From the guest editor

GEORGE 5. WIEDEMANN Chairman. Grey Direct lnternafional

From the Guest Editor What the ’90s Consumer Demands: “ ABrand Contract-” A NOTE FROM THE EDITOR It is not often that someone really synthesizes the basic issues, challenges and opportunities which face the entire field of direct marketing in the 1990s. George Wiedem a n n did so in his keynote speech to the 1991 Convention of the Direct Marketing Association, held in Boston last November. So, for the first time, I have invited a guest commentator to ‘Speak” in the space where my JDM editorial column usually appears. Often, speeches are not perceived as very scholarly-or even as very enlightening. This one is, I believe, quite different. It is a message that everyone connected with the direct marketingfield should heed and understand. Don E. Schultz, PhD Professor, Medill School ofJournalism Northwestern University

If any group had been poised to inherit a bright marketing future, it was this group. In the mid ’ ~ O S , which now seems like another century on another planet, we were the toast of the town, on the cover

of Time. We had made it. We had arrived. We were the future. We announced it, to the world and to ourselves. We believed. But something happened on the way to the twenty-first century, and we have temporarily ended u p o n the cover of Time, and in the hearts and minds of many Americans, as just junk mail again. How were we to anticipate the Crash of ’87, the Gulf War, the recession, the crushing postal increases, and most importantly, the new attitudes of consumers? How were we to know that our very success, our impressive mastery of database marketing, would sow alarming seeds of self-defeat? I would so much like to entertain you this morning. To tell a joke. To amuse. But I simply don’t have time if I am to tell you that a canvass of industry thinkers shows we are at a crossroads, and that a survey of consumers reveals a profound and longterm shift in American attitudes and behavior that we must address to protect our success. I’m anxious to “get to it,” because I do fervently believe that together we can make direct marketing the quality channel of communication with the consumer in these hard times, and beyond. If w e pay close attention to these signals, we can overcome the double obstacles of recession and the perception that we are guilty of irritating junk communications.

0 1992 John Wiley L(r Sons, i n c and Direct Marketing Educational Foundation, Inc CCC 0892-0591/92/0304~07$04 00

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LEADING INDUSTRY VOICES

Working with the DMA, I canvassed industry thinkers, and asked them to comment on how we have fulfilled on the promise of direct marketing. The thoughts they expressed have huge implications for us at this critical juncture of our evolution as a marketing form. I was struck with the unprompted, spontaneous similarity of concerns and ideas expressed by these industry leaders. Diane Shaib of Chase Manhattan talks about our need to fulfill on the basic promise that true marketers pride themselves on: building our brands so that they can endure. Diane believes, and I concur, that we have reached the point in our existence that research is no longer optional, but mandatory, in order that we understand whether we are satisfying our customers. Bob Wientzen of Procter & Gamble concurs, and literally begins his treatise with this thought: “The major challenge . . . will be to listen to our customers.” It’s important that we d o listen, because as Jack Shea observes, our true competition is every cash register in America. Retail brands and retailers are doing such a better job today that the consumer has raised his expectations for quality products and service from us. As Professor Don Schultz observes, “We have changed the technology of direct marketing, but not the thinking.” We are living in an era you might call the customer revolution, and we need to turn our thinking inside out . . . to begin with the consumer’s wants and work back, rather than start with data and work out. What worries Dave Shepard is that the growth in using our technology, which holds the promise to vastly improve direct marketing, can actually set u s back through misuse. Pointing in the right direction, Richard Anderson of Lands’ End starts with this simple, and-in a business of single-digit response rates-radical notion that we should be in the business of making sure our messages are welcome. If we do head in the right direction, our future is still bright. Many large corporations are entering our field regularly, and-as Graeme Livingstone-Wallace of Nest16 indicates-more are making direct marketing part of the equation.

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In fact, technology is racing to the point where interactive direct marketing will be possible to deliver at the cash register. Sometimes w e think that we are the people who have injected information technology into marketing, but as John Kuendig of Kraft General Foods reminds us, the retailer has caught up to us, and could conceivably surpass those of u s focused on home transactions. Katherine Matheny of AT&T points out that in business-to-businessdirect marketing things are not much different, and that business-to-businessmarketers will be challenged with supplying better information and service to the business customer. 1 agree with Tom Jones of Epsilon that we are challenged to pave the way to a new era of relationship marketing, and only by taking that as our mutual goal can we achieve the wish expressed by Bob Blattberg of Northwestern University. He hopes that “direct marketing reaches the same status . . . that packaged-goods marketing possesses.”

