Payday lending giant Wonga could rue the day it decided to axe the pensioner puppets – synonymous with its advertising since 2011 – and rein in its marketing spend after reports that 2014 was the nightmare year from hell for the company.
According to Sky News, the one-time darling of the payday loan market is set to reveal a £35m loss for last year, with revenues slumping by a third to £215m. As recently as 2013 Wonga made a £40m profit.
It is claimed a quadruple whammy of a slashed marketing spend, an expensive restructure, the introduction of a price cap and the scandal over false legal letters has triggered the firm’s annus horribilis.
One of the first things former RSA chief executive Andy Haste did when he joined as chairman in July last year was to ditch the puppets, devised by ad agency Albion. Although they were criticised by some for appealing to children, they were also credited with driving the business to dizzying heights.
At the time, Haste said: “I’m very aware of the criticism of the advertising approach, and the puppets will be going, I’m going to be reviewing all our advertising and marketing to make sure we don’t leave any impression that we’re trying to influence or target the very young or the vulnerable.”
Another contributing factor has been the introduction of a price cap on loan and repayment charges, which it has been claimed could force as many as 400 payday lenders out of business. Meanwhile Wonga was also ordered to pay nearly £20m in compensation and costs for issuing letters from a fictional law firm to 45,000 customers.
The disastrous performance has forced the firm to halve its UK workforce to 325, overhaul its management team and tighten its lending policy.
When the restructure was announced Haste said: “Wonga can no longer sustain its high cost base which must be significantly reduced to reflect our evolving business and market. Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce.”
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