managing consumer behaviour is the key to a great marketing strategy

IDEA 21

PROPOSITION

For far too long marketing has been viewed as a synonym for advertising. Indeed, advertising agencies have a vested interest in having us believe this is so, and they have done an excellent job of convincing us. The truth is, as I have said many times before – marketing is all about managing human, or more specifically, consumer behaviour

Central to managing consumer behaviour cost-effectively is the development and implementation of an optimal marketing strategy. Given that managing behaviour is the requirement, the marketing strategy needs to address the characteristics of human behaviour that will impact on success.

This paper addresses the development and implementation of a marketing strategy focused on managing consumer behaviour to achieve commercial or social objectives.

MARKETING IS ALL ABOUT MANAGING CONSUMER BEHAVIOUR

While your marketing might call for advertising, it need not. Indeed, as the examples that follow suggest – your marketing strategy, branding strategy and communication strategy need not involve advertising. Marketing strategies should be designed such that they facilitate the management of consumer behaviour as cost-effectively as possible. Advertising is not necessarily the priority.

1/24 – THE ZARA FORMULA FOR RETAIL SUCCESS

7% sales growth and 56.8% margin growth – How does this compare to your business?

In 2019, fashion chain Zara reported a US$1.71 billion profit on the back of a 7% rise in sales and a 56.8% boost in margins. I can’t speak for your business – but mine was not in the same league on any of these criteria.

Some would be surprised to learn that this was achieved with an advertising budget of $0. In 2019, as in previous years, Zara had no advertising budget. Instead, their focus was on being truly customer-centric and maximising the lifetime value of each customer. This was demonstrated by:

  • Leveraging customer data
  • Selecting the best locations
  • Leading the market in range

Zara has built a market on the back of a great product – and so can you!

RECOMMENDATION – Use advertising if you like, but don’t rely on it. First, ensure that you are truly customer-focused.  Start by gathering and analysing the data available to you now.

2/24 – THE ZAPPOS FORMULA FOR BRANDING

6% growth to US$537 million in sales – How does your business stack up?

In 2019, Zappos, the online shoe retailer grew 6% compared with 2018 and reported sales of US$537 million. When current CEO, Tony Hsieh, was appointed in 1999, sales were US$1.2 million. Hsieh sold the business to Amazon in 2009 for US$1.6 billion.

When asked the secret to his success, Hsieh commented as follows:

  • “Our number one priority is company culture. Our whole belief is that if you get the culture right, most of the other stuff like delivering great customer service or building a long-term enduring brand will just happen naturally on its own”.
  • “Your personal core values define who you are, and a company’s core values ultimately define the company’s character and brand. For individuals, character is destiny. For organizations, culture is destiny.”

Brand and branding have more to do with culture than they will ever have to do with advertising

RECOMMENDATION: Utilise the brand – culture continuum. Define your brand and bring it to life through your culture. Then, communicate it through behaviour first and foremost.

 

3/24 – COMMUNICATE LIKE COSTCO

US$19.8 billion gross profit on growth of 7.56%. What was your growth rate over the last year?

Growing by 7.56% year on year, supermarket giant Costco reported a gross profit of US$19.8 billion in 2019. Trading globally, Costco is the second-largest retailer in the world and the second most profitable bricks and mortar retailer in the United States. These results were achieved without traditional marketing.

The marketing strategy for Costco is built around value pricing and a limited range of unique products sold in bulk. The communication strategy for Costco involves:

  • Ambush marketing
  • Documentary marketing
  • Database marketing

Costco is living the highly profitable truth that it is possible to communicate without much advertising.

RECOMMENDATION: Consider all modes of communication before resorting to advertising, which is the most expensive. Pay attention to new modes such as documentaries and ambushing.

 

UNDERSTAND PEOPLE TO MANAGE THEIR BEHAVIOUR

It is not economically feasible, nor practically desirable, to try to be all things to all people. It is important to identify the smallest possible market and target scarce resources with a view to extracting full value from each of the priority audiences identified.

4/24 – IDENTIFY ALL AUDIENCES – NOT JUST BUYERS

$430 million to political parties. Is access to politicians important to your business?

According to the Australian Electoral Commission, corporate donations to political parties in 2018/19 topped $430 million, up from $279 in 2013/14. This included donations to all political parties – but excludes donations to local electoral campaigns. These numbers serve to highlight the importance corporate Australia places on access to politicians – supposedly the only thing these donations buy them.

