A History of Marketing

• Giana Eckhardt: The Origins of Branding in Imperial China

  A History of Marketing / Episode 11When and where did modern branding really begin? The usual narrative suggests it started during the Industrial Revolution, when the UK and the US began mass producing goods.This week, we’re challenging that story with my guest Giana Eckhardt, Professor of Marketing at King's College London, whose research reveals sophisticated branding practices thrived in Imperial China centuries before the Industrial Revolution.Early examples of Chinese brands like the "White Rabbit" show how sophisticated targeted marketing and brand symbolism are much older than originally thought. We also explore Eckhardt’s work on The Rise of Inconspicuous Consumption and analyze how conspicuous and inconspicuous consumption have trended over the 20th and 21st centuries, with cameos from Marty McFly and Larry David.----------------Challenging the Traditional History of BrandingAndrew Mitrak: Giana Eckhardt, welcome to A History of Marketing.Giana Eckhardt: Thank you for having me, Andrew.Andrew Mitrak: So the typical narrative is that modern branding originates from the Industrial Revolution. But you have research that shows that branding practices date way back further than that, all the way back to imperial era China, more than a thousand years ago. Before we dive into this research, could you give a high-level overview of what the traditional version of this story is?Giana Eckhardt: What you'll read in every branding textbook that's used with MBA students, for example, is that yes, there are examples of the place origin of where something was from that exists in antiquity. So in other words, if you look at a vase or something that's been found in an archaeological site, it may say the name of the country or even the region from which it was from.But in terms of modern branding practices, which basically refers to the symbolic uses of brands to say something about who you are as a person and being much more identity focused, that first came into being around the Industrial Revolution. So in the 1800s and typically the UK and the US are the places that are referred to where modern branding practices originated. So this is things like brand mascots, for example. The first brand mascot is Bibendum, who represents Michelin tires.Andrew Mitrak: I didn't know he had a name.Giana Eckhardt: He does. Bibendum, yeah. So things like elements where the brand starts to become anthropomorphized. Consumers are willing to pay more for something because it has a particular name on it. All of those types of things originated around the Industrial Revolution and are typically tied to capitalism.Discovering Branding's Ancient Roots in ChinaAndrew Mitrak: So if the traditional story is that brands emerged out of the Industrial Revolution tied to capitalism, when did you start to second guess this version of events?Giana Eckhardt: I did my PhD research in China and what I was doing it on was the symbolic uses of brands in China at the time. And so I have some really, really great stories, which we can talk about some other time about how brands, which were brand new in the 90s in China like McDonald's, what they came to mean in a culture that was so different. But during the process of being over there and doing the research for my PhD in the late 90s, I started to realize that there were all of these brands that were way, way older than that. Meaning like millennia older than that. Using very sophisticated and symbolic uses of visual images or textual words that you can see in brands from basically the Song Dynasty, which is around 900 BC onwards.Andrew Mitrak: When you say you saw these and found them, how literally did you see them? Did you see them in books? Did you see them at museums? And like what was that aha moment where like, hey, this actually, this looks like branding and this predates the Industrial Revolution by millennia. What was that “aha” moment like?Giana Eckhardt: Yes, there are brands in museums actually, which you don't really see in a lot of countries outside of China. So that is definitely one place that I saw them. There have been books written on this, although in Chinese only. So we worked with some different people to help us translate a lot of what these ancient brands actually said. And also, some of the brands from that time are still around. So Tong Ren Tang, which is a pharmaceutical brand, for example, still exists now. And the white rabbit, which although not for needles, it's used for candies now, but in terms of a branding symbol from then is still used now as well. So they're still around.Early Branding Practices in Imperial ChinaAndrew Mitrak: As you came across this research, what led you to dive in and start to publish literature to correct the narrative and change the story? What drove you to this as an area of interest to keep pursuing?Giana Eckhardt: I've always been interested in Chinese culture and philosophy in general. And so I think when I realized that all of this had existed, and although it had been written about in Mandarin, it hadn't been written about in English, I really wanted to bring that knowledge to the canon of what people read in the West.Andrew Mitrak: Let's talk about bringing it to the canon in your article, A Brief History of Branding in China. What were the earliest traces of branding practices that you came across and shared in this article?Place Branding: The Changzhou Comb and Maotai LiquorGiana Eckhardt: Yeah, so place branding, so in other words, calling a product by the region in which it's from, is one of the oldest branding practices in general. And in China, we can see this as well. The Changzhou comb is a particular style of comb that was made in the region of Changzhou. And so when people wanted combs that looked like that, they just started calling it the Changzhou. Which one do you want? Oh, the Changzhou comb. And eventually, it became a brand in terms of like a legally protected brand, etc. But at the beginning it was not. So early branding practices of the place brands evolving into more symbolic brands is definitely one.Andrew Mitrak: This is so interesting because today we see place brands all the time. There's Kentucky Fried Chicken, there's Fiji Water, there's Philadelphia Cream Cheese. Almost every sports team is a place brand as well because it's tied to a city or an area. And how did a region become associated with Combs?Giana Eckhardt: Well, that's where they were made. That style of really brightly colored and having a person on the comb. Again, things that aren't necessary from a utilitarian standpoint, that was only happening within that one region. And there are a lot of other products that are similar to that too. It was very organic. We tend to think of branding as something that is very intentional, right? That it's something a company is doing or maybe a country is doing, branding itself or whatever. But it's very intentional and actually, if you look at a lot of these older brands, they just evolved into the brand rather than having it be a managerial decision.Andrew Mitrak: Yeah, and another place name example that you cite is Maotai liquor. And I thought it was so interesting to see a liquor example given that we associate alcoholic beverages with the region so much, whether it's breweries and microbreweries or macro breweries like the Rocky Mountain Coors lights and the macro beers of Michigan or the scotches of Scotland and the wines of France and of Napa. But here you have Maotai liquor as being associated more than a thousand years or so before modern day liquor brands evolved and it's a region known for its liquor. So I just think that's really fascinating that this seems like an organic way for a brand to emerge.Giana Eckhardt: Exactly, and you have to support it as it grows. You can't just leave it there to continue that way organically. For Maotai liquor, the key moment was when Richard Nixon went to China in the 70s. That was the first time that a US president visited since the Communist Party had come in charge. It was the first time that a US president had been invited. And when Nixon arrived to China, he was served Maotai. And all of a sudden the brand became so famous. Oh, what is he drinking? What is that? It's still very difficult to get Maotai outside of China now. So it's not like it had a huge boom in terms of sales after that outside of China, but it definitely had a boom in terms of brand recognition.Andrew Mitrak: Let’s go back to Imperial-Era China, well before Nixon’s visit. Let’s say we’re in 960 AD or some time like that, and I'm looking for a product. What is my experience of branding in these early days? If I'm or if I'm a merchant selling a product, what are the forms of branding? What are the primary functions that it's serving? Because this is outside of capitalism as well. So like who is involved in creating brands and who is involved in purchasing and identifying brands? What does that look like?Giana Eckhardt: It often stemmed from consumers themselves wanting to have a way to be able to find the same thing of the same quality that they wanted the next time. That's the Changzhou combs, right? How do I know that this is going to be made in the way that I'm looking for? You need some sort of language in which to explain that, right? So consumers would oftentimes come up with their own names, like which sometimes were place brands, but some sometimes weren't.The government also as well. The government realized that this was a way to help regional development. And also, in the same way that in the UK, the royal family will still endorse particular products, the emperors always endorsed particular products. And they realized that that was very strategic also. And so it was their way of helping saying, “Oh, why don't you call yourself this and we'll give you a seal that says that the emperor has endorsed this.” And so these are some of the ways outside of, we have a company and a brand manager who makes these decisions. These were some of the ways that were happening then.The White Rabbit: A Case Study in Early Brand SymbolsAndrew Mitrak: One of my favorite examples in your paper from this era is the white rabbit, which we referenced earlier. And can you tell listeners what the white rabbit is and what the brand of the white rabbit is?Giana Eckhardt: The white rabbit is widely considered to be the first modern brand. So in other words, a brand that just goes beyond identifying where it's from or something like this, but has more symbolic aspects to it.Andrew Mitrak: And it was for needles, right?Giana Eckhardt: Exactly. So it was needles that typically women back then would be using to sew. And it's important to say that the women who were the target segment for this were largely illiterate. So there is text on the brand. So there are the characters for a white rabbit. But people would recognize it, just who couldn't read that. And the reason why they would recognize the white rabbit is because that is a key character in a Chinese myth that everyone would know. And it's a character that represents females because the white rabbit is an empress ascended to the moon in a particular story that is very long to tell. But she ended up on the moon and the only thing she brought with her from Earth was her white rabbit. And so it's a symbol that's associated with women who were the target segment. And where you would see these images of a white rabbit is in the wrapping paper. So when you would buy your sewing needles, they would wrap them up in a brown paper and it would have the symbol of the white rabbit on it. It was also outside of the store, the first store, to show people where it is you could go to buy it. So it really served so many functions that current brands serve, in terms of making people feel seen and feel like this is for them because they can understand and relate to the different images and messages that are associated with the brand.Andrew Mitrak: So the artifact that's preserved with the white rabbit and is an image that's copied in your article is an etched metal stamp that would be used to imprint on a piece of paper. And in this image, you have it all. You have an image of the white rabbit. You have text around it and the text, the translation that I read is quote, we buy high quality steel rods and make fine quality needles to be ready for use at no time, unquote. And it sounds like it has all the hallmarks of a very modern advertisement. The image of the rabbit, of course, is on something that could be stamped and repeated and be consistent and you have positioning that emphasizes the quality and the speed of use. And it just seems remarkably contemporary, even though it's from close to a thousand years ago.Giana Eckhardt: Yeah, I 100% agree. And I would just highlight that in addition to everything that you said that leads it to sound remarkably modern, it's also speaking to a specific target segment, which brands that just identified things they did not do. And this is something that I think is really important to emphasize because it's one of the keystones of modern brand management now, right?Early Chinese Celebrity Endorsements and Target AudiencesAndrew Mitrak: So we've talked a lot about some of these keystones. We've talked about branding places. Are there any other favorite examples of early branding practices in China that you want to highlight?Giana Eckhardt: Celebrity endorsements. This was during the 1900s, but there is a cigarette brand that's featured on their packaging, the different generals that had fought in the war and been successful. And so you can have this idea of hero worshipping and promoting nationalism, using people who were well known and widely admired. Especially in the age of social media, a lot of people think this is something that is so new. And yeah, maybe the medium in which it's being disseminated is new as compared to cigarette packaging or something like that. But what they're trying to do is remarkably similar.The Spread (or Lack Thereof) of Branding Beyond ChinaAndrew Mitrak: Let's look at how this might have influenced branding outside of China. Do you see these early branding practices as a unique offshoot that developed within China and didn't influence the outside world or do you feel like these early beginnings of brand development influenced how areas outside of the Chinese region also practice brand development?Giana Eckhardt: China was remarkably insular for thousands of years. And this was because China was never a colonizing power over other areas. If you think about like as when we were talking before about modern day branding practices and those stem from the Industrial Revolution. Well, think about the UK at that time, for example, like and how many colonies they had. So that way of doing things, it's easy to see how it spread. With China, it wasn't until others went to China that even that this was even that these practices were realized. Of course, there was the Silk Road. So, products from China had been going to Europe for a long time. But the branding practices that went along with them because you need a level of cultural understanding to get what these brands mean and why they would be important. And so they didn't travel. And this is why we don't know about a lot of these brands and these types of practices even now in the branding literature. It's something that has been under the radar. And of course, now some Chinese brands are starting to become more prominent globally. Now, we can of course see this with Byte dance and TikTok, for example. It's been something that's been insular to China for a long time.Independent Development of Eastern and Western Branding PracticesAndrew Mitrak: The idea of branding and consistency and stamping sounds like within China it was identified and developed first and then almost independent of that years later, then the Industrial Revolution also adopted these practices, not necessarily influenced by what happened early in China, but they just came to a lot of the same ideas independently at a later time. Is that the right way to think about it?Giana Eckhardt: Yes, I think so. In terms of the symbolism attached to branding, that's something that yes, I think that definitely developed during the Industrial Revolution, but also in China, as we've seen and been discussing. So I think it's yeah, similar practices that developed from different cultural milieus that didn't, yeah, so they developed independently even though as you said, they can be so similar now.Conspicuous and Inconspicuous ConsumptionAndrew Mitrak: Let's just segue into a separate topic. There’s another area of your research that I wanted to cover with you, which is this idea of conspicuous consumption and inconspicuous consumption. And by the way, these words are a mouthful and I'm gonna probably get tongue tied. But I think that this idea of conspicuous consumption, it was an idea I've heard this phrase before, but admittedly I had to look it up and catch up on who Thorstein Veblen was and where these ideas came from. But could you define what conspicuous consumption is for listeners and how it relates to ideas of luxury and branding?Veblen and Defining ‘Conspicuous Consumption’Giana Eckhardt: Veblen is the first person and still who people look to when they think about conspicuous consumption. He was writing at the turn of not this past century, but the one before. So in 1899. And this was the era of the robber baron. If we think about the Rockefellers of the world and those types of people.He defined conspicuous consumption as the purchase of expensive goods to wastefully display wealth rather than to attempt to satisfy the more utilitarian needs of the consumer. For the sole objective of gaining or maintaining higher social status. So it's the idea that consumers buy things, expensive things, not because they need to, but because they want to signal something to others and it has to do with social status.So we can think about contemporary brands now, like people are always asking, why would someone pay $1,000 for a t-shirt when you can buy a t-shirt in Walmart for $10. And so it's about what you're signaling to others. And I think this notion that Veblen had about wastefully displaying wealth, it's this idea that this isn't something, yeah, that I need in any way and because it is wasteful, that's what makes it valuable to me because it tells other people that I can afford to be wasteful and they can't.And back in Veblen's day, the symbols of what was called conspicuous was for example, having a tan because if you at that time, if you had a tan, you were either a laborer who was working outside and so getting tanned from the sun, not because you wanted to, but because you had to. But if you were a person of leisure who was outside playing tennis, you would get a tan from that. And so it morphed from a symbol of not having high social status to having high social status. So those are just, yeah, that's how Veblen was thinking and writing about it at the turn of the last century.Andrew Mitrak: So Veblen coined this term in 1899. That's not to say that it didn't exist before then of course, you think of Pharaohs in Egypt being buried in extravagant tombs with all sorts of things that their dead body probably doesn't need. Of course, there's always been displays of wealth that are extravagant, but for the first time we had this in economic words, a phrase conspicuous consumption to identify it.Inconspicuous Consumption: IYKYKAndrew Mitrak: And that if this extravagance and luxury and perceived wastefulness of spend is conspicuous consumption, then inconspicuous consumption must be the opposite of that, right? It's consumed in a more subtle, less flashy way.Giana Eckhardt: So inconspicuous consumption is when you consume not because others will be able to recognize these symbols, but so that they won't be able to recognize the symbols of what a brand is saying. There's a term that's used, if you know, you know. (IYKYK) And inconspicuous consumption is embodied by that, right? And we can think about more modern terms like quiet luxury, which you hear a lot as well now, which is that no one would be able to know because there isn't anything that people can immediately recognize that says, this is the brand that this is. So along with that, this is the strata of society that I am from. It's keeping that more quiet and more hidden. And so there's a lot of talk now that inconspicuous consumption is more desirable than conspicuous consumption. I think it depends on who the people are and what the context is. But that's the contrast between the two.Andrew Mitrak: So they can of course coexist with each other and it's not to say everybody's conspicuous or inconspicuous, but there are cultural trends where one seems to dominate more than the other.Trends of Conspicuous vs. Inconspicuous ConsumptionAndrew Mitrak: If you think of how conspicuous and inconspicuous consumption have trended over time since since Veblen introduced this concept in at the turn of the last century, how would you describe the ebbs and flows or the pendulum swinging between one and the other?Giana Eckhardt: Yeah, it's really interesting. I mean, you can look at some of the most expensive brands at the moment and I would definitely categorize them as an inconspicuous brand. There's a new luxury brand in China that's partially owned by Hermes, but it's called Shang Xia and it is extremely expensive, but you would never ever know that it was a Shang Xia from, you really have to be in the know to even. So in terms of luxury, the highest levels of luxury have switched almost in a complete 360 from Veblen's Day when it was very obvious, if someone was a laborer versus a robber baron. Whereas now you really can't necessarily tell that immediately anymore. So think about one of the most expensive bags from the past few years, one that looks like an IKEA plastic bag that they give out at IKEA for you to put your purchases in. And IKEA sells them for like $3, right? But so this idea that something is inconspicuous, it actually has more social cache now, flipping Veblen's theory on his head.Economic Cycles and Consumption PatternsAndrew Mitrak: I think of the roaring 20s and flapper dresses and extravagance. Then the great depression happens and it's probably you probably don't want to be seen wearing the fanciest