Brand Box 3 - Know Your Consumers - The Marketer's Ultimate Toolkit

- KNOW YOUR CONSUMERS -

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THE MARKETER’S ULTIMATE TOOLKIT

KNOW YOUR CONSUMERS

KNOW YOUR CONSUMERS

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GROWTH

Know Your Business

Brand Architecture Branding

Positioning

Know Your Consumers

Profiling Segmentation

InsightsPricing

Know Your Market

CompetitiveEnvironment

Binary AnalysisPredatory Thinking

What’s the Big Idea?

Launch or NPDInnovation

Communications

How to Say It

Advertising IdeaTone & Messaging

When and Where to Say It

Media StrategyConnection IdeaChannel Planning

AC

TIO

NS

from

I

NS

IGH

TS

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Know your consumers

One of the unfortunate mass market legacies is talking about people as consumers. They’re people first and, if you’re lucky, they might decide to be your customers. They’re not owned by anybody and the digital age has given them the power to rebel and repel on mass the brands which have disrespected them or taken them for granted.

So now we know how important they are, the big question is, who are they? People are becoming more eclectic with their choice, focusing more on personalisation and becoming harder to fit into any box. We’re seeing niche brands do very well (like the Icecreamists) and we’re seeing brands like Facebook, Apple and Google have such mass appeal that targeting becomes almost ridiculous.

For the rest of us left in the middle it’s important to try and understand who we’re trying to talk to and, more importantly, who we’re not trying to talk to. We need to know what makes them tick, what they’re thinking and how they relate to us – this is bundled up into the term “insights”.

The following section tries to get under the skin of your customers and help shape and frame some decisions so you can decide what an ideal customer really looks like.

KnowYour

Consumers

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Consumer powerConsumers have infinite resources and techniques to unearth and expose the fake, the untrue, the phoney and the scripted. This means that inauthentic companies can no longer get away with fakeness

IMPLICATION: 87% of purchases are first researched online*

3rd party unbiased endorsements are considered to be 3 times more credible than paid advertisements

“You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”

“There’s an old Wayne Gretzky quote that I love; ‘I skate to where the puck is going to be, not where it has been.’ And we’ve always tried to do that at Apple. Since the very, very beginning. And we always will.”

INSIGHTSThe fuel for creativity

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INSIGHTS

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Insightvs.

Information

Information is primarily data that comes from observations.

Insights are a perspective on information that means you will never look at the information the same way again – it’s the “meta-information” if you will.

Result: Insights give a deeper understanding, getting you closer to the result you are after. In marketing terms:

Usually... to deliver the most relevant and persuasive message to your customers or simply... to better understand their needs, behaviours and motivations.

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INSIGHTS

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Insight Gleaned

You’ll probably never forget an insight:

“The Australian” Example:Sales were down for The Australian newspaper. Research indicated the reason for this was people considered it a “tough read”. The insight beneath this was that even though it was tough, it was worth it and influential. Australians knew they “should” be reading it. This insight was brought to life in the “Think. Again.” campaign where Australian thought leaders challenged their contemporaries with thought provoking questions, with the last question being: “When did you last read The Australian?”

Think. Again.

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INSIGHTS

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Total Matches

111

56

28

14

7

4

2

55

28

14

7

3

2

1

Winner

Why are Insights Important?

Why are insights important without giving it away?

Insights are fuel for thinking.

Example:In the singles division of a knockout tennis tournament there are 111 entrants. The organiser wants to calculate the minimum number of matches that must be played. What is this number and how do you reach it? is bundled up into the term “insights”.The following section tries to get under the skin of your customers and help shape and frame some decisions so you can decide what an ideal customer really looks like.

Here is the way most people would probably tackle this problem: How many matches can be played between 111 people, how many people will be left in the tournament after this round, and so on.

A much simpler method to solve this problem involves an insight switch-over. Instead of working towards the gradual selection of the winner, consider instead all the eventual losers. There must be 110.

Since each loser can only play one match, there must be 110 matches.

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INSIGHTS

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The Pareto Principle

Vilfredo Pareto was born in Paris in 1848 and moved with his family to Italy in 1858. In 1886 he began lecturing on economics and management at the University of Florence and eventually moved to Switzerland where he worked, developing the Pareto Principle, until his death in 1923.

The Pareto Principle states that 80% of the result is obtained from 20% of the input. i.e. 80% of the results come from 20% of your time and effort!

This law can also be applied to everyday situations: 20% of sources cause 80% of your happiness, and 20% of sources cause 80% of your unhappiness

If you don’t have any new insights then how about you focus on the 80/20 rule. Every marketer has an insight available to them – the 80/20 rule encourages you to focus on the 20% of your business that gets you the 80% of returns. In some industries we find this is even higher.

For example, focusing on the 20% of your customers that generate significant income allows you to reward them and single them out for special treatment. This might increase their spend and loyalty and help you model for other customers who are similar. Conversely, some businesses should sack their worst 20% of clients. Doing some analysis might identify that 80% of problems and wasted time originate with a small group of problem clients.

“80% of the result is obtained from 20% of the input.”

