Using Data to Target the High-Profit Consumer
However, in the world of packaged goods, maintaining profitability and viability amid unprecedented audience fragmentation, price-based promoting and store brand-generic competition has proved difficult - even impossible - for many historically successful products.
Too often we use blunt mass marketing when precision is needed to identify, reach and keep profitable consumers. As marketers, we must be aware of the important difference between low- and high-profit consumers. Low-profit describes indiscriminate purchasers who regard a category as a commodity. High-profit buyers are regular rather than occasional category buyers who are motivated by something other than price.
Because high-profit buyers appreciate the benefits of a brand and are willing to pay for it, exposing them to excessive price-based marketing wastes money. It is sobering to realize that a staggering 80 percent of people who redeem a coupon would have bought the product anyway.
Compare the following promotion against regular price example:
Unit cost: 91 cents.
5 units of product sold on promotion @ $1 (9 cents profit each) = 45 cents.
2 units of product sold at regular price of $1.49 (58 cents profit each) = $1.16.
71 cents more available to spend on keeping these high-profit buyers.
How do you find high-profit buyers? The solution may be to work with a data provider that can supply in-depth behavioral and demographic information to help define the right target segment.
The best data providers supply more than a list of names and addresses. They tap into the behavior, attitudes and specific brand or category usage habits of millions of households, generating huge databases from which to draw sizable and distinct segments. The best of these companies use fresh, accurate data that are updated frequently.
Working with a data provider, you can determine which characteristics are typical of the high-profit buyers in your category and generate the ideal list. The cost of doing this will be a mere fraction of your total consumer communication budget.
One of the most efficient and effective methods of reaching your newly determined segment is to use direct mail to very specific groups. For example, marketers might choose to target university-educated magazine readers who buy cosmetics in drugstores, or fitness club members who buy frozen prepackaged meals twice a week. The targeting possibilities are endless, and the data providers are experts in determining who your high-profit consumers are.
The benefits of high-profit targeting. Segmented targeting reduces wasted spending. In a mass mailing, you reach your targets, but you also reach a majority of low-profit shoppers or people who will ignore your message. With a precise segment, you have data that indicate interest from each and every household.
Second, you can offer a truly meaningful message by tailoring your creative to a specific segment's needs. Research shows repeatedly that when speaking to an attentive, predisposed audience, information is the driver, and involvement is the catalyst.
Third, you can track the results of your precision marketing efforts using a variety of proven methods such as surveys, matched consumer panels and pre- and post-buying patterns appealing to the high-profit buyer.
Involvement is key. When developing the creative, remember that you are communicating with captive consumers, so respect their interest and speak to their needs. Listing all benefits is simply a mass message in disguise. Each segment has a common set of drivers, and success depends on your ability to appeal to these needs in a meaningful way.
To illustrate this point, take a look at a pediatric pain-relief product. Two campaigns were developed: The first took a traditional product performance stance, claiming that it was fast, safe, effective and doctor-recommended, and hid bad taste. All solid, supportable claims, but did they speak to the needs of the high-profit, potentially loyal user? The second, which was consumer-focused and written with moms' needs in mind, claimed that kids preferred its taste and went on to provide dosage instructions. The second message prompted a response rate 2.5 times higher than the "mass message" first example.
Marketers who focus their efforts on high-profit, loyal buyers have a powerful competitive edge. In the bargain, they will deepen their consumer relationships and become experts in generating strategically focused, profitable campaigns.