things and it doesn't quite strike the right tone to be flashing your wealth when a lot of folks are in poverty. And how much do the trends in this tie to how the macroeconomy is doing in the culture?Giana Eckhardt: It definitely does tie into that. So when we started to see a rise in inconspicuous consumption was after the 2008, I don't know what exactly we're calling it, but...Andrew Mitrak: The great financial crisis of 2008 to 2011, 2012-ish….Giana Eckhardt: Exactly. So during that 2008 to 2012-ish period, we may not have seen a lot of inconspicuous consumption immediately, but from 2000, yeah, kind of, well, actually 10, I would say onward, it was very evident to see. So I think that connection is definitely still there.Cultural Examples: Marty McFly & Larry DavidAndrew Mitrak: An illustration you give in one of your lectures is Back to the Future where Marty McFly, of course, is from the 1980s and wearing 1980s clothes and he's transplanted back to the 1950s. Could you tell the story of the branding example in particular of what this tells us about conspicuous consumption and how the 1980s contrasts with the 1950s?Giana Eckhardt: So there is one scene where Marty McFly, the main character in Back to the Future, has his pants off so you can see his underwear. And his underwear says Calvin Klein on it because that's what he was wearing when he left the 1980s.And so the 1950s folks, when they see him think it's his name and start calling him Calvin. When he has to explain like, no, this is the name of who made this underwear and not my name. They don't get it. Well, why would you have the name of someone else, of some other person on your own underwear? And hearing him try to explain that is quite humorous.Andrew Mitrak: One of the examples that I wanted to share with you is from a favorite show of mine. It's called Curb Your Enthusiasm. Have you ever seen the show at all?Giana Eckhardt: I have. Yeah.Andrew Mitrak: There's this episode called the Anonymous Donor and Larry, he sponsors a hospital wing and it's called the Larry David Wing.But then somebody else at the same time gets another wing at the hospital and it's the anonymous hospital wing. And Larry looks like a jerk because he put his name on it, the inconspicuous. Somebody else and it turns out to be his friend Ted Danson, gets the anonymous wing. and he gets all the cache of being anonymous, but people know that it's Ted Danson and Ted Danson looks like a hero because he's doing something but not getting credit, but everybody he is getting credit even though because everybody knows he's the one behind anonymous.It's a funny interplay of how the elites who have all the wealth to sponsor a hospital wing, they want to show off their wealth, but they don't want to be perceived as showing off their wealth. It also ties into how there's psychological mind games, and reverse psychology to how conspicuous and inconspicuous consumption can interact with each other.Giana Eckhardt: I love that example. I love that TV show too, although I haven't seen this episode, but I love this example because it shows that there's always a tension between wanting people to know what it is, what status you have in society, etc, but also, yeah, wanting to be thought of as a good person, right?So a lot of people, the critiques of brands for super expensive brands, for example, are like, well, you could take all the money that you just spent on that and why haven't you donated it to people who need it in other parts of the world or something like this. So this idea that you can be a good person but not necessarily reap the social rewards for it. That's directly against Veblenism, right? So not that a lot of people even know what that is anymore, but really it's a great example of showing that there are still downsides to publicly consuming in this way and I'm going to go and watch the episode now to see how this one humorously plays out.Luxury Brands Shift to InconspicuousAndrew Mitrak: I'm wondering if you have any favorite examples of how how marketers or companies and their brands have tapped into the cultural zeitgeist when it comes to conspicuous versus inconspicuous consumption, either adapting their brand or launching new product lines that embrace the the tone that's in vogue at the moment. Do you have any favorite examples of that?Giana Eckhardt: One of my favorite examples is Louis Vuitton, and their famous LV brand. In terms of the iconography and the way that it visually looks, the brand visually looks. And they will go from having the word Louis Vuitton printed as large as it could possibly exist on a handbag to a handbag where you can't even tell it's a Louis Vuitton. There may be an LV inside of it somewhere, but that's it. And so some brands will try and play in and have both of these in their product line, right? So think about the Ralph Lauren pony. Yeah. It can be very small on a shirt or it can be very large and that can be changed and you can see the changes over time when this conspicuous versus inconspicuous, when either one is more in vogue and you can see that. So yes, I think that brands adapt to the zeitgeist, absolutely. But they don't necessarily have to embrace one versus the other. That can change over time or even to target different audiences at the same time.Read Giana’s article: Luxury Branding Below the RadarGiana Eckhardt: Further Reading and ResourcesAndrew Mitrak: Giana Eckhardt, this has been such a fascinating conversation. I've really enjoyed getting this new look into the well both what we were just talking about the history and the ebbs and flows of conspicuous versus inconspicuous consumption, especially over the last century. But then even dating back further the origins of branding in China. I think this is really fascinating and this is just exactly the type of stories I'm hoping to uncover in this podcast. The things that listeners may not be aware of and that might change how we think about the history of marketing, of branding. So I think this has just been such a fascinating talk. Thanks so much for your time. Where can listeners find more of your work online?Giana Eckhardt: I've been doing some work recently on digital nomads and the fact that when people don't have a permanent place to live, it really changes how they consume as a consumer. That's a Harvard Business Review piece. I've also been doing work on the rise of analog consumption as compared to digital. And why consumers want to go back to analog. And I have a book that's coming out with Princeton University Press. It's called In Praise of Inconvenience. So it's about why consumers are seeking out the inconvenient rather than the convenient and what benefits that brings them. So keep your eyes open for that when it comes out as well.Andrew Mitrak: That's great. Thanks so much for your time. We might have to do a follow-up conversation at some point because I feel like we just have scratched the surface of these fascinating histories of brands and all the great research and work you've done.Giana Eckhardt: Sounds good. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketinghistory.org

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• Sergio Zyman, Part 2: New Coke and "The End of Marketing as We Know It"

  A History of Marketing / Episode 10 (Part 2)“Some critics will say Coca-Cola has made a marketing mistake, and some cynics say that we planned the whole thing. The truth is we're not that dumb, and we're not that smart.” - Don Keough, Former President of Coca-Cola in 1985We go beyond the headlines of New Coke and hear Zyman’s first-hand account of:The Internal Battles: How resistance to changing Coca-Cola's iconic (but stale) advertising led to the fateful decision to change the product itself.The Research Blind Spot: Why focusing solely on taste preference, without considering purchase intent, led Coca-Cola astray.The "Kamikaze" Strategy: The audacious plan to kill Crystal Pepsi by launching the intentionally ill-fated Tab Clear.The “best feature of Excel is Word”: How Sergio influenced Microsoft to elevate its narrative of Excel and market the full Microsoft Office bundle.The transcript below and it features amazing vintage ads and helpful links. I recommend watching the video or listening to the audio to hear Sergio Zyman tell the story in his own voice. ----------------Coke vs. Pepsi: The Cola Wars in the 1980sAndrew Mitrak: Sergio Zyman, welcome back to A History of Marketing.Sergio Zyman: Hey, how are you?Andrew Mitrak: Good. Congratulations. You're the first two-part guest. And so, at this time in the mid-1980s, what was the dynamic between Coca-Cola and Pepsi? Was Coca-Cola very obsessed with what Pepsi was going to do next? Was Pepsi gaining market share? What was the sort of dynamic at this time between the two?Sergio Zyman: “The Cola wars” which have been documented 200 ways to Sunday… The media, and everybody else was basically figuring out how we were doing. And I think we were going to Wall Street, and so was Pepsi, saying, "Hey, we just gained a tenth of a share point," or whatever it was.Pepsi had become the marketing director for Coke because Coke was so passive. Coke believed in imagery and branding, and all that. They weren't forced to understand how to spend money to make money.At one point, we were in a conference in Naples, Florida, and I went for a run with my boss, Brian Dyson. He told me that we had just gotten wind that Pepsi was about to buy Seven-Up. And that was huge, right? Because we didn't want them to get any more leverage.One of the issues was that when Pepsi went to fountain customers like McDonald's, we always allowed for one valve on a six or eight-valve machine to be for a competitor, to be fair, because we're allowing for Dr. Pepper or Seven-Up to come in.I said to Brian, while we were running that day, "Well, what we have to do is we have to go buy Dr. Pepper." He said, "It'll never happen. Anti-trust is not going to allow us." I said, "Exactly." So we made an offer for Dr. Pepper, knowing that that was going to kill the Pepsi/Seven-Up acquisition, which it did. But to me, that was an honest, competitive environment.The Genesis of New Coke: Answering the Pepsi ChallengeAndrew Mitrak: That's very clever. Does this competitive environment plant the seeds for the origins of New Coke?Sergio Zyman: No. The New Coke thing was, as I told you before, McCann-Erickson had a dominance on the management of Coke that was unbelievable.The company liked to be able to go to the country club or to church and have people come over and say, "Oh my God, I love your commercial, I'd Like to Buy the World a Coke or Mean Joe Greene."So that social currency, that was enabling bottlers and company management, and all that, that's something that McCann exploited incredibly well. The top brass never went to see the marketing guys; they went to see the CEO of the companies. They were always kind of paying homage to the management of the company.And we had the Pepsi Challenge. My argument at the time to management was we have to change the positioning of the brand. We keep on basically saying we are the original brand. We have to come out with something; we have to change. Have a Coke and a smile, it's not selling us anything. We have to stop doing Mean Joe Greene commercials and Buy the World a Coke, which was blasphemy, okay? Because the company loved that stuff.Then, a project was created to try to figure out how to stop the Pepsi Challenge.Then everybody said, "Well, it's the product. People are going in, and they're choosing Pepsi. So we're going to change the product." And I got into the whole project, but there were absolutely deaf ears in changing the position.When I proposed that we actually use Cosby to be the guy that introduced New Coke, this guy, Ike Herbert, almost had me fired, right? Because they wanted to have these big songs with jingles.And the problem was the position of the brand was wrong. Yeah, we were the original, but we were old. We didn't have any value to the consumer, and the whole thing started going in that direction.The New Coke Launch: 77 Days of InfamySergio Zyman: I remember perfectly; we were in the last meeting before deciding to go on New Coke, and there was the New York bottler and a couple of other bottlers that were the kind of advisory board. Brian Dyson went around the room and said, "Do you agree this is the right thing to do?" And then he got to me, and he said, "Do you agree that is the right thing to do?" I said, "No, I don't. I think we should change the position of the brand, but I think that we've gotten to the point in which we relaunch New Coke." And we did.And we launched it with a big black-tie dinner, with Ray Charles singing.The next day, we had a press conference. And I was manning the Atlanta press conference, and Goizueta and Keough were in New York, doing the big press conference. And one reporter turned around to Goizueta and said, "So what if it doesn't work?" And Roberto said, "You don't understand. It will work." And this guy just went on a rampage, basically saying, "These guys are crazy. They don't know what they're doing."And then we launched New Coke. Then we got all kinds of consumer backlash.There was a group from Seattle that was flying planes around the company saying, "You guys are a bunch of jerks." We had to take our tags off our baggage when we were traveling. People would start harassing you, a hard time.The Psychology of Coca-Cola’s TasteAnd after four weeks, 80% of people in America had tried New Coke, and they hated it. And we only had 6% distribution. So, it was all in the head.77 days later, we brought Classic back. When we brought Classic back, 75% of the people had tasted it and said they loved it. We didn't have any distribution. They were drinking New Coke. So then we found out that Coke's taste was in the brain, not in the mouth.Andrew Mitrak: Right.Sergio Zyman: Do you drink Coke? You drink Coke sometimes?Andrew Mitrak: Yeah, of course. I've had a Coke. I don't drink it every day.Sergio Zyman: What does it taste like?Andrew Mitrak: If I was to describe it, well, first you feel the bubbliness of it.Sergio Zyman: What's the taste?Andrew Mitrak: The sweetness to it, and then there's a bite to it.Sergio Zyman: No, no, no. I didn't ask you how it feels. I asked you, what does it taste like?Andrew Mitrak: It's hard to say other than it tastes like Coke.Sergio Zyman: It has no taste memory.Andrew Mitrak: Yeah.Sergio Zyman: And by not having taste memory, if you go and you say, "What does Pepsi taste like?" People will say, “Sweeter than Coke”Andrew Mitrak: Right. Coca-Cola is your baseline for comparing everything else.Sergio Zyman: And look, you go and you say to people who drink wine once in a while, and you have all these crazy people like me who go and said, "Oh yeah, it has a leather smell, and it has berries." There's no memory. There's no taste memory. Coke didn't have it, and that was one of the big findings that we had. It was all in the brain, not in the mouth. It's how you felt is what you said. It's not what you tasted. And that was a big finding.But everybody talks about New Coke ad infinitum. Nobody talks about the fact that we brought Coke back in 77 days. Oh, by the way, in 77 days, the price of the stock doubled. It was unbelievable. It was a huge success.Andrew Mitrak: Yeah. There's so much to unpack with the story, and I'm so grateful that I get to hear it directly from you.The Role of Marketing vs. Advertising at CokeAndrew Mitrak: I want to go back to the influence of McCann and the reluctance to change the advertising and positioning. And this is from an interview that you did with Ad Age some years ago, and I want to quote,"The only thing left was to change the product or change the advertising. I think we were lazy in recognizing that we needed to reactivate or reposition the brand. If we had done that through an advertising process, I don't think New Coke would have ever happened. But there was such resistance to any kind of change in advertising position of the brand that we introduced to change the taste."It seems, as an outsider, that it would be easier to change the advertising than to change the product. But as you tell it, there was such an affinity for the smiles with a bottle of Coke and McCann-Erickson's influence at the company that it was actually easier to change the whole product than it was to change the advertising. Is that kind of the right way to think about it?Sergio Zyman: Well, there is a kind of bigger macro issue, which goes at the core of my life and my success, which was, what is marketing? And at the Coca-Cola company, marketing was nice commercials. That's all it was. It wasn't about positioning; it wasn't about understanding the consumer and consumption. It was about how much the consumers like our ads. And that was marketing.And I just thought that it was nuts because it didn't serve us well. Now, it served us well for many years in getting the brand to be viable, but it didn't serve us well in growing the business. And that's why Coke was struggling for so long.Diagnosing the Research Flaws Behind New CokeAndrew Mitrak: Something that you bring to marketing is research. You've highlighted how you look at research to make your decisions. And you have a quote about the research and New Coke. And you said,"We'd done taste tests and found that consumers seem to prefer Pepsi's sweeter taste to [the original] Coke's more biting taste. So we stopped right there and decided that if we made Coke taste like Pepsi, more people would drink it. But you know what happened? We came up with New Coke, and consumers weren't interested. The problem was that we didn't follow up that question with, ‘If we made Coke taste like this, would you buy it?’"It seems like there were some flaws with the research. I'm curious, how does a flaw like that happen in the research, or what's the takeaway from New Coke?Sergio Zyman: It wasn't only Coke. Every company in the world basically had this awareness disease, which was, is the consumer aware of your brand?Probably the best model of marketing is politics. Because in politics, if you don't get elected, if people don't vote for you more than the other guy on the second Tuesday of November, you don't get [elected] – look at Al Gore, okay? I mean, he ended up instead of being in the big plane and the big house, he went to teach school in Tennessee, right? Because he lost the election by a few votes, but it didn't make any difference.What you do in politics is you try to convince consumers to buy your candidate. Why doesn't that happen in consumer products? That's what we want to do.Consumer democracy is the right to choose. That's what democracy is. Everybody talks about democracy. And you say, "Oh, the democratic process." Democracy is the right to choose. But you also get the right to not choose. So, purchase intent, intent to buy, intent to consume is the only criteria that should drive marketing. Not how much people like you, but are they going to buy you? Are they going to vote for you?In reality, in 1985, we didn't know much about the consumer. I know it's kind of blasphemy to talk about the fact that a company like Coke would not know enough about the consumer, but in the research process, we used to track 13 image items, which was great, tasty, delicious, good with friends. That stuff did not drive consumption. What was driving consumption was price discounts, larger sizes, and plastic bottles.Announcing The Return of “Coca-Cola Classic”Andrew Mitrak: So, just tying a bow on the New Coke story, in 1985, you mentioned Don Keough, he was then the president of Coca-Cola, and he came to the stage of a hotel to announce that the original taste of Coca-Cola was back. And he finished his speech by saying, quote,"Some critics will say we've made a marketing mistake. Some cynics will say we have planned all this. The truth is that we are not that dumb, and we are not that smart."And some people are still conspiracy theorists that think, "Oh, this is all some intentional flop to make Coca-Cola more popular." What's your take on that, and is there any truth to that at all?Sergio Zyman: There was a research guy that was listening to the consumer center, the call center, and we were getting consumers calling, just screaming on the phone. We had this guy, Goldman, who was sitting there; he was a researcher. He came to give me the day's report. I used to get a report every day.And I said, "How'd it go?"He says, "You know, I got to give you an example of what is going to happen here. You've seen a lot of people who have been freed from Vietnam jails, and they've been found."Remember in those days, they were finding a lot of POWs. "And then you get the family of John Smith that's told that," this, by the way, is a true story. "The family of John Smith, we found him, he's been freed. He's going to arrive tomorrow in Minneapolis on the flight Northwest from wherever."And the family all gets dressed up, goes to the airport, and they're at the gate, waiting for John Smith to come out, and they don't see John Smith.This guy Goldman is telling me, and I said, "So what happened?"He said, "They made a mistake. The guy that they found was not John Smith."He said, "When you bring Coca-Cola Classic back, it needs to look exactly like the one that left. You cannot make it look different, be odd, be anything else. You can add 'Classic' to it, but it needs to be a red can." And that's what drove the whole thing.One day I get a call, literally, 6:00 in the morning and says, by the way, there's a rumor that you guys are going to bring back Coke and kill New Coke, and Wall Street stops trading on Coke, right? Because it was material, and we get stopped trading.So, we had a creative guy at McCann, very smart guy, John Bergen, very political, but very good guy. He was a copywriter. And he wrote that commercial. We didn't have any strategy or anything like that. That was kind of, we were writing as we went. We got Keough into a studio, and we recorded the commercial.And then, anytime you actually have a commercial, I don't know how it is today, but you have to actually fly it to New Jersey. In New Jersey is where you actually integrated the commercials into the pods.So Peter Jennings comes out on ABC. He interrupts General Hospital, right? And he basically says, by the way, we have a rumor Coke is going to bring back Coca-Cola. And so we had helicopters flying this commercial from New York to New Jersey in order to put it into rotation for the 7:00 news, and we basically opened up the 7:00 news with a commercial that says, "We're not that smart and we're not that dumb."And it was really well done, and it was so much in the personality of Keough. He was kind of the Santa Claus-like guy, and he had great credibility, and that's how that thing came about.Strategic Sabotage: Tab Clear’s “Kamikaze” takeout of Crystal PepsiAndrew Mitrak: To prep for this interview, I watched clips of your speeches on YouTube, and there's a quote from General Patton that you like to use. Do you know the quote that I'm talking about?Sergio Zyman: Yes.Video of Sergio Zyman: “He said, ‘The idea is not to die for your country, is to have the other SOB die for his.’ Don't die for your company. Have the other guy die for his. Let them lose share. Let them lose relevance."Andrew Mitrak: This quote reminds me of a story in your book about how you launched Tab Clear to take out Crystal Pepsi. Can you tell the story of Tab Clear and Crystal Pepsi?Sergio Zyman: One day, I was sitting in a meeting at Coke, and they said that they had gotten wind that Pepsi was going to launch a product called Crystal Pepsi because Pepsi was fixated on having a lemon-lime or a clear product to compete against Seven-Up.And Coke had Sprite, but it wasn't really doing great. So I said to the guy, "Send me the research. Let me see what the research says." So they sent me the research. It was a guy called Jerry Payne, who was the research guy, and we sat down.I was looking at the research, and I said, "You know, all of the characteristics of this product are the characteristics of diet products." And I knew a lot about it because I had done Diet Coke. So, I said, "I think we can position this product as a diet drink." He said, "Well, but it's not a diet drink." I said, "I know. Let me think about it."So I came back, and I proposed that we launch a product called Tab Clear. Tab was already kind of on the outs because Diet Coke was doing so well. They bought into it. I got the project as a consultant.And then we went out to work, we developed a product, which was nothing more than a diet product with all the characteristics of the same thing.We launched it in advance of Pepsi launching Crystal Pepsi at the Super Bowl. They spent a lot of money. And what happened was that we were so aggressive with it that the whole category collapsed, which was our idea.The idea was to launch Tab Clear and make it just a kamikaze product that basically just killed the category, and it did.Andrew Mitrak: That's right. I'm going to quote from your book, The End of Marketing as We Know It."From my perspective, Crystal Pepsi was just screaming for someone to reposition it. We decided to take the liberty of moving Crystal Pepsi into the diet segment, where it was bound to fail because it contains sugar. By meeting a sugared drink with a non-sugar drink, we only confused customers about what the category stood for."This is just not something they would teach you at any marketing school. What was the business value of this for Coca-Cola?Sergio Zyman: Well, I think that you touched on a very important point. You said, "Well, this is not something that they teach you in marketing school." Well, what do they teach you in marketing school? Do they teach you to actually be somebody who does stuff to drive top-line and bottom-line? They don't. They teach you about positioning, and they teach you about all kinds of stuff, but there's really no financial element in marketing.One of the things that I always drove for was, if it doesn't make any money, why do you want to do it? My riff with the ad agencies was that they said that you couldn't measure advertising. All advertising was image building for the long term.I'm saying, if I can't measure it, I don't want to spend it. So, there was a project that was coming into the market, and we were a competitor in the soft drink business, and we needed to define where the volume was going to be. So if Pepsi was going to get consumption from consumers that were going to pay money to buy a six-pack of Crystal Pepsi, by us killing the category, we eliminate one more competitor. I think that, to me, that's marketing.Inventing the Chief Marketing Officer Role at Coca-ColaAndrew Mitrak: You left Coca-Cola in 1988, and you returned in 1993, this time as chief marketing officer. And this was a newly created C-level role. What did it mean for marketing to be in the C-suite for the first time?Sergio Zyman: When I got called to go back to Coke, I didn't want to. I was doing great. I was skiing 50 days a year. I had great gigs in consulting with Miller Brewing, with all kinds of other companies. I had built this company called Core Strategy Group. I went through a year-long interview with Ivester because I was actually, quote-unquote, teaching him marketing.But when I went to meet with Goizueta, I said, "What do you want me to do, sir?" He said, "I want you to do the marketing thing." And I said, "I don't understand what you mean. What do you want me to do?" He said, "You know, the marketing thing." And he couldn't articulate what marketing was.So I said, "Sir, I'll tell you what I'd like to do. I'd like to go away and put together a deck about what I think marketing should do at the Coca-Cola company. Come back, I'll show it to you. If it makes sense to you and if you buy it, then I'll come back to the company."I went away with a couple of guys, one inside the company, and we wrote a 40-page deck. And I came back, and I presented to him and Ivester and a couple of other people. He said, "Wow, that's what we need to do." It was about positioning brands, about spending money to make money.I said, "By the way, I need to be part of the C-suite because I want to make sure that marketing is about making money. Marketing is not about spending money." And that's how we came about with naming me chief marketing officer. I was the first ever, by the way. I invented the title. If you go check it out on NexisLexis, there had never been a chief marketing officer before.Andrew Mitrak: I heard you say this, and not that I don't believe you, but I just wanted to verify it because it's a big claim that you're the first-ever chief marketing officer.And the search engines and the AI tools, they say, "Oh, that can't possibly be true. Sergio's misrepresenting." But they never point me to one that existed before you, either.I'm trying to find a person who's actually had the title of Chief Marketing Officer.Sure, there were presidents and CEOs who had marketing-type functions, and there were other people who were senior marketing leaders, but I haven't yet found another chief marketing officer out there that predates you at Coca-Cola.By the way, if anybody's [reading] and can find one, I’m happy to be proven wrong, but you do seem to be the first as far as I can tell. But it is a very surprising claim.Sergio Zyman: Remember, the C-suite at the time was Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, stop. Then, the head lawyer evolved to Chief Legal Officer. The head of HR evolved to Chief People Officer. And now, everything. I mean, you have the chief banana officer, right?But my objective at the time was I wanted to be part of the C-suite. I didn't want to be the advertising guy. I had a bunch of friends in the consulting business, and I remember I went to Wimbledon before I agreed to take the job, and I was with this guy, Rob Smith, who's another political guy. I had a lot of political consulting friends, and I was trying to help them find a way to not take the job.That's how we came up with the idea of being the chief marketing officer.Marketing's Role in the C-SuiteAndrew Mitrak: So, what was different about being chief marketing officer at Coca-Cola in the 1990s versus being a very senior marketing leader in the 1980s?Sergio Zyman: Senior marketing leader had no function in the company except be sideways to the advertising process. There was no marketing. We were at the time in which when Pepsi started, the trade, the supermarkets figured out that Coke was a loss leader, and then we engaged in – there was a company called Majors, who was measuring trade activity.And a big marketing effort was discounting. We used to go on the big holidays and have big displays and put displays in parking lots. But that was pretty much the only marketing thing that was going on. And then you had the commercials that were actually doing the thing to make people feel good.But there was no scientific way about going and getting volume.Microsoft: Elevating Excel and the Office BundleAndrew Mitrak: After Coca-Cola, you found the Zyman Group, and you have a long, successful career also as a consultant, as a speaker. One of my mentors and friends, his name is Mark Kroese, and he worked at Microsoft in the 1990s.He was somebody who reached out to me saying (paraphrasing), “If you're doing this podcast, you have to speak to Sergio Zyman.”And he has some great stories of you supporting Microsoft Office and the launch of Excel. It's hard to believe, but Excel at the time only had 10% market share, and they were a massive underdog to Lotus 1-2-3. And here's Mark's recollection."Excel was trying to go feature for feature against Lotus 1-2-3, and that you, Sergio, famously said, 'The best feature of Excel is Word.' And soon after, Microsoft started selling the bundle instead of selling Excel standalone.”They were in this low-level feature war, and you helped elevate the narrative. And that you also said,“Microsoft is creating the tools that are driving the productivity gains, and the productivity gains are what is responsible for creating the booming economy of the 1990s."I'm curious if you have any stories of your role supporting Microsoft?Sergio Zyman: Sure. They hired us, kind of the oddballs, to come in and work on all kinds of stuff. And it was incredibly disjointed. Microsoft was fighting the FTC because they were doing both applications. There was a guy that just died, Mike Maples, who got hired by Gates from IBM, and then Ballmer was doing the other side, okay? So you had two guys; you had Steve and Mike Maples.And the way Microsoft would launch products is they go into these developer things, and they had what's called the keynote, right? And Gates would come in and do a keynote, talking about how the future was going to be. And they'll demo the product.So one of the things that I said is that the DNA – I believe very much in brand DNA – the DNA of Microsoft was no product is ever finished. And the consumer is okay with that. The consumer doesn't expect a Microsoft product to be [finished]. So we used to have the meetings in Boston, in the cafeteria of the Lotus 1-2-3 building, for Excel. That's how competitive the Microsoft guys were in those days. It was unbelievable. And we were working on all kinds of stuff, and then we had Harvard Graphics (PowerPoint competitor), which was one of the products that was competing in the space, and there was Lotus 1-2-3, which was Excel. The comparative to Word was WordPerfect.And you know, I had all these disjointed things, and one day in a meeting, we said, "Why don't we just put it together? Just as an office thing." And that – I don't know who actually ran with it, but there were fantastic meetings. One day I went into Gates's office, and Gates was laying on his couch. Gates was just brilliant; he was unbelievable. And Ballmer used to call me “the soda guy.” And Gates is sitting there, and we're talking to him about something, and he turns around to me, points his finger and said, "Did you ever go to camp?"And I go, "Huh?" I said, "Listen, I'm Jewish, I'm from Mexico. We didn't go to camp."He said, "Well, I went to camp, to math camp for many years. I know what I'm talking about."It was an incredible culture being over there. Later on, I did a strategy for Xbox with some other guy [who] hired me for Xbox. That was after I had my company, and I turned around and says, "Why are you guys going to launch Xbox versus PlayStation?" I said, "Because Bill is going to do a keynote, and we're going to talk about it."And I got the project, and I went to actually look, and when I checked with gamers, gamers hated Microsoft. They thought it was the deep state. We came up with a different position, and we had some issues with the name with Xbox. We came out with alternative names. Working with Microsoft was an incredibly learning experience because those guys were true warriors. In those days, it was 24/7; it was great times.Product Naming: “It’s Cup-a-Soup!”Andrew Mitrak: Another friend of mine, who I talked to in advance of this interview, Joe Michaels, he's the person who actually put us in touch. And Joe was a leader at a startup in the Dot-com era, and he mentioned that you did some consulting for them at the time. And he was presenting a product branding idea to you, and then he said you interrupted him as he was presenting his idea, and here's him quoting you."Let me tell you how to name a new product. The best product I ever marketed was Cup-a-Soup. No one ever wonders why they buy it. The name says it all, Cup-a-Soup."I'm wondering, do you remember this? Did you ever work on Cup-a-Soup?Sergio Zyman: Well, no. But what happened, when those guys used to come with all these ideas. There was a company in Atlanta called E-Hatchery. You had all these brilliant guys who were innovators, and they'll come in. We got hired for $30,000 to do the initial analysis for these guys, venture capital firms.And I would turn around to the guy and I would say, "So, who's your oldest family member?"And they'll say, "My grandmother."I said, "How old is she?""79."I said, "Okay. So I'm your grandmother, explain to me what your product is. You're going to explain it to a 79-year-old person. I don't understand anything you're doing."And I was forcing them to come up with a way to actually explain the value proposition of the product, which is critical to marketing.And as part of that, they'll come up with these whacky names.And I would say, "Look, it's Cup-a-Soup. So tell me, how are you going to name your product? It's what you call it. I Can't Believe It's Not Butter – those are great names. You don't have to spend $20 million explaining to people what it is. Come up with a simple name." A lot of those were like that.Andrew Mitrak: Yeah.“The End of Marketing as We Know It”Sergio Zyman: The problem with that, if I might, is, look, I failed at changing the world of marketing. I failed because we're back at which commercial is going to be in the halftime at the Super Bowl, right?I used to do a piece of research every year about the Super Bowl, and they won the Super Bowl commercial, but their volume went to hell. I didn't succeed in changing the face of what marketing was. It worked good for me, right? But companies are back doing the other thing. They're back doing commercials that they can go brag about at the golf course or in church, really not focused on selling more to more people for more money.Andrew Mitrak: Yeah. Sergio, I just want to thank you so much for speaking with me and sharing all these insights. Like I said, you're the first person who I've interviewed twice – maybe someday we can do a part three or four. I just think that you have so many amazing stories and so many amazing insights, and we've just scratched the surface of it. So I just want to thank you so much for your time.Sergio Zyman: Thank you.Andrew Mitrak: You've written a couple of books. Do you feel like you're fully out of the marketing game now and are done with it at this point, or just enjoying life, or would you point listeners to any place where they can read your work?Sergio Zyman: I've published four books. The first one was The End of Marketing as We Know It, which became a bestseller. It's still taught around schools and universities. And then I wrote after that Building Brand Width, which was the whole thing about putting brand into the thing. And then I wrote The End of Advertising as We Know It, and I wrote Renovate Before You Innovate. And then I've written three more books, which I never published.We are at a very interesting time. Companies in general, like humans, develop plaque in their arteries over time. And if you don't take care of it through exercise and eating better, eventually, you need a bypass, right? I did a lot of consulting after I sold my company, and recently, I got involved in boards.People are still looking for… I don't know what the hell they're looking for.But they're not really interested in understanding the dynamics of – if you have somebody who's an entrepreneur who comes up with a brilliant idea, like… I evolved with a company, a couple of Israeli guys who worked in the military in Israel on voice recognition. And then one of these guys, and by the way, this guy was the wackiest guy you ever seen in your life. And one day he turned around to the other guy, he said, "By the way, voice recognition is noise recognition. What else can we do with noise recognition?"And they developed a company that actually developed a modem that was put in machines that run 24 hours a day, [that] will be able to predict the noises that were going to happen when a piece of the machinery started breaking three years ahead of breaking. And they use AI to put it into a model to try to actually predict what the thing was going to do.I developed a strategy for the guy, and all he wanted to do… was to hire an advertising agency. By the way, where is the company today? Nowhere.Andrew Mitrak: Smartest people in the world, but they don't see it.Sergio Zyman: They don't. They don't see it.Andrew Mitrak: Yeah, thank you so much for your time, Sergio. It's really been an honor.Sergio Zyman: All right, take care. Thanks so much. Bye-bye.A Special ThanksI want to extend a very special thank you to two people who were instrumental in making this interview happen: Mark Kroese and Joe Michaels. Their insights were invaluable as I researched and prepared for this interview. And it was Joe who put me in touch with Sergio, making this conversation possible. Thank you for your support, Mark and Joe! This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketinghistory.org

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• Sergio Zyman, Part 1: “The First Chief Marketing Officer”

  A History of Marketing / Episode 10 (Part 1)“Marketing is about selling more stuff to more people more often for more money more efficiently. That's what marketing is.” - Sergio ZymanThis week, I’m joined by a marketing iconoclast: Sergio Zyman. Wikipedia describes Zyman as being “best known as the marketer behind the failed launch of New Coke and the success of Diet Coke, Fruitopia, Surge, and ad campaigns such as "Coke Is It."Zyman rarely gives interviews, and the few that are available tend to focus on the New Coke saga, which is frequently described as one of the biggest marketing blunders of all time. But New Coke is only a brief, and frankly misleading, snapshot of Zyman’s career full of marketing milestones.This is the first of my two-part interview with Zyman. This conversation explores his unlikely journey from Mexico City to the C-Suite of the Fortune 100, with stops at Procter & Gamble, McCann Erickson, assignments in Japan (working on Nescafe and General Motors), and even becoming president of Pepsi in Brazil by age 30.Ultimately, Zyman's path led him to Coca-Cola, where he launched iconic brands like Diet Coke and Cherry Coke...and yes, New Coke.Listen to the podcast: Spotify / Apple Podcasts / YouTube PodcastsHe was eventually named Coca-Cola's first Chief Marketing Officer – and, according to Zyman himself, the first CMO in history, period. I've tried to verify this claim, and so far, I haven't found anyone holding that title before him. (Listeners, if you have evidence to the contrary, please reach out!)In part one, we focus on Zyman's incredible rise. I’ve included the transcript below, but I recommend listening if you can to hear it in Zyman’s own voice. He's brimming with personality – too much to contain in a single episode.Joining P&G’s "Cult-Like" Brand ManagementAndrew Mitrak: Sergio Zyman, welcome to A History of Marketing.Sergio Zyman: Hey, how are you?Andrew Mitrak: Great. So, you've had a legendary career in marketing, but I want to start at the very beginning. You were born in Mexico City. I'm curious, what are your earliest memories of marketing and advertising when you grew up in Mexico City?Sergio Zyman: You know, I wanted to get out of Mexico. Pretty much my family was in the clothing business and stuff like that, and I had no interest. I went to school in Europe. I traveled around the world a lot. And then I joined Proctor, you know, through a variety of coincidences.And then I worked for Proctor in marketing, which at the time was kind of almost like a cult. And then from there, I went into the ad agency, and then on and on – I traveled around the world, lived in Japan, lived in Brazil, and so forth.Andrew Mitrak: Procter & Gamble is legendary for implementing the principles of modern brand management. What was joining Procter & Gamble in their marketing department like? You said it was almost like a cult. What was it that made it cult-like?Sergio Zyman: Well, most of the people that worked at Proctor in Mexico were either sons or daughters of expats, and primarily sons. They were primarily guys. And, you know, we joined as a staff assistant. There was a very orderly progression. Then, after a while, they sent you to sales training, which everybody hated.It was a locked wing of the company. It was basically housed across the street from the agency. And marketing was about managing products – well, not managing products, but managing brands or launching brands. It was a lot of advertising and, you know, a lot of promotions and stuff like that.Marketing Ariel to Transform Laundry in MexicoSergio Zyman: I was part of the team that actually introduced a brand called Ariel, which eventually became the largest brand in the world for Proctor. It was an enzyme detergent. I'm going to date myself many times here through this interview, but in Mexico at the time, people used to wash clothes on a stone with a bar of soap.Then, after that, there was a product that Proctor introduced in Mexico called Rapido. The whole premise was that you could actually speed up – rapido means "quick" – you could