MARKETING CONCEPTS AND CONSUMER POPULARITY

What it all boils down to is two simple notions. First, we may have forgotten about marketing with a capital M, and in doing that we lost sight of building the direct marketing brand, our individual brands and our collective way of doing business. And second, in the wake of the database rush lies a consumer population which no longer makes us as welcome as before. We are challenged to address this situation just at a time when there is a profound and long-term shift in American attitudes and behavior. First, I want to discuss a study with you this morning that began in the waning days of 1990, when recession was bearing down, war was looming, and consumer confidence was plunging. It had been twenty years since this country last faced the double jeopardy of recession and war. And for the last decade, the nation was on a full-tilt,freespending consumption binge, joyfully pursuing selfexpression and personal gratification in every form. The big question is, how will consumers respond in the tougher and more challenging times we now face? And how can marketers identify opportunities based on changing consumer needs? To find out we talked by phone to adults in na-

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tionally projectable samples of 725 U S . households. We conducted structured, in-depth interviews, covering all the vital points-consumers’ priorities, attitudes, values, behavior, and household characteristics. I don’t have to tell you that we are dealing with a tougher marketplace and tougher consumers than we’ve seen in a very long time. But I can tell you at the same time that smart direct marketers will find no shortage of opportunities for success in the 1990s. My sincere hope is that the insights our survey has given us can help you get off to a running start. The most important thing I can tell you about our findings is recognition of this basic fact. An entirely new mood has taken hold in America. Americans who were raised in an era of unprecedented abundance, who believed and behaved as if that abundance would never end, are being forced to deal with limitations. For the first time in our generation, we are experiencing real doubts about our collective and personal futures. As a nation, we are beginning to confront the possibility that the wonderful period of surging living standards unleashed after World War 11 might be coming to an end. Because of these doubts and fears, we are moving from an attitude of invincibility to a disturbing new sense of vulnerability. Just look at what they told us.

VOICES FROM THE SURVEY Three of four of us wonder if our dreams will ever come true. A majority of Americans is now resigned to the reality that they cannot afford the lifestyles they expected already to have by now. And eight of ten Americans agree that, from now on, we will all have to learn to live with less. We know that an enormous change is transforming our country’s psyche. A population raised on visions of boundless prosperity is beginning to question its dreams. Importantly, recession has not caused this attitude shift, but it is clear that it is acting as a powerful catalyst, and focusing consumers’ attention on some fundamental flaws in their expectations of endless prosperity. Of great importance to marketers is what con-

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sumers are doing to cope. Because the good news is that while Americans feel threatened and cautious, they are not allowing events to overwhelm them. And what they are reaching for plays directly to the ability of direct marketers to put the consumer in control of the shopping process. Today’s Americans, in order to maintain their sense of stability and security, are showing great reserves of spirit and resolve. Our survey made it clear that Americans feel down, but they’re far from out. The more outside events seem out of control, the more the people of this country are turning inward, focusing on aspects of life that can still be controlled. Nine of ten feel they can make a difference in their own lives, and seven of ten believe that their own personal resourcefulness will see them through the tough times ahead. As they reach out for this personal control, Arnericans are turning away from the self-fulfillment quest of the 1980s. Nearly eight of ten say they are searching for more meaningful and fundamental values. This search is leading consumers to make home the emotional center of their lives. As world events become more threatening, Americans are battening down the hatches; they’re building a fortress of comfort and security in home and family. Here is another reaction that is in our favor, because consumers are drawing inward, and pulling away from activities outside the home. They are having fewer meals away from home, going to fewer movies and sporting events. Here is o n e more interesting point: people are extending their sense of relationship responsibilities beyond the home to the community and the environment. Some 87 percent of Americans are now more interested in playing an active role in protecting the environment. Seventy-three percent are already active recyclers of papers, bottles, and cans. The big question is . . .What does all this mean for direct marketers?

