by Bill Bishop
Business at the beginning of the twentieth century was all about getting big. Between 1898 and 1902, in a massive wave of mergers, 2,653 firms consolidated into just 269. "With remarkable swiftness," historian Daniel Pope wrote, "large-scale corporate capitalism had appeared."4 Mass production, with its heavy capital investments, demanded mass markets. "The essence of manufacture," wrote a DuPont executive at the beginning of the twentieth century, "is steady and full product."5 Marketing was geared to encourage allegiance to the new national brand names: Coca-Cola, Quaker Oats, Kodak. By 1930, the fifty biggest American corporations accounted for half of the nation's industrial production.6
National advertising and mass merchandising worked for ketchup, cigarettes, and sweet, brown-colored water, and it was soon employed for political candidates as well. No parades, just facts. No brass bands, just pamphlets to be read by atomized voters. The merchandising technique elected candidates, but it devastated democratic participation. Turnouts in national elections dropped from 80 percent of eligible voters in 1896 to under 50 percent in 1924.7 Democracy was no longer a craft skill; it was a commodity of mass production. Voters weren't owners of a process; they consumed a product, democracy, designed by department store moguls. Nation's Business, the publication of the U.S. Chamber of Commerce, eagerly anticipated the 1956 presidential campaign, when "both parties will merchandise their candidates and issues by the same methods that business has developed to sell goods."8 Those methods, however, were about to change, both in business and in politics.
One year after Donald McGavran's The Bridges of God appeared in 1955, adman Wendell Smith introduced the idea of "market segmentation." Smith described the old mass-marketing strategy as "bending... demand to the will of supply." In this model, Smith wrote, manufacturers looked upon the national market as a large cake and worked to take a full layer. Smith suggested that firms slice in a different direction. Manufacturers should consider tailoring products to the specific needs of a smaller number of consumers. Companies could charge higher prices to more loyal customers if they gave fewer people exactly what they wanted. Instead of taking a thin horizontal layer of the national market, business should consider taking a deep, vertical, wedge-shaped slice.9
Smith's article was about a marketing strategy, but it was also an insight into how Americans were changing—the "Revolution of the Individual" O'Toole would write about in 1973. In the 1950s, a time of unprecedented prosperity, consumers were willing (and able) to pay more to buy just the item they desired. At the same time, manufacturers had learned to gain economies of scale in shorter production runs. (A factory didn't need to make every car a black Model T to be profitable. Manufacturers had learned to add variety without losing income.) These new, more flexible manufacturing techniques, Smith announced, could be used to meet "the desires of consumers or users for more precise satisfaction of their varying wants."10 It was a shift in perspective, away from trying to generate sales for what manufacturers could make in volume to producing exactly what groups of consumers were willing to buy.
When advertisers thought grandly about their profession early in the twentieth century, when the mass market ruled, they saw their work as a thick strap that pulled the nation together. Taking the ideals of Progressive politics and the Social Gospel into the commercial world, Albert Lasker, president of the Lord & Thomas agency, told his employees in the 1920s that "we are making a homogeneous" people out of a nation of immigrants.11 Marketing research in the 1950s and 1960s, however, discovered that commerce would be more profitable if the nation were divvied up into smaller, segmented groups. Moreover, the melting pot turned out to be a flop. People, classes, and races didn't "melt" as expected. The Chicago Tribune conducted a survey in the late 1950s to see whether economic class made a difference in the way people thought about buying, saving, and shopping. The assumption at the time was that a rich person was simply a poor person with money. That's not what the Tribunes research found. A "Lower-Status person is profoundly different in his mode of thinking and his way of handling the world from the Middle-Class individual," Pierre Martineau wrote in 1958. "Where he buys and what he buys will differ not only by economics but in symbolic value."12
People of different classes shopped in different stores not simply to find a particular style and price but also to be safely among those who were like themselves. "The shopper is not going to take a chance feeling out of place by going to a store where she might not fit," Martineau wrote. The most important function of advertising wasn't to boast of prices or quality. It was to "permit the shopper to make social-class identification."13 The role of advertising was to help shoppers sort themselves into the social group where they felt the most comfortable. Martineau urged retailers to develop "personalities" in their stores, arguing that it was a mistake "to be all things to all people."*14 McGavran found that people wouldn't cross class boundaries to go to church. Martineau was simply applying the same "homogeneous unit principle" to shopping. It worked in both realms.