actually speed up the process of washing your clothes. From then on, we wanted to launch a product like Gain in the US. And, I can't remember who came up with it, but the idea was that Ariel made every bucket a washing machine. We had this visual where you put the detergent into the bucket and the bucket would start moving like a washing machine. It was a huge success.Andrew Mitrak: I want to quote from your book about Ariel and Procter & Gamble."So P&G had just introduced a detergent called Ariel, and the challenge was to convince skeptical Mexican housewives, most of whom did their washing by hand and didn't own a washing machine, that a packaged detergent could get the family's clothes as clean as whatever product they were currently using."So, you're a young man, earlier in your career. How do you research skeptical Mexican housewives? How do you know what will persuade them, or what the real challenge is to be solved with this?Sergio Zyman: Well, I think it was more about barriers than anything else. Research was very rudimentary. I don't even think that we used – I mean, we probably used some form of focus group at the time or something – but it was observational. You'd actually go look at the market, and every building on top had a place where it has a stone with little indentations in it.All you needed to know was how the product was being used, right? And I think that was the genesis of a lot of the products at Proctor at the time. The positioning of Safeguard was that it eliminated bacteria, right? But there was really no big piece of research. We just hit onto something that was – I mean, it was probably when we asked people, "Why don't you buy a packaged detergent?" they would tell you that. And I think that's how we ended up getting into that. But it was very rudimentary.Andrew Mitrak: Now, Procter and Gamble was your first job in marketing. Did you know that you wanted to be a marketer before you joined them, or did you kind of just fall into it once you came to this job at Procter & Gamble?Sergio Zyman: My number one objective was to get an American Express card. And you needed to have an X amount of money, which was $200 less per year than what Proctor was paying. So, when I was looking around trying to get a job – I had actually, before that, become the major coordinator for the Miss Mexico contest. And that's how I met some of the Proctor guys.So, I didn't have a real career vision. I wanted to make some money. I knew I wanted to get out of Mexico. I wanted to work for an American company because, usually, American companies worked Monday to Friday, not Monday to Saturday, which is what Mexican companies did. So, there were a lot of criteria there that were kind of dumb, if you wish.And I met with a guy called Al Frost. My English was broken, even worse than today. And he asked me at one point during the interview, "What do you want to do when you grow up?" And I said, "I don't know. I just want to have the power of knowledge to be able to make the decisions that I have to make down the road." And he fell in love with that thought and hired me.And that's how I got into Proctor. I really did not fit the Proctor criteria for being hired. I didn't go to school in the US at the time, didn't have parents that were expats in Mexico, my English was so-so – but that's how I got in.When I got hired by McCann Erickson to go work on the Coke business, I remember sitting in my very first meeting at McCann and they were doing media planning, and I sat there in panic and I said, "I don't know anything about marketing. I don't even know what marketing is. These people are talking about something totally different."Marketing became advertising. That's what marketing was. And I guess for a lot of companies today, still, marketing is advertising. It's not real marketing. It's not linked to the bottom line.McCann Erickson & the Coca-Cola AccountAndrew Mitrak: You mentioned you moved from Procter & Gamble to McCann Erickson. And for listeners who aren't familiar with McCann, they're a major advertising agency. I think they had been the agency of record for Coca-Cola since the 1950s. And for those who've seen the show Mad Men, this is the agency that swallows and absorbs Sterling Cooper at the end of the series. So what led you to McCann Erickson? Why did you join after Procter and Gamble?Sergio Zyman: Money.The natural progression – I mean, I know it was more romantic – but the natural progression at Proctor is you were at Proctor, and then after about seven or eight months of just basically sitting around doing shipment analysis, they sent you to sales. They gave you the worst car that the sales department had and they sent you over to sell soap into public markets and little mom-and-pop shops.And, I did that, and everybody hated it, and I figured I was going to do a good job. I ended up winning the contest, the three and a half months that I was there. And I ended up getting hated by all the Proctor guys, the marketing guys, because everybody didn't want to do well in sales.I came back and then I became an assistant brand manager. And then I started getting offers. The natural progression was that we were the source of, quote-unquote, "marketing people." So I got a job from Kimberly Clark, and then McCann – I had met the guy at McCann during the Miss Mexico thing. And I liked them a lot, and I went to be an account executive on the Coke business, which was sexy. And that's why – and it paid me double my salary.Andrew Mitrak: That's a good reason to move on and move upward.Sergio Zyman: It is.Andrew Mitrak: So what was the culture of McCann like – this is probably the mid-70s or so, right? So what was their company culture like?Sergio Zyman: The Coke relationship was very difficult because it was imposed by Atlanta. So, pretty much, you couldn't go and choose your own ad agency. It was McCann or else. And the guys at Coke had come from sales. Most of the guys that were in “marketing” – VP of Marketing or Marketing Director role at Coke was a sales guy.It was about dealing with bottlers and stuff like that, and there was always an antagonistic relationship."Pattern Advertising" and Challenging the Status Quo of Marketing at Coca-ColaSergio Zyman: We adapted advertising that was created in Atlanta. It was called "pattern advertising." And we did a good job with it, but there was always tension between us and the Coke guys. It was not a happy relationship. It was just to do what you needed to do.Andrew Mitrak: Yeah.Sergio Zyman: I was thinking about this interview. And, you know, when did marketing come to these companies? If you go back and you look at fast food, Wendy's head of marketing was a guy called Bill Welter. The marketing guy at McDonald's was Paul Schrage. I don't know who the marketing guy at Burger King was, but pretty much what happened to these companies as they started opening up more stores, they realized that they needed to communicate with the consumer and explain to them why they should go and buy their stuff, right?There was not a lot of competition. And the powers that be in these companies, whenever they wanted a marketing guy, they said, "Wow, I think that we better get it out of the agency." So it was the ad agency guy. Welter was the ad agency guy. And so was the guy at Burger King.So that's where the guy at Coke who was the head of marketing at the time, Ike Herbert, was a McCann guy. So it was all about advertising. Advertising actually dominated the marketing function in a lot of companies. It wasn't about truly doing marketing the way we knew it. And I always felt very uncomfortable about it. I didn't want to be an ad guy. I thought that it was not a great label for me. I was not a businessman. So that's kind of where my formation as the challenger of the marketing function began.Coca-Cola’s “Hilltop” Ad: An Accidental ClassicAndrew Mitrak: I want to ask you about your impression of the ads that were created for Coca-Cola because McCann, of course, they had created the famous Coca-Cola hilltop commercial with the jingle "Buy the World a Coke," and it really is an incredible commercial and it's one of the most famous advertisements in history.But Coca-Cola almost became kind of a victim of this ad's success, and ads like it, where they internalized this – happy, smiley people with a Coca-Cola bottle in their hand – and this was the formula for them. And it sounds like you were questioning, "Was this actually driving sales? Was this actually working at the end of the day?"Sergio Zyman: Well, look, I think that there is a lot of mythology about advertising, and about advertising for Coke. So, there was a guy at McCann called Bill Backer, who eventually left and went and built Backer Spielvogel. And he was a really creative, artistic guy. And there was a music guy there called Billy – my God, I just forgot his last name. And Billy had actually sung with the Four Tops before he became the music director for McCann.They were going to do a radio spot called "I'd Like to Buy the World a Coke" and they wanted to do it – they went to record it in London, because that's how you did buyouts. And the commercial became an accident. It had no strategy behind it. And then everybody fell in love with it. And Coke sales kept on going south for a long time because Pepsi was really the marketing director for Coke. Pepsi was determining the dialogue; Coke wasn't.Andrew Mitrak: Yeah. I just looked it up, by the way – it must be Billy Davis.Sergio Zyman: Billy Davis, exactly.Andrew Mitrak: That's it. Okay.Sergio Zyman: Billy. Yeah. Good guy.Pepsi: “The marketing director for Coke”Andrew Mitrak: You mentioned that Pepsi was really the marketing director for Coca-Cola. And I'm going to quote from your book again:"This was the 1970s and Pepsi had just started with their 'new generation' approach. McCann's philosophy, which was the same as the rest of the industry, including Coke's, was 'grab their hearts and their wallets will follow.' So we kept coming up with ads that made people feel good, made them cry and won us awards."It goes on to say that these ads didn't really seem to be working as far as new business and sales were going.Sergio Zyman: Well, they were not.Remember, in the old days, Pepsi was not a viable choice for people who drank soft drinks. By the way, we didn't have 10,000 different options. Okay, you had Coke and you had Pepsi, and then it was all done by manufacturing. Sprite was created in the UK in order to be able to actually fill the bottling lines because they weren't selling enough – there was no strategy behind it.And Pepsi then decided, in order to – they said to get out of the kitchen and into the living room – that they needed to become a viable option to Coke. And they had a very good strategy because they started discounting in supermarkets, they started multi-packing. Coke just didn't believe in that. They believed that all they needed to be was this – "grab your hearts and their wallets will follow."But Pepsi basically said – and they never said, "Coke sucks." What they said was, "Pepsi's for the new generation." And the implication was that Coke was for the old folks. So they called it the Pepsi Generation. There was a guy at Pepsi that was very smart about that, Alan Pottasch.And then, after that, they did the Pepsi Challenge, where basically they said – by the way, they never said Pepsi tasted better. They just showed that people chose it. So they were always doing that stuff. And then when I became marketing director – and by the way, you can look at the quotes out there – I became, you know, Pepsi basically said that I snuck up on them because I said, "Enough!"I hired Bill Cosby at the time to do a bunch of advertising to basically say, "There wouldn't be a challenger if there was not a number one." We launched Coke Is It, which was a very successful ad campaign. That, by the way, McCann took credit for, but it was developed in Canada for the Canadian market. So there are a lot of secrets along the way about how these things came about.Andrew Mitrak: Yeah, we'll get to all of those stories, but I want to come back to while you were still at McCann – you said you're an account executive on the Coca-Cola account. And over time, I've become less impressed when someone comes up with a good idea and more impressed when someone can convince their client to get behind the good idea. And that's kind of the role of the account executive in a lot of ways, right?Sergio Zyman: Well, Coke had this thing, as I mentioned before, called "pattern advertising." So they developed a series of commercials. They did "Have a Coke and a Smile." They did, at the time, "It's the Real Thing," right? The advertising is the real thing. I mean, it was shot down to everybody around the world. Our job at the agency was to translate it and adapt it. And then we had to go and sell it to the client.But we were not coming up with a lot of original marketing ideas to grow volume. It was all about – we were implementing whatever was coming down from the north. And even at headquarters, and later on when I was at headquarters, it was kind of – the agency drove and dominated the whole communication or marketing thing. The Coke marketing folks were ex-salesmen. There was no strategy.Coke was a distribution company. They had a great product and a great idea, and then they developed a distribution network around the world. There were a lot of people that wanted a franchise, and that's how they ended up growing for a long time. At one point, they actually needed to go vertical, and that's when the company started changing. But it was all about launching bigger bottles, or different sizes, or plastic bottles, or stuff like that. You didn't really have a real marketing strategy coming out of the company.There was a group at McCann who went off into this quiet lab, and they'd come in and they'd make a presentation about how we're going to go to the next level. And we had this stupid piece of research, which was "13 elements of imagery." And it was about, "How much do the consumers love us?" Not how much do the consumers buy us, but how much they love us. And, you know, it was very frustrating.International Marketing: From Japan to New York to BrazilAndrew Mitrak: You were at McCann and eventually, of course, you went to have a very successful career at Coca-Cola. But before that, you actually joined Pepsi, their top competitor, in Brazil, right?Sergio Zyman: No, so I went to McCann in Mexico, and I saw Gene Kummel, who was the president of McCann, came to visit in Mexico. And I got a call – the president of the Mexican company called me up at McCann and said, "By the way, Jean is here. Would you like to see him?" And I said, "Yeah, great." Or, "He'd like to see you."So I went down to meet Jean. And he said, "What do you want to do?" And I said, "I want to go international. I want to get out of Mexico." I told him all the reasons, and three months later I got a call that said I was transferring to Japan. And I said, "Japan? Why Japan?" And they said, "Because if you can make it in Japan, you can make it anywhere."So I went to Japan as an account executive again, to work on the GM business. They had bought Isuzu in Japan, and they were trying to create a pattern model for advertising around the world. And I also worked on Nestlé.And in Japan, the Japanese are very methodical, as you know. And they were selling Nescafé, which was the number one brand for Nestlé around the world. But then when it came to the spring, the Japanese went and got a haircut, switched their suits from winter to summer, and stopped drinking coffee – just stopped. So we came up with a cold drink out there, and I worked on that. I was there for a year and a half – an incredible experience, living in Japan.So then I got a call saying that they wanted me to go back to the States. I went to New York, and they offered me a job as account supervisor on the Coke New York – the bottler in New York. And I said, "You know what? I need to get the New York experience. I got to check that thing." So I took the job, and it was a nothing job. All we did was take the client to dinner. We didn't do anything meaningful.Becoming President of Pepsi in Brazil at Age 30And then Pepsi started asking me to join them, and they offered me like five or six jobs. They were all kind of ad jobs, and I didn't want to be in that. And then eventually, McCann – I went to Central America to be general manager of the Central American company. And then when I was there, they asked me whether I wanted to interview for a marketing job in Brazil.And I had just gotten married, my wife was pregnant. And I said, "You know what? Take a free trip to Brazil. What the hell? I don't think anything is going to come out of it." I went to Brazil, and the job actually was to develop an advertising campaign, even though I was a marketing guy. And I said, "Well, I can do that. I know how to do that."So I took the job as head of marketing for Pepsi Brazil, and we moved to Brazil, which was a great experience. My daughter was born there. We lived there for three and a half years. About two years in, my boss gets transferred to Venezuela, and I get promoted, at age 30, to be President of the company. And I was over my head – beyond anything. I didn't know what I was doing.The Pepsi Challenge: Growing Pepsi’s Marketshare vs. CokeAndrew Mitrak: In your book, you write,"When I got there, I found out that Pepsi Brazil had the same advertising philosophy as Coke, but to make things worse, Coke was outselling us there 10 to one. Not good. I knew that with the odds so heavily against us, and with comparatively no penetration in the market, the only way we could dig ourselves out would be an ad campaign that provided a contrast between us and Coke. So we came up with the Pepsi Challenge."And I'm wondering, what were the origins of the Pepsi Challenge? You were at Pepsi when the Pepsi Challenge was launched. What did the rollout of that look like? How did that start?Sergio Zyman: Pepsi was doing some spectacular advertising with the puppies and the "Pepsi Generation" – great jingles and all that. And there was an agency in Dallas, Texas, that came up with the Pepsi Challenge. And in the old days, you didn't go negative, right? I mean, you basically came out and told people why you were the right candidate or the right product, but you never went negative. The only time you went negative is when you had nothing to say.And Pepsi had tried everything to get out of the kitchen and into the living room. And all they were trying to find was a way to be equally considered by consumers. In Brazil, I had no money. I had no budget. And, you know, I didn't come up with the Pepsi Challenge. It came out of Dallas. But then we started doing it in Brazil. It didn't go as well as it went in the States because, in Brazil, people frowned at negative advertising. But all that changed over the years.Andrew Mitrak: At a tactical level in Brazil, when you're doing this, was it pop-ups in supermarkets and public areas where people could try them both? Were you filming these and putting them on TV? What were the mechanics of the advertising campaign rollout look like there?Sergio Zyman: We basically did taste tests, right? Blind taste tests. And you did a not-blind taste test until you won. The moment you won, you stopped. You didn't have to do any more. So you kept on filming these very rudimentary spots. And then once you got to the number where you could claim that more people prefer the taste of Pepsi to the taste of Coke, you didn't have to do any more.Andrew Mitrak: If you ever lose, you can just stop that ad and not run that one.Sergio Zyman: No, no, you don't. You never – you won't lose because the chances of a sweeter product, which is what Pepsi was... Eventually, you didn't have to win by a large margin. You could win. All you needed to do is have 51%. "More people prefer the taste…" – all you needed to say. "In taste tests in Rio, more people prefer the taste of Pepsi to the taste of Coke." That's it.Andrew Mitrak: Yeah.Sergio Zyman: And I would do things like, when we would launch a new flavor or something, I would take all the trucks and I would do a parade through the cities of Rio or São Paulo, as a way to do that. I didn't have any money. And I learned a lot.And then they decided to restructure Pepsi down in South America. They put together a group with Bolivia, Argentina, and everything else, and they brought in a guy called Roger Enrico. And Roger arrived in Brazil, and – the flight arrived at 5 o'clock in the morning. I sent a car and a driver and a letter saying, "Welcome to Brazil. I'm at your service. Let me know – I'm sure you want to rest." He got all offended about it. Hated me from day one. He came into the office; he wanted to take my office because he was now the guy for South America.Anyway, so he fired me a year later. So now I am in Brazil with my wife. She's pregnant with my second kid, and I'm fired. So I said to my wife, "We're going back to Mexico." She said, "I don't want to go back to Mexico." I said, "Guess what? That's the place that I can actually retool and figure out what I'm going to do."But then John Sculley, who was president of Pepsi North America, heard what happened, and he said, "We're not losing Sergio." So they moved me to New York against Roger's desires, and then I went to be director of marketing for Brand Pepsi in New York. But it was a nothing job, too, because it was all about advertising.Andrew Mitrak: I've got to ask you about – you mentioned John Sculley, of course, later became CEO of Apple. Did you work with John Sculley, and what were your impressions of him?Sergio Zyman: John was an incredibly cerebral guy. Very introverted. And I worked with him, and I worked with “Ted” Glover, who had then moved to New York as well.And then I got a call from Brian Dyson, who I had competed against in Brazil, and he said, "By the way, I'm back in the States. I'm running Coke North America. Do you want to have lunch next time I'm in New York?" I said, "Sure." And we went to have lunch at the Bar Americain at the Waldorf. And then as we were sitting having lunch, suddenly Don Keough, who was the president of North America, by accident, shows up at the window and waves at Brian. He comes in, sits down, and pretty much starts grilling me about what I thought about Coke.And I said, "I think you guys are screwed up. I think