2 Kinds of Customers: Relational v. Transactional

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Overtargeting and reliance on demographic research is one of the sacred cows of marketing. Focus, instead, on human behavior instead of someone's age, race or gender.

This concept was originally introduced to me in 2003 by my business partner, Roy H. Williams.

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2 Kinds of Customers: Relational v. Transactional

  1. 1. Two Kinds of Customers © 2007 -- Wizard of AdsWednesday, May 23, 12
  2. 2. Two Kinds of Customers “ Half the money I spend on advertising is wasted; the trouble is I dont know which half.” - John Wanamaker © 2007 -- Wizard of AdsWednesday, May 23, 12
  3. 3. Two Kinds of Customers The Relational Customer • Thinks long term. R • Considers today’s transaction to be one in a series E of many. L • Does not enjoy comparison shopping or A negotiating. T • Fears only “making a poor choice.” I • Hopes to find an expert they can trust. O • Considers their time spent shopping to be part of N the purchase price A • Is likely to become a repeat customer. L • Is a good source of word-of-mouth advertising. © 2007 -- Wizard of AdsWednesday, May 23, 12
  4. 4. Two Kinds of Customers The Transactional Customer T R • Thinks short term. A • Cares only about today’s transaction. N • LOVES the process of shopping and negotiating. S • Fears only “paying more than I had to pay.” A C • Is willing to spend lots of time investigating. T • Considers themselves the expert. I • Hinges every transaction on price. O • Loyalty? Wants to “beat you.” N • Is a good source of word-of-mouth advertising. A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  5. 5. Two Kinds of Customers NOTES: According to a study conducted by Dr. Richard D. Grant of 60 million Myers-Briggs Type Instruments, for a given product or service, Relational Shoppers tend to comprise roughly half the population, while the other half are Transactional Shoppers. A customer can be a Relational Shopper in one product category and a Transactional Shopper in another. © 2007 -- Wizard of AdsWednesday, May 23, 12
  6. 6. Two Kinds of Customers R E L A T One I O N A L Case T R A N S Study A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  7. 7. Two Kinds of Customers R E L A T I O N A L T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  8. 8. Two Kinds of Customers R E $100 L A T I O N A L T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  9. 9. Two Kinds of Customers R E L A T I O N A L T R A N S $90 A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  10. 10. Two Kinds of Customers R E L A T I O N A L $100 T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  11. 11. Two Kinds of Customers R E L A T I O N A L $100 T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  12. 12. Two Kinds of Customers R E L A T I O N A L T R A N S A C T I O N A $90 L © 2007 -- Wizard of AdsWednesday, May 23, 12
  13. 13. Two Kinds of Customers R E L A T I O N A L $70 T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  14. 14. Two Kinds of Customers R E L A T I O N A L T R A N S A C T I O N A L $80 © 2007 -- Wizard of AdsWednesday, May 23, 12
  15. 15. Two Kinds of Customers R E L A T I O N A L $60 T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  16. 16. Two Kinds of Customers R E L A T I O N A L T R A N S $70 A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  17. 17. Two Kinds of Customers R E $60 L A T I O N A L T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  18. 18. Two Kinds of Customers Average Sale: $82 Average Gross Profit: $32* Average Profit Margin: 39% © 2007 -- Wizard of AdsWednesday, May 23, 12
  19. 19. Two Kinds of Customers BEWARE of Averages © 2007 -- Wizard of AdsWednesday, May 23, 12
  20. 20. Two Kinds of Customers R E L A T I O N A L T R A N S Only 22% of Store A C T Visits (5 of 23) were I O N made by Relational A L Shoppers. © 2007 -- Wizard of AdsWednesday, May 23, 12
