January 21, 2009

How Advertising Works - Part 4: The Second Principle

In parts one and two of this series I observed that most ad people and most agencies do not have unifying principles for how and why they create advertising. In part three, I discussed the first principle of what I call Performance-Based Advertising. Today, I'll talk about the second principle.

Principle #2: Advertising messages should be created for, and directed at, the heavy-using, high-yield customers in your category.

It is a good thing to love all your customers and treat them with respect and gratitude. But it is not productive to fashion your advertising message to appeal to all of them.

Most marketers define their target customer in either demographic (women 18-34) or psychographic (millennials) terms. I think this is wrong.

The target customer should be defined in terms of category usage. This is just a fancy way of saying that you should define your target as the high value customer in the category -- regardless of sex, age, or generational characteristics -- and create your advertising to appeal to these people.

Some customers just aren't profitable. And some are extraordinarily profitable.The following chart is not meant to be scientific, but to illustrate the wisdom of focusing your message on heavy-using, high-yield customers:

Even though some customers are way less profitable than others, the cost of marketing to them can be just as expensive. While people in your top quintile may be hugely profitable, people in your lowest quintiles may actually cost you money. Even if you market to them successfully, it may cost you more than you can ever hope to recover.

The reason it is critical to fashion your message for the heavy-using, high-yield customer is that they will usually have a different point of view and a different set of needs from the average or light user.

As an example, let's talk about fast food. The average user of fast food may visit a fast food place once every two weeks. To him, fast food may be a guilty treat. The heavy user of fast food, however, uses it in a completely different way. He visits fast food places 10 times a week or more. To him, it's not a guilty treat. It's his refrigerator.

In fact, in the fast food category, as in many, about 30% of customers account for 70-80% of the volume.

These heavy fast food users are the key to profitability in the category. Attract them, and you're coining it. Miss them, and you're in trouble.

Often advertisers try to find a common denominator among all their potential customers and then try to create a message that appeals to everyone. This is a mistake. The way to minimize waste and maximize the productivity of your advertising is to shape the message for the high-yield customer.

Media strategy can only do so much. When you buy a spot on Monday Night Football, it costs just as much to talk to the guy who buys a hamburger once a month as the guy who buys every day. But you have no choice.

The key is your creative strategy. Make sure your ads are written for the right people. Be sure your advertising has been developed with the needs of the heavy user in mind.

In summary, success in most categories is directly related to the number of heavy-using, high-yield customers you can attract. (In this post I have used "heavy-user" and "high-yield" interchangeably. In some categories this may not be true.)

Since nobody has an unlimited marketing budget -- except, apparently, erectile dysfunction remedies and congressional candidates -- maximizing the performance of your advertising dollars consists of doing the following:
• Studying high-yield customers and understanding what they want
• Crafting a message to these needs
• Treating your low-yield customer nicely, but not shaping ad messages for him.
The Series So Far
How Advertising Works - Part 1: The Problem
How Advertising Works - Part 2: Overview
How Advertising Works - Part 3: The First Principle
How Advertising Works - Part 4: The Second Principle

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