A. C. Nielsen Company
A. C. Nielsen Company
Northbrook, Illinois 60062
Fax: (708) 498-7286
Wholly Owned Subsidiary of The Dun & Bradstreet
Operating Revenues: $1.87 billion
SICs: 8732 Commercial, Economic, Sociological, and Educational Research
A. C. Nielsen Company is the nation’s leading consumer research concern, offering comprehensive information that tracks sales, volume, shares, trends, pricing, promotions, distribution, and inventory levels for corporate clients worldwide. The company is a subsidiary of The Dun & Bradstreet Corporation, the world’s largest supplier of business information and services.
Nielsen’s enormous scope has justified the formation of distinct divisions to optimize the management of the company’s most valuable services. Nielsen Marketing Research, for example, measures consumer response at point-of-sale for suppliers of groceries, drugs, health and beauty aids, and other packaged goods. It also measures and evaluates promotions that influence consumer sales at the retail level. The patronage of 40 of the 50 largest consumer packaged goods companies in the United States have bolstered Nielsen Marketing Research’s position as the world leader in providing these services. The other key division, Nielsen Media Research, provides similar marketing information and services to media-related businesses and advertisers.
The company’s origins date back to 1923, when an engineer by the name of Arthur C. Nielsen borrowed $45,000 to start a business running quality tests and offering buying suggestions on conveyor belts, turbine generators, and other machine-related parts. After that business was nearly bowled over by the Depression, Nielsen shifted to measuring consumer sales. In 1933, Nielsen introduced measurements for drugstore and retail store sales. A year later, similar measurements were introduced for food and department store sales. By going beyond conventional consumer questionnaires and having auditors actually survey store shelves and accounting books to determine sales patterns, Nielsen helped pioneer key market research tools— including the concept of market share in 1935.
While he was pioneering the discipline of marketing research, Nielsen faced the difficult task of drumming up demand for his services. The labor required to gather and tabulate useful data was expensive, and many businesses were skeptical about paying top dollar for data that they thought they could gather almost as effectively themselves. “For years my father would go around and try and explain that his work was worth something. He’d quote the price. And he couldn’t get any takers,” Arthur C. Nielsen Jr. told Barry Stavro of Forbes in 1984. Nielsen recalled that his father’s attempts to sell his services to Kellogg Co. were rebuffed on the grounds that the cereal giant already had its own, cheaper alternative: “a guy stationed outside the gates trying to see how many carloads General Foods shipped out.”
Though sales did not always come easily to the budding leader in marketing research, A. C. Nielsen Company enjoyed continued growth into the 1950s. That decade saw the emergence of new industries in mass media through radio and television—areas that called for new forms of marketing measurement that Nielsen was equipped to provide. Indeed, as early as 1942, Nielsen began measurement of radio audiences on a national scale. In radio’s heyday following World War II, determining radio ratings was a labor-intensive endeavor: listeners would send cards to advertisers, who would actually weigh the mail-bags to determine which shows were most popular. Improving upon this technique, Nielsen attached meters to radios in sample households and, eventually, installed cameras that took pictures of the meter readings. The heads of the households then mailed the pictures in to the rating company on a regular basis. In the 1950s, the advent of television and the need for ever-quicker rating techniques spurred the development of meter readers that Nielsen attached to telephone lines for “overnight” TV ratings. This method saved time over past techniques, but costs were extremely high. Still, the relatively young company persisted, driven by the belief that the TV market would grow—and communications technology along with it—enough to compensate for the high costs of tracking market trends.
Nielsen’s projections were right on the mark, and the rapid growth of television worked to the overwhelming advantage of the marketing research company. By the mid-1980s, more than $19 billion was spent on national TV advertising; Nielsen metered more than 5,500 homes and generated approximately $100 million in revenue from that business segment alone. Encouraged by the continued success of its media rating service, the company established a separate division to manage it. Nielsen Media Research provided television advertisers, advertising agencies, syndicates, cable operators, networks, and stations with TV-rating information to increase the effectiveness of television advertising and programming into the 21st century.
