Which customers to focus on?

I think that many of you remember charts with the results of consumer panels analysis. Quite often when we do such kind of analysis we rush to compare our brand with others in order to decide where we can fin… But what if we have just a look on our brand data?

First of all we will see obvious thing – the diverse profiles of our consumers. For instance, a lot of light buyers who we usually tend not to focus on. However,  “while these people are only occasional buyers of a brand, there are so many of them that they significantly contribute to sales volume” (Sharp, 2010).

I think that this might be something that you might from time to time oversee in your charts. But then, it was also found out that “these consumers buy infrequently because they don’t buy from the category very often, and they buy a number of different brands” (Sharp, 2010).

Really how often do you analyze the purchase frequency for your brand among different customers groups? I think that you usually use just an average number…

There is one academic law that is important to keep in mind and that is called the “law of buyers moderation“, that means that: “light customers might become heavier and heavy customers lighter” (Sharp, 2010).

So, I would advise you before making a strong targeting on your heavy consumers next time, to consider the percentage of your light customers, their purchase frequency and shifts in their behavior over time frame of a year.

As a recommendation on the communication strategy, focus on driving your brand penetration and reach of wide consumer audiences, because “when brands grow or decline there is a lot of change in their category penetration and little change in their purchase frequency“.

 

Which_consumers_to_target

Sources: Sharp, B. (2010). How Brands Grow: What Marketers Don’t Know, Oxford University Press, Australia

The value of customers segmentation

Consumers segmentation has always been one of the core marketing topics. Many companies spend big budgets on conducting segmentation studies and long time on arguing what segment to choose for the brand positioning.

However, available findings might step change the current perception of the segmentation importance.

In his book “How Brands Grow: What Marketers Don’t Know” Sharp shares the results of more than 50 years of research of customer bases for different competing brands. These studies were conducted across various categories starting from cigarettes to computer games and across different dimensions used in segmentation: demographics, psychographics, attitudes, values and media habits (Sharp,  2010).

The results of these investigations are very mind opening: competing brands sell to the same sort of consumers (Sharp,  2010). Speaking more precisely, the results show that “within each brand there is a lot of variation (i.e. different types of people), but each brand has the same variation“.

For sure, there are also available differences that are attributed to product characteristics like brands that sell big cars have more customers with bigger households, Scottish newspapers are mainly read in Scotland, children’s programs mainly watched by children and high level luxury brands are mainly bought by reach people (Sharp,  2010).

But when we speak about directly competing brands, their customers characteristics vary in the frame of a statistical error. The reason for that might be the fact that “competitive brands seek to match each other’s functional advantages, and partly because brands have so many polygamous customers [who switch brands] in common” (Ehrenberg, 2004).

One more important finding shared by Sharp (2010): the bigger the brand the more “average” people are buying it and it becomes less focused on a particular customer segment.

Therefore, the recommendation here is to become focused on high level segments mainly associated with product characteristics and less on granular customers segmentation. The last one will not bring additional benefits for further targeting and will also limit the possibility to grow and source the share increase.

Segentation_2

Source: http://www. abc. net. au/ news/ 2013-05-02/people-walk-over-a-pedestrian-crossing-in-tokyo,/4666656

Source: 1. Ehrenberg, A. (2004). What brand loyalty tells us. Admap, 454, 36-38; 2. Sharp, B. (2010). How Brands Grow: What Marketers Don’t Know, Oxford University Press, Australia.