Chris Kuenne’s late father, Princeton University professor Robert E. Kuenne, often brought his work home. Talk around the dinner table might be about soccer, but it also might be about ogilopoly theories, how competing rivals interact. As an economist, the senior Kuenne challenged conventional theories with his econometric models of, for instance, how OPEC sets price and production quantity.

His son got it into his head that he could use econometric modeling, but on a micro level, to figure out why different people buy what they buy. Kuenne founded his firm, Rosetta, on that concept: personality-based segmentation. The $150 million interactive agency has just acquired Wishbone, a Manhattan-based full-service pharmaceutical ad agency, bringing the firm up to 725 employees. With 125 workers at the American Metro Center headquarters, Rosetta also has offices in New York, Cleveland, Denver, Boston, Chicago, and Toronto.

“My dad introduced me to intellectual creativity and problem solving,” says Kuenne. “If you have a passion, you can pursue that passion and continue to turn it over in your mind, asking yourself, ‘Is there a better way to do that.’” His advice to would-be entrepreneurs: “When you find that one thing that you are passionate about — explore it, academically or professionally.”

Kuenne’s father died of ALS (Lou Gehrig’s disease) in 2005, but Rosetta was already seven years on its way. “The essence of what he was working on and what we do is very similar,” says Kuenne. “Dad was studying economic systems in theory, and we were studying them in practice.” He sought his father’s advice on a regular basis.

The gist of oligopoly research: “In an oligopoly, the economic systems seek a point of equilibrium, of tacit collaboration to move the oligopoly forward but not put competitors out of business,” says Kuenne. The OPEC nations’ strategy is a good example of this. His father built a series of quantitative models and ran simulations to suggest how a series of rational decisions could be made to keep the system in equilibrium.

Conventional wisdom said the participants would cheat and do anything to advance their best interests. “My father proved that it would be in everyone’s best interest to work in implicitly coordinated fashion, operating carefully to avoid throwing the system out of equilibrium.”

How Rosetta uses it: “We do the opposite. We work to build our client’s business very much at the expense of competition. Consumers have different combinations of needs, attitudes, and behaviors. We use fancy math (a proprietary process and algorithms) to analyze those three dimensions — needs, attitudes, and behaviors — to make the marketing more personally relevant to a brand’s most valuable customers. That is the way we help our clients gain market share.”

Marketing experience and psychology also come into play. “My dad was an incredibly analytical guy, but he was also a humanist who used tools to investigate problems in society that were typically explored on either a qualitative or quantitative level, but never both. We are one of the most analytically based marketing companies, but we combine a human understanding, to make marketing work better.”

The latest acquisition, Wishbone, is devoted to healthcare professionals, while Rosetta focuses on both the consumer and professional side. With major clients that include Baxter, CardioNet, Dey Genzyme, Meda, Novartis, Otsuka, and Pfizer, Wishbone had more than $15 million in revenues last year and grew its business more than 20 percent. Rosetta’s healthcare clients include Allergan, Amgen, Bristol-Myers Squibb, J&J, Medco, Novartis, Otsuka, Shire, and Takeda.

Rosetta has four other vertical markets: finance, consumer and retail, B2B web-based technology, and travel. Clients range from Fidelity and Coach to Nationwide and Joseph A. Bank. With $150 million in revenue in 2009, Rosetta is among the top 10 digital agencies (those that specialize in web-based marketing strategies) in the United States, and the largest one that is privately held. And Kuenne is on a buying spree.

He says Rosetta is inventing a whole new way of doing interactive marketing: “We believe we have the components to reinvent marketing, and we have the capital to expand by a combination of acquisitions and internal growth.”

At the ACG meeting, Kuenne told how Rosetta helped Excedrin, which derived 42 percent of its revenue from 18 percent of the population. Because the pill contains caffeine, it makes the other two ingredients work faster. Rosetta found that its users are “aggressive medicating believers” who want to “nuke” their headaches, and Excedrin does that. “Spend no dollars on the other 82 percent of the market,” he told the brand’s owners, and it worked.

As consumer markets has become increasingly more competitive, marketers have had to focus making their message, product and customer experience more personally relevant to the specific needs, wants and preference of each consumer.

