To Market, To Market

Procter Gamble veteran James McManus has an uncanny ability to analyze consumer behavior and parlay his findings into a variety of sucessful ventures.

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Twelve years ago, the company's name -- Marketing Corp. of America -- was in one sense a joke about an outfit with $25,000 in cash, a $50,000 loan, and no clients. In another sense, it was a crafty label for what James R. McManus hoped would become the country's finest pool of marketing talent. McManus, a lanky Northwestern University business school graduate, founded MCA in 1971 after eight years at Procter & Gamble and seven years as group vice-president with a sales promotion consulting firm in Westport, Conn.

The consulting firm, Glendinning Cos., was owned by another P&G alumnus, Ralph O. Glendinning. "When it came time to share the business with key employees, Ralph had a change of heart," says McManus. "I knew in 30 seconds that I was going to leave the company."

But first McManus had to figure out a way to support his wife and four children. That took two months. He decided to go into the same business, in the same town, but emphasize marketing rather than promotion.

With characteristic boldness, he tramped into Glendinning's office and spelled out his intentions. He promised that he would not solicit business from Glendinning's clients for a year, nor would he offer jobs to any of Glendinning's employees, outside of four he specified. But there was something he wanted.

While at Glendinning, McManus had been working on a system to distribute samples of manufacturers' products -- cat food, cold medicine, cigarettes, razor blades -- through trading-stamp redemption centers, such as those operated by S&H, Blue Chip, and Gold Bond. Since store clerks would be instructed to give only one sample to each person who redeemed stamps, it would allow manufacturers to control the number of free samples consumers received. And it would make it easy to get in touch with the people who received the samples to find out if they subsequently bought the product (the marketing firm would obtain the names and addresses from the trading stamp centers). Consumer-products manufacturers, McManus reasoned, should find this combination appealing.

"Ralph," McManus began the conversation, "we have three options. One, we leave the idea here and it will die. Two, I can steal it from you, or, three, I can offer to buy it from you. I'd like to buy it."

"Okay," Glendinning responded. "What do you think it's worth?"

McManus thought for a moment, then made a fundamental mistake. He answered the question.

"Fifty-thousand dollars," he said.

It was Glendinning's turn. "I think it's worth $100,000."

The two men agreed to meet halfway.

McManus learned an important lesson. Never make the first offer. But the $75,000 still turned out to be well spent. From 1971 through 1975, the trading-stamp sampling business generated more than $4 million in revenues, setting the pace for the corporation's future growth. In 1982, MCA was No. 325 on INC.'s list of the 500 fastest-growing private companies in the United States and ranked 16th in revenues per employee. It posted sales of $83.2 million in fiscal 1982 and anticipates fiscal 1983 sales at nearly $125 million. Compound annual growth rate in sales over the last six years has been an impressive 61%.

But more remarkable than the figures has been McManus's ability to analyze consumer behavior and then parlay the results of his analyses into a variety of unrelated -- and mostly successful -- ventures. In the beginning, MCA focused primarily on selling marketing ideas to other corporations, including Ralston Purina, Reynolds Metals, and Frito-Lay. In Ralston Purina's case, MCA suggested that the company distribute, through veterinarians' offices, Puppy Care Kits, which would include samples of Ralston Purina products and a booklet on the care of puppies. According to McManus, the kits were so successful that Ralston Purina now sells them to veterinarians for $1 each.

When McManus started MCA, he had two fundamental ideas: "We were going to be slaves to the idea of quantification of consumer behavior. We were going to be slaves to the idea that our success depends on our clients' success." In those early days, he didn't care how much money he made. "What I cared about was how well it worked for the client," he says. "I knew that if it worked for the client everything else would take care of itself."

By the mid-1970s, however, McManus began to wonder if MCA could go beyond marketing consulting and start to create both new products and new companies. The answer, he decided, was yes, if he could protect MCA's existing business at the same time. The solution he chose was to enter into ventures where his marketing clients had no interest.

MCA was already establishing a formidable research arm that collected -- and still collects -- data from three main sources. The first is information in the public domain, including statistics from the U.S. Departments of Commerce and Labor on such subjects as marriages, divorces, birth rates, employment rates, beverage consumption, and household-appliance usage. MCA also plugs into a number of data banks that are available to anyone who can pay for the access code.

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