RJR: USE OR LOSE DATA BASE MARKETING

PAT NATSCHKE LENIUS

CHICAGO -- Once you develop an ongoing relationship and dialogue with consumers via data base marketing, you have to sustain it or you will lose the benefits initially gained. This was the lesson learned by R.J. Reynolds Tobacco Co., Winston-Salem, N.C., with data base marketing of its Vantage low-tar cigarettes, according to Khurshed Wadia, senior manager of direct marketing. "Data base marketing is effective in delivering franchise redemption as long as you have the right audience and maintain relevance in offers and communications. "You don't want to be just another piece of mail. This requires continuous improvement, testing new things, talking to customers, frequency and continuity. You need an 800-phone number," said Wadia. "When the marketplace is at parity, data base marketing can be the point of difference, especially for a niche brand." He spoke here at the Packaged Goods Database Marketing Conference hosted by International Business Communications, Southborough, Mass. To illustrate the success of data base marketing, Wadia used programs developed for the Vantage and Winston brands of cigarettes.

RJR introduced the Vantage Inner Circle data base marketing effort in 1990. Elements of the program included quarterly mailings of a newsletter and coupons, point-of-purchase offers, premiums and gifts. Portable ashtrays promoting Vantage were distributed at events. Vantage was the fifth-largest RJR brand and its first low-tar brand. While it had a highly loyal franchise, it was a niche brand and faced a tough competitive environment, complicated further by private-label growth. The Inner Circle program was developed to retain the franchise and product volume. Invitations to join the Vantage Inner Circle were issued to Vantage smokers yearly. By 1993 two-thirds of the Vantage data base were participating, Wadia said. "Being a small brand, we did not have mass advertising funds behind it. Return on investment in 1992 was four times our promotion cost. The coupon redemption rate was 35%," Wadia said. From January to June 1993, volume and attitudes continued to move in a positive direction. In the summer of 1993, all the tobacco companies rolled back their prices. "Most funds were channeled to retail. Our data base marketing was suspended to fund the price cutback, not for retail marketing programs. From 1990 until June 1993, the size of our club was growing. Then it hit a wall," he said. By the end of December 1993, volume allocation was down 14%. Brand perceptions declined after increasing for the first half of the year. The majority of brand imagery ratings declined to preprogram levels. Several product ratings also suffered due to the period of direct marketing darkness, Wadia said. "Creating expectations requires follow-through. You have to sustain the relationship. Data base marketing is not a short-term proposition. One mailing a year won't cut it," according to Wadia. A similar data base marketing effort was launched by RJR in 1992 in support of the Winston brand. "Winston was operating in a declining, highly competitive market," Wadia said. "It had a strong franchise base and a strong heritage in motor sports and Americana, but it was being threatened by private-label [sales]." Wadia listed the challenges faced by the company's brand: stopping the sales decline among franchise smokers, increasing brand loyalty, maintaining share of purchase, reducing private-label migration, leveraging its heritage and becoming the customer service brand. "Our solution was to develop an ongoing relationship and dialogue with our franchise consumers through integrated direct marketing. This included a newsletter, event marketing, a customer service desk, merchandise offers, surveys and comment cards," he said. The marketing was done with minimal discounting, which was a brand objective, Wadia pointed out. The customer service desk handled travel packages, provided information on events and addressed product-related questions. Surveys and comment cards helped establish a two-way dialogue between RJR and the Winston smokers. An original solicitation to join the Winston Winners Club was sent to Winston smokers. A second mailing was done to nonrespondents. Communication was ongoing, according to Wadia. Members received a $2-off coupon on a carton of Winston cigarettes in one mailing. In another mailing, the newsletter contained a photo of the people who answer the toll-free phone number for Winston. "When you want to show something to your customers, make sure it is something they can relate to," Wadia said. The program has undergone continuous improvement, he said. "Just because someone makes a mistake in the first mailing, don't let it go on. Correct it. Talk to your customers and find out what they want. A relationship requires a two-sided dialogue. Improve the program," said Wadia. In testing conducted prior to its national rollout, the program generated a strong data base marketing response. Thirteen percent of members were active, participating in travel packages, responding to coupons and calling the toll-free number, he said. Brand perception improved an average of 10%. Share of purchases increased 16%. Return on investment was 41%. Those results led to a national roll-out of the program in 1993, Wadia said. "A year later, our membership reached critical mass with 43% of our data base in the program. Members defined as active members increased from 13% to 38%. Our volume was maintained while the marketplace declined. Positive brand perception was sustained. Some price promotion sensitivity was reversed, but we found that we do need coupons from time to time," he said. RJR's direct marketing efforts are aimed at encouraging smokers to switch from other brands and retaining franchised smokers, he said. Its quantified consumer data base has been built through response. Consumers became involved by choice. "A true relationship marketing program is what we wanted," Wadia said.