A Singular Sensation – personalized direct marketing and customer relations

Kenneth Hein

With unprecedented access to personalized data, marketers from cigarette firms to book publishers are attempting to fulfill the one-to-one promise.

Say you’re a travel or financial services marketer flying to reach that coveted group of potential customers who still have extra vacation dollars to spend, or are looking for sound ways to manage their money But with your tight tap marketing budget, it’s essential to stay focused. Why not of the most desirable audiences you can think of: Palm users. Of the more than 1 million consumers IN that category you’d like the names of, say, 10,000 people who have purchased a Palm handheld in the last three months.

No problem. Direct marketing firm 21st Century Marketing, Farmingdale, New York, can connect you with Palm owners at roughly $140 per thousand buyers in the last two years, plus a small fee for buyers in the last three months. So, for about $1 500, you have your list.

Such is the current state of one-to-one marketing, where voice, fax and wireless applications are being employed to zap messages to just about anyone anywhere. When Don Peppers and Martha Rogers penned One-to-One Future (Doubleday) in 1993, it was the stuff of marketing science fiction. Rather than acquiring more customers via mass marketing per the common practice, the idea was to sell more goods to fewer people. Companies could become more profitable by building one relationship, one customer at a time.

In those days, the tools at a marketer’s disposal included direct mail, fax, phone and interactive television. The World Wide Web was still in its infancy, used mostly by college professors and the military But with today’s technology companies have readily embraced the concept of using data to personalize marketing messages. The practice has even spawned a new industry: the customer relationship management (CRM) space.

CRM has arguably become the umbrella term housing monikers such as one-to-one, loyalty and relationship marketing. The idea behind CRM software is to enhance the relationships companies have with consumers using traditional one-to-one tools. The ultimate goal is to allow these companies to “draw information from every single touchpoint,” said Jim Sterne, president of promotional firm Target Marketing, Santa Barbara, Calif.” [Consumer interaction] at a trade show, e-mail, call centers, the [Web] links you click on–CRM takes it all in and makes a profile you can act on.”

Sterne provided a basic example of how that might work: “A pizza store will only send me a coupon for discounts on pizza with Canadian bacon and pineapple on it because that’s my favorite. My wife gets the coupon for mushrooms. But if they really get it down, they’ll figure out we always order half and half.”

Blue-chip companies are investing millions in software products from CRM leaders like E.piphany, Kana Communications and Siebel. But many of these companies are discovering that combining reams of information into one database presents huge integration problems.” The main hurdle during the next two to three years will be CRM failures,” said Peppers, partner at Peppers and Rogers research group, Stamford, Conn. “A lot of companies bought the idea from software vendors. They figure that if they install the software, the problem is solved.”

Additionally companies have yet to incorporate CRM into a successful business plan: “CRM is a strategic business process decision and, secondly, a product technology,” he said. “If you customize offers for frequent Web site visitors, whose decision is it at the company to make the offer? What’s the result of that offer? Does that increase your customer’s lifetime value? Is it achieving your company’s goals?”

Installing the software can a]so prove to be costly and time consuming. A recent survey by Stamford-based IMT Strategies revealed that the top 2,000 companies worldwide plan to spend an average of more than $20 million implementing CRM solutions during the next two to three years.

That’s not to say there aren’t “less expensive, more powerful and more flexible” technologies available, said Rick Barlow, chairman/CEO of Frequency Marketing, Cincinnati.

Yet this proliferation presents another obstacle in one-to-one marketing–information overload. E-mail marketing, for example, has suffered “because there’s a whole lot more messages,” Barlow said. It’s kind of like mass marketing all over again.”

The same may be true of the emerging wireless marketing arena. “This whole scenario of pager and phones beeping with a special offer when you pass a Starbucks, that’s still interruptive marketing said Larry Bums, CEO of online sampling firm StartSampling.com, Carol Stream, Ill. “If I can check where the Starbucks is on my wireless device and then find out today I can get 50 cents off a cup of coffee, that’s fundamentally different.”

