The Smarter Approach To Marketing

Just saw a news story on Ad Age. It is titled “Will Retailers or Consumers Come Out on Top on Black Friday?” The story references how Sears, Kmart and other retailers have begun holiday sales ahead of time as shoppers start early, searching for deals. According to Ad Age, Black Friday 2009 has become a massive game of chicken among retailers and consumers, as the closely watched post-Thanksgiving sales data will largely decide which succeeds at outsmarting the other.

Is this the right attitude?

As marketers, are we really trying to outsmart our customers?

If we are customer-centric, we would not be trying to one-up each other, but would focus our efforts on helping our customers solve their needs with relevant and differentiated offers.

As I defined in one of my earlier posts, providing value to customers by fulfilling their specific needs (relevance), recognizing their unique contribution to the business (recognition) and rewarding them with specific offers (reward) will create a win-win proposition. I defined the equation as 2RL + 2RC + RW = CL.

By doing this, the customer gets what they need from the brand and the brand gets the transactions that add strength to the business while building value in the relationship.

It is not about being smarter than them. It is about serving them well.

A simple idea. One that works

Back-to-School Budgets: Not Just For Parents

This year’s back-to-school shopping season will be quite different than years past, thanks to the focus on the economic recession and saving money. For retailers, back-to-school season is considered the second most important shopping season of the year (behind the holidays) and is often used to predict second half sales. Many fear that a tough back-to-school season could indicate an even tougher holiday season.

While retailers are cautiously examining their inventory and sales, consumers are also paying close attention to their numbers. According to the National Retail Federation, four out of five Americans have made some changes to back-to-school plans this year as a result of the downturn. In fact, the NRF predicts that the average family with children in grades K-12 will spend $548.72 on school merchandise, a decline of 7.7% from 2008.

One tactic that many parents are using to deal with a lack of funds is to teach kids how to budget their money while they shop for the essentials. This approach definitely ties in with the sales- and price-focused messages seen from retailers this year. Target is even encouraging parents to make back-to-school shopping “one of the first math lessons of the year” by doing just that. They offer several list-making tools on their website, a Target ‘09 College Facebook page and a 44-page “Smart scholars save dollars” catalog.

I have two children going back to school. Sanaa (11) will start her first year of junior high and Aamir (14) is going into high school. This year, my wife and I developed clear lists and established budgets with the kids. We also selected just one store to buy from (Office Max). Making sure we were prepared with shopping lists, budgets and sticking to one store allowed us to save both time and money. We were able to get everything the kids needed for school and still had money from their budgets left over.

Marketers should take a cue from their customers and use this time to look at their own budgets. They should make sure that their marketing dollars are being spent wisely and on effective programs. The only way to ensure this is to test and learn using analytics. Analysis of current programs and customer behavior can help refine marketing campaigns, increase loyalty and drive profits during this challenging back-to-school season and beyond.

Is Smarter Spending Here to Stay?

The current recession is on everyone’s minds right now – business leaders, politicians, marketers and consumers alike. Constant reminders of economic doom in our professional and personal lives have clearly changed the way we behave. Consumers are shopping differently. They are acting more frugal, researching each purchase and avoiding impulse buys. At this point, this change is old news.

But when our economy returns to its normal, pre-crisis state, will shoppers’ behavior revert as well?

As referenced in a recent Ad Age article, this issue is on the mind of many marketers. According to the article, this recession has had a much bigger impact on people than the last big crash in 1987. People really fear for the future. Thanks to vanishing retirement funds, people are being forced to work much longer than they had ever anticipated. In fact, 40% of people over 55 are currently in the workforce – a 10 year high, according to Barron’s.

As a result, people are re-thinking about what’s important to them and, in a sense, returning to more traditional values. Their attitudes may be the same – they still want that new car – but they are behaving differently – they aren’t necessarily buying it. People are being much more practical and focusing on saving for the future.

I believe, however, that the American consumer’s mindset is not changed forever. The frivolous spending and over-the-top consumerism that was prevalent over the last 30 years may be gone for good, but people innately like to shop. Consumers will likely make more of an effort to find good deals on significant purchases, but I think that impulse shopping will continue to be a part of the American culture.

The current economic downturn may permanently impact American values and shopping behavior, but eventually consumers will return to some of their old ways.

A Sign Of The Times – Companies Changing Their Marketing Focus

It takes a fundamental change in the environment for marketing models and approaches to change. In the current environment, we’re seeing a significant number of companies begin to use the principles of retention marketing (over acquisition marketing alone).

Banks are leading this paradigm. Given their unique situation, they have recognized the benefit of retention-based marketing strategies over typical acquisition-driven efforts. Last week, Mintel Compermedia reported that banks registered a 57% increase in direct mail geared toward selling additional products and services to current customers. A very big shift.