This number also serves to highlight the fact that for any business, in addition to the target markets (potential buyers of products), there are other audiences that can impact on performance, and therefore should be addressed in the marketing strategy. These audiences might include:

  • Investors and financiers – the confidence of which is critical
  • Staff – central to performance maximisation
  • Community stakeholders – required for the social license to operate
  • Regulators and government – influencers of market conditions
  • Suppliers – partners in securing favourable trading terms
  • Media – voices that can make or break a business
  • Influencers – who constantly tell followers what to buy
  • The community – the drivers of social media comment

The marketing strategy for any business should address all audiences that can impact on the success of the individual or organisation. Non-market audiences are particularly important in terms of branding. The optimal brand will appeal to and engage all relevant audiences.

 

RECOMMENDATION – Identify ALL of the audiences that impact on the success of an individual, product, or organisation. Ensure they are addressed in the marketing and branding strategy.

 

5/24 – DEFINE THE SMALLEST POSSIBLE MARKET

41.3 billion Euros to IKEA. Is there something you can learn from this great brand?

In 2019, IKEA reported sales revenue of 41.3 billion Euros, up from 38.8 billion Euros in 2018. The revenue of IKEA has grown every year since 2001. In 2019, this revenue resulted in a profit of AUS$545 million in Australia alone. IKEA is a very successful business, and one of the most valuable brands in the world. It is a great business.

IKEA is a great business in part because management knows who their market is, but also because they:

  • Know who their market is not
  • Target the smallest possible market
  • Work hard to avoid competitors

I would never go into an IKEA car park, let alone an IKEA store. I dislike everything about IKEA – and their management does not care, because I am not their target market, and they know it is not possible to effectively target all people. Venture capitalist Mark Cuban maintains that the only businesses he will consider investing in are those with the smallest possible market – a market they can own (as IKEA own their market). Peter Theil, one of the co-founders of PayPal suggests that the only way to maximise performance is to have no competitors and the starting point for having no competitors is selecting a market that is not too big to own. He is 100% right!

RECOMMENDATION: Define the smallest possible target market and focus on it. Know who is not in your market and stop thinking about them. Find a market you can own and dominate.

 

6/24 – FOCUS ON CONSUMER VARIABLES THAT IMPACT ON YOUR BUSINESS

US$58.3 billion in just 3 months. Are you focusing on the right variables?

In the third quarter of 2019, Apple reported a revenue of US$53.8 billion, up 1.0% compared with the same period in the previous year. Few of us work in businesses that will achieve returns of this magnitude. However, there are important things we can learn from Apple in our quest to achieve the best possible returns for our businesses.

My 88-year old father uses an iPhone. I use an iPhone for business and personal use, but my partner does not. My tech crazy 30-year old son uses an iPhone. I have employed junior staff that use iPhones, and others that insist they are crap. The point is, it is very hard to pin down the Apple iPhone demographic to the extent that it is arguably irrelevant to try and do so. Indeed, evidence suggests that demographics are of little interest to Apple – beyond those that impact on the capacity to pay.

Psychographic variables are far more important to Apple. This is almost certainly the case for your business. These variables include:

  • Personality – traits that impact behaviour
  • Lifestyle – activities, interests, opinions, and attitudes
  • Social class – upper, medium, and lower

These variables are impacted by demographic variables. However, they are not in themselves demographic, and they are almost always more important than demographic variables. They usually impact more on purchase behaviour and should be understood by all businesses. That said, few businesses understand these variables or the impact they have on the performance of the business.

RECOMMENDATION – Give priority to defining your target market in terms of personality, lifestyle, and social class. Recognise that they are often more important than age and gender etc.

7/24 – GO ON THE JOURNEY WITH THE CUSTOMER

54% increase in ROI from mapping. Are you fully leveraging your customer journey?

Recent research found that businesses that map and address all stages of the customer journey increase the return on investment in marketing return by 54%. Research also found that customer journey mapping and leveraging increases ‘upsell-revenue’ by 56%.

Fully leveraging the customer journey involves:

  • Mapping the customer journey from the first point of need or want identification right through to repeat purchase and referral
  • Identifying every point at which the customer interacts or could potentially interact with you and your business
  • Understanding and addressing the needs at each touchpoint and establishing the capacity to address those needs.
  • Identifying a strategy for engaging with your target market at each and every touchpoint in a way that encourages the purchase of your product

In my experience, few businesses understand their customer journey as well as they should. Even fewer identify and leverage each touchpoint in that journey. This failure tends to drive marketing costs up and the potential for maximising revenue down.

RECOMMENDATION – Do the research required to identify the journey your target market goes on and apply effective strategies to fully leverage the potential of every touchpoint.

 

EMBRACE ALL THE TOOLS AVAILABLE TO MANAGE BEHAVIOUR

Advertising is just one of many tools available to marketers to manage the behaviour of their target markets. It is important to consider all available tools and the best possible use of these tools. The following examples address current thinking on these tools.