But those kinds of offers have their potential downside, too. If a consumer does get an offer for pizza with half Canadian bacon and half mushrooms, “it may very well scare them stiff said Jay Schwedelson, corporate vice president at Worldata/WebConnect, an interactive media services company based in Boca Raton, Fla. “It’s to the point where consumers are getting nervous about how personalized an offer is. They feel it’s violating. Just because you can, doesn’t mean you should.”

Currently a number of companies place offers with wireless devices, including the newly launched PlanetHopper, Incs which issues “Digital Deals,” coupons and promotions to consumers who’ve chosen to receive them. Competitors include GeePS.com, IQ.com, SkyGo and WindWire.

The technology, for example, allows Sony to put its eMarker device onto a consumer’s key chain. Whenever they hear a song they like, they can hold it up to a radio and record a snippet. When they get home they can plug it into their PC to find out the song’s title, the band, album and where to find it online.

Below, Brandweek presents case studies of two companies using one-to-one marketing in different ways. The first is children’s book publisher Golden Books, which used online sampling to develop its new series of print/Web research guides. The second, R.J. Reynolds’ Doral, offers an old-school approach to building appreciation and brand loyalty Like many cigarette marketers, RJR is relying heavily on one-to-one marketing–partly because it has been banned from major consumer outlets, and partly because the strategy has been so successful.

I. A Golden Opportunity?

For more than 60 years, children have been learning to read with the help of Golden Books, those hard-cover kiddie classics in the gold-foil spine: Little LuLu, The Poky Little Puppy and Scruffy the Tugboat, to name a few But today’s kids no sooner learn to read than they go online. Recognizing this, Golden Books looked to extend its franchise to the Internet using one of the medium’s newest marketing tools.

Last fall, the company introduced a hybrid print book and Web site concept called Finditquick.com. Bookstores carried a series of information/Web resource guides based on general topics: dinosaurs, insects, robots, music, space and extreme sports. Space, for example, contains factual tidbits about planets and stars organized under questions such as “How can I track extraterrestrial life?”

The guides also direct readers to Web sites that contain articles on the main topic. One blurb announces, “See the comet’s collision with Jupiter,” and offers a link to NASA. Meanwhile, at find itquick.com, users must correctly answer a qualifying question–such as “What planet appears on page 17 of Space?–in order to fully utilize the site’s educational resources.

For Golden Books, the new venture was a means to add value to a core business. “We’re not trying to reinvent ourselves; we’re creating content and trying to deliver it in the right vehicle,” said Mark Aherns, senior director of Internet marketing for parent Golden Books Family Entertainment, New York.

The Internet proved to be the right vehicle not only for delivering content, but also for product testing. Seeking an alternative to traditional sampling and focus groups, the company tapped StartSampling.com, whose database of more than 1 million consumers included the publisher’s core readership of wired families with young children.

About 1.2 million consumers have registered their demographic data with StartSampling.com, and in doing so, they have agreed to provide feedback on free samples. Golden Books made 20,000 of its Finditquick.com books available to households with children ages 6 to 18. More than 13,000 came back to StartSampling with valuable information about the product.

Initially the company simply wanted to build consumer awareness for its new spiral-bound books, which have a distinctly different look and feel from the trademark product.

Marketers learned, for example, that the series skewed older than anticipated. “We targeted books and the Web site at students in grades 4-7. It was equally liked in grades up until high school said Aherns. “To us, that’s expanding our potential markets not only in age but in channel.”

More surprising, he said, was the test subjects’ response to where they would want to purchase such a product. “If you think about our business, traditionally books are sold in upscale booksellers. Mass merchandisers, grocery and drugstore channels are secondary,” said Aherns. “The key insight was that where we had sort of an incoming belief that the upscale bookstores would be the likely candidate, other channels were just as popular and even more popular with Startsampling people.”

The company said its salesforce would use that feedback to get the books into new distribution channels.

Golden Books also discovered that some of the “hipper” titles it had created didn’t translate well with its target audience. “Dinosaurs, insects and space did better than extreme sports and music,” said Aherns. “We reshifted our thinking about future editorial titles, We decided to stay in the sweet spot of more traditional subjects.”