Pareto and His Garden: 80/20 and Freedom from Futility, End of Time Management, Peter Drucker

80/20 Rule

Effort

Res

ult

s

20%

80%

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Finding the Outstanding Results

The Seven Habits of Highly Effective People, first published in 1989, is a self-help book written by Stephen R. Covey

Finding the 20% that gets 80% of outstanding results

NOW DISTRACTION

THE KEY PROCRASTINATION

Important Not Important

Not

Urg

ent

Urg

ent

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INSIGHTS

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BackgroundThe Stanford Prison System Experiment was a 1971 study of the psychological effects of becoming a prisoner or prison guard. Conducted by a team of researchers at Stanford University, led by Psychology Professor Philip Zimbardo, 70 people were chosen to play the roles of either guards or prisoners and live in a mock prison in the basement of the Stanford psychology building.

Those selected were chosen for their lack of psychological issues, crime history and medical disabilities in order to obtain a representative sample, and roles were assigned based on a coin toss.

The Stanford Prison System Experiment:An Insight Gleaned

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The Stanford Prison System Experiment cont...

What happened?“Our planned two week investigation into the psychology of prison life had to be ended prematurely after only six days because of what the situation was doing to the college students who participated. In only a few days, our guards became sadistic and our prisoners became depressed and showed signs of extreme stress.”*

Result

• This demonstrated the impressionability and obedience of people when provided with a legitimising ideology and social and institutional support

• Illustrated cognitive dissonance theory and the power of authority• Supported the psychology theory of situational attribution of behaviour

rather than dispositional attribution. In other words, it seemed the situation caused the participants' behaviour, rather than anything inherent in their individual personalities

* Official Site - http://www.prisonexp.org Wikipedia - http://en.wikipedia.org/wiki/Stanford_prison_study

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INSIGHTS

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RTA “Pinky” Campaign: An Insights Case StudyBackgroundThe RTA’s graphic advertising campaigns around speeding seemed to be working for all but one group: young males. Some of the statistics around this group are horrible;90% of fatalities in P-plate crashes are male. P-platers represent just 7% of licence holders but account for 33% of speeding infringements 30km/h above the limit and 41% of 45km/h and above the limit.

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INSIGHTS

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InsightIt emerged that young male drivers were speeding in an attempt to impress their audience – passengers, other mates, girls and the wider community.

The campaign needed to empower passengers to undermine the speeding driver’s masculinity by making speeding “uncool”. Being considered “uncool” was a much more real and immediate concern than death for these drivers. The message they needed to get across was: “you may not die but everybody will think you’re an idiot”.

Passengers, rather than the driver, became the audience for “Pinky” – a first in RTA communication campaigns.

Results

• The most salient youth speeding campaign ever• The campaign reached over 97% of its target audience, making one of the “biggest

global media impacts in Australian communications history” • Passengers embraced the “Pinky” gesture• Prompted a crucial behaviour shift in young drivers – “Pinky” decreased the incidence

of speeding behaviour and helped save over 50 young males from speed-related deaths

Needing to be more than a 30 second TVC to succeed and save lives, this high saturation campaign involved digital (XXS condoms/thecashewboy.com.au), outdoor and ambient (implemented in environments where young guys are feeling their most masculine – pubs and men’s magazines), as well as the TVCs.

RTA “Pinky” Campaign cont..

CONSUMER SEGMENTATIONUseful Tools

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CONSUMER SEGMENTATION

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Know your consumersThis model identifies the levels of human needs. As marketers it’s often useful to see how our category, product or service fits into the human needs hierarchy.

Maslow’s Hierarchy of Needs

Maslow’s Hierarchy shows us that you can’t operate properly at a higher level when there is dissatisfaction at a lower level.

Example:You can’t motivate someone to achieve their sales target when they’re having problems with their marriage.

Transcendence

Self-actualisation

Aesthetic

Cognitive

Esteem

Belonging/Love

Safety

Biological/Physiological

Basic life needs - air, food, drink, shelter, warmth, sleep

Protection, security, order, law, limits, stability

Family, affection, relationships, workgroup

Achievement, status, responsibility, reputation

Knowledge, meaning, self-awareness

Beauty, balance, form

Personal growth,nself-fulfilment

Helping others to self-actualise

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7 Levels of Organisational Consciousness

Survival

Relationships

Self-Esteem

Transformation

Internal Cohesion

Making a Difference

Service

1

2

3

5

6

7

4

Pursuit of Profit and Shareholder ValueFinancial Stability, Employee Health and Safety

Limiting: Short-term Focus, Control

Relationships that Support the OrganisationOpen Communication, Respect, Customer Satisfaction

Limiting: Blame, Internal Competition

High Performance Systems and ProcessesProductivity, Efficiency, Quality, Professional Growth

Limiting: Bureaucracy, Complacency

Continuous Renewal and LearningAccountability, Adaptability, Innovation, Teamwork

Development of a Strong Cohesive CultureCommitment, Enthusiasm, Shared Values

Strategic Alliances and PartnershipsEmployee Fulfilment, Community Involvement

Service to HumanityEthics, Social Justice, Future Generations

Richard Barrett

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of things we Read

of words we Hear

of pictures we See

of things we Hear and See

of things we Say

of things we Say and Do

Watching a movieLooking at an exhibit

Watching a demonstrationSeeing it done on location

Participating in a discussionGiving a talk

Doing a dramatic presentationSimulating the real thing

Doing the real thing

Cone of Learning

In Web 2.0 and beyond, marketers have given unprecedented opportunity to engage with customers and prospects. In our quest to be relevant and memorable we can gain insights from the Cone of Learning on how we choose to engage with people.

