Thus it is more important now than at any time in the history of marketing to really understand your target market and to let this understanding drive not only your marketing decisions, but the entire decision-making framework of the company. It is our opinion that many of the business successes of the past ten years have come about not because of great business management, but because of individuals with tremendous consumer insight-insight developed through a deep understanding of the target market, the business environment, and the competition.
It was the genius of people like Steve jobs, who understood the impact of the personal computer first on businesspeople and then on home consumers. Jobs started Apple Computer from his garage, igniting the computer revolution.
It was Sam Walton's insight that determined that the rural consumer was underserved from a retail standpoint. Walton built his business on the concept that the rural consumer would travel much farther than the normal retail trading area distance to shop at a store which offered a one-stop shop with good value on its products.
While the standard doctrine of the day said that there had to be , people within a mile trading area to support large general merchandise stores such as Wal-Mart, Mr. Walton put his stores in small towns such a Viroqua, Wisconsin.
- Discipline and Fortitude: The Two Most Important Factors To Improve Your Digital Marketing Results.
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He succeeded because consumers in rural areas were willing to drive much greater distances to avail themselves of the deep selection of merchandise and reasonable prices that in the past could only be found in the larger cities. One final example would be Famous Footwear. In an era of flat retail footwear sales, the fast-growing footwear retailer realized that Nike, Reebok, Keds, Rockport, Naturalizer, etc. What a retailer could do best was to provide the brands for less.
Famous Footwear targeted the heavy female purchaser with children and provided that consumer value-not the best prices, not the best quality, not the biggest selection, but value. The best price on popular brand-name shoes for the entire family. In all of these examples, companies used their insight into their target markets to provide products, communication programs, and sales programs that made individuals in the target markets think they were talking directly to them.
Much of the target market innovation in today's marketing environment is coming from retailers, service firms, package goods companies, and business-to-business firms who are interacting with their target markets with a new level of urgency. Technological innovations in the retail industry, such as "smart cash registers," increased use of research, and marketing databases have provided marketers a wealth of customer information. The more successful business-to-business firms are spending less time selling what they have and more time defining their customers' needs. And package goods companies faced with parity of product and a sales promotion environment are exploring new ways to build brand equity and value-added with their products.
Marketers who are on the front lines, engaging in dialog with the consumer on a daily basis, are the ones who are often closest to the consumer and target market demands.
This "closeness" is bringing about a change in the way many marketing-oriented companies are doing business. These marketing-oriented companies are now in a position to define specific segments based upon unique needs or consumption behavior and then realistically set marketing objectives to affect the segment's behavior. For example, companies now have the ability to know whether product repurchase rates are different for new versus old customers or by demographic age segment.
They have the ability to determine exactly how many customers there are for each unique purchasing segment, and they know what the average expenditure per purchase and the average number of purchases is for the segments. With this type of target market information, the marketing-oriented company is able to set objectives to affect consumer behavior.
As a result, the marketers writing the plan know they have a good chance of achieving the goals, because these objectives have been set with the consumer's needs in mind. For example, setting an objective which increases the repeat purchase rate might be developed due to a knowledge that the consumer has the desire and the ability to purchase more if the company made some basic changes in the way it does business.
This might require changing the product to satisfy shortcomings in important attributes in order to stimulate increased repurchase. It might mean changing the packaging to allow for easier storage, or it might mean adjusting price to encourage multiple purchases.
And, it might mean improving customer service to increase after-sale purchases and repurchases. While all these involve strategic decisions, it is consumer insights which provide the marketer the confidence to set obtainable marketing objectives and to determine the appropriate strategy for achieving them.
The premise of disciplined marketing planning as outlined in this text is that marketing plans focus on the needs of the target market.
The Successful Marketing Plan: A Disciplined and Comprehensive Approach
A zero-based approach establishes a consistent terminology for spending and investment, making ROI and budget discipline the common ground for decision making. At a global manufacturing company, for example, the CEO used the same cost-management tool that had been tracking budgets and spending for zero-based budgeting to plan, track, and monitor growth initiatives. The change resulted in more transparent budgeting decisions about which initiatives to finance and an ability to track and redirect resources during the course of the year to ensure optimal spending.
The company achieved the target ROI. More important than the tools and methodology used, however, is personal commitment on the part of marketing leaders. In all zero-based marketing efforts, commercial executives must provide marketing managers with full ownership of their respective cost areas, along with targets to achieve in the form of ROI, and where relevant, savings and reinvestment.
Establishing a governance mechanism to track progress of these owners against their commitments is a fundamental step to ensuring that growth targets are met as a result of the adoption of zero-based marketing. One EU-based consumer packaged-goods company launched a zero-based marketing program with the goal of redirecting funds from marketing and sales categories to support of new growth initiatives. The management team was skeptical of the cost savings it could achieve, since these categories had been scrutinized already.
As a first step, the team created a database of more than 50 spending categories across business units and regions. It then applied industry benchmarks to set targets for each category. Using this detailed information, the team identified cost-savings initiatives, including removing some components from the media agency contract reducing overall agency fees, and cutting packaging design costs.
The zero-based approach created new budgets and a proactive cost-management process for each category. The impact was significant: a 15 percent increase in spending efficiency, with more than 70 percent of the opportunities coming from nonworking media levers.
- Gaining a granular view of spending and opportunities.
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More important, the process helped to instill an ownership mind-set among marketing and sales managers, enabling cost-reduction efforts to be sustained beyond the initial stages. In another case, an online gaming operator was in a period of stagnating revenue growth while marketing costs—mostly for digital channels—were increasing year on year due to market inflation and increasing competition. With profitability coming under pressure, management was compelled to take a hard look at the cost of acquiring new customers in relation to their value.
By mapping all of the marketing activities and their contribution to new customer acquisitions and then linking them to the behavior and economics of the customers acquired, executives were able to rank their spending categories in order of effectiveness.
Marketing – Disciplined Agile (DA)
They were stunned by the results: 15 percent of their marketing was destroying value by bringing in low-value customers at a negative ROI. In the space of three months, marketing leaders cut spending in those areas and used the savings to finance high-potential channels. One such channel was programmatic media buying, a methodology that allows the marketing function to precisely target specific customers using personalized messages and offers based on their behavior. With the savings, the function was also able to build a rich data set comprising third-party sources of data such as social media activity.
It has never been easier for companies to reassess their level of marketing spending, where funds are allocated, and ROI by category. From greater access to data to media agencies with in-house capabilities to measure the performance of marketing activities, companies have a range of tools and support at their disposal.
Discipline and Fortitude: The Two Most Important Factors To Improve Your Digital Marketing Results
Scott W. Cooper is the senior vice president of marketing and branding for Brown Shoe Company, whose divisions include Naturalizer, Bass, Buster Brown, and the store Famous Footwear chain. Cooper is the former president of The Hiebing Group.