  21. 21. Two Kinds of Customers R 78% of Store Visits E L (18 of 23) were made A T I by Transactional O N A Shoppers. L T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  22. 22. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  23. 23. Two Kinds of Customers R E L A T I O N A L T R A N S A C T I 50% of Buyers O N A (5 in 10) were L Relational Shoppers. © 2007 -- Wizard of AdsWednesday, May 23, 12
  24. 24. Two Kinds of Customers R E 50% of Buyers (5 in 10) were L A T Transactional Shoppers. I O N A L T R A N S A C T I O N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  25. 25. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  26. 26. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  27. 27. Two Kinds of Customers R E $100 L A T I O N A L $100 $100 T R A N S $90 A C T I 59% of Dollars Spent O N A L ($480 of $820) were by $90 Relational Shoppers. © 2007 -- Wizard of AdsWednesday, May 23, 12
  28. 28. Two Kinds of Customers R E 41% of Dollars Spent $60 ($340 of $820) were by L A T Transactional Shoppers. I O N A L $60 $70 T R A N S $70 A C T I O N A L $80 © 2007 -- Wizard of AdsWednesday, May 23, 12
  29. 29. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  30. 30. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  31. 31. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L 60% Sales 40% N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  32. 32. Two Kinds of Customers R E $50 L A T I O N A L $50 $50 T R A N S $40 A C T I 72% of Gross Profit ($230 O N A L of $320) came from $40 Relational Shoppers. © 2007 -- Wizard of AdsWednesday, May 23, 12
  33. 33. Two Kinds of Customers R E 28% of Gross Profit ($90 $10 of $320) came from L A T Transactional Shoppers. I O N A L $10 $20 T R A N S $20 A C T I O N A L $30 © 2007 -- Wizard of AdsWednesday, May 23, 12
  34. 34. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  35. 35. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  36. 36. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L 60% Sales 40% N A L © 2007 -- Wizard of AdsWednesday, May 23, 12
  37. 37. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L 60% Sales 40% N A L 70% Profit 30% © 2007 -- Wizard of AdsWednesday, May 23, 12
  38. 38. BUT… © 2007 -- Wizard of AdsWednesday, May 23, 12
  39. 39. Two Kinds of Customers T R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L 60% Sales 40% N A L 70% Profit 30% © 2007 -- Wizard of AdsWednesday, May 23, 12
  40. 40. Two Kinds of Customers T 10% Advertising 90% R R E A L N A 20% Traffic 80% S T A I C O 50% Buyers 50% T N I A O L 60% Sales 40% N A L 70% Profit 30% © 2007 -- Wizard of AdsWednesday, May 23, 12
  41. 41. WHY? © 2007 -- Wizard of AdsWednesday, May 23, 12
  42. 42. Two Kinds of Customers Most retailers say their primary objective is to “drive traffic.” And since traffic is heavily weighted towards the everywhere-at-once Transactional Shopper, it’s not surprising the majority of all retail ad dollars are spent on “Sale,” “Price-Item” and “Event” ads that target the transactional mindset. © 2007 -- Wizard of AdsWednesday, May 23, 12
  43. 43. Two Kinds of Customers Most retailers assume the store traffic they see each day is representative of their typical customer profile and potential sales volume. But seldom is this the case. © 2007 -- Wizard of AdsWednesday, May 23, 12
  44. 44. Two Kinds of Customers Transactional Shoppers represent a greater share of overall store traffic than of actual sales or gross profits because they tend to visit a greater number of stores in search of the the lowest price. © 2007 -- Wizard of AdsWednesday, May 23, 12
  45. 45. Two Kinds of Customers Consequently, Transactional Shoppers represent lower closing ratios, lower average sales, and smaller profit margins. © 2007 -- Wizard of AdsWednesday, May 23, 12
  46. 46. Two Kinds of Customers Relational Shoppers represent a smaller share of store traffic, but a larger share of sales, higher closing ratios, higher average sales, and higher profit margins. © 2007 -- Wizard of AdsWednesday, May 23, 12
  47. 47. Two Kinds of Customers Intentionally or unwittingly, every ad speaks to either a relational or transactional shopper. Who have you been targeting? © 2007 -- Wizard of AdsWednesday, May 23, 12

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