WINNING OVER THE NEW CONSUMER They're tightfisted and don't like to shop. To coax them to start buying again, companies are revamping the ways they invent, promote, and deliver their products.
By Patricia Sellers REPORTER ASSOCIATE Rosalind Klein Berlin

(FORTUNE Magazine) – SELLING to customers in the Nineties is like running a hurdle race. In the Eighties, Americans wanted quality, paid up for it, and -- lucky for marketers -- even flaunted it. Now consumer-products companies are crippled by recession, and long after it ends there will still be barriers between them and their buyers. Among them, Americans will be spending a lot less. Says Herbert Baum, president of Campbell Soup North America: ''I think people are going to have almost a Depression ethic. The idea of a nest egg will resurface much as it did in the early 1930s.'' This year the first of the baby-boomers, the largest buying group ever, are turning 45, and finally becoming mature, practical, and skeptical. Not to mention less needy of material goods. They have their homes and their microwaves, thank you. And they also have financial worries. Retirement, declining home values, and college tuitions all add up to a mighty burdened boomer. People no longer like to shop. Yankelovich Clancy Shulman, a marketing consultant that interviews thousands of adult consumers annually, recently found that 66% of Americans consider shopping for clothes frustrating and time consuming, vs. 60% a year earlier. Some 47% find food shopping distasteful. Moreover, the retail distribution system, the pipeline through which goods reach the consumer, remains in financial disarray. A remarkable 23% of department store sales in the U.S. are being rung up in outlets that are currently in bankruptcy. Companies that distribute goods through a shaky store have to pray that they'll get paid. Meanwhile, supermarkets are putting their shelf space up for ransom. If companies want to place a new product in a grocery chain, they must give owners discounts, special deals, and usually a slotting fee -- essentially a bribe -- of $30,000 or so. Attention marketers: To leap over these obstacles and into the pocketbooks of consumers, you must try to be like Edwin Moses. He became history's greatest hurdler by adopting a revolutionary technique: 13 strides between the barriers instead of the 14 or more that everyone else used. Rethink your sport; challenge its assumptions. -- Invest heavily in new products that are relevant to consumer needs and sensible and profitable to retailers who sell them. -- Liberate yourself from conventional advertising. Consumers are becoming brain-dead to TV messages, so promote in the store, in the mail, and wherever your potential buyer might twitch in recognition.

-- Reflect on the way you deliver goods. If consumers don't like to shop, should you be selling in traditional stores? A pro at prospering in slow-growth markets, Sara Lee is well equipped for the sluggish decade ahead. Says Chief Executive John Bryan: ''If you can find a growth category in the U.S. today -- and there aren't many anymore -- everybody else in the world is going to see it too. Sophisticated marketers will pounce on it and quickly destroy the economics.'' So Sara Lee has stuck mainly with mundane goods like sausages and underwear, becoming a packaged- + goods victor of volume in the process. The secret? Bombarding consumers with a variety of fits and flavors with the result that, as the old slogan almost goes, nobody doesn't like something from Sara Lee. Look at hosiery, the company's most profitable division. Sara Lee sells L'eggs to drugstore and mass-merchandise shoppers, Hanes Silk Reflections and Sheer Elegance to more upscale consumers, and Donna Karan designer hose (as much as $35 a pair) to fashion bugs. Just My Size is for large women. Knocking hundreds of private-label products off store racks, Sara Lee has increased its U.S. volume at six times the rate of the hosiery industry since 1985 and run up its market share to 43%, from 35%. Now the company has to maintain the growth of its hosiery lines as the primary customers, working women, are tiring of careers and heading home to peel off those panty hose. The growth in female employment has declined from 5.6% in 1984 to 2.2% last year. The Sara Lee response: Turn up the heat. The company is doubling the rate of product launches and plans to raise advertising and promotion spending, currently $160 million, at least 12% annually over the next few years. Nineties customers will have to be coaxed to consume, and they will buy only what they really want. Kraft General Foods learned this lesson the hard way. Despite powerful brands like Oscar Mayer meats and Post cereals, the Philip Morris subsidiary had a disappointing record in the new-product race. The reason: It disregarded customer needs. It ravaged its Maxwell House franchise a few years ago by using cheap beans when coffee drinkers were unambiguous about wanting a rich taste. It launched Philly Slices, even though people like to spread their cream cheese like butter, and Jello Microwave Pudding, when no one needed zapioca. Two years ago Michael Miles, who becomes Philip Morris's CEO in September, overhauled product development to create what he calls his ''TNCVV'' strategy, and lately new-product winners have been popping out of the pantry. The awkward TNCVV, in case you wondered, stands for ''taste, nutrition, convenience, value, and variety,'' which company researchers say are consumers' five greatest concerns about food. Miles urges managers to outdo competitors in these areas and create ads that highlight their brand's advantage. The payoff? Kraft General Foods was first off the block with premeasured coffee (for bleary-eyed A.M. drinkers) and fat-free foods like cheese, salad dressings, mayonnaise, and baked goodies. Miles says KGF will sell $450 million of fat-free fodder this year, up from $310 million in 1990. Unfortunately, marketers can't focus all their attention