Commentary
Tipping the Iceberg
- by kyle , Daisy Whitney , December 1, 2009
Missing the mark with messages is costly (and common)
Sometimes a number can be both frightening and liberating. Like this one from Don Schultz, a professor of integrated marketing communications at Northwestern: Only 4 to 5 percent of customers account for the preponderance of a consumer product's sales. Does that make the other 95 percent of a marketer's customers chopped liver? Maybe a little bit. Because not only does that 4 to 5 percent comprise most of your sales and your profits, the rest of your customers often cost you money to acquire.
"What that says is, I better figure out who those 5 percent are and pick them up in a car and drive them to the store and help them shop," says Schultz. That's why he is advocating a complete overhaul in the way media planners approach campaigns. Rather than focus on the distribution of a message, they should concentrate on finding the customers. By flipping their thinking around, they'll have a much better chance of reaching prospects with the right media mix and, in so doing, gain a bigger share of dollars for digital budgets.
"Most advertisers and marketers will have some clear definition of who they are trying to reach and it could be broad, like women ages 18 to 49, or it could be individual names and addresses. All I am suggesting is starting at the other end of media planning. Start with what media forms they consume as opposed to what [the marketer] wants to do," Schultz says.
In some ways that sounds elementary, but many shops are still married to old ways of thinking. "We have used averages and broad statistical analysis for so long that we have lost sight of what the marketplace is really like," Schultz adds.
Instead, media planners should consider four critical measures in media consumption: what media is accessed, how much time is spent with each media form, what media is used together and which media has the greatest influence on product purchase. Makes perfect sense, right? So obvious that all marketers must do this in their sleep?
Maybe not.
Because, says Schultz, if you calculate cost weighted by the influence, then auto marketers overspent last year in TV by $3 billion, underspent in radio by $1.6 billion and underspent online by $1.5 billion.
Other marketers are misfiring, too. Computer marketers, as an example, should have been marketing online, in magazines and via email, while radio is much less relevant to prospective computer purchasers, Schultz says, citing data from June 2008.
The key to success is to study consumption. Most people consume multiple kinds of media at once. They read a magazine while talking on a cell phone or use Twitter while watching TV. Knowing the media consumption habits, preferences and combinations for your prospective customers is the proper way to plan a campaign. "It's what media combinations are most important to people and having a clue how to put media combinations together," says Schultz.
And that means reach isn't all it's cracked up to be. "It's not how many messages are distributed, it's how many are consumed. It's not what is most efficient, it's what is most effective. It's not how big your share of voice is, it's how important your customers think you are."
That 4 to 5 percent may seem small, but as the saying goes, good things come in small packages.
Fantastic! The 80/20 rule is still alive and well. Although it seems it could be shifting to a 95/5 rule.
l seriously doubt 95/5 applies in all...even most...cases. The other thing to keep in mind is that the 5%...or 20%...is not a static group. People move in and out for various reasons. So while understanding who they are and catering to them are worthy goals, brands that over-focus on core customers risk "disappearing" in the minds' eye of the larger mass market. That is not a recipe for long term growth.
There is no 80/20 rule or 95/5 or X/Y rule.
What the author implies is that media type, its reach and response rates are somewhat correlated and have complex elasticities as a function of the produce or service offered and are also affected by p/s features, innovation, price, market share, and media budget.
Online marketing now recognizes that CPM and CPC (cost per ad and click per 1000) are no longer useful for measuring ad effectiveness. Even CPT (transaction) is hard to measure due to the primitive nature of cookies and beacons.
The holy grail of online advertising is eCPM (effective) which should measure efficiency in terms of the ratio the authors proposes. I suspect that this figure may be much higher than 5/95 when done effectively. Why? because the measurement systems can be more precise and the intent to buy is much closer in time to when the message is presented (no long time lag).
The sole purpose of advertising is not to stimulate an immediate sale.
This has been a long established finding for direct marketers and shouldn't come as any surprise. But, having seen how the 95% of "non-respondents" are impacted and hopefully have an improved perception of the brand and the experience...it is important to not view the" other 95 percent of a marketer's customers chopped liver" but as an opportunity to continue to impact "birds of a feather"...cost effectively and cost efficiently.
It's important for marketers to understand who the top 5 or 10% of your customers are, and in the context of this article.. figure out what media they like to be reached through and also what media channels they were initially acquired through. Then use that information to reach and acquire new customers through those same media channels... if you want to grow the number of top customers in your file a good way to start is by going straight to the source of where your other best customers came from.
On the flip side, take a look at your worst performing customers and figure out how you acquired them.. what makes these customers different from the rest of your customer base? Use that information to make sure you stop investing in media channels that produce low or negative long term ROI and reallocate those media dollars appropriately.
I like your summation in regards to ad messages being consumed over the amount of distribution they get and being effective instead of just efficient. Hopefully sooner rather then later this will become a serious part of the equation.