Marketing ROI - Kodak's "Celebrity Apprentice" Experience

Last month Andy wrote in asking "I'd love to see something on marketing and cost benefit analysis, it's been my experience the two things rarely go hand in hand. I hope I'm an isolated case but guess that I'm not."

I'm making that the focus of this month's newsletter. On Thursday, Peter Roosen and I interviewed Jeff Hayzlett (2nd from the right), Kodak's Chief Business Development Officer and Vice President and David Lanzillo Director, Corporate Communication and Vice President, Communications & Public Affairs.

Tip #1: Try something new if what you are already doing isn't working.

We asked them about their experience in having Kodak featured on Donald Trump and Mark Burnett's "The Celebrity Apprentice" show a few weeks ago.To put this into perspective, Kodak, a 125 year old company, has undergone a major transformation as its traditional photographic films and papers business has been virtually eliminated by the advent of digital photography. The company has gone from having 150,000 employees in 1988 to 51,000 in 2005 and 27,000 today. 60% of the current employees are new to the company within the past 4 years. Yet Kodak remains on the Fortune 500 list in spite of these huge changes to its traditional business.

Jeff said there were two impacts of having Kodak featured on "Celebrity Apprentice" The first one was internal. "It was a morale lifter. Employees see that we are back on the air." He said of the major transition completed at the end of 2007 that employees had experienced considerable "transformation fatigue" resulting from "cost crushing" and "pumping into new businesses."

Tip #2: Don't stack various campaigns if trying something new. Kodak focused on one big one for this time frame - a risky one.

The second impact of being featured on the Trump show was external. Kodak paid about $2.5 million to engage in what Jeff described as "the best product placement deal in history." He said there were "4.6 mentions per minute, about one every 15 seconds, with a total of 89 million viewers. We doubled our sales that week and weren't doing anything else at the time. This was for sales on consumer stuff for what we normally had going out the door."

Tip #3: Create slogan to help communicate your idea or strategy.

Kodak's focus for the show was promoting its new cost model for printer ink consumables. Kodak is launching into the high margin ink market with its "pricey ink stinks" slogan. Jeff said that he would be on live television this week "debating Gene Simmons on getting rid of pricey ink."

David figured the advertising and public relations value equivalency for the Trump show was in the "tens of millions of dollars."

Tip #4: Activation counts more than buzz.

With the improvement of technology and increased competition, there is ever-increasing pressure to make marketing spending more accountable. David and Jeff claimed that activation (marketing efforts that drive sales and not just awareness or buzz) was the thing that counted. Jeff said "if you talk about buzz building in this company, you buzz yourself out the front door."

Tip #5: Have people from different key areas on board with your marketing.

Kodak has a brand and development council with representation from R&D, legal and M&A on it. It also has a marketing operations council tasked with ways to leverage the marketing spend. The company also has its marketing strategy council led by the CEO. Kodak has an EMM (Enterprise Marketing Management) system across the company with dashboards or predictive indicators for campaigns and growth initiatives. This is especially important when one considers that 80% of the company's revenue comes from 19 products, only half of which were in existence 10 years ago.

Tip #6: Make things measurable using whatever tools are needed.

Quantifying marketing ROI (return on investment) is not new. It just hasn't been very doable in the past. Soft measures including brand awareness were more easily determined than strict financial measures such as ROI for marketing investment. Technology and improved ways of measuring customer behavior is making the difference today. Beyond basic software like CRM (customer relationship management) packages, the ability to employ technologies to help track and analyze relevant knowledge helps companies to deepen their understanding of the customer. That is a prerequisite to being able to apply the financial return on investment measurement. Kodak is a large company that has taken this to a high level as an important part of its strategy for transforming itself from a traditional photographic films and papers company into a key competitor in the digital marketplace.

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Product Marketing versus Service Marketing

Product marketing is more specialized and detailed than most people may realize. If it wasn't, there wouldn't be nearly as much investment lost on products that do not become commercial successes. General marketing companies that don't seem able to clearly differentiate between marketing products and services haven't been able to effectively increase the commercial success rates for companies that specifically market products.

