Brand Box 3 - Know Your Consumers - The Marketer's Ultimate Toolkit

KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
GROWTH
Know Your Business
Brand Architecture
Branding
Positioning
Know Your Consumers
Profiling
Segmentation
Insights
Pricing
Know Your Market
Competitive
Environment
Binary Analysis
Predatory Thinking
What’s the Big Idea?
Launch or NPD
Innovation
Communications
How to Say It
Advertising Idea
Tone & Messaging
When and Where to Say It
Media Strategy
Connection Idea
Channel Planning
ACTIONS from INSIGHTS
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KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
Know your consumers
One of the unfortunate mass market legacies is talking about people as consumers.
They’re people first and, if you’re lucky, they might decide to be your customers. They’re
not owned by anybody and the digital age has given them the power to rebel and repel on
mass the brands which have disrespected, or taken them for granted.
So now we know how important they are, the big questions is who are they? People
are becoming more eclectic with their choice, focusing more on personalisation and
becoming harder to fit into any box. We’re seeing niche brands do very well (like the
Icecreamists) and we’re seeing brands like Facebook, Apple and Google have such mass
appeal that targeting becomes almost ridiculous.
For the rest of us left in the middle, it’s important to try and understand who we’re trying to
talk to, and more importantly, who we’re not trying to talk to. We need to know what makes
them tick, what they’re thinking and how they relate to us - this is bundled up into the term
“insights”.
The following section tries to get under the skin of your customers and help shape and
frame some decisions so you can decide what an ideal customer really looks like.
Know
Your
Consumers
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KNOW YOUR CONSUMERS
KNOW YOUR CONSUMERS
Consumer power
Consumers have infinite resources and techniques to unearth and expose the fake, the
untrue, the phoney and the scripted. This means that inauthentic companies can no longer
get away with fakeness
IMPLICATION: 87% of purchases are first researched online*
3rd party unbiased endorsements are considered to be 3 times more credible than paid
advertisements
“You can’t just ask customers
what they want and then try
to give that to them. By the
time you get it built, they’ll
want something new.”
“There’s an old Wayne
Gretzky quote that I love; “I
skate to where the puck is
going to be, not where it has
been.” And we’ve always tried
to do that at Apple. Since the
very, very beginning. And we
always will.”

INSIGHTS
The fuel for creativity

KNOW YOUR CONSUMERS
INSIGHTS
Insight
vs
Information
6
Information is primarily data that comes from observations
Insights are a perspective on information that means you will never look at the
information the same way again - it’s the ‘meta-information’ if you will.
Result:
Insights give a deeper understanding, getting you closer to the result you are after.
In marketing terms:
Usually...
to deliver the most relevant and persuasive message to your customers
or simply...
to better understand their needs, behaviours and motivations

KNOW YOUR CONSUMERS
INSIGHTS
Insight Gleaned
You’ll probably never forget an insight:
‘The Australian’ Example:
Sales were down for The Australian newspaper. Research indicated the
reason for this was people considered it a ‘tough read’. The insight beneath
this was that even though it was tough, it was worth it and inﬂuential
Australians knew they ‘should’ be reading it. This insight was brought
to life in the “Think. Again.” campaign where Australian thought leaders
challenged their contemporaries with thought provoking questions, with the
last question being; “When did you last read The Australian?”
7
Think. Again.

KNOW YOUR CONSUMERS
INSIGHTS
Total Matches
111
56
28
14
7
4
2
55
28
14
7
3
2
1
Winner
Why are Insights Important?
Why are insights important without giving it away?
Insights are fuel for thinking
Example:
In the singles division of a knock-out tennis tournament there are 111 entrants. The
organiser wants to calculate the minimum number of matches that must be played.
What is this number and how do you reach it? The answer is bundled up into the term
“insights”.
The following section tries to get under the skin of your customers and help shape
and frame some decisions so you can decide what an ideal customer really looks like.
Here is the way most people would probably tackle this problem;
How many matches can be played between 111 people, how many people will be left
in the tournament after this round, and so on.
A much simpler method to solve this problem involves an insight switch-over. Instead
of working towards the gradual selection of the winner, consider instead all the
eventual losers. There must be 110.
Since each loser can only play one match there must be 110 matches.
8

KNOW YOUR CONSUMERS
INSIGHTS
The Pareto Principle
Vilfredo Pareto was born in Paris in 1848 and moved with his family to Italy in 1858. In
1886 he began lecturing on economics and management at the University of Florence and
eventually moved to Switzerland where he worked, developing the Pareto Principle, until
his death in 1923.
The Pareto Principle states that 80% of the result is obtained from 20% of the input. i.e.
80% results come from 20% of your time and effort!
This law can also be applied to everyday situations: 20% of sources cause 80% of your
happiness, and 20% of sources cause 80% of your unhappiness.
If you don’t have any new insights then how about you focus on the 80/20 rule. Every
marketer has an insight available to them - the 80/20 rule encourages you to focus on the
20% of your business that gets you the 80% of returns. In some industries we find this is
even higher.
For example, focusing on the 20% of your customers that generate significant income
allows you to reward them and single them out for special treatment. This might increase
their spend and loyalty and help you model for other customers who are similar.
Conversely, some businesses should sack their worst 20% of clients. Doing some analysis
might identify that 80% of problems and wasted time originate with a small group of
problem clients.
“80% of the result is obtained from 20% of the input”
Pareto and His Garden: 80/20 and Freedom from Futility, End of Time Management, Peter Drucker
80/20 Rule
Effort
Results
20%
80%
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KNOW YOUR CONSUMERS
INSIGHTS
Finding the Outstanding Results
The Seven Habits of Highly Effective People, first published in 1989, is a self-help book
written by Stephen R. Covey
Finding the 20% that gets 80% of outstanding results
NOW DISTRACTION
THE KEY PROCRASTINATION
Important Not Important
NotUrgentUrgent
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KNOW YOUR CONSUMERS
INSIGHTS
Background
The Stanford Prison System Experiment
was a 1971 study of the psychological
effects of becoming a prisoner or prison
guard. Conducted by a team of researchers
at Stanford University, led by Psychology
Professor Philip Zimbardo, 70 people were
chosen to play the roles of either guards
or prisoners and live in a mock prison in
the basement of the Stanford psychology
building.
Those selected were chosen for their lack
of psychological issues, crime history
and medical disabilities, in order to obtain
a representative sample and roles were
assigned based on a coin toss.
The Stanford Prison System Experiment:
An Insight gleaned

