This segment explains why customer targeting is arguably the most important discipline in marketing today. It also outlines the three imperatives that are key to targeting success.
The 80/20 Rule
The overwhelming majority of our business is generated by a relatively small group of our customers. We generally use the 80/20 ratio to characterize this concept but the actual ratio may be closer 90/10 in many domains. Our tendency is to cast our promotional nets broadly but we need to avoid this temptation as it can undermine our competitiveness and destroy profitability.
The Two Targeting Criteria That Matter Most
Category potential and brand share are the two criteria that matter most in building an effective targeting strategy. Third party data can help you assess these criteria but profiling surveys are often needed to provide more granular insight into the relative value of different customers. Surveys are subject to bias so care must be taken to avoid the obvious sources.
Existing Customers are More Valuable Than New Ones
Existing customers are more valuable than new ones for two reasons. The first is that they represent the overwhelming majority of total customers over the lifecycle of a brand. The second is that they’re more psychologically open to expanding their usage of an existing brand. New customers remain an important source of growth. We just need to be selective about the types of new customers that we approach.
Timing is Everything
Timing is critical because the windows of opportunity for behavior change are small. We know from research that the potential for behavior change is greatest when traditional cues are no longer present. Savvy companies develop mechanisms for spotting these windows and engaging with their customers. Promotional efforts that fail to acknowledge these windows have the potential to squander vast resources.
Some Prospects Are Easier to Convert Than Others
The two targeting criteria that matter most are a customer’s category potential and brand share. For new products, however, brand share is not yet available. In these instances, a customer’s propensity for adopting new products can be a valuable, second targeting criteria. To establish an accurate ranking of adoption potential, there needs to be a high correlation between past adoption behavior and future adoption behavior. If this link cannot be established, you may want to survey actual adoption behavior shortly after launch and then re-prioritize your customers and adjust your promotional efforts accordingly.