Getting to the core of the problem

Editor's note: John Kavalkovich is vice president and marketing/research director, and Linda Kessel Roovers is public relations specialist, at FH&K Ideas That Deliver, a Neenah, Wis., advertising and marketing communications firm. They can be reached via e-mail through the company's Web site at www.ideasthatdeliver.com.

Neenah, Wis.-based Appleton Manufacturing Division (AMD) is a machinery builder specializing in semi-custom equipment for the paper, film, and foil converting industry. The converted materials are wrapped around cores of various densities and lengths, which are cut into specific sizes using machines called core cutters.

In the summer of 1997, AMD and its president Barry Hammerberg were becoming increasingly concerned that its dominance in the core-cutter market was eroding.

The arrival of new competitors and a series of mergers and acquisitions in the core-cutter market had left a host of companies -- some with ties to AMD - fighting for the same business and offering similar products. Potential buyers were confused.

This was a case where differentiation was not just a marketing strategy. It was crucial to AMD's very survival. Hammerberg approached FH&K Ideas That Deliver, a Neenah, Wis., advertising and marketing communications firm, for help.

FH&K used a strategy it calls Roundhouse Marketing, a four-step, multidimensional approach. Step I is to get to know the client's business as well as they do - better if possible. Step II is to learn the client's company intimately, by listening to the client and by talking to third-party sources to get the objective opinions the client can't get alone.

Steps I and II can only be achieved through research. Using research as the foundation, FH&K aims to find the overwhelming selling point that will differentiate the client's brand, product or service from that of its competitors. This process leads to Step III of Roundhouse Marketing: creating a unique positioning.

Finally, in Step IV, FH&K develops a marketing communications strategic plan. With clear objectives set, each possible communications vehicle is analyzed for its ability to meet specific preset goals. Then FH&K develops an integrated plan to carefully time and execute a multilevel communications effort.

Applying Roundhouse Marketing to AMD

"We really had to address two problems with AMD," says John Kavalkovich, vice president and marketing/research director for FH&K. "The first was to differentiate the company from a competitor that was assuming its identity. And second, Appleton's current and potential customers saw AMD as a 'tired' company, an old company that may have had new ideas but wasn't presenting itself as an innovator with new ideas."

To differentiate AMD from its competitors, FH&K's first step was to undertake positioning research. Strategic positioning theory begins with the proposition: If a prospect believes that one company offers a meaningful and beneficial difference from its competition, that company will win more customers than it otherwise would.

"In today's business environment, prospects are constantly bombarded with thousands of selling messages," Kavalkovich says. "In order to stand out from this clutter and be remembered - to be intrusive in the minds of the customers and prospects -- a message describing the company's meaningful difference has to be short and simple. It must use words that are easily understood by customers and prospects. The selection process is critical because the best positioning message contains only one or two ideas."

Two key objectives: differentiation and awareness

The purpose of the research, then, was to gain insight into the perspectives of AMD's current and potential customers. The focus was on determining what attributes customers and potential customers used to select a core-cutter manufacturer, as well as identifying those attributes AMD's management and staff felt were important in selling their products. The research also addressed customers' and prospects' awareness of AMD and how the company stacked up against the competition regarding the attributes identified. The overall goal was to discover a unique positioning for AMD which would be compelling to both current customers and prospects.

Kavalkovich recommended the research be conducted in two phases. Throughout both phases, questions were disguised so AMD was not identified as initiating the research.

Phase I

Phase I was a qualitative stage consisting of unstructured interviewing, which was used to identify critical or important attributes used in selecting a core-cutter manufacturer. In this phase, primary emphasis was placed on gaining an understanding of consumers' perceptions of the attributes which impact their selection decision. The attributes identified by respondents in this phase were compared with a similar list identified by AMD's key people.

In order to develop the most comprehensive list of important attributes, telephone interviews were conducted among both AMD customers and prospects. For the greatest dispersion of opinions, participants were controlled to include equal numbers of customers and non-customers. Respondents in both groups were randomly selected from a list provided by AMD.

The goal of Phase I was to address the following issues in order to give direction to Phase II research:

  • Identification of the specific attributes with which customers/potential customers associated the most value in selecting a company like AMD.
  • Identification of the attributes which key people at AMD felt were most important to their customers/potential customers in selecting a company like AMD.

Twenty respondents - 10 customers and 10 non-customers - were randomly selected from a list supplied by AMD. Each was contacted and asked to identify the most important attributes considered in selecting a supplier of core-cutting equipment. The attributes identified by everyone interviewed, or by at least 90 percent of the respondents, were used in the next research phase.

"There were some attributes that AMD felt were important that the current clients or the potential clients didn't think were important, and those were eliminated," Kavalkovich says. "We basically tried to get agreement on the attributes from all three groups of respondents -- the current customers, prospective customers and AMD."

The resulting attributes - derived by consensus - became the source of questions for Phase II of the research project.

Phase II

Phase II was a quantitative measurement of the attributes called out in the previous research phase. Phase II served to statistically quantify the information gained in Phase I, forming a reliable foundation for future decisions.

Using the attributes identified in Phase I of the research, a questionnaire was developed. From June to August 1997, FH&K conducted 97 telephone interviews, lasting an average of 15-20 minutes, with people who work at companies which utilize core-cutting machines. Selection of survey participants was controlled to include the primary person involved in choosing a supplier of core-cutting equipment for his or her company. Respondent anonymity was guaranteed to achieve the most honest response.

