ImaginativePRO Blog

A MANIFESTO ON NEUROMARKETING, OR HOW TO GET INSIDE THE MIND OF TODAY'S CONSUMERS AND WIN THEM OVER

 

It takes more than a fancy logo, fancy catch phrase or brand character to connect with today's consumers.  Today, what counts far more than a puma, a monkey, or a snarling aardvark is the cross-sensory experience your brand offers.  It's not just the emotion, beliefs, personality and desires your brand evokes, but its feeling, touch, view, sound and smell, of which the logo is just one small part. 

When marketing to today's Generation Y (a.k.a. Millennials) and Generation X consumers it's very important for marketer's to use a sensory marketing approach that appeals to the five senses:  sense: hearing, sight, touch, smell, and taste and fulfills their social needs or values.

The sensory marketing approach has given rise to the science of neuromarketing, a new field of marketing that studies consumers' sensorimotor, cognitive, and affective response to marketing stimuli.  In effect, getting inside the head of the consumer.  Neuromarketing has often been equated with brainwashing, an evil concept if there ever was one, which results in the forced modification of human behavior by repeatedly exposing individuals to the same stimuli over-and-over again.  

Neuromarketing has been used very successfuly in the political arena, where candidates for public office use "negative" advertisements that paint their opponent as "soft" on a popular political issue (e.g. national defense, crime enforcement, etal) or "for" an unpopular political issue (e.g. abortion, universal healthcare, etal).  If voter's are continually told that Barack Obama is not a legal American citizen or is a muslim, a lot of people will eventually believe that as true.  Both parties are guilty of using negative ads, but I won't get into political issues.

Without reallly realizing it, marketer's have been using neuromarketing for quite some time. When you come to think about it, a firm's brand equity, is really the sum of all the influences, both sensory, emotinal and social that consumer's connect with a brand.  No where is this more importan5t than when marketing to Generation X and Y.   This is based on my observance of human behaviors especially among Millennials and Gen-X because they are both sensory and social animals.  They are very susceptible to sensory stimulation and place very high value on social interaction and relationships.    In fact, I have developed a manifesto or marketing strategy built on two pillars:  

• Sensory Approach - A marketing approach that involves the five senses: sight, hearing, smell, taste and touch. 
• Social Approach - A marketing approach that involves the social needs of the individual.

It has been my experience that employing only a sensory approach will not prove as successful, and that marketer's must integrate a social approach into the equation.  Trust me, you do not want to get this part wrong.  

In developing my manifesto, I discuss the general marketing principle's I have employed in marketing to Gen-Y and Gen-X,  and the best and least successful advertising and promotions strategy's that should be used for both demographics.         

