CASE STUDY BRONNER SLOSBERG HUMPHREY

David E. Bell DAVID E. BELL is with Harvard

Business School.
Donald M. Leavitt
DONALD M. LEAVITT is with
Dyographics, Inc.
j
Professor David E. Bell and Donald
M. Leavitt prepared this case as the
basis for class discussion rather
than to illustrate either effective or
ineffective handling of an
administrative situation.
In January 1998, David Kenny had been with Bronner Slosberg Copyright q 1998 by the President
Humphrey (Bronner) for exactly one year, and had been CEO and Fellows of Harvard College. To
for only four months. After 10 years with Bain & Company, and order copies or request permission
with an MBA from Harvard Business School,1 he was accustomed to reproduce materials, call 1-800-
to thinking strategically, and that was what he needed to do now. 545-7685, write Harvard Business
Bronner provided relationship marketing services to a dozen School Publishing, Boston, MA
02163, or go to http://
blue-chip, market-leading clients including AT&T, American Ex-
www.hbsp.harvard.edu. No part of
press, FedEx, General Motors, and IBM. Bronner’s approach,de- this publication may be
veloped over nearly twenty years, was summarized in the com- reproduced, stored in a retrieval
pany’s mission statement: ‘‘Enable and assist clients to maximize system, used in a spreadsheet, or
the value of their customer base, and the return on their customer transmitted in any form or by any
base investments, across all points of contact.’’ In the beginning means — electronic, mechanical,
the company had used direct marketing opportunistically, but photocopying, recording, or
otherwise — without the permission
Bronner came to appreciate that only if a client managed every
of Harvard Business School.
interaction with its customers could the client give (and get) the
most value from every customer.2 Thus it was important to Bron-
ner that it select clients who would work with them on a relation-
ship rather than transaction basis, who shared a common vision,

Published by John Wiley & Sons, Inc. and

Direct Marketing Educational Foundation, Inc.
CCC 1094-9968/98/030067-19
■

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1
MBA ’86
2
Our usage will be that Bronner has clients who in turn have
customers.
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 JOURNAL OF INTERACTIVE MARKETING

and who had the will to make the organizational capabilities all took time. Furthermore, the com-
and operational changes that were required to im- pany’s chairman, Michael Bronner, believed
plement the vision. As a result, Bronner restricted strongly that with multiple offices and/or multiple
itself to a small number of new clients per year. new clients, the company could dilute its strong
This, along with private ownership, allowed them culture and intense focus on client results. As
the luxury of selecting clients who represented the Kenny pondered these issues, he reviewed in his
best fit, and ensured that each new client received mind how the company had evolved.
the depth of attention that was required.
Due to the care with which Bronner executed
its programs and measured their effectiveness, 1980–1989: EASTERN EXCLUSIVES
Bronner could give clients precise estimates One summer’s day in 1980, Michael Bronner,
about the return on investment of their market- who was then a junior at Boston University
ing dollars, allowing tradeoffs between market- (BU), noticed people on campus selling coupon
ing programs to be made on an objective basis. books. The coupons gave discounts at local
In recent years, Bronner had become convinced stores and restaurants and for services such as
that managing the individual interactions be- dry cleaning. It occurred to Michael that if the
tween customer and client went beyond a mat- stores were so eager to get the coupons into the
ter of pure financial return and indeed was at hands of BU students they should be giving
the heart of the customer’s relationship with them away, not selling them. And if they were
the client’s brand. Bronner’s belief was that the to be given away, why not be systematic about
future of marketing lay not in traditional mass it? He approached the dean of housing with the
‘‘image-based’’ communication to build a following proposal: Bronner would produce a
brand, but rather in building ‘‘experience- coupon book to be distributed to all 14,000 stu-
based’’ brand relationships. dents via their mailboxes ‘‘compliments of BU
housing.’’
Occupying eight floors of the Prudential
Armed with a letter of exclusivity from BU,
Tower in Boston, the company had been grow-
and operating under the name ‘‘Eastern Exclu-
ing at a rate of 30% per year with 1998 billings sives,’’ Michael invited local merchants such as
estimated at over $825 million. Yet, thought Store 24 and Kenmore Pizza to pay him $500
Kenny, the irony of the situation was that there for the privilege of offering a coupon in the
were danger signals that the company might not ‘‘University Coupon Book.’’ Though many of
be growing fast enough. Existing clients were his original 20 clients paid him in kind (‘‘I ate
demanding more and more comprehensive ser- a lot of pizzas’’), Michael was in business. The
vices from Bronner in addition to their tradi- response was immediate. Within hours of the
tional mail, Internet and teleservices channels. coupons being delivered, the client stores were
Kenny had already initiated a new group to han- jammed. Bronner moved quickly to propose the
dle Events and Sponsorship for clients and to idea to the housing departments of other local
measure the value of these activities in building universities. A short time later he had exclusives
customer relationships. Some clients thought on nearly 100,000 Boston area student mail-
that Bronner should become involved in their boxes.
face-to-face interactions with customers. Global Though he was now studying business, Bron-
clients were insisting that Bronner provide ser- ner had until his junior year been majoring in
vices on a worldwide basis. Finally, Kenny was biochemistry with a view to entering medical
facing pressure from all parts of the company school. ‘‘I had always wanted to be a doctor,
to permit expansion beyond the company’s few but one day, talking with my mother across the
hand-picked clients. kitchen table [Bronner’s father died of compli-
Kenny was wary of growing too fast. Finding cations from surgery when Michael was 11
enough of the right people, absorbing them into months old], she asked if that was what I really
the company’s culture, and consolidating new wanted to do. I surprised myself by saying no.’’

