Should Your Advertising Target Heavy Buyers ?

November 11, 2010

Heavy users are every Marketers dream segment. Large sales, highly profitable (usually), and inclined to stay with your brand forever. Large sales: yes;  highly profitable: usually;  inclined to stay with your brand forever:  not necessarily.

Should Your Brand Advertise to Heavy Buyers ?


Do Heavy Buyers Really Stay Heavy ?

Jenni Romaniuk and Samuel Wight, both of the Ehrenberg-Bass Institute of Marketing Science, recently conducted an analysis of heavy buyer buying behavior using 2006 Kantar Worldpanel data.

Buying behavior was defined using multiple schema—using both relative consumption (e.g. top 20% of consuming HH’s) and also purchase frequency (number of purchase occasions per year).

They examined 15 categories and 139  CPG brands across the 2006-2007 time period. Their analysis shows that, on average, about 50% of heavy buyers become non heavy buyers of the same brand in the next year.

Let me put that differently: heavy buyers aren’t heavy buyers forever. They can become light or non-buyers if you’re not paying attention to them.

Heavy Category Buyers and Category Effects

Of course, some heavy buyers become non heavy buyers because they leave the category (e.g. parents of a diaper age baby). But even after looking at category heavy buying, Romaniuk and Wight’s analysis still shows that 65% of category heavy buyers remain heavy buyers in the subsequent year.

This is surprising to say the least. What should Marketers do about it? Romaniuk and Wight suggest focusing on light or non-buyers given the annual churn of heavy buyers and also the fact that growing brands growth is often due to the acquisition of non or light buyers.

I agree with this, but also think that CMO’s need to ask the question: “what do I need to do to keep my heavy buyers buying heavily?” And, how do I turn light buyers into heavy buyers?

3 Considerations for Advertising to Heavy Buyers

1.  Heavy buyers are not heavy buyers indefinitely.  As the Ehrenberg-Bass data shows, Marketers cannot just assume that heavy buyers will hang around and stay loyal. You have to constantly re-earn their loyalty.Marketers need to have a continuing dialogue with heavy buyers and find new ways to delight them.

2. Heavy buyers tend to be more profitable.  Although there is some debate on this point, especially in promotion intensive categories, most analyses I’ve ever seen show that heavy buyers not only buy more, they also tend to be disproportionately profitable.

3.  Competitors often target your heavy buyers.  Heavy buyers are attractive not just to your brand, but to competitors as well. Heavy buyers tend to be the gold that every brand likes to mine—so if you don’t mine it, some other brand will.

Targeting Based on Buying Behavior

Dissenting Opinions — Issues with Heavy Buyer Targets

All of the above seems obvious, but there are dissenting opinions on this. Kevin Clancy wrote a blog post in his “Shocking Truth of the Month” series titled: “Heavy buyers are the worst target for most marketing programs.”

His argument is twofold. First, heavy buyers tend to be more deal and promotion conscious and are, therefore, inherently more price sensitive and less profitable. Second, competitive heavy buyers are already “psychologically locked” to a competitive brand and hard to convert.

There are no doubt cases where the first is true–e.g. brands have heavy buyers who buy the brand heavily because it’s often on sale. Make sure your brand doesn’t fall into this trap. His second point contradicts the first. If consumers are locked-in to another brand, then they are inherently loyal and unlikely to be price sensitive.  Lastly, my point is not to advertise to competitive brand heavy users; it’s to consider targeting your own heavy users before they become light users.

50% — A Loss Too Much?

Let’s come back to the central point here:  that 50% of your heavy buyers are likely not going be your brands heavy buyers next year. And on average, this will contribute to a -15% loss in sales for your brand all things being equal.

Assuming you’ve done your homework and know they’re not just loyal, but also profitable, then the question remains: should your advertising target heavy buyers (before they’re not heavy anymore)?

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Using the Tidal Forces of Category Dynamics to Build Your Brand

May 24, 2010

Momentum can be a powerful thing, especially when it’s on your brand’s side. I’ve worked on numerous brands over the years, and seen firsthand the effect of both positive and negative momentum.  

Almost every Brand building article or book I’ve ever seen focuses on the fundamentals: defining your brands positioning, delivering a product or service that’s truly differentiated, communicating effectively with consumers, etc.  

Category Marketing Insights Build Brands

However, virtually none of them address the effects of your category’s dynamics on momentum. These dynamics are like the tide and can either make your brand’s growth easy or challenging depending on their direction. Momentum comes not just from your brand, but also your category.  

Category Dynamics

1.  Category Growth Rate – This is the most obvious metric that people focus on. Is the category growing, flat or declining ? This factor alone has a huge impact on brand growth. The E-Reader category is growing fast, so most E-Reader products benefit. On the other hand, the Travelers Cheque category is declining, making it virtually impossible for American Express or any other brand to grow volume.  

e-Reader Category Grows: iPad & Kindle

2.  Category Penetration – Category penetration is the percentage of consumers who use the category. The absolute level of penetration, along with the penetration trend over time, provide a snapshot into the potential for growth or decline. A low, but growing penetration rate indicates lots of growth upside–a likely situation facing the e-Reader category. A high, but stable penetration level — like paper towels or laundry detergent — suggests little growth opportunity.  

Laundry Detergent Category: High Consumer Penetration

3.  Category Heavy User Momentum — Not all consumers are the same within a category. Understanding the status of “trend setter” and “heavy user” groups is particularly important for insight into category health. If the percentage of heavy users in the category is increasing, this signals a healthy category and suggests consumers are finding new and more useful ways of using category products. If heavy user category penetration is declining, it suggests consumers are finding preferred alternatives to your category and reducing share of requirements.  

Soap Category Characterized By Heavy Users

4.  Category User Concerns — What are category consumers concerned about? Are there non-brand specific concerns about the category that suggest future changes in category consumption? Category specific research can identify and isolate consumer concerns that are contributing to the exodus of households or heavy users. Examples would be food categories where consumers have growing health concerns, etc.  

User Concerns Such As Healthy Eating Impacts Category Growth

5.  Category Leakage — If the category is declining, and consumers are leaving the category, where are they going ? Every category is like a glass with a hole in the bottom; consumers are being “poured” into the category (usually as consumers age into the category), but consumers are also flowing out of the bottom thru the hole. The relative rate of pouring and leakage is a large factor in whether the category water line (e.g. volume) is rising or falling.  

Understanding which categories, if any, are benefiting most from category “leakage” is an excellent diagnostic which can sometime provide insight into new product opportunities. Conversely, if your category is growing, where are consumers coming from?  

Category Dynamics — An Overlay to Brand Building

Most brands spend all their time understanding their brand position and not nearly enough understanding category dynamics. Your category is like the tide; and ideally your brand is swimming with it, not against it. Understanding category growth, penetration, heavy users, category concerns and leakage provides an excellent diagnostic framework for understanding category health and your brands challenges and opportunities.  

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