Sunday, January 09, 2005

THE ROOTS FOR CONTEXTUAL MARKETING

Where do Good Ideas Come From?

Before I go too far with my new blog on contextual marketing, I need to go back and recognize the roots. Good ideas come together when people think things can be done better. Three guys thought promotional marketing could be done better and together we opened a marketing agency in 1979 – founding partners Richard Blumberg, Barron Krody and myself.

Part of that transformation was a result of Richard Blumberg’s fascination with technology. When we opened our doors for business the PC was not yet invented but we were all equipped with hand-built computers for word processing, with memory running on cassette tape recorders. We had an intuitive understanding for how this technology could enable us to do more things faster and with less effort. Later Ross Johnson -- a genius at using database to manage customer profiling joined the agency and further fueled our commitment to marketing technology.

The American Red Cross International Committee

Another genesis for change came from my volunteer work with The American Red Cross. I had the fortune to chair the International Committee, and as a result came into contact with the Japanese business community in Cincinnati. One of my first projects was to take the wives of Japanese businessmen on tours of the area hospitals to acclimate them to our healthcare system. Along the way, I watched with fascination the dogged commitment of these Japanese working far from home to maintain their language and culture while also fitting into the American way of life.

Where we as marketers would shoot point blank, the Japanese were gentler in their approach. They looked across a longer horizon than we did, and they took the time to make continuous, often small changes that improved how they ran factories. The secret of Japan’s success was this cultural look at reality and then a slow, purposeful process of change that in the end produced enormous leaps in factory productivity. The seed was planted in my head: how could we do the same thing to marketing?

By 1999, our promotional marketing agency was one of the 50 largest of its type in America and served some of the most successful companies in the country. The strategists working for our promotional marketing agency began experimenting with new approaches to give our clients a dramatically improved return on their marketing investment.

The First Shift: Contextual Marketing

The direct marketing world accepted 2% response rates as the norm, but we saw it only as a 98% failure, and this was not acceptable. If we could target prospects ready to buy and if we could send messages and offers that were relevant to their situation, then results should improve. We had to stop looking at marketing as a series of isolated initiatives. We began to see our task as a longitudinal process where we identified prospects and helped them move step-by-step toward purchase. We called it “contextual marketing.”

By way of example, let me describe briefly the Pillsbury Recipe Book program. Pillsbury was getting the typical under 2% rate of coupon redemption from its free-standing advertising inserts in Sunday newspapers. We turned that on its head by mailing recipe books to two million households. Each book had six “smart coupons” bound in at the back. Each coupon was individually coded to each household and we tracked the coupons back through the redemption process and databased the results. If a recipient bought a product at ten cents off, then next time the coupon would be for eight cents. If she did not buy at ten cents off, then next time the coupon would be for 15 cents. In essence, we allowed each household to determine the price they were willing to pay for value received.


Additionally, we analyzed the database results to identify what we called “Persona” – for example, families with children or families that were health conscious. We then directed coupons for related products to each Persona. The contextual situation and definition of value for each Persona drove the remaining promotional offers. Results dramatically exceeded the traditional free-standing inserts and unit sales per household increased from 1.2 to 2.6.


The FARM System

A similarly innovative process was developed to create better collaboration between marketing and sales teams. We came to realize that the discontinuity between sales and marketing was a major contributor to wasted marketing resources. We created The FARM System, a process that brought sales reps into the marketing process and marketers into the sales process. It was a recognition that marketing and sales are not distinct, but were actually similar disciplines applied along a continuum called the customer’s buying cycle.

The 9-Box Grid

We developed “The 9-Box Grid” as a means of describing the matrix nature of marketing solutions. In the lower left corner was the simplest and least expensive set of activities and at the upper right was the most comprehensive solution. The other boxes progressively filled in other variations, from simple to comprehensive. This enabled everyone on the marketing team to select the most appropriate solution, given restrictions of various resources.

It Worked!

Little by little, our processes began changing how our clients went to market, with results that were several hundred percent more effective than most marketers were achieving. This worked for some of America’s most effective marketers: Procter & Gamble, Toshiba Electronics, Compaq Computer (now HP), 3M’s spin-off Imation, Wisconsin Paper and Florida Power & Light.


1 Comments:

At 4:23 PM, Anonymous Anonymous said...

Almost every small business owner wants growth - including me. For some reason many of us have difficulty achieving that growth. We know what to do - but putting it into action is more difficult. marketing small businesses is all about solutions that help put our marketing efforts into action

 

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