By the early 1960s, market segmentation was the norm. In 1966, the Journal of Marketing quoted an advertising executive as saying, "It has become practically impossible to enter the national market on a broad, undifferentiated basis with any real hope of success."15 The business of marketing became the science of defining market segments, the art of division. For this purpose, Daniel Yankelovich announced in 1964, quantifiable traits such as age and income were useless. More crucial were qualitative characteristics such as "attitudes, motivations, [and] values."16
The transformation of marketing was evident in Pepsi's battle with Coca-Cola. In the 1930s, Pepsi advertised cost: you got "twelve full ounces" of cola with a Pepsi instead of six and a half ounces in the thick, green glass of a Coke bottle. In the 1950s, however, Pepsi began appealing to customers "on the basis of who they were rather than what the product was."17 In the late 1950s, the slogan was "Be Sociable, Have a Pepsi." By 1961, Pepsi was for "Those Who Think Young." And then, in 1963, soda pop drinkers were urged to join the "Pepsi Generation."18 Marketers learned that they could not only find segments, but they could also create them. And in the new post-materialist world, those segments would be less about the cost of a product and more about the values it represented.*
One Nation, Many "Image Tribes"
The divisions grew finer. The Pepsi Generation had to be divided again between LSD-laced rock singers and blond daughters of Republican presidents, and again between hockey players and golfers, between environmentalists and Evangelicals. Researchers parsed consumers into ever-smaller homogeneous groups. In the early 1990s, marketing consultants Don Peppers and Martha Rogers announced the ultimate in market segmentation, the "one to one future." Computing power allowed producers to develop relationships with individual customers. Firms were told to "manage your customers, not just your products," and to produce specific goods for specific people. Peppers and Rogers described a nation of consumer "hunters and gatherers," traveling in groups "held together by a sense of common purpose, not confined by any sense of place. This is the 1:1 future ... It will be a tribal society at light speed. Individuals will congregate in wandering, venturesome image tribes, held together by their pursuit of common ideas, common icons, common entertainment—linked, in other words, by nothing more than a sense of belonging. It will not be a geographic community."19
Peppers and Rogers summed up the early 1990s, as mass media disassembled and production batches shrank. (The average assembly run for a set of identical automobiles was only fifty cars; the manufacturing system was no longer geared for mass production but for mass customization.)20 The job of marketers (and pastors and politicians) was to find ways to manage the fractious society being created. Marketers used computers to track individual customers. Peppers and Rogers were right about the return to tribes—McGavran's homogeneous units. But they were wrong about another thing: the tribes were geographic, too. They were sequestered in neighborhoods and in churches.
When John OToole posed his question ab
out Tricia Nixon and Grace Slick, he was telling fellow marketers that they had better be able to tell one woman from another, because any advertising that seduced Nixon types was sure to turn off Grace Slick fans. "Marketing and media executives are sure that people gravitate to materials that most closely zero in on their likes and dislikes, their sense of themselves," wrote historian Joseph Turow. "But marketers also believe the converse: that people prefer not to confront materials that cause them discomfort."21 People had grown intolerant of advertising's intrusiveness,* but that impatience was just part of a deeper distress. Americans were developing a generalized discomfort with differing points of view. It was a deepening anger that encompassed politics, culture, entertainment, religion, and commerce. In the summer of 2004, J. Walker Smith told me that his polling for Yankelovich Partners detected this rancorous turn in public opinion beginning in the 1990s. People became "increasingly uncomfortable with tolerating trade-offs," Smith said. "So it makes it difficult for people to compromise or to listen to other people's opinions."† Smith ran a poll asking whether people identified more with integrity or success. It was a false choice, in theory, since the two aren't mutually exclusive. But Smith figured that the question was a way of determining which term resonated more with people—whether means mattered more than ends. Beginning in the 1990s, Smith said, he found a big jump in the salience of means (integrity) over ends (success). Principles were paramount. "Nobody is willing to live with trade-offs anymore," Smith said. "We're in this no-compromise world."