IMPLICATIONS FOR THE MARKETPLACE Here is the answer: Today’s Americans are bringing the same resourcefulness and control that they apply to their personal lives into the marketplace. Un-

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demanding this change in the consumer’s mindset offers real clues to us about the types of opportunities that are emerging in today’s direct marketing arena. Today’s American is becoming one tough customer, and specifically for us, one tough direct response consumer. Although people feel very pressed by the economy, this new toughness is not just a matter of financial restraint. One of the most intriguing things about the country’s new economic mood is its surprising complexity. What’s going on in the marketplace right now is not just a matter of old-fashioned, across-the-board cuts in spending. Americans have not lost their taste for the good things in life. The news is, they have become much more discriminating and deliberate about acquiring them. They’re no longer in the market for whatever is newest or trendiest; these days, they’re saving their money for good things that last. Consumers tell us that they’re tackling today’s financial challenges in their own way, rather than repeating the patterns set by previous generations. Where older generations would have made wholesale cutbacks in their lifestyles, today’s consumers are rejecting the slash-and-burn approach. Recession or no recession, 71 percent are determined to maintain as much quality in their lives as they can. And even now, most would rather have a small amount of a high-quality product than a lot of something cheaply made. In their effort to maintain the maximum amount of quality in their lives, consumers are redefining the relationship between , was quality, price, and value. In the ’ ~ O S value quality at almost any price-and in some cases, the higher the price, the better. As a result, marketers in many categories could, as the saying goes, name their price. , That attitude is history today. In the ’ ~ O Svalue is quality at the right price-and consumers are setting the price. For the first time in a long while, consumers are stopping to decide what a product or service is really worth to them. And, incredible though it may seem, they’re even learning to delay gratiJication-they’re holding back until they find the quality they desire at the price they’re willing to pay for it. Here’s the bottom line. Almost all consumers insist that a quality product

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or service be affordable in order to earn consideration. This means that just about every purchase, for anything, is a considered purchase today. As a result, the impulse shopping binge that characterized the last few decades has come to an abrupt, screeching halt. Almost everyone thinks very carefully about everything they buy before they actually buy it. So, when they shop today, they go armed with a whole range of strategies designed to help them hold on to quality while still holding the line on spending. Let’s look at just five. FIVE CONSUMER PRIORITIES

First, consumers aren’t cutting out their small luxuries entirely, but are buying them more sparinglypreferring to enjoy their favorite brand of premium ice cream, wine and other indulgences less often rather than switching to less expensive, less satisfying alternatives. Second, consumers appear particularly inclined to do business with marketers who sweeten the offer. The three most popular price moves are discounts or incentives, quantity discounts, or more coupons. Third, when it comes to discretionary products such as cameras, video games, watches and home electronics, consumers are using a variety of strategies, with some trading down, some postponing the purchase, and quite a few trading up to more expensive brands. The deciding factor seems to be the importance the items have in consumers’ new home- and family-centered lives. Fourth, many Americans are postponing or completely eliminating high-priced, short-lived discretionary expenses like travel. And finally, almost half the population have started buying store brands and generics. For everyone in direct marketing today, the important question is, what does this caution and strategizing mean for brands-for your brand? BRAND IMPORTANCE

The good news is, the consumers we spoke with remain strongly oriented toward brands they can trust. But a red flag has been raised by consumers.

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Their willingness to put their trust in brands is beginning to slide. Eighty-five percent prefer to buy brand names. But, the percentage of people believing that a brand name alone is an assurance of quality has dropped six points in the last two years. If you put that finding together with consumers’ new sensitivity to price, and their growing interest in store brands and generics, the conclusion is unavoidable: brands are vulnerable. Any brand that’s going to find a place on today’s shorter shopping lists has to preserve its image, but also offer a.lot more than that. The real news for direct marketers is not that our opportunities are dampened. In fact, our survey indicates that there are some really exciting opportunities available for direct brands in today’s marketplace. But we must understand what is underneath it all.

We must listen and react to the consumer’s complaints about our one-to-one, interactive process. We must eliminate those things the consumer tells us are irritants. And, we must do this quickly. We must perfect the high touch, emotional, human, interactive sides of relationship marketing. We must alter course in the ’ ~ O Sand , begin an era of what I’d like to call marketing to the individual. And finally, we must recognize that fashion governs a great deal of marketing and purchase decision making. When we have a good relationship experience to offer, we must use brilliant advertising to make it fashionable. That begins with listening to the consumer, and what the consumer is telling us is that their loyalty is directly connected to the ability to have a satisfying relationship with the brand. If you truly have a relationship with the consumer, then accountability is the name of the game.