8/24 – CREATE PRODUCTS WITH NOT FOR CUSTOMERS

1.11 billion Euro net profit for Lego

In 2019, plastic blog maker Lego reported a net profit of 1.1 billion Euro, up from 1.08 billion Euro in 2018. In an economically challenging environment, Lego continues to shine, despite the fact that its core products have been on the market since 1932. One of the tools Lego has used very well in recent years is its ‘product’. The innovative development of that product addresses new generations and responds to the changing needs and expectations of a changing world.

Much of Lego’s success has been due to the innovative development of its product as a result of ‘co-creation’ facilitated by online communities. Other well-known brands using co-creation include DHL, Unilever and Manchester United. Co-creation involves designing and developing your product in partnership with customers and potential customers. Research suggests that some 58% of businesses are now piloting product co-creation.

Co-creation is an incredibly powerful approach to developing products that consumers see as ideal and preferable to others available. It is central to value creation. Approaches to co-creation include:

  • Market research
  • Establishing panels
  • Brand communities

Regularly testing product innovations with market research is a rudimentary approach to co-creation. Many businesses are now establishing panels that can be accessed for research and testing of products. Perhaps the lowest direct cost and most effective approach involve establishing a brand community that can be consulted on a regular basis.

RECOMMENDATION – establish a brand community. Start small and build over time. Use that community to work with customers and potential customers to develop optimal products.

9/24 – USE PRICE TO ENHANCE THE PERCEPTION OF VALUE

800 – 1000% mark up

Research completed in 2019 found that margins on eyewear ranged from 800% to 1000%. Close behind, margins on luxury women’s fashion ranged from 400% to a massive 2000%. Obviously,  these prices were not determined on a cost-plus basis. It is more likely that they were set on a value basis.

Most prices are set on a ‘cost-plus’ margin basis. While this may be the best approach to setting the minimum price a product might be sold for, ‘value pricing’ is usually the best approach to setting the actual price a product should be sold for if profits are to be maximised. Value pricing involves:

  • Setting the price of a product based on the value perceived by the consumer
  • Recognising that the price can add value to a product

In the case of eyewear and fashion, customers expect to pay and are prepared to pay higher prices – and that is what they are changed. This also allows for selective and significant discounting while preserving profits during sale periods. Research also suggests that luxury brands would not be purchased as frequently if they were cheaper. Price is, in fact, one of the variables that creates the perception of value.

Value pricing consistently generates a better result than cost-plus pricing. When consumer expectation is low, it is likely they will pay no more. When the consumer expectation is high (by chance or by design), margins are enhanced by value pricing. If the value price is lower than the cost-plus price – it might be that the product is not viable.

RECOMMENDATION – Use cost-plus strategies to set minimum prices, but, use value pricing to set the actual sale price. Value pricing will maximise returns – and test the viability of products.

10/24 – BRING YOUR BRAND TO LIFE

73% love helpful experiences. How helpful is the experience you offer?

It is one thing to say buying from you delivers great value. Anyone can say that in a commercial – and most do. It is quite another thing to create a brand that delivers as promised and is capable of maximising conversion rates, margins, average sale, repeat business rates, and referral rates. This requires a brand that is authentic and real. It requires a brand that all staff members in the organisation have brought to life.

Recent research found that 73% of consumers love a brand because of helpful customer service. In other words, customers love a brand, not because of the advertising or other communication messages, but because of the way in which they are treated by staff. For a brand to maximise return on the investment, it must first be brought to life. It is the behaviour of the staff that brings a brand to life. Branding is more about culture than advertising.

Bringing a brand to life requires:

  • Defining the brand that the target audience will respond to optimally
  • Identifying the behaviours that will bring the brand to life
  • Employing ONLY people capable of bringing the brand to life
  • Training staff to ensure they can bring the brand to life
  • Monitoring and incentivising staff to create the optimal culture
  • Using the behaviour of all staff to bring the brand to life

Great brands are not created by advertising agencies, but rather by staff and the professionals that engage the staff and drive optimal behaviour

RECOMMENDATION – Employ the people and create a culture that will bring the optimal brand for your business to life. Then, leverage behaviour to add tangible and authentic value.

11/24 – CREATE A STUNNING CUSTOMER EXPERIENCE

84% that improve customer experience increase revenue. Is your experience memorable?

A recent study found that 84% of businesses that improve their customer experience also increase their revenue as a result. This is not surprising given two critical issues:

  • The importance of the customer experience to customers
  • The importance of the customer experience to branding

Research suggests that 73% of companies with above-average customer experience perform better than their competitors, and 83% of companies that believe it is important to make customers happy also experience growing revenue. Customer experience can be the key to maximising conversion rates, repeat business, and referrals.

