KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
GROWTH
Know Your Business
Brand Architecture
Branding
Positioning
Know Your Consum...
KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
Know your consumers
One of the unfortunate mass market legacies is talking about p...
KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
Consumer power
Consumers have infinite resources and techniques to unearth and exp...
INSIGHTS
The fuel for creativity
KNOW YOUR CONSUMERS
INSIGHTS
Insight
vs
Information
6
Information is primarily data that comes from observations
Insights ...
KNOW YOUR CONSUMERS
INSIGHTS
Insight Gleaned
You’ll probably never forget an insight:
‘The Australian’ Example:
Sales were...
KNOW YOUR CONSUMERS
INSIGHTS
Total Matches
111
56
28
14
7
4
2
55
28
14
7
3
2
1
Winner
Why are Insights Important?
Why are ...
KNOW YOUR CONSUMERS
INSIGHTS
The Pareto Principle
Vilfredo Pareto was born in Paris in 1848 and moved with his family to I...
KNOW YOUR CONSUMERS
INSIGHTS
Finding the Outstanding Results
The Seven Habits of Highly Effective People, first published ...
KNOW YOUR CONSUMERS
INSIGHTS
Background
The Stanford Prison System Experiment
was a 1971 study of the psychological
effect...
KNOW YOUR CONSUMERS
INSIGHTS
The Stanford Prison System Experiment cont..
What happened?
“Our planned two week investigati...
KNOW YOUR CONSUMERS
INSIGHTS
RTA ‘Pinky’ Campaign: An Insights Case Study
Background
The RTA’s graphic advertising campaig...
KNOW YOUR CONSUMERS
INSIGHTS
Insight
It emerged that young male drivers were speeding in an attempt to impress their audie...
CONSUMER SEGMENTATION
Useful Tools
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Know your consumers
This model identifies the levels of human needs. As marketer...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Seven Levels of Organisational Consciousness
Survival
Relationships
Self-Esteem
...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
of things we Read
of words we Hear
of pictures we See
of things we Hear and See
...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Why Target a Consumer Segment?
More relevant when building
value into your produ...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Targeting and Spillage
Often it’s helpful to have a bullseye target
because in m...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Key Benefits of Market Segmentation
21
Focus marketing efforts
where they have t...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Market Segmentation
If you can clearly position your product
within a competitiv...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Loyalty Segmentation
Rather than just assuming that customers are loyal because ...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Loyalty and Relationship Index
This Ogilvy model helps understand and clarify so...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
One of the most common and easy to define segments are generational
Generations
...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Baby Boomers
Defining characteristics:
•	 Born 1946-1960, after World War II
•	 ...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Generation X
Defining characteristics:
•	 Born 1961-1980
•	 Grew up during the 7...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Generation
Y
Defining characteristics:
•	 Born in 1981-2001
•	 Grew up during th...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Generation
Net
Generation Net
Defining characteristics:
•	 Born 1995 and beyond
...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Generation C
The GENERATION C phenomenon captures the avalanche of consumer
gene...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Consumer 2.0
Peers win over celebrities:
Consumer 2.0 responds better to endorse...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
Customisation
In the past Australians have only had access to generalised web po...
KNOW YOUR CONSUMERS
CONSUMER SEGMENTATION
The Long Tail
This term refers to the ‘Long Tail’ demographic that buy niche ite...
SEGMENTATION METHODS
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Types of Customer Segmentation
Who are
we Creating
Value for?
Mass Market
•	 Don’...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Segmentation: How is it Done?
Who they are? Where are they? What they do? What th...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Segment Examples
Down Agers:
Believe 50 is the new 40
Empty Nesters:
A couple wit...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Adoption of Innovation Model
The traditional marketing chasm occurs
between ‘earl...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Common Segmentation Methodologies & Models
Mosaic geoTribes
Neilsen:
Panorama
Roy...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Mosaic Segmentation
Mosaic is a consistent segmentation system that covers over 2...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
geoTribes®
In geoTribes®, social resources are represented by socioeconomic statu...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Nielsen: Panorama
Consumer and Media Insights:
Panorama helps clients to better u...
KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Roy Morgan Segments: Asteroid
Roy Morgan Asteroid research is operating in over 3...
CUSTOMER CONVERSION
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
There has been a lot of dissing of the good old marketing funnel of late; especial...
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Purchase Path
Following on from the Marketing Funnel, an ideal flow through passes...
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Conversion Strategy
Of course, the purchase path isn’t always set in stone, but is...
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Case Study: Joe Girard
When it comes to conversion we need to look at the humble u...
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Joe Girard cont..
Joe Girard would sell an average of 70 used cars per month, when...
RESEARCH
Angles and Issues
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
“Most marketers use research
like a drunk uses a lamp post, for
support rather tha...
KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
“If I had asked people what they wanted,
I would’ve built a faster horse”
Henry Fo...
KNOW YOUR CONSUMERS
RESEARCH
“Instead of asking them to watch, to
listen, to play, to passively consume,
the race is on to...
KNOW YOUR CONSUMERS
RESEARCH
Roles of Research
What is marketing?
The purpose of marketing is to get and keep a customer. ...
KNOW YOUR CONSUMERS
RESEARCH
Research and Ethnography
A context for research interpretation
Not aware
AwareWillsay
Won’tsa...
KNOW YOUR CONSUMERS
RESEARCH
Different Segmentation for Different Purposes
Segmentations to develop advertising
Population...
KNOW YOUR CONSUMERS
RESEARCH
Decision Making
Issues the business wants
to address
Shallow
decisions
•	 Whether to make sma...
KNOW YOUR CONSUMERS
RESEARCH
Research Strategies
58
Climb a mountain
Quantitative perspective
If you want to look at a tre...
KNOW YOUR CONSUMERS
RESEARCH
Research Can Confuse You!
Treat focus groups with caution
Allowing rooms full of total strang...
KNOW YOUR CONSUMERS
RESEARCH
Case Study:
‘NEW’ Coca-Cola Failure
In 1985, after $4 million was invested in market research...
KNOW YOUR CONSUMERS
RESEARCH
Defining and engaging social change
The easiest way to consider the emergence of trends
in ou...
KNOW YOUR CONSUMERS
RESEARCH
The Tipping Point cont..
The Law of the Few
A certain few types of people are primarily respo...
KNOW YOUR CONSUMERS
RESEARCH
The Tipping Point cont..
The Stickiness Factor
The content of the message is also intrinsic t...
PRICING
KNOW YOUR CONSUMERS
PRICING
Pricing Srategies
Pricing in the Consumer section? “Nonsense, surely it belongs under ‘Know Yo...
KNOW YOUR CONSUMERS
PRICING
Progression of Commoditisation
The below graph shows us that price becomes important only if e...
KNOW YOUR CONSUMERS
PRICING
Elements of Pricing
NOTE:
Cost of production
is not a factorPrice as
Quality
Necessity
vs
Luxu...
KNOW YOUR CONSUMERS
PRICING
Pricing Elements
Customer Value What is the product really worth to the customer and what gain...
KNOW YOUR CONSUMERS
PRICING
Pricing Elements cont..
Reference Pricing Is a product’s economic value, which is the price of...
KNOW YOUR CONSUMERS
PRICING
The Strategy and Tactics of Pricing
“No other weapon in a marketer’s arsenal can boost sales m...
KNOW YOUR CONSUMERS
PRICING
Reference Price
Why are people buying?
Low
Low
High
Value of Differentiation
PainofPrice
Price...
KNOW YOUR CONSUMERS
PRICING
Reference Price
72
Is there a response that
would cost less than the
preventable sales loss?
I...
KNOW YOUR CONSUMERS
PRICING
Adapting to a Changing Environment
Product
Development
Stage
Introduction Growth Maturity Decl...
KNOW YOUR CONSUMERS
PRICING
Price Metrics
When you set a price for your product or service, you must consider its value to...
KNOW YOUR CONSUMERS
PRICING
Marketing Success Through Differentiation
Customers purchase more than the product; they purch...
KNOW YOUR CONSUMERS
PRICING
Pricing Mechanisms
Fixed “Menu” Pricing
Predefined prices are based on static variables
List P...
