Pareto Rules

When vending machines call you by name

Used to be that buying a soft drink or candy bar from a vending machine felt a little bit like gambling. Getting the machine to accept your money could be a challenge in itself, especially if the dollar bill you were feeding it was in anything less than mint condition. Then, making your selection, there was always some chance that your requested item would get lodged somewhere along its journey to the dispenser tray.

What a difference a couple of decades can make. I can’t even remember the last time I had to thrust my weight against a Coke machine, rocking it to try to pry the can loose from its rest stop and release it to the force of gravity.

Today not only do most self-service vending machines operate flawlessly, but some are even elegant in terms of the mechanical levers and robotic arms that shepherd the purchased items to their new owners. On the flip side, most of the machines are still dumb in that they do nothing more than enable transactions.

Even state-of-the-art kiosks, such as the prototype Zoom Store I recently stumbled upon in a Macy’s in San Francisco, do little more than take your money and spit out your merchandise—in this case, iPods and related accessories. Macy's plans to roll out 180 of these 28-square-foot units this fall, stocking them full of consumer electronics.

To be fair, the Zoom Stores have a touch screen that allows customers to get product and price info. Still, there’s little indication that they aspire to deliver true interactivity, let alone the kind of customized brand experiences and precision marketing capabilities we’re starting to see in some of the more sophisticated Web-based retail environments.

Well, I have a feeling that’s about to change and that we’re on the cusp of a new era in vending machines, a $30 billion industry that’s growing by leaps and bounds. For evidence, look no further than Dubai, where The Middle East Vending and Kiosk Expo 2006 took place earlier this week. By all accounts, there were some pretty impressive machines on display and, importantly, a lot of talk about incorporating personalization technologies like wi-fi, radio frequency identification (RFID) and biometrics into future models.

Will there come a day when Coke machines deploy retinal scanners to automatically dispense your beverage of choice while delivering a brand experience related to your favorite rock band and sports team? Speaking earlier this month at Fair Isaac’s InterACT conference, Doug Rollins, the head of interactive marketing at Coke, seemed to suggest as much. With over two million vending machines in the US alone, Coke is coming to view the machines as  “consumer connection points” and “opportunities to drive traffic and participation.”

It may be some time before manufacturers and retailers fully capitalize on vending machines as an additional customer touch point and relationship-building vehicle. Meanwhile, at least, with the push of a button, customers can usually get the item they paid for without resorting to brute force.

The Large Marketing Organization Artistically Considered

“All things in nature have a shape,” wrote the Chicago architect Louis Sullivan in his 1896 landmark essay “The Tall Office Building Artistically Considered”. According to Sullivan, “it is the pervading law of all things … that form ever follows function.”

With this dictum—form follows function—Sullivan argued that the “upward character” of high-rise building design is a natural extension of the “pervading law”.

Which begs the question: If form should follow function in building architecture, shouldn’t the same hold true for business architecture? Like the physical building it occupies, shouldn’t a company’s organizational design be appropriate to its purpose?

It’s a question a lot of folks these days are pondering, including participants in last month’s board of trustees meeting for the Marketing Science Institute. Noting that “the customer equity paradigm” forces a company to structure its activities around customers rather than products, the group moderator asked: “Is a new marketing organization emerging out of this evolution?”

I have a few thoughts in the context of precision marketing—which, after all, provides a whole new set of financial metrics for the marketing organization to report and track against. Good timing, given that marketing accountability is rising to the executive suite, to the CMO, who has traditionally had no P&L responsibility whatsoever.

Given today's emphasis on ROI, the CMO might think about drawing a line down the middle of the organization, between those who set the marketing objectives and those who execute them. Bill Mirbach, VP of Direct Marketing at Intuit, once told me that a good organizational model might be to simply say, “Okay, finance guys, tell the marketers what their allowable cost per order is, and you figure it out depending on the business needs as defined by the senior manager.” Makes sense. After all, marketing managers shouldn’t be spending their time crunching numbers when they could be arm wresting with vendors for cheaper ad space.

The best way to resolve the internal conflict that exists in many companies with respect to marketing ROI may be to simply divorce the Art from the Science. Create two separate functions, in essence, and let each one do what it does best. Let Art focus on messages, ideas and creative development and let Science focus on the analytics of data management as well as the underlying economics of the overall marketing program.

To that end, how about creating a new executive position? Call it the Director of Marketing Economics. Reporting to the CMO, the DME would oversee all activities related to marketing ROI. The job description would vary, depending on the specifics of the portfolio and purview. In all cases, however, the resource allocation questions would naturally flow from a customer-centric perspective.

For example: Which customer segments should we spend money on? How much should we spend on customer acquisition versus retention? How much should we spend on mass marketing, and what are each of the different vehicles to which we'd want to allocate funds? How much should we spend on precision marketing, and what are each of the different vehicles to which we'd want to allocate funds?

Just an idea. CMOs might not go for it. But at least Louis Sullivan would've approved.