Robert Reiss: Hi, this is Robert Reiss on the CEO Show and we’re here today with Lester Wunderman. How are you Lester?
Lester Wunderman: I’m fine, thank you.
RR: And with David Sable –
David Sable: Hi, good to see you.
RR: – and Lester is the founder of Wunderman. Wunderman is a venerable organization that really reinvented the whole concept of advertising. You coined the term direct marketing back in 1967 at MIT and started 1-800 phone numbers. Talk about the organization, what your intent was when you started, and how you think you’ve done.
LW: The intent was to make advertising measureable. Advertising in its history was not precisely measurable; people had a sense that their advertising increased sales – or didn’t – but they couldn’t in any way put numbers to that. I got the sense that advertising ought to be totally accountable. If people were going to spend money on it they ought to know what effect the expense was having. I began, kind of as a maverick because no other agency was doing it, naming what we did direct marketing. Many of the clients we had did market directly to consumers rather than to normal distribution channels, and because they did that they could know who their customers were. Even in those days of immature data recording, customers kept index cards on who bought, and they’d have old-fashioned files where they could pull up people who ordered once or twice.
I grew up watching data become a science, and in our case the science of data became the foundation of our business. It’s what we know about the customer and what the customer does, has done, and is likely to do that lets us pretty much predict the effects from advertising. We know something – or try to – about what the lifetime value of the customer is. Most companies measure sales; we have always, from the outset, been interested in customers and in extending the period during which they buy from our clients and to expand their consumption as much as possible. You’re always using data as a marketing tool, and in the old business you had no technology to support data.
We got lucky; I got to know the early experimenters with computers – people at MIT and other advanced universities – because we were trying to measure everything. For example, there’s Nicholas Negraponte up at MIT, and Nicholas was really the founder of measurement. There’s Peter Drucker at Stamford, who was my teacher, and who knew the philosophy of marketing better than Peter Drucker? He was an extraordinary marketing person. I had the good fortune to seek out those persons who were making a technological and ideological change in the nature of marketing, and I realized that old-fashioned marketing as done when I entered the business could never exactly measure what role advertising had in the mix. I thought that that was an inefficient way, that there should be a way on a balance sheet that a company could know what the effective amount of advertising was. When I named the thing direct marketing, I was trying to get into the language of accountability, and I think we have successfully gone way beyond where I began.
David can tell you a lot more sophisticated ways of understanding that, and how the agency really functions around what it knows. We probably know more about our consumers and our clients’ consumers than any other agency does or cares to do. That’s our strong point: we’re responsible, we’re accountable, we can tell whether advertising is profitable or effective. Introducting that concept on a global basis made it possible for us to build an network that now expands through most of the developed world. We’ve taught people and we grew our experts at home. I found them all over the world and taught them at classes – we still teach what we do – and there’s been nothing left to chance. Somebody had to follow me and bring refreshing new thoughts into it and David, I think, was the perfect example. David, like myself, is essentially a creative mind. He imagines, he creates, he takes what doesn’t exist and makes it happen. I searched and searched; I can’t tell you how long it took me how long it took me to find the colleagues who could do what I thought an agency could provide. David is as good an example as one will ever find of somebody who’s mastered the art of what I made: direct marketing.
RR: There you have it: a wonderful sum-up which talks about accountability and the science of data. You segued into David Sable; so, David, let’s then shift over to you. You have operating responsibility for the global organization and you’re in about 60 countries with about 120 offices, about 6000 people. Talk about your responsibilities and the global perspective that you have in terms of clients.
DS: Having that many offices and that many people is a challenge. What’s interesting about our business and gets to the core of what Lester was talking about – the notion of accountability and of data – is that, if you really think about it, what simplifies the notion is that data is about the person, people or event that the entire transaction starts with. Someplace there is primal data. There is a person standing there that is your customer, your client, your user, your buyer. They could be anyplace in the world today. If you look at advertising, and I’m sure your listeners have seen this: if you get off an airplane in any country in the world and you walk through the airport, you probably see 60-70% of the same advertisements you’d see in any other airport. There’s a global image. The assets are the same, the pictures are the same, the copy is even the same.
In our business, and to Lester’s point, we’re accountable. We’re selling something. We’re not just creating a bank’s image; we’re helping to sustain and grow the bank’s image by getting someone to apply for a credit card from that bank. By definition, what happens at the local market is different than what happens at the global level. I can have a global image, but what gets that person to transact is different by country. We know that in America we tend to use credit cards to buy the next best thing. In countries like the UK people tend to use it to buy beyond their means. In Germany, people use credit cards because it helps them order the way they spend their money. In the far East, it’s a huge sign of respect and status. In Russia, we’ve been teaching people to use credit cards. In each of those instances, what we do at the local level is different. We can use the same assets, we’re true to the image and essence of the brand, but our offers and our insight have to be different. All relationships are local. For us, it’s critical to be powerful in-market, to have offices and people that are steeped in the locale and to have a balance of business that is both global and local. All of our global business is local by definition; we want to have global clients but we also want to be very powerful in business that is just local.
