Interview conducted by Peter Wagstaff with Tony Palmer Senior-Vice President and Chief Marketing Officer of Kimberly-Clark Corporation in the USA during his visit to the Department of Marketing in October, 2009.
Peter Wagstaff - Thanks so much for joining us Tony. It's well over 20 years since you left Monash Marketing. I am going to start with a very broad question. How has Marketing changed in those 20 plus years.
Tony Palmer - It's fascinating, funny since I left this fine establishment, a lot has changed, yet a lot has remained the same. I went and worked outside of Marketing for a period of time as a general manager, albeit in very marketing orientated companies like Coca-Cola and Kellogg and I came back into the marketing function specifically about three years ago and the thing that was shocking to me is that so much had not changed and, I felt that the way we are going about doing marketing is inappropriate for the times today. The world has changed significantly in terms of disagregation of media, everyone talks about this stuff, right, so it is nothing new. Losing the ability to talk to consumers directly, because they are being bombarded so much even interviewing consumers it's hard to get their attention.
The ways of marketing of the past are fast becoming out -moded. So just to give one example, which is something we have changed fundamentally in our company recently is the idea that you start off interrogating the brand and understanding the brand promise then you go and buy media in the upfront which pre presumes that 70% of the media is going to be on television. Then you go shoot a television ad with your creative agency then you go and try and blow it out around the various elements of digital and so forth, and basically you throw it over the wall. As much as people say they don't do that, that still happens today. We have re-invented that process so you understand the brand promise then you bring all the relevant parties including all the agencies together and interrogate what the opportunities are and what the barriers are then go through what we call touch point planning as opposed to media planning, choose where the best place to hit the consumer is given what you are trying to achieve then get into creative execution across all channels that you choose to touch the consumer in. That is a very different sequencing of the marketing process. That has surprised me that it hasn't happened more rapidly, there seems to be a lot of muscle memory both on the client side and on the side of the marketing services companies that's stopping that innovation happening and the way we go about marketing.
Peter Wagstaff - You have been quoted often as saying that the basic model of marketing if flawed - that's severely broken. So you have said how you (Kimberly-Clarke) would fix it. How are other organisations approaching this and are they attempting to fix this - or are they stuck in the old model?
Tony Palmer - I think firstly, it was a much greater degree of difficulty changing that process than I expected at Kimberly-Clark for the reason that the ways of doing it are so deeply embedded in both the culture of our organisation and the culture of our agencies. For example, all of a sudden you are asking a creative agency, which forever is being the lead dog, to regard a digital agency and a shopper marketing agency, and your own sales force, as equal partners in the strategic development. You are also placing the creative agency in a place where they help you with the strategic development of the brand, so what's the brand positioning, architecture, etc. Then you are putting space between that and marketing execution, or creative execution, and they participate in that but do not own it and then you are asking them to do creative execution. So you are breaking the functions of the typical creative agency in two and you are inserting a modified version of media planning in the middle of it. It is a modified version because the example I give you is people talk about media planning but for example on our Huggies brand we know the third trimester of pregnancy is a very important time to talk to mum because she has an insatiable appetite for information. We also know that a very important time in that third trimester is the baby shower, if you are thinking about having a commercial and knowledge relationship with the mother so owning the baby shower is really important. Now that is not a medium but you need to treat it like a medium and you should be sampling and so forth.
Peter Wagstaff - It's a touch point.
Tony Palmer - Yes - it's a touch point - absolutely! So broadening the way you think about it is really important. What is really important is having a systemic process and a systemic way to do that in a repeatable manner. I'd liken that idea going back to disciplines of manufacturing and thinking about lean and taking time out of the process and taking wastage out of the process.
Peter Wagstaff - Sure. You mention agencies in part of the problem. Are agencies changing quickly enough with new media for example? Should it be the role of the agency to be responsible for the digital side of things or is that a separate role? Should we be using separate agencies for example?
