• by Joe Mandese , May 10, 2015

WINSTON-SALEM, NC -- John Ross is giving me a walking tour of Inmar’s headquarters here when he stops suddenly, turns and says, “We can’t go beyond this point. It’s top secret. Even I can’t go in there.” The “there” Ross was referring to was a data facility processing some of the most sensitive information about people in the world -- every transaction consumers make between their pharmacies, prescription drug marketers and their health insurance providers. I understood why a journalist couldn’t enter the room, but I was surprised that it was also off limits to Ross, the No. 2 executive at Inmar, a company you probably have never heard of, but which arguably is one of the most powerful consumer marketing forces in the world.

I know it’s unlikely that you’re familiar with Inmar, because in the months leading up to this article I asked every senior executive I met with on Madison Avenue -- including the CEOs of some of the biggest ad agencies in the world -- and not one of them has ever heard of it. Until a couple of years ago, Ross was one of them.

At the time, he was on one of Madison Avenue’s fastest tracks. A former CMO of Home Depot, Ross had joined Interpublic in an effort to reengineer consumer marketing. His first stop was running the holding company’s fabled media lab, where he steeped himself in some of the most bleeding-edge media and marketing technologies and played a direct role in developing some of the most disruptive ones before incubating a new unit within Interpublic to focus on transforming a largely overlooked sector: so-called “shopper media.” The new unit, dubbed Shopper Sciences, set out to leverage as much information and technology as possible to find new ways of closing the loop between brands and consumers in retail environments -- either online or in physical locations.

Among the technologies developed by Shopper Science while Ross was running it was an application of a new form of neuroscience that used cameras positioned on store shelves that could read biometric signals on the faces of people looking at products on display to determine what their emotional and cognitive state might be -- were they happy, sad, angry, confused, curious -- so Shopper Sciences could figure out strategies for leveraging it. The innovations developed by Ross during his reign at Shopper Sciences led MediaPost to pick it as our first and only Shopper Marketing Agency of the Year in 2010. Then at the height of his career, Ross seemed to suddenly disappear, except for a small footnote in trade press articles in the summer of 2012 that he had left Interpublic to join Inmar, causing those who had been following him to scratch their heads and say, “What’s Inmar?”

Two years later, Ross invited me to Winston-Salem to show me exactly what it was, why he left one of the ad industry’s highest-profile jobs, and how it could change everything you think about consumer marketing. That Ross even wanted a journalist to hear Inmar’s story is telling, because the company trades in some of the most sensitive consumer information in the world. Marketers spend roughly $1 trillion a year trying to persuade consumers to consider, purchase and continue buying their brands. Roughly half of that is spent on media designed to get their attention: advertising, social media, content marketing, etc. The other half is spent essentially giving them cash in the form of consumer promotions, mainly coupons and discount offers transacted at retail or online. Inmar is the company that processes most of that.

As such, it handles a level of data as sensitive as any of Wall Street’s financial exchanges, literally. When brand marketers or retailers issue a coupon to consumers, those companies have to treat it as a cash liability until it is processed or expires. The information is extremely sensitive, because Inmar isn’t just a clearinghouse for financial transactions, but also gets to see the data on all sides of the equation: the brand, the retailer and the consumer. The ability to triangulate financial-grade data among those three stakeholders gives Inmar a unique vantage point. It also requires incredible security to ensure that proprietary data is protected on all sides. Inmar’s computers process transactions for competing brands, competing retailers, as well as consumers at a time when marketers are under intense scrutiny from regulators and advocacy groups to ensure consumers’ data and identities are protected.

Despite that, Inmar wants to shed as much light as possible on that data in an effort to create new transparency, efficiency -- and perhaps most importantly -- new benefits for consumers that wouldn’t otherwise be possible without the ability to connect all those dots.

That transparency is evident everywhere you walk in Inmar’s headquarters, a LEED-certified building that emphasizes open air design, glass, and natural light illuminating everything. One of the most ironic things about the building is its heritage. Before being redesigned as Inmar’s new offices, they were part of the RJ Reynolds Tobacco Companies tobacco processing facilities, buildings that arguably contributed to more manmade disease than any on the planet. Ross and his boss, Inmar Chairman and CEO L. David Mounts, are on a mission to use Inmar’s facilities to leverage data that can make people happier and healthier.

Mounts is not a data geek, per se, but understands the power of leveraging it better than most corporate leaders. Mounts, who began his career managing supply chain logistics for UPS, was part of a team that created a data processing system the courier service could use to more effectively track its delivery of parcels. He also figured out that could provide a direct end-user benefit, by enabling UPS customers -- businesses small and large, and even individual consumers -- to track exactly where their parcels were and when they could expect delivery of them. It was probably one of the most important early examples of a marketer sharing data with consumers to create greater transparency and form bonds of trust and confidence that transcended the actual service itself.

When Mounts left UPS to oversee logistics for another giant consumer brand, Domino’s Pizza, he took that concept and worked with the team that created a “pizza tracker” application enabling consumers to know exactly where their order is and when it would arrive at their doorstep. Mounts joined Inmar in the spring of 2010, but it wasn’t until Ross joined as president two years later that they started formulating a plan to begin leveraging their unique role as the transactional center point between consumers, brands and retailers to create new customer benefits.

How Ross ended up in that role is also a little ironic. Originally, he took a trip to Inmar as part of a scouting mission, thinking it might be an interesting asset for Interpublic to acquire and/or partner with. Given his background as a retailer and his years developing data, technology and Shopper Sciences, Ross inherently understood the power of the data Inmar sits on, but it wasn’t until he met with Mounts that he decided the best way to leverage it would be from within.

