WAM! 3 Consumer Segments That Drive Growth

With consumer spend hitting sporadic highs and lows, marketers are looking for segments of the population that show promise. And, who can blame them? There is news of consumer confidence that paints a choppy picture of consumer sentiment. But the U.S. is full of segments and sub-segments that can be drivers of success for any given brand. The entire population is made up of consumers, after all.

With consumer spend hitting sporadic highs and lows, marketers are looking for segments of the population that show promise. And, who can blame them? There is news of consumer confidence that paints a choppy picture of consumer sentiment. But the U.S. is full of segments and sub-segments that can be drivers of success for any given brand. The entire population is made up of consumers, after all.

There are three segments that all brands should take a close look at. These segments may not immediately come to mind, and companies may respond that their segmentation strategy is different from others. Even though this is true, there are three segments that all consumer brands should consider specific strategies for: women, the affluent and millennials. Or WAM, for those who like catchy acronyms.

Let’s look at the numbers. The important ones are: 85 percent, 47 percent and 34 percent.

black-women-shoppingSegment No. 1: Women

Women are the purchasing officers of the household and the chief investment officer when it comes to the majority of purchases. Many brands already have this information, but how many of them truly delve into the experiences of women in order to adjust products and the buying experiences to them?

According to Pew Research’s “The American Family Today,“ 40 percent of women with children under 18 at home say they are the main income earner in the family. Along with this comes a busy lifestyle. If they have kids and a full-time job, how much time can they really spend on shopping? At a recent conference, I heard that consumers are now saying that convenience is as important as price in deciding where to shop.

As a result, brands who cater to this can expect a loyal following. What are the priorities of a busy mom? Reasonable prices, healthy items/safety, a quick shopping experience and some understanding. How many times have you had a sleeping child in the car and needed to buy milk, detergent or anything without getting out of the car? The ones who are nodding at their screens right now are busy moms. And, there are a lot of them out there. Brands who cater to the female customer and really know her needs and challenges can expect a loyal following.

AffluentSegment No. 2: The Affluent

According to a study by Pew Research, the affluent have seven times the income than the middle income segment, and their income has grown by 47 percent in the last 30 years. This reflects upward mobility, as middle class households attain greater incomes and rise to the affluent segment. As a result, affluents have a significant amount of purchase power.

What do they buy? They are not very likely to buy only luxury brands, and just as likely as non-affluents to shop at stores like Gap and Macy’s, per the February 2016 Synchrony Financial Affluent Study. In terms of future spend, they say they intend to spend more money on experiences, rather than things, and they intend to increase their spend on travel. As a result, brands who reflect these needs may tap into this growth trend.

Millennial vacationers

Segment No. 3: Millennials

There has been a great deal of focus on millennials — they have been analyzed, debated, probed, viewed and quoted a great deal. A very great deal. A Google search on “millennial” yields about 18 million hits. That’s a lot of analysis. Well, they are a huge generation, and they are going to be coming into a good deal of discretionary income.

As they grow older, their incomes will outpace their student loan burden, and that means they will have money to spend. But their shopping habits are very different than past generations. They are all digital all the time. They are completely comfortable with digital shopping and becoming more interested in mobile payments. Social media drives a great deal of their spend, particularly for the younger millennial. According to a June 2016 Synchrony Financial Digital Study, about 75 percent of millennials say they have purchased something as a result of social media. As a result, marketers must look at this growing population and put strategies in place to attract them with digital technology and social media content.

This country is a beautiful combination of many segments and sub-segments. It is impossible to identify any one segment that will lead to success for any retailer. However, keep in mind WAM — women, affluents and millennials — as segments to watch, for future successful strategies.

Note: The views expressed in this blog are those of the blogger and not necessarily Synchrony Financial.

Death of the Salesman

There’s no question that the Willy Lomans of this world have been dying a slow, agonizing death—only instead of losing the fight to travel exhaustion, the opponent is the Internet … And marketing

There’s no question that the Willy Lomans of this world have been dying a slow, agonizing death—only instead of losing the fight to travel exhaustion, the opponent is the Internet.

