President and CEO, Merkle
By This e-mail address is being protected from spam bots, you need JavaScript enabled to view it | Corridor Inc. Staff Writer
Originally published May 2008

This month, David Williams is moving his headquarters — and 350 employees —to this new building in Columbia. Photo by Lisa Helfert.

 But the company isn’t your typical ad agency. Merkle sets itself apart by creating statistical models for clients to determine where marketing dollars are best spent. About 100 company statisticians build those models to predict how consumers behave and what products they’re likely to buy next.
 Merkle works with such big name clients as Nike, Disney, Dell, Geico, Procter & Gamble and Samsung. With Procter & Gamble, for example, Merkle’s research showed the company what kind of customers were buying Crest toothpaste every day.
 Merkle has helped DirecTV create consumer programs and develop a relationship with their customers by helping predict what products they want and will buy next.
 Merkle has set up a marketing database for the Arthritis Foundation to predict how likely consumers are to financially support the group and if mailed marketing materials are influential.
 “We know today an awful lot about how consumers behave and we have huge databases to be able to maintain that information,” Williams said. 
 Merkle will move its headquarters — and 350 employees — from Lanham to Columbia this month. Williams has enough room in the new offices to hire 200 more employees, which he plans to do over the next year or two.
 In the last two months, Merkle has already hired more than 50 people, including 10 statisticians. 
 “By any stretch of the imagination, we’re not done,” said Williams. “We like to refer to Merkle like running a marathon — we are sprinting everyday and every time we get close enough to see the finish line we just move it out further.”
 Corridor Inc. recently sat down with Williams to discuss the success and future of Merkle.

HOW ARE YOU THRIVING AT A TIME WHEN AD AGENCIES ARE STRUGGLING?
We’re not a traditional advertising agency in the sense of creating a brand message and creating print and TV ads. We grew up as a direct-response marketing company so everything we do here has a sense of fact-based understanding of its impact on
consumer behavior … There’s a lot of pressure on chief marketing officers on how to spend marketing dollars and create and measure outcomes and that’s sort of the center of the storm that Merkle’s found itself in.
We were in the right place at the right time and we are a firm that has figured out how to capitalize on that whereas a lot of other people are having trouble adjusting their business models or things they’ve done in the past to a new environment.

HOW MUCH OF AN IMPACT DOES THE ECONOMY HAVE ON MERKLE?
We haven’t seen real budget reductions yet across the board but we are seeing conversation for the first time since 2001 of the possibility of budget reduction. We feel like we are a little more immune to those potential reductions than a classic advertising agency might be and we’re focused right now on giving our customers the most intelligent tool sets to make those decisions as best they can.

HOW DO YOU GET THE ATTENTION OF BIG NAME CLIENTS?
We’ve had a handful of clients that have defined us over the years and we’ve built that evolution over the course of the last decade. It’s not difficult to find someone who specializes in agency services or marketing technology
platforms and marketing consulting. What’s hard is to find somebody who has the competency to integrate those three things and that’s really the market position we’ve created for ourselves.

GIVE AN EXAMPLE OF HOW MERKLE HAS HELPED A CLIENT.
Vonage is a relatively young organization and growing rapidly. We are helping them build a marketing database of every consumer in America that we think is capable of buying their product. We are building statistical models for Vonage to predict whether a particular household is likely to buy a Vonage product and e-mail applications to solicit those households with a Vonage offer and then tracking those to see how well they have worked to grow their business.

HOW IMPORTANT IS DIRECT MARKETING?
Direct marketing can be a very effective tool for a small organization. If I’m a dry cleaner on the corner and I’m trying to get my message out there, I can do it in a highly targeted, specialized and measurable way. It’s also very effective for a mass marketer such as credit card companies to put a specific offer at a specific point in time to a specific individual very relevantly into the marketplace. Other than the Internet, direct marketing has been the fastest growing media in the U.S. today.
We are huge fans of direct mail and marketing because we are finding these things are incredibly impactful and work extremely well when executed properly.