you've had so many advantages, and you're just giving more up." And I gave him a bunch of examples. And he said, "Well, we're not that bad." I said, "By the way, I'm not here – I'm just having lunch with Brian." I didn't even think that they were interviewing me. And then later on, Brian offered me a job to go down to Atlanta, and I went down to Atlanta. I got an offer – a very good job – and then from then on, lots of stories.Andrew Mitrak: Lots of stories. So, you joined Coca-Cola in 1979. To quote your book, you say,"That's when I found out exactly what happened after those ads I'd worked on at McCann were sent off to the media and aired 20,000 gazillion times, and I was shocked. Nothing happened. All those beautiful, heart-grabbing, award-winning ads that were supposed to be getting people to buy Coke weren't having much of an effect."So, was this really the time when you learned that the advertising wasn't really working at all, once you had moved in-house at Coca-Cola?Sergio Zyman: Yes. I mean, there was – Coke was really – I found out when I got hired, the reason they hired me was to pick up the secrets from Pepsi. And they really didn't treat me well when I got there. It was kind of almost like a joke. I was the token Pepsi guy and kind of a spy. And Coke was such a fraternal, "belonging-only," non-performing company.And all of a sudden, I started doing things which were so bad – like, I went down to lunch one day, and I'm an avid runner, and I was running a lot. And the only thing they had in the cafeteria was chili dogs and really fat stuff. So I convinced them to put in a salad bar. And I became like this terrible person. They'd scratch my car in the parking lot. It was awful.Andrew Mitrak: Do you think that you being from Mexico had something to do with that? Do you think it was prejudice?Sergio Zyman: No question. For sure. But, for me, being Mexican was kind of – I knew that I was in the minority. I knew that people didn't see me correctly. Even at McCann in New York, my own friends in New York were always kind of saying, "Why do we need a Mexican guy to be in New York?" There was always discrimination, but I just took it as part of the course. I had to work through it.But the advertising was very garbage at Coke, and it was managed by a whole different group, kind of corporately. You were not allowed to touch anything, do anything. I remember when, after a while, there were all kinds of people who left, and I was named director of marketing for the US. And I tried to hire people, and I had a couple of marketing people from Procter and other places.I remember there was a guy called Richard Ternowski, and he came to see me one day and he said, "Look, I tried to talk to the product guys about what's going on with the product, and they said I'm not allowed because that's a corporate thing. I tried to talk to advertising, to this guy John Gillen, who is kind of a protégé of the president and the son of a cousin, and I'm not allowed to talk about advertising. The packaging is done by corporate, and I'm not – what am I doing here?"That was the issue. So, the thing that – I started then becoming the guy that would come up with challenges. "How do we break this? What do we do in order to do something totally different?" We wanted to sponsor Hands Across America, and we did all kinds of things that were stupid in today's world.But then the thing kept on growing that way. Eventually, I became the head of marketing for North America. I ended up being the project manager on Diet Coke. It got canceled twice. And I did New Coke and Diet Coke and things like that, but it was so hard. It was really hard. It was counter-cultural.Launching Diet Coke: “Just for the taste of it”Andrew Mitrak: I want to ask you a little bit about some of these launches during this period. Can you share the story of Diet Coke? You kind of take it for granted that Diet Coke is one of the options today, but it didn't exist until you were there and really oversaw some of the launch of that. So how did that go?Sergio Zyman: Remember, I was Attila the Hun. I was there to destroy the status quo. So anytime Brian would call me up and say, "What do we do now?" I would come in with these cannonball things. Tab had a 3% share. Pepsi had two brands, Pepsi Light and Diet Pepsi. Together they had 4.1%. Anything that we did to grow Tab was just tough because Tab had been positioned as a diet drink. And the number one benefit of Tab was that it tasted sh****. Because of – I mean, it had saccharin, right? So people saw it as a way to punish themselves so they could go in and have three hamburgers.When I started the project initially, I started doing a lot of work on it with only two guys. I was actually semi-being the executive assistant to the president of the company as well. We went to Brazil – we were in Brazil. That's the time that Paul Austin, who was the chairman at the time, they discovered he had Alzheimer's, and there was a change in management. And then we got an email saying, "Stop all work on Diet Coke." And then the project got canceled.They had agreed with me that I was going to go to Harvard for the 13-week post-grad. And then I was leaving. So I was going to go to Harvard. Then Roberto Goizueta gets named CEO of the company. The project gets reinstated, becomes "Project Harvard," and I said, "I want to have a different ad agency." And they said, "Okay." Literally, after that meeting, I went to the airport, I went to New York, and I hired Lintas before McCann had a chance to react. And of course, that made me persona non grata. Remember, at the time, Madison Avenue saw me as destructive. I mean, they named me the “Aya-Cola.”Andrew Mitrak: So, Aya-Cola being a pun on Ayatollah, right?Sergio Zyman: Right. Exactly. And my view about it at the time was advertising needs to sell product. And they're saying, "No, no, no, no. Advertising needs to do these great commercials and entertain people. Look at the success of “Mean Joe Greene” and 'I'd Like to Buy the World a Coke,' and blah, blah, blah." And I just – I mean, we got into a massive fight for years about it. And I still believe today that the thing is all broken.But I just kept on going about it. And then, I got introduced to Goizueta, and I said, "Sir, I'm going to go away. And if I come back with a proposition to you, you're going to have no choice but to approve it. Because it's going to be an unassailable proposition." We walked out of the meeting, and Keough says, "You almost got fired there by talking like that to the chairman." I said, "What did I do? All I said was I wasn't going to just go play with this thing, that if I found out that there was no viability for the project…"So we went and we hired a design company – a very – I mean, I went non-traditional on everything. And we hired this guy, Alvin Schechter, who was really smart. He had done a lot of industrial stuff. I wanted somebody that had not done consumer products. That was – every time I tried to kind of do it sideways.And in one of the meetings, he was talking about the fact that the thinness of the lines on the Diet Coke can had to be enough to have the equity of brand Coke on it. And I was kind of rolling my eyes, and suddenly I said, "Wait a minute. We cannot launch a diet drink. We need to launch a regular drink with no calories." And everybody looked at me like an idiot."Wait a minute. We cannot launch a diet drink… We need to launch a regular drink with no calories."And I said, "It has to have all the imagery" because a brand is made up of five components of imagery: product imagery, user imagery, brand imagery, usage imagery, and trademark imagery. So eventually, making a long story short, we ended up with a product that was sweetened with saccharin initially. But basically, we launched it on a platform of taste, with a big jingle. Say, "You want to drink it just for the taste of it." And we launched it in Radio City Music Hall with the Rockettes.So that's how we got around the thing. And that's – I left. I went to Harvard, and then they, kind of corporate, took over the product. They tried to launch it around the world, and it failed miserably everywhere around the world. And the reason for that is because they were launching it as a diet drink. When I came back to the company, I just changed the nomenclature from Diet Coke to Coke Light, and volume went through the roof. And that's – I mean, Diet Coke, there's a lot of stories behind Diet Coke and a lot of insight about it. Same story with New Coke.Sergio Zyman: “I was the first-ever Chief Marketing Officer…”Andrew Mitrak: Yeah, there's a lot of stories, and we're at time for our interview today. We're going to do a follow-up because we've covered a lot of your career – from Mexico to Japan to the US, to Brazil, back to New York and Atlanta. But we're still… there's decades and decades of the rest of your career. I want to talk about Tab Clear and the takedown of Crystal Pepsi, of course, New Coke, the founding of the Zyman Group, your advising to politicians on political campaigns, also some of your consulting work with Microsoft. Just so many stories to keep going through your career. So I'm going to follow up with you and we'll schedule part two of this conversation.Sergio Zyman: Well, let me finish with one comment only. Remember, my philosophy is marketing. And I learned it over the years. Marketing is about selling more stuff to more people, more often, for more money, more efficiently. That's what marketing is, right?Marketing is about selling more stuff to more people, more often, for more money, more efficiently.And it's not just a moniker. It's selling more stuff, which is volume, or more money, which is profit, more efficiently, which is spending as little as you can. And then it's about penetration and usage. And I think that when we talk again, we've got to talk about those philosophies, which are still not embedded in companies today.I was the first-ever Chief Marketing Officer, and the reason I became the Chief Marketing Officer – and we can talk about it as well – is because I wanted to have a seat at the table. Now, everybody's a Chief Marketing Officer. They're not. They don't have any responsibility for the bottom line. So we'll talk some more.Andrew Mitrak: Absolutely. Well, I'm really looking forward to it, Sergio. Thanks so much for your time. This has been an absolute blast. I really enjoyed this conversation so much. So thank you again, and we'll talk again soon.Sergio Zyman: All right. Take care.**End of Interview — Tune in Next week for Part 2.**A Special ThanksI want to extend a very special thank you to two people who were instrumental in making this interview happen: Mark Kroese and Joe Michaels. I'm incredibly fortunate to count them as mentors and as friends. They both independently recommended I speak with Sergio Zyman for the podcast, and their insights were invaluable as I researched and prepared for this interview. And it was Joe who actually put me in touch with Sergio, making this conversation possible. Thank you for your support, Mark and Joe! This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketinghistory.org

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• Dr. Robert Cialdini: “The Godfather of Influence” on the Seven Principles of Persuasion in Marketing

  A History of Marketing / Episode 9This week, I sit down with Dr. Robert Cialdini, a NYT bestselling author and Regents Professor Emeritus of Psychology and Marketing at Arizona State University. Cialdini is regarded as “The Godfather of Influence” and The Harvard Business Review describes him as “the foremost expert on effective persuasion.”This is a special conversation for me. Cialdini’s 1984 book “Influence: Science and Practice” is a book I’ve revisited over my career, and I’ve recommended it to several marketing colleagues. Speaking directly with Cialdini was a true honor. He’s given a handful of podcast interviews in the past, but I haven’t come across one that’s specifically focused on the marketing applications of his research. Listen to the podcast: Spotify / Apple Podcasts / YouTube PodcastsWe'll also explore Cialdini’s 2016 bestseller Pre-Suasion, which is all about how to prime audiences to be persuaded before a marketing message is delivered. Along the way, we’ll ground these principles in case studies, with examples of McDonald’s, Coca-Cola and the New Coke launch, Bose, Norwegian Cruise Lines, and Berkshire Hathaway. We’ll hear how Cialdini’s principles helped Warren Buffett and the late Charlie Munger — and had reciprocal benefits for Cialdini himself.Now here it is, my conversation with Dr. Robert Cialdini.Bringing the psychology of persuasion to marketingAndrew Mitrak: Dr. Robert Cialdini, welcome to A History of Marketing.Dr. Robert Cialdini: Well, thank you, Andrew. I'm looking forward to our conversation.Andrew Mitrak: So, you are the Regents Professor Emeritus of Psychology and Marketing at Arizona State University. That word “Marketing” is officially in your professor title. That stood out to me because I think of a lot of your work as primarily psychology. So, I'm curious about what your relationship has been to the field of marketing over the years.Dr. Robert Cialdini: Well, it's always been an interest of mine because of my larger, broader interest in the psychology of influence, and of course, marketers are influencers in many situations and ways. So, I've always had an eye toward what marketers are doing, what's been successful, and what isn't successful in the marketing arena.But my role as an academic with a marketing title comes from the fact that on a sabbatical leave, I went to Stanford. I was going to write a book, a new book, the book called Pre-Suasion, and I was asked by the Associate Dean if I could teach a marketing class. I was in the business school, the GBS, because I wanted to get the advice of various professors there about my ideas. And so, they gave me an office in the business school, and they asked me to teach a course to MBAs on effective business communications. So, inside that is, of course, the marketing element, and I began teaching that course, and it was very well received.When I came back to ASU, my marketing colleagues said, "Hey, Bob, how about if you join us, get a joint appointment, not just in psychology, but also in marketing, where you can teach that course, this time sharpened to effective marketing communications?" So, that's how the joint appointment developed, and I was very glad for it because the marketing students that I would teach would give me a side of the influence process that psychologists just didn't have a deep experience in. And so they were great sources of information for me.Andrew Mitrak: I would have loved to have taken that course at some time. I'm sure that marketers brought a new lens onto it that you weren't getting in psychology, but on the other foot, I'm sure you were bringing concepts that aren't really taught in marketing programs usually. Were there any notable reactions to some of the ideas that you recall from this time?Dr. Robert Cialdini: One of the things that was especially riveting for the marketing students was the idea that I was claiming that although we live in what is known as the Information Age, it's never been known as the Knowledge Age.Information has to be processed. It has to be structured. It has to be prioritized. And then, people will take it in, resonate with it, and then employ it in ways that lend themselves to assent if you're interested in influence. And so, that idea that information, no, we have to really think about how we construct it for marketing purposes rather than just sending it out there and expecting it to land in a favorable way. That's just naive, so the course was really reimagined in terms of that difference. We have information. We have a case to make. We have the merits of our offer and so on. That's not enough. We have to arrange it in psychologically strategic ways to make it knowledge that people will take with them and employ.Early Influences: Coke, McDonald's, and "The Hidden Persuaders"Andrew Mitrak: Let's go back to the beginning. You grew up in the Midwest. I think I have that right. And I'm curious about what your first encounters were with marketing as a young person.Dr. Robert Cialdini: Well, what I remember is Coca-Cola ads. I remember McDonald's ads and so on that had an emotional component to them that employed some of the things that I talk about in the universal principles of influence.The idea of unity that we're a community, we're a Coca-Cola community, a McDonald's community. Then information like we're the widest selling brand, McDonald's, ex-millions sold, and all those kinds of things that they were allowing us to recognize about their product that didn't have to do specifically with the features of it, just the response to it, the emotional response that people would have to knowing those, those facets of it. And that struck me as very interesting.I remember being interested in a couple of books back in those days. One was The Hidden Persuaders by Vance Packard. Back in 57. I was just 12 years old, so I didn't read it then, but a few years later, that whole idea of elements that you could put into an ad or a marketing appeal that would resonate with fundamental motives that people had, but they didn't even recognize them. You didn't have to be explicit about it. You could lay them into the background of the ad, for example, there was this great example of a set of ice cubes in a glass, a whiskey glass, and if you look close, you could see kind of racy images within the ice cubes that they laid in there and generating this desire for the product because there was desire that was coming into consciousness, although under the radar.And, Ernest Dichter, too, with The Strategy of Desire. I think it was his idea of underlying consumer motivations that weren't just about the product, but were about the things that people are looking for, striving for attainment and recognition and affection and so on. Those kinds of factors when aligned into the messaging were very effective, even though they were outside of the particular features of the ad, they were connected to it in terms of those fundamental drivers of human conduct.Going undercover to find the secrets of persuasionAndrew Mitrak: So you were really interested in the science and psychology behind persuasion from a very young age. And I'm going to read an excerpt from the introduction of Influence that speaks to a pivotal moment in your career as a researcher. I'm going to quote."For nearly three years, I combined my experimental studies with a decidedly more entertaining program. I systematically immersed myself in the world of compliance professionals, sales people, fundraisers, marketers, recruiters, and others."So, this period of being undercover in this immersion with these compliance professionals, I'm sure you have a lot of stories from this period. It sounds like a lot of fun. Do you recall any of your favorite interactions with marketers or public relations people while you were undercover for a few years?Dr. Robert Cialdini: Well, you know, I'm going to give you an example that I think is important, not because it took place in a marketing or PR setting, but because of its implications for the way as marketers and marketing professionals, we need to take this lesson into account.It has to do with the importance of establishing trust in our audience before we launch into trying to convince them to come in our direction. And in modern communication technology, we are separating ourselves in terms of human connection from our audience. We're using technology that allows people to buy or learn about our products and so on with no human connection, where you have experience with people, you've come to like them, you've come to trust them. And so, here was an example.So I was taking training in a sales program for very expensive heat activated fire alarm systems in the home. And I was undercover. I was incognito. I would just enter their training programs. I would learn what they were telling me was most effective in getting people to say yes. And I did this across a whole range of industries and programs and so on.In this particular one, there was one salesperson who, after you would get an invitation on the phone, you would recruit people to allow a salesperson to come into their home, and it was usually a couple, and tell them about this new fire alarm system that was superior to all the smoke based systems. And there was one guy who was always at the top of the sales lists. Every month he sold more than anybody else.In their sales training program, we were allowed to accompany the old pros on sales trips, and sales visits, to learn what they were doing. And I was especially interested in this one guy. Let's call him Jim. It wasn't his name, but let's call him Jim. And to see what he was doing. And it turns out he was only doing one thing different and it was designed to establish trust before he ever said a word about the products.Because if we, if we have that human connection with someone we trust, our defenses come down and we're more open to that person. There’s less skepticism and so on.So, what we would do with all the other sales people, there would be a big ringed folder of information about the product and all the benefits. And everybody would bring it in with them, introduce themselves and then start walking through this bit.This guy, Jim, left that binder in the car and would introduce himself and then everybody was all the sales people were asked to give the customers a little test of their home fire danger knowledge. So, and they would have, it would be a time test. They would only have five minutes. Okay, and so you give that to them and they're taking the test.And Jim would say, “Oh, wait a minute. I forgot some important information. Do you mind if I let myself out and back into your home while you're taking the test? I don't want to interrupt your test.”That often involved giving him a key to the front door of their home or to say, sure, let me unlock it for you and go ahead and leave and come back at your discretion. We did three separate calls that night and he did the same thing on all three calls.