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Bronner’s entrepreneurism was evident at an program, Bronner was soon engaged on a num-
early age. ‘‘Starting in third grade I worked in a ber of projects for Amex.
stamp and coin shop every day from one o’clock At a trade show in 1983, he started chatting
until dinner. Later I sold holiday cards door-to- with a representative of AT&T who was staffing
door. Though we were not affluent by any a nearby booth. AT&T was anticipating that
means, I wasn’t doing it for the money: it was after its separation from the Regional Bell Op-
just something I wanted to do.’’ At age 13 he erating Companies in 1984, it would face severe
started a car washing service for clients in neigh- competition from new entrants such as MCI.
boring apartment buildings. At 14 he ap- Since AT&T would remain regulated, MCI
proached the golf pro at Doral Country Club could offer prices 30% lower and rapidly gain
and asked if he could set up his car wash service share. Bronner proposed that AT&T give $1
in the parking lot of the club. Such was the worth of discounts from third-party companies
success of this endeavor, Michael was able to for each dollar AT&T customers spent on long
hire his friends and buy his first car soon after. distance calls. Launching the program in 1984
As the success of his University Coupon Book as ‘‘Opportunity Calling,’’ Bronner recruited
grew, Michael decided that if it could work for national name companies such as General Elec-
university students, it could also work for office tric, American Airlines, and J.C. Penney to offer
workers. The downtown skyscrapers were filled discounts on their products. For example, an
with the kind of affluent professionals Boston AT&T customer who bought a GE dishwasher
merchants would like to reach. Repeating his could receive a $50 rebate from AT&T (but paid
successful formula, the ‘‘City Coupon Book’’ for by GE) which would then be subtracted from
would be delivered free to employees ‘‘compli- the customer’s accumulated credits. This pro-
ments’’ of their employer. Sixty days later, he gram not only played to Bronner’s strength in
had 100,000 employees under exclusive distri- bringing companies together to create cus-
bution, and was charging (and receiving) $1,000 tomer value, but also expanded his use of the
direct mail channel, which was used to encour-
per ad from clients and $1 per book from em-
age AT&T customers to embrace the plan.
ployers.
The AT&T account continued to be an im-
Michael dropped out of school in the middle
portant one in the company’s early years. Two
of his senior year to pursue his next idea. He
marketing directors at Bronner, Jean Alexander
was aware that holders of the American Express
and Clare Robinson,3 led teams that developed
Card used it when traveling, but not when in a program to win back AT&T customers who
their home town. Why not mail upscale coupon defected to MCI and other long-distance en-
books to cardholders, enticing them to use the trants. ‘‘Our plan was to segment lost customers
card in high-end local establishments? Having by long distance usage (the value of their busi-
pitched his idea to a local Amex representative, ness), how recently they had left AT&T and the
he flew to New York to sell it to the bigwigs. company to which they had gone,’’ said Clare
They liked the idea and gave him $50,000 for a Robinson. ‘‘But it wasn’t as easy as it sounds.
pilot program. Now charging $3,000 per estab- Some of our difficulties stemmed from AT&T’s
lishment, he had 36 takers. ‘‘Yet I still lost heritage with the local Bell telephone compa-
money. I plowed all the profits into making the nies. For one thing, their customer records were
coupon books really successful.’’ A key element organized by telephone number. This meant
of his selling proposition to Amex was that he that if a customer changed telephone numbers,
promised to show measurable results. ‘‘Part of
the deal was that each participating merchant 3
Clare Robinson and Jean Alexander gradually entered into a
was to return all redeemed coupons to me. That job sharing arrangement. Alexander took over Robinson’s duties
way we could track effectiveness and allow Amex when the former went on maternity leave, and later the situation
was reversed. At the time of the case they were jointly in charge
to draw clear conclusions about the worth of of the AT&T account, shared an office and, in an unusual arrange-
the coupon program.’’ With the success of the ment, shared the position of partner at Bronner.