KNOW YOUR CONSUMERS
INSIGHTS
The Stanford Prison System Experiment cont..
What happened?
“Our planned two week investigation into the psychology of prison life had
to be ended prematurely after only six days because of what the situation
was doing to the college students who participated. In only a few days,
our guards became sadistic and our prisoners became depressed and
showed signs of extreme stress.”*
Result
• This demonstrated the impressionability and obedience of people when
provided with a legitimising ideology and social and institutional support.
• Illustrated cognitive dissonance theory and the power of authority.
• Supported the psychology theory of situational attribution of behaviour
rather than dispositional attribution. In other words, it seemed the
situation caused the participants' behaviour, rather than anything
inherent in their individual personalities.
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* Ofﬁcial Site - http://www.prisonexp.org
Wikipedia - http://en.wikipedia.org/wiki/Stanford_prison_study

KNOW YOUR CONSUMERS
INSIGHTS
RTA ‘Pinky’ Campaign: An Insights Case Study
Background
The RTA’s graphic advertising campaigns
around speeding seemed to be working for
all but one group: young males. Some of the
statistics around this group were horrible;
90% of fatalities in P-plate crashes are male.
P-platers represent just 7% of licence
holders but accounted for 33% of speeding
infringements 30km/h above the limit and
41% of 45km/h and above the limit.

KNOW YOUR CONSUMERS
INSIGHTS
Insight
It emerged that young male drivers were speeding in an attempt to impress their audience -
passengers, other mates, girls and the wider community.
The campaign needed to empower passengers to undermine the speeding driver’s
masculinity by making speeding “uncool”. Being considered “uncool” was a much more
real and immediate concern than death for these drivers. The message they needed to get
across was; “you may not die but everybody will think you’re an idiot”.
Passengers, rather than the driver, became the audience for ‘pinkie’ - a first in RTA
communication campaigns.
Results
• The most salient youth speeding campaign ever
• The campaign reached over 97% of its target audience, making one of the “biggest
global media impacts in Australia communications history”.
• Passengers embraced the ‘pinkie’ gesture.
• Prompted a crucial behaviour shift in young drivers - ‘pinkie’ decreased the incidence
of speeding behaviour and helped save over 50 young males from speed-related deaths.
Needing to be more than a 30 second TVC to succeed and save lives, this high saturation
campaign involved digital (XXS condoms/ thecashewboy.com.au), outdoor and ambient
(implemented in environments where young guys are feeling their most masculine - pubs
and men’s magazines) as well as the TVCs.
RTA ‘Pinky’ Campaign cont..
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CONSUMER SEGMENTATION
Useful Tools

KNOW YOUR CONSUMERS
Know your consumers
This model identifies the levels of human needs. As marketer’s,
it’s often useful to see how our category, product or service fits
into the human needs hierarchy.
Maslow’s
Hierarchy
of Needs
Maslow’s Hierarchy shows
us that you can’t operate
properly at a higher level
when there is dissatisfaction
at a lower level
Example:
You can’t motivate
someone to achieve their
sales target when they’re
having problems with their
marriage
Transcendence
Self-actualisation
Aesthetic
Cognitive
Esteem
Belonging/Love
Safety
Biological/
Physiological
Basic life needs - air, food, drink, shelter, wamrth, sleep, etc.
Protection, security, order, law, limits, stability, etc.
Family, affection, relationships, workgroup. etc.
Achievement, status, responsibility, reputation
Knowledge, meaning, self-awareness
Beauty, balance, form, etc.
Personal growth, self-fulfilment
Helping others
to self-actualise
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KNOW YOUR CONSUMERS
Seven Levels of Organisational Consciousness
Survival
Relationships
Self-Esteem
Transformation
Internal Cohesion
Making a Difference
Service
1
2
3
5
6
7
4
Pursuit of Profit and Shareholder Value
Financial Stability, Employee Health and Safety
Limiting: Short-term Focus, Control
Relationships that Support the Organisation
Open Communication, Respect, Customer Satisfaction
Limiting: Blame, Internal Competition
High Performance Systems and Processes
Productivity, Efficiency, Quality, Professional Growth
Limiting: Bureaucracy, Complacency
Continuous Renewal and Learning
Accountability, Adaptability, Innovation, Teamwork
Development of a Strong Cohesive Culture
Commitment, Enthusiasm, Shared Values
Strategic Alliances and Partnerships
Employee Fulfilment, Community Involvement
Service to Humanity
Ethics, Social Justice, Future Generations
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Richard Barrett

KNOW YOUR CONSUMERS
of things we Read
of words we Hear
of pictures we See
of things we Hear and See
of things we Say
of things we Say and Do
Watching a movie
Looking at an exhibit
Watching a demonstration
Seeing it done on location
Participating in a discussion
Giving a talk
Doing a dramatic presentation
Simulating the real thing
Doing the real thing
Cone of Learning
In Web 2.0 and beyond, marketers have
given unprecedented opportunity to engage
with customers and prospects. In our quest
to be relevant and memorable we can gain
insights from the below on how we choose
to engage with people.
10%
20%
30%
50%
70%
90%
We Remember:
18
Edgar Dale, Audio-Visual Methods in Teaching (3rd Edition). Holt, Rinehart and Winston (1969)