Though the test was not intended to stimulate direct sales, about a third of the 14,000 participants who visited Finditquick.com clicked through to an online bookseller to inquire about buying the books. And that comes on the heels of relatively small investment: Startsampling.com’s base rate runs $600-800 per delivery of 1,000 products–considered “an unbelievably good price compared to mall intercepts and phone research,” Aherns said.

Overall statistics indicate that Internet marketing continues to grow quickly By 2005, U.s. companies will spend $63 billion annually on online advertising, promotions and e-mail marketing, according to Forrester Research, Cambridge, Mass. Online marketing per company will almost double from $550,000 to $1 million in 2003.

Online sampling, meanwhile, is a relatively new phenomenon. In tapping Startsampling.com, Golden Books joins a list of companies that includes Procter & Gamble, Quaker Oats and Johnson & Johnson. A handful of other Internet companies, including FreeShop.com and FreeSamples.com, also distribute and test products via the Web.

As with any burgeoning medium, observers have mixed reviews. “It’s an ideal use of the Web. It makes it easier to do what they used to do offline,” said Frequency Marketing’s Rick Barlow.

Others see an inherent flaw in the model: the demographics of wired consumers are far different from those in the general population. “It’s a different type of customer,” said Schwedelson of Worldata/WebConnect. “The biggest mistake they can make is not employing it offline because it’s cheaper to do it online. Companies need to be in both environments because they are different people.”

Aherns knew that fact going in to the test. “The way in which the data is grabbed does not allow us to project a national number. It’s not statistically representative of the country,” he acknowledged. Still, he added: “Speed is a benefit. We can do a questionnaire today and begin receiving feedback tomorrow.”

In addition, once Golden Books has established a relationship with consumers, the company can reach out to them again and again. “We may not know your name but we do know you like the book and it was an insect book,” said Aherns. “Maybe you said you were a teacher. We can go back in and ask teachers more follow-up questions that would help Golden Books reach the teacher to further refine our marketing efforts.”

Admittedly like other Web marketing tools, online sampling is still in its infancy Said SmartSamplings’ Burns, “Regardless of the 50 million people connected, we’re still scratching the surface about how we can use these tools and how consumers will react.”

II. Doral Goes Direct

For cigarette manufacturers, competing on price is tough these days, particularly when fourth tier-cigarette companies can undercut the Big Four tobacco brands by as much as $10 a carton. Small manufacturers both in the U.S. and abroad are pouring hundreds of brands into tobacco outlets and c-stores, burning away the market share of branded savings smokes–like Philip Morris’ Basic, and Brown and Williamson’s GPC–which declined 1.4% overall between the fourth and third quarters.

But R.J. Reynolds Tobacco’s Doral, after losing ground for a few quarters, gained half a share point to grab 6.2% of the market. Discounts played a role, as did packing more tobacco into sticks, which made for a longer-lasting cigarette. So did cash incentives, as RJR pays retailers and wholesalers for prime shelf space and for attaining share targets.

Yet the most potent part of the marketing mix could be the birthday cards RJR sends to millions of Doral smokers. Or the quarterly Doral & Co. newsletters consumers receive with stories about other Doral smokers, recipes and coupons. Toss in the annual Doral Celebrations that RJR stages with food and entertainment, and consumers are getting face-to-face appreciation for their brand loyalty

Last year the country’s No. 2 cigarette brand invited smokers to a VIP tent that followed the 10-city George Strait music tour. Previous Doral celebrations drew consumers to a riverboat cruise in Pittsburgh and a cookout with employees at Doral’s manufacturing plant in Tobaccoville USA, actually Winston-Salem, N.C.

Thanks to the Doral & Co. relationship marketing program, appreciation is so embedded into the cigarette’s brand equity that a small group of loyal smokers reciprocate by sending Christmas cards to the company Without resorting to point or UPC hoarding, the eight-year-old marketing initiative has instilled a sense of community among consumers in a subcategory where competing brands lean heavily on price to move product.

