Coming Out of the Shadows
Curtis C. Nelson, CEO of Visible Customer, LLC, meets me on a gloomy afternoon in November, just a few days after auto sales data for October—called by analysts the “most catastrophic” to date in the history of the motor vehicle industry—are released.
General Motors has reported a decline of 45 percent from sales the previous October. Toyota, the world’s largest automaker, is down 23 percent, Ford, 30 percent, and Volvo, owned by Ford, a staggering 52 percent. Even Mercedes, long considered recession proof, is off 25 percent. Other brands have similarly dropped off a cliff: Porsche down 39 percent and Suzuki 47 percent.
In fact, sales have been plummeting for 12 months. Nationally, dealers moved only 838,156 cars and light trucks in October 2008, a decrease of 32 percent from October the year before. The industry has hit a 25-year low and Detroit is on its knees, asking Congress for a bailout.
Visible Customer is a Bloomington-based marketing company that works exclusively with automobile dealers. It’s been around since 2005, but went through a change last summer, when cofounder John Stapleton brought Nelson on as majority investor and CEO.
A large, square man, Nelson is not the slick mogul I had expected. Shoe-polish brown hair; a ruddy, lived-in face; a jaunty polka-dot tie. The only nod to his upbringing is a set of diamond-studded cuff links that he says he wears because his grandfather did. Nelson has been in the public eye since childhood, yet he appears nervous or perhaps just restless. He sits, jiggling one foot, drinking both water and iced tea.
Seated with him at the conference table in his office, I ask: “Why now? Why sink everything you have—your money, your reputation, your name, and your experience—into such a troubled industry?”
Nelson stares at me for a moment.
“Because I’m a firm believer that change brings opportunity.” As he speaks, I can see him relax, foot finally quiet. “When there’s change in the automotive industry, the top three market players shift position. Everything is up for grabs. We’re in that kind of environment now. For our product, there couldn’t be a better time to prove the value of our philosophy and why it works.”
Visible Customer’s product is a package of marketing capabilities and loyalty programs. The company has developed technology that can sort and use data from a dealership’s own database to put out e-mail blasts, direct mail, and recorded voice messages, reaching customers who are prime candidates for precisely the message being sent. It’s the opposite of the carpet bombing and boisterous advertising that auto marketers historically have done. Visible Customer customizes offers to small groups of people—as small as one person—who are the most likely to use and benefit from them.
The idea is to position the dealer as an advocate for customers who is looking after their needs. That will bring more business—and more repeat business—than slashing prices will, Nelson says. No more fire sales to get one-time buyers onto the lot. That’s a losing tactic. Deeply discounted vehicles with no upgrades give dealers an infinitesimally small return. Nelson cites industry research showing that a repeat customer will spend $800 more on a vehicle than a dealer’s first-time buyers will, and that less than 15 percent of first-time buyers will ever return—at least if dealers use traditional marketing.
“Whereas, we can prove that if dealers consistently do right by their customers, they will create a relationship that translates into far greater profitability,” Nelson says. Visible Customer claims to increase the profitability of many of its dealer-customers within a few months of enrolling them, saying that some have had a 5 to 6 percent increase in gross profit margins on new-car sales and a 10 percent increase in gross margin on service sales.
That’s without cheap oil-change deals to bring people in and then pitch a tire rotation to them, and without warranty offers sent to a dealer’s entire list of customers, whether or not their warranty is up.
“Very deeply ingrained in our values at Visible Customer is that we will never send a message to a customer that’s irrelevant,” Nelson says. If customers choose to take advantage of an offer—an extended warranty, a new car purchased on trade-in, a vehicle check-up—he wants them to go away feeling it was a good deal. He adds, “Our goal is to look after the customer in the life cycle of their automobile and purchase.”
If all this sounds familiar—say, like the original Saturn message—that’s because it is. Nelson worked on Saturn’s immensely successful “Different Kind of Car Company” campaign back in the ’90s, when he was an executive at Carlson Marketing. But that was a different time for Nelson, a nearly different life.
His name sounds so common that you might not recognize at first who Curtis Nelson is. You’ve read about him many times before.
Nelson is the eponymous grandson of Curtis Carlson, that legendary Minneapolis businessman who used $55 of borrowed capital to start the Gold Bond Stamp Company, which became the Minnetonka-based Carlson Companies, one of the largest family-held corporations in the United States, with businesses in travel, hospitality, and marketing.