According to a recent CEB article in the Harvard Business Review, 57 percent of purchase decisions are made before a customer ever talks to a supplier, and Gartner Research predicts that by 2020, customers will manage 85 percent of their relationship with an enterprise without interacting with a human. That shouldn’t surprise anyone since we spend much of our days tapping on keyboards or flicking our fingers across tiny screens.

In Willy’s day, the lead generation process would have consisted of making a phone call, setting up an appointment, hopping a plane to the prospect’s office, and dragging a sample case through the airport. In the 1980’s, that sample case turned into an overhead projector, then a slide projector and a laptop, and finally a mini projector linked to a mobile device or thumb drive. In 2014, salespeople are lucky if they can connect to a prospect on a video conferencing call.

Clearly the days of gathering in a conference room for the sales pitch are long gone. We’ve always known that sales people talk too much and buyers, who’ve never had the patience to listen, now have the tools to avoid them altogether: websites, whitepapers, case studies, videos, LinkedIn groups, webcasts—virtually anything and everything to avoid talking to sales.

As a result, the sales function has now been placed squarely in the hands of the content strategists and creators. And yes, that means that the sales function is now in the hands of marketing.

Now a different problem exists. Most marketing folks don’t know how to help the buyer along their journey because that’s not how they’ve been trained. They have no idea how different types of buyers think, or how they search for information, or make decisions, so they don’t know how to create nor position content in a meaningful and relevant way—and that’s long been the complaint of sales. In their opinion, all marketing does is churn out “fluff” that is irrelevant to a serious buyer.

Now marketers must step up and really understand how to optimize marketing tools in order to help that buyer reach the right brand decision at the end of their journey. That’s really why content has become the marketing buzz word.

And just like we despised the salesman who talked too much, potential buyers despise content that is full of sales-speak. While a product brochure has a purpose, it is not strategic content. Similarly, a webinar in which most of the supporting slides are simply advertising for the product, turns off participants who quickly express their displeasure via online chat tools to the host and by logging out of the event.

Great content should seek to:

  • Be authentic: What you say needs to sound genuine and ring true—no one believes you are the only solution to a problem. On the contrary, the discovery process is all about evaluating your options (the pros and the cons). Avoiding a question because your answer may reveal the flaws of your product or service only shines a spotlight on the issue. Honesty is always the best policy.
  • Be relevant: Share insightful information that leverages your expertise and experience; help the buyer connect the dots. “How to” articles are popular, as are comparison charts—if you’re not going to do it, the prospect will be doing it for themselves anyway, so why not help by pointing out comparison points (that benefit your product) they might not have previously considered?
  • Be timely: To get a leg up in the marketplace, you need to be prepared to add value when the timing is ripe. It’s highly unlikely that your marketplace hasn’t changed in the last 50 years. Help show buyers how your product/service is relevant in today’s marketplace—how it deals with challenges you know they’re facing or are going to face tomorrow.

Smart marketers have a lead nurturing strategy in place—an organized and logical method of sharing relevant content along the buy cycle. And that content is well written and segmented by type of decision maker. The CFO has a different set of evaluation criteria from the CEO and the CTO. Business owners look at purchase decisions through a completely different lens than a corporate manager.

Depending on the industry, business buyers have different problems they’re trying to solve, so generic content has less relevance than content that addresses specific issues in an industry segment. Those in healthcare, for example, perceive a problem from a different perspective than those in transportation.

The new name of the selling game is “Educate the Buyer—but in a helpful and relevant way.” And while Willy Loman may continue to sit at his desk making cold calls or sending out prospecting emails, the reality is nobody has the patience or interest to listen to his sales pitch any more. So marketers need to step up and accept responsibility for lead generation, lead nurturing and, in many instances, closing the sale.

Avoiding the One-Night Stand

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

At minimum, companies need to segment their customers so they can determine how much longer that customer will remain with them, how much revenue each customer will contribute, how much and what kind of services the customer should receive, and what efforts will be needed to keep them whether they are new, at risk, or even already lost. Also, if a company is changing product or service focus—such as beginning a new customer experience management or frequency marketing program—decisions will have to be made about which customers it wants to retain.

