Addressing Questions Regarding Advertising and Marketing Programs

I have had the opportunity to speak with many employees and stakeholders and read a number of the comments on this blog since our recent cost reductions announcement and I thought it was important to address questions that have been raised regarding our advertising and marketing programs.

The FedEx brand is one of the most widely recognized and respected brands in the world.  Some might say we're lucky, but the strength of our brand is no accident.  The management of the brand and the discovery and retention of our valued customers has been the job of FedEx marketing for over 35 years.  And FedEx has invested in marketing over the years for a very simple reason – marketing drives business.

Our marketing group has not been immune to cost cutting efforts.  At this point, more than 25 percent of the non-contractual marketing budgets have been reduced.  We have reduced our television advertising to its lowest levels in over three years and, as Steve Pacheco noted in his recent blog post, we will not advertise in the upcoming Super Bowl for the first time in several years.

It's important to note that a large part of all marketing expenses are tied to long-term contractual agreements that we have with our various sports properties.  This means that we are committed to pay both the sponsorship fees and for advertising during broadcasts.  However, we have significantly cut back on the non-contractual aspects of these properties like hosting events during games.

It is probably not going to surprise anyone when I say that the state of "traditional" advertising has changed.  We invest in sports for very good reason.  Unlike years back when there were only three networks, we now compete with more than 150 cable and satellite channels.  It’s incredibly difficult to reach customers in this cluttered realm.

One exception is sports where huge audiences are drawn to live events.  NFL games are the #1 rated sports show on television and NASCAR races are #2.  FedEx must have a presence in these venues to reach customers.  In addition, our research shows that people making shipping decisions are sports fans.  We carefully analyze the demographic profile of shippers and this has been a recurring characteristic.

There are also aspects of our marketing programs that we cannot put a number on -- but are the right thing to do.  We heavily leverage our sports portfolio as a way to give back in our local communities.

Over the years, we have given millions of dollars to charities through our sports properties:

• The FedEx #11 Racing team is very involved in children's hospitals throughout the country.
• As part of our NFL sponsorship we donate hundreds of thousands of dollars to children's hospitals every year.
• First Tee is a part of the FedExCup sponsorship and events are hosted at several tournaments per year.
• And of course our longstanding relationship with the St. Jude golf tournament has been responsible for millions of dollars of donations to that important children’s hospital.

For small business efforts, Marketing also leads the charge with our small business customer base managing more than nine million customers.  They are directly responsible for the growth of this customer base more than 8 percent year over year.  These customers, and the revenue they bring, are absolutely critical to the success of FedEx.

So, how do we measure success?  A few examples follow:

• FedEx gets a return on investment of $4 to every $1 we spend on sports marketing, on average.  Some promotions even generate up to $14 for every $1 spent.
• We receive direct revenue from sporting organizations that use FedEx as a result of our sponsorships and indirect revenue from customers who use us for the same reason.
• Just in the last 90 days, our advertising and marketing programs have been directly responsible for the opening of tens of thousands of new FedEx accounts. 
• We have generated tens of millions of dollars in incremental revenue from our small business marketing programs. 
• We have had over 3 billion impressions in the last seven months driven by our advertising and sport sponsorships even while being significantly outspent by our competitors.

Not to belabor the state of the economy but at no time in the history of FedEx, has the job of our marketing department been more critical.  We absolutely must stay competitive, drive new business and retain our existing customers.  Marketing budgets have decreased but our goals remain the same and we will continue, like all FedEx team members, to do more with less.