FH&K selected respondents at random from a list of companies supplied by AMD, controlling respondent selection to arrive at the following goals:

  • 50 respondents in pulp and paper mills, core manufacturers and converting plants that were currently using Appleton machines, and
  • 50 respondents in pulp and paper mills, core manufacturers and converting plants that were not currently using Appleton machines.

These groups were polled to give their insights on the following issues:

  • aided/unaided awareness of AMD and its competitors;
  • what attributes are most important in choosing a supplier of core-cutting equipment, asking respondents to rate each attribute on a scale of 1 to 10;
  • what consumers are looking for regarding each of these attributes;
  • consumer perceptions of how well AMD delivers these attributes;
  • identification of a positioning which could provide a meaningful difference between AMD and its competitors.

Step III: Results point to two differentiators

The positioning study revealed interesting and useful results. First, it showed that AMD had high awareness levels among customers, but had moderate unaided awareness and very low top-of-mind awareness with non-customers. This confirmed Hammerberg's initial suspicion that AMD's dominance in the market was eroding.

Second, it became apparent that there was a need for core-cutting machine manufacturers to differentiate themselves in order to build and maintain awareness with consumers. With companies attempting to communicate many attributes and telling the same story, it was obvious that none had been effective in setting themselves apart from the competition. Therefore, FH&K recommended that Appleton develop a multilevel communications program to increase its consumer awareness.

The study identified five key attributes, now considered proprietary, which were valued by customers and non-customers alike. In addition, the study found that none of the core-cutting manufacturers mentioned in the study -- including AMD -- were meeting respondents' expectations on these five key attributes. While the results indicate there was significant room for improvement at AMD and in the industry overall in reaching consumers' satisfaction, it also indicated that the opportunity existed for one company to set itself apart from others in meeting consumers' desires regarding at least one or two of these attributes. Therefore, FH&K suggested AMD focus its communications positioning on the top two of these five attributes.

Equally revealing, the study found that people involved in purchasing core-cutting machines do not appear to be looking for any additional ideas in the core cutting, finishing and handling arena. The findings point out that these individuals are not looking for manufacturers to try to sell them new ideas in core-cutting machines on an ongoing basis. Rather, they are looking for options that meet their needs when they are looking to purchase new equipment. This meant it was important that AMD have an ongoing communications program that focuses on the two key attributes discovered by the research.

The final step: strategic planning and implementation

With the research completed and the positioning determined, it was time to implement a change. AMD's reaction to the findings was like a researcher's dream come true, Kavalkovich says. "This was one research study where the client reacted the way you hoped they would when they got information they weren't expecting. We presented it to them. They looked at it. They talked about it. They asked some questions about it. And then they realized that maybe they do have a problem in terms of how they're seen in the marketplace, how they're positioned, and it forced them to realize they had to think differently if they were going to survive. AMD did what the research told them they had to do, which was completely opposite of what they had done before in their advertising."

For example, FH&K developed a new proposal pocket folder. Rather than showing machinery, as had been AMD's practice until then, the folder showed only cores in a very stylized manner with an unusual color background of red, magenta and purple. The folder contents, such as specification sheets developed by AMD, remained the same. The highly technical nature of the inserts was still appropriate for AMD's audience, which also was confirmed by the research.

New magazine advertisements were developed, again moving away from the focus on machinery. Instead, playing off the company name, the ads showed an apple with a paper core going through it.

Just as important as the ad content was the ad size. FH&K convinced AMD to move away from the quarter-page ads typical of the industry. Starting with full-page ads to introduce its new image, the company then went to two-thirds of a page.

An unexpected, but nevertheless promising, result was competitors' reaction to the new ads. Perhaps feeling unable to compete, it appears that most of AMD's competitors pulled out of magazine advertising altogether for a time.

AMD also modified its approach to trade shows. Previously, its participation focused on its staff members working the booth, answering questions and demonstrating equipment for those who happened to visit. Following the research results, AMD added enlarged images taken from the new proposal pocket folder to enhance the display. And rather than relying solely on machinery demonstrations, the company gave away small apple-shaped sponges to increase name recognition. The new approach instantly drew a positive response from both current AMD customers as well as prospects encountering AMD for the first time.

Positioning means more than just marketing

While differentiating product attributes is crucial to a successful marketing campaign, it is equally - if not more - important that AMD be capable of delivering those attributes if it is to capture and/or own the positioning. In this case, AMD was poised for success, Hammerberg says. "AMD has a variety of stripped-down pieces of equipment. Clients can select a model based on how many cores they need and if they want manual or automatic operation. Then the client can add various components depending on the company's own needs."

Time will tell

Hammerberg agrees that market reaction to AMD's new positioning and image has been very positive. But it may be too soon to tell about its impact on sales. The research conducted by FH&K also found that 62 percent of the respondents did not expect their companies to purchase core-cutting machines within the next two years. Only 15 percent of the sample indicated their companies would be purchasing this type of equipment in the next two years, and 23 percent were unsure. However, the good news is that more non-customers (20 percent) tended to feel their companies would purchase within the next two years as compared to current AMD customers. The true measure of success may be to see how many non-customers go with AMD for their next core-cutter purchase.