Kevin Roberts has been CEO Worldwide of Saatchi & Saatchi since 1997, and in the space of 11 years has cemented the ad agency’s reputation as one of the most successful and creative companies in the industry. Among Saatchi & Saatchi’s clients are Procter & Gamble, General Mills, Novartis, Toyota, JC Penney and the New York State Department of Economic Development. Roberts, who travels the world for the New York based company, is perhaps most well known for an idea he came up with called “lovemarks” — which means creating a brand for which the consumer has “loyalty beyond reason.” Before joining Saatchi & Saatchi, Roberts worked for Mary Quant Cosmetics, Gillette, Procter & Gamble and Pepsi-Cola. During a visit to campus last week, he spoke with Knowledge at Wharton about “lovemarks” and other advertising initiatives.

In addition, Roberts gave a presentation as part of the Wharton Leadership Lecture series, during which he talked about the skills needed to be a successful marketer, what consumers really want, the importance of failure, his own personal management style, and the need to have a dream.

An edited transcript of the Knowledge at Wharton interview follows.

Knowledge at Wharton: Can you tell us a little bit more about your “lovemark” idea and why it’s been such a hit?

Roberts: It started about eight, nine years ago when I was growing very concerned that mass marketing and commodification were going to put companies like mine out of business. I thought that brands were getting strangled by assistant brand managers, by promotion budgets and by retailers. So I started to think about what the future beyond brands was. I had a conversation with a guy called Alan Webber, who at the time was the editor of Fast Company, when Fast Company was very hot. Alan said, “It’s time we did have some new thinking of brands; what do you have?” I said, “I think it’s all about trust.” You may recall that the literature was based very much on respect and trust about a decade ago. And he said, “That’s not very exciting and it’s not very Fast Company. It’s [more like] BusinessWeek. We really want to be on the leading edge, not behind it. Go and think again.” 

I went home pretty disconsolate, you know despondent. When you’re in the ideas business and people stomp on your ideas, it’s not a great night. I live in Tribeca in New York and my wife is in New Zealand — they are kind of a long way apart. So, I was there unloved, my wife wasn’t there and Alan didn’t like my idea. I opened up a couple of bottles of red wine and was doodling around, as you do at 2:30 in the morning…. I started to draw a little heart, okay? And then I saw heart, marks and then love marks… I thought, I’ve got it; this is so simple. What’s the deepest emotion of all?

I called up Alan and said, “Man, you’ve got to come back.” He wrote a cover story about three weeks later on “lovemarks” and that’s how it was born. It was then tested. We proved it, we researched it, we figured it out, we kind of backfilled all of the data into the concept…. We found out that yes, indeed, there was an incredible yearning for an emotional connection from consumers. And about that time, a lot of the thinking moved to emotional marketing. So, “lovemarks” was born really out of desperation and fear.

Knowledge at Wharton: You have said in the past that one of the most successful examples of this is Michael Jordan, whom Nike hired for their company. People just established this incredible emotional connection with him. Somehow, the company was able to start selling $70 shoes for $200. He was a phenomenal success — but then he retired. What happens when your “lovemark” brand or your “lovemark” representative retires, or goes into drug rehab, or whatever? How do you keep that momentum up?

Roberts: You’ve got to be authentic, right? And, I think that Nike had a very authentic position. They started life as a product … which was very innovative when it was introduced out of the University of Oregon. It was a ‘waffle soled’ shoe that had a benefit, an attribute and it was lighter. It actually helped you perform better.

So, it started life classically as a product, and then when Phil Knight really got his juices flowing, he turned it into a massively successful brand with all of the brand iconography that we’re all familiar with: The Swoosh, the Just Do It idea …. and the kind of advertising approach that they [implemented]. It took Jordan to move Nike from being irreplaceable to becoming irresistible. This is because Jordan gave it aspiration, he gave it emotional connectivity.

The whole idea was that “If you wear Nikes you can be like Mike,” which was a very aspirational thing for many people. That’s how the “lovemark”started for Nike. And, of course the only purpose to create a “lovemark” is to charge a premium. Brands were invented to charge premiums…. Jordan went from $70 sneakers, as you’ve said, to selling $200 Nike Air Jordans. Then, what happened? Two things, Jordan retired and there was the sweatshop crisis.

It’s very hard to love a company or a brand that is seen to be, or is perceived to be, exploiting other humans. That’s a really tough thing. Knight and the company then took a look at that and said, “Whoa, we have to go back to our roots.” So, what did Nike do? They went more and more local. They sponsor every local college team, every local soccer team and every local athlete. They’ve continued with their heroes, Lance Armstrong, for example. But they moved right back into local grassroots. They also addressed their sweat shop issue by a) coming clean; and b) fixing it.