Just as companies are becoming smarter about keeping the customers they want or “firing” less attractive customers through stepped-down services, they have to invest more upfront, at the beginning of the customer life cycle, in learning which potential customers will be the most valuable over time. This goes beyond segmentation. It is almost pre-segmentation.

Here’s a prime example. The business of gaming in Las Vegas, Atlantic City, numerous riverboats, Indian reservations and offshore is built not on a house of cards, but a house of numbers. At Las Vegas casinos like the Rio, those players who gamble $1,000 a day with the Rio, whether they win or not, receive the designation “hosted guests.” These are the kinds of customers the Rio works hard to acquire. Their level of play accords them VIP status, with more “comps” (free dinners, show passes and other gifts). Each hosted guest has an individual staff host assigned to check on them and provide any needed services.

The host is actually a highly paid, personal customer service representative. It’s an important position, which casino operations like the Rio consider pivotal to their success. The hosts cultivate relationships with the players; and VIP players are encouraged to call their hosts before arriving at the casino, so the host can have show tickets, restaurant reservations and suites set up, per the player’s profile.

There’s even a higher echelon of gaming customers—those players who have a $1 million line of credit. They get the best suites and virtually everything the casino has to offer. They’re nicknamed “whales,” and with good reason. At the Rio, this means a suite with 7,000 square feet of space and bathroom sinks with gold-plated faucets. These players are relied upon to bet in the Rio’s secluded back room, called the Salon, where they may play baccarat and roulette with $100,000 chips.

In an industry like gaming, where the level of customer migration is very high, it is imperative that casinos not only keep the players they want but target the right customers in the first place. They do this in a number of ways, including geodemographic profiling for their acquisition. For the high rollers they’ve lost, many of the casinos make an extra effort to get them back, as well.

Advanced companies have begun applying “conversion” models, seeking customers who:

  • Need less direct motivation (incentive) or indirect motivation (promise of support and committed resources) to purchase;
  • Have demonstrated more resistance to claims and attempts to lure them away;
  • Are less price-sensitive;
  • Are more accepting of occasional value delivery lapses and are less likely to accept alternatives if the brand/service is unavailable; and
  • Demonstrate more positive attitudes about “their” brand.

In the retail automotive industry, as another example, potentially loyal new customers take less time making their purchase decisions, consider fewer dealerships, are less price-driven, and rely less on magazine articles and other media and more on previous experience and personal recommendation.

Some years ago, South African researchers Jan Hofmeyr and Butch Rice created an effective conversion model, which helped marketers develop and sustain effective customer loyalty initiatives programs for customers, both new and established. They found that, beyond customer needs and value delivery requirements, companies must understand the potential depth of a customer’s commitment to the supplier. Part of this means identifying the degree of customers’ tangible and intangible involvement with the company. Tangible involvement can include such factors as the actual dollar cost of switching to a competitor. Intangible issues include the emotional strength of the connection or the upset and insecurity created by switching suppliers. The model also measures the degree of attractiveness of competitive brands, based on what these customers want as prioritized elements of value.

Hofmeyr and Rice’s model also enabled them to view their clients’ marketplace in terms of users and non-users. Users can be divided into those who are truly committed and loyal and those who are “convertible”; that is, declining or wavering in their loyalty. Non-users—prospects and previous customers—are divided into potentially convertible and non-available (because they are committed to their current supplier).

Detailed analysis could then be developed for current customers and prospects. The percentage of current customers who are entrenched, or completely loyal, can be identified, as well as those who have moderate loyalty, shallow loyalty, or convertibility (true vulnerability). Non-users, or prospects, could also be identified in a similar manner: those who are available, or highly receptive to a competitive offer; and those who are ambivalent, but who would switch with the right value-based incentive. Other prospects, who have average or strong loyalty to their brand or supplier, are considered unavailable by the model.