just on consumer needs. New products must have value -- that is, good profits -- for retailers in order to win space on their shelves. And it's a jungle out there. Over 13,000 new items jostled one another in supermarket aisles last year, five times the number in 1980, and there simply isn't room for many more. A typical grocer carries 30,000 different items, more than twice the number ten years ago. One product getting a rare red-carpet reception: superconcentrated detergents. These environmentally friendly powders, which clean a lot of laundry with a little scoop and come in boxes substantially smaller than regular detergents, are usurping shelf space in 60% of the U.S. The $3.8 billion detergent category is turning into a battlefield as Procter & Gamble rolls eastward with its ''Ultra'' line -- Tide, Cheer, Gain, Oxydol, and Bold -- and Lever Brothers barrels in with Wisk Power Scoop. Everyone likes the suds, but for retailers they are particularly profitable. Lever says Wisk Power Scoop, which costs 45% less than standard detergents for retailers to handle and store, has helped the company raise its market share six points to about 30% in the regions where it is sold. MARKETERS aren't just putting products on the shelf, they are teaching retailers how to sell them. Kraft General Foods runs several programs -- with titles like Dairy Case 2000 -- in which sales teams help grocers rearrange shelves and displays to maximize profits. To improve slipshod operations suppliers are coddling troubled department stores. In a flat market over the past two years, VF Corp. has increased revenues in its Vanity Fair lingerie division by 25% to some $300 million by building alluring displays, training salespeople how to sell bras and camisoles, and giving lessons in customer service. All right, you've got your item in the store, and everybody is geared up to sell it. How exactly do you get the consumer to buy it? Not only are he and she more sophisticated than ever, they are also harder to reach. You used to run a commercial on network TV and bank on your target customers' seeing it. Not anymore. The networks' share of the U.S. viewing audience has declined to about 60% from 87% ten years ago, and the average prime-time show attracts 15.8 million viewers instead of 24.1 million. Worse, research indicates that the folks still watching can't recall the ads. Says William Johnson, chief executive of Heinz Pet Products: ''For all but a few products, network TV no longer makes sense.'' That's why marketers are unplugging themselves from the TV set and transmitting their messages wherever buyers might be. At your local supermarket -- or coming soon -- are product pitches on your shopping cart, electronic ads above the aisles, and coupon dispensers attached to the shelves. In-store radio and television deliver hit songs and news, along with cues to pick up Pampers or Pepto-Bismol in aisle two. The leading hawker of this hype, ActMedia, sells ad space in 26,000 stores to such companies as Kellogg and P&G much as TV networks sell commercial time. Says Chief Executive Wayne LoCurto: ''Does it make any sense to spend millions of dollars talking to people in their living rooms and cars and then let them wander around a supermarket with 30,000 product choices without something to remind them to buy your product?'' Somewhat sensitive to overkill, LoCurto reports that he has turned down suggestions for ads on eggs, on the dividers in checkout lanes, and on the floor tiles. Campbell Soup, which has used all of ActMedia's programs, reports sales increases of 7% to 10% from various in-store promotions. Says Herb Baum: ''We believe there's no better time to reach consumers than when they're in the store with a fistful of dollars.'' Grocers are happy because they pay nothing for ActMedia's displays and receive commissions of 10% to 25% on the ad programs marketers buy. COMPANIES are also reviving multimedia campaigns -- TV ads, videos, sweepstakes, you name it -- with the object of showing customers how products fit into their lives. Geritol is perking up its tired blood with spry new TV commercials and swing-dance competitions across the U.S. SmithKline Beecham, the drug company that owns Geritol, faced an unusual problem. The company had successfully captured younger buyers with a new multivitamin Geritol, but lost some of its original gray-hairs because it paid scant attention to them. And this at a time when 50-plussers, already 26% of the population, are growing faster than any other group. To woo them back, SmithKline created another multivitamin called Geritol Extend. The company promoted it with a TV commercial from the appropriately named Grey Advertising featuring a leather- jacketed Geritol granny and grandpa on motorcycles. SmithKline used the big-band standard ''In the Mood'' as background music for the ad and staged ''Geritol Extend Big Band Bash'' dance competitions in eight cities. The company announced the program last fall by mailing $1-off coupons for Geritol Extend to 13 million households where there was at least one person past 50. The mailing included a toll-free number for information about the competitions and a Big Band Bash cassette offer. The dance contests drew lots of press attention and helped boost Geritol's sales 21% last year to about $25 million, while profits increased 15%. At the grand finals in June at Manhattan's Roseland Ballroom, Helen O'Connell crooned with the Jimmy Dorsey band before 1,000 potential customers. And the winners were: Hal and Marge Takier of El Toro, California, jitterbugging. DEVELOPING a dialogue with your most important customers, the way SmithKline does, is known as relationship marketing. And, says Laurel Cutler, vice chairman of FCB/Leber Katz, an ad agency, ''marketers had better get themselves out of the transaction business and into the relationship business.'' Direct mail is one way to corner those customers, and you don't need a million names in a database to do it.

