Clare Beale on Advertising

This week, a story. This is the story of how £1.14 revived Sainsbury's fortunes and saved the reputation of the UK's biggest ad agency.

It's a simple tale, but brilliant. Three years ago, Sainsbury's was slipping. Sales were down 0.2 per cent. Hardly cataclysmic, yes, but in a ferocious, growth market Sainsbury's was looking like the joker of the pack, trailing sadly in the wake of Tesco and Asda. Justin King, the chief executive, wasn't happy.

So King came out fighting, promising the City that he would grow revenues by a reputation-staking, bowel-clenching and frankly ridiculously optimistic £2.5bn within three years.

Panic – £2.5bn is a lot of money. It's the equivalent of creating a brand twice the size of Walkers, or three times the size of Pepsi. For a mature brand like Sainsbury's that's the stuff of fantasy.

Enter Abbott Mead Vickers BBDO, the largest ad agency in the country and Sainsbury's loyal servant for 20 years. In 2005 the beleaguered Sainsbury's did the (almost) unthinkable; it called an advertising review and put AMV on notice.

It looked bleak for AMV (whose chief executive Farah Ramzan-Golant was just three months into her tenure) and for Jamie Oliver, who AMV had anointed the face of Sainsbury's. When agencies are forced to re-pitch for accounts they already have, the odds are firmly against them; incumbents only retain their business five per cent of the time in a re-pitch.

And every decent agency without a supermarket account was circling on the scent of blood.

The real challenge for AMV was to persuade Sainsbury's that the agency could play a key role in delivering on that £2.5bn promise. Hmmm. Sainsbury's is a people-driven service company; the problem with £2.5bn was that it was so enormous, so scary that it became abstract; no one could really imagine what £2.5bn actually meant (other than the preservation of King's balls).

So as it prepared to re-pitch for the Sainsbury's ad account (and to revive its own reputation into the bargain) AMV tried to make the target seem comprehensible, achievable.

An AMV coven gathered in a Kent lighthouse, owned by its creative chief, to work out how to win back Sainsbury's heart. AMV's planner, Craig Mawdsley, got his calculator out. Right: £2.5bn over three years. That's £833,333,333 a year. That's £16,025,641 a week. Sainsbury's has 14 million transactions a week, so that's an extra £1.14 per transaction. Or, to put it another way: salvation.

One pound 14 pence. Every time someone bought something from Sainsbury's, if the store could persuade them to spend an extra £1.14 then the £2.5bn target was well within reach. And £1.14 is not enormous, it's not scary, and it's not incomprehensible or unachievable. And it means you don't have to go out and persuade shoppers to switch store allegiance, every week. Or flog the "good quality at low prices" proposition beyond death. All you have to do is earn the right to a little more money from the people that already shop with you.

Of course, there was plenty of icing on AMV's sponge. Sainsbury's was caught in the middle, in shopping terms: it wasn't the cheapest but nor was it the finest; it was mid-market prices for mid-market food. And that was a commercial wasteland.

But AMV research found that 85 per cent of people would rather shop in a store that offered them fair prices and interesting food ideas than a store that was simply about cheapest prices. Surprisingly, this was a marketing proposition unexplored by rival supermarkets. And so was born the Try Something New strategy that's still going strong today.

It wasn't all intellectual robustness and searing insight, though. Like all good stories, this one had a fair dose of fairy dust. Just as AMV was fighting to keep the Sainsbury's account, Jamie Oliver was becoming a national hero with his battle for better school food. From being a rather tired brand spokesman he suddenly became Britain's best champion of good food.

As you've already guessed, this story had a happy ending. AMV's simple £1.14 approach gave Sainsbury's staff a workable target that affected everything from prices to shelf displays. Jamie's lucrative advertising contract became more lucrative (£1m a year if you believe the rumours). And AMV lives on as a deeper-rooted business partner to a resuscitated Sainsbury's: 1.5 million new customers, 43 per cent hike in profits and revenue up by £1.8bn in two years.

That, ladies and gentlemen, is what good advertising agencies do. And last week the brilliant bit of thinking that lies at the core of the story won the Account Planning Group's Grand Prix award. I'd like to think Craig Mawdsley has had a nice little pay rise, too. The End.

Now from one sort of story to another: a 10-minute story, written, rehearsed and performed in the space of 24 hours. A story about chips.

OK, not quite about chips. More about a man impregnating his sister-in-law whilst his wife watches. But more of that later. In a commercial sense, this is very definitely about chips.

Every year the Old Vic puts on a gala to raise money to support young theatrical talent. Well, I say "gala" but it's more of an endurance test really. A group of writers, producers and actors (this year including Kevin Spacey, Maureen Lipman, Fiona Shaw, Rob Brydon, Ralph Little) have 24 hours to produce a series of 10-minute plays, which are then staged before a glittering audience that has dug deep to pay for the tickets.

Traditionally it's a rather luvvie affair but this year commercialism reared its welcome head to boost the kitty. The plays each take their inspiration from a single prop and Beattie McGuinness Bungay persuaded McCain to pay to be one of those props.

So here's the scene: woman wants a baby; her sister offers up her husband as sperm donor but poor hubby is told the sisters have agreed a natural conception is best. He's just coming round to the idea, stripped down to Y-fronts and about to bonk on the sofa when the woman's flatmate appears with a bag of Oven Chips ("they're only five per cent fat" he helpfully explains).

The audience, pre-warned about the lucrative product placement, greeted the brand message with a hearty round of applause. I doubt many of them were moved to buy a packet of chips on their way home, but the deal (brokered for BMB by milktwosugars) has generated some tasty PR (you're reading some of it) and McCain can now hold its head up as a supporter of the arts – something big businesses do regularly but without wit or style.

And that, ladies and gentlemen, is what good advertising agencies also do.

Claire Beale is the editor of Campaign