RR: It’s a really interesting concept. When you talk about it being local, that’s where the actual sales take place.
DS: When you think about the web and the digital environment, it’s provided a particular challenge. Today, wherever you sit in the world you can be any place. I could sit in a basement in Hoboken and be in Zurich. That’s what the web allows me to do. We’ve made the world a lot smaller, however we’ve created a phenomenon where it’s even smaller than you would think. You still have to talk to me; if you want to transact with me you’d better know that I’m sitting in Hoboken. At the end of the day, for you to be successful, you need to know who I am and what drives me. We think that’s the biggest opportunity for us.
RR: I have another question for you, David. You were talking about ‘global is local,’ and we talk a lot about the customer on the CEO Show. Could you elaborate a little more on your view of the customer and their role?
DS: One of the interesting things about our business in general is that – and you heard Lester talk a little about the history of our company – so much has changed in 50 years, but so much haven’t changed. We live in a digital world; things that people couldn’t imagine 50 years ago, our children are doing by rote. What, five years ago, cost $2-3 million to get designed on the web, five-year-old kids are doing with $3 software packages. Data has also changed, and our ability to know a lot and to know many things is very different.
What hasn’t changed is that, when Lester started the company some 50 years ago, it was all about the customer. It was all about the beginning point of the journey, that person who was the user, the buyer, the customer. That was critical. What we see being really important today is this notion of CRM. For many companies, CRM is about customer relationship management. Think about it: do you, as a customer, really want to be managed? It strikes a note that doesn’t sound right with us. What’s interesting about the digital age is that it’s all about information; people have access to amazing amounts of information and tools that allow them to be interactive in ways that they couldn’t before. We say it’s not about customer relationship management, it’s the understanding that customers really manage.
RR: That’s a really interesting concept. It’s sort of turning the table.
DS: We think that it’s the only way to look at it. Think about some of the things that we’ve all been doing for a good twenty-plus years and haven’t even thought about. Take an ATM, for example. You, as the marketing entity, give the customer the tools to put them in control so that your relationship with them is some sort of partnership. You use the ATM because you don’t want to stand in line in the bank. It’s very convenient, you can get your money out and make transactions… and very often you get charged for that. Your bank should be paying you for taking cost out of their system, but they have made you think that you’re in charge. It’s brilliant.
LW: You have to add to it the fact that technology has made it possible for the customer to be in charge. When we had media that were all one way, whether newspapers or radio or television, the customer was really the target. We didn’t know who he was, he couldn’t communicate back. Except as a mass, he had no power as an individual, nor could an advertiser learn what that customer needed to know or have so that they could make more sales. What we have today are two-way technologies. We’re in the death, now, of one-way conversations and the birth of the dialogue system of marketing. The secret of the future is to listen to the customer, not to talk to him.That’s going to be the basic difference.
DS: And that’s why we believe that if you put the customer in control and let them feel that they’re managing the dialogue, it changes their voice. You’re not talking to them, you’re allowing them to tell you what’s important to them and then you can respond.
RR: What we’ve been hearing is about the customer leading the way. We’re dealing globally but thinking locally to drive sales. It’s all about accountability and the science of data.
Norm Sherman: We had a lot of conversation about the positive things that technology has enabled in your business. Is there anything that technology has caused, or might cause, which might be a negative impact in the world of marketing?
LW: That’s a superstition. The big issue with information is whether we know enough to invade anybody’s privacy. The crime, if we were going to commit one – if we knew how, and if there were means to – would be to invade a person’s privacy. The fact is, we don’t know how; we don’t want to, there is no function to it, it is not possible. The suspicion was developed by competing media because nobody grows as fast as the direct marketing industry has grown without taking some flak from proceding forms. The flak we took was that we wanted advertising to be personal, relevant, and individual; we were finding the technological means to execute that. If you’re going to attack me, what are you going to attack me on? “Well, you know all that, but if you use all that you’re going to invade people’s privacy.” That’s downright impossible. If you gave me a million dollars today to invade the privacy of one person, I wouldn’t know how to go about it with the techniques that we use. I might have to hire a private detective and invade someone’s home but we don’t know how to do that. We know how to use media to reach people. We know how to use all forms of media to encourage people to respond to us and to invite us to help them acquire what they need. That whole issue of invasion of privacy was created by competing media. They’re simply jealous of the rate of growth and the potential that we have. Advertising is going to be us.