Tony Palmer - I think, firstly, the old style of creative agency that focuses on television and television alone I think is going to become a thing of the past, frankly. What I think is becoming much more powerful is touch point planning and the analytics that go around that. And also if you think about the construct that I laid out what happens in that process where you are working through the development of ideas to overcome the barriers, or to address the opportunities, is a free market for ideas across various functional agencies and it's the creative collision from all the various different agencies, and suppliers you have that creates a richness of ideas. Diversity of thought always will drive you to a better outcome in my view. So I do not think specialty agencies is a thing of the past. I think they need to work together much more thoroughly. One of the ways we have addressed that is I have an agreement with Martin Sorrel, Chairman of WPP, that we do the vast majority of our business through WPP and we have an account manager that reports directly to Martin that brings together the power of WPP and helps us force the agencies to work in a constructive manner together. I've been on record, and I'll say it again, I am very pleased with the way our agencies are working together but it is not perfect and probably will never be but it is a much better construct that we have had in the past.
Peter Wagstaff - On that, what role do you see new media playing in marketing? Is new media a passing fad or is it here to stay? Where should we head with new media?
Tony Palmer - I have a loathing, to be honest, for the word 'new media' because I think the idea of a touch point is much more powerful than new media and ultimately one of my concerns that I see, there is seemingly a loss of discipline in marketing, and ultimately the discipline in marketing is what's the promise I am going to make with my brand, and most importantly who is the target I am going to address with that promise. So you have great clarity on who you are talking to. Then, having marketing objectives that are really clear. To me a marketing objective is I am going to drive category penetration against this target. Or I am going to drive brand penetration and therefore take share against this target. Or I am going to drive usage of people who are already in this category against this target, or I am going to drive share requirements and therefore take share in usage. Now if you have the discipline to really drive objectives like that and then you have a process that says you have a brand promise and you try and service that objective - all of a sudden it becomes clear what medium you should be using. Even in store for example, what it has done for us is where we have understood that we have tried to drive penetration, well you tend to give deeper single price discounts rather than multi packs and even in pricing you tend to look at, OK if I am going to try and drive penetration, then maybe sampling is the right way if I have a strong product proposition and you think much more broadly about it. Whereas if you are trying to drive usage you may be able to give multi buys and also driving the consumer through communication to think about new ways to use your product.
Peter Wagstaff - Moving on to a different topic, 2009 has been a particularly difficult year, particularly for a lot of big consumer brands. What do you think the impact, both short term and long term is going to be of the global economic slow down?
Tony Palmer - I don't think you can standardise or you can generalise and say the impact is going to be this on consumers. For example in the US if you look at consumers, lower income consumers have been impacted very differently than higher income consumers. In fact, in some way lower income consumers have income concerns whether or not they can get the next pay cheque in time. Higher end consumers have retirement concerns and balance sheet concerns. They are a very different reaction depending on whether you are worried about 'am I going to be able to eat next week' versus whether you are worried about retiring, for example. So even within the US where it has been a very difficult time it is very hard to generalise. You go to places like China for example or India where there is a powerful growth economy. The economies have slowed, but they are back into growth pretty quickly. It is quite likely to be, and they do not have higher expectations in terms of material ownership - the impact might be quite different. So, in Australia I don't think have suffered the depths of the depression as the US had so that the recession so that the impact is slightly different. If I go to the US I do think that you are going to see a much less material view of the word, and you are already seeing a shift in attitude to a more round experience than ownership, so by experiences be happy and you hear a lot more people talking about that, than living life for a purpose as opposed to living a life for material things and you see that showing out in accentuation of corporate social responsibility, sustainability, there is a fundamental shift to that type of activity. There certainly is in the shorter term and how long this will hold out, there is a trading down within brands and so there is a trading down of channels. Whether that is going to be shorter term or longer term - it's hard to tell. Although all the research says that consumers tend to trade down in a recession then as they come out they trade up. But they only trade up about 80% - so not all the way so therefore private label tends to get a bump in a recession fall back, but not fall back to the prior level, for example.
Peter Wagstaff - So, you have adjusted your strategies accordingly?