INSIGHT AND SEGMENTATION TOOLS
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
The ‘Big Questions’ for Stimulation
What catches
people’s attention?
Wh...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
24 Secondary Questions
1.	 Who are the different people involved with t...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
The Top 4
Questions Answers
80
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Interrogate Your Consumer
Interrogate
Your
Consumer
What influences the...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Customer Profile Page
An understanding of a
customer’s mindset lets
you...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Benefits vs. Problems
When asked what they want for their dog, consumer...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Benefits vs. Problems
Category/Product Benefits Category/Product Frustr...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Picture Profiles
Picture profiles can be used to really bring the targe...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Pen Portraits of Target Markets
Writing a portrait of your target marke...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Mind Snapshot
This tool helps you analyse your customer’s drivers of pu...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Insight Windows
An insight is merely a point of view on a
piece of data...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Insight Links
This tool is handy for linking insights to communications...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Customer Journey Audit
This tool provides a framework for conducting an...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Experience Engineering
This tool lets you compare the current
customer ...
KNOW YOUR CONSUMERS
INSIGHT AND SEGMENTATION TOOLS
Value Your Existing Customers
The average acquisition cost of a new cus...
The End
Congratulations on completing Book 3: Know your consumer
Contact us to get yourself a copy hellostepchange.com | +61 2 803...
Brand Box 3 - Know Your Consumers - The Marketer's Ultimate Toolkit
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Brand Box 3 - Know Your Consumers - The Marketer's Ultimate Toolkit

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1. Brand Box 3 - Know your consumers 2. Actions from insights 3. Know your consumers 4. Apple - Think different 5. Insights 6. Insight vs. Information 7. Insight gleaned 8. Why are insights important 9. The Pareto principle 10. Finding the outstanding results 11. The Standford prison system experiment 12. The Standford prison system experiment cont... 13. RTA "Pinky" Campaign 14. RTA "Pinky" Campaign cont... 15. Consumer Segmentation: Useful tools 16. Maslow's heirarchy of needs 17. 7 Levels of organisational consciousness 18. Cone of learning 19. Why target a consumer segment 20. Targeting and spillage 21. Key benefits of market segmentation 22. Market segmentation 23. Loyalty segmentation 24. Loyalty and relationship index 25. Generations through the ages 26. Baby boomers 27. Generation X 28. Generation Y 29. Generation Net 30. Generation C 31. Consumer 2.0 32. Customisation 33. The long tail 34. Segmentation methods 35. Who are we creating value for? 36. Segmentation: How is it done? 37. Segment examples 38. Adoption of innovation model 39. Common segmentation methodologies & models 40. Mosaic segmentation 41. geoTribes 42. Nielsen: Panorama 43. Roy Morgan segments: ASTEROID 44. Customer conversion 45. Marketing funnel 46. Purchase path 47. Conversion strategy 48. Case study: Joe Girard 49. Joe Girard cont... 50. Research: Angles and Issues 51. Bill Bernbach 52. Henry Ford 53. trendwatching.com 54. Roles of research 55. Research and ethnography 56. Different segmentation for different purposes 57. Decision making 58. Research strategies 59. Research can confuse you! 60. Case study: Coca-Cola 61. The tipping point 62. The tipping point cont... 63. The tipping point cont... 64. Pricing 65. Pricing strategies 66. Progression of commoditisation 67. Elements of pricing 68. Pricing elements 69. Pricing elements cont... 70. The strategy and tactics of pricing 71. Reference price 72. Reference price cont.. 73. Adapting to a changing environment 74. Price metrics 75. Marketing success through differentiation 76. Pricing mechanisms 77. Insight and segmentation tools 78. The "Big Questions" for stimulation 79. 24 Secondary questions 80. The top 4 81. Interrogate your consumer 82. Customer profile page 83. Benefits vs. problems 84. Benefits vs. problems cont... 85. Picture profiles 86. Pen portraits of target markets 87. Mind snapshot 88. Insight windows 89. Insight links 90. Customer journey audit 91. Experience engineering 92. Value your existing customers

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

  1. 1. KNOW YOUR CONSUMERS KNOW YOUR CONSUMERS GROWTH Know Your Business Brand Architecture Branding Positioning Know Your Consumers Profiling Segmentation Insights Pricing Know Your Market Competitive Environment Binary Analysis Predatory Thinking What’s the Big Idea? Launch or NPD Innovation Communications How to Say It Advertising Idea Tone & Messaging When and Where to Say It Media Strategy Connection Idea Channel Planning ACTIONS from INSIGHTS 2
  2. 2. KNOW YOUR CONSUMERS KNOW YOUR CONSUMERS 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, or taken them for granted. So now we know how important they are, the big questions 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. Know Your Consumers 3
  3. 3. KNOW YOUR CONSUMERS KNOW YOUR CONSUMERS Consumer power Consumers 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.”