THE PERSONAL ELEMENT

KEEPING THE AGREEMENT

Deep down, what consumers really want from today’s marketplace is the security that normally is found only in lasting, person-to-person relationships. They want the same trust and accountability that existed in the days when most goods were crafted by hand, when most buyers knew the merchant by name, and most products were made with a degree of care and pride that kept customers coming back for a lifetime. This is an astounding finding, given that this study was done for brands in general, not just for direct brands. And it is particularly relevant to us, at a crucial time in the development of our discipline, when we must tell ourselves the truth about not having adequately developed our relationship marketing skills. We have Lester Wunderman to thank for inventing the term “relationship marketing” over ten years ago. We have ourselves co blame for what I might describe as an overemphasis on database techniques ever since. Of all the marketers who could take advantage of this consumer need, we are best equipped. We have already been through an unprecedented explosion in our database expertise. Now we must put it to work to integrate aspects of that reassuring, “handshake deal” relationship into today’s direct marketing shopping experience.

Consumers are calling for companies to commit themselves to the terms of what is, in effect, a “Brand Contract”-an agreement that makes marketers accountable for both the promise and the lasting performance of their brands and the brand experience. The Brand Contract is the delivery on the promise that a particular brand is their brand-exactly the right brand for their needs. It brings the marketing company into the relationship between the consumer and the brand in a new and positive way, and provides the assurance, long-term commitment, satisfying dialogue, and accountability consumers are searching for. Our research has indicated three broad areas and their several clauses that we think marketers must include in their Brand Contracts to compete effectively in the ’90s. The first is, make the right offer. Second, commit to a long-term relationship. Third, foster the relationship through communications. Let’s look at them. First, make the right offer. When we say the right offer, we mean the product or service as well as the offer and the entire experience surrounding the acquisition of it and incorporation of it into daily living. I’m going to illustrate how this means corporate

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credibility and corporate accountability, as though you knew you were going to be your customer’s next-door neighbor for the next 50 years. So that you know where I’m going, I’ve created a sequence for the Brand Contract, and I’d like to discuss these elements briefly, and connect them with examples. Beginning with offer, you might think, “Big deal. The right offer is Direct Marketing 101.” But I think it is more complicated than what we have traditionally meant by offer. Today’s consumers are looking for very specific qualities in products and servicesand they’re not the same qualities consumers wanted just a couple of years ago. First and foremost, today’s consumers demand substance. They’ve lost their patience with tacky or shoddy products, and have lost their naivete concerning empty or confusing claims. Now they demand solid workmanship, expert craftsmanship, quality materials and healthy, natural goodness in the products they buy. They are not fascinated with frills, so they place much greater importance on simplicity and elegant design, and they want a wellconceived product that works. I’d like to mention how one commercial for a retail product illustrates these points: brilliant cinematographic images convey the facts and feelings of quality and substance for Maglight: superb engineering and technical excellence-all for a simple everyday object, a flashlight. Procter & Gamble is a real leader in the movement toward corporate responsibility. A P&G commercial tells consumers about something positive that they are doing for the environment. By conveying a practical packaging improvement in an execution both simple and believable, P&G completely avoids sounding self-serving. One thing our research shows is that consumers absolutely insist on information. They want more and better information than we’ve usually provided in the past. Consumers want a quick, quality shopping experience. They want better product brochures and better-informed selling copy. They want one-stop shopping. Our research shows that more people do not want to go anywhere at all, and increasingly shop at home if the experience is positive-and catalog shopping and home banking are just the tip of the iceberg. And above the desire for information is the desire

