Wake up and Smell the Co-Marketing

Account-specific marketing is stopping traffic in Greenwich Village.

It started with Fender Guitars’ Christmas radio campaign, the first consumer spots for the $200 million company. Casual reminiscences from professional musicians like Dick Dale and Sheryl Crow encouraged Baby Boomers who played in garage bands as kids to pick up a guitar again, and share the hobby with their own kids. A trucker making a delivery in Greenwich Village heard one of the spots and was so moved that he drove straight to the nearest dealer and ran in to buy a guitar – double-parking his 18-wheeler and blocking traffic for half an hour.

Ironically, the store he shopped in, Matt Umanov’s, had turned down Fender’s offer to feature Umanov’s in radio spots in exchange for extra merchandising. Umanov’s was one of the first to sign up for Fender’s Sounds of Summer promotion now running.

Greenwich Village heard one of the spots and was so moved that he drove straight to the nearest dealer and ran in to buy a guitar – double-parking his 18-wheeler and blocking traffic for half an hour.

Ironically, the store he shopped in, Matt Umanov’s, had turned down Fender’s offer to feature Umanov’s in radio spots in exchange for extra merchandising. Umanov’s was one of the first to sign up for Fender’s Sounds of Summer promotion now running.

The other irony is that now that specialty marketers like Fender have wised up to co-marketing, it’s losing its appeal in the packaged goods industry, where the strategy was born.

Even the most conservative packaged goods companies have a promotion menu these days, and top marketers have advanced well beyond that, developing promos from the ground up with key retailers. Co-marketing agencies are taking the religion to soft goods and durables marketers, reaching into retail channels from electronics chains to music stores. Co-marketing has become such a buzzword that ad agencies feel an urgency to get into the business, buying or starting up units like Saatchi & Saatchi Co-Marketing, formed to service longtime Saatchi client General Mills.

“The promotion industry has a very timely opportunity. This is an easier leap for promo agencies to make than ad agencies,” says Jon Kramer, president of J. Brown/LMC Group, Stamford, CT.

The yawn factor Account-specific marketing has spread so far among packaged goods companies that their interest and activity is starting to plateau. Manufacturers rank it as their fifth biggest issue, with only 66 percent considering it “very” or “extremely” important, according to Cannondale Associates’ 1998 Trade Promotion Study. Retailers rank customized consumer promotions as their sixth concern, far behind margin erosion and labor costs, Cannondale reports. Here’s another irony to add to the pile: Manufacturers’ biggest concern is trade promotion inefficiency – the very problem that co-marketing was designed to solve.

Only 69 percent of manufacturers agree that account-customized consumer promotion is “the wave of the future.” Eighty percent believed it last year, Cannondale reports. And yet 80 percent still agree that account consumer promotion and trade funds should be integrated.

In theory, co-marketing channels nebulous trade dollars into consumer promotion that simultaneously builds the retailer’s and the manufacturer’s brands. In practice, however, it costs more to spend trade money this way.

Retailers say only 35 percent of account-specific promos pay out, compared to 55 percent of feature/display promotions. Account-specific promos deliver only 61 percent incremental volume, far less than the 80 percent generated by feature/display, Cannondale found in its survey of 250 manufacturer and retail execs.

Lower payout and volume strike at the heart of grocers’ two major concerns: Margin erosion and labor costs. Those are the issues manufacturers need to address next to make co-marketing work.

Grocers’ margins erode when promos don’t deliver short-term volume. Account-specific promos don’t boost incremental volume as much as feature/display, although they do boost long-term volume growth. That’s good news for manufacturers eager to build brand loyalty, but not so swell for grocers looking to boost the register ring on each shopping cart.

“Account-specific marketing doesn’t contribute as many immediate benefits as feature/display. It’s more of a loyalty-building tool,” says Don Stuart, a partner with Wilton, CT-based Cannondale.

As for labor costs, retailers worry that they’re footing the bill for executing customized promotions in their stores.

“Account-specific marketing requires more customized work. Retailers recognize that carries extra costs, whether they pick it up directly or not, and they realize that lowers their payout,” Stuart says.

Manufacturers need to make programs as turn-key for retailers as possible, either by streamlining P-O-P and in-store elements, or by providing merchandising service.

The real customer Kramer holds that co-marketing provides a new vision, acknowledging that where consumers shop is just as important as what they think and how they behave – two items addressed by advertising and promotion, respectively.

Each marketer’s approach depends on the dynamics of his or her product category and channel of trade. In supermarkets, where category managers can affect sales volume more than consumers can, Kramer says, the real customer is the retailer. In specialty stores (like music shops) and category killers (think Best Buy), promotion equals price cuts, so manufacturers’ tie-breaker has become brand awareness, and the real customer is the consumer. The hard goods approach to account-specific marketing is to target key consumers and drive store traffic.