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their history was lost. If they had two numbers, since local phone numbers belonged to the lo-
they got two separate solicitations. Often we cal Bell companies. AT&T needed to encourage
wouldn’t know that a customer had defected for its customers to accept a new card with a differ-
some months.’’ ent, usually randomly chosen number, owned
‘‘Over time we made great strides,’’ said Rob- exclusively by AT&T. Together, Bronner and
inson. ‘‘We developed a separate database of AT&T were able to achieve a more than 70%
prospect contacts, successes, and failures. By conversion rate with communications and offers
constant experimentation and refinement we targeted at the most valuable calling card cus-
became able to predict with great accuracy how tomers.
successful any particular initiative would be. We
were able to tell AT&T more or less exactly what
kind of share gain and return on investment 1989–1996: BRONNER SLOSBERG
they could expect from any particular cam- HUMPHREY
paign.’’ ‘‘Let me give you a couple of examples Michael invited two seasoned executives with ex-
of the kinds of things we learned,’’ said Alexan- perience in highly visible New York agencies,
der. ‘‘Early on, we assumed that our least vulner- and in direct marketing, to join him. Mike Slos-
able customers were those that had been ap- berg had spent 24 years at Young & Rubicam,
proached by MCI but had said no. However, it including four years as President of Wunder-
turned out that the fact that this customer was man, Y&R’s direct marketing agency. In 1987,
being targeted by MCI meant that they would at the time of Michael’s approach, Slosberg had
soon be approached again with a more aggres- recently left his position as Creative Director of
sive offer. We also learned that it was much Bozell Advertising’s Southwest Division and was
more economical to win back a customer within President and Creative Director of Bozell’s Di-
days or hours of a decision to switch, rather than rect Marketing subsidiary. Yet Slosberg came to
wait until they had grown comfortable with the Boston. ‘‘I had never heard of Eastern Exclu-
new service.’’ sives, and I had never visited their Boston office.
Russ Natoce, who was Director of Customer Michael had not formalized any specific role for
Acquisition for AT&T in 1990, recalled: ‘‘Our me in the company, but we agreed that I could
partnership with Bronner helped us to create, help build the creative resources needed to pro-
quickly, a huge marketing machine to reduce vide consistency among all direct communica-
customer attrition. Bronner’s people added tions from a client. I also talked to one of his
value to AT&T in five important ways: (1) pro- clients and that convinced me this was an oppor-
viding a wide breadth of analytical capabilities, tunity worth being a part of.’’ In 1989, Bronner
including the determination of how much we hired as president Steve Humphrey,4 who after
could and should invest in each customer, (2) 12 years at Ogilvy & Mather had been CEO of
developing creative and compelling offers, (3) the ad agency Rosenfeld, Sirowitz and Hum-
developing a ‘‘communications diet’’ that inte- phrey. Humphrey thought the potential of the
grated various offers through waves of direct company stemmed in part from it being 100%
mail and outbound telemarketing, (4) provid- devoted to direct marketing. ‘‘At other agen-
ing execution for our marketing programs, and cies, direct marketing was a division, a poor rela-
(5) creating a closed-end direct marketing pro- tion. At Bronner it was all they did!’’ In 1989,
cess to ensure continuous learning.’’ Michael changed the company’s name from
A second early assignment with AT&T con- Eastern Exclusives to Bronner Slosberg Hum-
phrey.
cerned calling cards. AT&T calling card custom-
The company’s three principals were con-
ers usually had a number equal to their home
vinced that clients were missing a tremendous
telephone number plus a personal identifica-
tion number. Deregulation required AT&T to
withdraw calling cards using this number system 4
Tuck MBA ’65. Steve Humphrey retired in December 1997.