Born in 1964 to Marilyn Carlson Nelson (former CEO and now board chair at Carlson) and her husband, Dr. Glen Nelson (once vice chair at Medtronic), Curt Nelson first made news as a teenager. It was 1980. He was driving home from a dance at the Blake School—upset because he’d just broken up with a girlfriend—when he crashed his parents’ car and was thrown out of the vehicle, then smashed by it as it rolled. His lungs were crushed, his liver perforated. He should have died.
But according to an article Nelson has kept from the Star Tribune, written by columnist Jim Klobuchar, two miracles occurred that night. First, a woman in a nearby house—who later claimed she’d heard nothing, but awoke with a “feeling” that something terrible was happening—called 911 and summoned what turned out to be the only ambulance in the area that traveled with a pneumatic suit that could be used to compress Nelson’s body and keep blood flowing to vital areas: brain, lungs, and heart.
Second, during the few minutes when Nelson lay alone and bleeding in the dark on the road, his own parents drove by. They stopped to investigate what they thought was a random accident and found their son. And Glen Nelson—one of the few people in the state with the clout and connections to assemble a world-class team of surgeons in a matter of hours—ministered to his son.
Nelson had a badly severed artery; doctors worked through the night to fashion a new one from his veins. The operation was successful. But months later, Nelson was back in the hospital and the right lobe of his liver was removed.
“Unfortunately, I went through several times my blood weight that night [of the accident] and needed multiple transfusions and contracted hepatitis C,” Nelson says. “But I didn’t know it; there was no test back then.”
There was a brief period when Nelson struggled with alcoholism, though he is vague about the details. He realized he had a problem while he was young enough, he says, that the damage was minimal. And he got help.
Then, having survived a car accident, two major surgeries, and a bout with the bottle, Nelson headed off to Cornell University and earned a bachelor’s degree in hospitality in 1987. After graduation, he worked for Hyatt and Four Seasons hotels. His ambition was not to go into the family business. His grandfather changed his mind.
“It was only because I was so in awe of what that man did,” Nelson says. “I never intended to go to work for Carlson Companies. But my grandfather and I were very close, and after several years of his prodding me and talking about exponential job growth and philanthropy and family responsibility, I finally said yes.”
Curt Carlson proposed to create an executive position that would put his grandson in charge of increasing synergy across the company’s business units. But Nelson said no.
“I told him I would go in only at the level I would achieve on the outside,” he recalls. “So instead of starting at the VP level, I went to work as the food and beverage director for the Radisson in Alexandria, Virginia, in 1989.”
He moved around the country, working at different Carlson properties, then was named executive vice president of the Country Hospitality Worldwide business (Country Inns & Suites hotels and Country Kitchen restaurants) in 1993, and became its CEO later that same year. He had returned to the Twin Cities and completed an MBA at the University of Minnesota’s Carlson School of Management in the early 1990s. By 1997, he was president and CEO of Carlson Hospitality Worldwide.
Despite his powerful family, Nelson’s life wasn’t easy. Ongoing health issues stemming from hepatitis necessitated an emergency liver transplant in 2000. He developed an addiction to his prescription pain medication after the surgery, a problem he says was brief, ending after he sought treatment.
Despite those challenges, he worked and rose within the family business. He had moved into a house in the shadows of the Carlson Companies towers along Interstate 494 to be close to the office. By March 2003, he was president and COO of the entire corporation.
It was widely expected that he would succeed his mother as CEO. What happened instead was that Nelson left the company abruptly in 2006.
He says now that he resigned to pursue his own independent ventures. But in 2007, Nelson sued Carlson Companies and his mother, in part because the company’s board had removed him from his post as president and COO. Language in his suit indicates that Nelson believed he had been wrongfully denied the CEO spot; he demanded a share of the then nearly $5-billion company.
Documents issued in response from the company and its board—which filed a countersuit against Nelson—describe him as unqualified for the CEO job because of his business judgement, and say that as late as 2006, he had ordered large quantities of controlled substances from online pharmacies using his computer at work, and that he also had ordered a product called Quick Detox, which was advertised as helping users to pass drug tests.
Nelson’s public relations spokesperson says his suit has not been fully settled yet in late January. Asked about the conflict, Nelson answers carefully:
“The truth of the matter is that disagreements in business are always difficult. Disagreements in families are even more difficult. You marry the two, and it was an extremely difficult period. But when I walked away from Carlson, I had the kind of education you could not pay for. And at the end of the day, I’m pleased with who I am and what I’m doing—my ability to contribute.”
What Nelson plans to contribute to the business world is no small thing. Visible Customer is poised to change the way commerce is done in the 21st century, he says, just as Carlson Companies did in the previous one.
