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Best New Thinking Winner 2010

Changing Audiences

What has this got to do with Account Planning?

In advertising, account planners never do this because advertisers never use their own media, they rent other people’s.  And that is what the media planner is there for.  In direct marketing, sales promotion, internet marketing and relationship marketing account planners get involved in developing the customer and prospect base as a medium in its own right.Dataplanners also cover this area but often wind up functioning as technicians not looking at the whole area holistically. It takes an account planner to take the long view.

The third area has always started arguments.  I now call it medium planning.  It covers the area of direct marketing, relationship marketing and database marketing.  Every brand has an audience of prospects and customers at different distances from the brand.  The communications spend needs to be managed across these people given that their value to the brand varies hugely.  Why don’t media planners do this?  Probably they should – but conventionally a media planner is someone who plans and rents other people’s media rather than the brand they’re actually working on – and while I’m making enemies, my experience has been that data planners tend to function as technicians and don’t usually take a holistic view of this audience which is the source of the brand’s income present and future.

It is critical to do so because of the cost of servicing and promoting the brand to the audience using different communications disciplines.  Planners  need to be adept at business casing to show the cost benefits of communications activity and how to target the different disciplines to extract the maximum return from communications.  Sales promotion and loyalty activity for example can easily overlap increasing promotional costs in real terms for no return.  Worse still it can actually drive up promiscuity among the heaviest users.

In this section I have drawn heavily on Garth Hallberg’s book All Consumers are not Equal one of the most useful outputs of a series of studies commissioned by Ogilvy & Mather Direct Worldwide in the early 90s.  It rests on Pareto’s law more popularly known as the 80/20 rule.   20% of your customers generate 80% of the profits.

The basic matrix of customer value

A few observations to make.

  1. Firstly that the proportion of sales made by existing customers is a lot higher than that of conquest sales and that the first costs a lot less than the second.
  2. Secondly that the total value of the first and ensuing sales makes retained customers a lot more valuable.
  3. Thirdly that the allocation of promotional spend needs careful thought.  Most advertising budges treat all of these people the same.  Which is one reason why clients are taking chunks out of ad budgets and stuffing them below the line to improve the rate of return – whether this is just short term thinking is a subject for debate!

On the lumpiness of target audiences

If you take one thing away from these pages get this – people are not the same.  You cannot define people purely by demographic, or by whether they buy the product [YES/NO] delete as applicable.  Some people are more responsive to communications, some people are responsive to the communications medium itself (hi QVC viewers I know you’re out there), some people are better at storing information, some at passing on communication messages. Mass marketing is OVER! So start to use the discontinuities within your existing audiences to make your communications more effective and more cost effective.

Here’s a quick summary of some types of lumpiness that you need to be aware of.

Heavy/Medium/Light users. The lumpiness means that heavy users tend to know a truckload more than light users.  Part of the problem with seasonal products is that you have to teach everyone how to use them again every year.  I once worked on this with Bisto light users on a so called loyalty programme.

Frequent customers. Club Cards, Air Miles, Loyalty bonuses.  Can we get one thing clear?  Being a frequent customer doesn’t make you a loyal customer (that’s projection and wishful thinking on behalf of the client).  It makes you an experienced customer who is looking for recognition (which may be cheap) or a reward (which won’t be).  Frequent customer are a pain in the butt because they’re so valuable you can’t afford to ignore them but they can be tough to find and tough to service and to keep.  Here’s why.  They use the product so much they have commoditised it in their own minds or they have become expert enough to tweak it to their needs.  So they don’t need a load of brand reassurance.  See loyalty next for some of that.  These people need somehow to be locked in because if you don’t they’ll walk across the street to your competitors.  And watch out with the promotions to frequent customers.  These are addictive for brands and customers.  I’ve known brands take a loss on their £800 spend a year customers because they hadn’t the nerve to stop running promotions to keep ’em sweet. But this is exactly where brand experiences should be allowed to weave their magic because you can afford to treat these people.  But don’t throw money.  Please.

Loyal customers.  The classic typology of a brand loyal customer is someone who is insecure.  And the brand gives them something they don’t have: status, reassurance you name it.  Which means that your loyal customers aren’t necessarily your most valuable customers.

Prospects/Triallists are like adolescents or tourists.  They experience everything intensely.  Look after them and they’ll turn into loyalists.  But treat them the same as anybody else and the results are less certain.  They may survive.  But you’ll be missing a trick.  Remember your first time.  How was it for you?

Brand Rejectors.  Are great because they are polarised.  Like Saul of Tarsus they may be subject to surprising turnarounds if you can afford to stick around long enough to turn them.  Their opposition is emotional and can be overturned if you charm them.  Chances are that the brands they are with won’t be looking after them as well as you will be if you specifically ask them why they don’t like the brand and what needs to change.  Have you ever wondered why the generation that lived through the last war are now the most enthusiastic buyers of German and Japanese cars?  Hello??

Complainers who have tried your brand and have had a bad experience are your best prospects for loyalists and advocates (promoting the brand through word of mouth).   At least they bothered to let you know.  Look after them and they’ll let everyone else know.

The 20/80 rule

rIs remarkably stable. Garth Hallberg showed this In All Consumers are not Equal. Even Diet Coke gets 80% of it’s profit from only 20% of its customers. Sounds great but of course there’s a catch. How do you identify the top 20% and how stable a group are they? Wherein lies the billion dollar question at the heart of CRM. There are 3 questions you need to be able to sort out in your head.

  • How do I distinguish the top 20% from the rest?
  • How do I treat the top 20%?
  • How do I treat the bottom 80%
  • How often should I make the cut to find my new top 20?

If you want me bring you a presentation on this to present to your department then by all means contact me. If you’ve found this page interesting you may well be interested in BrandAudience where I provide some tools for developing the brand as a medium.

 

 


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