Better late than never

Noticed anything different about the envelopes filling up your home mailbox lately?...

Noticed anything different about the envelopes filling up your home mailbox lately?

Chances are if you’re married and have kids, your family has been the target of a greater preponderance of direct mail solicitations from the makers of many of the food and household products that are filling up your kitchen pantry, refrigerator and bathroom cupboards.

The reason is that a growing number of packaged goods manufacturers are turning to direct mail, e-mail and the Web to promote their products and to strike up direct, one-to-one relationships with consumers…in many cases, for the first time.

‘Packaged goods companies have woken up to relationship marketing with a vengeance,’ says Diane Wysocki, managing director of Continuum Relationship Marketing, a Toronto-based direct and database marketing agency that counts Unilever and Labatt Breweries of Canada among its clients.

Why? Well, as Jaya Kumar, senior director of targeted marketing with Kraft Foods North America, says, ‘Necessity is the mother of invention.’

Kumar, who heads up an 18-month-old international customer relationship team at Kraft’s Canadian head office in Toronto, says Kraft began to notice a few years ago that its advertising spending – estimated at more than US$100 million in the U.S. alone – was actually yielding a negative return on investment. Something had to be done, he says, before ‘we would soon be at a state where we wouldn’t be able to afford to advertise to our consumers at all.’

‘When we looked at our marketing spend efficiencies,’ he explains, ‘we found that our average return on investment across Kraft was about 45%, which meant that for every buck we spent, we were actually seeing a net loss on investment in the range of 55 cents.’

Kraft’s obvious need to ‘reverse the efficiency trends’ of its marketing expenditures led it to assemble a team of target marketing experts to identify who its customers were, what messages it needed to communicate to those people and to track the results. Since mid-1999, the company has invested millions of dollars in Canada and the U.S. to test a flurry of Web promotions, direct mail, custom publishing, and television sponsorships.

According to Kumar, the test results, which are the product of an effort to take a ‘holistic’ view of consumers across Kraft’s more than three-dozen product categories, have been excellent.

‘Our return on investment against some of the direct vehicles we tested, in terms of influencing sales volume, has been pretty solid,’ he says.

The change in thinking by one of the world’s consummate mass marketing organizations marks an intriguing turn of events, especially considering that just a few years ago, the prevailing opinion among industry watchers was that the returns simply weren’t there to attract packaged goods marketers to direct or database marketing. The general consensus was that packaged goods marketers, lacking access to crucial retail transactional data, were too handicapped to make a successful go of database marketing.

That all started to change, though, with the recent advent of the Internet and the plummeting cost of enterprise-wide database software systems. Suddenly, it didn’t seem unrealistic for a packaged goods marketer to contemplate the possibility of developing a strategy focused on individual customers, rather than brands. Not surprisingly, the coinciding fragmentation of traditional mass media vehicles and their audiences has simply accelerated the trend.

‘Packaged goods companies are really getting into the metrics and figuring out who their most valuable consumers are, who it’s going to pay to talk to and executing strategies based on that,’ says Warren Storey, marketing manager with the packaged goods division of Toronto-based ICOM, a database marketing company that specializes in developing and executing product sampling programs for its clients.

However, Stuart Sherman, president of IMC Interactive Marketing Concepts, the Toronto-based interactive marketing arm of

J. Walter Thompson, cautions that a move toward one-to-one target marketing may not work for all packaged goods companies. That’s particularly true in Canada, he says, where economies of scale still dictate that relationship marketing is an unaffordable option for most low-margin packaged goods firms.

That said, Sherman, whose agency does digital marketing work on behalf of such clients as Kraft and Unilever, says he believes the level of direct and customer relationship marketing activity in the packaged goods sector is ‘slowly picking up across the board’ in North America. That’s largely because of the Web, which provides an excellent opportunity to add ‘stickiness’ to an existing relationship between a packaged goods company and its customers, he says.

‘Once you have a consumer who is interested in your product, the mathematics of continuing a relationship with them is much easier,’ he says.

That’s a viewpoint with which Jaya Kumar might concur, although he would likely stress the complex challenge involved in figuring out which brand combinations appeal to which customers.

‘At Kraft, we have the scale and synergy across our [brand] portfolios to provide us with enough critical mass to talk to households in a way that makes sense,’ he says, hinting that the strategy may not be an available option for many other companies.

‘The scope of the investment is pretty huge,’ he says.