Marketing To Gen-Y and Gen-X 

GENERATION-Y MARKETING APPROACH
Gen-Y consumers are the most ethnically diverse of all demographics.  Gen-Y’s are interested in pop culture, being part of the latest fad, things or activities that are trendy, hip and cool, experiencing new tastes, listening to the latest music, wearing the trendiest clothes, playing the latest online games, interacting and communicating with their friends, expressing their opinions and showing off.  Their friends are very important and part of their social DNA.  They ignore traditional advertising and rely more on word-of-mouth.  Gen-Y’s are the “we want it now” generation and interested in immediate gratification.  Gen-Y’s work hard until they get bored.  Gen-Y’s are less brand loyal and always looking for a good value.  These qualities require a marketing approach that is both sensory and social.
The Sensory Approach	The Social Approach
The sensory  marketing approach involves the five senses: sight, hearing, smell, taste and touch.	The social  marketing approach involves satisfying a Gen-Y’s need for social interaction and being part of social groups or communities.
Marketers must be aware of the importance of the five senses in reaching Gen-Y’s.  Gen-Y’s must be sold on the great taste, texture, aroma, look and quality of a food product (taste, smell, sight and touch).  By the same token, Gen-Y’s would be attracted to a new electronic music gadget by its overall design, sound quality and features (sight, touch and hearing).  The Internet with its compelling digital imagery, video and sound is a natural media channel for Gen-Y’s as it offers elements of all five senses.  Gen-Y’s are among the heaviest users of the Internet for news, information, entertainment and interacting with others.	Gen-Y’s are social animals so marketers must incorporate social elements into the design of a business whether it is a website, retail or eating establishment.  Businesses are no longer solely for shopping, eating or drinking, but places to meet friends, hangout, read a book, surf the Net, socialize and exchange gossip.  Facebook, MySpace and YouTube are excellent examples of social networking sites that appeal to a Gen-Y’s need to network and interact with others.  Starbucks, Abercrombie & Fitch, Borders, Steve Madden, American Eagle and Best Buy are excellent examples of retail establishments that incorporate social design elements like cool and trendy store interiors, the latest in fashion and electronic gadget’s, piped in music, visual displays, and in-store food and beverage facilities.
In the case of a business establishment, whether brick-and-mortar or digital, Gen-Y’s must be sold on the convenience, product selection, atmosphere and total experience that the business establishment offers (sight, hearing, smell and touch).  The success of eBay, Starbucks, Facebook, Myspace and Borders are excellent examples of brands that have capitalized on the importance of the five senses in developing successful products and services.	Gen-Y’s are notorious multi-taskers who communicate with their friends and relatives by telephone, text messaging, instant messaging (IM) and mobile devices like smartphones and iPhones. They interact by sharing video’s and music, rating products, services and business establishments and posting comments over the Blogosphere. Gen-Y’s have an insatiable desire to interact with others and are the driving force behind online social networks like YouTube, MySpace and Facebook and Starbucks.
GENERATION-X MARKETING APPROACH
Gen-X marketing requires elements of high perceived value, quality, purity, less hype, more facts and a marketing message that is honest and straightforward.  Gen-Xers are cynical about advertising.  Less likely to be taken in by fads or product hype, and more likely to say, “show me”.  Their tastes and preferences overlap with both Gen-Y’s and Boomers, making them an elusive target.  They are less brand loyal that boomers, and more likely to experiment with other brands, new drinks and foods.  Gen-Xers are very technologically savvy.  They tend to be first adopters of the latest electronic gadgets like iPods and iPhones.  Gen-Xers support social causes like the environment and world hunger.  They enjoy social events, leisure activities and get-togethers with family and friends.  They are known as the “family-first” generation because they value their family over their jobs.  Success with Gen-Xers requires a marketing approach with less hype, more facts and a social approach centered around quality of life, social causes and importance of friends and family.
Less Hype, More Facts Approach	The Social Approach
Gen-Xers are interested in less hype and more facts and figures.  They are interested in knowing the nutritional value of a food product: How many calories, how much fat, cholesterol and nutrients a product contains.  Gen-Xers look for products with high perceived value and quality like the fuel-efficiency of Japanese cars and durability of German-made automobiles. Gen-Xers take delight in experiencing new foods, beverages, films and products.  It is best to deal with Gen-Xers in an honest, respectful and straight forward manner.  Gen-Xers seek products and services that are relevant, solve a problem or fill a real need in the marketplace and offer a high value-added component: Superior quality, design, durability, features and convenience.	Gen-X have a social need that is grounded in placing a premium on quality of life, leisure activities, social causes, strong parental and family values and spending time with family and friends. They enjoy family get-togethers, activities and socializing with their friends.    Marketers must incorporate social elements whether they are an online, retail, eating or entertainment establishment.  Businesses that have succeeded in doing this include McDonald’s (children’s playgrounds), Las Vegas Hotels & Casino’s (electronic games, rides and attractions), Disneyland (family-oriented rides and attractions), Gymboree (early childhood development programs), Target (family-oriented merchandise and refreshments), DisneyOnlineForFamily.com (Disney entertainment for the entire family) and BabyCenter.com (Young mothers with infants),    Advertising that works with Gen-Xers include ads depicting the crash safety of Volvo cars and high performance of Michelin tires fit in perfectly with Gen-X’s strong parental values.