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for access. Improved access to the people behind products and services is another important aspect of a successful product offering today. Access is such a key issue that I have long admired the strategy behind the GE Answer Center. Research shows people are more satisfied with a brand if someone will simply listen to the service problems which inevitably arise. I admire even more GE’s resolve to communicate this service broadly. I’ve already talked about how much more sensitive consumers have become to price. Every marketer will have to respond to that new price-sensitivity-never forgetting that the right price is not necessarily a low price. The objective is to satisfy consumers’ new, more considered ideas about value by making quality affordable, and by making sure consumers see you as a marketer of affordable, quality products and services. N o offer so jolted its competition in this respect than the entry of AT&T into the credit card business. Into a sea of fee cards, AT&T offered Visas and Mastercards, temporarily with no fee for life, and discounts on long-distance calls charged to their card. To the consumer, they became good guys overnight. The second major area of focus in the Brand Contract is to commit to a long-term relationship. Most of us here think we do that all the time, but our research indicates that a major part of having a relationship with the consumer involves corporate credibility and responsibility. The consumer insists that you are corporately responsible. Getting closer to direct communications, I want to tell you how Nissan, maker of the gorgeous 300ZX, invited me to a long-term love affair with one of their cars in a very credible and responsible process. First, they kept showing me their enticing television commercials. Then they reached me through one of my favorite magazines with a compelling, beautifully simple ad. I challenged people in the office to tell me whether this is a direct response ad or an image ad. N o one could say and we finally agreed that it’s both. It worked. I called their 800 number and received very thoughtful service, which is essentially designed to make sure I get the correct fulfillment. Lastly, they attempted to connect me to a local dealer. I love

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this kind of marketing and I think we have to learn how to do more of it to allow the customer to selfselect. Not only does it magically change junk mail into mail I want, it also is doing an awful lot to build the brand. I have heard direct marketers voice the same complaint for twenty-five years: “My mailable list universe isn’t growing.” We must learn to use targeted mass media to allow the consumer to self-select,and learn to accept the inevitable, higher cost-per-response as an advertising investment used to build the brand and the database. It would make our mail much more welcome to be supported by media, and we would be taking a giant step toward having consumers get more of the mail that they really want. This brings me to the third and last area of the Brand Contract, which is to foster the relationship through communications. This has two aspects: One, using more,than just mail in the media mix; and Two, interactivity. I know that if your business has enough critical mass, television advertising will absolutely help make your business larger and more profitable. I also know that not many of us are regular users of television advertising, but we should be. We shouldn’t think of it as direct response television, but as brand-building support covering our total effort. In Barcelona earlier this year, I listened to the fascinating story of how Quelle, the large German mail-order house, had lost share to its arch-competitor, Otto-Versand,and how they gained it back. They ran TV commercials, which even if you don’t understand German, you’d get. There was little else to explain the lift in sales and share except the new Quelle television advertising. Quelle management is now committed to its use. In 1987 I conducted a study jointly with Grey, which discovered the Interactive Consumer, and named survey-based interactive communications “Personal Marketing.” O n e campaign, just launched by the American Express Platinum Card, is such a perfect example of Personal Marketing, I wish I could say I did it. But at least I got it in the mail, and it is fabulous. Amex asks me to tell them all about my personal interests and then uses my inputs to bring me tar-

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geted, “by invitation only” perks, such as meeting jazz artists at a reception following a concert. I can’t wait to see the delivery on this. In case you think this technique of Personal Marketing is confined only to upscale products, Duncan Hines uses a personal medium called “Recipes and More”; the “more” part includes survey-driven coupon values as well as the chance to guide future editorial matter to help the consumer fit this brand into their lifestyle. I’m absolutely convinced we will see personal media explode as a media form in the ’90s. I thought I’d wrap u p with an example of Brand Contract which contains all of the elements we’ve discussed this morning. The example is the resurgent marketing behind the Chase Manhattan Bank’s credit card products, and in particular this summer’s special effort, the Chase ExtrasSMSweepstakes. For nearly a year now, Chase has been repositioning the bank through advertising which is quite sensitive to the consumer revolution we are going through. I want to mention two commercials. The first is the new “Profit from the Experience” advertising for the bank, followed by a commercial for the credit card products which recognizes, with its “we’re flexible” approach, many of the elements we found the consumer wants in the Brand Contract. This summer Chase decided to orchestrate extra value to its cardmembers by offering them airline flight coupons in return for card usage, as well as the benefit of being entered in the Chase Extras Sweepstakes every time the card was used. The communications effort began with this direct mail package to cardmembers. Chase then supported the effort with newspaper ads. And, against that entire backdrop, three commercials ran throughout the third quarter. Ladies and gentlemen, we invented marketing to the individual. We possess the technical knowledge that the marketing world needs to manage one-too n e relationships. Whether we deal in the direct channel exclusively, or in a multi-channeland multicommunication environment, it strikes me that our future progress lies in understanding our consumers better, and in using that knowledge to forge Brand Contracts with them that can stand the test of time. Personally, I’m looking forward to being part of this next, new era of relationship marketing.

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