It is very difficult for many businesses – for example, Coles and Woolworths to differentiate the products they sell.  While there might be minor differences, they, along with Aldi and IGA, sell pretty much the same thing. For many such businesses, it is much easier to differentiate themselves from their competition by offering a unique and inviting customer experience. Indeed, many businesses have a great deal more scope to differentiate the customer experience than they realise. This is particularly so with supermarkets.

Ideally, the customer experience will be tangibly different and add real value to the customer journey. This is something that businesses like IKEA and Apple understand very well. The IKEA experience, including the channelling of customers and the sale of meatballs, is unappealing to me. However, it is embraced and enjoyed by the target market. I also dislike the Apple shop experience – but the target market loves it – as evidenced by the number of people in an Apple store on any given day.

RECOMMENDATION – Understand your customer and capabilities well enough to create a customised, memorable, unique and value-adding customer experience

12/24 – MAKE IT EASY TO BUY NOW

69.57% average abandonment rate

While consumers will compare online vendors on price, the principal reason for shopping online is convenience. In most cases, online shopping is easier and more convenient than getting into the car, driving to the shop, finding a park, fighting your way through the crowd and then dealing with a shop assistant who is less than accommodating. The fact is, while consumers want to buy, most want to do so with the least possible effort.

A 2019 study found that the average shopping cart abandonment rate is 69.57%. That is, nearly two-thirds of consumers who find the site, sift through the products, consider the pricing and then place the item in the cart – do not make a purchase. The main reasons for this were:

  • High delivery costs – 50%
  • The site required the opening of an account – 28%
  • The check out process is too long – 21%
  • To total cost was not clear upfront – 18%
  • Delivery was too slow – 18%

Of the top five reasons for abandoning a cart – four of them relate to convenience and ease of purchase, and four are directly involved with ease of purchase. This highlights the importance of the distribution strategy, within the marketing strategy and making it as easy as possible to purchase. Indeed, ease of purchase is a critical component of the customer experience.

Ease of purchase is not only critical to avoiding online cart abandonment. It is also critical in the real, bricks and mortar world. If you want to maximise sales and margins, it is important to make the product as accessible as possible and as easy to purchase as possible. This might involve an omnichannel presence. It will involve eliminating the barriers to purchase including – a long distance to travel, difficulty in finding a park, difficulties navigating the store, availability of staff to assist, availability of stock, speedy delivery, and all credit cards being taken without an additional cost. Businesses need to realise that as competition increases, consumers will work less and less to make a purchase – even if they end up spending more than they might have to.

RECOMMENDATION – Embrace omnichannel marketing. Make it as easy as possible for customers to move through the purchasing journey and make a purchase at the end of the journey.

13/24 – STOP WRITING AND START TAPING

54% want more video content. Are your messages on video?

In the last missive in this series, I wrote about the importance of making it easy for customers to purchase. It is also important to make it easy for them to move through the customer journey by making information as accessible as possible. That is why video is so important. It is easy for the consumer to consume. By comparison, reading takes more effort.

While content is not necessarily king, it is possibly the most important approach to communicating with customers and potential customers in 2020 and is an essential communication tool for the majority of businesses and brands. Content needs to be addressed in most communication strategies and is a critical component of most marketing strategies. Further, video is the most important content format: Note:

  • 54% of consumers want to see more video
  • 87% of marketing professionals use video content
  • 88% of marketers using video are satisfied with the ROI

Video is arguably the most powerful communication medium in marketing. On this basis, you might well ask why I wrote this missive rather than recording it. Well, firstly, I like writing (which is a very bad reason); secondly, I am addressing an audience far more likely to read; and finally, I am in the process of moving to video – with my first ten videos now in circulation.

You should have a communication strategy. That strategy should address content, and the content should probably involve video. Fortunately, it is usually not necessary for the video to have high production values, and there are advantages in this not being the case.

RECOMMENDATION – Ensure your communication strategy includes content and that the content includes video. Leverage the growing trend towards video-based communication.

 

SET CLEAR OBJECTIVES

A strategy without objectives lacks both direction and a point of evaluation. Objectives tell us where we are going and provide a foundation against which to measure performance. It is important to set overall objectives, and then secondary objectives for each element of the strategy – brand and communication for example. The following deals with marketing and behaviour.

14/24 – GET YOUR MARKETING OBJECTIVES RIGHT

74% set marketing objectives – 51% achieve them most of the time

I recently heard an Australia politician suggest that the strategy is necessary, but objectives are not. I concluded that the man was either a populist or an idiot – possibly both. Strategy must serve objectives. The objectives define the destination and provide criteria against which to measure the progress and effectiveness of the strategy. Objectives facilitate meaningful review of strategies.