Advertising & Promotions Strategy

Although there is some overlap between Gen-X and Gen-Y, they differ in lifestyle and are difficult to reach through traditional media channels, requiring: 1) commercial messages and content that is relevant to their social and psychological needs, 2) selecting the appropriate media channel for each group and 3) carefully targeting our advertising and promotions to insure we reach them most cost-effectively.   

REACHING GENERATION-Y

MOST EFFECTIVE MARKETING CHANNELS
Internet Advertising - Gen-Y’s spend more time online than watching television, reading publications or newspapers.  62% of Gen-Y’s watch TV programs episodes online. Gen-Y rank the highest in joining social networking communities, viewing and uploading online videos, downloading music, playing online games sending instant and text messages and reading online blogs.  Popular Gen-Y sites include: Online Social Communities:  MySpace , Facebook and Bebo Video Sharing: YouTube, Veoh, Break, ManiaTV, Hulu  and MetaCafe. Online News and Information: Diggs, Technorati and StumbleUpon. And a large broad array of Blogs.  Marketers can achieve success reaching Gen-Y’s by targeting websites where they are likely to congregate and socialize.	Viral Marketing - Gen-Y’s go online and rely on word-of-mouth to obtain product and information, so it is vital that firms have a great website that is fully-optimized for search engines and listed in all the major search engines. Firms should have a promotional page on popular social networking sites like MySpace, Facebook and Twitter and video sharing sites like YouTube. Street Marketing – Gen-Xers enjoy new experiences and street marketing is a great way to create marketing buzz and reach them face-to-face. Street marketing include neighborhood promotional stunts, free product samplings, and rollouts in specific venues (street fairs, music festivals, concerts, college campuses, bars and clubs, etc).  This is also a great way to pass out flyers, free offers and discount coupons.
Contests and Sweepstakes – Gen-Y’s are wild about winning a contest or receiving a gift, especially something meaningful like an iPod, concert tickets, vacations, cell phones and FREE sample servings.  This is a great way to increase store traffic, create brand awareness and get them to try a product.    Flyers and Discount Coupons – These should be incorporated into a firm’s street marketing as a way to create excitement, interest and additional traffic. “ONE FREE PIZZA” and “BUY-ONE, GET ONE FREE” coupons work the best.
Paid Search – Nearly 90% of Gen-Y’s use online search engines like Google, Yahoo and MSN Live Search  to find online information, news and entertainment sites.  Radio Advertising – Radio ranks third for Gen-Y’s in hours per week behind the Internet and TV as their preferred media.  Marketers should incorporate targeted radio into its media mix picking stations with the largest reach and most effective CPM’s.
Mobile Advertising – Gen-Y’s are the biggest users of iPhones, Smartphones and portable multimedia devices like iPods. Gen-Y’s prefer text message over email and this is a great way to reach them through one of their most preferred methods of communication.
LEAST EFFECTIVE MARKETING CHANNELS
Television, Direct Mail, Publications and Newspapers – Gen-Y’s cannot be reached effectively through traditional marketing channels.  Direct mail, magazine ads, newspaper ads and television advertising does not work well with Gen-Y’s.  They do not respond to he marketing messages that appeals to their parents and grandparents.  A Gen-Y’s favorite TV programs  include sitcoms Friends and Seinfeld, reality TV shows Survivor and Project Runway, Animated TV shows The Simpsons, Music contest shows like American Idol, music video programs like MTV and TV comedy shows like The Daily Show With Stewart., just to name a few.