“Oh, I forgot the, do you mind if I get it and get access to your home?”And I asked him about it on the drive back to the office and first of all, he wouldn't ask, he wouldn't answer me. He said, he didn't want to reveal his secret.Finally, at the third time, he said, "Listen, Bob, what kind of person do you allow into and out of your house on their own with a key that you've given them? Only somebody you trust, right? I wanted to establish myself as a trustworthy individual before I began my pitch."It's the only thing he did differently. And he was at the top of the sales team. So, the importance of establishing trust before you launch in, right? How do you do that?Bose case study: Establishing trust with testimonialsDr. Robert Cialdini: Well, one piece of evidence that I have recognized from a marketing campaign from Bose. Bose Acoustics: you give them testimonials of experts on this topic on, it was the Bose wave music system. So, experts in acoustics and audio technology and so on.They used to have those expert testimonials buried in the message down below or you have to press a button to get to the to the testimonials to another page and so on. And we asked them to put the testimonials first. So they had the power, the trust that came from expertise of not, not the, not the marketer, but people outside of Bose who were recommending it. They now were able to get that trust in what was being said before they said a word, right? And it increased purchases by 16%.Now, the other thing about it is to optimize that trust from expertise, we didn't just put one testimonial. There will be a lot of advertising agencies that will tell you, no, no, just put your best testimonial first because the only, put that in there first. The others will just dilute its impact. That's not what the research shows. The research shows that subsequent testimonials, as long as the best one is in there, don't dilute it. They reinforce it. They reinforce what the best one said. They validate it. So that you can be you can trust that this wasn't just a cherry picked testimonial. They say that it's the only one that really raves about. No, there are several. So they put three up there, right? First thing. And that's what got them 16%. And the thing is it was the same material. It's where it went. It went in a place that established trust first, then led to compliance.Andrew Mitrak: There's so much to unpack with that. That example of Bose and the one best rating versus the multiple testimonials. I think today also of Google reviews and Yelp reviews where, which one do you trust? Do you trust the restaurant that has one single five-star review or do you trust the one that has 200 reviews that are 4.9?Dr. Robert Cialdini: Well, you're exactly right. Well, that 4.9 actually seems more authentic and it's better. And there's research to show it. The best conversion is not all five stars. It's a range between 4.3 and 4.7. Because you don't trust that person who's giving you just blanket positivity.Andrew Mitrak: You don't trust it, exactly.Dr. Robert Cialdini: No. Oh, and by the way, one of the things I'm going to recommend, because I think it's so important to build human connection back into our marketing even though technology is separating us. When you say there are “200 reviews,” right? Say “200 reviewers.”Those are people. We want people, not words on a page. We want people these days because we're, again, we're we're being drained of human connection through technology where we are just interacting with people separately from them, just pressing buttons.Influence: unpacking the seven principles of persuasionAndrew Mitrak: Let's, let's jump into your book Influence to ground some of this conversation, these ideas in the principles you lay out in the book. And when I first read Influence, there were six principles of persuasion you outlined. But this interview spurred me to purchase the new and expanded edition, which is not just a light, you know, rewrite with a new chapter here or there. It is a beefy, 400, 500 page book with a lot of material.Dr. Robert Cialdini: No, we added 215 pages. Yeah.Andrew Mitrak: Oh my gosh. Yeah. Well, knowing I was going to interview led me to purchase and read this new copy, which is just a delight in itself. And so, highly recommended to listeners. And so there were six principles initially. In this new book, you added a seventh principle, unity. Can, can you briefly walk through what the six principles are and why you added unity as a seventh principle?Dr. Robert Cialdini: Sure. Let's do that briefly.The first is reciprocation. People say yes to those people who have first given to them when they get a request from that person. We say yes to those we owe. So, we ought to be giving first, information. We should be giving various kinds of benefits, advantages and so on before people sign or or buy. Because they then feel appreciative. They feel grateful. And one of the things is to just, for example, there's research to show if you, if you just show people the amount of effort that you went through to provide this information to them, they're more receptive to it. They give effort back for having received that effort. That's the essence of the rule of reciprocity. What you give first, so you give benefits, advantages, information, evidence of your efforts and goodwill and so on. So that's one.Next is liking, the liking principle. Nobody would be surprised that we prefer to say yes to those people we like. Well, how do you get liking online, for example? How can you possibly do that? You don't know those people. They don't know you. They have no familiarity, no history with you. Well, there's a study of 6,700 online commercial sites, right? And they looked at AB tests to see which were the things that cause people to be more likely to go from visitor to purchaser, right? They convert. And the, the, fortunately, the principles of influence that we talk about are at the top of the list, but how do you get “liking” in there, right? Turns out that if you include on your landing page a welcoming statement, you get more conversion. You just establish, like, you approve of those people. You welcome them the way you would welcome somebody into your home. So on my, you know, we have a startup called the Cialdini Institute, where we teach ethical influence, and we have on the landing page, a welcoming statement, where it's said, well, welcome to our site. We're so glad that you're there. And then to make sure that it's personalized, I don't just have my name typed out in machine font, I sign it with my, I want a, I want them to see a person there. And there's a photograph of me. So, again, a person. So, those are the kind of things that bring, again, human connection in, increase liking and lend themselves to yes.Andrew Mitrak: It's not the “Institute of Influence” or “Institute of Compliance.” It is “The Cialdini Institute” and it's you–and you're a likable guy! So it's personalized.Dr. Robert Cialdini: And there's a, there's a photograph there, and. And you know how in, well, I'll give you an example, in marketing, two of the things that have shown the greatest increase over the last decade, influencer marketing. There's a person there. Somebody you know, somebody you were com- you're comfortable with, somebody you're familiar with, right? Big increase. And the other is handmade products. 37% increase. Why? Because there's a person there at a time when we're being separated from human connection, right? So, that kind of thing, anything you can do like that is gold. Yeah, so that's the liking principle.And how about social proof. The idea that if a lot of people are doing this, it must be the right thing to do. In our information overloaded world there are so many choices, so many options, so many challenges that we're dealing with, we're uncertain of what we should do. And people are looking for ways to reduce their uncertainty.We've already talked about one of them: authority. You give them evidence before you give them anything else, that of testimonials from genuine experts or, and here's the principle of social proof, which says people want to follow the lead of multiple comparable others. If a lot of other people like me are doing this thing or have done this thing, then it's probably the right thing for me too. Again testimonials or star ratings or quotes of one sort or another from others, a lot of others, multiple others will lend themselves to success. And we've already covered authority.Another is commitment and consistency. People want to be consistent with what they have already said or done. Okay? So, commitment and consistency.We've talked about scarcity. That people want more of those things they can have less of. So, the more we can give them evidence that what we have is unique, uncommon, rare, that Yeah. you can't get this from anybody else, not in combination. A lot of times it's not one thing that distinguishes us from all our rivals. It's a suite of things that together nobody else can match. That would be the thing to make very clear to people at the outset.Then finally, there is the new principle of unity, which says that people want to say yes, not just to those who are similar to them, but to those who are one of them, who share an identity or share a set of values or goals or or or category memberships. So I'm one of them. And how do you do that? Well, you, you can let people know if you know what their identities are, and you happen to share them, let them know that. But the way that works for me, we remember we were talking about getting people to feel connected. One of the great marketing advances of the last couple of decades, I think, is co-creation, where you ask your existing customer base to create with you the next generation of products or services. And the research shows that that not only increases favorability toward your brand, it increases loyalty. They're more likely to stay with you, even after there's been a stumble of some sort or another, right? If they've co-created something with you, they feel of you, part of you, of your brand.Now here's the latest research: One of the things we are doing with the Cialdini Institute is focusing on what we call small bigs. What are the smallest changes we can make to an appeal, an influence appeal, that will have the biggest impact on its persuasive success. Like, can you change one word and have that. Here's an example:Suppose you want to get your, you want to get co-creation and you're going to ask your customer base or your most important clients or customers to help you in this regard, and you will ask them for their opinion, can you give us your opinion on what we can do? Or you'll give them an outline or a summary or a blueprint of a new thing, can you give us your opinion on this? It's exactly the right thing to ask for that unity there.Right? Be, be one of us in this. Join us with this. Be our partner. It's a mistake to ask for their opinion. Because when you ask for an opinion, you get a critic. You get someone who does the opposite of unifying with you. They step back from you and they go inside themselves to provide a critique of your idea or your new initiative, let's say. Instead, if you substitute the word advice for opinion, you get significantly more favorable responses to your idea, right? Yeah. Because they're part of it. And here's the evidence that really sells the case for me. They give you better input into how to improve it, to change it or to emphasize features within your idea, right? Because they're one of you now. Yeah. The word advice asks for collaboration, partnership, unity, right?A small big for how you generate unity is not to ask for an opinion. And the newest research shows that's exactly the same thing for asking for feedback, which is the other thing we typically say. No, ask for advice and you get a better outcome.Andrew Mitrak: That's super interesting. There's this concept of the net promoter score and it's a question that's always asked by either product managers or marketers always using the same, the same text. It's it's, it's something to the effect of, “How likely are you to recommend this service to a friend?”And it's always that way. I think they always want to be consistent. In fact, I don't think they want to change it too much because they want to track it over time.Does that speak to unity in that you're bringing in friendship or do you the net promoter score could be improved upon?Dr. Robert Cialdini: Yeah, I think I would change it a little bit and say, what would be the single most positive feature of our product or service? Yeah. That you would tell a friend about. Now, they imagine themselves advising a friend, right? About this positive feature, that would be, I think, the most streamlined way.Andrew Mitrak: Yeah.Dr. Robert Cialdini: To get to the unity that we want. But I think that your point is very well taken that that general kind of questioning does that. It's an attempt at that.Andrew Mitrak: Right. Yeah. Well, you're inspiring my next listener survey for this podcast. So, just to recap, we've talked about:* Reciprocation* Liking* Social proof* Authority* Commitment and consistency* Scarcity* UnityInfluence through the agesAndrew Mitrak: This podcast is called A History of Marketing and so I'm very curious about how concepts and tactics and strategies have evolved over time.When you think about these principles, do you see them all as something that's innately human that's existed as long as humans have communicated and had something to sell to each other or or do you think of them as something that have culturally developed over time and that and that they've that they've changed over the years?Dr. Robert Cialdini: I think the majority of them have evolved over eons of human development. These are the things that if we, if they're truly in the situation, authority, social proof, we should want to move toward them, right? They will have evolved.There are a couple that have a very strong socialization component. Commitment and consistency, for example, the idea that you want to be consistent with what you have already said or done. Well, that's really about a reputation that you're spreading to people. That's the sort of thing you learn how to do. You don't get commitment and consistency effects in small children until they're maybe in fifth or sixth grade that they recognize that. So it's probably not innate. It has to be socialized into them. The other is reciprocity.All of these other principles, like scarcity and liking and what other similar others are doing, social proof and what, you'll see those even in non-human animals, that but reciprocity, especially a particular kind of reciprocity where the receipt of a gift or favor or service, piece of information, beneficial information, lends itself to future compliance with that gift giver. Animals don't have that. They don't have the ability to hold that sense of gratitude in their minds or obligation in their minds. I think this is something that is socialized into us.It's true in every human society. There's not a single human culture that fails to train its members in the rule for reciprocity. You must not take without giving in return. Because if you do, you're isolated, you're shunted off to the side. You're not somebody who will do well in that culture. The society benefits from people who receive to give back, which increases the likelihood that somebody will want to give in the first place, which increases human interaction and cooperation. I think those two, commitment and consistency and reciprocity are heavily socialized. The others are there already.Persuasion in marketing vs. salesAndrew Mitrak: You highlighted earlier the examples of the salesperson selling fire detection systems and then Bose, the audio system. And I think you were highlighting the differences between how salespeople can apply these and marketers and brands can apply these. And I think of marketers as they're influencing usually through the voice of a company or they're a voice of a product or a brand. They're kind of representing an entity that's like a non-human entity.This is different from a salesperson who's usually being more direct and personable and one-to-one with the person they're trying to persuade.How do you see these principles as being different? Or do you see them as being different for someone who's a marketer speaking on behalf of a brand or a sales person who's more taking an individual one-to-one approach?Dr. Robert Cialdini: Yeah, I think you're exactly right that they're different in that respect, but marketers would be well advised to bring those principles like liking, unity, reciprocity, that that produce a favorable connection, bring that into their marketing efforts, right? Let people know what you've already done for them or the effort that you've gone to present this information and so on.There was a study done in England where they were trying to get people to attend a particular meeting. And a lot of people just, it wasn't in their best interest. But if they were told how much trouble had been undertaken to set the meeting, find the location and get the schedules of everybody. They got a significant increase. Since, simply using reciprocity in terms of what we've already done might be something to do.The other thing about reciprocity, I think that's new over the years is not just material gifts, favors or services, but information, valuable information that's not designed to sell them your product because then it's a sales device. It's not really seen as a gift. Information in general about how to best proceed in this general area that you're working in, or just information about safety or whatever it is, that's the sort of thing that we can provide first and in a marketing context, we don't have to have a face-to-face interaction with people that can develop and has developed over the years. It's not just, you know, free samples.Coca-Cola: Comparing case studies of “Hilltop” and “New Coke”Andrew Mitrak: I want to ask about examples of companies and brands that have where their principles of influence have gone right and they've done it really successfully, then an example about where it's gone wrong or where maybe the lessons of influence weren't successful. And I think Coca-Cola could be a fun example to kind of compare and contrast.You mentioned Coca-Cola as one of the advertisements that made a big impression when you were a young person and of course, when I think of the concept of unity, I think of commercials like “I'd like to buy the world a Coke” and people holding holding hands. What did Coca-Cola do well with with these advertisements?Dr. Robert Cialdini: Yeah, they did exactly that. They made their product part of your upbringing, part of your youth, part of your history, part of your family experience. Even notice their ads for Christmas. There's a Christmas ad and Santa is drinking. I mean, just making it part of something that you've experienced that's a positive aspect of who you are. And that brand gets blended into that, right? They did a terrific job. Now, they also did a mistaken job on one thing, New Coke.Andrew Mitrak: Yeah.Dr. Robert Cialdini: Remember New Coke?Andrew Mitrak: Yeah, I wanted to ask you about this because I actually just last week I interviewed a man named Sergio Zyman for this podcast. He's the former Chief Marketing Officer of Coca-Cola and he's the marketer who's most associated with the New Coke launch. He did a lot of great things in his career, like involving the launch of Diet Coke, but we talked a lot about New Coke. So I want to hear you have a few pages on New Coke in Influence. What are your impressions of it?Dr. Robert Cialdini: So what they failed to recognize is the consequence of taking the old Coke away. So people couldn't have it anymore. And they produced what's called reactants where people reacted against the loss of this valued thing. It wasn't just that they introduced New Coke as another brand version or flavor with a little sweeter. No, they took it away. It produced a fire storm of protest. I mean, there were marches in the street. There were communities that developed with people raging against it. There were suits filed in court to bring back the old Coke because of loss aversion. That's part of scarcity. We want more of those things we can't have.Coke did this great job of establishing itself in the sense of self of their customers. And then they took that thing away that had been associated, that flavor, that taste, you can't have it anymore. And it produced this massive counter reaction to it. And actually Coca-Cola had the evidence in their testing data that this would happen, but they interpreted it wrong.New Coke: A lesson in loss aversionDr. Robert Cialdini: For three years they did taste tests, blind taste tests, the New Coke versus the old Coke. And the New Coke was rated more favorably by about 55% to 45%. They like the sweeter taste. Okay. And they thought, okay, well then people are and then they took away the thing they had established for decades and decades and decades and people and produced this fire storing. Okay, what was in their data that could have told them that this was going to happen? Some of the taste tests were not blind. They said, this is your usual Coke and this is the New Coke that's not yet on the market, right? And preference for the New Coke went up by 6%. And Coca-Cola said, this is great. This means that when we bring them something new, they will choose it. What it really said is when you give them the choice between something they can have, the classic Coke, the regular Coke, and something they can't have because it's not on the market yet, they liked it even more.In both cases, it was loss aversion. The thing that you couldn't have was the one that was elevated in preference. And then Coke went ahead and said you can't have our product anymore. The one that's, you know, embedded in yourself, we're going to give you this and that produced the reaction.So, in both cases, I think we can find evidence of a good marketing strategy and a poor marketing strategy in the history of Coca-Cola.Andrew Mitrak: That's right. The word you brought up a couple times is loss aversion. I think it's this idea that if I was to take something away from you and give something to you, the pain you would feel about your loss is actually greater than any positive feeling you'd have about what you gained.And people really felt that pain with Coca-Cola Classic that was now gone. What's more scarce than, “You can't have