10%

20%

30%

50%

70%

90%

We Remember:

Edgar Dale, Audio-Visual Methods in Teaching (3rd Edition). Holt, Rinehart and Winston 1969

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Why Target a Consumer Segment?

More relevant when building value into your product

More relevant distribution – being more selective when

distribution channels can give a competitive advantage

More targeted in communication, meaning less wastage

Consumer

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Targeting and Spillage

Often it’s helpful to have a bullseye target because in mass media it’s impossible to only target a certain group.

However, unless you’re specific it is possible to miss your ideal customers by being too general.

A bullseye model helps you target a niche while identifying a secondary audience and therefore apply a “non-alienation” test to to your communications, i.e: we must talk to A, but must not alienate B.

A:Bullseye

B:Secondary

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Key Benefits of Market Segmentation

Focus marketing efforts where they have the best

chance of success

Build on the success of other companies

products

Increase profitability through increased customer loyalty

and higher prices

Increase the efficiency of money spent for marketing activities

Find growth opportunities

MarketSegmentation

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Market Segmentation

If you can clearly position your product within a competitive market environment then you will appeal to the most desirable consumer segment. The greater your appeal, the more rewarding your relationship with your customers will be. They’ll take the time to have a relationship with you and to help you develop new products (crowd sourcing).

So if you get your product positioned right, it will appeal to a segment, there will be reciprocal value and you’ll have unbelievable loyalty.

ProductConsumer Segment

Positioning Value

New Product Development(Crowd Sourcing)

Product Segment Value Loyalty

Relationship

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Loyalty Segmentation

Rather than just assuming that customers are loyal because they keep on coming back, it often pays to look at what’s underpinning that loyalty. What are their opinions, beliefs and motivations?

Non-customersThose who buy competitor brands or are not product class users

Price switchersThose that are price sensitive and switch between brands depending on price

Passive loyalThose who buy out of habit rather than reason

Fence sittersThose who are indifferent between two or more brands

CommittedThose that will only have eyes for the one brand

Committed

Fence Sitters

Passive Loyal

Non-Customers

PriceSwitchers

Building Strong Brands, David A. Aaker 1996

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Loyalty and Relationship Index

This Ogilvy model helps understand and clarify some of the drivers of loyalty.

Strangers DistantLovers

Happy MarriagesPrisoners

Low High

High

EmotionalLoyalty

Beh

avio

ura

lLo

yalt

y

Single product holders. No relationship manager. Potential grievances. Non-response to offers and communications. Conduct relationships with other providers. Most likely to leave.

Not unhappy with the relationship. Have a mixed portfolio and relationships with other brands. Relevance lacking.

Multiple product holdings. Advocates and satisfied. In a two way relationship. Respond to relevant communications.

Long-term customers. A combination of customers with: Bad experiences/grievances, overdrawn or in debt, intertia stops them moving.

OgilvyOne

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One of the most common and easy to define segments is generational

Generationsthrough the

Ages

BabyBoomers(1946-1960)

GenerationX

(1961-1980)

GenerationY

(1981-2001)

GenerationNet

(1995-...)

http://www.dhss.mo.gov/LPHA/New2008MCHI/GenerationalDifferences_Worksheet_GalenHoff.pdf

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Baby Boomers

Defining characteristics:

• Born 1946-1960, after World War II

• Grew up during the ‘50s, ‘60s and ‘70s

• Entered the workforce when unemployment was high; late ‘60s to early ‘80s

• They remember starting at the bottom and working their way up

• They are today’s ageing workforce

BabyBoomers

Through the Ages, Business Review Week, Dr Roslyn Sayers 2008

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Generation X


• Born 1961-1980

• Grew up during the ‘70s and ‘80s, entering the workforce in the ‘80s and ‘90s

• Were influenced by increase in number of divorces, single-parent and dual income

situations

• Generally well educated with majority having had a tertiary education

• Highly influenced by the ‘90s technology boom with the increasing popularity of the PC

and Internet

• Stay loyal to themselves only and have a tendency to change jobs frequently, with

many involved in starting their own businesses

• Today they are faced with the demands of managing work and family commitments

GenerationX


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GenerationY


• Born in 1981-2001

• Grew up during the ‘80s and ‘90s and entered the workforce from the ‘90s up to the

current day

• Are generally either working or studying at school or university

• Influenced by technology and are highly impatient, expecting everything to be

instantaneous

• Are characterised for holding several jobs at one time and consider holding a job for

more than 2 years to be a long time

• Generation Y is aware of globalisation and concerned with global issues such as

climate change and sustainability

Generation Y


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GenerationNet

Generation Net


• Born 1995 and beyond

• Are growing up in the ‘90s and ‘00s

• Will enter the workforce from around 2010-2020

• Have grown up with technology such as mobile phones and Internet

• Expect everything to be instantaneous

• Generally have an extremely short concentration span

Before they turn 25, Net Generation will have:

• Spent 10,000 hours gaming

• Sent 200,000 emails and Instant Messages

• Spent 20,000 hours using their mobile phones

• Spent 15,000 hours on the Internet

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Generation C

The GENERATION C phenomenon captures the avalanche of consumer generated “content” that is building on the web, adding tera-peta bytes of new text, images, audio and video on an ongoing basis. The two main drivers fuelling this trend?