REACHING GENERATION-X

MOST EFFECTIVE MARKETING CHANNELS
Internet Advertising - Gen-Xers are No 2 behind Gen-Y’s in spending time online than watching television and reading publications or newspapers.  57% of Gen-Xers watch TV programs episodes online. Gen-Xers are just behind Gen-Y’s in joining social networking communities, viewing and uploading online videos, downloading music, playing online games sending instant and text messages and reading online blogs. Gen-Xers over forty represent the largest segment online gambling. Popular Gen-X sites include: Online Social Communities:  MySpace , Facebook, Twitter and Bebo Video Sharing: YouTube, Hulu, Veoh, Break, ManiaTV  and MetaCafe. Online News and Information: Diggs, Technorati and StumbleUpon. And a large broad array of Blogs. Viral Marketing - Gen-Xers trust themselves and the opinion of their friends and rely testimonials and word-of-mouth on product and services. It is important that firms have a great website that is fully-optimized and listed in all the major search engines. Firms should have a promotional page on popular social networking sites like MySpace, Facebook and Twitter, and run online ads on popular video sharing sites like YouTube and Hulu.	Street Marketing – Gen-Xers enjoy new experiences and street marketing is a great way to create marketing buzz and reach them face-to-face. Street marketing include neighborhood promotional stunts, free product samplings, and rollouts in specific venues (street fairs, music festivals, concerts, college campuses, etc).  This is also a great way to pass out flyers and discount coupons.
Contests and Sweepstakes – Gen-Xers enjoy winning a contest or receiving a gift, especially something meaningful like an iPod, iPhone, concert tickets and FREE sample servings.  This is a great way to increase store traffic, create brand awareness and get them to try a firm’s products.    Flyers and Discount Coupons – These should be incorporated into a store’s grand opening and street marketing as a way to create excitement, interest and additional store traffic.  Women with children, in particular, are attracted to discount coupons if there is high perceived value in the offer. Offers that work most often include “ONE FREE DESSERT”, “BUY-ONE, GET ONE FREE” and “BUY-ONE-ADULT serving and receive ONE-FREE child serving.
Direct Mail – Direct mail works best for older Gen-X (Over 35) men and women, especially with children.  The offer must be compelling, without a lot of hype, and sold on the basis of high perceived value or in support of a social cause.  Some offers that work best include “FREE AIR FARE” or “10% OF PROFITS GOES TO SAVE-THE-WHALES”.                            Paid Search – Nearly 90% of Gen-Xers use online search engines like Google, Yahoo and MSN Live Search to find information, news and entertainment sites.  Paid search is an effective way to reach Gen-Xers and drive traffic to a firm’s website.
Radio Advertising – Older Gen-Xers (Over 30) rank the highest in listening to the radio for music, news and information.  Marketers should incorporate targeted radio into its media mix, selecting stations with the largest reach and most effective CPM’s. Mobile Advertising – Young Gen-Xers (25-30), like their Gen-Y counterparts, are the biggest users of iPhones, smartphones and portable multimedia devices like iPods. Younger Gen-Xers prefer text message over email and this is a great way to reach them through one of their preferred methods of communication. Marketers should incorporate mobile advertising into its media mix.
LEAST EFFECTIVE MARKETING CHANNELS
Television, Radio, Direct Mail, Publications and Newspapers – Gen-Xers are stuck in the middle between Gen-Y’s and Boomers so there are some overlaps with both generations, making them an elusive target.  Younger Gen-Xers cannot be reached effectively using traditional marketing channels like direct mail, print ads, newspapers, radio and television advertising.  Older Gen-Xers (over 35) can be reached through direct mail, radio and television as their media tastes are similar to Boomers in many respects. Gen-Xers are impervious to the marketing messages that appeals to Boomers, who they treat with some resentment.  Favorite TV shows of Gen-Xers include prime-time shows like ER, CSI, Friends, reality TV shows like Survivor and The Apprentice, animated shows likeThe Simpsons, music video shows like MTV  and TV comedy shows like The Daily Show. With Stewart., and late night talk shows like David Letterman and Conan O’brien just to name a few.