it”?Dr. Robert Cialdini: You're exactly right. Loss is the ultimate form of scarcity. You can't have it anymore.Andrew Mitrak: Yeah. To Coca-Cola's credit, when they brought back the classic Coca-Cola, they made sure that everything was exactly the same, that there were no changes to it. This is the same packaging, the same color, the same brand, everything that was there before. It's just the way it was.Dr. Robert Cialdini: So what's the implication for marketers, right? Here's one. Don't just tell people what they will gain, what they will receive from choosing your product. Tell them what they don't want to lose. Loss aversion is stronger than desire for the very same thing.Daniel Kahneman (and Amos Tversky) won the Nobel Prize in economics for his prospect theory that showed that the prospects of gaining something are significantly less motivating than the prospects of losing that very same thing. So, in that Bose ad I was telling you about where we added multiple testimonials of it, so that was the authority principle. We also had the scarcity principle when we changed the title of the ad from "New," the new Bose wave music system to "Hear what you've been missing in the new Bose wave music system." That produced a significant increase in sales. So tell people not just what they will gain, but what they will forgo. It's more powerful.Andrew Mitrak: That's a great line: “Hear what you've been missing.”Pre-Suasion: Setting the Stage for "Yes"Andrew Mitrak: Another book of yours that's a favorite of mine is Pre-Suasion. And speaking of great lines, I love this word, "Pre-Suasion." And did you coin this word yourself? and do you remember the moment you came up with it?Dr. Robert Cialdini: Yes, I did coin it, “Pre-Suasion.” The initial title of the book was “Moments of Power.” I was looking for moments when people were especially susceptible to a marketing or influence-based appeal. And they were always first. Almost always first.It's what you did first that changed the mindset of people to be more receptive to the message they haven't yet received. So, it was possible to increase people's agreement with a message that hadn't been sent to them yet. How could that be? Well, it's because if you put people in mind of a concept that is central inside your message, they have been readied for it when they do encounter it. Here's a great example, the Norwegian Cruise Line, one holiday season, had a marketing campaign where they were sending emails to all of their former customers that there was a great bargain for cruises during the holiday season of that year, right? But it was a limited time offer. So inside the email, there was a ticking down digital clock of how many hours and minutes you had to do it. Everybody got that. But half of them got that message with two ticking clock emojis in the subject line. So they were primed for scarcity. They were primed for potential loss, dwindling opportunity, before they encountered dwindling opportunity, which, according to the Norwegian Cruise Line, significantly increased purchases of cruises as a result. Yeah. So what do you do first? And how do you find those opportunities for mentioning something? We already provided one. Put, for example, a welcoming statement on your landing page before they get any information. You've established liking for them.Andrew Mitrak: That's exactly right. Recalling our conversation, almost everything you've mentioned is all about Pre-Suasion or or that's that initial moment, whether it's the welcome message on your your website, the salesperson who's selling the fire safety system, you know, he doesn't ask to leave at the end as he's signing the paperwork. He does it right at the beginning to build trust.Bose elevating those testimonials right to the top. It's both taking all of these principles of influence and persuasion and recognizing that, hey, often these happen right at, right at the beginning of an interaction and enter Pre-Suasion.Dr. Robert Cialdini: You're well advised to structure them for the beginning.Warren Buffett's Masterclass in Pre-SuasionDr. Robert Cialdini: You know who's the best at this is Warren Buffett. Okay. Maybe the greatest financial investor of our time. I get his annual letter to shareholders every year. Here's what he does on the first or second page of that letter. He mentions a weakness, something that went wrong that year and says, you know, we're human. We make mistakes, but this won't happen again because we've learned. We've made changes now.Every time he leads with a mistake, I say to myself, “Wow, this guy's being straight with us. What's the next thing he's going to say?” I'm especially interested. I'm focused now. I'm primed for trust. Then he mentions the strengths of Berkshire Hathaway. And why you should hold your shares and buy new shares because, and I am diving into that new. But it's not, he's waited until he's established his trust before he presents the strengths. Wow. What a brilliant guy.Andrew Mitrak: Very brilliant guy. And if I was to go down the principles of influence, the principles of persuasion and think of Warren Buffett, commitment and consistency. Is there anybody more consistent than him and the late Charlie Munger? Scarcity, they still have the class A stock and there's it class B? So there's like two stocks. There's one that I could probably afford and there's one that's like several hundreds of thousands of dollars and there's -Dr. Robert Cialdini: It's between six and $700,000 a share.Charlie Munger and the rewards of reciprocityDr. Robert Cialdini: Now, I'm going to tell you a story.I got one of those A shares 25 years ago in an envelope that had Charlie Munger's name on it. Charlie was Warren's long standing partner. It was worth $75,000.And he said, "Your book has made us so much money by understanding human behavior because we know that the markets are not made up of econometric models, they're made up of people. By the principle of reciprocity, you are entitled to this share."And I was sitting in a chair that had rollers on the back and I read this and it knocked me back and the chair hit the wall behind me. I was so shocked by this.Okay, so I've kept that share and it's recently, it reached $700,000 for that single share. That's how good these guys were not just at financial investing, but telling people about financial investing and how they did it and how and by establishing trust first. I mean, it's just brilliant.Andrew Mitrak: That's amazing.Will marketing internalize the lessons of Influence?Andrew Mitrak: So, your books have had so many answers to how marketers should position products and persuade audiences, and why do you think there's still so many marketing campaigns that fall flat and aren't persuasive? Is it just that more people need to read your books and sign up for the Cialdini Institute? Or why is it not fully known? Because the answers are there.Dr. Robert Cialdini: Yeah, I think it is that they think that my book is, well, “That was developed before the internet. Well so why would I pay attention to it?”And so actually, the book has been called the Bible of online marketing. It was written before there was online marketing and people have asked me, “How did you see ahead? How did you look ahead to see that it would be so successful in this new platform?”I said, "I never looked ahead. I looked in us.”I looked in us. What are the drivers of yes that have always existed across platforms, across populations, across situations. Those are the ones we need to.You have to think about not just the latest technology or approach. Look to the factors that have always driven. There's a Chinese saying, "The years tell what the days can't say.”Look to what has always worked. Don't get swept away by what happens to be the most novel or the newest. Go to the most primal features. Those are the ones that are going to drive behavior.Andrew Mitrak: I, of course, couldn't agree more. That's part of this whole podcast. I feel like everybody is is looking to the future of marketing or the latest tips and tricks today and I think a lot of the lessons are in history and they're they're from experts like you, like Dr. Kotler, like so many others who have gone through all this before and I couldn't recommend enough for listeners if they're in marketing to, you know, pick up a copy of Influence.It made Charlie Munger and Warren Buffett a lot of money, so definitely recommended. And Pre-Suasion as well, which is also just a delightful read. So, Dr. Cialdini, thanks so much for your, for your stories, your time, your wisdom. I've really enjoyed it.Where can listeners find you and learn more about you beyond purchasing these books to learn more about your work and to and to support you?Dr. Robert Cialdini: I think the easiest way would be to go to cialdini.com and then there's an array of possible options that they might want to partake of.Andrew Mitrak: Yeah. Well, Bob, thanks again for being on the show. It's been a lot of fun.Dr. Robert Cialdini: I've enjoyed it. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketinghistory.org

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• Dr. V. Kumar: Marketing Research and the Data Revolution

  A History of Marketing / Episode 8“Anytime there was a budget cut, marketing was cut first. So I took it personally to make executives believe marketing is an investment, not an expense. The only way you can prove that is to show the ROI of marketing.” - V. KumarThis week, we have a marketing titan joining us: Dr. V. Kumar, also known as “VK.” He's among the most cited and influential scholars in the field of marketing. He has published over 300 scholarly articles and 35 books. VK’s has been recognized with over 20 Lifetime Achievement Awards, including being inducted into the Analytics Hall of Fame and being named a Marketing Legend as part of the "Legends in Marketing" series, alongside the Philip Kotler and Jag Sheth. He was Editor-in-Chief of the Journal of Marketing and is the Goodman Academic-Industry Partnership Professor, Goodman School of Business, Brock University.In our conversation, we trace VK's journey from his engineering roots to how a talk by Philip Kotler sparked his passion for marketing.We also dive deep into the evolution of marketing research and analytics, from surveys and diaries to scanner panel data and the rise of database marketing and CRM. VK shares a behind-the-scenes look at his work measuring the Customer Lifetime Value of Coca-Cola consumers, revealing insights about Coke vs. Pepsi.Listen to the podcast: Spotify / Apple Podcasts / YouTube PodcastsWe'll also explore VK’s paper, "Evolution of Marketing as a Discipline," charting how marketing organizations have adapted, using Coca-Cola as a case study.Finally, we'll discuss the relationship between marketing academia and practice, highlighting VK's extensive collaborations with companies like UPS, IBM, P&G, Comcast, Home Depot, Wells Fargo, and Pitney Bowes, and how this work has helped demonstrate marketing's value as an investment, not just an expense.Now here it is, my conversation with V. Kumar.Early Influences: Philip Kotler and the Journey into MarketingAndrew Mitrak: Welcome, Dr. Kumar. It's an honor to have you here.Dr. V. Kumar (VK): My pleasure, Andrew. Thank you.Andrew: So, before we get into some of marketing's history with you, I wanted to talk about your history. Before you were a marketer, you studied at the Indian Institute of Technology, and you earned your master's in engineering and industrial management. So, I'm curious, how did you make the jump from engineering into marketing?VK: Both my undergraduate bachelor's in technology as well as my master's were from IIT. In the master's program, there was a segue. I majored in industrial engineering and industrial management, whereby we still continued with some engineering classes, but predominantly focused on the management of the engineering function. That was the time that Phil Kotler had come to India to give a few talks and meet with a few people. And I was blown away by the influence of him in the business field in general, particularly in marketing.And so, I started reading about what it is, and it was his textbook that we used in marketing in the master's program. So, when he came, and as well as I heard his talk, and I followed his book, I said marketing is what I'm going to do. And I reached out to him and he said to join Northwestern, but then I chose the University of Texas at Austin because they gave me a full scholarship, and it's a warmer place. I grew up in Southern India, Chennai, and, Texas being warm, it was a natural liking for me to join the University of Texas at Austin. There, I did both marketing and a minor in statistics. So, I brought in the engineering expertise throughout my life, even majoring as a minor in statistics. That's the segue that happened.Andrew: So, you came to the US to start studying marketing. What were your initial impressions of marketing as a consumer, versus an academic? Were there advertisements that made an impression on you when you were young? Were there specific brands or examples that stood out to you?VK: The first thing is, when you land in the US and start watching television, you see a plethora of advertisements. You get glued to that as to how colorful it is, how beautiful it is, and what the message is. We have this AIDA model: awareness, interest, desire, and action. So, I used to evaluate each of these ads as to where they stop. Are they just creating awareness, or are they going through the process till the end to make me go and buy that product?So, that was very fascinating. But the one ad growing up that really caught my attention, which for many people and the whole ad world talks about it, is the renaissance of advertising, the Apple 1984 Macintosh ad in the Super Bowl. That transformed Super Bowl ads from then on, and also the ad industry in terms of how to be creative and catch the attention of the consumers. So, that was there. Then after that, a series of Coke ads and Budweiser ads all followed through, but this was like a moment to reflect, and that still stands in the mind.Andrew: Yes, I think we can all envision that ad, almost frame for frame in our heads. It made quite an impression.VK: Definitely.Andrew: And so, you mentioned Philip Kotler, of course. Who were some of the other individuals that first shaped your understanding of marketing as you were first entering the field?VK: So, I was admitted to the University of Texas at Austin, and my advisor throughout my stay was Bob Leon, Professor Bob Leon. He was a significant influence then, and till now. He's the best friend, he's the mentor, guide, everything. So, he prepared me for life saying that there's only one thing you need to remember. You just put in your hard work, and if the expected outcome doesn't come, don't give up the hard work, keep persisting, putting it in.That was great advice because as an academic professional, you would see that when we submit manuscripts, rejection is the norm. So, every paper we write, we keep rejecting it. So, we cannot give up. So, he prepared me well. And then also in terms of quantitative marketing, he is a great quantitative marketer. So, he taught me some of the basic statistical techniques as well as advanced. I was his research assistant.But I was the one who was fortunate upon graduation, and then even before I got promoted to associate in the '90s, Dave Aaker and George Day adopted me and said, "V. K., we want to write this marketing research book with you. We have done something so far, but we want you to take over from here."I was like, is this a dream? And then I took it over and wrote the book, as the fourth edition or so was the first one that we co-authored together. And now, it's the 13th edition, and we'll release the 14th edition very soon. It is the standard. And then in the middle, somewhere, Jag Sheth also influenced me significantly, adopted me and said that the work that you do, make sure you also give back.You know, I was adopted by many people at different stages. So, what do I do? And now, fast forward to today, I've had 40 doctoral students I could mentor. And it was the most rewarding experience I have seen, and probably one of the largest numbers among the academics, to mentor, and they are all doing very well in the academic field. Most of them in the academic field, some in the practitioner world. They keep switching back and forth.The Evolution of Marketing Research: From Surveys to Scanner Data and BeyondAndrew: You've clearly taken these early lessons of hard work to heart because you've had a very prolific career. Of course, you've contributed to virtually every field of marketing in some capacity, but one area that stands out is marketing research, and you mentioned the book, Marketing Research, which is now in its 13th edition and the 14th edition's on its way. Can we dive into marketing research as a category? What was the evolution of marketing research, and how did it change and what was your role in shaping it?VK: This is a great point to reflect. So, when I came to the US in the '80s, we had one of the companies of marketing research was Marketing Research Corporation of America, MRCA. And they, prior to them, marketing research was survey research. Semore Sudman who was the pioneer of survey sampling and how to sample correctly and do the survey. So, surveys were the most common thing.From there, the evolution came with MRCA into giving diaries to people. You write what you buy and then mail the diaries on a weekly basis so that they don't forget. In the survey, there could be telescopic bias. I forgot what I bought, and so there could be errors, so diaries minimize those errors. And then, from there, we had A.C. Nielsen and IRI Information Resources Inc. introducing the scanner data, scanner panel data in the '80s, in a few test market cities. Port Washington was one of them.And one of my first jobs was after graduating, although it was short-lived, I was at the University of Iowa, and I joined there because the co-founder of IRI, Information Resources Inc, Jerry Eskin, was a marketing professor at the University of Iowa. He said, "If you join, I'll give you all the scanner panel data. You can build the models, whatever you want, and we will share it with the companies."I did that. He took me from Iowa City to Chicago over the weekends. We got a lot of data, built a lot of models for P&G and Kimberly Clark and published them in Journal of Marketing Research and JMR subsequently. But that is the revolution, from survey research to diary panel to scanner panel data. Then the revolution came in the '90s of database marketing, that we could really have databases of customers. The scanner panel is one part, the retailers collect, but also, manufacturers also started collecting data, buying data from the retailers, as well as with the credit card, they were also registering us. The loyalty programs emerged in a big way.So, they had not only what you buy, but who you are, and also through the models, we were able to generate why you are buying. So, that part came in the database marketing, and then, of course, the birth of 2000, the CRM came into the revolution, that is, which customer is buying what. So, what should I be showcasing to this customer in terms of ads, in terms of customization and personalization, that was the goal, but the goal was materialized later on in the 2011 to 2020 time period.And today, with the advent of new-age technologies, we are able to easily do that, the personalization, customization. But the question is, is every company venturing into this path or are some of them lagging behind? Still, if you take P&G, the majority of their products are all mass marketing. They are in many categories and multiple brands all over the world, and it's mass marketing. World of Coke, the same thing, Coca-Cola is mass marketing.Unlocking Customer Lifetime Value: Insights from the Coca-Cola Case StudyVK: Having said that, even Coke came to us and said, "can you tell me what is the lifetime value of a Coke consumer?" You know, never thought of it, because to measure the lifetime value, you need customer transaction data, exactly what it is, but then, who tracks it? A.C. Nielsen tracks how much you buy over a weekly period, but also the competition. So, we had to come up with a very new model. Me and one of my former doctoral students, Saran Sundar, we came up with measuring CLV of Coke, Pepsi, all soft beverages and published in JMR, which won the best research in JMR and the Donald Lehmann award as well as the best doctoral dissertation award for my doctoral student.So, this marketing research is the one that you can clearly see the barriers and then how we overcome these barriers.Andrew: Can we dive into that Coca-Cola example, just in a little more detail, because this is far before the age of really digital advertising as we know it today, as well. So, how did you approach that?VK: The data comes from A.C. Nielsen scanner panel. So, they had 20,000 people in the panel. They track over a six to seven year period as to, you know, what soft drinks that they buy. And so, we have like, if Andrew bought Coke in week two, three, four, and then switched to Pepsi in week seven, eight, then came back to Coke. So, we have all these switching as well as sticking to the brand.And some people are variety seekers, some people are die-hard brand loyal, some people are promotion sensitive, we call them deal-prone customers, and some customers are rational customers. They look for a coupon, cut the coupon, and go to the store and take it. So, we look at the buying pattern of a Coke, and then among these 20,000 panel members, you have a wide range of age.Then you segment also by, if you're a 20-year-old versus a 30, 40, 50, 60, how is the consumption pattern varying? And in this process of this data, we use something called a structural model. People often confuse with structural equation model. No, this is structural model, which facilitates what is the utility for consuming Coke at this instant by an individual. And so, we model the functional utility, and then see that at what time interval, because they buy and how often they switch.And if you can model this steadily, in the observation period, then you can project it across age group, so that what will be the lifetime value of Coke. The interesting thing in the study is, if