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CASE SUMMARY Michael Bronner founded Bronner Slosberg Humphrey (now known as Digitas) in 1980.

The company was originally called Eastern Exclusives, which distributed coupon books to colleges and businesses in the Boston area. The coupon idea was pitched to American Express (Amex), and Bronner was involved with numerous projects for Amex. The company used direct mail to help companies such as AT&T. In 1989 Eastern Exclusives became Bronner Slosberg Humphrey (BSH). The company began to focus on the consistency of marketing communications coming from clients. Database management and modeling was relied on heavily to segment customers. In 1993, the company worked with FedEx to successfully implement a customer-based philosophy. The Strategic Interactive Group (SIG) was formed in 1994. This was a wholly owned entity, but separate from the company. The focus of SIG was on Internet capabilities for clients, which included strategy consulting, interactive marketing, and website development. Michael Bronner wished to keep the companys client roster small. He believed in the 8020 rule in which 20% of your customers yield 80% of your business, thus his rationale for fewer clients. Bronner felt his company helped clients in creating and executing relationship marketing programs, managing these programs through database management, and using the Internet. The founder was so passionate about adding value to the customers, bonuses were based on client performance not his own companys. In 1998, new CEO David Kenny needed to find ways to grow the company without disrupting the existing culture. He determined that the ways to grow were through adding clients, adding capabilities, or both of these options together. However, many clients did not want the entire service and new capabilities may not be superior to competitors.

THREE EVOLUTIONS IN APPROACH BSHs approach to helping clients had gone through three evolutions since the company began as Eastern Exclusive in 1980. Although all three phases deal with direct marketing, all three are somewhat different. The first evolution of the company occurred when Michael Bronner pitched his coupon books to American Express. With this account, Eastern Exclusives went from handling the direct marketing of regional businesses, to a company known worldwide. The company also applied the same ideas to AT&T in its attempts to battle competition from new companies, such as MCI. The main approach during this stage of the companys development was bringing companies together to the benefit of both parties. The company utilized direct mailings and measured success based on response rates. The second evolution occurred in about 1990. During this stage, the practice of Behavior Optimization was implemented, replacing the response rate success measurements. This approach looks at actual behavior versus desired behavior also known as the behavior gap analysis. Bronner and the client would then look at the value of closing this gap and the investments necessary to make the changes. The company relied on database management and modeling, and teleservices during this stage. This was used to segment the customers based on potential profitability and responsiveness. The third evolution in the companys approach utilized a philosophy known as Customer Base Management. This focuses not only on the marketing communications of the client, but also all of the sales and service interactions that occur. This approach provides feedback and learning through various stages from strategy development to execution to performance assessment. FedEx is an example of the Customer Base Management philosophy at work.

BRONNERS CONTRIBUTION TO FEDEX Weak market and increased competition contributed to Fedexs problem of stagnating growth. However, Fedexs main problem may lie in their mass-marketing strategy of offering a list rate structure to a segmented market. Although Fedex had a lot of information on their customers, Fedex had little understanding on how they behave and what they prefer. In order to spur growth, Fedex contemplated on the idea of reducing their general rate. Bronner suggested to Fedex that they should invest more on understanding their customers behaviors and preferences by constructing a more comprehensive customer database. Information is gathered through customer service calls, account executive visits, and accounting transactions. Bronner learned that Fedexs customers have different service requirements and priorities. Some of them used multiple carriers to do their business, because they either require different types of services that Fedex do not provide or have low customer loyalty. Some of them placed higher priority on on-time delivery instead of fast shipment. Some of them prefer greater use of computers to print shipping labels and to track packages. Using the learned information, Bronner initiated a pilot test in which Fedex offered different prices and services to some customers. Through this test, they further learned about how they can segment the market using the customers needs and potential return on investment as the criteria. The pilot test was so successful that Fedex institutionalized the process. Bronner helped Fedex to reduce the behavior gap by learning and meeting the needs of their customers. These needs were learned through comprehensive customer database and met through different promotional offerings. For examples, Fedex promoted reliability to customers who valued on-time performance and Fedex promoted diversity of services to customers who needed flexibility. In the end, customer loyalty is deepened. Such return of investment was measured by the decreasing numbers of dual account customers and the increasing numbers of new customers.