I first developed my manifesto for marketing to Gen-X and Gen-Y in 2006/2007, at about the time that social networking really began to take hold, and I realized then that in order to successfully market to these two generatioins, a social approach was also needed.   So far those observations have proven to be correct.   Although my manifesto is albeit a bit dated, the basic concepts of neuromarketing work for all demographics.     

If you are marketing to Millennials or Gen-Xers you might be interested in reading some of the following blog articles:

• 9/24/10 - "IN ORDER TO ENGAGE WITH TODAY'S GENERATION Y YOU MUST MAKE IT AN EVENT"
• 10/1/10 - "GENERATION-Y IS QUITE LITERALLY A "WIRED" GENERATION OF TECH SAVVY AND SOCIAL NERDS"
• 12/18/10 - "MARKETER'S NEED TO CUT THE CLUTTER TO ACHIEVE SUCCESS WITH TODAY'S COLLEGE STUDENTS"

Courtesy of Tommy Toy, PBT Consulting

HOW TO DETERMINE PRODUCT MARKET FIT IN YOUR INDUSTRY AND HOW TO MEASURE IT

The lack of market need is the main reason for startup failure. Product-market fit is one of the most crucial elements needed to create a successful business. It indicates that people are interested in the company’s product and are willing to pay for it because the offering is better than the other alternatives. Due to this reason, finding a product-market fit should be among the first and foremost objectives for your business.

Snapchat is an excellent example of a startup that managed to find product-market fit. This resulted in more than 293 million daily active users and $2.5 billion in annual revenue since its initial launch in 2011. In 2012 Snapchat users were sharing over 20 million images per day or about 231 per second. 10 million Instagram users, in contrast, were sharing only 25 photos every second. During the early stage, the target audience of the startup consisted of bloggers and students. Snapchat quickly became popular at colleges and high schools through word of mouth. The company was gathering customer feedback and constantly improving the application, which was important in reaching product-market fit. 

Let us take a closer look at the concept of the product-market fit and the practical steps required to achieve it.

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What is a product-market fit?

Product-market fit is the degree to which the product meets the target consumers’ needs and fulfills the market demand. PMF occurs when the business owner develops a solution that fills a certain market niche and evokes the desire to buy it. Product-market fit is not a constant state. Instead, it can be described as the continuous process of adjusting to changing client needs. 

The term was coined by the co-founder of Benchmark Capital, Andy Rachleff, and later popularized by entrepreneur Mark Andreessen, the co-founder of Andreessen Horowitz. Rachleff’s idea was based on the study of the investing approach of Dan Valentine, venture capitalist and founder of Sequoia Capital. Andy Rachleff explains product-market fit as a combination of “the feature set you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product.” Marc Andreessen  defines it as “being in a good market with a product that can satisfy that market.”

The alternative definition by Dan Olsen, the author of “The Lean Product Playbook”, says that the product-market is “meeting the underserved needs of target customers better than the competition”. Thus, we can summarize that product-market fit refers to the situation when the company provides value for a substantial number of customers who perceive the value with the effective delivery method, and differentiates itself from the competing companies. 

How to find a product-market fit?

The process of achieving a product-market fit differs for each company. Therefore, to create an outstanding product, you need to understand the problems your solution addresses and the issues your clients are trying to overcome with its help. So, the goal of finding product-market fit should be number one on your company’s priority list as it would dramatically increase the chances of business success. Despite the fact that the path to product-market fit is unique for each business, you can find it by focusing on the key areas and following several simple steps we will discuss below.

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Step 1. Determine your target audience

The first step in developing your product-market fit is to determine the target customers. They will represent the users who decide how well the product aligns with market requirements. The next task is to use market segmentation to later target customers more effectively by relying on their unique features, improving marketing campaigns and discovering more opportunities. Then you need to create buyer personas to ensure that your team’s efforts are tailored to your customers’ needs. Therefore, the main objectives of this step are to analyze your product or service, conduct a competitive analysis, segment your target market into several types of customers, and perform research.