Tony Palmer - Yes we have. Well our strategy hasn't changed - the way we are executing it has changed, is probably the best way to put it. Some of the adjustments we have made, the moment that things got really tough we increased our investment in market research for a simple reason that we came to understand very quickly that consumers' behaviour was changing very rapidly - and that we as marketers spend a lifetime trying to change consumers' behaviour and here all of a sudden all bets are off and consumers are willingly changing behaviours very rapidly so the opportunity to understand them and understand them real time, so we invested a lot more in a couple of areas. One was real time understanding - internet panels and blogging and tweeting and so forth so that we are getting real time feedback from consumers. The other space we spent a lot of effort and money on improving our pricing methodologies. Most of our large brands, around the world now, we can draw the price demand curve for and the cross elasticity curve (literally) which we could not have done in the past. Now that has served us really well in terms of being able to understand how consumers are behaving - qualitatively and quantitatively and statistically. So bringing that together was one element so there was more emphasis there. We continued to invest very heavily in advertising and innovation, so we have spent $100 million incremently in 2007, the same in 2008. We are up 95 million to the end of the third quarter this year, so we have spent more on advertising and we have increased the intensity of our innovation. The result has been this year, at the end of our third quarter, our top line has grown about 3% and in organic terms, our growth margins are up around 390 basis points or 3.9% which is a tonne of money in a 19 billion dollar company and our operating margins are up the same percentage. Our EPS this quarter was up 32% on the prior year and we are investing more in the business. We have a sustainable business model working in a really tough environment. The amazing thing to me is individually a company can do that. Individually people will agree that is the correct thing to do. Collectively the industry does not seem to invest for a recession which is amazing.
Peter Wagstaff - Now many of the people who are viewing this interview right now are current students or recently graduated students. Can you give them any advice on how to start and best build their marketing careers, particularly given the changed climate today, compared to back in the 80s. What should they be doing?
Tony Palmer - I have a few pieces of advice. The first would be I think as you start out in your career work to build experiences and to build understanding and skills and capabilities as opposed to working to get to the next title. It is very important and I think it is getting more important that it is the array of skills and competencies and experiences that you have that prepares you for the future. Just running to get the Director's title or Vice President's title just so you have got it is truly problematic . That would be the first thing.
The second thing is if you spend, as you are going through your career, if you get any opportunity at all, to spend time in alternative functions, because it is my view that marketing ultimately, the success of businesses is going to come from driving growth. You cannot save yourself to prosperity. It has never happened and it is never going to happen. You can do it short term not long term. Marketing is the engine of growth for the company when you are defining marketing in its broader sense. I think marketing is being redefined to include research and development, marketing customer development and almost the centre of the plate of the company. So a stint in general management is really important I think if you want to be a CMO for example. So getting that multitude of experiences. The final thing I'd say - seems strange to say this but what I have found that I have learnt over my career is be generous with acts of kindness. It's amazing to me - I have lived probably the last quarter of my career now and I have done favours for people just because I wanted to during my career. Its amazing how those things gather up over time and you get good things happen to you that you never knew would happen to you. You get back in spades if you give so have a giving attitude and don't make it about you, I think is really important.
Peter Wagstaff - Karma
Tony Palmer - Yes, I guess it is karma in some way, isn't it but it is probably a more analytical few of karma. I hadn't thought of it that way!
Peter Wagstaff - Is there anything else you would like to share with us Tony?
Tony Palmer - Well, the one thing I would like to share with you is - I must say having graduated from David Syme Business School, now Monash. That was the foundation for me of my career. The course that I did gave me a number of things. A wonderful analytic base to come from. A true understanding of how you should think about the consumer, and because we studied multiple functions as well, a view of how marketing fits in. One of the most wonderful experiences was international studies as well so, which to a large part inspired me to an international career. So that experience was fabulous. I must say the truth is I was a nerd, I worked my tail off when I was at college but it pays dividends. I think that strong foundation with a great institution such as my alumni is the bed rock of a career.
Peter Wagstaff - Absolutely and making the most of those opportunities. You will be pleased to know the International Study Tour continues to this very day.
Tony Palmer - Final thing - don't be afraid to take risks. Nothing ventured nothing gained. I have taken plenty in my life and I am not dead yet.
Peter Wagstaff - Great - Thank you so much for your time Tony.
Tony Palmer - Thank you!!!