Carrie McLaren

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In our glutted marketplace, the hot new product is (sorta) human. Carrie McLaren explores the burgeoning field of one-to-one marketing.

"Whether it's about agency billings and income or high-stakes geopolitical strategy, disinformation is part of the communications arsenal. Efforts to confuse, misdirect, mislead, or confound the public are part of today's world." --Advertising Age

As the folks at Ad Age well know, there are only so many ways to improve upon hand soap. Once you run out of ways to significantly change the product, you don't give up making soap, you give the job to the marketing department. The more your brand resembles other brands, the more noise you need to make. Hello, infoglut!

As the market evolves, so do its quandaries. After running out of ways to change soap, marketers have run out of things to say about soap. And no one wants to hear about soap anyway. Their solution: Stop talking about the product and focus on something else--the audience.

One of the main buzzwords for this is "niche" marketing, which differentiates consumers by segmenting them into groups. For instance, instead of pursuing the mass audience, cable television channels try to forge a closer relationship with a more specific (and often smaller) audience. It's the depth of relationships that counts, not the breadth (quantity) of them, because closer relationships increase the likelihood that advertising will make an impact. Viewers of the Independent Film Channel, a small, self-selecting group, are more likely to care about their channel than the viewers of CBS care about CBS. The Film Channel
would therefore tend to be a more direct pipeline to its watchers than CBS would to theirs. For the higher quality (more targeted and uniform) audience, advertisers pay a higher cost per impression, although the overall cost for advertisers is lower since the number of impressions is lower.

For a company selling independent films, the Independent Film Channel would seem an obvious place to advertise. But most companies don't have a channel devoted to their product (yet). There's no fragrance channel, no yellow-carbonated beverage channel. These advertisers use segmentation by figuring out the demographics and psychographics (which is like demographics, only instead of counting age, gender, race, etc., it counts psychological information: attitudes, opinions, religious beliefs, personality traits, etc.) of the audience they want to reach. Then they seek the media audience that most closely, or at least most economically, resembles their desired target.

This helps explain why so many channels are so lame. A lot more effort goes into researching the audience than creating worthwhile programming. The Discovery Channel--which targets upscale, educated adults aged 25-54--positions itself to viewers as a source of documentary and informational programming. As marketing VP Chris Mosely puts it, a "psychographic tie binds [our audience] together--they want information and they want to be entertained." Yeah, well, so do fans of MacNeil-Lehrer, Jenny Jones, and Big Bird, but that doesn't mean they are the same audience. The tie that binds viewers is actually having money, which makes for a pretty broad "niche." So Discovery meticulously segments its audience for advertisers. Discovery Communications' research uncovered eight types of "info-seeking" viewers, and, according to Mosely, these groups direct the content of Discovery's television programming, CD-ROMs, and home videos.

Each type is carefully defined. For example, Here & Nows (14 percent of info-viewers) are predominantly female (78 percent), have average incomes, are equally spread across age groups, and are the most ethnically diverse. They want to be "in the know" and are interested in people and the latest trends and fashions. They like topics relating to lifestyle, current events, and reality. To help marketers reach Here & Nows, Discovery Channel creates programming incorporating these traits. The content, in other words, is only a means to an end--to attracting a particular audience. And that audience, in turn, is packaged and sold to advertisers.

Same goes for the Lifetime Network, which targets college-educated women aged 18-49, with incomes in the $30,000 to $60,000 range. Lifetime's research concluded there are five types of female cable subscribers: Companions, Dreamers, Contemporaries, Realists, and Traditionalists. (Why there are only five segments is anyone's guess. With all the white upper-middle-class women
in the world, you'd think they could come up with . . . I dunno . . . eight, at least.) The network produces original movies to reach particular types. Contemporaries get women in strong roles; Dreamers go for the unicorn shows, etc.

The same process directs editorial concerns at lifestyle magazines (Spin, Details) and other niche media: research audience, define segments, connect the dots, and formulate content to reach them. Art, it ain't.

Buyers of all sorts of consumer products are segmented as well. Research by VF Corp., maker of Lee and Wrangler Jeans, found eleven types of jeans buyers: slaves to fashion, cowboy admirers, discriminating brand loyalists, fit and fashion aspirers, look fixated, jeans as uniform, fit me/fit my lifestyle, basic jeans buyers, and reluctant approval seekers.

Niche-ifying works a lot better in theory than practice, though. Like mass marketing, segmentation focuses on increasing market share--that is, on selling a product to as much of the market as possible. Once a product succeeds on a niche level, someone eventually modifies it to appeal to a larger group. Segmentation, then, like "college rock," leads back to the masses. Marketers know this, of course, and they know that, at best, segmentation is only a temporary fix until advertising (in all its forms) can afford to cater to the individual.

Enter the next big thing in marketing--one-to-one marketing, aka relationship marketing, "customerized" marketing, pinpoint marketing. Instead of trying to reach the greatest number of people, 1:1 focuses on earning more of an individual customer's business. One-to-one doesn't target groups of customers, it targets units of one. Unlike segmentation, 1:1 aims not for market share but customer share. (Or, as PepsiCo calls it, "stomach share.")

The foundation of the share-of-customer strategy is the Pareto Principle--the idea that 80% of a company's business comes from 20% of its customers. The most frequent fliers account for the bulk of the profit. So, rather than aiming to reach all possible fliers, businesses could more efficiently market themselves by trying to win over the top tier, and by encouraging those frequent
fliers to fly as frequently with them as possible.