1. The creative urges each consumer undeniably possesses. We're all artists, but until now we neither had the guts nor the means to go all out.

2. The manufacturers of content-creating tools, who relentlessly push us to unleash that creativity, using, of course, their ever cheaper, ever more powerful gadgets and gizmos. Instead of asking consumers to watch, to listen, to play, to passively consume, the race is on to get them to create, to produce, and to participate.

More than just age based segmentation, a behavioural segmentation like Generation C is sometimes useful. Also look to the Technographic profiling available on the Forrester research site to see how your audience might be using technology.

http://www.trendwatching.com/trends/GENERATION_C.htm

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Consumer 2.0

Peers win over celebrities: Consumer 2.0 responds better to endorsement from peers and friends, and not celebrities. In a survey conducted in America only 15% of college students said they would be influenced by celebrity endorsement of a brand.

Niche is normal: These consumers want choices and products that speak to them personally. They want to follow their hearts and pursue their own interests.

Small pieces of communication: Consumer 2.0 takes in small bits of information rapidly and filters the rest out. They multi-task and the best marketers can hope for is divided attention from them. For every email they send, they send 2.5 text messages.

Personal needs trump brands:A recent study found 78% of college students thought that brands were overrated; Consumer 2.0 will consume what suits them. In some categories brands are still important, but this is less obvious than in the past.

They own the brand: Consumer 2.0 constantly blogs and speaks out about their experiences of brands. It is their opinion that will make or break a product more than ever before.

Engage: Gen Y, Brandon Evans, April 17, 2009

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Customisation

In the past, Australians have only had access to generalised web portals such as Yahoo, Ask or Google. These sites, while each being slightly different, are ultimately very similar.

Recently, applications like PageFlakes, MyYahoo and iGoogle have given users the chance to make their home page and web portal customisable, hence tailoring to many different niches.

In 2007 the use of iGoogle grew 267%, with approximately 20% of Google homepage visits being through iGoogle.

Also, the websites that have Google ads on their sites as part of the Google content network reach 7.2 billion unique visitors each month, with a total of 1.2 billion page views.

Ben Phillips, AdNews, 8 August 2008

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The Long Tail

This term refers to the “Long Tail” demographic that buy niche items rather than popular items.

For example, Netflix or Rhapsody are two online media distributors that cater to the “Long Tail”. They do this by offering an enormous range of choice in their 25,000+ movie titles and millions of songs available.

As a result, people buying from these companies generally do not buy movies or music that are currently popular. Instead, almost 50% of sales are from niche, classic and old titles.

Thus, “Long Tail” customers buy what they want specifically, without regard to popular culture. This also increases the shelf life of the content.

Pop

ula

rity

Products

Head

Long Tail

Life After The 30-Second Spot, Joseph Jaffe 2005

SEGMENTATION METHODS

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Types of customer segmentation

Who are we Creating Value for?

Mass Market• Don’t distinguish between different customer segments• The value propositions, distribution channels and customer relationships

all focus on one large group with broadly similar needs and problems

Niche Market• Cater to specific, specialised customer segments• The value propositions, distribution channels and customer relationships

are all tailored to specific requirements of the niche market

Segmented• Focuses on more than one market segment with slightly different needs

and problems• One business model that serves different market segments with slightly

different value propositions

Diversified

• Serves two unrelated customer segments within the same business model• An example would be Amazon.com who diversified their online retail

business by selling online storage; both are linked by Amazon.com’s powerful IT infrastructure on more than one market segment with slightly different needs and problems

Multi-Sided

Markets

• Serves two or more interdependent customer segments, who together make the business model work

• An example would be a credit card company who needs a large base of credit card holders, as well as a large base of merchants who accept those credit cards

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Segmentation: How is it done?

Who are they? Where are they? What do they do? What do they think?

Psychographic

Behavioural Demographic

Categorisation Geographic

Define by service Customer or consumer?Custumer or prospect?

Categorisation

Global, country, region; urban or rural, etc.

Geographic

Demographic

Age, income, gender, education, religion, etc.

Behavioural

Product usage rates, loyalty, buyers/users, benefits sought

Psychographic

Attitudes, beliefs and lifestylesMotivation

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Segment Examples

Down Agers:Believe 50 is the new 40

Empty Nesters:A couple with adult children who live out of home

Clan and Community action groups

Early Adopters:Adopt and embrace new technology

Pets are people too:People who treat animals like surrogate children

Entrepreneurs

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Adoption of Innovation Model

The traditional marketing chasm occurs between “early adopters” and “early majority” and normally requires successful mass marketing to transition across.

The consumer adoption of any new product generally follows a bell curve of distribution and adoption. For a market launch of a new product an understanding of the above is critical to be able to identify the differences in the segments and plan the rollout over time.

2.5%Innovators

13.5%Early

Adopters

34%Early

Majority

34%Late

Majority

16%Laggards

Rogers Adoption/Innovation Curve

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Common Segmentation Methodologies & Models

Mosaic geoTribes

Nielsen:Panorama

Roy Morgan: ASTEROID

SegmentationTools

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Mosaic Segmentation

Mosaic is a consistent segmentation system that covers over 284 million of the world’s households.

It is based on a simple proposition that the world's cities share common patterns of residential behaviours.