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 CASE STUDY: BRONNER SLOSBERG HUMPHREY

opportunity. Customers typically received a vari- Bronner Slosberg Humphrey invested heavily
ety of communications from a company, often in database management and modeling, teleser-
with an inconsistent message and of variable vices, and creative advertising capabilities. The
quality. This was because communications came database capability was used not only to record
from various internal divisions and functional all customer interactions,5 but also to segment
areas of the client, each of which had partial customers according to their potential value
views of the customer relationship and relatively and responsiveness. By continuously experi-
independent goals and metrics. If Bronner menting with a range of programs, it was possi-
could partner with clients to influence all points ble to refine marketing strategies to be maxi-
of contact with the customer, effectiveness mally efficient in terms of the client’s return
could be greatly enhanced. This would also on investment per dollar spent. The teleservices
allow the construction of a more comprehensive capability helped clients use both proactive and
database that tracked all of a customer’s interac- reactive customer service calls to strengthen re-
tions with the client. Rigorous data collection lationships, engage in a dialogue, and capture
and analysis would then lead to a greater level valuable information. Finally, Bronner contin-
of understanding regarding the reaction of cus- ued to attract strong creative talent with both
tomers (and resultant economics) to particular direct and general advertising experience. ‘‘It
programs, offers, channels, and events. would be a big mistake if we ever allowed our
In 1990, Bronner began to develop a more creative talents to become routinized,’’ warned
formal approach to generating loyalty in cus- Betsy Karp, the recently named Managing Exec-
tomers. ‘‘The client may spend millions on net- utive Creative Director.6 ‘‘As more and more
work advertising but lose when the customer is companies shift their investments to direct cus-
working his way through layer upon layer of tomer communications, we need to create com-
voice response options on the customer service petitively superior communications which en-
line,’’ said Slosberg. ‘‘The executives all watch hance the brand experience, offer strong value,
the company’s ads, but how many read corre- and drive profitable customer behavior.’’ Exam-
spondence from the company or call their own ples of creative are shown in Exhibit 1.
service number? The old direct marketing phi- John Hayes, Executive Vice President-Global
losophy was at an aggregate level: so many peo- Advertising at American Express, described
ple responded to this piece of promotion, so Bronner’s relationship with his company: ‘‘Ser-
many upgraded from this service to that. We vice brands are not created solely in advertising.
thought about it at the individual level: How do In fact, much of a brand’s equity stems from
we ensure that the recipient feels better about the direct consumer experiences with the
the brand after a direct contact with them? How brand. We partner with Bronner to help us man-
do we make sure they derive a benefit? And how age consumer experiences with our brand
do we optimize the value of that customer to across all products and services—Card, Travel,
the client?’’ Financial Services, and Relationship Services—
Bronner switched from a practice of measur- via all direct channels, including phone, In-
ing success in terms of response rates to a pro- ternet, and mail. They have helped us ensure
cess they called Behavior Optimization. This be- that American Express knows its Cardmembers
gan with a ‘‘behavior gap analysis’’ that con- well, and the value they get from us increases
trasted the customer’s actual behavior (e.g., with the tenure and depth of their American
Amex card used only on business trips) to the Express relationship.’’
desired behavior (Amex card used for a large
share of total purchases). With the client, they 5
All proprietary customer data was maintained by the client.
would determine the economic value of closing 6
In 1997, Slosberg became Chief Creative Officer, responsible for
the behavior gap and make appropriate invest-
integrating messages across all channels. Karp and the Creative
ments in channels, offers, and direct communi- Department are responsible for direct advertising in broadcast,
cations to change behavior. print, and mail.

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EXHIBIT 1
Examples of Recent Creative Work

Behavior Optimization focused primarily on proach is illustrated by the company’s work with
marketing communications with a customer, FedEx.
but Bronner’s focus gradually evolved to in-
clude all sales and service interactions—a phi- The FedEx Case Study
losophy they described as Customer Base Man- ‘‘In 1993, FedEx was the preeminent overnight
agement, summarized in Exhibit 2. This ap- package shipper, as it had been since its found-

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 CASE STUDY: BRONNER SLOSBERG HUMPHREY

EXHIBIT 1
(continued)

ing,’’ said Malcolm Speed, the relationship attributable to weakness in the market com-
manager in charge of the FedEx account. bined with increasing competition from UPS,
‘‘Though FedEx’s revenue had grown impres- and smaller entrants like DHL and Airborne.
sively until 1990, there had been little or no While competition heated up, FedEx continued
growth during 1991 and 1992. This was largely to mass promote service with a list rate structure.

