The Diagnosis of Dr. Why
Holtzclaw: Marketers are scared to learn why customers buy.
Some years ago Eric Holtzclaw was a programmer who watched a focus group of PC users intuitively reject all the user-friendly features he and his fellow team members spent a year perfecting. It changed his life.
Entranced by the notion that maybe you should ask people what they want before you give it to them, he converted to marketing. Now the CEO of marketing strategy firm Laddering Works, Holtzclaw thinks Big Data is as good as far as it goes, but it doesn't go far enough. The secrets buried in binary code may tell you the what, he says, but they can never tell you the why. On the occasion of the publication of his book, Laddering: Unlocking the Potential of Consumer Behavior, we asked for a data-driven diagnosis from marketing's Dr. Why.
The introduction to your book says it calls upon recent learnings you've stockpiled to help you focus on what's really important. So, what's really important?
Understanding who the customer is as an individual. That's a scary thing to a marketer. I've interviewed between six and seven thousand people over the last several years, and they think they're different than the profiles marketers create. It's not whether they're male or female, or affluent or not, it's about other things they're trying to confirm. Marketers need to look at why people do what they're doing, but they only look at the what. For example, Chipotle came out today and said it's going to move away from its ban on beef from animals treated with antibiotics. But it's a mistake, because their ban is the reason why a lot of people go there and they have to stand by that. [Editors Note: Following a crush of negative reaction to the declaration, Chipotle spokesperson Chris Arnold later said that he misspoke in giving the story to Bloomberg News and that the company would maintain its ban.]
Give us an example of how the “why” can contradict the “what.”
People are either spenders or savers. It doesn't matter how much money they have. Some people need to buy and others like to save their money and watch it pile up. So marketers look at extreme couponing and see that as saving, but it's really organized hoarding. These people just go out and purchase. It doesn't matter what the economic conditions are, it doesn't matter how much money they have. I've been in people's houses and things were falling apart, they were nearly bankrupt, but they'd show you something they'd just purchased. They'd sell stuff so they could make a purchase.
What is laddering and how can understanding it help marketers sell more stuff?
Selling more stuff is what it's all about. Laddering is a concept introduced by Thomas Reynolds in the Eighties. It involves talking to people in person and understanding what drives them as customers. You spend time with them in their homes and observe them. You ask them “Why?” five different ways. One of the early laddering projects tried to learn why people bought a certain CD player. A lot of them said that it was because of the convenience of being able to load a number of CDs, but the real reason was that they wanted to spend more time interacting with their guests.
Companies come to me and say, “This product is not selling as is. We get too many support calls. Here it is and this is why it's broken and we want to build a new version.” Really, they all say that. They all come to us with assumptions. Then we go out and ask users and find out the [marketers'] assumptions are 98% wrong.
Sounds like laddering is more about product development than marketing.
Our company started out doing product usability testing. We started talking to customers and discovered that building a product and then figuring out how to market it is backwards. You have to know how you'll message a product to consumers before you start to build it.
You put a lot of stock into what you call “consumer DNA,” which you have defined by a set of markers. Please explain.
We've identified 12 consumer DNA markers. These are the new male or female. You're one or the other. Within certain contexts, you need only ask consumers two or three questions to see what cluster they fit into. If I really like to project aspects of my life, for instance, I'm very different from someone who doesn't like to project. Marketers talk a lot about social media, but not everybody is on social media. If I project and I require affirmation, I need that brand to speak back to me and to share things. If I'm independent and not so worried about opinions, if I don't want to be friends with my brand, social media messaging diminishes it in my eyes. We worked with one company where all we had to do was ask customers one question about parenting style. From that that one response we determined if they were A or B and we knew how to market to them.
But doesn't it require exhaustive rounds of one-on-one interviews with consumers to draw such a distinction?
Actually, you start to see the pattern after 18 to 27 consumer interactions. Marketers try to tell me you can't do that. But if you have good conversations with those people, they are going to reveal themselves. I think quant is a great way of confirming what you're doing. The mistake marketers make is using quant as a substitute for quality.
Can your methods help detect which customers can become brand advocates and which will never be?
Marketers have a problem here. They are so numbers focused. I'll say to them, “Here's the group you have to go after,” and their first question is “How big is it?” I'll say, “Eight percent of your market.” Their reaction is, “What? Never.” We don't do anything with any group unless it's 20%” Then I'll say, “But these are your customers. If you service them, they will spread your message.” I fight this battle all the time.
Leave us with a real-world example of successful laddering.
We had a bank client that wanted us to help them with a campaign to get new accounts. Now, people change banks only every 17 years, on average, so this bank wanted us to segment people who had gotten new jobs, gotten married, or had just retired. They wanted to target people in transition and they wanted us to focus on convenience. We found it meant one of three things. One was the number of ATMs and branch locations a bank has. These people wanted to be recognized by face at their bank, but not necessarily by name. To the second group, convenience meant online tools. They were willing to use a bank that had little or no brick-and-mortar presence. To the third group, convenience meant having a personal banker. It might be a business owner, it might be someone who'd won the lottery, but they wanted a banker who recognized them by voice and was knowledgeable about their complex financial issues. The bank had learned in time that convenience was about one of these three things, not about marriage or a new job.