I ask you this question, which would Pepsi have a higher customer lifetime value, or Coke will have a higher customer lifetime value?Andrew: My best guess would be Coca-Cola.VK: If you look at how much as a consumer, a Pepsi consumer consumes more Pepsi than a Coke consumer is consuming more Coke. So, the customer lifetime value was higher for Pepsi. But the overall consumption and profitability and the share was higher for Coke.Andrew: Right.VK: So, after this study, the plan was how to increase the customer lifetime value of Coke. How can we make a customer drink more Coke?And one of the ways that you do that is to introduce a lot of variations, of Coke, diet Coke, caffeine-free, zero, cherry Coke, zero, Coke, and all those things. So, that's the way you keep them in the family. So, overall, if you look at the family structure, then Coke manages that very well.The Evolution of Marketing as a DisciplineAndrew: I want to turn attention to a paper you published called "Evolution of Marketing as a Discipline." This is a long, dense paper, but if you were to take the 30,000 foot high-level view of marketing, say over the last hundred years or so, how would you describe its evolution from the highest level?VK: So, if you go back to 1936, and then, I will go like a decade, one decade, marketing was viewed as applied economics. Then from there, it became marketing as a managerial activity. And then the third decade, it became marketing as a quantitative science. Then after this, something happened that we started looking at consumer behavior. It became a behavioral science.And then how do they make decisions? And so, decision science followed. And then after decision science, it became an integrative science. And this is a very interesting period that integrative science between 1986 and 1995. Why? Because we borrowed a lot of theories from psychology, sociology, anthropology, to better understand the consumer's behavior. Why do they behave in a certain way?We were able to explain much better. So, and also the economics field was always infused, but then, statistics became very dominant. Prior to that period, prior to 1996, most of the research done, when you have multiple customers data on buying behavior, you would just run a regression model and get one coefficient for price, across all customers.And what is the assumption behind it? Is basically saying that every Andrew or V. K. or Phil Kotler or Jag Sheth, they all have the same price elasticity. But you and I know that's not true. So, in the mid '90s, where prominent modeling, unobserved heterogeneity, that's a technical term, in layman's term, all that means is that there are groups of customers who behave similarly.And so, all these latent class segmentation became so prominent, how to model that at the segment level, and at the individual level, we have advances in statistical models, through random effects model. So, we were able to really understand each customer at the individual level, what is their elasticity. And then market to them. So, that was a revolutionary period as to why my elasticity is different from yours. That's because maybe I belong to some socioeconomic class different from yours, or my lifestyle is very different from yours. So, we were able to explain all those things with the borrowed theories from psychology, social psychology, and sociology.Then marketing became a scarce resource, like people anytime there is a budget cut, marketing was cut first. The notion was that it's an expense. And so, I took it personally from 1999, 2000 onwards, for the last 24 years, to make executives believe marketing is an investment, not an expense. But how do we prove that? The only way you can prove that is to show the ROI of marketing expense. Whenever anybody invests, so, I invested, I give you $30 million, the CEO might tell the CMO, "Show me the return."So, when you do mass marketing, the famous saying, "Half of it goes wasted," I don't know which one. So, but when you do it individual-level marketing, who's buying, who's not buying, based on the marketing that you're doing, we are able to directly link the spend to the outcome. And so, that is what we did from 2000 onwards to measure the birth of customer lifetime value, came in terms of measurement, concept, definition, and implementation.IBM and Wells Fargo were the two companies that were the initial companies that we started working with. And then, I had students from Europe, so they also, roped in a Spiegel catalog company, and then, through marketing science Institute here, we got many member companies of marketing Science Institute, also share data and built a lot of models, fast forward today over 150 companies, implemented some of the models we have done, and they're all showcased as either practice price in inform society, and they're also available as practice price videos on my website.So, that is the investment part of it. To complete the story of this evolution, then, marketing became an integral part of the organization, that no decision can be made in isolation. They have to be even if it's an information systems or finance or operations, we'd say how we are going to market it, if you're going to change the operations.Example, rather than delivering the product from warehouse, you are now going to deliver it directly through mail. So, how will you market it? Because there could be a lot of delays in the mail system. So, what do you do? Or the vice versa from mail to warehouse, what can you do that? A famous example is Amazon also touted two-hour delivery window, but that didn't go far because that was impossible to implement.So, marketing promise has to collaborate with the operations. And then, in the late part of 2015 to 2020, we had the engagement marketing, and today, we are standing as transformative marketing.How Marketing Organizations EvolveAndrew: I want to come back to this early period, though. You started by citing the year 1936, and at the time, it was a field of applied economics, and you went from there to today. I'm curious how this would have impacted, say, a marketing organization. Take a company like Coca-Cola or Proctor & Gamble, or a company that existed from 1936 to the present. How did their marketing organization develop? What are the key changes or milestones? If I was a CMO and I was hiring a team, what did my team look like in 1936, and then what does it look like today, or what are the major changes in between?VK: This question is the right question because just four days ago, I was at the World of Coca-Cola in Atlanta, seeing the evolution of ads that they showed in the 15 minutes cinema that they screened.You know, that is one part. Just the evolution of Coke itself, the product formulation pretty much remained the same, in terms of selling it, they were in a situation where the more bottling plants, the more places they were present, they could sell more. So, the distribution era was the 1920s, '30s, '40s, and all, '50s. So, as they increased the distribution, then became the product era. So, they had variations of the product. Then they had like Fanta, Coca-Cola, Sprite, and a few other lime-based drinks all started evolving, the product era. Then the selling era, then they had competition.So, the salesperson went and said that why should they go through the selling era. But the commercials, if you look at it in parallel with this, they were showing colorful ads, colorful people, good-looking, attractive, and all those things they were showcasing that. Two benefits-based advertising in the '70s and '80s. That was a good shift that they followed through. Like what is the benefit of drinking Coca-Cola?And how often you should drink, and when you should drink, occasion-based drinking. So, all these expanded the scope for Coca-Cola in terms of advertising. And then with us tag teaming with A.C. Nielsen and IRI, using the scanner panel data, they found out which type of customers are buying more and less over as they age through, is the consumption dropping or increasing? And we find the consumption dropping.It's maximum when you're a teenager, 20s and 30s, and then it drops. So, what can we offer as a substitute drink to keep them in the family at that age, then they brought all these SmartWater and tonic water, all these water-based things came about. So, they were very clever in keeping a member of the household within the Coke family, Coca-Cola family with this understanding.And today, the biggest talk is about the AI-generated Coca-Cola advertisement, all over the world that we are seeing. And die-hard Coca-Cola fans, love it and saying that, oh, what, how colorful it is. And the critics are saying, "Oh, they've gotten down to this low level of using AI, they don't want to spend money, just AI." But if you focus on the ad itself, it is just combining the benefits, the occasions, and people all over the world.They are one company that throughout from 1896 have steadily done very well.Andrew: Yeah, it's such an iconic brand, of course, but you were mentioning how you tie it to a time. And we're entering, at the time of we're recording, we're starting to enter the Christmas time, and they're a brand that somehow is associated with things like Santa Claus and polar bears, but then their classic "I'd Like to Buy the World a Coke" ad, it's very summery, and it's part of the hippie movement. I'm sure that that was controversial to some extent at the time. And now, they are doing it again with AI.VK: But that's the objective, Andrew. That is everybody is talking about it. Good or bad, the awareness and what it is. So, it makes people curious to go and see.From Mass Marketing to PersonalizationAndrew: Another paper you wrote, along these lines is called "Conceptualizing the Evolution and Future of Advertising." And the paper describes how advertising has evolved from a one-way broadcast to a two-way conversation between brands and consumers. And advertising was focused on selling, but now it's more focused on engaging. And so, stepping back on this, what were some of the major milestones in how advertising has changed over the last century? And if you want to continue with Coca-Cola as an example of how their advertising has changed, that might be a useful framing for us too.VK: Yeah, Coca-Cola is one, but this study was done with Professor Shefali Gupta from India. A lot of thoughts went into this in terms of culturally how it has evolved, in an individualistic culture versus collectivistic culture, like India and China, or Singapore versus Europe versus America, North America, and so on. So, that was the thing. If you look at the traditional way of persuasion, advertising has got three objectives, inform, persuade, and remind.So, every ad focused on measuring it. Did I inform, how many people are aware, how many people intend to buy, and then how many people recollect the ad. So, those three objectives still, they would say that. But what the evolution has seen in advertising is that there was a mass advertising in television or radio, broadcast advertising was all there. Then came this beautiful media convergence, where you could have the confluence of the technology, multiple proliferation of media, and the ability to understand each customer's preferences.So, because of this media conversion, we had this split cable. Meaning like, if I and Andrew are neighbors in a city, in a zip code, we both are watching Jeopardy, and I will be seeing one ad, and you will be seeing another ad. And that was the media convergence, the technology allowed. Because I like to eat, say, Lays chips, or some chips, I don't eat that much chips at all, but some product that I'm eating, or maybe drinking Coca-Cola, the ad would be for Coke, and you consume Pepsi, then the ad would be for Pepsi for you.So, that is the way with the scanner panel data giving insights to the manufacturers and ad agencies that they buy this data, they can customize it.Andrew: So, if I was to go back to our Coca-Cola example, for instance, if I was in 1896 or so, I'm somewhat limited to print, or maybe out of home. And then radio comes along, and television comes along, and as a marketer or as a brand manager, how do these changing technologies change how I'm approaching advertising my products.VK: That's where advertising was always viewed as a creative component. And it was a mass marketing component. So, how can we infuse science into advertising? It is the messaging. So, advertising is nothing but creating a message to the audience, the relevant audience that they are targeting. Now, from mass marketing, general message, creating awareness or either to create an interest in that category, or the product, and to desire the product, I want to consume it, to actually buying it.The general-purpose advertising is to create awareness. So, what is the next step that they can do to induce interest? Then they focus on the benefits of consuming the product, the interest. Then what what can they do to make them consume, go to the desire, this is the one that I want to consume. I'm interested in this category, but I want to consume Coke, desire.So, for that, they'll say, "It is easily available and an attractive price, affordable." Affordability and availability became the message in the advertisements to create the desire. And the action is, there is a store next door to you. So, that is the completion of the circle or the cycle of advertising in terms of what it is. The reason I said circle is it has come back now to the beginning with the new technology again, they do the digital advertising, starting with like, how many people click, so that they become aware of it.Then how many people are now asking for more information, like not only seeing the ad, but clicking it to get additional information. And then, from additional information, what are, where is it available? So, which, so put your zip code and see where all it is available. So, then, you go to the desirability part of it, where affordability and availability is done in the digital world, and finally, you order from your home base. product gets delivered.So, the same cycle has repeated in the digital world, through the click through and conversion rate and so on.Applying Marketing Research to Inform MessagingAndrew: You brought up this relationship between marketing as a creative act, and marketing and advertising as a science. And it feels like there is, of course, a little bit of a natural tension here between being data-driven and being creative, but of course, marketing is, as you mentioned, it's strongest when measurement and creativity work together. And I'm curious if you have any thoughts on how the relationship between data and creativity and marketing has evolved over the years.VK: I can give you, explain this with one very nice example that we did with UPS. What happened there is that they have almost 4 million small businesses that they cater to, shipping packages. And they were communicating with them, sending them messages. So, they know they have to send them messages at some intervals. And the messages they varied are one is a relationship-oriented message, meaning like we can help you grow your business. If we come and spend a day with you, we can customize like what kind of shipping is good for you, for your business to grow. So, they, there's a relationship message.There is another message called economic message, which is, says that if you ship 10 packages, you get 20% discount, or 10 packages, pure economic discount. So, the creative part was done there. That is what what should be the creative economic message, what should be the creative relationship message. Now, the measurement part comes in where, who should get the economic message, who should get the relationship message, that's first question.Then for how long they should be getting that message, and when should it flip back to a relationship to economic. Or, they should bring both to some other group of customers. And that's where using the historical data for each of the 4 million small businesses, what messages they received in the last three, four years, how did they respond to each of those messages?And for how long they were responding. So, we built something called a time-varying parameter model, a dynamic model. Each time they get an ad at different times, the effect of that ad varies over time. We capture that. Using this historical data of measurement, we have the insight which small business should get economic message for how long, and then what should happen after that.We did this for them, and it was implemented very successfully, and we were able to also report. And some of the things that at that time, the CMO was Mr. Kevin Warren, and we also did a Harvard Business Review article of a variation of this, and he came and commented that how CMOs are when they are given strategic discretion, operational discretion, and financial discretion, that they can take decisions like this to move forward, that creativity and accountability or measurement part can go together, and they are very successful.Marketing Academia and Practice: Building a BridgeAndrew: Through this interview, you've cited several examples of how your academic research has closely collaborated with businesses. You mentioned Proctor & Gamble, you just mentioned UPS, Coca-Cola. I'm curious if you have any thoughts on how the relationship between marketing as an area of academics and scholarship and research has collaborated with marketing practitioners and CMOs. How has that relationship evolved over your career? And do you think that relationship could be even tighter than it is today?VK: Yeah, this is something very close to my heart. As I said to you, around about 2000, around that time period, marketing was relegated as an expense, it's not an investment. So, we went on a crusade, me and my team of doctoral students over the next 20 years to prove marketing is an investment. And we have done that. So, there is an organization called MASB, Marketing Accountability Standards Board, like FASB, MASB, which the focus of that board is to show marketing as an investment. We were all founding members, founding directors, and we did that.Now, what happened simultaneously at that time, because marketing was not able to prove its worth, CMOs were the most frequently fired executives in the organization. Their stint was less than two years, less than 24 months. So, how to reverse this? So, from then on, we took up the role of what should we give to the CMOs as ammunition for them to use?One of the questions that was asked by a company like Pitney Bowes was that if I give $10 million to my marketing CMO, they had, I think, director marketing or so. Should it be spent on building customer relationships, or should it be spent on building the brand?How do you answer that question, like, should you build the brand, or should you build customer relationships? It's like a chicken and egg problem. And so, to answer that, we started this journey of linking brand perception to actual customer lifetime value at the individual level. What Andrew as an individual thinks of Coca-Cola's brand awareness, brand trust, how much emotional attachment he has got, and how much he's willing to pay for that.And if the store next door closes, would, are you willing to go to the next street and buy it, and are you willing to advocate this, are you willing to repeat buy this? So, we came up with eight attributes to link it, and then showcase this branding, all these attributes to customer lifetime value. What you think of the brand today, link it to the customer lifetime value, which is the next three years value that you're likely to give to this brand.So, when we connect all these dots together and work with, here is where we work with the marketing practitioners, give it to them and say, "You have a tool here, and you can showcase to them, if you give me money, I can do both. Build the brand as well as build customer relationship." And that blossomed into working. And then down the line, we did another study which was published in Sloan Management Review as well as Journal of Marketing, is that if a CMO focuses on maximizing customer lifetime value, would that increase the stock price, share price.We did a field experiment with a B2B company and a B2C company, and Wall Street analysts observed it, and we showcased that maximizing CLV, customer lifetime value, results in increasing stock price or the value of the firm.And then Sloan Management Review immediately published this in saying, "This is great news for the marketers, the marketing field." So, that happened. Then, another five years later, we took a 10-year data, longitudinal data to study, help the marketing practitioners that if the marketing practitioners are given what decisions to make strategically, and which markets to enter, and how to enter the foreign markets, like operational discretion, and then how much to spend, doing the financial discretion, if you give strategic operations and financial discretion, then they can show global growth for the companies.So, 10-year data, and that was published in, it was an international study, so Journal of International Business Studies, but most importantly, it was published in Harvard Business Review again, repeatedly. So, everything we do, we get coverage from either Harvard Business Review or Sloan or California Management Review, because they have direct relevance to the practice. So, I feel that the close tie-ups that I have with the marketing field and the marketing practitioners to help them grow, this has worked out magically for us.Learn More and Connect with Dr. V. KumarAndrew: Dr. Kumar, I've really enjoyed this conversation. Your insights have been so valuable. So, thanks for sharing your experiences and your wisdom with us. And for listeners, what's the best way for them to learn more about your work and connect or follow your work online?VK: It's all documented in my website, drvkumar.com, and for all the the engagement work and the customer lifetime value work is all in vkclv.com is all there. But most importantly, they can Google search me and write to me directly. I'm a public figure, like everybody can find me easily.Andrew: Dr. Kumar, thank you so much. It's been so great meeting you on this podcast, and look forward to staying in touch.VK: My pleasure. This is a public episode. 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