The Geography of Influence
Market segmentation and psychographic market research roused the same fears as McGavran's homogeneous units. Vance Packard warned in his 1957 book The Hidden Persuaders that advertising employed "mass psychoanalysis" to manipulate consumers. This was The Manchurian Candidate fear that advertisers had managed to "invade the privacy of our minds" to manipulate both sales and political opinion.*22 Other social critics said that beyond exploiting consumers, advertising and marketing were actually making national consensus impossible. Joseph Turow argued that marketing tactics aimed at segmenting society instead of making society whole was causing the "breaking up" of America. Beginning in the 1970s, there was, he wrote, a "profound movement by advertisers away from society-making media." Marketers created the electronic version of gated communities, encouraging "small slices of society to talk to themselves." For example, Cubans in Miami had a relatively low opinion of Mexicans, who were commonly used in Hispanicoriented commercials, Turow reported. So Saturn produced a new set of car ads for South Florida using Cubans. Marketers were "surrounding individuals with mirrors of themselves, their values, and their activities."23 Historian Robert Wiebe wrote in his book The Segmented Society that the "major casualty of the 1960s was a dream of moderation, accommodation, and cohesion, and its passing brought acute feelings of loss and betrayal." The country adopted a new "national style," one that was "sectarian, not pragmatic. When Americans encountered problems, they looked not for the common ground but for the boundary dividing it ... Americans appeared automatically to know that security and comfort could only be found inside a fortress."24
Advertisers, however, were, like pastors in the church growth movement, simply following their customers—and Americans were sorting themselves into more homogeneous groups without any help from Madison Avenue. Marketers didn't make these groups, but they did take advantage of them. Advertising firms soon realized that people were linked most strongly to others who had similar interests or beliefs. Environ-mentalists talked to other environmentalists; swimmers hung out with other swimmers. Once identified, these "peoples" (in McGavran's sense) could be either sold a new kind of deep-dish pizza or recruited to a megachurch. The makers of the first PowerBars, for example, were triathletes, and they found their initial market among fellow long-distance runners, swimmers, and cyclists. To generate sales among golfers or mountain bikers, they had to "plant separate seeds" in each sports network. Back in nineteenth-century India, Bishop J. Waskom Pickett realized it was essential that a convert named Ditt plant Christianity among his Chuhra tribe (see chapter 7). When the makers of PowerBars wanted to introduce their product within a new "tribe"—say, tennis players—they hired a tennis player, somebody who knew the language of the court—a Ditt with a crisp crosscourt backhand.25
The whole concept of markets was changing as business came to understand the social psychology of groups. "People speak about the 'mass market,'" William H. Whyte wrote in Fortune magazine in 1954. In reality, the market "breaks down into a series of groups," and these groups "exert a great power, sometimes of frightening intensity, over their members." To prove his point, Whyte conducted an early experiment examining the power of groups in the marketplace. He decided to test the power of "word of mouth" by mapping how air conditioners, then a relatively new appliance, spread through city neighborhoods. He snapped aerial photographs of row houses in an outwardly homogeneous Philadelphia development. (All the houses were the same style, the same size, and approximately the same price.) If a house had an air conditioner, it was easily seen on the photograph. Overall, about 20 percent of the houses had air conditioners. But the percentage for the neighborhood as a whole was misleading when Whyte looked block by block. In one block of fifty-two houses, there would be three air conditioners. In another, there would be eighteen. Whyte marked the air-conditioned houses on his aerial photographs with a grease pencil. When he looked at the clusters of air conditioners, he saw clear "symbols of a powerful communication network." Individuals didn't buy air conditioners as much as "peoples" bought air conditioners.26