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EXHIBIT 1
(continued)

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 CASE STUDY: BRONNER SLOSBERG HUMPHREY

EXHIBIT 1
(continued)

FedEx was considering various options for individual account level. Bronner used its tele-
maintaining the strongest value position with services capability to profile over 1 million of
their customers including general rate reduc- FedEx’s small shipper accounts. Information
tions as a means of restoring growth. Bronner collected included whether the customer used
strongly recommended that money be invested FedEx exclusively (if not, they were referred to
in customer knowledge. While FedEx was awash as a ‘‘dual’’ account), volumes and classes of
in shipment data, it had little understanding of services with other shippers, and what service
its customers’ behaviors and preferences at the requirements they had (for example, even

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EXHIBIT 2
Customer Base Management

smaller accounts sometimes had a regular ments in the domestic market included: new,
pickup service). The database identified which growing, stable, declining and lapsed. The test
customers valued on-time delivery as of major pilot stage alone, estimated to have cost less
importance (law firms, for example) versus fast than $5 million, was believed by FedEx to have
shipment (a parts supplier). It was also clear that generated nearly $50 million in incremental rev-
there was demand for an early delivery option, enues.
same-day service, and integrated ground/air With the success of the pilot program, FedEx
services. A major discovery was that many firms moved to institutionalize the processes that had
would welcome a greater use of computers in shown so much success. A cross-functional tran-
dealing with FedEx, ranging from the ability to sition team consisting of people from Bronner
generate shipping labels all the way to tracking and all sectors of FedEx laid out the steps re-
packages themselves rather than needing to call quired. A potentially limiting factor in the suc-
FedEx. cess of the endeavor was FedEx’s organization,
In partnership with FedEx, Bronner applied which was structured around traditional na-
its customer base management concept to the tional and local mass market strategies. Re-
new data. They began by conducting a pilot test sponse to a customer problem, or speed in tak-
which consisted of methodical variations in ing up a new product opportunity, might be
price and service offers made to some custom- hampered by the need to coordinate across in-
ers. As knowledge of customer behavior in- ternal organizations. Under the personal direc-
creased, Bronner was able to develop customer tion of the head of marketing, T. Michael
segments that warranted different marketing Glenn, a new structure was set up with a cus-
strategies based on their differing needs or their tomer focus: Prospects and New Accounts, Small
return-on-investment potential. Customer seg- Accounts, Key Industries, Large Accounts, Na-