There are several references that give the failure rates for new product introductions. The normal range is typically from 70 to 80%. These sources include:
1. Various studies cited by Advertising Age,
2. A study by Linton, Matysiak & Wilkes, Inc. of the top 20 food companies reviewing 1935 new products,
3. A Booz Allen Hamilton study on new product management claiming that one out of seven product ideas yields a successful product,
4. Boston Consulting Group vice presidents and directors James Andrew and Kermit King claiming 60% to 85% in an article titled ‘Boosting Innovation Productivity',
5. Some college textbooks claim 80%.

Before looking at the different kinds of marketing and a couple key differences that can help companies improve their commercial success rates for launching or products, let's take a brief look at some definitions.

So, what exactly is a "product marketer" and what is the definition of "product marketing"? What about "service marketing"? The answers are not as obvious as they should be. In fact, there are conflicting definitions of "marketing" that can lead to considerable confusion. Let's begin with a crystal clear definition of marketing - the process of anticipating, identifying and satisfying customer requirements profitably. This is the core of what a business is all about and therefore a clear leadership role. That differs greatly from the opinion held by many that marketing is or ought to be primarily a support or management function rather than a key strategic leadership issue.

Okay, now that we have a clear definition of marketing and positioned it so that the tail doesn't try wagging the dog, we can look at the key differences between marketing products versus services.

Here are some differences between product marketing and marketing services:

1. Product marketing requires more sophisticated feedback systems than that required for marketing services. This is a key difference.

2. Product marketing has a lot of front end investment compared to service marketing which normally has much of its investment in the back end. This is another key difference.

3. People and companies become more attached to products than to service offerings. Few talk about this inventoritis aspect that can and often does have enormous impact on a business.

4. Products are often returnable whereas services are not. This is not a key difference although it is one that is often cited by marketing professionals. More service providers are offering guarantees making this difference somewhat moot.

5. Products except for things like insurance are tangible while services are less tangible. Construction workers building a bridge might argue otherwise but most buyers of services are purchasing intangibles. This is also a commonly cited difference that really isn't that important when looking from an investment standpoint.

Looking closer at the key differences.

When a product is sitting on the shelf at Wal-Mart, it isn't as easy to relate relevant customer feedback into the offering itself. In contrast, service providers are often sitting face to face with the consumer of the service and there is not a multi-link distribution chain involved like there is for most products.

Largely due to the complexity of determining products in the context of often modern distribution channels, it takes a lot more investment on the front end to accurately determine the product, its market orientation, packaging, presentation, etc. than it does for service offerings. Services are not normally distributed through complex or multi-player channels, each of which has specific needs to be considered for the process to work.

Another important and often ignored aspect is that it is a lot easier to get attached to a product than to a service. People and their organizations have a natural tendency to become attached to their products. This is generally not the case for service offerings. Look up "inventoritis" and you'll see what we mean.

Knowing the key differences between the different kinds of marketing will allow you to position resources more effectively. It also makes it easier to better plan your product deployments for greater returns on these investments, while avoiding common pitfalls. The bottom line: greater success with your product marketing.

[1] Brock, D. (1997). Getting the most out of your new product introductions. Partners in Excellence. Retrieved April 27, 2007, from the World Wide Web:
http://www.excellenc.com/articles.htm

[2] Linton, D.B. (1997, July 1). Market study results released: new product introduction success, failure rates analyzed. Frozen Food Digest 12(5), 76.

[3] Dean, B. (2005, March 28). Case study: Incorporating focus group research into the product development process. DM News, Article 32310. Retrieved March 31, 2007, from the World Wide Web: www.dmnews.com/cms/dm-news/e-commerce/32310.html

[4] Andrew, J.P. & King, K. (2003, April). Boosting innovation productivity. BCG opportunities for action, April 2003. Retrieved April 27, 2007, from World Wide Web:
http://www.bcg.com/publications/publication_view.jsp?pubid=847

[5] Friedman, H.H. (2000). Product policy; new product development. Retrieved March 31, 2007, from City University of New York, Brooklyn College Economics Department website: http://academic.brooklyn.cuny.edu/economic/friedman/mmproductpolicy.htm

Zipper inventors had their profits stuck in their teeth (The Zipper Story)

When someone mentions the word "zipper", what's the first thing that comes to mind? For many people, it's "I wish I had invented it." Zippers can be found almost everywhere on the planet. There are enough being produced each week that if they were joined into a long one, it would go around the world. Yearly production for this $8 billion industry exceeds 15 billion zippers - enough to make it to the moon and back five times.