KNOW YOUR CONSUMERS
Why Target a Consumer Segment?
More relevant when building
value into your product
More relevant distribution -
being more selective when
distribution channels can give
a competitive advantage
More targeted in communication,
meaning less wastage
Consumer
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KNOW YOUR CONSUMERS
Targeting and Spillage
Often it’s helpful to have a bullseye target
because in mass media it’s impossible to
only target a certain group.
However; unless you’re specific it is
possible to miss your ideal customers by
being too general.
A bullseye model helps you target a niche
while identifying a secondary audience and
therefore apply a “non-alienation” test to to
your communications, i.e. we must talk to A,
but must not alienate B
A:
Bullseye
B:
Secondary
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KNOW YOUR CONSUMERS
Key Benefits of Market Segmentation
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Focus marketing efforts
where they have the best
chance of success
Build on the success
of other company’s
products
Increase profitability through
increased customer loyalty
and higher prices
Increase the efficiency
of money spent for
marketing activities
Find growth opportunities
Market
Segmentation

KNOW YOUR CONSUMERS
Market Segmentation
If you can clearly position your product
within a competitive market environment
then you will appeal to the most desirable
consumer segment. The greater your
appeal, the more rewarding your
relationship with your customers will be.
They’ll take the time to have a relationship
with you and to help you develop new
products (crowd sourcing).
So if you get your product positioned
right, it will appeal to a segment, there
will be reciprocal value and you’ll have
unbelievable loyalty.
Product
Consumer
Segment
Positioning Value
New Product Development
(Crowd Sourcing)
Product Segment Value Loyalty
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Relationship

KNOW YOUR CONSUMERS
Loyalty Segmentation
Rather than just assuming that customers are loyal because they keep on coming
back, it often pays to look what’s underpinning that loyalty. What are their opinions,
beliefs and motivations?
Non-customers
Those who buy competitor brands or are not product class users.
Price switchers
Those that are price sensitive and switch between brands depending on price.
Passive loyal
Those who buy out of habit rather than reason.
Fence sitters
Those who are indifferent between two or more brands.
Committed
Those that will only have eyes for the one brand.
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Committed
Fence
Sitters
Passive
Loyal
Non
Customers
Price
Switchers
Building Strong Brands, David A. Aaker 1996

KNOW YOUR CONSUMERS
Loyalty and Relationship Index
This Ogilvy model helps understand and clarify some of the drivers of loyalty
Strangers
Distant
Lovers
Happy
Marriages
Prisoners
Low High
High
Emotional
Loyalty
Behavioural
Loyalty
Single product holders. No
relationship manager. Potential
grievances. Non-response to
offers and communications.
Conduct relationships with other
providers. Most likely to leave.
Not unhappy with the relationship.
Have a mixed portfolio and
relationships with other brands.
Relevance lacking.
Multiple product holdings.
Advocates and satisfied. In a
two way relationship. Respond to
relevant communications.
Long term customers. A
combination of customers with:
Bad experiences/grievances,
overdrawn or in debt, intertia
stops them moving.
24
Ogilvy One

KNOW YOUR CONSUMERS
One of the most common and easy to define segments are generational
Generations
through the
Ages
Baby
Boomers
(1946-1960)
Generation
X
(1961-1980)
Generation
Y
(1981-2001)
Generation
Net
(1995-...)
25
http://www.dhss.mo.gov/LPHA/New2008MCHI/GenerationalDifferences_Worksheet_GalenHoff.pdf

KNOW YOUR CONSUMERS
Baby Boomers
Defining characteristics:
• Born 1946-1960, after World War II
• Grew up during the 50’s, 60’s and 70’s
• Entered the workforce when unemployment was high; late 60’s to early 80’s
• They remember starting at the bottom and working their way up
• They are today’s ageing workforce
Baby
Boomers
26
Through the Ages, Business Review Week, Dr Roslyn Sayers 2008

KNOW YOUR CONSUMERS
Generation X
• Born 1961-1980
• Grew up during the 70’s and 80’s, entering the workforce in the 80’s and 90’s
• Were influenced by increase in number of divorces, single-parent and dual income
situations
• Generally well-educated with majority having had a tertiary education
• Highly influenced by the 90’s technology boom with the increasing popularity of the PC
and Internet.
• Stay loyal to themselves only and have a tendency to change jobs frequently, with
many involved in starting their own businesses
• Today they are faced with the demands of managing work and family commitments
Generation
X
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KNOW YOUR CONSUMERS
Generation
Y
• Born in 1981-2001
• Grew up during the 80’s and 90’s and entered the workforce from the 90’s up to the
current day
• Are generally either working or studying at school or university
• Influenced by technology and are highly impatient, expecting everything to be
instantaneous
• Are characterised for holding several jobs at one time and consider holding a job for
more than 2 years to be a long time
• Generation Y is aware of globalisation and concerned with global issues such as
climate change and sustainability
Generation Y
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KNOW YOUR CONSUMERS
Generation
Net
Generation Net
• Born 1995 and beyond
• Are growing up in the 90’s and 00’s
• Will enter the workforce from around 2010-2020
• Have grown up with technology such as mobile phones, Internet,
• Expect everything to be instantaneous
• Generally have an extremely short concentration span
Before they turn 25 the Net Generation will have:
• Spent 10,000 hours gaming
• Sent 200,000 emails and Instant Messages
• Spent 20,000 hours using their mobile phones
• Spent 15,000 hours on the Internet
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KNOW YOUR CONSUMERS
Generation C
The GENERATION C phenomenon captures the avalanche of consumer
generated 'content' that is building on the Web, adding tera-peta bytes of
new text, images, audio and video on an ongoing basis. The two main drivers
fuelling this trend?
1. The creative urges each consumer undeniably possesses. We're all artists,
but until now we neither had the guts nor the means to go all out.
2. The manufacturers of content-creating tools, who relentlessly push us to
unleash that creativity, using, of course, their ever cheaper, ever more powerful
gadgets and gizmos. Instead of asking consumers to watch, to listen, to play,
to passively consume, the race is on to get them to create, to produce, and to
participate.
More than just age based segmentation, a behavioural segmentation like
Generation C is sometimes useful. Also look to the Technographic profiling
available on the Forrester research site to see how your audience might be
using technology.
30
http://www.trendwatching.com/trends/GENERATION_C.htm

