|Photo Illustration: Joe Zeff Design|
|With an ambitious new plan for one-to-one marketing, Procter & Gamble will be dispensing with some conventional marketing wisdom.|
It seems curious that a company such as Procter & Gamble, which grew into the world's largest package-goods marketer by shocking and awing American moms with bulky payloads of heavily tested ads, is even worrying about this stuff. Sure, company bigs have been good at talking the new-marketing-era talk at conferences, but even after declaring the old ad model "broken" they spend more than the GDP of most developing nations each year on domestic paid media. And when you consider that sales have boomed as ad spending has ballooned, you have to ask yourself: Why even bother?
To Elva Lewis, the executive charged with ushering P&G into a post-mass world, it's simple: She doesn't want to get wet.
"The boat's setting sail, and we have one foot on the dock and one on the boat," she said. "If you listen to A.G. Lafley or Jim Stengel, they're all talking about the declining return on investment in TV. This trend tells us we should go to one-to-one marketing. We just haven't put our money where our mouth is."
One-to-one has pretty much been the holy grail of contemporary marketing, a way of talking to consumers that disposes of all the waste associated with mass advertising -- clutter, targeting difficulties, the rising cost of media -- and it's something any sentient marketer is trying to get to. Earlier this month, Ms. Lewis, a 21-year veteran of P&G, sat down for a rare, extensive discussion about how the biggest advertiser in the U.S. is trying to make the shift. Sitting in the suburban Dallas offices of Targetbase, the Omnicom-owned agency she enlisted four years ago to rethink P&G's approach to customer segmentation, Ms. Lewis is blunt. She has a rapid-fire way of speaking that belies her Texas roots as she summarizes a job that's put her in a "selling mode," as she put it, perhaps a bit euphemistically.
While Messrs. Lafley and Stengel have been out there making policy pronouncements, Ms. Lewis has played a more behind-the-scenes role, a sort of direct-marketing whip with the cat-herding task of getting the real power barons at P&G, its brand managers, to cooperate on an idea in a way these legendarily siloed brands haven't before.
That idea is targeted scale, a nearly oxymoronic term for the way P&G, so expert at using its enormous clout to buy vast amounts of TV time efficiently, is trying to leverage its heft in relationship marketing, whether through direct mail, online communities, or even content plays, such as its Home Made Simple website and newsletter, which promote the company's home-cleaning products.
Information in exchange for friendship
These kinds of marketing programs get consumers to surrender at least some of the personal information necessary to maintain relationships and are key to helping P&G evolve to a more targeted approach. Smacks of Big Brother, you say? Maybe, but Orwellian fears aside, it's easy to get seduced by the notion of a company like P&G evolving from a "consummate push marketer," as Ms. Lewis puts it, into a company that better serves its customers through information, communications and resources that are relevant. Relationships, after all, are built not on hard sells but on give and take.
Jordis Rosenquest, senior VP-strategy at Targetbase, describes this as a theory of the "noble brand." "We want conversations that are meaningful and not just a currency exchange," she said.
The goal here, as Ms. Lewis explains it, is cut and dried. "We want solid relationships with 40 million to 60 million households. Right now, we have a decent relationship with 10 million."
You would be correct, at this point, to note the sweep of this endeavor. There are roughly 107 million households in the U.S., and P&G is attempting to forge relationships with more than half of them. Consider also that most industries that lean heavily on relationship marketing -- such as financial services and automakers -- take the field with large amounts of consumer information on products people typically give some thought to buying. As a result, you'll likely be more interested in hearing from BMW or a bank that'll save you points on your mortgage than from the company that makes your soap or deodorant.
Unwieldy number of targets
To buck this, P&G developed a different way of segmenting its customers. Historically, that job has been the dominion of the company's individual brands. As a result, marketers who work on Tide are thinking about a very different consumer profile than those who work on Pantene. With 86 brands in North America and another 70 or so sub-brands or variants, like Tide Coldwater, that approach yields 150 different targets, an impractical number for a direct-marketing approach to deal with.
By crunching syndicated consumer data and doing tons of qualitative research, Targetbase has helped reduce that dramatically to nine or 10 targets called cohorts, groups such as new moms or baby boomers. They're not mutually exclusive, and consumers move in and out of them. But the idea is to create customer segments that take a broad enough account of habits and preferences to provide a base of insights for several products. A recent mailer to new moms flogged both Tide and Pampers products. Cohort segmentation, Ms. Lewis said, covers 90% of the top prospects for P&G's biggest 50 brands.
While this sounds simple, it's based on the assumption that a P&G culture can morph into one where interbrand cooperation is possible, maybe even making the corporate brand more consumer-facing. "That's the million-dollar question," Ms. Lewis said. "The debate is that, since we're built on brand management, everyone's afraid they'll get lost or the wrong thing will be said."
Robert Passikoff, founder-president of the consultancy Brand Keys, said consumers who are vigilant gatekeepers of the information they receive, along with barely differentiated products, make this a tough row to hoe. However, he said, marketers can "absolutely form these relationships as long as, on a continual basis, you understand what your consumers want."
Countering conventional wisdom
If Ms. Lewis' mission is successful -- and that's a big if -- she will have disposed of at least two pieces of conventional marketing wisdom. The first is the notion that consumer-goods companies, because of their low-involvement products lines, can't fashion relationships with consumers. The second follows from that. It assumes these companies can't do one-to-one because direct programs just don't scale, and scale is everything at a company the size of P&G. The margins on a tube of toothpaste just aren't big enough to support a piece of mail aimed at every target. Sure, the internet offers a cheaper alternative, but what sad soul is eager to make a Metamucil website a destination?
Were these truisms to hold up ad infinitum, then P&G -- not to mention Unilever, Johnson & Johnson and scores of other large companies -- would be forever enslaved to a mass-marketing model, even as mass audiences are dispersing.
"Our long-in-the-tooth marketers think that TV is a cheap way to get mass reach and that targeted marketing is an expensive way to get smaller reach," Ms. Lewis said. "We haven't been entirely successful at breaking through their thinking. We can use targeted scale and let the fixed costs of direct marketing -- list buys, acquisition, response modeling, mail and fulfillment -- be spread across 10 brands. It doesn't work for P&G otherwise."
Pushing for an A
Resistance to this way of thinking has kept P&G's spending -- when you count all expenditures, not just paid media -- at something like 60% advertising and 40% everything else. She said the watershed will come when more than half of the marketing outlay comes from nonadvertising spending. But that's a few years off.
Asked to grade P&G's efforts up until now, as Mr. Stengel appraised the ad business a few years back, Ms. Lewis thought for a long moment before delivering her verdict: a D.
"That's theoretically a passing grade," she said.