Mosaic creates a set of groups which are used to classify sections of society, such as:• Sophisticated Singles • Bourgeois Prosperity • Career and Family • Hard Working Blue Collar • Rural Inheritance

Mosaic

http://www.business-strategies.co.uk

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geoTribes®

In geoTribes®, social resources are represented by socioeconomic status, while needs are represented by lifecycle stage. The geoTribes® scheme is ranked in descending socioeconomic status order.

Applications for the segments include targeting of letterbox, outdoor, media inserts, database enhancement and profiling and sophisticated integrated campaigns.

The geoTribes® segments are based on a sophisticated spatial modelling process that combines Census demographic data with lifecycle stage and socioeconomic status data from the ABS’s Household Expenditure Survey (HES).

geoTribes®

www.rdaresearch.com.au/geotribes.php

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Nielsen: Panorama

Consumer and Media Insights:Panorama helps clients to better understand consumer usage of products and services by providing insights they can act on and the market understanding for profitable customer growth. As a syndicated multimedia marketing database, Panorama integrates consumer demographics, product usage and media consumption for value-added marketing and media solutions.

It enables consumer profiling (a stronger comprehension of consumers’ or potential consumers’ needs) to reveal opportunities for new business in the marketplace. It also enables targeting of advertising campaigns with greater accuracy through planning and evaluating integrated media campaigns using the strengths of the media industry's most widely used research tools:• OzTAM Metropolitan TV Ratings data• AGB Nielsen Media Research Regional TV Ratings data• Nielsen Radio Ratings data• Panorama Product and Service Usage data

Nielsen:Panorama

http://au.nielsen.com/products/nmr_panorama.shtml

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Roy Morgan Segments: ASTEROID

Roy Morgan ASTEROID research is operating in over 365 client sites around the world.ASTEROID is decision-oriented. It makes survey data accessible to people who have to formulate conclusions and recommendations.

It allows you to explore data, generate and test hypotheses, follow up ideas and trains of thought and search for supporting evidence.

ASTEROID encourages researchers to be more proactive and creative in using survey results. It promotes fuller understanding of survey results and allows faster responses to queries.

Asteroid adds value to surveys. Most of the cost of surveys is in data collection – ASTEROID allows you to get much more information for little extra cost.

Roy Morgan: ASTEROID

www.roymorgan.com.au

CUSTOMER CONVERSION

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CUSTOMER CONVERSION

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There has been a lot of dissing of the good old marketing funnel of late; especially from the digital sector. To our mind, it’s simple, it’s clear and it still helps.

Marketing Funnel

Suspect

Prospect

Customer

Client

Advocate

Free product samples

Digital front-end products,books, audio

Back-end physical manuals,tools

System consulting

Apple example:

Free iTunes Card

iPod, iTunes account

iMac, MacBook

AppleCare, licensing

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CUSTOMER CONVERSION

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Purchase Path

Following on from the Marketing Funnel, an ideal flow-through passes all levels of brand engagement down the purchase path.

Awareness Knowledge Liking

Purchase Conviction Preference

RepeatPurchase

Endorse Advocate

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CUSTOMER CONVERSION

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Conversion Strategy

Of course, the purchase path isn’t always set in stone, but it is dictated by your industry. What is set in stone is that there is always an action which is prompted by a stimulus.

The below is an example of the path taken by people in the publishing industry.

Aware

See

Understand

See Ad

Interest

Friend Uses

Use

Demo

Purchase

Trial

Advocate

Subscription

Act

ion

Stim

ulu

s

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CUSTOMER CONVERSION

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Case Study: Joe GirardWhen it comes to conversion we need to look at the humble used car salesman. From a category that’s often so loathed, there’s one guy who has emerged as universally loved! There’s much that some of us ivory tower marketers can learn from the humble car lot.

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CUSTOMER CONVERSION

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Joe Girard cont...

Joe Girard would sell an average of 70 used cars per month, when the industry average was 7. He would find out information about customers, such as asking when their birthday was, their favourite song and would ask them about their kids. He would keep this information and then do little value-adds such as putting the CD of the customers’ favourite song in the car ready to play when they picked up the car.

Joe would go above and beyond: putting a bow on the key of the car, offering free annual detail, sending the customer a birthday card, then the car a birthday card with a free fuel voucher!

In fact, he would send cards to customers up to 13 times per year!

RESEARCHAngles and Issues

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“Most marketers use research like a drunk uses a lamp post, for support rather than illumination.”

Bill Bernbach

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CUSTOMER CONVERSION

52“If I had asked people what they wanted, I would’ve built a faster horse.”

Henry Ford

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RESEARCH

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“Instead of asking them to watch, to listen, to play, to passively consume, the race is on to get them to create, to produce and to participate.”

trendwatching.com

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RESEARCH

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Roles of Research

What is marketing?The purpose of marketing is to get and keep a customer. Marketing is the planning and decision-making process that manages the links between our clients and their consumers.

It helps us answer the following questions around our customers:• What do they want?• Why do they want it?• What do the competitors offer?

Research strategies

Con

text

Con

sum

er

Trends - experts, technological changes

Culture - pop culture, style, fashion

Cross-Industry -influencesfromparallelindustries,developmentsetc.