KNOW YOUR CONSUMERS
Consumer 2.0
Peers win over celebrities:
Consumer 2.0 responds better to endorsement from peers and friends, and not celebrities.
In a survey conducted in America only 15% of college students said they would be influenced
by celebrity endorsement of a brand.
Niche is normal:
These consumers want choices and products that speak to them personally. They want to
follow their hearts and pursue their own interests.
Small pieces of communication:
Consumer 2.0 takes in small bits of information rapidly, and filters the rest out. They multi-task
and the best marketers can hope for is divided attention from them. For every email they send
they send 2.5 text messages.
Personal needs trump brands:
A recent study found 78% of college students thought that brands were overrated; Consumer
2.0 will consume what suits them. In some categories brands are still important, but this is
less obvious than in the past.
They own the brand:
Consumer 2.0 constantly blogs and speaks out about their experiences of brands. It is their
opinion that will make or break a product more than ever before.
31
Engage: Gen Y, Brandon Evans, April 17, 2009

KNOW YOUR CONSUMERS
Customisation
In the past Australians have only had access to generalised web portals such
as Yahoo, Ask or Google. These sites, while each being slightly different, are
ultimately very similar.
Recently, applications like PageFlakes, MyYahoo and iGoogle have given
users the chance to make their home page and web portal customisable,
hence tailoring to many different niches.
In 2007 the use of iGoogle grew 267%, with approximately 20% of Google
homepage visits being through iGoogle.
Also, the websites that have Google ads on their sites as part of the Google
content network reach 7.2 billion unique visitors each month, with a total of 1.2
billion page views
32
Ben Phillips, AdNews 8 August 2008

KNOW YOUR CONSUMERS
The Long Tail
This term refers to the ‘Long Tail’ demographic that buy niche items rather
than popular items.
For example, Netflix or Rhapsody are two online media distributors that cater
to the ‘Long Tail’. They do this by offering an enormous range of choice in
their 25,000+ movie titles and millions of songs available.
As a result, people buying from these companies generally do not buy movies
or music that are currently popular. Instead, almost 50% of sales are from
niche, classic and old titles.
Thus ‘Long Tail’ customers buy what they want specifically, without regard to
popular culture. This also increases the shelf life of the content.
Popularity
Products
Head
Long Tail
33
Life After The 30-Second Spot, Joseph Jaffe, 2005

KNOW YOUR CONSUMERS
SEGMENTATION METHODS
Types of Customer Segmentation
Who are
we Creating
Value for?
Mass Market
• Don’t distinguish between different customer segments
• The value propositions, distribution channels, and customer relationships
all focus on one large group with broadly similar needs and problems
Niche Market
• Cater to specific, specialised customer segments
• The value propositions, distribution channels and customer relationships
are all tailored to specific requirements of the niche market
Segmented
• Focuses on more than one market segment with slightly different needs
and problems
• One business model that serves different market segments with slightly
different value propositions
Diversified
• Serves two unrelated customer segments within the same business model
• An example would be Amazon.com who diversified their online retail
business by selling online storage; both are linked by Amazon.com’s
powerful IT infrastructure on more than one market segment with slightly
different needs and problems
Multi-sided
Markets
• Serves two or more interdependent customer segments, who together
make the business model work
• An example would be a credit card company who needs a large base of
credit card holders, as well as a large base of merchants who accept
those credit cards
35

KNOW YOUR CONSUMERS
Segmentation: How is it Done?
Who they are? Where are they? What they do? What they think?
36
Psychographic
Behavioural Demographic
Categorisation Geographic
Define by service
Customer or consumer?
Costumer or prospect?
Categorisation
Global, country, region; urban
or rural, etc.
Geographic
Demographic
Age, income, gender,
education, religion, etc.
Behavioural
Product usage rates, loyalty,
buyers/users, benefits sought
Psychographic
Attitudes, beliefs and lifestyles
Motivation

KNOW YOUR CONSUMERS
Segment Examples
Down Agers:
Believe 50 is the new 40
Empty Nesters:
A couple with adult children who live out of home
Clan and Community
Action groups
Early Adopters:
Adopt and embrace new technology
Pets are people too:
People who treat animals like surrogate children
37

KNOW YOUR CONSUMERS
Adoption of Innovation Model
The traditional marketing chasm occurs
between ‘early adopters’ and ‘early majority’
and normally requires successful mass
marketing to transition across.
The consumer adoption of any new product
generally follows a bell curve of distribution
and adoption. For a market launch of a new
product an understanding of the above is
critical to be able to identify the differences in
the segments and plan the rollout over time.
2.5%
Innovators
13.5%
Early
Adopters
34%
Early
Majority
34%
Late
Majority
16%
Laggards
Rogers Adoption/Innovation Curve
38

KNOW YOUR CONSUMERS
Common Segmentation Methodologies & Models
Mosaic geoTribes
Neilsen:
Panorama
Roy Morgan:
Asteroid
Segmentation
Tools
39

