more than $250 billion worldwide before the year 2020. Over the years Federal Express became known for its humorous advertising campaigns, including pitchmen who spoke at a frenetic speed and an employer who pretended to be his secretary when he telephoned to check on a package. With ‘‘The Way the World Works’’ the company took a more serious approach, stressing brand image and the ability to help businesses compete in the global economy. The latest campaign also meshed with the general FedEx tagline, ‘‘The World On Time,’’ which had been introduced along with the company’s updated logo in 1994. It was not only the tone but also the message of the company’s advertising that changed. In the early 1990s the message was that consumers could rely on Federal Express to deliver packages quickly. The ads emphasized the company’s technological features, such as software for tracking shipments. The principal message of ‘‘The Way the World Works,’’ however, was that FedEx could deliver worldwide.
According to Steve Pacheco, manager of advertising for FedEx, ‘‘The Way the World Works’’ campaign was targeted primarily at three groups of consumers: professional managers who were 25 to 54 years old and who earned at least $35,000 annually, small shippers and owners of small businesses who were 25 to 54 years old and who earned at least $50,000, and people who made decisions and influenced opinions in corporations, a largely male group 35 to 64 years old and with household incomes of at least $60,000. Although in the past, small businesses had not had much opportunity to buy and sell merchandise in other countries, this was becoming important to compete globally. ‘‘Federal Express is an enabler that allows them to do business all over the world,’’ Pacheco explained.
FedEx could not only ship goods quickly, but it could also track the precise location of a package, and it offered a money-back guarantee if the item did not arrive on time. A business could predict when merchandise would arrive or exactly when it needed to be shipped. This allowed businesses to lower their operating costs by maintaining smaller inventories. Because a large percentage of inventory was in transit at any given time, FedEx planes and trucks, in effect, became mobile warehouses for the company’s customers. The concept of shipping and receiving merchandise ‘‘just in time’’ became increasingly popular. The taglines ‘‘The World On Time’’ and ‘‘The Way the World Works’’ thus helped FedEx convey the message that it understood modern business practices and could be an important element in a company’s operating strategy.
Pacheco said that FedEx hoped that the ads would surprise people who were not familiar with everything the company had to offer. At the same time the campaign was intended to broaden the company’s appeal to its established customers and to encourage them to make better use of its services.
FedEx was the largest express transportation company in the world. Thanks to its vast network of aircraft and trucks, it could deliver to more than 200 countries within 48 hours. It had the only routes in and out of China and exclusive rights to many other routes in Asia, where 7 of the 10 fastest-growing economies were located. By 1997, although FedEx still dominated express delivery with a market share of about 43 percent, it had lost ground to competitors. According to the Colography Group, United Parcel Service (UPS) had 27 percent of the market, Airborne Express 15 percent, and the U.S. Postal Service 5 percent, with all other services combined claiming 8 percent. Worldwide, the total revenues from express shipments for FedEx were 50 percent more than those of its nearest competitor.
In terms of all shipping, however, UPS had grown to be twice the size of FedEx. In 1995 UPS shipped 3 billion packages every day and had revenues of $21 billion. By contrast, in 1997 FedEx shipped about 3 million items daily, and it reported revenues of $10.2 billion in 1996 and $11.5 billion in 1997. To better compete with UPS, FedEx merged with Caliber System and thereby acquired the RPS trucking company, which was the second-largest ground carrier after UPS. FedEx also benefited from a 15-day strike of UPS workers in August 1997. UPS saw its share of the package delivery market drop from about 80 percent before the strike to an estimated 70 percent after. FedEx employees put in overtime to cope with the flood of extra packages during the strike, and the company reported that its earnings more than doubled for the quarter because of the additional volume. FedEx estimated that it retained 15 percent of the extra volume after the UPS strike had ended. During the strike FedEx ran a print ad thanking its employees for helping the company handle the additional workload, and it rewarded its workforce with a $20 million bonus. Among other things, the ad told the public that customer service was important to FedEx personnel. The U.S. Postal Service competed with both FedEx and UPS by advertising its Priority Mail service, priced beginning at $3, which was notably cheaper than its competitors’ charges of $6 to $12 for two-day delivery. FedEx sued the Postal Service for false advertising, because Priority Mail did not guarantee two-day delivery. Instead, it offered ‘‘two- or three-day’’ delivery and in 1996 delivered only 81 percent of its packages within two days. An advertising industry watchdog council said that the ads were acceptable, however, for the public understood the difference between what the Postal Service and its competitors were offering. The ads and the lawsuit continued, and the Postal Service maintained that, by promoting Priority Mail at an inexpensive price, it had pressured FedEx to lower its charges by a third.
