OfficeMax's Wacky Marketing Strategy
Businesses everywhere are adjusting, painfully, to tough times and promoting their wares with limited funds. But that's nothing new for Bob Thacker, the senior vice-president for advertising and marketing at OfficeMax (OMX). The big-box retailer operates about 1,000 stores in the U.S. and Mexico but remains the third-place player in a three-player category, trailing titan Staples (SPLS)and runner-up Office Depot (ODP), and has long spent much less on advertising than those rivals. Thacker, a former top marketing executive at Target (TGT), arrived in late 2005 as new management embarked on a turnaround effort.
It may occur to you that office-supply stores are not the kinds of places that send shoppers into paroxysms of joy, as Thacker readily concedes. His category, he says in a baritone befitting a Midwestern radio host, is perceived as "totally beige. Lifeless." Consumers see so little difference between the chains that, Thacker reports, some of his customers trundle up to a cashier and write out checks to Office Depot.
So Thacker, and OfficeMax, embraced marketing stunts, most notably by creating "Elf Yourself," a silly and ubiquitous Christmastime online gag that, for three years, has allowed consumers to turn themselves (or someone else) into an animated elf, which can then be sent to pals. According to comScore (SCOR), Elf Yourself's site welcomed 17 million unique visitors in 2007's Christmas season alone. To plump a "Power to the Penny" ad tag line for its most recent back-to-school season, the company gave away 2 million pennies at the Mall of America in Bloomington, Minn. (There are YouTube (GOOG) videos of this event, and other gags involving pennies, on the OfficeMax-created YouTube channel "pennypranks.")
OfficeMax is hardly bypassing standard retail ad routes. It spent almost $15 million on newspaper ads in the first nine months of 2008, according to TNS Media Intelligence. But it shells out a fraction of what its rivals spend. In 2007, Staples outspent OfficeMax by roughly a 4 to 1 margin across all measured media categories. Office Depot more than doubled OfficeMax's spending. A challenging category coupled with limited dollars forced an aesthetic of necessity on Thacker, who now sometimes disgorges the phrases of an old-time public-relations barker: "My mantra is: 'Don't make ads. Make news.' " Has any of this driven away the storm clouds hanging over OfficeMax? No. Late last year, the company announced some layoffs and stopped paying dividends on its stock. But has OfficeMax won outsize attention for its efforts? Well, er, I appear to be writing about it.
THE CHRISTMAS CHALLENGE
Thacker's approach crystallized in 2006, when he was searching for a low-cost fix for a quandary. Christmas is, believe it or not, one of the biggest seasons for office supplies, but how could an OfficeMax grab attention during such an ad-mad season? Thacker and his crew retained New York digital agency Toy to create 20 holiday-themed gag Web sites. One entreated visitors to arm-wrestle a reindeer; another invited the reckless to "shoot your eye out." Many faded quickly, but Elf Yourself proved a big hit, one of the few gewgaws of the Web that most everyone gets sent at least once and that gets pickup from the likes of CNN and NBC's Today Show.
The aggregate cost of all of those Web sites, Thacker says, is less than the price of producing one 30-second TV spot, which is generally reckoned to be $300,000 to $400,000. That frugality continues. Video ads for the company's new "Life Is Beautiful" campaign, aimed at female consumers, have thus far only appeared in movie theaters—a cheaper way, OfficeMax executives say, to reach its audience.
The glass-half-full hope would be that OfficeMax's budgetary cunning leaves it better positioned to prosper now. Reality doesn't wholly support that notion. In the third quarter of last year, Staples' sales dropped 1%, while OfficeMax and Office Depot posted larger declines. Indicators in '06 and '07, analysts say, boded better for OfficeMax. The company "was making good progress on a turnaround, and then the economy started to soften and the turnaround started to unravel," says Joe Feldman, a senior retail analyst at research firm Telsey Advisory Group. The success of Thacker's marketing, and OfficeMax itself, will be determined by factors much larger than whether or not Elf Yourself returns for a fourth Christmas. But if the turndown gets so grim that companies are forced to make marketing campaigns out of duct tape and paper clips, well, OfficeMax will be better prepared than most.