How Kimberly-Clark Is Lifting Sales by Elevating Marketing

Radical Approach Ties Compensation for All Execs -- Not Simply Marketers -- to Improvements in Brand Equity

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When Kimberly-Clark named Tony Palmer CMO in 2006, the move seemed in line with what other companies had been doing. But it soon became evident that the intent was anything but the norm: Within K-C, Mr. Palmer, and marketing generally, were afforded influence in the organization unusual for any company. That includes creating a committee of the board of directors that focuses on marketing and innovation; making brand-equity improvement part of the compensation package for general-management executives; and giving Mr. Palmer authority for recruiting and developing not just marketing but general-management execs.

Kimberly-Clark CMO Tony Palmer
Kimberly-Clark CMO Tony Palmer
Elevating the role of marketing within the organization has resulted in a longer-term focus that led to a 25% increase in global ad spending last year to $700 million for the $19.7 billion marketer of such brands as Huggies, Kleenex and Cottonelle. The past two years have seen Kimberly-Clark increase reported ad spending as a share of sales by nearly a percentage point to 3.5%, which would be more in the range of 5% if you remove the traditionally low-spending away-from-home and professional health-care product portions of the business from the mix.

K-C also saw its organic sales growth rate rise to 4% last quarter, putting it in league with the likes of Procter & Gamble Co., Reckitt Benckiser and Colgate-Palmolive Co. despite reliance on some generally slower-growing categories and more concentration in slower-growing developed markets than those players. And the company has seen major turnaround or new growth for such brands as Kotex, Poise, Kleenex and Depend in recent years, thanks to new programs developed under the integrated marketing planning system Mr. Palmer has spearheaded.

Speaking in an interview and presentation at the Association of National Advertisers conference in Phoenix late last month, Mr. Palmer outlined the transformation he's been part of at K-C, including the integration of marketing from the boardroom to executive compensation and human resources.

The plan, Mr. Palmer said, was "to elevate marketing to a level in the company where marketing is the organizing principle for growth as opposed to a function within the company. "

The process started with a decision five years ago to create a marketing and innovation committee on the board, he said, "which would guide growth for the company in the same way you have an audit committee or a compensation committee. It was, for us, a completely new idea, and I don't actually know many companies that do it."

Another major change for K-C that's unusual among marketers has been making improvements in brand equity, which is measured by such factors as consumer-preference scores, a direct part of determining salary and bonuses for the company's top 10 executives overall -- not just marketing executives. That's resulted in "a huge shift in focus," Mr. Palmer said, as well as helping fuel long-term thinking and discourage getting results through short-term tactics such as price promotion.

"Compensation is a lot of the secret, in my opinion," Mr. Palmer said. And it's been a factor that works both ways, since general managers get scored and compensated on brand-equity measures, while marketing managers are similarly evaluated and compensated based on profit-and-loss numbers.

Another key to elevating the role of marketing at K-C, he said, has been a move to put him as CMO in charge of recruiting and developing not just marketers but also general managers. He believes K-C is making progress in improving performance on both fronts. Part of the reel of work he showed at the ANA and has showed at other appearances includes an emotional ad for Walt Disney World and a harrowing clip for an Australian safe-driving campaign that shows a distracted driver hitting a child who runs into the street. He shows them not just because they get impact, but because both were projects of marketers he later recruited to K-C, and both "changed the trajectory" of their brands. In the case of the Australian clip, he said the ad helped move the state of Victoria from the worst to the best record in the country for the number of auto-related fatalities.

One area where general-management notions are bleeding over into marketing is a growing focus on what Mr. Palmer calls "lean marketing," which isn't so much about bargaining costs down with agencies or media companies as it is about changing processes within K-C to eliminate waste.

"Your processes and bureaucracy get in the way," Mr. Palmer said. "The question you need to ask anyone in your organization is "How much time have you spent worrying about the consumer and the brand vs. what you spend on your internal processes,' and the answer will shock you."

Another aspect of lean marketing, he said, has been standardizing processes and language for consumer segmentation around the world, he said. It doesn't mean brands have the same exact segments everywhere, but they analyze their consumers the same way.

But the biggest area of standardization has been the integrated-marketing planning process, where Mr. Palmer sees considerable progress, but still a long way to go.

As Mr. Palmer describes it, IMP starts with determining what the brand "promise" or central proposition is, understanding what consumer segments are crucial, then understanding what the barriers and opportunities are for reaching consumers with that promise, identifying the communication "touch points" to do so, and finally doing the creative execution as the last step. As a general rule, that means involving the creative agencies most heavily at the beginning and end and the media agencies in the middle, though media shop MindShare has done key creative work in some cases, too.

"It's very difficult and it turns your agency relationships on their head," Mr. Palmer said.

The change has led to some turnover among agency creatives working on K-C, he said, but tended to attract better and more strategic agency talent.

"There's a tendency to confuse structure and discipline in the way you do things with reducing creativity and the ability to do great stuff," he said. "The reality is when you do drive lean processes in marketing in particular, you drive out a ton of waste and free people to do the things they should be."

He credits the IMP process for the success of such things as the U by Kotex launch in the U.S., which ended a generation of decline for the brand and has added 2.5 to 5 points of market share for Kotex in feminine care since its early 2010 rollout, according to Symphony IRI data from Deutsche Bank. The process also helped end years of category decline and share erosion for Kleenex, helping spawn successful programs such as a "Softness Worth Sharing" social sampling program.

Still, challenges remain. K-C has been particularly hard hit by recession and slow growth in its biggest business globally -- diapers and training pants -- and in its biggest market, the U.S., where it has a disproportionate share of its business compared to rival Procter & Gamble Co., and a more premium mix of products.

K-C is the leading player in training pants by more than a three-to-one margin, but in a tough economy, parents have been waiting longer to switch from diapers to training pants or more often training straight from diapers, K-C Chairman-CEO Tom Falk said on the company's third-quarter conference call Oct. 24. Sales of training pants fell 6% last quarter, according to Symphony IRI data from Deutsche Bank, compared to 4% for diapers. Still, K-C outperformed P&G in both training pants and diapers in share as measured by IRI, which doesn't include Walmart, club or dollar stores in its published data.

But as Mr. Palmer said at the ANA, "The biggest fault you can have in our organization is to talk about brand equity and then say "Other things happened and I can't drive the business.'"

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