Depth (insight) -qualitativeanalysis-groups,interviews,observations,ethnography

Breadth (quantisation) - online, omnibus, Roy Morgan data

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RESEARCH

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Research and Ethnography

A context for research interpretation

Not aware

AwareW

ill s

ayW

on’t say

Conscious factors

• Public and spoken• Socially acceptable• Left brain

Private Feelings

• Private but suppressed• Don’t like to admit• Hard to verbalise (right brain)

Intuitive Associations

• Potentially public• No vocabulary• Right brain

Unconscious factors

• Private and repressed

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RESEARCH

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Different Segmentation for Different Purposes

Segmentations to develop advertising

Populations studied

Users of the product or service to be advertised

Data sourcestapped

Attitude surveys

Analyticaltools used

Statistical analysis of survey results

Outputs Segments that differ in their responses to a given message

Segmentations to develop new products

Users of related products or services that already meet similar needs; partners such as distributors and retailers

Purchase and usage data on consumers, supplemented by surveys; analysis of consumers’ finances and channel preferences

Analysis of customers who remain loyal and those who switch to competing offerings

Segments that differ in their purchasing power, goals, aspirations and behaviour

Harvard Business Review Feb 06

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Decision Making

Issues the business wants to address

Shallow decisions

• Whether to make smallimprovements to existing products

• How to select targets of a media campaign

• Whether to change process

Consumers’ concerns

• How relevant and believable new-product claims are

• How to evaluate a given product• Whether to switch products

What the segmentation should try to find out

• Buying and usage behaviour• Willingness to pay small premium

for higher quality• Degree of brand loyalty

Middle-of-the-spectrum decisions

• How to position the brand• Which segments to pursue• Whether to change the product

fundamentally• Whether to develop an entirely

new product

• Whether to visit a clinic about a medical condition

• Whether to switch one’s brand of car

• Whether to replace an enterprise software system

• Whether the consumers being studied are do-it-yourself or do-it-for-me types

• Consumers’ needs (better service, convenience, functionality)• Their social status, self-image, and

lifestyle

Deepestdecisions

• Whether to revise the business model in response to powerful social forces changing how people live their lives

• Choosing a course of medical treatment

• Deciding where we live

• Core values and beliefs related to the buying decisions

Harvard Business Review Feb 06

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Research Strategies

Climb a mountainQuantitative perspective

If you want to look at a tree, stay on the ground. If you want to see the forest, climb a tree.

Go to the jungleEnvironment qualification

If you want to see how a lion hunts, don’t go to the zoo, go to the jungle.

Think like a fish Collaborate sessions

If you want to catch a fish, first you must think like a fish.

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Research Can Confuse You!

Treat focus groups with caution

Allowing rooms full of total strangers with big mouths to influence your marketing strategy can be disastrous.

In a focus group, you are asking people to form an opinion in a manner that goes way beyond that of their normal mental processing, turning them into marketing managers for a day.

If there are any questions around the quality of the members of the group, or the discussion guide, you simply must have an expert facilitator to help you sift the wheat from the chaff.

Always be aware that people often talk one way but act another; especially in artificial group environments.

And lastly, remember that focus groups are qualitative, not quantitative, so don’t treat comments as statistically valid – holding multiple groups, in multiple locations, can help isolate some of the factors.

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Case Study: “NEW” Coca-Cola FailureIn 1985, after $4 million was invested in market research and over 200,000 blind taste tests had been performed, Coke launched “New Coke”.

However, they forgot to tell consumers it was instead of “old” Coke.

PR disaster!

After a deluge of phone calls and letters demanding the return of the original Coke, the company decided to return to the original ingredients.

The result was that Coke acknowledged that it is the consumer that drives “Coca-Cola”, not the company.

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Defining and engaging social changeThe easiest way to consider the emergence of trends in our society, such as the rise of particular fashions or the popularity of certain books and films, is to think of them as epidemics.

You can spread your own “epidemic” by considering three rules:

• The Law of the Few

• The Stickiness Factor

• The Power of Context

Tipping Point

Gladwell took an existing concept and made it his own. “Tip of the hat to you sir”. It would be remiss for us to not acknowledge him in our toolkit.

The Tipping Point, Malcolm Gladwell 2000

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The Tipping Point cont...

The Law of the Few

A certain few types of people are primarily responsible for the emergence of social epidemics in society:


2. Mavens:These people collect information, and when they find something interesting they love to share it with anyone who will listen. They are more interested in the world around them, reading more magazines, newspapers and even junk mail. They provide the message and Connectors spread it.

1. Connectors: People with an uncanny knack for making friends and acquaintances. Due to their personality and character their networking skills generally span across various subcultures and niches. This makes them invaluable for spreading ideas and trends.

3. Salesmen: These people convince the unconvinced. Unlike the other two they work with nonverbal as well as verbal persuasion. Their personalities are very expressive – they are the carriers of the epidemic.

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The Tipping Point cont...

The Stickiness Factor

The content of the message is also intrinsic to starting an epidemic, not just the messengers. The message needs to be “sticky.” That is, it needs to be memorable and needs to spur people to action.

You need to make your message irresistible!

The Power of Context

We are exquisitely sensitive to changes in our context. The Power of Context advocates that behaviour is a function of social context and environment. For example, when people are asked to consider something or make decisions in a group, their conclusions generally differ greatly than if they had been alone.