A. C. Nielsen Sr.’s efforts gained momentum in 1945 when his son, A. C. Nielsen Jr., joined the firm, bringing new energy and ideas. The time-consuming tasks of sorting through data cards and doing calculations on slide rules prompted the younger Nielsen to consider emerging computer technology as a way to reduce the time and costs involved in managing the data so crucial to their business. In 1952, the company acquired one of the first computers manufactured by IBM. Although it was unwieldy in size and function compared to later models, it nonetheless marked a milestone in efficiency. Nielsen Jr. also helped implement a training program that allowed the company to disseminate its expertise in cutting-edge marketing research tools to its growing employee base.
Such technological and administrative advances helped position A. C. Nielsen Company for decades of growth and diversification. From the 1960s through the 1980s, the company developed new information-management systems and attracted a broader client base. In 1963, Nielsen introduced measurement of sales at mass merchandisers, providing a bulk of consumer-related information that would have been virtually unmanageable just a decade earlier. Three years later, a system of warehouse withdrawal reporting was introduced. In addition, the company established a coupon clearinghouse segment that would top $91 million in volume by the mid-1980s, with no sign of slowing down.
A momentous advancement for Nielsen was the development of scanning technology, which allowed the company to collect accurate and instantaneous data on consumer purchases as they occurred. Scanning of universal product codes at retail stores was introduced in 1977. By 1979, Nielsen offered local SCAN-TRACK service, which gave clients proprietary means of tracking specific market trends and producing custom reports to develop better marketing and distribution plans. A year later, such services were available on the national level. Scanning technology and data processing software continued to improve, and by the mid-1990s Nielsen considered retail scanning information “the nerve center of the changes now underway,” according to the company’s promotional literature. “Not only do scanning databases bring a speed and precision never previously possible, they also provide the foundation for a range of diagnostic and analytical applications which can help clients find and implement solutions that grow their revenues and minimize the cost of delivering their products to their consumers.” In 1993, Nielsen became the first in the industry to offer scanning-based information from warehouse clubs with the introduction of the Nielsen Warehouse Club Service.
Nielsen’s unparalleled status as a marketing research leader drew the attention of The Dun & Bradstreet Corporation, and Arthur C. Nielsen Jr. sold A. C. Nielsen Company to the financial data giant for $1.3 billion in stock, a remarkable 26 times earnings, in May 1984. In fact, the two companies had been considering such a merger for over 15 years, as Nielsen Jr. and Harrington Drake, chairman and chief executive officer of Dun & Bradstreet, told the New York Times. “We both have the ability to collect a lot of data and deliver it efficiently to clients,” Nielsen Jr. explained. “I’m sure Nielsen will take advantage of our technology as well as our data bases,” Drake added.
With the backing of its powerful parent, Nielsen continued to grow rapidly, entering several alliances and introducing new products in the late 1980s. In June 1987, Nielsen Marketing Research and The NPD Group signed a contract to establish electronic household panel services through a joint venture, NPD/Nielsen Inc. The venture had three main objectives: to measure all marketing stimuli received by sample households, including TV commercials and product purchases; to measure consumer response to promotions at the local market level; and to provide profiles by product category and brand by integrating facts from store, retail-promotion, TV-commercial, coupon distribution, and household databases. The scope of the project was enormous, offering detail and complexity unprecedented in the marketing research industry. By 1991—just three years after its inception—the National Electronic Household Panel announced coverage of 40,000 homes.
Nielsen also formed other key alliances. In August 1987, Dun & Bradstreet acquired Information Resources Inc. (IRI), bringing the market research “wonderkid” together with its rival, Nielsen. IRI’s flagship product, BehaviorScan, provided a highly effective method for analyzing the effectiveness of TV commercials. Under the auspices of the same parent, IRI and Nielsen were freed from the “upward battle” of head-on competition and were better positioned to focus on new product development, according to David Snyder in Grain’s Chicago Business. A similar collaboration of formerly competitive forces occurred in 1988, when Nielsen acquired Logistics Data Systems, the market leader whose software product, SPACEMAN, helped retailers profitably manage shelf space and display areas.