Step 2. Talk to your customers

Gather feedback from your customers to identify their underserved needs and discover a suitable market opportunity. Determine the common challenges they face and how much they are willing to pay for you to solve their problems. The competition plays a huge role in the degree to which the product fits customer demands as they evaluate the solution in comparison to the alternatives.

If you want to improve the existing product, collect data from your sales and marketing departments to understand the recurring complaints. Face-to-face interviews are more effective than online surveys as they provide more useful information. 

Step 3. Define your value proposition

The value proposition is the most crucial aspect of your marketing message. It explains why your customers should purchase your company’s products instead of the competitors. A great value proposition is clear and understandable. The statement should be relevant to the target audience. Describe how your solution addresses customer problems and provide the set of advantages. To define your value proposition, you need to determine customers’ pain points, identify your product’s benefits, describe what value your solution adds to the market, connect it with the problems and make it unique.

Step 4. Specify your MVP feature set

The following step is to define the features that your minimum viable product (MVP) will include. If you add sufficient functionality to your product, you will be able to demonstrate the value to your customers, save time and money and leave space for improvement. MVP will help you determine the features your solution lacks or what can be done better. Moreover, you might understand that the customers will not use the specific function, so you can remove it. The primary objective is to continue adjusting the minimum viable product feature set until the potential customers approve it.

Step 5. Design your MVP

Once you have determined the MVP feature set, it is time to create the test version of your product, so your customers can provide feedback and valuable insights. Building the MVP prototype usually takes less time and effort than producing the working version of the minimum viable product. The prototype will brilliantly represent your product without the need to build it.

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Step 6. Test your MVP with customers and analyze feedback

The last step is to test the MVP prototype with target customers. The goal of MVP testing is to receive feedback from the audience, make improvements to the product and determine whether the idea is valid or not. The most efficient method of MVP testing is user interviews. First, provide the list of the problems your solution aims to solve and put open-ended questions to your customers. Then ask them to rank the issues and analyze their level of interest. Finally, present the MVP as the solution to the problem and offer people to try it. The other way to test your minimum viable product is to create a landing page demonstrating its features or promote the solution through advertising. This will help you to understand whether your MVP interests the target market. You can also test the prototype on crowdsourcing platforms. If the users like your idea, they would be willing to invest in the development of your product, so this would be the perfect indicator of the product-market fit.

After conducting tests: 

1. analyze the received feedback, 
2. identify similar answers and pay attention to common patterns, 
3. use the information received from the customers to modify the initial prototype and address consumer issues.

You might learn that a majority of your audience consider themselves too young or too old for your product. Then you can ask the respondents who they assume the product is intended for. The feedback will reveal how your product is perceived in the market. You might understand that your solution is more niche-oriented than you expected. In this situation, you need to return to step 1, review your customer profiles, and proceed from there. 

If the product is not right, but the audience is a fit, return to step 2 and gather feedback to understand what adjustments your customers would apply to your product to make it more appealing. Then, move to steps 3 and 4 to review your value proposition and minimum viable product features.

Netflix is a company that constantly adapts to changes, monitors trends and shifts in the market, and takes advantage of them. Netflix changed its business model multiple times, adjusting to user demand. In the early 2000s, Netflix achieved the product-market fit when the company positioned itself as the alternative to traditional DVD rental stores. Netflix started shipping DVDs by mail as part of its membership services and allowed clients to keep videotapes for an unlimited period of time. Later, when the DVD trend faded, the company turned into a subscription-based streaming platform and reached product-market fit owing to cheaper and better services. 

Step 7. Build the product and take it to the market

Prepare a product launch plan and create a marketing strategy to take advantage of the opportunity to promote your offering. The product launch event has a significant influence on market acceptance. It helps inform the clients that the product is available for purchase and introduces the solution to the market. With product launch, you will gather valuable information from early users, build anticipation and brand awareness. Create content that will align with marketing activities, such as landing pages, blog posts, and product tutorials. 