Recent research found that 74% of businesses have defined marketing objectives, and 51% of businesses achieve their marketing objectives most of the time. I can only assume that the 26% without marketing objectives are from the same school as the idiot politician. That said, while objectives are important, there is little value in setting any old objective. Ideally, marketing objectives should have the following characteristics:

  • Aligned with the corporate objectives. Marketing objectives must serve the objectives of the business more generally;
  • Specific and measurable. Numbers are essential. Value objectives make for poor strategy and ineffective monitoring and fine-tuning of that strategy;
  • Optimistic, but achievable. Marketing objectives need to stretch the marketing team and maximise the return on investment – but they must also be realistic;
  • Time-bound. Objectives should never be open-ended. The date by which they are to be achieved needs to be clearly defined – providing focus and criteria for measurement;
  • Motivating and inspiring. Staff need to believe in the marketing objectives and feel inspired to work towards their achievement;
  • Absolute commitment. Once objectives are set, they should be actively pursued. Changes, when objectives appear out of reach, are unproductive.

Every business should have documented marketing objectives, and those objectives should satisfy the abovementioned criteria.

RECOMMENDATION – Set specific, measurable, optimistic, achievable, time-bound and motivating marketing objectives based on your corporate objectives – and commit to their achievement.

15/24 – IDENTIFY THE BEHAVIOURS TO BE MANAGED

82% of customers expect an immediate response

Perhaps they are being unrealistic, but 82% of consumers surveyed expect an immediate response to a sales enquiry. This is interesting, but it only relevant if one of the behaviours you are seeking is a high conversion rate. If you are, it would appear to be very important and possibly a competitive advantage to ensure that you address all enquires immediately.

The starting point in determining what needs to be offered to drive conversion rates and sales, in general, is a clear determination of the behaviours required and the strategies that will cause that behaviour to occur. In other words, the process should never start with – ‘What advertising is required to get the appropriate level of awareness (for example)? The questions should be:

  • What behaviours do we require?
  • What is the cheapest way of causing that behaviour to occur frequently?
  • How will we fully leverage the behaviour when it does occur?

It is ideal to consider the widest possible range of options and define the essential core behaviour before identifying the most cost-effective way of causing it and capitalising on it. It may not involve advertising at all – it may not even involve awareness building. Ultimately, all marketing is about behaviour and, more specifically, causing a behaviour to occur:

  • for the first time (buy a brand);
  • for the last time (smoke cigarettes);
  • more often (use a professional service);
  • less often (drink alcohol).

Having set the marketing objectives, it is important to determine the behaviours that will allow those objectives to be met and then develop cost-effective strategies to manage the behaviours.

RECOMMENDATION – Having set the marketing objectives, identify the behaviours required to achieve those marketing objectives – then identify the most cost-effective strategy to deliver.

CRITICAL CONSIDERATIONS

In developing a marketing strategy, there are a number of critical considerations that need to be addressed. These include enquiry rates, conversion rates, the average sales per customer, repeat business rates, and referral rates. Each of these needs to be monitored and included in the strategy.

16/24 – SECURE FEWER ENQUIRIES

2.35% conversion rates on average

Research suggests that the average conversion rate for an e-commerce website is 2.35% while better e-commerce sites reach as high as 3 – 5%. This means that even for the best of sites – 95% of enquirers do not purchase. While there is effectively no cost involved with low conversion rates online – there are generally high costs involved in low conversion rates offline. Indeed, very real and concerning costs can arise where the conversion rates are low with telephone or face to face selling.

All too often in marketing, the focus is on driving awareness and enquiry rates when, in reality, this is not the best strategy. For many businesses there can be merit in reducing the number of enquiries – especially if the enquiries reduced are those that would not have led to a purchase anyway. Tyre kickers and other enquiries that will not purchase are time and money wasters. The objective should be to maximise qualified enquiries rather than the total number of enquiries.

To maximise qualified enquiries as opposed to total enquiries, it is essential to:

  • Know what a qualified enquiry looks like and who should be targeted
  • Track and leverage the behaviours of potentially qualified customers
  • Establish a value proposition that is compelling for qualified enquirers
  • Frame your proposition in a way that targets qualified purchasers
  • Provide information upfront that attracts the qualified and not the unqualified
  • Be explicit in terms of who is and is not being targeted
  • Be upfront in relation to terms, conditions, and pricing
  • Personalise all messaging as much as possible

This may or may not involve advertising – but it most certainly needs to include defining, understanding, and targeting the right members of the target market. It also needs to be recognised that this is generally easier online than offline. Targeting is one of the strengths of online marketing.