The model has been used to plan the amount of advertising and promotional activity required for new customers and prospects, according to their commitment level and potential value. It has been applied in more than 50 countries and for scores of products and services.

On an everyday, or tactical, basis, companies should also always be on the lookout for customers who could represent more of a problem than the revenue they might contribute. Through our own research, we’ve identified seven such types of customers:

  • Non-Complainers—Customers who never express any negative feelings about performance or identify potential areas of improvement may just be hiding their disaffection. Marketing scientist Theodore Levitt has said: “One of the surest signs of a bad or declining relationship with a customer is the absence of complaints. Nobody is ever that satisfied, especially not over an extended period of time.”
  • Over-Complainers—Customers who tend to complain frequently, sometimes irrespective of whether their issues are really consequently or not, can beat down a company’s morale and overtax its support infrastructure.
  • Price Grinders—New customers who pressure their suppliers to lower prices on initial sales in return—they often promise—for future business that may or may not exist.
  • Chronic Defectors—When customers have a history of pulling their business without explanation or warning, this may be a sign that they’ll never be happy with any supplier’s performance. Their volatility and refusal to communicate issues makes them undesirable.
  • Friends in Need—These “quick-jump” customers who want to find new suppliers with great haste often don’t make purchase decisions very well, or they may have economic challenges.
  • Discourteous Slobs—Any customers who are chronically rude and verbally abusive, even though they may not contact their suppliers frequently, can undermine a company’s morale and operations. If they have reason to be upset or annoyed, that’s one thing. Their concerns should, obviously, be addressed and dealt with as quickly as possible. If the negative behavior continues, they’re probably not worth the effort.
  • Misfits—The needs of some new customers may simply not align well with the supplier’s ability to perform. If, for example, 99.9 percent of the deliveries to customers are made during normal business hours and the new customer wants delivery in the middle of the night, unless this customer truly represents a great deal of business, they are probably not serviceable.

If most people are like me—a statement always open to interpretation—virtually every day they will see content or promotional material from long distance telephone companies offering their latest and greatest low cost plans. Typically, they don’t try to find out about my business and personal long distance needs. They just try to push the plan. One of the enduring reasons for the high rates of customer turnover in this industry is the lack of scientific prospect targeting, and attempts to understand potential customers’ tangible and intangible switching issues, done at the outset. Perhaps it’s time for their conversion.

Getting Your Email Heard Above the Roar of the Holiday Crowd

Getting your message heard above the roar of the holiday crowd requires a different approach. Instead of being the loudest voice, you have to be the voice your customers and prospects want to hear. This requires a marketing shift from one-off deals to providing the service that people want when they need it. The better the relationship between company and customers, the easier it is to connect with them in crowded channels.

The noise in the marketplace is almost deafening under normal conditions. It reaches a high point during the holiday season. Every marketing channel is filled with offers and one-off stunts designed to capture people’s attention, if only for a nanosecond. Frenetic cries from marketers desperate to generate revenue overwhelm the senses of the customers and prospects they seek to engage. Enjoyable shopping experiences become a crazy event that people dread.

Good marketing messages get lost in the attempt to outshout the competition. The constant barrage of screaming marketers becomes white noise to recipients. They become adept at filtering out the extraneous information to only hear the messages they need. This ability is similar to athletes who hear their coaches over thousands of fans.

Getting your message heard above the roar of the holiday crowd requires a different approach. Instead of being the loudest voice, you have to be the voice your customers and prospects want to hear. This requires a marketing shift from one-off deals to providing the service that people want when they need it. The better the relationship between company and customers, the easier it is to connect with them in crowded channels. If your past marketing strategy included provided highly targeted messages your customers are already tuned into your messages. If not, here are a few things you can do now to be heard above the crowd:

  • Make everything as easy as possible. When it comes to making people happy, easy trumps exceptional. This is especially true during the holiday season when time is limited. Create emails that include everything needed to make a buying decision and minimize the number of click from the email link to check out.
  • Be available. Sometimes people have questions that are not addressed in the email, catalog or online. Put your telephone number on every piece of marketing materials, in every email and on every web page. It will increase your sales without significantly increasing your calls. If you offer click to chat service, include a link to it in your emails.
  • Preselect items to simplify the shopping process. Buying patterns change during holiday season because people shift from shopping for self to shopping for others. Review historical data for seasonal purchases and make appropriate recommendations for similar products or services.
  • Offer reassurance. The best delivery and return policies cannot influence purchase decisions if people don’t know about them. Provide specific “order by to receive in time” dates during the shopping process. Send transactional emails that include expected delivery dates and shipping confirmation numbers with a link to the carrier. If there are any issues with the order, notify the buyer immediately.
  • Follow up on abandoned carts. Life gets a little crazy during the holidays. It’s normal to see a bump in abandoned carts since people are ordering more and trying to be secretive about it. Browsers get closed quickly when others walk into the room. Double check your online and email reminders to make sure that they are working. If you don’t have a reminder process in place, add one.
  • Show appreciation. After enough time has passed for the order to be delivered, send an email to verify receipt, thank the customer for the order, and offer assistance if needed. Doing this distinguishes you from the competition, encourages feedback and improves trust. Be sure to use a valid reply address. Test using an individual’s email address versus a generic corporate one. People tend to respond to other people better.
  • Prepare for next year. Create and implement a strategy that is designed to keep people engaged and listening for your voice. The more they are tuned in to your marketing messages the less they will hear the competition.

What Do We Really Know About Consumers?

Turns out American’s didn’t splurge on trivial junk during this recession, and that means many experts don’t know today’s consumer as well as they thought they did.

Turns out Americans didn’t splurge on trivial junk during this recession, and that means many experts don’t know today’s consumer as well as they thought they did. At least that’s the takeaway from this article by Mina Kimes of CNN Money.

The prevailing assumptions about recessionary spending were based on studies of consumer spending during past recessions that showed Americans spending more on cheap indulgences during hard times. But as Kimes points out, that hasn’t held true during this recession. iPhone sales spiked while lipstick, liquor and candy dropped.

Some of those trends saw ups and downs (a previous report by Kimes indicated general cosmetics doing well last year), but overall, 2009’s cash-strapped consumers seemed to make purchase decisions more thoughtfully than in recessions past. Instead of cutting expensive items and indulging on the cheap, they made more complex calculations. They often saved money to buy expensive items, for example, sometimes by cutting out the very indulgences consumers might have wallowed in during “simpler” times. It appears that many took control of their finances instead of living hand-to-mouth, with some surprising retail results.

I wonder how much of that reflects a psychological shift in consumers, and how much reflects shifts in the retail market. Many goods are available at relatively low prices these days thanks to several decades of the biggest retailers competing on price (i.e. Wal-Mart). I’m not sure indulgent lipstick’s that much less expensive than a pair of bargain shoes. On the other hand, consumer electronics is not simply an entertainment purchase. People spend their careers using their personal laptops and smartphones as tools; so spending more can mean more money or better opportunities. Consumers are well versed in the investment calculation of these items: If you have to buy a phone and phone service anyway, why not choose the one you can carry with you and load with apps that make you more productive, or at least more entertained?

Consumers have changed, but the retail landscape may have changed even more. What can you assume about a nation of potential customers who constantly consider that?

That’s probably not surprising to those of you who read Target Marketing or All About ROI, which often talk about the importance of testing and verifying assumptions about your audience. At heart, direct marketing is a numbers game, and those successful at it know what my football line coach used to sum up: to “assume” makes an “ass” out of “u” and “me.”

But even extensive testing doesn’t really take assumptions out of the equation. Who spends resources testing something they don’t expect to work? When you try something new, where did the idea come from? Usually an assumption. So even with testing, there’s a bias to test toward what we believe to be true. Adaptability is learning to recognize and react quickly when things we thought we knew turn out to be wrong.

So have consumers changed during this recession? Has that been the case for your customers? Are they acting against type, buying or not buying in ways that defied your expectations?