“My grandfather is really the patriarch of all this.” Nelson waves around the interior of his office. “His genius was that he created a point of opportunity and built a customer-vendor relationship with that. But what we’re doing here is a further variation on the concept of loyalty. And the opportunity is immense.
“We’re highly committed to auto dealers, but there’s no doubt our philosophies will someday apply to every vertical business,” he continues. Traditional marketing will die out. Only data mining and targeted marketing that builds on precisely what customers need and want—sometimes before they know they need or want it—will succeed.
Transforming commerce is a lofty goal, and even Visible Customer’s goals for 2009 could be a stretch given the state of the auto industry. The company has 51 employees now, but intends to have about 92 by year’s end. It also projects revenues of $57 million for the year, up from $8 million in 2008, when it focused less on selling its services and more on rescaling the business.
Stapleton has launched more than a dozen start-ups over the past 30 years, including Coordinated Management Systems, a data mining and data warehousing business that he says was acquired by A. C. Nielsen in the late 1970s. More recently, from 2003 to 2005, he was CEO of Texas-based Who’s Calling, a firm with technology that enables companies to capture customer data from sales and service calls to increase the effectiveness of their marketing—a concept with similarities to Visible Customer’s. Who’s Calling also had large auto dealership groups among its clients.
Now Visible Customer’s chairman, Stapleton met Nelson when they were both investors in a local data-matching software company called IX Match. When they began talking about Visible Customer together, Stapleton acknowledges that he had some worries.
“I had heard all the stories about Curtis and Carlson, and to be honest, I was concerned when we first got together,” he says. “But he has a sense of process and scaling that in all my career I’ve never seen. He took a model that we’d proved with about 150 dealers and rebuilt it so it can service thousands.” Visible Customer currently works with 200 dealer-customers. “Curtis is genuinely smart,” Stapleton adds. “He thinks his way through a situation. And he’s brought in a team of people that are world class.”
Those include the company’s chief information officer, Scott Heintzeman, who came from Carlson Companies, and chief operating officer Siamak Masoudi, who has worked with Carlson, Yum Brands, and Lexco Hospitality. Also vital to the company’s growth will be the 10 software developers on staff, who continue to build on Visible Customer’s internally developed and proprietary technology platform.
“One of the things that’s vital—and different—about what we’re doing is we’re in the business of marketing as a science, not as an art,” Nelson says. “We’re not a bunch of people sitting around a table trying to figure out what wild and crazy thing we can do to sell more cars. We’re using hard data to determine exactly which people will respond to specific sales messages.”
Visible Customer’s software might look at several variables—when people purchased their cars, when service is due, the customers’ average number of days between service, whether they have service contracts—to create a target group at the intersection of several subsets, then send a marketing message relevant to only that group. “We rely on science and statistics,” Nelson adds. “And all our results feed back, so the process is more accurate every single time.”
Greg Jensen, chief operating officer of the five-dealership Ballweg Automotive Group based in Middleton, Wisconsin, has been a customer of Visible Customer for about two years. At one of his stores, he says by e-mail, advertising expenses went down 30.5 percent year over year (including his Visible Customer fees), and gross profit stayed level—“meaning in the very challenging market we are in, [Visible Customer] allowed our marketing dollars to work smarter and harder for us, producing great results.” A fourth-quarter auto-service campaign last year with Visible Customer had a 12 percent return on investment according to his own calculations, Jensen adds.
Ballweg pays a monthly fee of approximately $4,000 to Visible Customer (this varies from customer to customer, depending on the scope of services they want), and then pays nothing more to execute individual campaigns. In return, Jensen says, he’s getting the first marketing program he has ever used that relies heavily on e-mail.
“Instead of sending out 36,000 direct mail pieces at whatever a pop, [Visible Customer] will go through our database and find the 6,000 people who are likely to be in the market for a new car,” Jensen says by phone. “Their ability to look into and predict the buying habits of our customers is just phenomenal.”
In the next few months, Visible Customer will roll out a whole new roster of services, opening up more marketing channels for its dealer-customers: customer surveying, live calling, click-to-chat e-mails. Nelson is shooting to take on 500 new customers in 2009. His longer-term goal? To make Visible Customer a $1 billion company in the next 5 to 10 years.
“Over the course of time, we’ll take over the majority of the marketing responsibilities for auto dealers across the country,” Nelson says. “And we can do it. Visible Customer has no direct competitors. Nobody else is coming and attacking this industry the way we are.”