It is vital within the retail sector for the central message of any given advertising campaign to reach the right customer. Customer Segmentation – breaking down consumers into various groups depending on age, income, location, purchase habits and so on – is key to achieving this.
But how can retailers use customer information to better understand the way different media affects these various customer groups?
Marketing Mix Models (more commonly known as Econometrics in Europe)
This approach is used to understand what causes sales to vary over time, but while the model can provide valuable insight into marketing performance, it doesn’t always provide information on which customers are responding.
Modelling by customer segment allows a deeper insight. This statistical analysis shows the total impact of each campaign and which types of customers respond. This can be also combined with Path to Purchase models – how advertising impacts each part of the decision process – to help understand how advertising influences consumers.
How can retailers target customers with advertising?
Customer Relationship Management
Focusing on direct means of communication leads to highly granular customer data. This feeds into Customer Segmentation, which then allows the retailer to further target each group of customers.
For instance, ‘loyalty card’ schemes can track and analyse the purchases of all those who subscribe, then analyse and categorise their consumers into different groups. One-time buyers may view a particular brand as too expensive, so retailers would have arguably more success targeting their message towards that customer segment with price-led advertising.
Similarly, a targeted campaign that doesn’t appeal to price, but offers instead a lifestyle choice, can yield long-term results. It’s clear that by using the right mix of brand and price-led advertising with branded content, you can better resonate with the target audience.
Price Sensitivity
Card data allows you to understand how sensitive consumers are to price. With this you can find out if they buy cheaper, own-branded produce or more-expensive branded goods.
Segmentation also allows you to determine how important promotional offers are on the least price-sensitive consumers for bringing in a new purchase.
Time and time again a direct correlation can be seen between the amount people advertise and the price elasticity of those consumers over time. Brands such as Coca-Cola are a great example of this. They have shown that the more advertising you do, people become less price sensitive. Simply put, if you can convince people of a reason to pay more, then they will.
Above-the-line
Historically, Print and TV advertising have been very effective at driving short-term sales. However, technological advancement such as addressable TV is closing the gap between CRM and above-the-line advertising.
In the US, advertisers capitalised on the nation’s different TV cable regions sending different messages to different cable zones and offering increasingly targeted advertising opportunities. In the UK, SKY aims to send a different message to each household via their set-top box using Sky AdSmart.
TV’s increasing addressability means we are able to target individuals with personalised messaging. In doing so, it will be increasingly important to know what turns them on and what turns them off.
Final thoughts
Ultimately the aim of any advertising message is simple. Convince someone to buy, ensure they have a good experience in the process, and that they return to buy more in the future.
Of course, all the factors mentioned above are intrinsically linked, but understanding what drives sales for each Customer Segmentation allows a company to target specific groups of customers effectively and best allocate marketing resources.
Alan Bloodworth, managing partner, Ohal
Alan graduated from the University of York with a BSc in Economics and Econometrics. He joined Ohal in 1995 and was appointed Managing Partner in 2000. Alan has extensive experience across a wide variety of marketing analysis projects, measuring the impact of marketing activity on sales, encompassing Store level data, Regional analysis, Awareness modelling as well as Penetrations and Loyalty Card data modelling. Alan has a diverse client list encompassing Retail and FMCG, across several markets in Europe, US and Canada.