Marketing Viewpoint by Ruth Winett
How Loyal Should You Be to Loyal Customers?
Is focusing on loyal customers the best use of your marketing budget? What about prospects who have not bought before, but who might consider your brand? Since seventy percent "of [consumer] brands that are eventually chosen for a purchase come from that initial consideration set, it's where companies must focus their energy and resources," found Bo Finneman and Dave Elzinga of McKinsey and Co. in a study of 125,000 consumers. This advice makes sense for business-to-business companies, as well.
The consideration set includes the brands the customer is considering, not just brands the customer knows about. Consumers were loyal in just three of the thirty product categories McKinsey studied (Mobile Carriers, Auto Insurance, and Investments). McKinsey developed tips for getting into and staying in the "consideration set of brands to shop" along with the "incumbent brand." Here are comments based on their tips.
Define what people are buying more precisely. Identify the value offered to the customer. Go beyond features and abstract benefits. Express the values in concrete terms.
Know when and why customers buy. Customers shop around when they are dissatisfied or when they learn about innovative products, concludes McKinsey. Investigate what made customers dissatisfied. Can you address those problems? Are you keeping up with the competition and their innovations?
Revisit groups you don't target, and re-segment them (who). Approach lapsed customers again. Also reconsider segments you previously excluded. For instance, most colleges now offer online courses and certification programs for non-traditional students in response to the shrinking pool of eighteen year-olds. With fewer foreign applicants because of new immigration policies, colleges must look for new market segments.
Spend more on ensuring your brand is in your consideration set; spend less on closing sales (how). Use traditional and social media to increase awareness of your brand, and use your website creatively to move prospects from awareness to consideration, advises McKinsey.
If you focus sales and marketing efforts on just your loyal customers, your company will not grow. Inevitably, some customers will disappear. You must continuously enlarge your customer base by feeding new prospects into the purchase funnel. Winett Associates helps companies understand their customers and markets.
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