  4. 4. INSIGHTS The fuel for creativity
  5. 5. KNOW YOUR CONSUMERS INSIGHTS Insight vs Information 6 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
  6. 6. KNOW YOUR CONSUMERS INSIGHTS 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?” 7 Think. Again.
  7. 7. KNOW YOUR CONSUMERS INSIGHTS 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 knock-out 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? The answer 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. 8
  8. 8. KNOW YOUR CONSUMERS INSIGHTS 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% 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 Results 20% 80% 9
  9. 9. KNOW YOUR CONSUMERS INSIGHTS 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 NotUrgentUrgent 10
  10. 10. KNOW YOUR CONSUMERS INSIGHTS Background The 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
  11. 11. KNOW YOUR CONSUMERS INSIGHTS 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. 12 * Official Site - http://www.prisonexp.org Wikipedia - http://en.wikipedia.org/wiki/Stanford_prison_study
  12. 12. KNOW YOUR CONSUMERS INSIGHTS RTA ‘Pinky’ Campaign: An Insights Case Study Background The 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 were horrible; 90% of fatalities in P-plate crashes are male. P-platers represent just 7% of licence holders but accounted for 33% of speeding infringements 30km/h above the limit and 41% of 45km/h and above the limit.
  13. 13. KNOW YOUR CONSUMERS INSIGHTS Insight It 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 ‘pinkie’ - 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 Australia communications history”. • Passengers embraced the ‘pinkie’ gesture. • Prompted a crucial behaviour shift in young drivers - ‘pinkie’ 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.. 14
  14. 14. CONSUMER SEGMENTATION Useful Tools
  15. 15. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Know your consumers This model identifies the levels of human needs. As marketer’s, 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, wamrth, sleep, etc. Protection, security, order, law, limits, stability, etc. Family, affection, relationships, workgroup. etc. Achievement, status, responsibility, reputation Knowledge, meaning, self-awareness Beauty, balance, form, etc. Personal growth, self-fulfilment Helping others to self-actualise 16
  16. 16. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Seven 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 Value Financial Stability, Employee Health and Safety Limiting: Short-term Focus, Control Relationships that Support the Organisation Open Communication, Respect, Customer Satisfaction Limiting: Blame, Internal Competition High Performance Systems and Processes Productivity, Efficiency, Quality, Professional Growth Limiting: Bureaucracy, Complacency Continuous Renewal and Learning Accountability, Adaptability, Innovation, Teamwork Development of a Strong Cohesive Culture Commitment, Enthusiasm, Shared Values Strategic Alliances and Partnerships Employee Fulfilment, Community Involvement Service to Humanity Ethics, Social Justice, Future Generations 17 Richard Barrett
  17. 17. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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 movie Looking at an exhibit Watching a demonstration Seeing it done on location Participating in a discussion Giving a talk Doing a dramatic presentation Simulating 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 below on how we choose to engage with people. 10% 20% 30% 50% 70% 90% We Remember: 18 Edgar Dale, Audio-Visual Methods in Teaching (3rd Edition). Holt, Rinehart and Winston (1969)
  18. 18. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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 19
  19. 19. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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 20
  20. 20. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Key Benefits of Market Segmentation 21 Focus marketing efforts where they have the best chance of success Build on the success of other company’s products Increase profitability through increased customer loyalty and higher prices Increase the efficiency of money spent for marketing activities Find growth opportunities Market Segmentation