RECOMMENDATION – Identify, understand, and focus your resources on targeting qualified customers. Personalise and customise the message as much as possible. Cut waste.

 

17/24 – ADDRESS CONVERSION BEFORE ENQUIRY

81% of sales happen after seven or more interactions

Unfortunately, most of the data concerning conversion rates relates to online conversion rates. That said, while the numbers for online conversion rates vary from offline conversion rates, many of the principles driving conversion and the importance of maximising conversion rates do not.

One study of online conversion rates found that 81% of sales happen after seven interactions with a business, and 40% 0f businesses report a conversion rate of less than 0.5%. Not only does this highlight the low conversion rates online, but it also serves to highlight the importance of conversion rates. Most businesses – online and offline would benefit from an increase in conversion rates – and all organisations should prioritise conversion rates over enquiry rates.

A client once told me that because of a decline in sales – he needed to increase his advertising spend. After some investigation, I determined that he could achieve increased sales by increasing conversion rates with no additional expenditure on advertising. Consider the following four fictitious but illustrative scenarios:

  • Scenario 1
  • Average sale $100, average enquiries 100, average conversion rate 20% and advertising budget $1000 – giving rise to sales of $2000 and a gross profit of $1000
  • Scenario 2 (double the advertising)
  • Average sale $100, average enquiries 200, average conversion rate 20% and advertising budget $2000 – giving rise to sales of $4000 and a gross profit of $2000
  • Scenario 3 (double the conversion rate)
  • Average sale $100, average enquiries 100, average conversion rate 40% and advertising budget $1000 – giving rise to sales of $4000 and a gross profit of $3000
  • Scenario 4 (doubling both the conversion rate and the advertising)
  • Average sale $100, average enquiries 200, average conversion rate 40% and advertising budget $2000 – giving rise to sales of $8000 and a gross profit of $6000

Increasing the conversion rate is often more cost-effective than increasing advertising, and it is usually more certain. It is likely that addressing the conversion rate before addressing advertising will deliver a superior outcome.

RECOMMENDATION – Address conversion rates before addressing enquiry rates with a view to extracting the greatest possible value from every dollar invested in advertising.

18/24 – ADD TANGIBLE VALUE TO EVERY PURCHASE

21% of marketing expenditure on existing customers

Recent research found that an average of 61% of respondents’ revenue came from existing customers. It is, therefore, quite concerning that, on average, only 21% of their marketing budget is allocated to existing customers. Business in Australia and elsewhere in the world consistently prioritises new customers over existing customers.  The focus seems to be on securing sales from new customers ahead of increasing the average sale and the lifetime value of existing customers.

Of interest here is the average sale per customer. While most businesses want to maximise the average sale per customer, few devote adequate headspace and resources to maximising it.

Strategies for increasing the average sale per customer might include:

  • Cross-selling and up-selling
  • Personalising customer service
  • Surprising and delighting customers

Maximising the average sale per customer is all about adding value to the purchase and enhancing the customer experience. This will help them to:

  • Extract full value from the purchase
  • Enjoy and engage with the purchase process
  • Feel connected and significant during the process

It is about developing a relationship with the customer predicated on the desirability of extracting maximum mutual benefit. The more value the business adds, the more the customer is likely to spend.

RECOMMENDATION – rise above other businesses and document a strategy and approach to maximise the average sale per customer by adding value that delivers mutual benefit.

19/24 – LEVERAGE THE HUMAN NEED FOR CONNECTION

36.5% will spend more if they are brand loyal

Brand loyalty is the key to repeat business and maximising the lifetime value of a customer. The value of a loyal customer is well documented. One study found that brand loyal shoppers expect to spend 36.5% more when they shop. Repeat business driven by loyalty can be one of the most cost-effective avenues to increasing profitability. It is, therefore, strange that only 30% of businesses have a documented repeat business strategy.

Among the more common loyalty strategies are ‘reward programmes’ which offer points, discounts, products and the like. These programmes are common because more often than not, they work. Some 57% of consumers respond positively to reward programmes. Another approach, which may or may not include a rewards programme, is a brand community. Some 61% of corporations in the United States report having or being in the process of developing a brand community – a ‘tribe’ of customers and potential customers they interact with on an ongoing and mutually beneficial basis.