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tional Accounts, Global Accounts. Segment also working on the L. L. Bean business, and
managers were given job descriptions that re- with the assistance of Ruben Pinchanski,8 who
quired them to implement the customer base was then working for Harvard Business School’s
management procedure themselves. This meant Publishing Division, Biro led the development
not only implementing the learnings from the of a business plan to support the idea of setting
pilot, but continuing to experiment and learn up a group—a new capability—to take advan-
over time. Four hundred people were put tage of the new web channel. Bronner agreed
through a five-day training program, which in- to fund the new activity as a wholly owned
cluded pre-reading, case studies, and interactive but separate entity—the Strategic Interactive
training, to get them up to speed. Group (SIG)—with three partners: Biro, Pin-
Now instead of one price and one service for chanski, and Cosinuke.
all customers, rates and services could be ad- SIG developed three internet capabilities: (1)
justed, often in real time when a customer or Strategy Consulting, to assess the economic and
prospect called FedEx. Billing or service prob- market impact of the web on client businesses,
lems were responded to at once by a service (2) Interactive Marketing, to apply the disci-
representative or, where appropriate, by the rel- pline of direct marketing to the web, and (3)
evant sales representative. As a result of these Development, to build web sites for clients. SIG
changes, the perceived ‘‘value gap’’ that had saw itself as competing with consulting firms,
been an original motivation for considering low- advertising agencies, and software developers,
ering price across the board was eliminated. but believed it, uniquely, was able to offer all the
One measure of that success was the number of necessary capabilities to win in the interactive
dual user accounts that were shifted to exclusive market place.
use of FedEx. Prospects were attracted in Ruben Pinchanski described the SIG ap-
greater numbers and activated more rapidly. proach to web development. ‘‘We call it the
From 1994 to 1997, FedEx enjoyed historical 4Cs,’’ he said, smiling9: ‘‘Content, Commerce,
rates of double-digit growth, and the company Customization, and Community. We begin with
credited the new approach with value added of several weeks at the client doing knowledge
around $125 million annually. T. Michael mining: finding out where sources of company
Glenn, now Executive Vice President at FedEx, information lie. You’d be surprised how much
commented ‘‘Bronner and FedEx have grown information is collected in different parts of a
together over the past four years as we’ve gone company once you start to look. The content of
from strategic approach to execution to contin- the site is built around these knowledge bases.
ued improvements. The latest impact is strategic Typically we arrange that a customer can make
use of the web to serve customers, as well as to a purchase through the web site or, if the cus-
support our field reps around the world.’’ The tomer prefers, simply order a catalog or receive
Bronner/FedEx partnership is summarized in customized information, satisfying the com-
Exhibit 3. merce dimension. Customization is created by
arranging, for example, that the site retains
Strategic Interactive Group
what the user has looked at on previous visits.
In 1994, Kathy Biro, the relationship manager
Finally, a sense of community might be created
for L. L. Bean and IBM, with extensive experi-
by using chat rooms, for example, for outdoor
ence from her earlier banking career in vid-
enthusiasts.’’
eotex and home banking, concluded that the
‘‘We helped L. L. Bean establish itself as an
internet was a phenomenon that could change
early success story on the web, leveraging its
the economics of these and other Bronner cli-
world-class brand and catalog system to become
ents. Together with Rob Cosinuke,7 who was
a leader in e-commerce,’’ said Biro. ‘‘For Kraft
7
Harvard MBA ’89
8 9
Harvard MBA ’93 (Recalling his Harvard marketing course)

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EXHIBIT 3
The Bronner/FedEx Partnership

Foods, SIG helped create a Web site which be- and customer satisfaction while also freeing up
came the virtual embodiment of the Kraft brand the sales force to focus on complex, high-value
and considerable corporate equity—the Kraft transactions. It’s a kind of ‘virtual blue suit’ vi-
Interactive Kitchen was hailed as one of the best sion, whereby the web eases the burden on the
examples of Fortune 500 branding on the web. sales force and extends their reach at relatively
For Federal Express, SIG helped create a Web- low cost.’’ Exhibit 4 illustrates how the web can
based sales support system to reduce paper com- play a role in all stages of the sales cycle: generat-
munications expense while enhancing sales pro- ing leads, qualifying prospects, and closing sales.
ductivity.’’ While there was little doubt that the IBM web
IBM, a major client for SIG, was also an early system was more efficient, some observers won-
Web pioneer. ‘‘They realized that the internet dered if the ‘‘virtual blue suit’’ interaction
could be a transforming force in their business, would impact brand loyalty over time. ‘‘We have
complementing the efforts of their sales force a good idea of how different channels stack up
and dealers in reaching customers,’’ said Biro. on a cost/loyalty basis,’’ said Cosinuke, refer-
For example, SIG helped IBM build customized ring to Exhibit 5, ‘‘but IBM, by its nature, has
sites for their best customers, called Gold ac- customers that are especially eager to use this
counts. These customers were given their own channel and for whom demonstrated excel-
secure web sites that served to integrate IBM’s lence on the web is loyalty enhancing. The web
selling process with the customer’s own procure- transforms a transaction into a long-term service
ment system, and store customer specific war- relationship.’’ Fred Fassman, IBM’s head of
ranty information, purchase agreements, and Global Direct Marketing, commented, ‘‘E-busi-
support contracts. ‘‘The idea,’’ said Biro, ‘‘is to ness is the cornerstone of IBM’s strategy, so we
simplify purchasing and improve service levels must lead the market in using the Internet to