“I think it works because it is simple,” said Doug Souse, vp-marketing. “We try to apply a lot of common sense into what we do and that’s why [Doral & Co.] is based on this basic appreciation principle–having an honorable, down-to-earth dialogue with our consumers and rewarding them for their business.”

Doral & Co. was born a few months after Marlboro Friday that fateful day in April 1993 when Philip Morris upended competitors’ expectations by cutting the price of its most profitable brand by 20%. Rivals followed the move, and the gap between full price and savings brands narrowed. Doral’s brand team had to find a way to deliver added value to consumers. Building a loyalty program that offered points redeemable for merchandise and other goodies was considered but deemed tough to manage. Besides, Philip Morris at the time was passing out enough Marlboro gear through its loyalty program to be the third largest mail order house in the country Mimicking such an effort would create a liability that RJR was not willing to take on.

“Soliciting or creating two-way dialogue was part of the original vision for the program because we felt people would feel more a part of it if they were interacting with it, apart from just receiving stuff in the mail,” said Souse.

RJR already had a data warehouse in place that could segregate Doral smokers from consumers of competing brands, so the brand team was able to ramp up Doral & Co quickly The early newsletters featured snippets about Doral employees and solicited photos and letters from consumers about their hobbies and lifestyles. Subsequent issues contained shorts, for example, about a smoker’s pet iguana or a recreational pilot who enjoys a Doral after every flight. Then there were the contests like the “I Want to Celebrate with Doral,” which asked for photos and a brief essay about why entrants wanted Doral to come celebrate with them. The newsletter continues to spotlight employees to show consumers that Doral is made by people who are just like them.

Reaching consumers on a one-to-one basis via direct marketing has been one of cigarette manufacturer’s best tools because they have “fewer and fewer ways they are permitted to reach the consumer,” said Barlow. “They had to give up on a lot of mass marketing because they were forced to, and lo and behold they created effective databases and very valuable relationships.”

Souse said the Doral database has grown into a powerful marketing tool. “In the beginning we weren’t as knowledgeable about our customers’ likes and dislikes as we are now, so it was a little more speculative,” he said. “But from day one we were soliciting good feedback from customers about their hometowns, their lifestyle and things that would help us feel more relevant to them.”

Among the gems RJR gleaned was that a high percentage of Doral smokers were veterans or had family and friends in the military. So, last spring, about 200 vets and family members participated in the “Red, White and Blue Salute” in Pilot Mountain, N.C. Besides food and entertainment, the event featured an on-site museum put together by local vets which included an autographed photo of General George Patton, division pins and mess kits.

The creation of such an event for brand loyalists also plays to smokers’ emotions. “They all know the feeling when they step outside to smoke. Even outside they give you dirty looks,” said Barlow.” [The pleasure of] rubbing elbows [with fellow smokers] is a feeling tobacco manufacturers have tapped into by creating smoker events.”

Doral also helped attendees apply to receive missing medals and get on the national World War II Memorial Registry of Remembrance. The company donated 10 cents toward local veterans’ associations or military memorials for every pack seal collected during the gathering. The salute was restaged in Metairie, La., and the brand team is currently evaluating whether to expand the event.

The database also showed that half of Doral smokers are collectors. Armed with that data, the brand team had confidence to roll out it own collectible: limited-edition cigarette cards, with the first set hitting retail this month featuring landmarks of the 50 states. Future series will showcase trains, antique cars and lighthouses.

“The program is built on interaction where on an ongoing basis we will ask folks what’s going on in your life, what is important to you, what are some of your key lifestyle choices,” said Souse. “That information helps us to really understand our customers. We’re not speculating because they’ve already told us what motivates them and we’re obviously playing that back.”

Souse won’t say how many direct mail pieces RJR sends out, or how many records are in the data warehouse, which is managed internally and built with assistance from MARC & Target-base, Dallas. But Doral smokers will see on average four to six pieces of literature in their mailbox per year. That’s a lot of mail, considering more than 3 million smokers bought more than 130 million cartons of Doral in 1999.

COPYRIGHT 2001 BPI Communications, Inc.

COPYRIGHT 2001 Gale Group

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