July 10, 2008

It's The Heavy User, Stupid

One of the biggest problems that many marketers are facing is that they are too deeply invested in a questionable online philosophy.

The philosophy is centered on "social media" (blogs, networking websites, Facebook, MySpace, etc.) For the sake of this post, I’m going to call this philosophy New Age Marketing .

Whatever you call it, this philosophy centers around three hypotheses:
  1. That online social media are uniquely suited to create "conversations" among consumers.
  2. That people who engage in online conversations are more valuable to marketers than the average consumer.
  3. That the web allows businesses to make more money selling niche products to niche markets than selling blockbuster products to a mass market (The Long Tail.)
In the past few weeks, we've seen pretty convincing evidence that #1 and #3 are probably wrong.

First, a study by a Harvard marketing professor showed that The Long Tail theory is wrong and that online retailers are actually more dependent on blockbusters (see Long Trail of Baloney.)

Then a Yankelovich study indicated that offline consumers are more likely to engage in marketing conversations than online consumers (see Is The Conversation Over?)

While these studies are not definitive, they certainly raise big questions about two of the three pillars of the New Age Marketing model. (They also raise questions about the willingness of New Age Marketing gurus to accept and disseminate "information" about online marketing without the benefit of supporting data. But that's another story.)

The best hope for the New Age model is hypothesis #2 above -- that people who engage in online conversations are more valuable to marketers than the average consumer.

As I mentioned in Is The Conversation Over?, I find this argument to be obnoxious, elitist, and self-congratulatory. It's the online crowd claiming, once again, that they and their ilk are superior to the poor slobs who aren’t perpetually on line. Or, as The Wall Street Journal said about The Long Tail,
“...it flattered its readers, many of whom were in the tech industry, by suggesting (yet again) that the Internet was changing everything..."
The fact that I find this obnoxious, however, doesn't mean it's wrong. It could turn out that the online chattering class are more valuable than average customers. I doubt it, but it's possible.

What the New Age model is certainly right about is that some customers are more valuable than others. The problem is, they’re wrong about who that Most Valuable Customer is.

The true Most Valuable Customer is not the online conversationalist, it’s the heavy user in the category. In many categories of business, heavy users -- people who spend lots of money in the category-- can represent fewer than 30% of customers but more than 70% of sales.

To my knowledge there is no data to support the idea that heavy usage in a given category correlates to online jabbering.

Until there is evidence that online conversationalists are the heavy users in your category, you would do well to remain skeptical of trendy New Age Marketing chitchat and focus your attention on finding and influencing the heavy users in your category.

Don’t assume that just because they are Most Valuable Customers they are engaged in social media. And, most important, just because they are engaged in social media, don’t assume they are Most Valuable Customers.

And Don't Forget:
Targeting the heavy user is one of the 3 principles of Performance Based Advertising you will find in The Ad Contrarian book. Click here to download. It's free and worth every cent.

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