2 Kinds of Customers: Relational v. Transactional

Two Kinds of Customers

© 2007 -- Wizard of Ads

Wednesday, May 23, 12


“ Half the money I spend on
advertising is wasted; the
trouble is I don't know which
half.”

- John Wanamaker



The Relational Customer
• Thinks long term.
R
• Considers today’s transaction to be one in a series
E
of many.
L
• Does not enjoy comparison shopping or
A
negotiating.
T
• Fears only “making a poor choice.”
I • Hopes to ﬁnd an expert they can trust.
O • Considers their time spent shopping to be part of
N the purchase price
A • Is likely to become a repeat customer.
L
• Is a good source of word-of-mouth advertising.



The Transactional Customer T
R
• Thinks short term. A
• Cares only about today’s transaction. N
• LOVES the process of shopping and negotiating. S
• Fears only “paying more than I had to pay.” A
C
• Is willing to spend lots of time investigating.
T
• Considers themselves the expert.
I
• Hinges every transaction on price.
O
• Loyalty? Wants to “beat you.” N
• Is a good source of word-of-mouth advertising.
A
L




NOTES:

According to a study conducted by Dr.
Richard D. Grant of 60 million Myers-Briggs
Type Instruments, for a given product or
service, Relational Shoppers tend to
comprise roughly half the population, while
the other half are Transactional Shoppers.

A customer can be a Relational Shopper in
one product category and a Transactional
Shopper in another.



R
E
L
A
T

One
I
O
N
A
L

Case
T
R
A
N
S
Study
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
$100
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S $90
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L
$100

T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

$100

T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A $90
L



R
E
L
A
T
I
O
N
A
L

$70
T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A
L
$80



R
E
L
A
T
I
O
N
A
L
$60

T
R
A
N
S
A
C
T
I
O
N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S $70
A
C
T
I
O
N
A
L



R
E $60
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A
L




Average Sale: $82
Average Gross Proﬁt: $32*
Average Proﬁt Margin: 39%




BEWARE of Averages



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S

Only 22% of Store
A
C
T

Visits (5 of 23) were
I
O
N

made by Relational
A
L

Shoppers.


R
78% of Store Visits
E
L (18 of 23) were made
A
T
I by Transactional
O
N
A Shoppers.
L

T
R
A
N
S
A
C
T
I
O
N
A
L



T
R R
E A
L N
A 20% Trafﬁc 80% S
T A
I C
O T
N I
A O
L N
A
L



R
E
L
A
T
I
O
N
A
L

T
R
A
N
S
A
C
T
I 50% of Buyers
O
N
A (5 in 10) were
L

Relational Shoppers.


R
E
50% of Buyers
(5 in 10) were
L
A
T

Transactional Shoppers.
I
O
N
A
L

T
R
A
N
S
A
C
T
I
O
N
A
L



T
R R
E A
L N
T A
I C
O 50% Buyers 50% T
N I
A O
L N
A
L



R
E
$100
L
A
T
I
O
N
A
L
$100

$100
T
R
A
N
S
$90
A
C
T
I 59% of Dollars Spent
O
N
A
L
($480 of $820) were by $90


R
E
41% of Dollars Spent $60
($340 of $820) were by
L
A
T

I
O
N
A
L
$60

$70
T
R
A
N
S
$70
A
C
T
I
O
N
A
L
$80



T
R R
E A
L N
T A
I C
O 50% Buyers 50% T
N I
A O
L 60% Sales 40% N
A
L



R
E
$50
L
A
T
I
O
N
A
L
$50

$50
T
R
A
N
S
$40
A
C
T
I 72% of Gross Proﬁt ($230
O
N
A
L
of $320) came from $40


R
E
28% of Gross Proﬁt ($90 $10
of $320) came from
L
A
T

I
O
N
A
L
$10

$20
T
R
A
N
S
$20
A
C
T
I
O
N
A
L
$30



T
R R
E A
L N
T A
I C
O 50% Buyers 50% T
N I
A O
L 60% Sales 40% N
A
L
70% Proﬁt 30%


BUT…



T
10% Advertising 90% R
R
E A
L N
T A
I C
O 50% Buyers 50% T
N I
A O
L 60% Sales 40% N
A
L
70% Proﬁt 30%


WHY?



Most retailers say their
primary objective is to
“drive trafﬁc.”

And since trafﬁc is heavily
weighted towards the
everywhere-at-once
Transactional Shopper, it’s
not surprising the majority
of all retail ad dollars are
spent on “Sale,”
“Price-Item” and
“Event” ads that target
the transactional mindset.



Most retailers assume the
store trafﬁc they see each
day is representative of
their typical customer
proﬁle and potential
sales volume.

But seldom is this the case.




Transactional Shoppers
represent a greater share
of overall store trafﬁc
than of actual sales or
gross proﬁts because
they tend to visit a greater
number of stores in search
of the the lowest price.




Consequently, Transactional
Shoppers represent lower
closing ratios, lower
average sales, and smaller
proﬁt margins.




Relational Shoppers
represent a smaller share
of store trafﬁc, but a
larger share of sales,
higher closing ratios,
higher average sales, and
higher proﬁt margins.




Intentionally or unwittingly,
every ad speaks to either a
relational or transactional
shopper.

Who have you been targeting?


2 Kinds of Customers: Relational v. Transactional

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