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EXHIBIT 4
Retail Channel

sell and serve our customers. Our work with SIG same reason, I have always believed that we
has helped us lead the market in practical appli- should restrict our efforts to just a few clients,
cations of using the web to drive commerce, only those we can handle with excellence and
rather than the industry practice of putting bro- who share our passion for leadership and in-
chures and PR online.’’ novation. Once you have lots of clients you
As of the end of 1997, SIG had grown to a end up with the 80 – 20 rule: 20% of your cli-
staff of nearly 200, and was one of the largest ents yield 80% of your business. And then
web developers in the country. A partial listing what happens? The minor clients get less at-
of SIG-developed web sites is given in Exhi- tention. They churn. And employees assigned
bit 6. to those clients feel like second-class citizens.’’
Michael saw himself as a quality control re-
source who ensured the company executed
1997: MOVING FORWARD what it promised to clients. ‘‘I stop in on peo-
By 1996, Michael Bronner believed his com- ple and see how they are doing. I’m viewed as
pany had helped clients achieve leadership in a perfectionist. It’s true. But to me this busi-
three related capabilities: creating and exe- ness is pretty simple. We keep our minds
cuting relationship marketing programs, man- straight on doing whatever we need to for cli-
aging these programs via the underlying ents. Every few weeks I meet with anyone who
customer management systems (e.g., data- has been hired since the last such meeting.
base management, teleservices, organizational I invite everyone to ask questions. Last week
alignment), and using the internet. Bronner someone asked me how it was that with nearly
explained his rationale for focusing on a small a thousand people there is still a small-com-
roster of leading clients: ‘‘We have never set pany feel. I said that the feel of a professional
formal growth or profit objectives. Once you services company derives in part from the
focus on internal goals, people start making number of clients it has. I define the size of
decisions that aren’t in the client’s best inter- our business by the number of clients we have.
est and that erode the relationship. For the Not the number of employees nor the number

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EXHIBIT 5
Cost/Loyalty

of dollars we bill. We have only a few clients, fied David Kenny as the person with the skills
so the business remains small.’’ and empathy to lead the company into the next
Michael Bronner was passionate about keep- century. Kenny had developed close ties to
ing the focus of the company on adding value American Express during his years at Bain and
for clients. Individual bonuses were based more was familiar with, and an admirer of, the Bron-
on the results delivered for the client by the ner approach. ‘‘It seemed to me,’’ reflected
employee than on the profitability of the ac- Kenny, ‘‘that the company had grown beyond
count to Bronner. ‘‘A side benefit is that every- the stage where Michael had enough time to
one is trusted to make the right call,’’ said Mi- lend his personal magic to all clients, be there to
chael. For example, in reflecting on her job motivate employees, and simultaneously direct
sharing with Jean Alexander, Clare Robinson new capabilities. As the company transitioned
said: ‘‘One reason it has worked so well is that from a wholly Michael Bronner-owned company
we almost always make the same decision when to more of a partnership, there was an increas-
given the same information, so we don’t work ing desire to tap the vast potential of the com-
at cross purposes. But the reason this is true is pany.’’ Kenny realized he needed to find a way
that the objectives of our company have always forward that combined the best aspects of the
been the same: do the best for the client.’’ Bron- existing culture with the organizational realities
ner clients had, in fact, been doing very well. of a soon-to-be billion-dollar enterprise.
Exhibit 7 shows the stock price of Bronner’s
largest clients during 1997, relative to the Pressures for Growth
market. Kenny decided that future growth required
Yet Michael began to consider, as he had in that ‘‘we clone Michael Bronner.’’ Replacing
the late 80s, that perhaps the time had arrived a system in which Michael assembled ad hoc
for a change in leadership. In 1996, he identi- teams to service clients, Kenny introduced a

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EXHIBIT 6
Selected Public Web Sites Designed/Developed by SIG
formal matrix system of organization in which not all prospective clients were willing to make
relationship managers had complete authority the investments or apply the focus and rigor
to deliver for their clients, and functional required to manage their customer bases and
managers were charged with providing world- build brands via direct customer experiences.
class capabilities (Exhibit 8). ‘‘With this struc- What were the characteristics of a good client
ture,’’ said Kenny, ‘‘there are three basic ways for Bronner? Was there indeed a long supply of
to grow: adding more clients, adding more them? Service and durable industries had cus-
capabilities, or both. The biggest constraint tomer data, but could the Bronner approach
on growth is talent — finding and developing be extended into marketing packaged or soft
leaders who can help us stay ahead of competi- goods?
tors in each of our core capabilities, while also Many potential clients wanted only short-
finding and developing potential relationship term projects from one of Bronner’s services.
managers who can lead and execute across Bronner seldom accepted projects which fo-
capabilities.’’ cused solely on direct advertising or teleservices
Finding prospective clients was not a prob- or database management. The leaders of these
lem. The agency received inquiries from major capabilities each wanted to expand outside the
corporations on a weekly basis. This could be core client list, but the agency’s focus had always
explained, in part, by the explosive growth in been on clients who used Bronner’s integrated
the use of direct response marketing while gen- approach. The only exception was SIG, which
eral advertising had remained flat.10 However,
report—Economic Impact: U.S. Direct Marketing Today, 1995).
10
Between 1990 and 1995, direct response marketing expendi- Of the direct response dollars, direct mail accounted for $19 bil-
tures grew from $101 billion to $134 billion while general advertis- lion and $37 billion respectively (Robert J. Coen, McCann-Erick-
ing expenditures increased from $79 billion to $82 billion (DMA son, Inc., 1997).

