Also in This Report:
What price loyalty?: Barara Canning Brown discusses the point of a loyalty program: page 15
Information please: Behram Hansotia and Ron Fabbro discuss turning information into customer insight: page 20
MuchAXS: The ever-innovative MuchMusic launches a viewer loyalty club: page 22
David Saffer, a specialist in integrating database and advertising communications, has brought back to life advertising legend Rosser Reeves, and asked him to respond to new advances in motivating and measuring customer behavior. Saffer can be reached at (416) 449-7961.
There is a battle raging in ad land between advocates of mass marketing and proponents of the new one-to-one marketing approach of database marketers.
Indeed, the billings appropriated by database marketing companies are enticing leading advertising agencies to embrace this new approach through ‘integrated’ services divisions and acquisitions.
Whether customer loyalty programs based on database marketing principals are working more efficiently than mass marketing approaches is debatable.
How does one compare the effectiveness of incremental sales generated through database marketing with revenues generated by advertising?
For example, what factor is used to account for the development of a brand’s identity or character?
Nevertheless, anyone who has reviewed a business case for a database/loyalty program cannot help but be intrigued.
Is it true that an Air Miles Bank of Montreal cardholder tends to spend more at participating retailers than a non-card holder?
Is it true that many Waldenbooks club members can be enticed to spend incrementally on reading materials each year at Waldenbooks?
How would copywriter paragon Rosser Reeves, the man, who, in the 1950s and 1960s, gave the advertising industry ‘Reality in Advertising,’ perceive this technology-based marketing wave?
Q. Mr. Reeves, you have been an advocate of mass marketing and mass advertising for a long time. Do you think that this new database marketing will eclipse traditional mass advertising?
A. You will recall, my friend, that in 1960 I clearly established that ‘for the first time we have an auditing approach to advertising.’
I demonstrated how mass advertising generated sales and brand loyalty.
Now, in 1995, you are telling me that it is only Tom Collins’ (founder of the Rapp & Collins direct marketing agency) method that is measurable.
My boy, I knew Tom when he was just a wee lad, and although he became a masterful copywriter with the Wunderman agency, he always knew that direct marketing was just one piece of the puzzle.
Q. Do I detect a note of jealousy between copywriters?
A. Not at all.
While at the Ted Bates agency, I tried to inject some reality into advertising.
Today, many marketers understand and work with my notion of the u.s.p. (unique selling proposition), and many advertisers today are less inclined to change their messages after each campaign.
Do you recall what I said? ‘Penetration is volatile. Like vapor, it can melt into thin air. Too frequent change of your advertising campaign destroys penetration.’
Q. Mr. Reeves, how is it that traditional media advertising can possibly survive given that database marketing tells clients who their best customers are and then delivers messages tailored to each customer’s specific needs?
A. You pose an interesting question, yet I can assure you that what you call ‘traditional’ media are in no immediate danger.
I would be afraid if I thought that broadcast, print and outdoor advertising were not working well for our clients.
However, before tv, there was radio, and before radio, newspapers.
And how long have we had a postal service?
Today, we have fast computers that can hold and manipulate transactional information.
Isn’t it fascinating that this most advanced state-of-the-art data manipulation is most often fulfilled by that old and stuffy medium, the post?
Q. Yes, it is ironic. However, more and more ways are being used to take advantage of customer transaction information held in company databases: cash-registers that inform cashiers how important a customer is based on their previous spending; interactive kiosks that speak in whatever language a customer wants, collecting customer information and disseminating learning; online computer interaction that allows customers and companies to talk to each other one-to-one.
So, do you now see that the ‘mailings’ and ‘newsletters’ of database marketers are just the tip of the iceberg that will sink the ship of traditional media advertising?
A. You would be wise not to forget that what you call ‘traditional media’ were each at one time ‘new’ and ‘revolutionary.’
Yet, they are all still with us today.
Different advertisers use these media differently, and there are still new ways of communicating with these media that are being explored.
So, had we witnessed the death of each old media with the birth of the new, then maybe I could agree with you; however, I think we will see these ‘new media’ become part of an overall advertising mix.
Q. Will database marketing not dominate these older media? After all, this micro or one-to-one marketing produces far better results than the old, tired way of mass marketing.
A. What results are we really speaking of?
My clients’ products and services must be advertised to the widest group of current and potential customers.
Our research has shown that it is better to reach a bigger audience less often than to reach a smaller audience more frequently.
What database marketers are calling ‘results’ are incremental sales based on offering selected groups of people in their database certain offers.
Yet, what predisposed these people to buy a particular product or shop a specific store?
The principle of dispersion, of spreading an advertising message across the greatest number of people, is directly linked with penetration, the likelihood of being a customer.
Developing sales messages that relevantly position a product in consumers’ minds is the most critical component of marketing.
I see that many department stores have ‘best customer programs,’ but I also see their tv advertising, weekly circulars and public relations efforts.
Moreover, the world’s most successful retailer does not have a loyalty program, it has good prices.
It has a brand identity that customers identify with.
Their loyalty is proven by the chain’s success.
I do fear that this new technology may seduce some advertisers to let up on supporting the goodwill that their brands have established with consumers.
Q. Yes, I agree that brand identity and character are important, but perhaps not as important as they used to be.
For many companies, 80% of profits come from 20% of customers. Database marketing allows you to determine who these customers are, and then keep them.
After all, it costs a lot more to get a new customer than it does to keep one and do more business with her or him.
A. Now I understand from where you are coming. You believe that database marketing is a new, better mousetrap.
But let me show you where you are going.
In many ways, you are saying that in the one-to-one future, retailers will not need pre-prints because they will mail individualized flyers to each customer, or allow customers to tune in to cable channels with ‘specialized products.’
How will consumers decide between Coke and Pepsi, or between Reebok and Nike, or between Sega and Nintendo?
Database marketing does not account for the fact that the retailer can charge premium prices for branded products – products whose brand characters have been well developed
Moreover, how will the retailer control whether a customer’s habits are kept in one or in 10 competitive databases?
If a customer is on both Loblaws’ and Dominion’s database, how will he or she decide between the two?
What about the influence of various media? Marshall McLuhan was a smart fellow who knew that different contexts have different effects – beyond the message.
The future will hold companies that have learned to harness the information in their relational databases in the same way they have learned to capitalize on what types of people read what types of magazines, listen to different radio stations or watch various tv programs.
The database is another tool in the marketer’s hardware, but it will remain with the genius of the copywriter to develop the hooks and the selling propositions that build brands and generate retail traffic.
It will remain with the ingenuity of advertising executives to use the right mix of new and old media to draw the customer to our products and encourage them to buy more.
I think it is good that more agencies are developing direct and database divisions.
More importantly, we should witness the evolution of the agency account director who must grow into a more professional, consultative role – responsible for managing all aspects of a brand’s character and communications.
She must have the ability to recommend the correct media mix – the best allocation of resources that will both enhance her client’s brand character and drive sales.
While database marketing may be part of this mix, it will not replace the other ingredients.
Database marketing does not economically create brand preferences, however, it may well prove an effective catalyst for building on existing preferences.
The reality is that database marketing is available.
The smartest advertising executives will learn how best to use it to their brand’s advantage.