Love is something, as it is in real life, that you can win and that you can lose. It’s certainly something that you have to earn every day and you can’t take it for granted. You’ve really got to get deep into the grassroots of your consumer. “Lovemarks” is different from other brands in one other key way; brands are run by brand managers and by companies, okay? And the biggest problem in business today is persuading companies to give up control, because we’ve seen the power shift. When I grew up, brands had the power. When I was at Gillette or Procter & Gamble, man, when I walked into a store with Tide or Crest…

Knowledge at Wharton: You were the king.

Roberts: I was the king. And then we saw the rise and rise of Wal-Mart, the world’s biggest company. And we saw the private label and we saw the price guys and we saw Tesco in the UK … and we saw the power switch from brands to retailers. That power is now gone forever. Wal-Mart has as little power, as you can see, from recent events, as Procter & Gamble — as little or as much. The power has now switched to the consumer. The consumer is boss. And the consumer really will not be talked to or controlled. She’s in control. So, what we have to do is to give up control. Nike had a hard time doing that. Now they’ve been able to do it. They’ve been able to welcome the bloggers, they’ve been able to welcome the interactivity. So people are falling in love again.

Knowledge at Wharton: What companies, besides Nike, have been able to establish this connection?

Roberts: “Lovemarks” are very personal, right? They’re personal to me and to you. I mean the brands that I love may not be the brands that you love. Steve Jobs at Apple would be a classic example. You can buy any MP3 Player in the world that is cheaper than an iPod — and you wouldn’t dream of doing that, right? This is because you’re in love with the iPod. It has a 75% share, it’s tripledthe profits of the company and it’s allowed Jobs to restage the music industry.

There are three things that we think make a “lovemark” — mystery, sensuality and intimacy, words that are never used in an MBA program. These words are at the heart of today’s consumer choice. Unilever doesn’t use them very much, but you can see with Dove that they are starting to understand that intimacy. P&G, with Pampers, they are starting the whole sensuality area. Even with Tide, they’ve now got smell and all of this kind of stuff, really deep into the brand. It’s those three words – and Apple really drips with that.

Knowledge at Wharton: Toyota has had a recent ad campaign on YouTube — and actually the creative people were from Saatchi and Saatchi LA. What does that say about how big companies are now using social networking sites to promote their products, and is this going to change the way that you work with companies?

Roberts: The consumer is boss, so we shouldn’t really be thinking about companies any more, or brands any more — you are spot on. Companies like mine have to recalibrate away from being brand centric, or company centric, or client centric, or service centric — and be consumer centric. Yoshi Suzuka, who ran Toyota for a decade, said to me 10 years ago, “Kevin, you will never know more about cars than Toyota — and we will never know more about the people who buy them than Saatchi & Saatchi.”

Companies like us now have to become very, very close to consumers. That’s complex because every consumer is different. So the whole mass reach and scale thing is gone. It’s complex because information and knowledge are now pure and simple table stakes. You will send the MBAs out of here. They will be fully equipped with information. They will be very knowledgeable about how to use it. Harvard will do the same, Stanford will do the same … they will focus very hard on information and knowledge.

What will win in our world is using those vital table stakes quickly, but then developing insight and foresight. You can’t get insight and foresight from data and from analysis. If you want to know a hell of a lot about lions, you better go to the jungle and not to the zoo. So, you’ve got to figure out how you can empathetically have the insight into consumer behavior and then have the creative foresight to do something about that before the competition. Jobs and his folks are very empathetic.

Knowledge at Wharton: I remember you also noted recently that while other people [claim] that television and newspapers are dead, that actually television is the most important medium and will be the most important medium for the next 20 years because: a) people have them; including people abroad and b) people know how to use them.

Roberts: I know it’s pretty important.

Knowledge at Wharton: You’ve also said that stores are the second most important medium, the actual going-into-stores shopping experience as opposed to online shopping. Do you still feel that way?

Roberts:  Yeah, I feel that we live, first of all, in the screen age, right? And, I’ve written a book called Sisomo — which is about sight, sound and motion. None of us now, are ever, ever, ever, more than a few inches away from a screen because we all carry the mobile phone in our pocket, we all have a computer at work or at home, we all have five or six TV screens at home, we have our iPods with us. We’re constantly in a world with a screen. More and more that screen will be, as it is in many cases already, interactive, it will be social, it will be networked and it will be mobile.

So, the screen is going to be the first place that we all go. TV will be the absolute dominant screen in the world. Just look at China, look at Russia, look at India, look at Brazil, look at Indonesia and look at the way TVs are absolutely going crazy. Even in the U.S., people still spend two and a half hours a day in front of a television screen. And, you’re not going to watch a game of football on a 3×3 inch iPod; you’re going to watch it on a 40-inch high tech, high digital TV screen, right?