KNOW YOUR CONSUMERS
Mosaic Segmentation
Mosaic is a consistent segmentation system that covers over 284 million of the world’s
households
It is based on a simple proposition that the world's cities share common patterns of
residential behaviours
Mosaic creates a set of groups which are used to classify sections of society, such as:
• Sophisticated Singles
• Bourgeois Prosperity
• Career and Family
• Hard Working Blue Collar
• Rural Inheritance
Mosaic
40
http://www.business-strategies.co.uk

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geoTribes®
In geoTribes®, social resources are represented by socioeconomic status, while needs
are represented by lifecycle stage. The geoTribes® scheme is ranked in descending
socioeconomic status order.
Applications for the segments include targeting of letterbox, outdoor, media inserts,
database enhancement and profiling and sophisticated integrated campaigns.
The geoTribes® segments are based on a sophisticated spatial modelling process that
combines Census demographic data with lifecycle stage and socioeconomic status data
from the abs’s Household Expenditure Survey (HES).
geoTribes
41
www.rdaresearch.com.au/geotribes.php

KNOW YOUR CONSUMERS
Nielsen: Panorama
Consumer and Media Insights:
Panorama helps clients to better understand consumer usage of products and services by
providing insights they can act on and the market understanding for profitable customer
growth. As a syndicated multi-media marketing database, Panorama integrates consumer
demographics, product usage and media consumption for value-added marketing and
media solutions.
It enables consumer profiling (a stronger comprehension of consumers or potential
consumers needs) to reveal opportunities for new business in the market place. It also
enables targeting of advertising campaigns with greater accuracy through planning and
evaluating integrated media campaigns using the strengths of the media industry's most
widely used research tools:
• OzTAM Metropolitan TV Ratings data
• AGB Nielsen Media Research Regional TV Ratings data
• Nielsen Radio Ratings data
• Panorama Product and Service Usage data
Neilsen:
Panorama
42
http://au.nielsen.com/products/nmr_panorama.shtml

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Roy Morgan Segments: Asteroid
Roy Morgan Asteroid research is operating in over 365 client sites around the world.
Asteroid is decision-oriented. It makes survey data accessible to people who have to
formulate conclusions and recommendations.
It allows you to explore data, generate and test hypotheses, follow up ideas and trains of
thought and search for supporting evidence.
Asteroid encourages researchers to be more proactive and creative in using survey
results. It promotes fuller understanding of survey results and allows faster responses to
queries.
Asteroid adds value to surveys. Most of the cost of surveys is in data collection - Asteroid
allows you to get much more information for little extra cost.
Roy Morgan:
Asteroid
43
www.roymorgan.com.au

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CUSTOMER CONVERSION
There has been a lot of dissing of the good old marketing funnel of late; especially from
the digital sector. To our mind, it’s simple, it’s clear and it still helps.
Marketing
Funnel
Suspect
Prospect
Customer
Client
Advocate
Free product samples
Digital front-end products,
books, audio
Back-end physical manuals,
tools
System consulting
Apple example:
Free iTunes Card
iPod, iTunes account
iMac, MacBook
appleCare, licensing
45

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Purchase Path
Following on from the Marketing Funnel, an ideal flow through passes all levels of brand engagement down the purchase path.
Awareness Knowledge Liking
Purchase Conviction Preference
Repeat
Purchase
Endorse Advocate
46

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Conversion Strategy
Of course, the purchase path isn’t always set in stone, but is dictated by your industry. What is set in stone is that there is always
an action which is prompted by a stimulus.
Below is an example of the path taken by people in the publishing industry.
Aware
See
Understand
See Ad
Interest
Friend Uses
Use
Demo
Purchase
Trial
Advocate
Subscription
ActionStimulus
47

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Case Study: Joe Girard
When it comes to conversion we need to look at the humble used car
salesman. From a category that’s often so loathed there’s one guy who
has emerged as universally loved! There’s much that some of us ivory
tower marketers can learn from the humble car lot

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
Joe Girard cont..
Joe Girard would sell an average of 70 used cars per month, when the industry average
was 7. He would find out information about customers, such as asking when their
birthday was, their favourite song and would ask them about their kids. He would keep
this information and then do little value-adds such as putting the CD of the customers’
favourite song in the car ready to play when they picked up the car.
Joe would go above and beyond; putting a bow on the key of the car, offering free annual
detail, sending the customer a birthday card, then the car a birthday card with a free fuel
voucher!
In fact, he would send cards to customers up to 13 times per year!
49

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
“Most marketers use research
like a drunk uses a lamp post, for
support rather than illumination.”
Bill Bernbach

KNOW YOUR CONSUMERS
CUSTOMER CONVERSION
“If I had asked people what they wanted,
I would’ve built a faster horse”
Henry Ford

KNOW YOUR CONSUMERS
RESEARCH
“Instead of asking them to watch, to
listen, to play, to passively consume,
the race is on to get them to create, to
produce and to participate”
trendwatching.com

KNOW YOUR CONSUMERS
RESEARCH
Roles of Research
What is marketing?
The purpose of marketing is to get and keep a customer. Marketing is the planning and
decision-making process that manages the links between our clients and their consumers.
It helps us answer the following questions around our customers
• What do they want?
• Why do they want it?
• What do the competitors offer?
Research Strategies
ContextConsumer
Trends - experts, technological changes
Culture - pop culture, style, fashion
Cross-Industry - influences from parallel industries, developments etc.
Depth (insight) - Qualitative analysis - groups, interviews, observations, ethnography
Breadth (quantisation) - online, omnibus, Roy Morgan data
54

KNOW YOUR CONSUMERS
RESEARCH
Research and Ethnography
A context for research interpretation
Not aware
AwareWillsay
Won’tsay
Conscious factors
• Public and spoken
• Socially acceptable
• Left brain
Private Feelings
• Private but suppressed
• Don’t like to admit
• Hard to verbalise (right brain)
Intuitive Associations
• Potentially public
• No vocabulary
• Right brain
Unconscious factors
• Private and repressed
55