  21. 21. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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. Product Consumer Segment Positioning Value New Product Development (Crowd Sourcing) Product Segment Value Loyalty 22 Relationship
  22. 22. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Loyalty Segmentation Rather than just assuming that customers are loyal because they keep on coming back, it often pays to look what’s underpinning that loyalty. What are their opinions, beliefs and motivations? Non-customers Those who buy competitor brands or are not product class users. Price switchers Those that are price sensitive and switch between brands depending on price. Passive loyal Those who buy out of habit rather than reason. Fence sitters Those who are indifferent between two or more brands. Committed Those that will only have eyes for the one brand. 23 Committed Fence Sitters Passive Loyal Non Customers Price Switchers Building Strong Brands, David A. Aaker 1996
  23. 23. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Loyalty and Relationship Index This Ogilvy model helps understand and clarify some of the drivers of loyalty Strangers Distant Lovers Happy Marriages Prisoners Low High High Emotional Loyalty Behavioural Loyalty 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. 24 Ogilvy One
  24. 24. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION One of the most common and easy to define segments are generational Generations through the Ages Baby Boomers (1946-1960) Generation X (1961-1980) Generation Y (1981-2001) Generation Net (1995-...) 25 http://www.dhss.mo.gov/LPHA/New2008MCHI/GenerationalDifferences_Worksheet_GalenHoff.pdf
  25. 25. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Baby Boomers Defining characteristics: • Born 1946-1960, after World War II • Grew up during the 50’s, 60’s and 70’s • Entered the workforce when unemployment was high; late 60’s to early 80’s • They remember starting at the bottom and working their way up • They are today’s ageing workforce Baby Boomers 26 Through the Ages, Business Review Week, Dr Roslyn Sayers 2008
  26. 26. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Generation X Defining characteristics: • Born 1961-1980 • Grew up during the 70’s and 80’s, entering the workforce in the 80’s and 90’s • 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 90’s 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 Generation X 27 Through the Ages, Business Review Week, Dr Roslyn Sayers 2008
  27. 27. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Generation Y Defining characteristics: • Born in 1981-2001 • Grew up during the 80’s and 90’s and entered the workforce from the 90’s 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 28 Through the Ages, Business Review Week, Dr Roslyn Sayers 2008
  28. 28. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION Generation Net Generation Net Defining characteristics: • Born 1995 and beyond • Are growing up in the 90’s and 00’s • Will enter the workforce from around 2010-2020 • Have grown up with technology such as mobile phones, Internet, • Expect everything to be instantaneous • Generally have an extremely short concentration span Before they turn 25 the 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 29
  29. 29. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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. 30 http://www.trendwatching.com/trends/GENERATION_C.htm
  30. 30. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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. 31 Engage: Gen Y, Brandon Evans, April 17, 2009
  31. 31. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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 32 Ben Phillips, AdNews 8 August 2008
  32. 32. KNOW YOUR CONSUMERS CONSUMER SEGMENTATION 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. Popularity Products Head Long Tail 33 Life After The 30-Second Spot, Joseph Jaffe, 2005
  33. 33. SEGMENTATION METHODS
  34. 34. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 35
  35. 35. KNOW YOUR CONSUMERS SEGMENTATION METHODS Segmentation: How is it Done? Who they are? Where are they? What they do? What they think? 36 Psychographic Behavioural Demographic Categorisation Geographic Define by service Customer or consumer? Costumer 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 lifestyles Motivation
