Kraft Foods had a problem only a couple of years ago: the flatline growth that affected most packaged goods marketers. But the proposed solution — a permission-based CRM program — did not come easily to the consumer-brand giant.
It was “no small feat” for the company, which spends most of its dollars on mass marketing, to target customers individually, said Chris Osborne, managing director at Redwood Data Sciences, Toronto, speaking at DMD New York in June. But Kraft did it in a credible way, Osborne continued.
The firm wanted to generate incremental sales and to identify and communicate with its most valued customers. It also wanted a higher return on investment.
Getting permission was important because Kraft “did not want to go out spamming everyone in the U.S.,” Osborne said. “They wanted to protect the Kraft brand name.”
Market research showed that 20% of the households produced 60% of the volume and 80% of the profits.
The research also found that high-volume consumers were spending hundreds of dollars a year on Kraft products, and that the target customer was a time-pressed female between the ages of 24 and 45, with two or more kids and a part-time job.
The first job was to start gathering subscribers. This was done by distributing 2 million copies of Kraft magazine, mostly at the point of sale, and by collecting names on its Web sites, at trade shows and everywhere else it could.
Osborne couldn't reveal numbers, but he said that Kraft pulled “a big response.”
Those who signed up started receiving Kraft magazine, which is issued five times a year. The book has customized editorial and is integrated with the company's online material. Kraft also sends a weekly e-mail newsletter called Friday Quick Menu. It offers homemakers a recipe they can prepare in five minutes or less.
Osborne wouldn't reveal numbers, but he said the program has driven “a significant volume of sales and inquiries.”
In addition, research documented that 90% of recipients keep the magazine as a resource, 84% have used suggestions from Kraft and 86% said the company's kitchen experts are believable.
“Customers remind Kraft to send the magazine,” Osborne added.
But it requires patience. “Kraft was slower to get people into the database,” he said. “But the permission-based approach pays out.”
And how do they determine if it's working? It's not done the way they do it in direct marketing.
Osborne said that Kraft “can't ever get to the actual data,” but it's able to determine success using Nielsen data and tracking store sales, and then linking that with “what the customer tells us. If it's off 5%, that's not bad. If it's off 50%, that's a problem.”
Can a company expect to see a return on investment within the first year?
“It doesn't have to be the first year,” Osborne said. “Over 12 months, you should end up with the same number of customers you're talking to now, but spend less money and send less mail.”