Brand communities are by no means a silver bullet (as there are no silver bullets in marketing). However, they offer more scope than just about any other strategy for building brand loyalty that drives repeat business, referral rates and the-all important lifetime value of a customer. While it takes time, building a brand community need not be difficult or expensive. Building a brand community can be as simple as:

  • Defining the brand and what it stands for
  • Identifying the market and what it has to gain
  • Building a platform and a programme for engagement
  • Building real value into membership of the community
  • Establishing clear parameters and guidelines
  • Targeting existing and potential customers
  • Engaging members while providing moderation

It is difficult to think of a business that would not benefit from a brand community. It is undoubtedly a more effective means of communication than simple and frequently boring newsletters

RECOMMENDATION – Document a repeat business strategy with a brand community that offers real value at its centre. Engage members and facilitate permission marketing

20/24 – ENCOURAGE PEOPLE TO TALK ABOUT YOU

74% of consumers identify word-of-mouth as a key influencer

What are your customers saying about you? Are you customers saying anything about you? Are you wasting the good service you are providing because you are not achieving the referrals you deserve?

Research suggests that less than 30% of businesses have a documented referral strategy. This is despite research findings as follows:

  • 74% of consumers identify word of mouth as a key influencer in a purchase
  • 71% of consumers are inclined to respond positively to a social media referral
  • 20 – 50% of purchase decisions are directly influenced by word of mouth

It is also worth considering research that found that referred customers spend 300% more than non-referred customers.

Strategies for driving referrals might include:

  • Building a subscriber database and adding value
  • Improving the customer experience at each touchpoint
  • Building stronger relationships with customers
  • Personalising all interactions with customers

There are many more. No matter what strategy a business employs, there is one common concept that must be understood if referrals are to be maximised. That concept is summed up in a phrase once uttered by marketing guru Seth Godin.

  • ‘no one tells their friends about a mediocre restaurant.’

You might go to a mediocre restaurant because it is cheap or close – but you will not recommend it. We recommend the extra-ordinary. Godin also drew attention to this concept is his book – ‘Purple Cow’. If you are driving with the family in the country, do you tell them when you see a brown cow? No. Do you tell them when you see a black cow? No. Do you tell them when you see a black, white and brown cow? Possibly Do you tell them when you see a purple cow? ABSOLUTELY.

We talk about the extra-ordinary, not the mediocre.

RECOMMENDATION – develop an extra-ordinary product and/or experience that customers will notice and talk about. Fully leverage the potential of this low-cost form of promotion.

DOCUMENT THE STRATEGY

Strategies that work well have several features in common. They are based on data rather than intuition and are customer-centric rather than business-centric. They are implemented rather than tabled – and they have simple and potent themes, core tenants – and a driver or two. They are accountable and open to change based on data.

21/24 – COMPOUND YOUR STRATEGIC COMPETITIVE ADVANTAGE

59.5% verified the power of a blue ocean strategy

In 2004 Chan Kim and Renee Maugborgne pioneered the concept of a ‘Blue Ocean Strategy’. This involves offering a product into a market in which there is little or no competition. It is, in effect, the opposite of a ‘Red Ocean Strategy’ in which a product is offered into a highly competitive market. A Blue Ocean strategy can involve one or more business sectors. Billionaire venture capitalist and PayPal co-founder, Peter Theil, encourages this kind of strategy in his book ‘Zero to One’. A Blue Ocean Strategy aims to create new demand and render competition irrelevant.

One study found that 59.5% of businesses using a Blue Ocean Strategy built on their competitive advantage significantly improved financial performance. This study highlighted the significant benefits of enhancing a strategic competitive advantage by adopting a Blue Ocean Strategy. A Blue Ocean Strategy, combined with a sustainable strategic competitive advantage, can have the effect of eliminating competition altogether.

Other strategies for eliminating competition that work well with a Blue Ocean Strategy include reframing a product so that it is viewed by consumers as being unique or distinct and, therefore, free or relatively free from competition. In this case, the strategy essentially involves converting a Red Ocean into a Blue Ocean by creating a new product category and leveraging a distinct strategic competitive advantage.

There are two critical issue here – firstly, the importance of at least considering a Blue Ocean strategy and, secondly, the importance of having a single core idea that brings the overall marketing strategy together and helps to focus the application of the various tools available to the marketer.

RECOMMENDATION – Ensure your strategy has a single idea that provides focus and guides the application of marketing tools. Consider a Blue Ocean strategy to enhance your SCA.

 

22/24 – PLACE THE HIGHEST PRIORITY ON ACCOUNTABILITY

122% return on investment

I have recently heard a lot of businesspeople question just how effective email marketing is at a time when people are receiving hundreds of emails – often incorporating a sales pitch – every day. Such questioning is to be applauded. Any examination of the effectiveness of marketing strategy is a good thing, particularly if it causes us to prioritise accountability and find ways of maximising the return on investment in marketing. That said, research suggests that email, used well, can yield a return on investment of 122% – four times that of other digital marketing tools.

