Futurist Laurel Cutler

A decade ago she warned her clients of consumers who would shop K mart in the morning, Saks in the afternoon, and define their very being by their choice of toothpaste. The smart ones listened

 

Laurel Cutler is perhaps Madison Avenue's most powerful woman. She counts among her current clients the food processors at Campbell Soup, the brand managers of Colgate-Palmolive and Procter & Gamble, and the tobacco and cereal merchants of RJR Nabisco -- as well as the top brass at Chrysler and Citicorp. What they all want is a glimpse into the future: Cutler's prediction of where the consumer marketplace is headed and what that means for their once and future businesses.

"This whole business of calling the future is either a lot easier than most people think it is, or we've been very lucky," says Cutler as she surveys the consumer landscape from the vice-chairman's office of FCB/Leber Katz Partners, 42 stories above Manhattan. While others in her trade retain a slavish devotion to market research, Cutler and her staff travel through more distant precincts in search of evidence of change in the sciences and art, in fashion and in retailing, in technology and in demographics. The patterns that emerge from these anecdotal impressions become working hypotheses that are shopped around in draft form to Cutler's clients, who collaborate in refining the good ones and rejecting the bad on the basis of their own experiences. It is only years later that there will be any hard evidence with which to confirm the hypotheses that emerge from that process. "There is," she tells skeptics, "no data on the future."

Cutler began her career as a Washington Post reporter and unpublished novelist before switching to writing advertising copy for J. Walter Thompson Co. during advertising's salad days. Now 60 and very much the industry veteran, she is a self-described "tough cookie" who delights in confronting and challenging her buttoned-down corporate clients. She spoke about consumers and the changing consumer marketplace with INC.'s Paul B. Brown and Steven Pearlstein.

INC.: There has been a lot written about the disappearance of the mass market and the rise of ever more specialized market segments. Chicken-or-egg question: is this happening more because consumers have changed or because business has changed?

CUTLER: Actually, the consumer has less to do with it than the increased competition in the marketplace. New competitors offering highly differentiated products -- these are the people who have changed the rules. Today, if you try to appeal to everybody by being bland and in-offensive, somebody is going to come in and begin to pick off significant chunks of your market. What that means is that as a marketer, you have to figure out exactly who your audience is: what are their aspirations, and what differentiates them -- and your product -- from the mass market.

You have to stand for something, and you have to stand for it very, very firmly, because if you don't, somebody else is going to come along and take it away from you.

INC.: What's a classic example of a market that's been segmented?

CUTLER: Shampoo. Back 20 years ago, the market leader in shampoo was probably protecting a market share of 45% or 50%, and all shampoos were pretty much priced the same. Today, the market leader -- Head & Shoulders -- has a share of less than 10%, and there are all sorts of tiers and segments. You even have a market now in $30 shampoos, if you can believe that.

INC.: So it's come full circle -- the market leader now is the product that started out to fill what was considered an uninteresting niche -- dandruff control.

CUTLER: But the more important point is that the market leader has only a small percentage of the market. You see, up until even four or five years ago, companies such as General Foods would think only in terms of $200-million sectors -- if the business couldn't get to $200 million in two years, they weren't interested in pursuing it. And by definition, that almost always meant mass market -- bland, undifferentiated. Nowadays, if they can identify a $50-million opportunity, they're thrilled.

INC.: Is it big business or small business that is driving this segmentation?

CUTLER: The more common pattern is that the ideas are developed by smaller companies that get to the point where they need more money, and they are bought by the larger companies. General Foods, for instance, has never created much of anything -- they have simply bought up the Posts and the Jell-Os. There are some large companies that have never lost the ability to think entre-preneurially -- IBM, Hewlett-Packard, 3M, Frito-Lay. But these are more the exceptions than the rule.

INC.: What is it about their management that distinguishes those companies from the pack?

CUTLER: Several things. They give their people the right to be wrong. They have compensation systems that pay people at least as well for creating new business as they do for maintaining old business. And -- this may be the most important of all -- they are willing to pay for the breakthrough. New ideas can't pay out in the first year.

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