After halting near Inmar’s pharmacy data processing facility, my tour with Ross continued on to another part of Inmar’s headquarters that ironically also had a top secret past. The room, which is now Inmar’s main conference room, used to be RJ Reynold’s blending room, where the tobacco company’s craftsmen plied their trade secrets. Today, Inmar uses it to blend something even more powerful: consumer data. In that room, we met with Inmar’s top data scientists responsible for turning the transactional data the company processes into consumer insights. One of the members of the team, Jim Deffenbaugh, was previously a top data and analytics executive at Equifax, one of the Big 3 credit bureaus that determine consumer credit ratings, and since joining Inmar he has been focused on creating mass marketing’s equivalent of FICO scores for every product category processed by Inmar.

The scoring system, known simply as Score, is to consumer and retail marketers what credit scores are to financial marketers, essentially determining the worthiness of a consumer to qualify for and likelihood to respond to a brand’s or retailer’s promotional offer. According to Deffenbaugh, Score can determine the precise value a consumer has for a brand and the amount of value a brand would need to provide a consumer in order to get them to try, switch or continue buying that brand over time. Deffenbaugh told me Inmar has Scores for almost every American that has redeemed a coupon for almost every category that uses coupons. And while it doesn’t reveal the identities of individual consumers, it can target offers to them with scientific precision.

While Inmar maintains firewalls between consumers, brands and retailers -- and especially among competing brands and competing retailers -- it knows everything about every thing each one of those stakeholders transacts with each other, and it is using the data to find new ways to make those transactions smarter, better and more meaningful for each of them.

In other words, Inmar can tell a consumer packaged goods brand how much of an offer it will take to win a consumer’s purchase, and even at what amount that brand should walk away from the consumer because it will only generate diminishing returns over time.

Most of the data applied to date has been used to improve the efficiency and effectiveness of brands and retailers at winning share of consumer purchases, but Ross and Mounts are in the early stages of identifying ways of leveraging the data to improve the lives of consumers directly. One of the categories they believe offers the greatest promise, ironically, involves some of the most sensitive data Inmar processes: prescription drug co-pays.

The transaction data processed by Inmar is so detailed the company can know if a consumer is complying with their medical treatment, because it knows when they are filling their prescription drugs. But that’s just a start, says Ross, noting that Inmar also has data on each individual’s consumer goods purchases, so it can tell, for example, whether consumers are purchasing food or drink products that might be counterproductive to certain medical treatments. It also would know how and whether to recommend alternative purchases -- ideally healthier ones -- the consumer could make instead. And it can leverage the consumer’s own metadata to inform them about it.

During his time at Interpublic’s lab, Ross spent a lot of time researching and testing so-called “quantified self” technologies and platforms -- wearable biometric devices like Fitbit, Jawbone and Nike Fuelband that help inform consumers about their physical fitness, their caloric intake and output. Now he is looking to leverage their own consumer purchasing data to make them smarter, healthier happier people via new form of quantified self: your quantified consumer self.

“We have the data and we’re just starting to understand how to apply it,” says Ross, adding that initial testing indicates that when it is used to incentify consumers to make healthier choices they are more than likely to comply.

“It turns out that if you reward people for eating healthier and you make it cheaper for them to make better choices, amazing things happen,” he explains. “But most of the spending in our industry goes behind products that aren’t necessarily the best ones for you: salt, sugar, etc. When was the last time you received a coupon for a banana?”

Ross says Inmar’s consumer database is “approaching the 100 million mark of lives under management right now,” and says the next stage is to begin working with brands, retailers, pharmacies and even directly with health insurance providers and healthcare organizations -- hospitals and even doctors -- to figure out better ways of applying all that data. He says the first program utilizing this data in an organized way for a “major healthcare provider network” will become operational this year. While he couldn’t disclose the name of it, he said Inmar hopes to use the case to convince others to get others involved in the future.

As vital as health data -- including medications, nutrition and other forms of fitness -- may be, Ross and Mounts see the potential to utilize other forms of consumer purchasing data in similar ways.

For a company transacting so much consumer data, the application of consumer data science may seem obvious. But Inmar is also working on research and development that could generate new forms of data and behavior well beyond the traditional coupon redemption.

In fact, Ross has been building his own consumer media and marketing lab inside Inmar’s headquarters. The lab, which sits on the ground floor near the building’s lobby is still in its early stages. It has shelves stocked with marketer and retailer brands, but it’s what’s going on behind the scenes testing promotional incentives that are the most interesting parts of the lab’s R&D.

Currently, about 80% of all consumer promotion redemption is still processed via conventional paper-based coupons, either from Sunday newspaper supplements, or circulars in stores. About 20% is redeemed electronically, often clipped from centralized couponing websites like Coupons.com. But Inmar’s lab is beginning to test what happens when the whole process is made completely frictionless. In other words, what happens when a consumer doesn’t even have to clip or download a coupon -- when the promotional offer is just a seamless part of their consumer shopping experience.

Among the methods Inmar’s lab is testing is one in which promotional offers are simply rung-up at checkout without the consumer having to make any effort. Ross says the research is vital toward understanding the evolution of consumer behavior, because some of Inmar’s research has already detected some significant shifts in consumer behavior and attitudes toward promotional offers when the process moves from clipping coupons to downloading digital coupons.

“It’s shifting from a form of consumer labor -- something the consumer has to do to reap a benefit -- to a sense of entitlement,” says Ross, noting that when promotional incentives make that leap, it may change the very nature of the way consumers think about the role of coupons, discounts, loyalty marketing and every other form of so-called CRM (customer relationship management).

If consumers expect marketers to give them promotional discounts automatically, he says, it could change the original reason brands and retailers began using promotions in the first place: to give a consumer an incentive to try a brand, shop in a store, and continue doing so in the future.