KNOW YOUR CONSUMERS
RESEARCH
Different Segmentation for Different Purposes
Segmentations to develop advertising
Populations
Studied
Users of the product or service to be advertised
Data sources
tapped
Attitude surveys
Analytical
tools used
Statistical analysis of survey results
Outputs Segments that differ in their responses to a given
message
Segmentations to develop new products
Users of related products or services that
already meet similar needs; partners such as
distributors and retailers
Purchase and usage data on consumers,
supplemented by surveys; analysis of
consumers’ finances and channel preferences
Analysis of customers who remain loyal and
those who switch to competing offerings
Segments that differ in their purchasing power,
goals, aspirations, and behaviour
56
Harvard Business Review Feb 06

KNOW YOUR CONSUMERS
RESEARCH
Decision Making
Issues the business wants
to address
Shallow
decisions
• Whether to make small
improvements to existing products
• How to select targets of a media
campaign
• Whether to change process
Consumers’ concerns
• How relevant and believable new-
product claims are
• How to evaluate a given product
• Whether to switch products
What the segmentation
should try to find out
• Buying and usage behaviour
• Willingness to pay small premium
for higher quality
• Degree of brand loyalty
Middle-
of-the-
spectrum
decisions
• How to position the brand
• Which segments to pursue
• Whether to change the product
fundamentally
• Whether to develop an entirely
new product
• Whether to visit a clinic about a
medical condition
• Whether to switch one’s brand of
car
• Whether to replace an enterprise
software system
• Whether the consumers being
studied are do-it-yourself or do-it-
for-me types
• Consumers’ needs (better service,
convenience, functionality
• Their social status, self-image, and
lifestyle
Deepest
decisions
• Whether to revise the business
model in response to powerful
social forces changing how people
live their lives
• Choosing a course of medical
treatment
• Deciding where we live
• Core values and beliefs related to
the buying decisions
57
Harvard Business Review Feb 06

KNOW YOUR CONSUMERS
RESEARCH
Research Strategies
58
Climb a mountain
Quantitative perspective
If you want to look at a tree, stay on
the ground. If you want to see
the forest, climb a tree.
Go to the jungle
Environment qualification
If you want to see how a lion hunts,
don’t go to the zoo, go to the
jungle.
Think like a fish
Collaborate sessions
If you want to catch a fish, first you
must think like a fish.

KNOW YOUR CONSUMERS
RESEARCH
Research Can Confuse You!
Treat focus groups with caution
Allowing rooms full of total strangers with big mouths to influence
your marketing strategy can be disastrous
In a focus group, you are asking people to form an opinion in
a manner that goes way beyond that of their normal mental
processing, turning them into marketing managers for a day
If there is any questions around the quality of the members of the
group, or the discussion guide, you simply must have an expert
facilitator to help you sift the wheat from the chaff
Always be aware that people often talk one way, but act another;
especially in artificial group environments
And lastly, remember that focus groups are qualitative, not
quantitative, so don’t treat comments as statistically valid - holding
multiple groups, in multiple locations, can help isolate some of the
factors
59

KNOW YOUR CONSUMERS
RESEARCH
Case Study:
‘NEW’ Coca-Cola Failure
In 1985, after $4 million was invested in market research and over 200,000 blind taste tests had been
performed, Coke launched ‘New Coke ‘
However, they forgot to tell consumers it was not and, but instead, of ‘old’ Coke
PR disaster!
After a deluge of phone calls and letters demanding the return of the original Coke, the company decided
to return to the original ingredients.
The result was that Coke acknowledged that it is the consumer that drives ‘Coca-Cola’, not the company.

KNOW YOUR CONSUMERS
RESEARCH
Defining and engaging social change
The easiest way to consider the emergence of trends
in our society, such as the rise of particular fashions or
the popularity of certain books and films, is to think of
them as epidemics.
You can spread your own ‘epidemic’ by considering
three rules
• The Law of the Few
• The Stickiness Factor
• The Power of Context
Tipping
Point
Gladwell took an existing concept and
made it his own. “Tip of the hat to you sir”. It
would be remiss for us to not acknowledge
him in our toolkit
61
The Tipping Point, Malcolm Gladwell, 2000

KNOW YOUR CONSUMERS
RESEARCH
The Tipping Point cont..
The Law of the Few
A certain few types of people are primarily responsible for the emergence of social epidemics in society:
62
2. Mavens:
These people collect information, and
when they find something interesting they
love to share it with anyone who will listen.
They are more interested in the world
around them, reading more magazines,
newspapers and even junk mail. They
provide the message and Connectors
spread it.
1. Connectors:
People with an uncanny knack for making
friends and acquaintances. Due to their
personality and character their networking
skills generally span across various
subcultures and niches. This makes them
invaluable for spreading ideas and trends.
3. Salesmen:
These people convince the unconvinced.
Unlike the other two they work with
nonverbal as well as verbal persuasion.
Their personalities are very expressive -
they are the carriers of the epidemic.

