With increased transactional, digital, mobile, content, social network and promotional marketing, how can marketers and merchants continue to differentiate, build brands and attack commoditization?
Let’s consider Google AdWords. Though performance-based advertising has great advantages, it is not great for building brands. Not only is real estate limited, the cost for impressions is high.
However, there are opportunities to differentiate products and build our brands in the rapidly changing channel mix, by honing our understanding of customers, increasing our use of “driver items,” and optimizing the integration of marketing channels.
Though the focus below is B2C, the strategies and tactics are applicable to B2B.
I believe the place to start is prioritizing the market segments where your brand’s value proposition is most relevant and competitive, where barriers to entry are highest, and where there are scalable growth opportunities—-and knowing what the different purchase motivations and needs hierarchies are.
Other than necessities, I have found market segmentation by purchase motivation is most effective. This has been true since consumers had choices, what is different now is the importance in forming relationships through social media, providing content and promotions, and better understanding shopping behavior for mobile marketing where real estate is limited.
For example, in the market for meal replacements you may think there’s only one purchase motivation, weight loss. However, there are three, weight loss, meal substitution and convenience. Only speaking to consumers who purchase to lose weight is leaving customer relationships and money on the table (if you have competitive product for the other segments).
Market segmentation not only allows us to be more relevant across market segments, it also makes possible having one consistent brand position across markets, while differentiating product positioning, including to wholesale customers and retail consumers.
For example, working on the launch of a product concept and new brand being sold wholesale to 2,500 retailers and DTC, through research we identified benefits that crossed wholesale and retail customers, and also identified the motivations and needs that were different, making possible a single brand voice but targeted product positioning by market.
As part of a market overview you can quantify, or at least estimate if there’s a lack of industry reporting, sales by channel. Your market segmentation will then help you identify channel preferences for each segment within the market.
For example, in the vitamins and nutritional supplements industry, consumers who shop primarily by price have historically tended to purchase in retail stores such as grocery and drug stores, whereas consumers who prioritize product quality and performance over price have been more likely to buy direct. By better understanding purchase motivations by sales channel, we can be more relevant with differentiated product assortments, pricing, packaging and product positioning.
Another example, working on a software brand re-launch, we conducted research with DTC and retail store consumers, and then developed SKU-mix and price optimization modeling. What we found were different purchase motivations, different prioritization of features and different price sensitivity. Starting with segmentation we now could be more relevant, competitive, increase inventory turn and be more profitable with differentiated product and merchandising at the sales channel level.
Driver items and assortments
With market segmentation-based strategies, what I have found to be the next step to address is the use of “driver items.” The advantages of driver items include taking advantage of the “80/20 rule” (80% of sales and / or customer acquisition comes from 20% of your products) and maximizing awareness of products with a point of difference.
For example, working at a manufacturer selling direct-to-consumer, where our strategic objective was developing new market segments through new DTC marketing channels, 1.) we identified which products historically drove the largest number of new profitable customers and 2.) identified which of those products also had a compelling point of difference (USP).
Another example, without much history to go on, we identified the product categories of most importance to us financially and strategically, then for each product line we created four product assortments from existing products, and then started line-filling with new product development. We then had assortments that were 1.) competitive on price with market leaders, 2.) targeted the largest product category, 3.) innovative or 4.) exclusive.
With driver items and multiple marketing channels, you can more effectively differentiate, brand, acquire customers, generate sales…. and increase marketing efficiencies.
For example, I referred to meal replacements, and one purchase motivation is weight loss and another convenience. Our brand was the lowest calorie brand on the market, however it was a powder to be mixed, and not the most convenient. Therefore, we focused our advertising and merchandising on our unique selling proposition and brand name across offline and online channels.
With national radio reaching millions of consumers with recent meal replacement usage, faster and less expensively than with performance-based marketing channels alone, we drove significantly more traffic to search engines, and the visitors sought us out by our brand name, allowing us to generate more traffic from lower-cost, higher converting branded searches than if we had to compete for non-branded search traffic…increasing customer acquisition volumes and reducing our cost of customer acquisition double-digits.
Clearly, this overview is very high-level, and does not address all the marketing mix, brand management and growth strategies at our disposal. What it offers is a five-step process I’ve used to differentiate and build brands across a changing channel mix.
Some of the strategies and tactics are faster and less expensive to implement than others. And, unless you’re working for a larger, more mature, optimized transactional or multi-channel marketer with deep pockets, I’m inclined to believe your marketers and merchants may be able to benefit from at least some of what you have just read.
If you would like more substantiation or detail, please feel free to reach out to me.
Paul Becker’s professional experience includes senior marketing and ecommerce positions with ancestry.com, Hasbro, the United States Mint and einvite.com. He can be reached at [email protected].