Y&R is an example. Y&R was the elegant, number one advertising agency. I had a choice, when I merged Wunderman into an agency. I talked to various people and I decided that Young and Rubicam, and its point of view, was more relevant to what I wanted to have happen. We had never even thought about the issue of privacy invasion. What we want is to be relevant. When advertising wasn’t proud that information was relevant, can you imagine that the billion dollars that were wasted on irrelevance? Talking to someone without a washing machine about soap? To talk to someone without a home about how to get new flooring? To talk to people who didn’t know how to drive about cars? The irrelevance was so costly. Nobody has really attacked it, as maybe if I write another book, I will. It was a primitive, unformed – although effective – flow of communication. We added to it together with Young & Rubicam, with the general agencies, and it’s changed the whole climate of what advertising is about.
Dennis Troyanos: David mentioned that all business, and all marketing, is local. Lester, you grew up in the Bronx. I wanted to get a sense from you of what you learned from the local Bronx shopkeepers and retailers about relationship marketing.
LW: My first job – I grew up in the midst of the depression – when I was nine years of age, I went to work for local retailers because nobody was going to hire a nine-year-old as a manufacturer? What I found is that I could talk to people. I had a butcher as a client; in the Bronx, Jewish women buy chickens on Friday, and they were living mainly in walk-up apartments. What they didn’t want to do was to carry their chicken up five or six flights of walk-up steps. Suddenly I had a job: I was the legs that got the chickens upstairs. I learned a lot from that; there was a woman in one of the buildings who tipped me; tips in those days were two cents, and she gave me a nickel. I said to her, “Mrs Schwartz, why do you give me a nickel when everybody else gives me two cents?” She said, “I live on the sixth floor; I need you more.” What I learned from being needed more and being able to satisfy needs was the beginning of my education in advertising. My education in advertising was not particularly as a service business but as part of the sales process. It was measureable, it was effective, it was necessary to the economy and it was of great satisfaction t o the consumer. Advertising is something that the consumer had a right not to be abused by but to be helped and assisted by. I learned all that as a kid and I haven’t forgotten it in all these years.
DT: David, Lester has said both privately and publically that you’re the perfect person to follow him. What’s the most important thing that you’ve learned from Lester Wunderman?
DS: To find as many Mrs. Schwartzes as we possibly can to get that nickel. Everybody in our company would say that the legacy that we follow is the notion of innovation. What’s brilliant about what Lester created, and what those of us who work in the company today are always cognizant of, is the notion that there’s always something new coming down the pipe. We should never get locked into any one channel, any one way of getting that dialog going with our clients. When Lester began the business, it was a lot of direct mail; there was some television. He helped create the 800 number so that all of those things became more and more efficient. Today we have the explosion of digital channels, so we have many more that we’re able to communicate in, and most of them have that built-in two way dialogue. We’re always tuned to the principal of focusing on adding value. How do we help Mrs. Schwartz get the chicken up six flights of stairs? That will never change.
DT: Lester, if you had to do it all over again, from the beginning, what would you do differently and what would you do the same?
LW: I would have started the same because there was no other way of beginning. My family was very poor, my father had died during the depression. My mother was a woman who had no skill at commerce whatsoever. She never held a job in her life. There wasn’t much I could do differently except learn to be useful. What I think happens now is that I’ve been fortunate enough to find people like David, who will continue the spirit and the innovation and the activity and the client functions that I began in a much more sophisticated form of media than those I began in. While I try to keep up with what David is doing, the fact is that it’s his turn.
RR: A final question that I’d like to hear first from you, David, and then from you, Lester. When you look at Wunderman, which has reinvented the entire advertising industry, what is different about Wunderman today?
LW: I think what’s different about Wunderman today is our ability ot use technology in ways that, fifty years ago, nobody would have thought of. We can immediately know who you are, serve you a message that is interesting and relevant to you, we can learn about you and use that learning, the next time you talk to us, to show you that we listened. We can be relevant in an instant. I think that that has changed what we do forever.
RR: What would you say, Lester?
LW: Well, the world has changed, and David’s issue of relevance is key. The fact that we have more information about the consumer than ever we had before and you can get it from so many sources that we don’t necessarily need to be the original of fundamental, basic data. What we do is to sophisticate that data and add to it in the way that we are specialized and organized to do. Data is really part of the balance sheet. It used to be that advertising was an expense, and companies preferred not to advertise. If they made a profit, they spent part of it on advertising. What we now know is that advertising adds profit when properly performed, and doesn’t go on the cost side. I think that’s what our agency has done. If you want to know the effect of what we have done, it’s that we have made billions of dollars in profits for our clients globally, instead of having them spend their money as an expense on the wrong side of the ledger.
RR: And there you have it. Wonderful having you on the show.