HOW DO YOU STAY COMPETITIVE?
Customers don’t always know what they could or should be doing differently ....  I hope Michael Dell wakes up every morning and asks himself a very simple question — is Merkle the best company to help me sell my products through direct marketing channels than anybody else in the world? I don’t care how nice we are or how nice our relationship is if he can’t answer yes to that question, I think he should fire us.

SINCE YOU AREN’T A TYPICAL AD AGENCY, HOW DO YOU PITCH CLIENTS?
When we’re sitting with a client today we’re talking about all the information that’s available to them and how they can use that to better inform the process that touches their customers. Generally, most chief marketing officers are not sitting around saying ‘yes, we’ve nailed all this.’
Our whole pitch is about impact and results. We’re not sitting with customers saying you should build a marketing database. We’re sitting with customers saying you should have a stronger customer life cycle management strategy to allow you to maximize the value of a household with your products over time and here’s how you look at that and the process and strategy you need.

HOW DO YOU BENEFIT FROM STATISTICIANS?
Having a statistical competency is the secret to Merkle. It will define the market leaders of the next decade and for us it’s the No. 1 priority.
If you look at marketing over the course of the last 50 years it’s been dominated through that emotional, right brain, universal view of marketing. Geico is world class with this – 15 minutes will save you 15 percent – they put that message to everybody in America and it resonates with everybody in America to start saving money on auto insurance.
When you start to look at the quantifiable side or the left brain side of marketing there’s nowhere near as much competency or experience … So ultimately it is about integration of left and right brain.

HOW DO YOU DEAL WITH SPAM?
Spam is a major issue in e-mail primarily because e-mail is so inexpensive. There is by the nature of that almost an invitation to abuse it because the marketing costs are so low people then tend to over promote particular offers.
With the Spam Act an organization is not allowed to have an e-mail communication with a consumer unless they’ve either opted in or agreed to it. Where Spam is still being abused today is sort of by these fly by night Ma and Pa shops that bluntly either don’t care or are taking the risks or don’t fully understand the laws associated with it.
I don’t think you’ll ever see Spam go away but certainly the kinds of organizations we deal with are very concerned about how that consumer perceives that organization and the last thing they want to do is to annoy that consumer so much that either they opt out or no longer engage with that brand.

HOW HAS THE COMPANY CHANGED OVER TIME?
The Merkle that I came to was a company that did good work but didn’t really aspire much beyond just doing great work for the customer’s they had. In those early days, we did everything – I knew every job that was running in the company, I knew every employee, every customer, every dollar. When we got to 100 people from 25 people that’s the first time that you see people in the hall and you are wondering are they a contractor, an employee, a client, a supplier, or a visitor.
The first 10 years of my relationship with Merkle was me trying to figure out how to run a business and then the second 10 years was me trying to figure out how to put it into a market leading position. It was all of the dynamics of how should we organize ourselves, how will we measure success and how do we hire senior talent and what do we want to be when we grow up.

WHAT MARKETS DO YOU ATTRACT?
It’s really across the board. Financial services primarily are probably the most advanced information-based marketers out there and the catalog and non-profit, fundraising and publishing areas. … Travel and entertainment, media, auto, pharmaceutical and retail — these are the emerging markets as we call it that are starting to take a stronger view of an information based approach to marketing.
But I wouldn’t say that there’s anybody that’s particularly running faster than anyone else. Financial services in my view is sort of ahead of the pack right now including banking, credit cards, investment and insurance. Those are the market leaders in this space and everybody else is sort of evolving at this point.

WHAT ARE YOUR EXPECTATIONS FOR 2008?
We see 2008 as a great year for us. It looks like in quarter one our growth will grow 26 percent versus last year so I think we will be looking for something in that mid-25 percent growth range this year. I think we will be more profitable this year than we were last year.