‘‘TheWay theWorld Works’’ campaign was created at the request of Frederick Smith, founder and CEO of Federal Express, who had asked the senior management of the company to organize a campaign that would focus on the global economy. BBDO produced the commercials. BBDO, known for the use of emotion and human interest in its advertising, tapped into the idea that FedEx empowered individuals to realize their dreams. The dream might involve designing avant-garde furniture and selling it to someone on the other side of the world or shipping a dress from Italy to Japan so that a wedding would come off perfectly. FedEx wanted people who saw the commercials to perceive them as heartfelt messages. What was implied was that the company cared as much about every package as it cared about the wedding dress. FedEx’s Pacheco said that the campaign’s five key objectives were to ‘‘magnify the scope of Federal Express, show the global and international capabilities, add value to the FedEx brand, communicate all of our high-tech innovations, and position Federal Express as a leader.’’ Previous ads had touched on some of these points, but ‘‘The Way the World Works’’ took a new direction by calling attention to global delivery services. The word ‘‘world’’ in the tagline was significant, because it emphasized FedEx’s ability to deliver worldwide. In addition, it referred to the fact that the people who worked for FedEx were of all races and lived in many countries. ‘‘Early on, we identified the need to be as culturally diverse as we could. You’ll see people from all around the world in the campaign,’’ said Pacheco. Just as important was the word ‘‘works,’’ which conveyed the idea that FedEx helped its customers get their work done by helping them solve their delivery problems. The campaign featured six TV spots—five 30-second commercials and one 60-second commercial—that were introduced in late 1996. The spots ran mainly on highly rated television programs, including prime-time shows and sports and news broadcasts. In one spot a dressmaker in Italy shipped bridal gowns to customers in Japan. Another scenario showed pop-up books published in Wales being sent to classrooms in England and Thailand. The warm, distinctive voice of actress Linda Hunt asked, ‘‘How did such ordinary people come by such extraordinary powers? Believe it or not, all it took was the wave of a wand.’’ In a humorous spot called ‘‘Doug,’’ an employee had entrusted an important package to a delivery company other than FedEx. When the package failed to arrive on time, Doug’s manager locked him in a closet and berated him while the rest of the staff looked on. Each commercial ended with a picture of a revolving globe and the tagline ‘‘The Way the World Works.’’
The spots were translated into various languages for the 20 markets in which BBDO handled FedEx advertising. Although they were broadcast in various countries, the commercials were created primarily for the United States. In fact, the campaign was the first that FedEx had not customized to individual countries.
It was generally felt that FedEx’s ‘‘The Way the World Works’’ campaign achieved its goals. For one thing the commercials improved the company’s image with the public. ‘‘The campaign spiked our awareness level up almost to all-time high levels,’’ Pacheco said. In a survey reported in USA Today, 28 percent of consumers said that the spots were very effective, while 15 percent said that they ‘‘liked the ads a lot.’’ A mere 4 percent said that they disliked the campaign. The spots were most popular with people 30 to 49 years old. Pacheco claimed that the commercials were actually more popular than the USA Today survey indicated. He noted that FedEx and BBDO had conducted their own awareness studies and had found that the campaign was one of the most effective the company had ever undertaken. For example, multiple telephone surveys conducted to judge the public’s perception of the FedEx brand over a period of time showed a strong, positive response to the commercials. Perhaps one of the most important indicators of the campaign’s success was the number of people who contacted FedEx directly after seeing the spots on television. One woman in New York City liked the wedding dress in the commercial so much that FedEx put her in touch with the dressmaker and gave her permission to use a copy of the gown for her own wedding. Another person used classical music from the campaign as a tribute at the funeral of a loved one. A third person obtained some 20 red chairs like those used in one of the spots. Pacheco noted, ‘‘I think FedEx, because of its closeness with its customers, probably gets more customer reaction like this.’’
‘‘The Way the World Works’’ came to a close in 1998, when FedEx elected to shift gears, as the company now faced competition from a number of upstart overnight shippers, such as DHL. The company returned to a more humorous approach with the ‘‘Be Absolutely Sure’’ campaign, which offered comical examples of what could occur when someone relied on a cut-rate shipper rather than FedEx.
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