Take guitars. The Fender Sounds of Summer road trip is a 21-city tour of three “Fender Roadhouse” vans decked out with displays on guitar history and a collection of 20 sample guitars that folks can pick up and play.

That is the Pheonix, AZ-based company’s simple sampling strategy: Get folks to try the product. Fender is looking to play on the counterculture reminiscences of Baby Boomers who wound up joining the establishment they once vowed to bring down. The Roadhouse vans and radio spots remind men of the fun they had playing in garage bands as teens, and encourage them to share the hobby with their own kids. Fender sends its vans to retail stores, malls, and beaches.

For its holiday campaign, Fender offered retailers in 17 markets an extended tag on radio spots; 180 dealers bought in, and two – yes, one was Umanov’s – declined. Sales jumped 48 percent for participating dealers, and 40 percent for non-participating dealers in the promotion markets. Fender likely will reprise the holiday effort in more markets this year via Inmark Services, Greenvale, NY.

“Our charter was to improve our image,” says Keith Brawley, Fender director of marketing services. Inmark “came along with an idea to build image and sales.”

Music shops were happy to piggyback on image advertising for the No. 1 brand, whose $200 million in annual sales dominate the industry.

“Our industry is the last bastion to deal with category killers. We have the same issues of profitability as other industries,” says vp-marketing Ritchie Fliegler.

“In one of our handwringing sessions, we looked at those issues and found Inmark’s pitch very compelling,” he says. The retailer-tagged radio campaign helps Fender “create parity between big chains and independent stores, and because we control the ads, we control the message.” That helps Fender avoid price wars and command merchandising support for its image effort.

“These programs aren’t philanthropic. Anything you can conjure up is legitimate to ask for in account-specific marketing,” says Inmark president John Benfield. The agency is targeting electronics, computers, healthcare, and other categories that are “virgin to this kind of program,” Benfield says. Newbie retailers like to put their fingerprints on promos, but building a joint campaign from the ground up – the cutting edge for packaged goods pros – is “too strenuous” for less seasoned retailers. Benfield recommends that marketers new to customizing promos get their plans 70 percent set, with about 30 percent flexibility for retailer requests.

IBM Corp. is readying its first account-specific effort to run in national retail chains for back-to-school. The computer giant is working directly with retailers to develop customized programs. That requires “a different relationship,” says account supervisor Bob Bird, who oversees IBM work at Einson-Freeman, Paramus, NJ. Co-marketing requires “more dialogue, more depth – more give and take.” Sometimes, that means finding a different carrot for retailers than shared TV spots, if the brand images don’t fit.

“You have to understand how a retailer’s brand image fits with yours, and how to interpret that. It isn’t always a good fit,” Bird says. “If you’re sticking to your guns on brand image, you dig into your deep pockets and pay for your own advertising,” and then focus co-marketing efforts in-store.

Old hands, new venues Some food marketers are expanding their co-marketing campaigns beyond supermarkets. Nabisco tapped C-stores for Rock the Coast, the second run of its free concert series, Crisp Night Air Concerts, for Air Crisps crackers. The current campaign centers on a national instant-win sweepstakes awarding trips to Nabisco’s finale, a Blues Travelers concert on the Santa Monica Pier in October. Overlays for C-stores and supermarkets in 36 markets award tickets to a local Nabisco-sponsored concert and dinner for two at a local restaurant. Nabisco hosts a winner from every store that participates from June through August and provides VIP tickets for the trade and a custom-pressed CD of A&M Records artists for secondary prizes.

Nabisco added C-stores this year to boost its two-oz. bags of Air Crisps, and will hand out 3.5 million samples at concerts and radio tie-in events. Clarion Marketing & Communication, Greenwich, CT, handles.

Meat marketer Hillshire Farm and Kahn’s took supermarket buyers and their kids out to the ballpark as part of its summertime push for display. Kahn’s sells hot dogs in four eastern stadiums, and held clinics for the kids of buyers who bought a set number of cases. An Aug. 29 clinic in Boston’s Fenway Park brings Hall of Famer Carl Yastrzemski to meet kids who win an essay contest on why they want to go to the clinic. Five mobile grills shaped like eight-foot Kahn’s dogs travel to the stadiums and stores, often as part of a retailer-specific radio tie-in. Waylon Cos., Cincinnati, handles.

New venues are good, but account-specific promotions also need more innovation and more consumer focus, especially now, when retailers are beginning to feel like they’ve topped out. Packaged goods companies are still wrangling with their trade budgets – 47 percent of total marketing spending – but no longer assume account-specific promos are the answer. While 84 percent of packaged goods marketers plan to increase account-specific spending over the next five years, that’s down from 94 percent a year ago. “It’s pretty darn high, but not a universal answer anymore,” says Cannondale’s Stuart.

That’s the last irony: A marketing strategy predicated on individualization can’t be universal. It must be tailored to the brand, the retail environment, and the consumer. That takes insight and creativity more than money.