  36. 36. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 37
  37. 37. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 38
  38. 38. KNOW YOUR CONSUMERS SEGMENTATION METHODS Common Segmentation Methodologies & Models Mosaic geoTribes Neilsen: Panorama Roy Morgan: Asteroid Segmentation Tools 39
  39. 39. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 40 http://www.business-strategies.co.uk
  40. 40. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 41 www.rdaresearch.com.au/geotribes.php
  41. 41. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 multi-media 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 market place. 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 Neilsen: Panorama 42 http://au.nielsen.com/products/nmr_panorama.shtml
  42. 42. KNOW YOUR CONSUMERS SEGMENTATION METHODS 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 43 www.roymorgan.com.au
  43. 43. CUSTOMER CONVERSION
  44. 44. KNOW YOUR CONSUMERS CUSTOMER CONVERSION 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 45
  45. 45. KNOW YOUR CONSUMERS CUSTOMER CONVERSION 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 Repeat Purchase Endorse Advocate 46
  46. 46. KNOW YOUR CONSUMERS CUSTOMER CONVERSION Conversion Strategy Of course, the purchase path isn’t always set in stone, but is dictated by your industry. What is set in stone is that there is always an action which is prompted by a stimulus. 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 ActionStimulus 47
  47. 47. KNOW YOUR CONSUMERS CUSTOMER CONVERSION Case Study: Joe Girard When 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
  48. 48. KNOW YOUR CONSUMERS CUSTOMER CONVERSION 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! 49
  49. 49. RESEARCH Angles and Issues
  50. 50. KNOW YOUR CONSUMERS CUSTOMER CONVERSION “Most marketers use research like a drunk uses a lamp post, for support rather than illumination.” Bill Bernbach
  51. 51. KNOW YOUR CONSUMERS CUSTOMER CONVERSION “If I had asked people what they wanted, I would’ve built a faster horse” Henry Ford
  52. 52. KNOW YOUR CONSUMERS RESEARCH “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
  53. 53. KNOW YOUR CONSUMERS RESEARCH 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 ContextConsumer Trends - experts, technological changes Culture - pop culture, style, fashion Cross-Industry - influences from parallel industries, developments etc. Depth (insight) - Qualitative analysis - groups, interviews, observations, ethnography Breadth (quantisation) - online, omnibus, Roy Morgan data 54
  54. 54. KNOW YOUR CONSUMERS RESEARCH Research and Ethnography A context for research interpretation Not aware AwareWillsay Won’tsay 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 55
  55. 55. KNOW YOUR CONSUMERS RESEARCH Different Segmentation for Different Purposes Segmentations to develop advertising Populations Studied Users of the product or service to be advertised Data sources tapped Attitude surveys Analytical tools 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 56 Harvard Business Review Feb 06
  56. 56. KNOW YOUR CONSUMERS RESEARCH Decision Making Issues the business wants to address Shallow decisions • Whether to make small improvements 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 Deepest decisions • 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 57 Harvard Business Review Feb 06
  57. 57. KNOW YOUR CONSUMERS RESEARCH Research Strategies 58 Climb a mountain Quantitative 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 jungle Environment 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.
  58. 58. KNOW YOUR CONSUMERS RESEARCH 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 is 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 59
  59. 59. KNOW YOUR CONSUMERS RESEARCH Case Study: ‘NEW’ Coca-Cola Failure In 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 not and, but 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.
  60. 60. KNOW YOUR CONSUMERS RESEARCH Defining and engaging social change The 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 61 The Tipping Point, Malcolm Gladwell, 2000
  61. 61. KNOW YOUR CONSUMERS RESEARCH 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: 62 The Tipping Point, Malcolm Gladwell, 2000 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.