Many inventors who file patents, including the inventors of the zipper - sewing machine inventor Elias Howe in 1851, Whitcomb Judson in 1891 (patented 1893), and much later again electrical engineer Gideon Sundback in 1913 (patented 1917), fall into the trap of being too far ahead of their time or otherwise being out of tune with the market. The zipper finally started getting good market acceptance after 1930 and is now one of the world's best known products - centuries later. It did little good for its early inventors.

Judson showed his version of the zipper to 20 million (20,000,000) people and sold only 20. If he went from door to door selling zippers and found everyone home, he would have knocked on every door in London, New York, Paris, Tokyo, Vienna, St. Petersburg and Milan to reach so many people. Yet he somehow only managed to sell a handful of these things. This seems like the ultimate case of not listening to the market. Judson had a severe case of inventoritis - being completely out of touch with the market and getting such terrible results.

Persistence only pays off where there is a real market. Judson certainly was persistent and spent the better part of his life working on his zipper. He brought investors into his new Universal Fastener Company, patented his zipper and promoted it at the 1893 Chicago World Trade Fair. He kept working at it for several years. Eventually, Gideon Sundback, who emigrated from Sweden to Canada, came to work for Judson's company. Sundback worked on the zipper designs for years and patented a newly improved version in 1917, years after both Judson's patent and Judson himself had expired. Sundback's new version did not do much better than the original. New machinery was built and over the next few years, production only got up to a few hundred zippers per day. This wasn't enough to make Sundback rich and Judson was already dead and buried long before then in 1909.

Zippers didn't really get their start in the market until after the B.F. Goodrich Company used them on a line of rubber galoshes in the 1920s. Goodrich invented the name "zipper" to replace awkward sounding phrases "hookless fastener", "continuous clothing closure" and "clasp unlocker" used by the various inventors to describe the product. Other players then started entering the market. The companies started by the inventors had a hard time keeping up. This includes the ones that evolved into present day Talon. Mid-1930s Japanese entrant YKK started from scratch with no patents and now commands roughly half the world market while Talon only has a 7% share. German producer Optilon has a similar share to Talon and much of the remaining share is made up of a growing number of Chinese and Korean producers.

Founded in Japan in 1934, YKK was called Yoshida Kogyo Kabushikikaisha, but 60 years later the company changed its company name to match its brand name. The privately held YKK Co. is headquartered in Japan and is made up of about 100 companies and subsidiaries operating 200 facilities in 60 countries.

YKK's success is based on constantly improving the quality of their products, treating their people with respect, lowering product prices and providing excellent service while managing tight delivery schedules. The company also introduced variations in styles, colors and attributes - highly responsive to market needs. Company founder Tadao Yoshida instilled this philosophy that he called a "virtuous circle" of rendering benefits to others so that benefits would return to YKK. His company is the Toyota of zippers.

YKK keeps quiet about its manufacturing process innovations and prefers maintaining trade secrets over patents. The company obscures the details of its improvements in its manufacturing processes. It does likewise for improvements in its supply chain and distribution management methods, custom-made computer software, and special management techniques. What is impossible for the company to keep secret is that it does not have a bad case of inventoritis. YKK has always been in close touch with the market - with excellent results.

The message for inventors is plain and simple. If you are going to do something, do your homework and always be in close touch with your market. Things don't come easily but they do come along to those who are prepared to engage the market constructively. Don't make it so your ideas and inventions end up being tens or hundreds or years ahead of time like those of the zipper inventors were. Fifteen minutes is about the right amount of time. The product could have achieved market acceptance much sooner if the inventors were better marketers. If they had gotten their zippers unstuck, they might have lived to see spectacular results from what has become one of the world's best known products.

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