WOULD ALL COMPANIES BENEFIT? The BSH approach to marketing has proved useful to several companies, especially FedEx. However, this approach may not work for all companies. Although segmenting and targeting customers is an important marketing aspect to all companies, the Bronner approach may not prove profitable to some companies. For commodity type products, the amount of investment may be too large for the small return that may be generated using Bronner. Another reason this approach may not work for all companies is that Bronner only wants to deal with clients that share his passion for excellence. The company does not contract out for shortterm services. The focus was on clients who are interested in the entire integrated approach. Therefore, not all companies would even qualify for using the approach. There are several characteristics of companies that may be a good match for Bronner. A prospective client needs to have the resources available to implement this type of approach. Gathering and analyzing consumer information may be costly if the company does not already have this information readily available. Organizational changes may also need to be made in order to implement the approach. It would be preferable for the client to provide services as opposed to sell mass produced products. Mass produced products are often sold through retail channels and it would be difficult to have a consistent message come across with so many different outlets. Finally, as of the date of the case, it would be best if the company did not have a huge international operation. Bronner did not have a strong international presence and therefore, was excluded from some global strategies. If Bronner strengthened its global position, this may not be a problem. A COMPANY THAT WOULD NOT BENEFIT Wal-Mart is one company that would not benefit from Bronners direct marketing approach. When consumers go to Wal-Mart, they think of bargain and one-stop shop. Wal-Mart achieved its bargain status through economies of scale and efficiencies. For example, Wal-Marts suppliers

are expected to offer their best price on all items and control their own inventories through WalMarts inventory system, Retail Link (Useem, 2003). Suppliers are neither allowed to have excess inventory nor shortages. Wal-Marts one-stop shop status is achieved through economies of scope. Wal-Mart has the ability to rotate its seasonal items and offer almost all categories of products. Furthermore, Wal-Mart requires its suppliers to educate them about the suppliers product market. What this means is that the suppliers are the ones analyzing the behavior gap. Suppliers are meeting the needs of the consumers through Wal-Mart. Wal-Mart has the ability to attract all customers in its market segments. This is proven by the fact that they spend 60% of their ad budgets on in-store promotions. Thus, Wal-Mart has no need for a customer database to figure out the needs of their customersthey already know it. BRONNERS CONTRIBUTION TO COCA-COLA Faced with decreasing market share in 1984, Coca-Colas executives ordered a study of consumer behavior and what they think about new flavor offering by the company. What they learned was a behavior gap. Many consumers ranked Coca-Cola as #1 in their hearts, but not in their refrigerators (Pendergrast, p.348). The consumers also reacted positively about line extensions by Coca-Cola; however, they were never asked whether it was OK to replace the original cola flavor. When Coca-Cola launched the New Coke in 1985, they learned the hard way that CocaCola is more than an icon for soft drinks. Many people related Coca-Cola to traditional values. Had Bronner been asked to help Coca-Cola then, they would have discovered this through their customer database. Next, Bronner could have segmented Coca-Colas market into the following categories: loyalists, dual drinkers, and non-drinkers. Coca-Cola should target the loyalists and dual drinkers market by triggering their sense of love for the brand. Coca-Cola can associate the product with the great America past times (e.g., Baseball games, McDonalds, concerts, etc.). Coca-Cola should also target the dual drinkers and the non-drinkers with their line

extensions (e.g., Diet Coke, Cherry Coke) and brand extensions (e.g., Minute Maid fruit juices). In the end, return of investments can be measured by the number switched drinkers and new drinkers.