The point of this missive is not to extol the virtues of email, but rather the virtues of accountability and monitoring the return on investment in marketing. This is essential for any marketer committed to maximising performance and profitability. Just as individuals need to have KPIs and be held accountable, so do marketing strategies. Advertising agencies often question the merits of accountability and measures of it. However, there is no doubt that they have a vested interest in doing so. There is even less doubt in my mind that all marketing should be ‘quantifiably accountable’.

Just as objectives should be quantifiable, so should be the key performance indicators along the way. Without quantifiable accountability, there is no way of accurately measuring progress or the return on investment in marketing. Indicators for which there should be KPIs include:

  • Cost per lead
  • Conversion rates
  • Repeat business rates
  • Referral rates
  • Customer lifetime value

These factors are critical, and yet, they are monitored far less frequently than sales revenue and overall profitability. Other factors that are rarely monitored closely include:

  • Campaign ROI
  • Lead quality
  • Lead sources

When monitored, these factors can, and should, drive strategy development and modification. Without the, updating strategy is just guesswork.

RECOMMENDATION – set quantifiable objectives and KPIs with a view to making all aspects of the marketing strategy accountable. Maximise return on investment and avoid guesswork.

THE ONLY STRATEGIES THAT WORK ARE THOSE THAT ARE IMPLEMENTED

Developing a strategy is never enough. One study found that only 12% of marketing strategies are ‘very successfully implemented’. The fact is, most strategies, marketing and otherwise are not fully implemented. This, of course, makes these strategies difficult to evaluate.

23/24 – AVOID PLANNING FOR THE SAKE OF IT

30% only always set deadlines

Recent research brings into question the commitment businesses have to the hard yards that are associated with maximising return on investment in marketing. Consider the following findings:

  • 45% say that ‘portions’ of their marketing strategy are documented
  • 30% ‘always assign deadlines’ to all initiatives in their strategies
  • 3% report that their marketing objectives are ‘always’ achieved

It might be a lot to expect that all strategies will always be achieved, but it is surely not too much to expect that all strategies be documented and that there is a critical time path driving strategy implementation.

Here are some further statistics from the same study:

  • 65% use project management software to drive implementation
  • 69% appoint dedicated project managers
  • 75% measure team productivity

It is a concern that these are not all 100%, but the numbers show that the majority of businesses surveyed recognise the importance of managing the implementation of a strategy.

The number one reason for a strategy failing is poor implementation. There is no point in a strategy that is not fully implemented.

RECOMMENDATION – Develop a comprehensive action plan and critical time path. Then, guide the implementation of all strategy and consider the use of project management software.

24/24 – BRING MORE STRATEGY IMPLEMENTATION INHOUSE

48% of marketing outsources

There is much debate about the merits of outsourcing marketing activities, as opposed to bringing them inhouse. A recent study in the US found that 48% of marketing undertaken by larger firms is outsourced.  This same study found that:

  • 47% outsource call centre activities
  • 47% outsource data analytics
  • 46% outsource advertising creative
  • 45% outsource advertising media
  • 41% of web development

Evidence suggests that outsourcing rates, especially among larger businesses, are lower in Australia than in the United States. I would argue that Australian organisations are behind the US in this regard. While some services need to be outsourced for a variety of reasons, I have found that Australian businesses are more:

  • Inclined to outsource the wrong things
  • Likely to outsource to cut costs

It makes a great deal of sense to outsource aspects of strategic planning and data analytics where a very high level of expertise and an objective, external, and dispassionate approach is required. By contrast, outsourcing of content development and social media management, which is very common in Australia, makes no sense at all. Content is growing in importance, and the material that is paying dividends is responsive, informed, and authentic. This is very difficult for external consultants to achieve.

There is no simple formula that can be applied to what should and should not be outsourced, but it is clear that this needs to be assessed objectively. It should be reviewed at least annually as part of a broader marketing audit.

RECOMMENDATION – Undertake an annual review of your resource requirements and your approach to outsourcing. Address outsourcing as part of a yearly marketing audit.

IN CONCLUSION

Marketing is so much more than advertising. Indeed, it is so much more than communication. Marketing is about managing the behaviour of members of a target market with a view to causing the achievement of commercial and/or social objectives.

Marketing involves setting quantifiable marketing and behavioural objectives and determining key performance indicators to be achieved along the way to achieving the objectives. It should include a review of all of the available tools to identify those which can and should be brought to bear to ensure the agreed objectives are achieved as cost-effectively as possible.

Cost-efficiency is facilitated through accountability, full implementation of the strategy, and ensuring the right activities are completed inhouse.

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