In The Media
Suppose you could really figure out why advertising works
Inc. Magazine, September 2003. Page 49
Advertising and marketing are usually considered to be more
art than science. Sure, a fair amount of statistical analysis
is used to be sure the person who is reading an ad, watching
a commercial, or hearing a message is from the target audience,
but the message itself is largely a work of art. When marketing
and advertising are taught in universities, much of what is
taught is anecdotal – what has seemed to work before.
But it doesn't have to be that way, at least not according
to James Kowalick, a scientist who say he can show you how
to use science to design a marketing campaign that costs less
while being 10 or more times as effective as doing it the
His secret is the Taguchi Method, which is a technique for
designing experiments that converge on an ideal product solution.
Devised in the late 1940s by Dr. Genichi Taguchi, then an
engineer at NTT, the Japanese phone company, the method that
bears his name has long been used in designing cars and computers.
If you've ever wondered why the quality of Japanese cars is
so high, credit Taguchi. The first American car designed using
the Taguchi Method was the original Ford Taurus, which quickly
became the top-selling car in America. Now just about every
car from every manufacturer is designed using the method,
which literally builds customer satisfaction into the design.
The Taguchi Method was first brought to the U. S. by researchers
at AT&T Bell Labs and has been used for more than 20 years
by companies like Xerox and Kodak. There is a global business
in teaching Taguchi, but for no reason at all it tends to
be restricted to engineering groups in large companies.
James Kowalick was corporate director of engineering at Aerojet
General ("Why, yes, I am a rocket scientist") when
he met Dr. Taguchi in 1985 and began using the method to design
better engines while saving millions of development dollars.
Kowalick was so taken with Taguchi that he later left Aerojet
and founded the Renaissance Institute at Cal Tech, where he
taught more than 300 Taguchi courses to executives from high-tech
companies at $13,000 per three-day session.
Taguchi's objective is robust design, which means building
a product, system, or process that works well even in the
presence of degrading influences. That means products that
deliver value without breaking and services that are enduring
while being as simple as possible. Taguchi first determines
the control factors that go into designing a product, their
interdependencies, then generates an orthogonal array specifying
the number of experiments required to find the optimal solution.
If the last paragraph reads like Esperanto to you, maybe that
explains why mainly eggheads have been attracted to Taguchi.
The short version is that however they work, the Taguchi Method
can take a project with thousands, even millions of combinations
of variables and quickly reduce it to a couple dozen simple
experiments that can be run simultaneously and will determine
the cheapest way to achieve a goal. Instead of considering
one variable at a time, Taguchi is able to test many variables
at once, which is why the number of tests can be so small.
It's a bloody miracle. Taguchi not only shows the right way
to do something, it also tells you what the cost in dollars
will be of doing it the wrong way.
But until now, Taguchi has been too obscure or too abstruse
to make its way out of laboratories and into real products
and services from non-high-tech companies. "I taught
over 300 courses for industry where we designed cars and electronic
devices, but it wasn't until one day I took over my wife's
kitchen and used Taguchi to perfect my recipe for vanilla
wafer cookies that I realized how broadly it could be applied,"
Kowalick recalls. "It took 16 batches, but by the end
of the afternoon I had those wafers dialed in."
That's when Kowalick turned the Taguchi Method to advertising,
with the goal of significantly raising the response rate for
ad campaigns. After all, advertising is just a process for
sharing information and inducing responses. Like any process,
advertising can be optimized if the control variables can
be properly defined. Kowalick did a test case with direct
mail campaigns for a local winery, then another with Internet
advertising for an insurance agency. That was where his longtime
friend Mario Fantoni, a former marketing executive for Oracle
and management-consultant executive at A.T.Kearney, entered
the picture. "Mario was a customer of mine," recalls
Michael Malloy, owner of Malloy Insurance Services in Grass
Valley, Calif., an insurance broker serving clients throughout
California. "I had an opt-in e-mail list of 7,500 names
and was sending out very nice ads I paid a lot of money for
but was getting almost no response at all, nothing. Mario
said he and Jim could help."
In three two-hour sessions with Malloy, Kowalick and Fantoni
identified the control factors that they thought affected
the ads and designed the resulting experiments. The design
process finally came down to 12 Taguchi experiments that would
define the right e-mail campaign for this particular product
and audience. The control factors included graphics, colors,
and use of humor. The experiments themselves were 12 mailings
to 625 addresses each – two mailings per day over six
days. Analyzing the results took two days, so the whole process,
start to finish, took two weeks. Once the control factors
were optimized, all further mailings followed the form dictated
by the experimental results.
"I was skeptical at first, but the results were clear"
says Malloy. "Where my expensive ads weren't working,
what did work were much simpler stories that were cheaper
to tell." Malloy's advertising costs dropped from $1,800
per week to $300 and his response rate increased from two
or three responses per week to around 70 – an increase
of 2,233% at one-sixth the cost.
"We're still working our way through all the new business,"
says Malloy. "Of course, all marketing becomes stale
with time, but when this tails off we'll just expand our audience
or run more experiments."
What the insurance broker learned was that he could find new
markets on a very lean budget while determining, in order
of importance, the major factors influencing insurance sales
to a given population. What worked on the Internet would probably
have worked as well using direct mail or even print advertising
once the intended customer base had been found.
"The approach condenses the experience of investigating
billions of possible combinations for an ad, including copy
words, graphics, visual impression sequence, and integration
with a larger sales system, into a few dozen mailings or e-mailings,"
says Fantoni. "It is also a psychological approach that
carefully considers what potential readers want to read. Copywriters
and artists still have to write the words and draw the pictures
that follow the procedures derived from the experiments, but
once they become accustomed to actually knowing why what they
do works, it becomes a way of life."
This process is very different from the kind of testing that
is presently done by major advertisers. A big advertiser may
come up with several campaigns it tests in separate markets,
but the approach tends to be shotgun, with little rigor in
determining how one campaign is different from another and
what influences are actually being measured. So Taguchi is
potentially a great leveler, making it possible for smaller
companies to advertise just as effectively as their larger
And just as the Taguchi Method was extended from scientific
R&D to marketing and advertising, it could easily be used
to develop consumer products. Wendy's International, for example,
takes an average of 18 months to develop and test a new specialty
sandwich. Using Taguchi, the same process could be reduced
to less than a month with the same or better results, according
to Kowalick. And any product development savings drop to the
bottom line as profit.
Of course, Kowalick and Fantoni have started a company to
exploit this technology. They claim their work can be applied
to ANY product or service and ANY advertising medium.
The vanilla wafer recipe, however, will remain a secret.