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Step 8. Improve product-market fit as you scale

Keep reviewing your product after it is launched. Take small risks and redesign the product in accordance with the customer base, competition, and the new needs of target audiences. Remove the elements that do not work, experiment with new functionality, and test the features on a small scale. Analyze qualitative and quantitative metrics, conduct customer surveys to adapt to changing market conditions, and stay ahead of the competition.

Product-market fit metrics and measuring

There are several quantitative metrics that will determine the percentage of customers who consider your solution as a ‘must-have’. We will discuss them further in greater detail.

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Growth rate

The growth rate will provide you with crucial information about your company’s performance over time. It is one of the essential metrics the investors examine before deciding whether to fund the company or not. To measure the product-market fit, you can analyze the growth in the number of users or revenue. The formula for calculating the monthly or annual growth rates is as follows:

Growth rate = (Period 2 – Period 1) / Period 1 * 100 

It is important to note that a high growth rate does not necessarily mean that you have achieved product-market fit (as it can be followed by a similarly high churn rate). Thus, you need to pay attention to various factors that may have led to this and take into account other metrics. In some cases, high growth rates can result from marketing activities and do not represent product-market fit. 

Churn rate

The churn rate is the number of customers who stop using your product over a certain time frame. With this metric, you can understand whether people are interested in your product or not. The churn rate varies depending on the type of business and its specifics. Newly established companies usually have higher churn rates compared to organizations that have been on the market for a longer time. You should inspect your monthly and annual churn rates to have a clear picture of your progress. The churn rate formula is: 

Churn Rate = (Lost Customers ÷ Total Customers at the Start of Time Period) x 100

Net promoter score

The net promoter score is a scale that ranges from -100 to 100. With this metric, you can estimate customers’ willingness to recommend your company’s products to other people. To calculate the net promoter score, you need to ask your customers a key question: “On a scale of 0 to 10, how likely are you to recommend the product to a friend or a colleague?” Then the respondents are categorized into three main groups depending on the answer: promoters, passives, and detractors. Finally, you want to subtract the percentage of detractors from the percentage of promoters. The final number will show you whether customers generally enjoy using your product. You may compare it to similar metrics in your industry and review it regularly to see if the satisfaction rate is improving.

Product-market fit examples

Now we will look at three successful companies that began their journey as startups but turned into global enterprises with a multi-million customer audience. We will consider how these companies managed to find their product-market fit and adapted to evolving market needs.

Spotify

The idea to create Spotify appeared after Napster’s collapse, and the sales plunge in the music industry as the users started downloading albums from illegal sources. Spotify’s founder Daniel Ek suggested the listeners the opportunity to consume high-quality music legally for a small fee. Now the platform has over 365 million active users.

The startup was created at the most opportune time when the other elements of product-market fit already existed. There was a target market with music listeners, distribution channels, and a lot of content. The platform provided consumers a way to listen to music without addressing any legal issues, resulting in a 20-30% annual growth rate.

Slack

Slack is a well-known messaging platform for business communication. Despite the fact that now Slack’s target customers are mostly enterprises, the company paved the way to product-market fit by targeting individual users. Between March 2020 and April 2021, Slack generated $902 million in revenue, but it all began with a startup that did not even have a sales team. 

At first, Slack’s founders were developing a role-playing video game. The messaging app was originally intended as a tool for internal communication. However, the team later realized that the solution perfectly fits into a free niche, while there are already many role-playing games on the market. The decision to give up the original idea in favor of better opportunity has brought over 12 million users by the end of 2020.

Google

In the early years, Google had a lot of competitors in the market. At that time, the search engines were making a profit from selling the advertising space next to search results. In 2003, Google leaders decided to introduce AdSense. This was a totally new concept that allowed to display the advertisements beyond the search page results. The technology analyzed the web pages and automatically displayed the relevant advertisements. 