Close knit groups have more power in amplifying the potential of the social epidemic or trend. The Rule of 150 guides this roughly; 150 is the maximum number of people the average person can have a genuine social relationship with. Any more than this and the group is no longer tightly knit.


PRICING

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Pricing SrategiesPricing in the Consumer section? “Nonsense, surely it belongs under ‘Know Your Business’”, did we hear you say?

We agree that we may seem to be flirting with the controversial to have it here and that’s the problem, and the point, we’re trying to highlight. 90%+ of businesses price based on either the cost of inputs or what their competitors are doing.

If you understand your customers and segment correctly, pricing presents a whole new opportunity for business growth.

PricingStrategies

The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden 2001

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Progression of Commoditisation

The below graph shows us that price becomes important only if everything else is equal.

$Margin

Time

Functionality Quality Convenience Price

Rod Young, dcstrategy.com

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Elements of Pricing

NOTE:Cost of production is not a factorPrice as

Quality

Necessity vs.

Luxury

Price of Fairness

Switching Cost

Size of Expenditure

Differentiation Value

Pricing Metrics

ReferenceValue

Elasticity of Demand

End Useas Driver

Bundling & Framing

EvaluationCost

Shared Cost

Effect

CustomerValue


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Pricing Elements

Customer Value What is the product really worth to the customer and what gain will they forgo without the product?

Evaluation Cost There can be a difficulty, and therefore risk, associated with an unknown alternative

Price of Fairness Customers are sensitive to prices that fall outside what’s considered “fair”; seller’s profits are one issue

Necessity vs. Luxury Shouldn’t charge higher for necessities

Size of Expenditure How large is the expenditure in absolute terms? How much effort is there to reduce it?

Elasticity of Demand How sensitive is the demand for the product to movements in price?

Pricing Metrics Quantity Based e.g. petrol. Access Based e.g. health clubs. Performance Based e.g. legal, banking

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Pricing Elements cont...

Reference Pricing Is a product’s economic value, which is the price of the next best “perceived” alternative

Differentiation Value Is Reference Pricing plus the value of the product’s differentiating values

Switching Cost Up-front fees and costs to customers should be considered to minimise switching barriers

Bundling and Framing; Proportioned Price

Customers are less sensitive to smaller “proportioned” add-ons to big ticket items, e.g. what’s a few hundred dollars when buying a car?

End User as a Driver Is the end use emotional, quality or cost driven? E.g. do people want a 2-4-1 dinner voucher for Valentine’s Day?!

Price as Quality With image and exclusive products, or in the absence of other cues, price can signal quality

Shared Cost Effect Does the buyer have to cover the full cost, especially during the start-up phase?

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The Strategy and Tactics of Pricing

“No other weapon in a marketer’s arsenal can boost sales more quickly or effectively than price. Price discounting – whether explicit, or disguised with rebates, coupons, or generous terms – is usually a sure way to enhance immediate volume.

However, gaining sales with price is consistent with long-term profitability only when managed as part of a marketing strategy for achieving, exploiting, or sustaining a longer-term competitive advantage.”

-T Nagle, R. Holden


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Reference Price

Why are people buying?

Low

Low

High

Value of Differentiation

Pain

of

Pric

e

Price Buyers Value Buyers

Convenience Buyers

RelationshipsBuyers

High


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Reference Price

Is there a response that would cost less than the preventable sales loss?

If you respond, is the competitor willing and able to cut price again to re-stablish the price

difference?

YES NORespond

Will the multiple responses required to match a

competitor still cost less than the avoidable sales loss?

YES

YESRespond

Does the value of the markets at risk justify the

cost of a response?

NO

YES

YES

Respond

NOAccommodateor

Ignore

Is your position in other markets threatened if

competitor gains share?

YES

NO


Competitive Price Out or New Product

Entry

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Adapting to a Changing Environment

ProductDevelopment

Stage

Introduction Growth Maturity DeclineSales andProfits ($)

Time

Sales

Profits


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Price Metrics

When you set a price for your product or service, you must consider its value to the customer. Do this by considering the nature of your product:

• Is it quantity based, i.e. petrol

• Is it access based, i.e. health clubs

• Is it performance based, i.e. legal services

You must set your prices proactively and not let them be determined by a misinformed or ill-intending customer.


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Marketing Success Through Differentiation

Customers purchase more than the product; they purchase the entire package, including:

• Ease of purchase

• Terms of credit

• Reliability of delivery

• Pleasantness of interactions

• Fair handling of complaints

“Customers buy the augmented product”-Theodore Levitt


Product

AugmentedProduct

Ease of purchase Terms of credit

Reliability of delivery

Pleasantness of interactions

Fair handling of complaints

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Pricing Mechanisms

Fixed “Menu” PricingPredefined prices are based on static variables

List PriceUsers of the product or service to be advertised

ProductFeature dependent

Price depends on the number or quality of Value Proposition Features

Price depends on the type and characteristics of a customer segment

Volumedependent

Price as a function of the quantity purchased

Dynamic PricingPrices change based on market conditions

Price negotiated between two or more partners depending on negotiation power and skills

Price depends on inventory and time of purchase

Price is established dynamically based on supply and demand

Price determined by outcome of competitive bidding

CustomerSegmentdependent

Negotiation(Bargaining)

YieldManagement

Auctions

Real-TimeMarket

INSIGHT AND SEGMENTATION TOOLS

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The “Big Questions” for Stimulation

What catches people’s attention?