Capitalizing on new developments in networking, information modeling, and forecasting, Nielsen was able to introduce a wave of new products in the early 1990s. The company’s decision-support and software services enabled customers to retrieve data and analyze information via terminals and personal computers installed in their offices. Such information was accessible in a number of ways, including on-line connection to mainframes or permanent downloading of information into customers’ in-house information systems. In 1990 alone, new product introductions included: a national Convenience Store Service representing all major U.S. chains; the SCANTRACK Food/Drug Combo Retail Outlet Service, representing all major U.S. chains; the Discount Drug Service for health and beauty aids (HBA) customers; Wealth Wise, a modeling tool for consumer-oriented financial services firms; and ScorePlus, which provided demographic and product-use data applicable to specific trading areas.
New product introductions kept pace with rapid growth in demand, as ever more powerful computer processing systems were made available to Nielsen’s customer base. In 1991, the company introduced Spotlight, a system that enabled users to locate and account for volume and share changes for given brands. That system would win an award for outstanding artificial intelligence application from the American Association for Artificial Intelligence in 1992. Other products introduced that year included: Nielsen Sales Advisor, SCANTRACK Category Manager, and ScanQuick. In addition, PROCISION provided a single source for tracking all components of HBA marketing, and the Nielsen Workstation provided Windows-based support for marketers. In 1993, the company introduced Nielsen Opportunity Explorer to help marketing and sales professionals understand category dynamics and pinpoint sales opportunities. Along with Nielsen Promotion Simulator, that product placed first in the software applications category at the Information Industry Association’s Product Achievement Awards in 1993.
Responding to overwhelming demand for its efficiency-related solutions in the consumer packaged goods industry, in 1993 Nielsen created a separate division for Efficient Consumer Response (ECR) and began forging ties within the industry to enhance its capabilities. The key objectives of ECR were to streamline distribution and sales processes, eliminate waste, and deliver product to consumers faster and at a lower cost. One example was the 1993 implementation of a Micro-Marketing system—Nielsen’s Eagle Eye—to help the Anheuser-Busch Company work with its retailers to organize space plans, marketing, and distribution for maximum sales. One retail chain that implemented the system saw an annual potential increase in beer category sales of $3.2 million, according to Nielsen literature.
In a joint effort aimed at ECR implementation around the globe, the company worked together with suppliers and distributors to form the Nielsen Solution Partners program in 1994. The program was designed to align the “best practices” of industry leaders, such as NON-STOP Logistics, a state-of-the-art cross-docking network focused on reducing warehouse inventory and speeding up the delivery process from plants to stores. Into the 21st century, one of Nielsen’s key objectives was to strengthen that partnership and thereby contribute innovative solutions to ECR in general.
Nielsen also continued to increase its global presence, with marketing-information clients in more than 34 countries by the mid-1990s. Indeed, the company’s international reach grew steadily after its first overseas office was opened in England in 1939. By 1991, the company had opened an office in its 28th country, Hungary. In 1993, the company was looking into a subsidiary office in Israel. In April 1994, Nielsen expanded into South Africa through a partnership with Integrated Business Information Services (IBIS), the premier market research company in that country. Serge Olun, president and chief executive officer of A. C. Nielsen, told Business Wire in 1994 that “Nielsen is moving aggressively today to negotiate further partnerships in South America, Africa, Eastern Europe, the Middle East and elsewhere.” He cited plans to increase the company’s coverage to 70 countries worldwide by 1995. In April 1995, the company made significant progress toward achieving that goal when it extended its global coverage to six countries in Central America: Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador, and Panama. Since its origin as a strictly American concern in the 1920s, Nielsen branched out until 70 percent of its business came from outside the United States in the 1990s.
By the mid-1990s, Nielsen asserted its dominance in the marketing information industry by successfully consolidating or winning back 26 consumer packaged goods clients, such as Dole Foods, Tambrands, Johnson & Johnson, Bristol Myers Squibb, and Clairol. It also remained king of the hill in media rating services—especially since its main TV-rating competitor, Arbitron Co., stopped providing local TV ratings at the end of 1993. Nielsen, a company that started as a rating service for conveyor belts, became a global success story by gathering information from an ever-increasing variety of sources and turning it into valuable products.
Nielsen Marketing Research, Nielsen Media Research.
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