KNOW YOUR CONSUMERS
RESEARCH
The Tipping Point cont..
The Stickiness Factor
The content of the message is also intrinsic to starting an epidemic, not just the
messengers. The message needs to be ‘sticky.’ That is, it needs to be memorable and
needs to spur people to action.
You need to make your message irresistible!
The Power of Context
We are exquisitely sensitive to changes in our context. The Power of Context advocates
that behaviour is a function of social context and environment. For example, when
people are asked to consider something or make decisions in a group, their conclusions
generally differ greatly than if they had been alone.
Close knit groups have more power in amplifying the potential of the social epidemic or
trend. The Rule of 150 guides this roughly; 150 is the maximum number of people the
average person can have a genuine social relationship with. Any more than this and the
group is no longer tightly knit.
63

KNOW YOUR CONSUMERS
PRICING
Pricing Srategies
Pricing in the Consumer section? “Nonsense, surely it belongs under ‘Know Your Business’”,
did we hear you say?
We agree that we may seem to be flirting with the controversial to have it here and that’s the
problem, and the point, we’re trying to highlight. 90%+ of businesses price based on either
the cost of inputs or what their competitors are doing.
If you understand your customers and segment correctly, pricing presents a whole new
opportunity for business growth.
Pricing
Strategies
65
The Strategies and Tactics of Pricing, A guide to proﬁtable decision making,
Third Edition by Thomas T. Nagle and Reed K. Holden

KNOW YOUR CONSUMERS
PRICING
Progression of Commoditisation
The below graph shows us that price becomes important only if everything else is equal.
$
Margin
Time
Functionality Quality Convenience Price
66
Rod Young, dcstrategy.com

KNOW YOUR CONSUMERS
PRICING
Elements of Pricing
NOTE:
Cost of production
is not a factorPrice as
Quality
Necessity
vs
Luxury
Price of
Fairness
Switching
Cost
Size of
Expenditure
Differentiation
Value
Pricing
Metrics
Reference
Value
Elasticity
of Demand
End Use
as Driver
Bundling
& Framing
Evaluation
Cost
Shared
Cost
Effect
Customer
Value
67

KNOW YOUR CONSUMERS
PRICING
Pricing Elements
Customer Value What is the product really worth to the customer and what gain will they
forgo without the product?
Evaluation Cost There can be a difficulty, and therefore risk, associated with an unknown
alternative
Price of Fairness Customers are sensitive to prices that fall outside what’s considered ‘fair’;
seller’s profits are one issue
Neccessity vs Luxury Shouldn’t charge higher for necessities
Size of Expenditure How large is the expenditure in absolute terms? How much effort is there to
reduce it?
Elasticity of Demand How sensitive is the demand of the product to movements in price?
Pricing Metrics Quantity Based e.g. petrol. Access Based e.g. health clubs. Performance
Based e.g. legal, banking.
68

KNOW YOUR CONSUMERS
PRICING
Pricing Elements cont..
Reference Pricing Is a product’s economic value, which is the price of the next best
“perceived” alternative
Differentiation Value Is Reference Pricing plus the value of the product’s differentiating values
Switching Cost Up-front fees and costs to customers should be considered to minimise
switching barriers
Bundling and Framing;
Proportioned Price
Customers are less sensitive to smaller “proportioned” add-ons to big ticket
items, e.g. what’s a few hundred dollars when buying a car?
End User as a Driver Is the end use emotional, quality or cost driven? E.g. do people want a 2-4-1
dinner voucher for Valentine’s Day?!
Price as Quality With image and exclusive products, or in the absence of other cues, price
can signal quality
Shared Cost Effect Does the buyer have to cover the full cost, especially during the start-up
phase
69

KNOW YOUR CONSUMERS
PRICING
The Strategy and Tactics of Pricing
“No other weapon in a marketer’s arsenal can boost sales more
quickly or effectively than price. Price discounting - whether
explicit, or disguised with rebates, coupons, or generous terms -
is usually a sure way to enhance immediate volume.
However, gaining sales with price is consistent with long-term
profitability only when managed as part of a marketing strategy
for achieving, exploiting, or sustaining a longer-term competitive
advantage.”
-T Nagle, R. Holden
70

KNOW YOUR CONSUMERS
PRICING
Reference Price
Why are people buying?
Low
Low
High
Value of Differentiation
PainofPrice
Price Buyers Value Buyers
Convenience
Buyers
Relationships
Buyers
High
71

KNOW YOUR CONSUMERS
PRICING
Reference Price
72
Is there a response that
would cost less than the
preventable sales loss?
If you respond, is the
competitor willing and
able to cut price again
to re-establish the price
difference?
YES NO
Respond
Will the multiple responses
required to match a
competitor still cost less than
the avoidable sales loss?
YES
YES
Respond
Does the value of the
markets at risk justify the
cost of a response?
NO
YES
YES
Respond
NO
Accomodate
or
Ignore
Is there a response that
would cost less than the
preventable sales loss?
YES
NO
Competitive
Price Out or
New Product
Entry

KNOW YOUR CONSUMERS
PRICING
Adapting to a Changing Environment
Product
Development
Stage
Introduction Growth Maturity DeclineSales and
Profits ($)
Time
Sales
Profits
73

KNOW YOUR CONSUMERS
PRICING
Price Metrics
When you set a price for your product or service, you must consider its value to the
customer. Do this by considering the nature of your product:
• Is it quantity based, i.e. petrol
• Is it access based, i.e. health clubs
• Is it performance based, i.e. legal services
You must set your prices proactively, and not let them be determined by a misinformed
or ill-intending customer
74

KNOW YOUR CONSUMERS
PRICING
Marketing Success Through Differentiation
Customers purchase more than the product; they purchase
the entire package, including:
• Ease of purchase
• Terms of credit
• Reliability of delivery
• Pleasantness of interactions
• Fair handling of complaints
“Customers buy the augmented product”
-Theodore Levitt
75
Product
Augmented
Product
Ease of purchase Terms of credit
Reliability
of delivery
Pleasantness of interactions
Fair handlings
of complaints

KNOW YOUR CONSUMERS
PRICING
Pricing Mechanisms
Fixed “Menu” Pricing
Predefined prices are based on static variables
List Price
Users of the product or service to be
advertised
Product
Feature
dependent
Price depends on the number or quality of
Value Proposition Features
Price depends on the type and
characteristic of a customer segment
Volume
dependent
Price as a function of the quantity
purchased
Dynamic Pricing
Prices change based on market conditions
Price negotiated between two or more
partners depending on negotiation power
and skills
Price depends on inventory and time of
purchase
Price is established dynamically based on
supply and demand
Price determined by outcome of
competitive bidding
Customer
Segment
dependent
Negotiation
(Bargaining)
Yield
Management
Auctions
Real-time
market
76