The way that you watch it will differ because you will want to have control, you will want to be interactive and you will want to be working with the screen. So, the screen is vital for all of us and it’s a great communications medium because you can hear it, you can see it, you can touch it and you can interact with it. You should be able to smell it, but you can’t yet — but you can on some sites.

And then, 85% of decisions are made in a store. That store can be an online store or it can be a physical store — but that’s where the decision making [takes place] today because we live in a world where pretty much all products are parity, right? All products do as billed. Anti-dandruff shampoos get rid of dandruff. Moisturizers help make your skin soft. Beer tastes good, you know? The differences that used to be in quality and price — they’re not there any more. And so there’s going to be an emotional connection for you that will make you select one shampoo versus another — 85% of the time that decision takes place in the store, in less than three seconds, boom.

Most store experiences are revolting, just terrible, particularly supermarkets, right?

The idea now is [instead of] just focusing on a 60-second, 30-second TV spot, to start with an idea, start with a consumer and start in a store because if we can turn that store into a theater of dreams…. The biggest thing that Apple did was that they stopped relying on Best Buy and Wal-Mart and they opened their own store — where the experience became an Apple experience.

Knowledge at Wharton: But how can you do that in a supermarket?

Roberts: At the moment, it’s all set up by product category instead of by consumer experience. When you are in the cold season, there are about 116 products that you need if you think you’re going to get a cold. Well, they’re never merchandised together. In fact, there are just 87 cough medicines up. We’re trying to bore the consumer into submission. [Laughter]

Knowledge at Wharton: Okay. We’re going to switch gears here. Is this truth or legend: that when you were the CEO of Pepsi-Cola Canada, during a presentation, you actually had a Coke vending machine brought onto the stage and you took out a machine gun and blasted away at it.

Roberts: And I hit it.

Knowledge at Wharton: And you hit it.

Roberts: That’s an important part of that story.

Knowledge at Wharton: I’m assuming they were blanks and I’m assuming that there no one was seriously hurt. And, I’m assuming that you made a business decision when you did that. 

Roberts: I wasn’t just pissed and trying to blast a coke vending machine out.

Knowledge at Wharton: Yes, but the other question related to this that I know such a move must have totally energized your audience, which included employees, and it must have energized you. How do you keep that “pumped up” energy that you need for the kind of job that you have?

Roberts: Let’s start with the truth behind the story. The story is true. I was the CEO in Canada. We were number two to Coke and we’d been number two to Coke for 105 years. And we were, [according to] Nielsen, at about .5 of a point behind them during that period. I figured if we could take our guys over the edge, we could get leadership.

At the time, NAFTA [North American Free Trade Agreement] was the big, big thing. The Canadians were very frightened of it, because they thought that they would be swallowed by America, because American has scale and blah, blah, blah…. A guy called Brian Mulroney at the time was the Prime Minister of Canada and had asked me to speak at some [event]. He was very pro free trade, and I was very pro free trade. He had asked me to speak at this big black tie dinner in Toronto. I said yes I would.

We had the TV cameras there because Mulroney was giving a speech in support of free trade. I was opening the [event]. So I brought in a load of our big retail customers, all of whom were very worried about free trade…. Plus, we had a load of our customers there and we had a lot of key Pepsi people there.

I made the point in my speech that competition was the way to go, and that in this kind of free trade battle, Canada would become stronger because we were fast, we were flexible, we could move quicker and all of this kind of stuff — and that we would be made better by the American competitors. They would lift our game, etc. etc. I talked about how Pepsi in Canada was a company driven by all local bottlers and local entrepreneurs, whereas Coke was owned by the U.S. Company.

And, I said “Here we are and here is what’s going to happen to us … and we’re going to go, with all of my Canadian Vancouver bottlers and Quebec bottlers… we’re going to go past them man, I’m telling you.” And at that time, I opened the theatre curtains and brought out a big Coca-Cola vending machine. I bent down and put on safety goggles, picked up a machine gun and blew the thing into pieces.

Everybody hit the deck. We, of course, told the Royal Canadian Mountain Police, so that they didn’t shoot me, because I was kind of nervous. I would never have done it in Detroit or anything like that. And, yes they were blanks. I had the vending machine lit up electronically and so all I had to do was hit it with a rubber bullet and the explosives were inside.

Of course, what had happened over the next three weeks was that the media was all over this thing, it was shot across every piece of television and it was always with the line, “Here’s Pepsi – going to go past Coke.” Every call that my sales guys made started off with “You work for that crazy guy who shot up the machine.” It was an instant success and we went past them. It was just that momentum of theater that tipped them over the edge. 