“Over the past 12 years Rosetta has invented, patented and perfected a way to understand what drives consumers to select the brands they do, how they use them and in which outlets they shop and purchase them,” Kuenne says. “For example, what causes Betsy to buy her Coach bag in the store on Palmer Square and Leslie to shop for it on line and then buy it at an outlet store?”

Understanding the answers to these questions and knowing how to apply them is what the firm has done for more than 700 clients, he says.

Kuenne got his start at Johnson & Johnson. Though his father was his hero “in every respect,” his second mentor was Jim Burke, then the chairman of J&J and also his best friend’s father. “Jim Burke became my beacon in terms of the kind of professional career that I wanted to have,” says Kuenne.

Before her retirement, Kuenne’s mother, Janet, had taught at the Hun School. He has one sister, Caroline, who is a lawyer. Kuenne went to the Lawrenceville School, majored in history at Princeton University (Class of 1985), and earned his Harvard MBA. He and his wife, Leslie, formerly a genetic counselor, have three sons, ages 15, 11, and 9.

He was working for a consulting firm in New York when, in 1997, their eldest child, five-year-old Olivia, died in a freak accident. It spurred him to go off on his own in 1998. Together with Procter & Gamble alumnus Kurt Holstein, he set up at the Carnegie Center under the umbrella of a healthcare communications business, Nelson Communications, founded by a former J&J executive.

At first the name was Rosetta Marketing Strategies Group, and Kuenne liked to refer to the Rosetta stone, inscribed in three languages — hieroglyphic, demotic, and Greek. He talked about how scholars used two known languages to decode the third language and compared it to the three components of his personality-based segmentation: needs, attitudes, and behaviors.

In 2000, just before Nelson Communications was bought by the mega-agency Publicis, Kuenne and Holstein bought themselves out. In 2005 Rosetta “moved downstream” to capture more of the business by buying a same-sized company, Simstar, a 12-year-old digital ad agency, pioneering in the digital healthcare space, with 65 employees and $9 million in revenue. Five years later Rosetta has a $61 million healthcare practice.

“Rosetta had been more of a consulting company, and Simstar provided an implementation engine, with programmers, developers, and artists,” says David Reim, co-founder of Simstar. “We created things. We were able to offer the strategy and thinking and also build it.”

Simstar’s venture capitalists had instigated an auction that turned into an Old Boy Network deal. “The bigger companies were looking for a three-year earn-out, but I wanted out,” says Reim, explaining that cofounder Rob Rebak knew Kuenne and Holstein socially. “He brought them to the table. Chris offered cash, backed by a bank. Then it was just the lawyers working things out.”

Kuenne now makes the pessimistic observation, “In today’s economy, borrowing $4 to $5 million on a $20 million company, we could never have done the Simstar deal.”

Reim got his wish, to get out right away and spend time with his five children, ages three to nine. He and his wife, a medical school graduate, bought a shore home with the SimStar profits. After 18 months Reim went back into healthcare consulting and now has a consulting practice, Influence Partners, with such clients as J&J, WPP, and Recording for the Blind and Dyslexic.

Both Simstar and Rosetta were at the Carnegie Center, and Kuenne moved the combined offices to the American Metro Center. Co-founder Rebak stayed for awhile and is now CEO of Marketing Technology Solutions. Brian Lucash, the only senior executive from Simstar who is still at Rosetta, is a senior solution architect.

In 2007 Kuenne found a private equity partner, Manhattan-based Lindsay Goldberg, to fund Rosetta’s buildout. His next acquisition was Cleveland-based Brulant, an interactive marketing agency that partnered with IBM. The Wishbone deal was signed on December 31.

Kuenne claims he is taking market share from four global publicly traded networks: Interpublic Group (IPG), Omnicom, Publicis, and Havas. “We are really focused on becoming the No. 1 interactive agency on the planet,” says Kuenne. “Numbers 1 and 2 (Digitas and Razorfish) were recently acquired by Publicis. We are growing faster and are more profitable than they. While we are smaller than those two companies today, we are on a trajectory — we grew by 35 percent in 2008 and they grew eight percent. Our profitability is 70 percent higher than the industry average.”