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EXHIBIT 7
Client Stock Price Comparisons–Gains in Calendar Year 1997

had accepted several Internet-only assignments an important element of their customer interac-
from clients in order to sustain leadership in the tion. ‘‘How can we implement experience-based
fast-growing Internet marketing arena. Kenny branding, a philosophy that says a customer’s
wondered whether he should change company perception of the brand is the sum of his or her
policy on this matter. interactions with the company, if we don’t have
Adding capabilities was another route to a capability in this area?’’ thought Kenny. A key
expansion. Bronner had never developed capa- issue in adding new capabilities was whether the
bilities in face-to-face customer contacts, such capability would be superior, on its own, to lead-
as personal selling, yet for some clients this was ing competitors’. Kenny viewed the following
firms to be Bronner’s principal competitors in
their functional areas:
Bronner/SIG Clients 1997 j Customer Management Systems (e.g., Data-
base Management, Analytics and Model-
Bronner Clients:
ing, Teleservices)—Management Con-
American Express Gillette
AT&T IBM
sulting Firms; EDS; Epsilon; Tessera Enter-
Enron L.L. Bean prises; Specialty Database Companies; Tele-
FedEx Pfizer tech
General Motors Seagram Americas j Interactive—CKS; True North; Modem
SIG-only Clients: Adobe Systems, Baan, Disney, Media; Poppe Tyson; Agency.com
Intel, Kodak, Kraft Foods,
Lever Brothers j Direct Marketing—Wunderman Cato John-
son; OgilvyOne; Rapp Collins

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EXHIBIT 8
Organizational Chart

j Events and Sponsorships—Momentum; quired global execution. ‘‘Direct marketing is

Advantage (Interpublic Group) not as boundaryless as it might seem,’’ cau-
More information is contained in Exhibit 9. tioned Rob Cosinuke, SIG’s relationship man-
ager for IBM. He pointed to the different local
Kenny believed that the company could more attitudes about what could and could not be
than double in size simply by serving the global done by direct marketers. ‘‘Even the data you
needs of its existing clients, without adding a are allowed to store is regulated in some coun-
single new client or new capability. However, tries. A local presence may be essential.’’
the availability of consistent talent around the Even within the U.S., Bronner had opportu-
world was unclear, and there would be a signifi- nities to grow via geographic expansion. Kenny
cant capital investment required to build offices and his partners at Bronner had already de-
and capabilities around the world. More than cided to open, in April 1998, a seventy-person
any other client, IBM was most in need of a office in New York, led by Harvey Kipnis, both
global presence on the part of its direct market- to serve clients and attract talent that could not
ing agency. Though IBM had recently ap- relocate to Boston. SIG had a small office in
pointed SIG as its Global Interactive Agency, San Francisco; the West Coast might present a
Bronner had also been excluded by IBM from substantial opportunity to attract people and
certain direct mail assignments because they re- clients.

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EXHIBIT 9
Selected Competitor Information

January 23, 1998: A Strategy Meeting would be the first under Kenny’s leadership.
The partners of Bronner11 met twice per year to The company was going to grow rapidly in 1998
set strategic priorities and assess their collective and beyond, but unless he acted to direct that
progress. The offsite meeting in January 1998 growth, the company he had so recently been
appointed to lead might become unmanage-
able. Preparing for his ‘‘State of the Company’’
11
In January 1998, the partners consisted of Bronner, Slosberg, speech, Kenny reflected that for the first time
Kenny, Kipnis, John Hoholik, Reuben Hendell, Karp, Robinson,
Alexander, and Speed, and for SIG, Biro, Cosinuke, and Pin- in his career, the CEO he was advising was him-
chanski. self.

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