And I think, “How do you keep yourself going?” if you’re in a creative industry. I’m in the ideas business, right? We live in the age of the idea. Wharton is in the ideas business; you’re in the innovation business. Without that you die. I’m in the same business. It’s pretty exciting. I’m not into process or routine or bureaucracy — or what went before. It’s all about getting to the future first. So if you can’t get excited…. you know I’m surrounded by 5,000 creative people and you can never get those eagles to fly in formation — so you better enjoy it.

Knowledge at Wharton: I also read that one of your favorite jobs, before the current job that you have now, was as a brand manager for P&G in the 1970s. What was so special about that?

Roberts: Learning. You know, I was kicked out of school when I was 17, so I wasn’t able to do an MBA at Wharton. At the age of 25, I realized that my peers were simply smarter than me. I was faster, tougher, more aggressive, whatever else — but they were smarter. And in the end, you can have as much EQ as you want, but if you’ve got an IQ gap, it’s not going to be very helpful — I better fill that gap.

At the time, I was working for the Gillette Company, and P&G never, ever hired from other companies. I persuaded them that with me, because I was still only 25, they should make an exception. So, they started me … as the lowest assistant on the totem poll. I worked there for seven or eight years. I must have learned 30 things a day. And, everything that I now know about marketing [pretty much] happened then. 

Knowledge at Wharton: When you went to Saatchi & Saatchi in 1997, I understand that you were brought in to kind of revive a flagging company with bad morale, etc. You were expected to bring in a whole new team of people. But, you made a conscious decision not to let any of the old team go for two years. That’s kind of counter intuitive to what we hear when they bring in new CEOs. They rush in and bring in their own team, they get rid of all the ‘dead wood’ that they perceive is there. Why did you make that decision and did it work?

Roberts: I never worked in advertising before. I didn’t really know much about advertising. So I thought that it would be better if I went with the people who did know about advertising. I had no idea how an advertising agency worked because I only worked on the other side. I also think that zigging when others zag is kind of where I’d like to start. The very fact that everybody did it the other way around made me think, “Well that usually doesn’t work, so let me think about it another way.”

I met the people in the first three days and I thought, “They’re okay.” All that you are suffering from is a leadership vacuum, you don’t have a purpose, you don’t have a dream, you don’t have a framework, you’ve been let down by the two Saatchi brothers who led the company, in typical style, from a great entrepreneurial company to the biggest in the world and couldn’t keep up.

So then it collapsed financially, not functionally, and everybody’s morale was battered. But from a capability point of view, I thought that they were all still the top talent. And, we’ve grown in our business, 11 years out of 11 … and we areone of the top three in the world creatively. We’ve gotten rid of the $2 billion debt and we didn’t go into bankruptcy, which is where we were heading.

Knowledge at Wharton: What’s the best ad campaign you’ve ever seen?

Roberts: I think it was for [an Australian beer called] Castlemaine 4-X. We have four because everything in Australia is bigger — it’s a bit like Texas — and so we had four. The campaign was run to launch the Aussie lager in the UK. The campaign line was, “Aussie’s don’t give a XXXX for any other lager,” and every execution was around that. It was absolutely dynamic.

Knowledge at Wharton: One final question: You were born in England, you live in Tribeca in New York, but actually your family — your wife and children — are in New Zealand, where your home is. Why New Zealand?

Roberts: I went there in 1989, headhunted to run what was then the biggest company in New Zealand. Two companies had merged together: Lion, which was a big brewer and soft drink manufacturer, and Nathan, a big retailer that was the equivalent of Target and Woolworth’s and those franchises. They put these two companies together and had no idea how to run them or what to do with them once they were merged. They wanted someone with international experience: They knew that the future was outside of New Zealand, because we only have four million people.

And, yes there are 25 million sheep there, so we can move forward on that. This would be good if they had purchasing power, but they don’t. So, there are four million people and the businesses had nothing to do with each other at all. We had to strategically decide how to go offshore, what businesses to keep and which businesses to sell. They wanted someone from outside both companies to sit on top of it.Again, this was not a typical solution. Typically, one guy would have won and one guy would have lost. So, I sat just on the top. And they wanted someone who was not an American; because they felt that an American in New Zealand would probably not understand. I had been working in Canada, I was born in England and they found that culture closer to New Zealand.

Knowledge at Wharton: But you could have settled your family in any country. You’ve probably been to what, 90 countries in the world? You could have settled in any one.

Roberts: Have you been to New Zealand?

Knowledge at Wharton: No.

Roberts: Well, that would answer the question. It’s paradise. I became a New Zealander within two years. It’s a value driven society, a value driven on egalitarianism — social equality — on environmental issues and on great education for all. I’m from working class England. It was like being transplanted into a place that the upper class hadn’t ruined.

Knowledge at Wharton: Thank you for joining us.

For Kevin Roberts’ Wharton Leadership Lecture presentation, click here.