What's Next: Better Methods
Suppose you could really figure out why advertising works.
Published September 2003
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COMMENT ON THIS ARTICLEAdvertising 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 and Mario Fantoni, two guys who say they 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 old way.
Their 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 ATKearney, entered the picture. "Mario was a customer of mine," recalls Michael Malloy, owner of Malloy Insurance Services in Oregon House, 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."