Timing helped Rosetta. The dotcom bubble had come and gone when Rosetta was starting up. So it had time to reinvent itself and ride the next wave. Other, more purposeful success strategies:

#b#Focus on one great idea but keep innovative products in the pipeline.

Focus on the right industries and serve the right marquee clients.#/b# Brand managers in those firms are very competitive. “You sell to one, in a company like J&J, and the rest get on the bandwagon.”

#b#Obsess over quality and client impact.

Hire the smartest people#/b#: “It is absolutely about raw intellect and raw drive,” says Kuenne. “Headhunters call this the best athlete recruiting strategy. Don’t look for a running back but for the best athlete, and form a team.” Rosetta hires 100 to 150 people a year, mostly through its 15-person internal recruiting team.

#b#Invest time in the staff#/b#: “We have a rigorous measurement process, with five cornerstones, each with eight dimensions. We rack and stack everyone in the company. It takes an enormous amount of time, but you can’t spend too much time on selecting and developing people.”

#b#Encourage ethnic, geographical, and religious diversity#/b#. Kuenne told Inc. magazine that diversity is the natural result of a painstaking hiring process designed to find people “who are really, really smart and really, really driven. We have serious jocks around here and we have serious bookworms. We have skeptics and optimists. We have introverts and extroverts. But what makes a fit is the ambition and drive to change the game.”

#b#Run like a publicly held company from the beginning#/b#. Have a major law firm, major accounting firm “and grow into them.”

#b#Choose your private equity firm carefully#/b#. Lindsay Goldberg has a hands off attitude about running the business but many private firms have a board member in your industry whose dream is to be the defacto CEO. “And, man, I didn’t want that,” says Kuenne.

#b#Use the downturn to shore up your infrastructure#/b#. Just after Rosetta bought Brulant came the recession of 2009. “If both businesses had been growing that year, we would not have done the hard work of integration.” Rosetta promoted 61 people and hired 75 people. It retained 95 percent of its clients that year and won 18 new clients.

Kuenne’s father, Robert, died in 2005 at the age of 81, four months after being diagnosed with Lou Gehrig’s disease.

Just before the telephone interview, Kuenne had been in a meeting with IBM where he introduced some of his father’s principles. “Rosetta is part of an ecosystem of IBM partners who sell and install IBM’s E-commerce software. In this ecosystem, we are the largest player. Competition within the ecosystem can be rough as we are all jockeying for position to win new clients. Based on my dad’s theory of ‘rivalrous consonance’ (while rivals in an economic system are pursuing market share gain, they should also be mindful of maintaining equilibrium), I suggested to IBM that we create a community of all implementers of their software. The community would meet regularly to create a more stable cohesion.”

“I like to have a personal relationship with my competitors because it is more likely to make them personally accountable for their competitive behaviors.”

By bizarre coincidence, his father had met Gehrig outside the ballpark in St. Louis, and when the baseball star signed autographs for other kids crowded around him, the then-teenage Kuenne declined one for himself. “That was typical of my dad, who never conformed to the traditional path. And it represents a sort of Dickensian cycle, that he would meet the man whose disease he would die from 67 years later, a spiritual cycle of elegance and grace.”

Kuenne says his father, who at 6-feet-4 towered over him, declined to be consumed by his disease. “Dad’s internal strength and grit, which was just extraordinary, made him physically, emotionally, and intellectually strong right to the end,” he says. “Through dad’s sheer determination, he forced his body to function despite the ravaging damage of ALS. And then he decided he was done. He was not bedridden. He just died one night.”

“He was an intellectual giant, a humanist, a phenomenal role model. Being the dad of three boys is so much easier because I had the handbook engraved in my mind. He was my hero in every respect. He taught me that an idea is just not enough; you have to work it, develop it and ultimately master it, for it to have relevance in the world. Dad’s ideas found their way into the 18 books and 200 articles that he authored. My ideas have found their way into the marketplace through helping to invent a new approach to marketing.”

Rosetta, 100 American Metro Boulevard, Suite 201, Hamilton 08619; 609-689-6100; fax, 609-631-0184. Christopher B. Kuenne, president. Home page: www.rosettamarketing.com.

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