  62. 62. KNOW YOUR CONSUMERS RESEARCH 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. 63 The Tipping Point, Malcolm Gladwell, 2000
  63. 63. PRICING
  64. 64. KNOW YOUR CONSUMERS PRICING Pricing Srategies Pricing 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. Pricing Strategies 65 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  65. 65. KNOW YOUR CONSUMERS PRICING Progression of Commoditisation The below graph shows us that price becomes important only if everything else is equal. $ Margin Time Functionality Quality Convenience Price 66 Rod Young, dcstrategy.com
  66. 66. KNOW YOUR CONSUMERS PRICING 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 Reference Value Elasticity of Demand End Use as Driver Bundling & Framing Evaluation Cost Shared Cost Effect Customer Value 67 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  67. 67. KNOW YOUR CONSUMERS PRICING 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 Neccessity 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 of 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. 68
  68. 68. KNOW YOUR CONSUMERS PRICING 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 69
  69. 69. KNOW YOUR CONSUMERS PRICING 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 70 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  70. 70. KNOW YOUR CONSUMERS PRICING Reference Price Why are people buying? Low Low High Value of Differentiation PainofPrice Price Buyers Value Buyers Convenience Buyers Relationships Buyers High 71 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  71. 71. KNOW YOUR CONSUMERS PRICING Reference Price 72 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-establish the price difference? YES NO Respond Will the multiple responses required to match a competitor still cost less than the avoidable sales loss? YES YES Respond Does the value of the markets at risk justify the cost of a response? NO YES YES Respond NO Accomodate or Ignore Is there a response that would cost less than the preventable sales loss? YES NO The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden Competitive Price Out or New Product Entry
  72. 72. KNOW YOUR CONSUMERS PRICING Adapting to a Changing Environment Product Development Stage Introduction Growth Maturity DeclineSales and Profits ($) Time Sales Profits 73 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  73. 73. KNOW YOUR CONSUMERS PRICING 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 74 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden
  74. 74. KNOW YOUR CONSUMERS PRICING 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 75 The Strategies and Tactics of Pricing, A guide to profitable decision making, Third Edition by Thomas T. Nagle and Reed K. Holden Product Augmented Product Ease of purchase Terms of credit Reliability of delivery Pleasantness of interactions Fair handlings of complaints
  75. 75. KNOW YOUR CONSUMERS PRICING Pricing Mechanisms Fixed “Menu” Pricing Predefined prices are based on static variables List Price Users of the product or service to be advertised Product Feature dependent Price depends on the number or quality of Value Proposition Features Price depends on the type and characteristic of a customer segment Volume dependent Price as a function of the quantity purchased Dynamic Pricing Prices 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 Customer Segment dependent Negotiation (Bargaining) Yield Management Auctions Real-time market 76
  76. 76. INSIGHT AND SEGMENTATION TOOLS
  77. 77. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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? ? 78
  78. 78. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 can this be 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 competitors 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 out 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? 79
  79. 79. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS The Top 4 Questions Answers 80
  80. 80. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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? 81
  81. 81. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 82
  82. 82. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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... 83 ...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.
  83. 83. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS Benefits vs. Problems Category/Product Benefits Category/Product Frustrations 84
  84. 84. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS Picture Profiles Picture profiles can be used to really bring the target market to life Traditional Media Target Viewing your consumer in terms of an age group or demographic e.g. 12 to 24 year olds Conceptual Media Target Viewing your consumer as a part of whatever community they belong to e.g. cool young people 85
  85. 85. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS Pen Portraits of Target Markets Writing a portrait of your target market may help get inside their mind and understand their motivations and desires Autobiography A brief story written in the ‘first person.’ Biography A story written by a second person 86
  86. 86. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS Mind Snapshot This tool helps you analyse your customer’s drivers of purchase behaviour Product Category: (e.g. Toothpaste) Category Attributes Importance as purchase driver (1-10) Relative Brand Strength 87 N.B: Different by segment Different by individual
  87. 87. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 above 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 88
  88. 88. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS Insight Links This tool is handy for linking insights to communications messages Core Insight 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? 89
  89. 89. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 1 Market Leader Competitor 2 Closet Competitor Competitor 3 Most innovative Parallel industry best practice My Brand PointofView Contact Stage 90
  90. 90. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 similarities and differences? What needs to be changed to engineer the perfect customer experience 91 The Idea Generator, Ken Hudson, 2007
  91. 91. KNOW YOUR CONSUMERS INSIGHT AND SEGMENTATION TOOLS 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 cross sell opportunity • Plan your next contact • Ask for feedback • Stay relevant • Consider their needs • Ask if the consumer can refer - empower and incentivise them S 92 Business Review Week, 2008
  92. 92. The End
  93. 93. Congratulations on completing Book 3: Know your consumer Contact us to get yourself a copy hellostepchange.com | +61 2 8030 8655 | chat@hellostepchange.com The Brand Box series The next book in the Brand Box series is Book 4: What’s the big idea?
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