Heinz wanted to steal dog owners away from Nabisco's Milk-Bone for its Meaty Bone dog biscuits. So it created a direct-marketing campaign with the help of ad agency Leo Burnett. Heinz ran a TV commercial regionally that included an offer for a free Meaty Bone Taste Challenge Kit and a toll-free 800 number to get it. Callers received a trial-size box of biscuits, a 50-cent coupon, and a special canine place mat that instructed literate pups: Place your paws here, a Meaty Bone there, and Milk-Bone over there. Pooch, you choose. Happily for Heinz, Pooch did the right thing by a 2-to-1 margin, and Meaty Bone sales rose more than 10% last year, the biggest gain in four years. Explains Heinz's Johnson: ''It's as if we poured the names of all our potential customers into a funnel. Thanks to that 800 number we now know the people most likely to buy from us, and we can send them coupons and questionnaires.'' A last hurdle remains for the weary marketer. Consumers may not be buying where you are currently selling. Campbell Soup and Kraft General Foods, among others, are dedicating special sales teams to stock their goods in discount outlets, convenience stores, even candy and tobacco concessions. Says Campbell's Baum: ''We've got to respond to the fact that 50% of food isn't being purchased in conventional grocery stores.'' Wholesale clubs present an unusual opportunity to the marketer. These cavernous, warehouse-style stores charge shoppers a membership fee -- typically $25 annually -- to buy at rock-bottom prices. The word ''popular'' does not accurately describe these clubs -- total revenues have sextupled in the past six years to $25 billion, and shoppers tend to be well- heeled folks with more than $50,000 in household income. The clubs primarily buy leading brands, usually from whichever supplier gives them the best deal. So marketers are redesigning products, packaging, promotion schemes, and delivery methods specifically for such clubs as Costco, Price, and Sam's. Heinz, for instance, is bundling condiments like ketchup and relish into a single package and shipping 64-ounce ketchup bottles on customized display pallets that are easy for the stores to handle. Though the slow growth of shopping at home via computer suggests that no company can afford to abandon traditional stores entirely, there is a backlash against conventional shopping. A privately held company called Nu Skin of Provo, Utah, is ringing up remarkable sales bypassing stores, catalogues, and all usual ways of selling. Over 100,000 distributors -- half of them male -- peddle products such as Glacial Marine Mud and Nutriol Hair Fitness Preparation to their friends in living rooms, offices, or gyms. Mention Nu Skin at any cocktail party, and you're sure to hear about some laid-off yuppie who has found his true entrepreneurial calling or a six-figure executive who sells miracles on the side. STARTED WITH $5,000 in 1984 by Blake Roney, a young graduate of Brigham Young University, Nu Skin has grown, without taking on debt, into an international marketer of skin- and hair-care products for men and women. The company expects revenues to double to $500 million this year, making it about one-third the size of Avon in the U.S. and larger than Utah's entire ski industry. Behind Nu Skin's success -- and a lot of controversy -- are overzealous salespeople. They pocket a 43% markup on the goods, plus commissions on sales by the distributors they recruit. The company claims that at least 25 earn over $1 million annually selling Nu Skin. This ''network marketing,'' similar to the way Amway sells its goods, is difficult for Nu Skin to police, however. Distributors, hot to enlist additional sellers, have published misleading literature and prompted complaints to Better Business Bureaus. But investigations have left Nu Skin unblemished so far. Ever since Ronald Reagan spoke at the Nu Skin convention last February -- and Gerald Ford the year before -- eager-beaver distributors have been bent on converting the Bushes too. The White House recently requested that Nu Skin stop sellers from blitzing the President with products. As consumers change their shopping habits, even conventional marketers are rethinking product delivery. Says Sara Lee's John Bryan: ''We aim to sell in every channel where people would want to buy.'' Since Sara Lee acquired Coach in 1985, the leather goods company has expanded annual revenues from $20 million to $150 million by moving beyond catalogues and department stores to stand-alone Coach boutiques and factory outlets. Sales in the outlets, where discontinued and irregular items are marked down about 25%, have risen 30% this year. Coach President Lew Frankfort builds tony stores in expensive tourist spots like Carmel, California, and Amagansett, New York, instead of Quonset huts in unsightly locales near superhighways, as most outlet operators do. Says he: ''We know that consumers look for bargains when they're on vacation.'' REACHING CUSTOMERS, and persuading them to buy, is the marketing challenge of the 1990s. Obviously, it requires much more than offering value-priced products, calling them green, and cloaking them in some neotraditional advertising message. Leaping hurdles Edwin Moses-style means abandoning standard, even sacred ways of marketing to end up in the winner's circle.