What do people respond to?

What surprises people?

Who do they want to talk to?

Who do people admire?

What do people enjoy?

What shocks people?

Who do people respond to?

?

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24 Secondary Questions

1. Who are the different people involved with this product?2. What do consumers hate about the category?3. When is the product most valuable to them?4. Why would they try our competitors?5. What other products is this used in conjunction with?6. How does the product help you interact with other people?7. Where is the product inappropriate?8. Who do we not want to use the product?9. What do our customers say about people who don’t use the product?10. When are customers likely to switch?11. Why would you speak to somebody else about it?12. How does it make you feel?13. Where will the category be in 10 years time?14. Who despises our product and would never use it?15. What do people that don’t use our product say about people that do?16. Why wouldn’t you buy a competitor’s product?17. When aren’t you thinking about the product but probably should be?18. What sense does the product stimulate?19. How else could you use the product?20. Why couldn’t you just change the logo?21. What would your most loyal customer do to get the product?22. Where do you wish you could find the product but can’t?23. Who isn’t using the product but should be?24. What would customers do if they did not have this product?

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The Top 4

Questions Answers

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Interrogate Your Consumer

Interrogate Your

Consumer

What influences them?

Who influences them?

Where do they get their information?

Who are they?

How can we help them buy?

How does the product fit into their communities?

How does the product fit into their lives?

Personality profiles

Barriers to purchase? Risks? Fears?

What drives their decisions?

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Customer Profile Page

An understanding of a customer’s mindset lets you find opportunities for products and communications

Customer’s Current Mindset

Their expectations

Their beliefs

Their experience with you

Dynamic Pricing

Their buying habits

What drives their buying

Their market category

Negative Aspects

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Benefits vs. Problems

When asked what they want for their dog, consumers most often respond with “nutrition” or “good taste”, which is what much dog food advertising has stressed over the years...

...but when asked what problems they have had with dog foods, consumers complain about their dog’s bad breath or the food’s odour or mess.

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Benefits vs. Problems

Category/Product Benefits Category/Product Frustrations

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Picture Profiles

Picture profiles can be used to really bring the target market to life.

Traditional Media TargetViewing your consumer in terms of an age group or demographic e.g. 12 to 24 year olds

Conceptual Media TargetViewing your consumer as a part of whatever community they belong to e.g. cool young people

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Pen Portraits of Target Markets

Writing a portrait of your target market may help get inside their mind and understand their motivations and desires.

AutobiographyA brief story written in the ‘first person’

BiographyA story written by a second person

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Mind Snapshot

This tool helps you analyse your customers’ drivers of purchase behaviour.

Product Category: (e.g. Toothpaste)

Category Attributes Importance as Purchase Driver (1-10)

Relative Brand Strength

N.B: Different by segment Different by individual

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Insight Windows

An insight is merely a Point Of View on a piece of data or information that changes the way we look at something. We encourage you to have a look through the “windows” or filters listed here and see what insights might be present.

TIP: Have a look at the future tools under “Know Your Market’ for stimulation on what trends are affecting your category.

Consumer Product

Category Future

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Insight Links

This tool is handy for linking insights to communications messages.

CoreInsight

Comms. Proposition

What feeling do you want to engage?

What rational support do they need to believe?

What experience do you want to create?

What action do you want them to take?

What perception needs to shift?

What “baggage” do they need to drop?

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Customer Journey Audit

This tool provides a framework for conducting an audit of your customer journey.

When conducting a customer journey audit you should look at it from 5 different points of view and across 4 distinct contact stages, looking to see whether your competitors are effectively delivering on their strategies.

Strategy/Positioning

Awareness Purchase Advocacy

Competitor 1Market LeaderCompetitor 2 Closet CompetitorCompetitor 3Most innovativeParallel industrybest practiceMy Brand

Poin

t of

Vie

w

Contact Stage

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Experience Engineering

This tool lets you compare the current customer experience to an ideal customer experience and see how you can link the two.

Describe the current experience your customer receives

Imagine the perfect customer experience

What are the similaritiesand differences?

What needs to be changed to engineer the perfect customer experience?

The Idea Generator, Ken Hudson 2007

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Value Your Existing Customers

The average acquisition cost of a new customer is currently $454, showing that it is important to value the relationship with your existing customers. Some easy ways to keep this relationship going and growing is to:

• Ask for the next sale

• Lock in the next x-sell opportunity

• Plan your next contact

• Ask for feedback

• Stay relevant

• Consider their needs

• Ask if the consumer can refer – empower and incentivise them SBusiness Review Week, 2008

The End

- WHAT’S THE BIG IDEA? -

4


- KNOW YOUR MARKET -

2


- KNOW YOUR BUSINESS -


1- KNOW YOUR CONSUMERS -

3


- WHAT’S THE BIG IDEA? -

4


- HOW TO SAY IT -

5


- WHEN AND WHERE TO SAY IT -

6


Congratulations on completing Book 3: Know Your Consumers

The next book in the Brand Box series is Book 4: What’s the Big Idea?

Contact us to get yourself a copy stepchangemarketing.com | +61 2 8028 6405 | [email protected]

The Brand Box series

Brand Box 3 - Know Your Consumers - The Marketer's Ultimate Toolkit

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