Banks also increased CRM-related mailings by 37%, including loyalty messages, renewal notices and upgrade offers to entice current customers. In fact, 94% of all bank emails in 2008 were sent to existing bank clients. The number rose from 89% in 2007, while acquisition-based emails dropped from 10% to 6%.

While acquisition-directed mail still accounted for the overwhelming majority of all bank direct mail, the percentage dropped from 85% in 2007 to 81% in 2008. Conversely, retention-based mailings increased to 15% last year.

Banks are clearly beginning to realize the importance of focusing on their existing customers. In today’s tough economic environment, it is more difficult than ever to acquire new clients and much more expensive. Companies in other categories need to learn from this and do the same. Especially retail, where most marketing departments are still being asked to drive traffic by acquiring new customers and very few have organized retention marketing programs.

This shift in your strategic focus – protecting your current customers and getting them to buy additional products and services is the best way to drive profitable growth at this time. And by communicating with them and engaging them in a deeper relationship with your brand, you can build valuable customer loyalty in a time of financial uncertainty.

Think current customers. Think retention first. You will see better results.

BIGresearch Reports BIG Changes In Shopping Behavior

We all know that the current economic climate has changed the way people shop. A new study by BIGresearch highlights some of the specific changes in shopping behavior. The study found that consumers are acting more practical, with 90% of respondents saying that they plan to change their spending habits in the long term. Over 55% reported that they will consider each purchase more carefully and just over half of consumers plan to become more price conscious over the next five years.

Trends In Spending Habits From BIGresearch

It is also important to point out that these long-term adjustments are being made by consumers in various income brackets In fact, 83% of respondents earning $150,000 or more say that the current economic crisis will impact their lifestyles over the next five years.

The shift toward budget shopping is reflected by the popularity of discount retailers among the polled group. Discount retailer Walmart led nearly every category in the report, with significant shares in Women’s and Men’s Clothing, Footwear, Health and Beauty, Groceries, and Linens/Bedding/Draperies. The only two categories that Walmart did not lead were Consumer Electronics, which Best Buy won (Walmart was second) and Prescription Drugs, which was led by Walgreens (Walmart was third). Other top retailers in the study included Kohl’s, JC Penney, Target and Macy’s.

What other long-term changes do you foresee for consumers in the coming months? How do you think this will affect retailers and marketers?

Why Attend Conferences?

“He who learns but does not think, is lost! He who thinks but does not learn is in great danger.”
- Confucius

As a frequent conference attendee and speaker, I thought I would focus on the value of these types of events for this week’s post.

There are many reasons to attend conferences, the most obvious being education. As a professional, it is important to continue to learn. Today’s marketing world changes daily, so what you learned back in college or your first few years on the job may not apply today. You can gain more from one day at a conference than from all of the blogs and articles you can read in a month.

Learning through conferences is also great for personal development. It keeps you fresh, energized, inspired. There is nothing like being in a huge banquet room in a beautiful hotel filled with people who share your same passions. The energy is undeniable. Pulse is an essential part of that. You miss out on context with blogs, trade publications and the like. Seeing the reactions of those around you helps you keep an eye on the pulse of the industry. The experience of actually being there to participate in the discussion makes it much more worthwhile than your everyday podcast or webcast.

In that sea of like-minded individuals can even be your next client, colleague or friend. The networking at conferences is yet another valuable element. Contacts made while grabbing a coffee or lunch between sessions can be well worth the time and cost of the conference alone.

For these reasons – and many more, I make a habit of attending all of the conferences that my schedule will allow. I hope to see you all at my next event – the Retail Advertising Conference in Las Vegas on Feb. 25-27 – where I would like to buy you that cup of coffee. Please don’t hesitate to contact me if you will be in attendance.

RAC 2009

Black Friday Behavior Versus Attitudes

For the last few months, retail industry experts and research firms have been predicting some pretty grim holiday sales numbers. It is no secret that our country is experiencing tough economic times. However, this “Black Friday” surprised many with an increase in sales of 3 percent from last year, according to research firm ShopperTrak RCT Corp. Reportedly, sales rose to $10.6 billion. This is the smallest increase since a decline of 0.9 percent in 2005 – compared with an 8.3 percent surge last year.

While the increase is smaller in years past, it is still an increase in sales. This is just another example of how people tend to focus on consumer’s thoughts or attitudes rather than their behavior. American shoppers behaved. They still shopped this weekend, despite their more frugal mind-set.

What does this mean? Have prices finally gotten low enough that customers are buying all of the things on their list? Could this mean that consumer confidence is not as low as we once believed? Is behavior outpacing attitudes?

What do you think?