This experiment has since been replicated with far more sophistication than Whyte's ad hoc aerial photographs. Finnish economists recently examined automobile purchases in two of that country's provinces over two years. Their findings matched Whyte's discovery of fifty years earlier. People who lived close to one another tended to buy the same kind of car. They weren't buying out of envy or in competition, the Finnish economist discovered. The most reasonable explanation was that neighbors were making group decisions from shared information.27 Whyte proposed that there was some leadership involved in these group-influenced purchases. It wasn't necessarily a good or virtuous person who was a group leader. ("Sometimes the leader is a bitch," Whyte wrote.) But it was the "catalytic influence of a leader" that connected people and helped transfer information.28 Whyte's hypothesis matched other research. Elmo Roper was conducting polls in the 1950s to try to find "influential" Americans. Roper proposed that a small group of people ("influentials") swayed the opinions (and purchasing decisions) of many others. All of this research would later be systematized into "buzz" or "viral" marketing and described in Malcolm Gladwell's 2000 book on social "epidemics," The Tipping Point. But in the 1930s, J. Waskom Pickett, a lone Methodist bishop living in India, had described the same movement of ideas and faith through an interconnected group. And when church growth advocates in the 1980s wrote about Pickett's research, they said that Christianity moved "contagiously"—just as "buzz" strategists would rediscover a decade later.29
Marketers also discovered geographies of culture or lifestyle. Chris Riley is a Portland, Oregon, marketing expert who worked with Nike in the 1990s. The sporting goods company was unique, Riley told me, because it had largely abandoned standard demographic market research. The company had found that "people [were] clustering around their interests" and those clusters had little to do with standard demographic categories. Nike also had recognized a "geography of influence" in the market. Depending on the subject, belief, or product involved, each interest, Riley explained, had its own map. "If you go down to Mount Hood [outside Portland] and have a look at the snowboarders, I challenge you to find a [Nike] swoosh," Riley said. Snowboarders avoided Nike "like it was the bubonic plague." Riley said that the company had tried to do a market study with snowboarders around Boulder, Colorado, but couldn't even recruit people for the research. Riley explained, "You go to Boulder and you're wearing the swoosh, an
d it's like, 'What the hell are you doing here? You've obviously come from New York. You're not one of us. You're about the urban experience. You're about basketball. You're about a giant corporation. We don't want you here.'"
When Riley thinks about markets now, he envisions local communities of special interests. What happens within these homogeneous clusters is the market. So instead of spending money on demographic research, Riley tries to tap into these lifestyle communities. When I met Riley in the fall of 2005, he was working at Apple. He said that he planned to take his Apple marketing staff to Marfa, Texas, because the little town on the edge of the Big Bend section of the Rio Grande appeared to be an emerging center of cultural influence. The minimalist sculptor Donald Judd had moved to the West Texas town decades ago, and Marfa had since become a most unlikely boomtown of art galleries, espresso cafés, Prada shops, French restaurants, and cool hotels. People were aggregating around communities of interest, Riley said, and those communities had an address. Riley said that he could learn more about hip culture by spending a weekend in Marfa than by buying reams of Zip Code research.
Place matters, and so does proximity. An MIT researcher tracked the communication patterns among employees in seven research and development firms. The closer people were to one another, the more they talked.30 William Whyte showed with his study of air conditioners in Philadelphia that we buy what those close to us buy. The purveyors of "buzz" marketing schemes count on the word about their products traveling through networks that are created, in part, by physical proximity.
Like Sells to Like
In the early 1960s, F. B. Evans studied the links between the sellers and the buyers of life insurance. Evans proposed that the "more similar the parties" in the relationship, the more likely the salesman would be to make a deal. In a study of 125 salesmen and 500 prospects, he found that sales were more likely between people of the same height and similar education, but that sales dropped if the salesman earned less than the prospect. Sales were highest when the salesman belonged to the same political party as the client. Sales were lowest when the salesman and prospect had different political allegiances.*31