Amazon is No. 1 in customer service, even above Nordstrom, according to Todd Morris, EVP brand development at Catalina. The reason? Personalization, he told South by Southwest attendees during a session titled "Death by Demographics: Killing Off your Ad Budget." Retailers and marketers need to become personal assistants through personalized data, reminding consumers to repurchase the vitamin bottle they just emptied.
Catalina looked at the average demographic media spend of 10 mega brands to find out what percent of the spend actually targets the people who buy their products. Some 62% of TV ad dollars were spent targeting people responsible for 2% of all sales. So companies spend two-thirds of their money to get 2% of their business. Slice that a little deeper, Morris said: 30% of ad budgets go toward those consumers who have never engaged with the product category in the prior three years.
Stop telling consumers about something they don't want and will never buy, because eliminating that waste through data to focus on consumers who really care about certain products gives brands a 60% improvement in return on investment.
Consumers are fickle. "We looked at the top new product in the past two years and found that 1% of all U.S. households drove 80% of new item sales," Morris said. "The problem is that across all those brands, it was always a different 1% of the population. Do the mass media, but rather than put $50 million, take $10 million and find the high prospects, the 1% of people who represent the greatest opportunity through predictive modeling, and really hone in on those consumers online, in store and on mobile."
Morris talked about analyzing consumer loyalty for the top 500 CPG brands. The first year of the study analyzed consumers' loyalty to brands; by the next year more than half were no longer loyal.
Walgreens began spending less to target current customers without offending them and more on new prospects the retailer wanted, such as younger consumers. Joe Magnacca, who recently left Walgreens to become CEO at Radio Shack, talked about spending to gain the customer of tomorrow. "We're still going to keep my mom satisfied… as we age, we're less likely to move around to different retailers because we're comfortable," he said. "We look at the lifetime of a customer. The earlier I can get them in, the longer I can hold them. How I talk to them during that trip is pretty significant."