In the 1:1 textbook The One to One Future, authors Don Peppers and Martha Rogers state that the best customers are said to outspend others by ratios of 16 to 1 in retailing, 13 to 1 in the restaurant business, 12 to 1 in airlines, and 5 to 1 in the hotel/motel industry. To reach these people, marketers use data from any number of sources: census data, mailing lists, credit card purchases, hospital records, phone bills, coupon returns, and surveys. Information from multiple sources can then be "data mined" to determine individual profiles.

One-to-one's cheerleaders--the Wired gang, for instance--say one-to-one practices help businesses provide better, more personal services, from customized online news filters such as Pointcast to clothing. (Nike and Levi's already use hi-tech gear to fit products to individual customers.) Pepper and Rogers also discuss potential new uses for ATMs. In their scenario, fast-food restaurant clerks are taken away and replaced with machines that react faster and remember their lines. The authors fantasize about going to McDonald's, placing an order, and reading this on screen:

Welcome, Ms. Fenwick, and thanks for coming in for lunch again. Your order will be ready in two minutes. Touch the Please button and we'll be happy to print out a coupon good for a free Filet-O-Fish sandwich or Large Fries any weekday evening in the next two weeks. And, because you've never tried our very popular Cherry Pie dessert, just touch button four and you'll receive one with our compliments today. Thanks again for coming.

But collecting personal data isn't exactly for the customer's benefit, even if some of the "customerization" plans actually do seem desireable. Businesses want to "know" customers not to meet their needs (which, more often than not, would mean leaving them alone) but to figure out how to sell more stuff to them. It's hardly a mystery that people want affordable medical care, diverse news coverage, and unwaxed apples, instead of a hundred brands of toothpaste.

For the most part, one-to-one business doesn't mean personalized products but personalized advertising. The more companies learn about individual customers, the better they can target them. (Consumers catch on to this and come up with ways to act defensively, of course, but that ends up feeding the cycle: the savvier the consumer, the more marketers need to know about them.)

While the technology and know-how to execute such campaigns remains to be conquered, electronic media--which don't have to pay for paper or stamps--are leading the way. Take junk email, for instance. However hackneyed at this point, the targeting can be a real drag. Most emails can just be deleted by glancing at the subject line. Exclamation points and dollar signs are a big giveaway:

45 Million Email Leads $195 + Bonuses

WWW.MeetHerLive.com!!!!!!

But others aren't quite so obvious.

hey Carrie, have a good weekend?

Wow, did you see Sunday's paper?

These can be deleted, too, of course, but if the sender actually designed the message knowing more of my data (what papers I read, how I spend my free time), it'd take a little longer to figure out that these were ads. This sort of microtargeting is supposed to be the future of television and the web. Different ads will go to different people, depending on their demo/psychographic profile. Mass marketing won't go away entirely. Kmart will still want to advertise a unified message (you and Granny will still need to more or less agree on what Kmart is about). And certain luxury items--your Mercedes, your Guccis--will still want to broadcast to the masses, since their value derives largely from their power as status symbols. But, eventually, the Right Guard commercial on your TV may look a lot different than the one on Granny's.

One-to-one is said to make it easier for consumers to find stuff they'll like. But when the same model of Buick masquerades as the family car, the sportscar, the liberated-lady car, it's still the same hunk of metal, even if Buick sends a robot out to personally shake hands with each potential customer.

With 1:1, a member of the Philip K. Dick fanclub could find everything from Pop-Tarts to the latest Tony Danza sitcom promoted as having a sci-fi edge. A middle-class mom with a history of heart problems could find scads of claims for heart-problem products; and that'd make the decision of what to buy harder, not easier. The eerie specificity of choices--and the proliferation of them--is a disorienting illusion. The better companies get at personalizing messages, the more we must work to figure out what they're really selling.

But all of this--the barrage of ads, not to mention the dissolation between ads and entertainment--is trivial compared to 1:1's real downside: what happens to the nonfrequent fliers. The converse of differentiating the best customers and pampering them is identifying the worst customers and getting rid of them. As Peppers and Rogers put it, "Some customers have negative value." In Marketing, a consultant writes:

Just as important as protecting and expanding the best customer relationships . . . [i]t is necessary to de-market unprofitable customer relationships. . . . As a matter of pure economics and sound profitabilty management, you should in fact make it very convenient [through bank procedures] for a certain percentage of your customers to bank elsewhere. (quoted in Breaking Up America, by Joseph Turow)

And banking is just the tip of the iceberg. As free-market principles extend their creeping reach to everything from healthcare (with for-profit hospitals, HMO's) to education (privatization schemes such as the Edison Project, corporate-sponsored curricula), it's only a matter of time before we've got one-to-one medical care and one-to-one schooling. And that's pretty damn scary.

SUGGESTED READING

American Demographics and Marketing Tools. Both magazines (but particularly AD) are great sources.

The Naked Consumer, by Erik Larson (1992). Excellent introduction to the business of buying and selling personal information from a man who discovered it by having a baby. The ins and outs of psychographics, demographics, mailing list brokering, the U.S. Census: all the hits!

The One to One Future, by Don Peppers and Martha Rogers (1993). The 1:1 textbook. It even has a section at the end that summarizes some of the social and ethical ramifications of 1:1 marketing.