 |
 |
 |
||||
|
||||
|
|
Refocus Your Investment – Less is More
|
|
"How can I get more bangs for my bucks?"
Possibly the most common question we hear in times like these. More often than not the response will focus on cost cutting measures. Typically managers think about fewer customer contacts, reduced research budgets, reduced media coverage… but these exercises are often broad brush and rarely consider the precise nature of the target audience we are addressing.
Simple mathematics
What if you were to stop for a moment and look at a simple fact; to get more 'bangs for your bucks' you need to stop thinking about where you can reduce efforts with the customers you are currently marketing to and start thinking about who to really focus on. And so to a very simple equation:
 This often ignored fact is a fundamental principle that relates to every brand in every category in every market – there are always a small group of customers who will account for a majority portion of that brand's sales and profits.
Look at Diet Coke, an extreme example; 84% sales are consumed by only 8% households in the US; or Levi's Jeans where 85% sales can be contributed to only 5% households in the US.
And in tougher times, 'differential' spending focused on these high-value customers will have all the more impact. Because within this group we find customers who are often 'recession-proof', who will stick with you through 'thick and thin' and who offer the great opportunity to significantly increase your ROI on communications spend. Likewise a 'differential approach' enables us to shift investment away from those customers whose usage is disproportionately low and refocus it where potential returns are far higher.
And recognising these 'recession-proof' customers is really not that difficult. Why? Because given the opportunity they will often tell you. You just need to recognise the right signs.
|
|
Five ways to recognize a loyal recession-proof customer
• You are their first choice.
• They share confidential information with you.
• They accept your advice and ideas.
• They give you feedback (good or bad) before you ask.
• They recommend others to you (and you to them).
From 'The Eleventh Commandment' by Sandra Vandermerwe (1996)
|
|
All of these clues have one thing in common; they point to customers who are emotionally committed to your brand; customers who will say "this is my brand". These are customers who reach the level of bonding as described by the Ogilvy Loyalty Index.
Let's take another look at some more simple mathematics:
Take the laundry detergent category in France for example. We know there are 20+ million buyers of detergent in France and we also know that about 2+ million of these can be classified as 'high-value'. If we take a look at the number one brand in that category, we can see it benefits by having 50% of those high-value buyers in the category. But if we look at how many of those are actually at bonding with that brand, the number of consumers falls to just over 200,000 – just 1% of the market (by volume).
Of huge significance is the fact that these 200,000 buyers are driving over 60% of that brand's sales advantage over its nearest competitor. So where would you spend your money? Would you continue to halve your efforts to your existing customer base – or start thinking about which half of your customer base you should be talking to?
* Please note that the reader should interchange the words consumer and customer as appropriate for their business category.
|
 |