INSIGHT AND SEGMENTATION TOOLS

KNOW YOUR CONSUMERS
The ‘Big Questions’ for Stimulation
What catches
people’s attention?
What do people
respond to?
What surprises
people?
Who do they want
to talk to?
Who do people
admire?
What do people
enjoy?
What shocks
people?
Who do people
respond to?
?
78

KNOW YOUR CONSUMERS
24 Secondary Questions
1. Who are the different people involved with this product?
2. What do consumers hate about the category?
3. When is the product most valuable to them?
4. Why would they try our competitors?
5. What other products can this be used in conjunction with?
6. How does the product help you interact with other people?
7. Where is the product inappropriate?
8. Who do we not want to use the product?
9. What do our customers say about people who don’t use the product?
10. When are customers likely to switch?
11. Why would you speak to somebody else about it?
12. How does it make you feel?
13. Where will the category be in 10 years time?
14. Who despises our product and would never use it?
15. What do people that don’t use our product say about people that do?
16. Why wouldn’t you buy a competitors product?
17. When aren’t you thinking about the product but probably should be?
18. What sense does the product stimulate?
19. How else could you use the product?
20. Why couldn’t you just change out the logo?
21. What would your most loyal customer do to get the product?
22. Where do you wish you could find the product but can’t?
23. Who isn’t using the product but should be?
24. What would customers do if they did not have this product?
79

KNOW YOUR CONSUMERS
The Top 4
Questions Answers
80

KNOW YOUR CONSUMERS
Interrogate Your Consumer
Interrogate
Your
Consumer
What influences them?
Who influences them?
Where do they get their
information?
Who are they?
How can we help them buy?
How does the product fit
into their communities?
How does the product fit
into their lives?
Personality profiles
Barriers to purchase? Risks?
Fears?
What drives their decisions?
81

KNOW YOUR CONSUMERS
Customer Profile Page
An understanding of a
customer’s mindset lets
you find opportunities
for products and
communications
Customer’s Current Mindset
Their expectations
Their beliefs
Their experience with you
Dynamic Pricing
Their buying habits
What drives their buying
Their market category
Negative aspects
82

KNOW YOUR CONSUMERS
Benefits vs. Problems
When asked what they want for their dog, consumers most often respond with “nutrition”
or “good taste”, which is what much dog food advertising has stressed over the years...
83
...but when asked what problems they have had with dog foods, consumers complain
about their dog’s bad breath or the food’s odour or mess.

KNOW YOUR CONSUMERS
Benefits vs. Problems
Category/Product Benefits Category/Product Frustrations
84

KNOW YOUR CONSUMERS
Picture Profiles
Picture profiles can be used to really bring the target market to life
Traditional Media Target
Viewing your consumer in terms of
an age group or demographic
e.g. 12 to 24 year olds
Conceptual Media Target
Viewing your consumer as a part of
whatever community they belong to
e.g. cool young people
85

KNOW YOUR CONSUMERS
Pen Portraits of Target Markets
Writing a portrait of your target market may help get inside their mind
and understand their motivations and desires
Autobiography
A brief story written in the ‘first person.’
Biography
A story written by a second person
86

KNOW YOUR CONSUMERS
Mind Snapshot
This tool helps you analyse your customer’s drivers of purchase behaviour
Product Category: (e.g. Toothpaste)
Category Attributes Importance as
purchase driver (1-10)
Relative Brand
Strength
87
N.B:
Different by segment
Different by individual

KNOW YOUR CONSUMERS
Insight Windows
An insight is merely a point of view on a
piece of data or information that changes
the way we look at something. We
encourage you to have a look through the
“windows” or filters listed above and see
what insights might be present.
TIP: have a look at the future tools under
“know your market’ for stimulation on
what trends are affecting your category.
Consumer Product
Category Future
88

KNOW YOUR CONSUMERS
Insight Links
This tool is handy for linking insights to communications messages
Core
Insight
Comms.
Proposition
What feeling do you want to engage?
What rational support do they need to believe?
What experience do you want to create
What action do you want them to take?
What perception needs to shift?
What “baggage” do they need to drop?
89

KNOW YOUR CONSUMERS
Customer Journey Audit
This tool provides a framework for conducting an audit of your customer journey.
When conducting a customer journey audit you should look at it from 5 different points of view and across 4
distinct contact stages, looking to see whether your competitors are effectively delivering on their strategies.
Strategy/
Positioning
Awareness Purchase Advocacy
Competitor 1
Market Leader
Competitor 2
Closet Competitor
Competitor 3
Most innovative
Parallel industry
best practice
My Brand
PointofView
Contact Stage
90

KNOW YOUR CONSUMERS
Experience Engineering
This tool lets you compare the current
customer experience to an ideal
customer experience and see how
you can link the two
Describe the current experience your
customer receives
Imagine the perfect
customer experience
What are the similarities
and differences?
What needs to be changed to engineer
the perfect customer experience
91
The Idea Generator, Ken Hudson, 2007

KNOW YOUR CONSUMERS
Value Your Existing Customers
The average acquisition cost of a new customer is currently $454, showing that it is
important to value the relationship with your existing customers. Some easy ways to keep
this relationship going and growing is to;
• Ask for the next sale
• Lock in the next cross sell opportunity
• Plan your next contact
• Ask for feedback
• Stay relevant
• Consider their needs
• Ask if the consumer can refer - empower and incentivise them
S
92
Business Review Week, 2008

Congratulations on completing Book 3: Know your consumer
Contact us to get yourself a copy hellostepchange.com | +61 2 8030 8655 | chat@hellostepchange.com
The Brand Box series
The next book in the Brand Box series is Book 4: What’s the big idea?

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