Google discovered a gap in the market that no other search engine could fill and satisfied that need. In 2017, the annual revenue from AdSense amounted to $95 billion.

COMMENTARY:   Don Valentine, from Sequoia Capital might have coined the term "product-market fit".  While Marc Andreessen, from A16z popularised it as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is a moment when a product or service has its place in the market, thus enabling traction for the company offering that product or service.

 

Courtesy of an article dated April 4, 2019 appearing in CleverTap, an article dated Unknown appearing in Awware, an article dated June 16, 2021 appearing in HubSpot, an article dated February 18, 2017 appearing in Future.com,

 

STUDY FINDS HAPPY CUSTOMERS WILL SPEND $100 OF DISPOSABLE INCOME EVERY MONTH WITH BRANDS THEY LOVE

Harris Poll Study Commissioned by Lithium Finds Great Customer Experience Means More to Consumers than Great Products

What makes customers happy? And what’s a happy customer worth? Eighty-three percent of U.S. consumers say having a positive customer experience with a brand is more important than the product itself, a new study by Harris Poll of 2,000 respondents reveals. Consumers are willing to spend one-third of their disposable income – $100 per month on average – with brands they love based on a great customer experience. That’s around $31 billion up for grabs every month to brands who make their customers happy.

Experience Over Product

Brands work relentlessly on product design and features, but today’s consumer increasingly values how a brand treats them as more important than the product they sell. The Lithium-commissioned study found 43 percent of consumers would actually buy an inferior product from a brand that they had a great experience with, and 73 percent will spend more on a product if it is from a brand they love. But this works both ways, with 71 percent of consumers unlikely to ever use a brand again after only one bad experience. Worse, 44 percent would share their negative experience with friends and family, potentially leading to even more customers fleeing.

Value of A Happy Customer

The following Lithium infographic summarizes the major findings and insights from the Harris Poll:

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And checkout what people on the street had to say about what a great experience with a brand meant to them:

What does a great experience with a brand mean to you? from Lithium on Vimeo.

Rob Tarkoff, President and CEO of Lithium Technologies says.

“Customers’ increasingly high expectations of brands have reached a critical point. When two-thirds of consumers say they are unwilling to stick with a brand that has treated them badly even if they love the brand’s products, it’s time to sit up and take notice.  Brands need to dig deeper to understand how they can create awesome experiences for their customers across platforms.”

What’s A Brand To Do?

Brands can no longer dictate terms. They must connect with the customer in the channel of their choice, which is increasingly digital. The study reveals 29 percent of consumers prefer to engage with a brand via its website/blog/social channels, compared to 17 percent who prefer in-store engagement, and 16 percent who prefer to connect over email.

Tarkoff said.

“This study shows that as consumers reach out on digital channels, they are highly sensitive to how and when brands respond to them.  It’s a wakeup call for brands to realize that providing great experiences on digital is the surest path to attracting and retaining happy customers.”

Path To Happy Customers

Harris Poll, on behalf of Lithium, conducted the “Value of a Happy Customer” survey of over 3,000 adults in the United States and the United Kingdom to help us understand what it really takes to make customers happy today.

Here are a few of the highlights:

• 86% of adults in the U.S. and 74% of adults in the U.K. say they are willing to spend more on products and services from a brand they love.
• 71% of adults in the U.S. and 64% of adults in the U.K. would share a positive experience with other consumers
• After one bad experience, 71% of adults say they would likely never use that brand again.
• 55% of adults admit they place more value on a positive experience with a brand than on the product purchased.

Key findings from this survey include:

• An Emotional Connection Matters - People tend to have love/hate relationships with brands. Savvy brands today understand that creating an emotional connection with customers is the best way to keep them in the “love” zone. The majority of adults surveyed said that they would be likely to spend more on products and services from a brand that makes them happy (80%), a brand they love (80%), and a brand to which they are loyal (80%). The message is clear: when a brand is able to create an emotional connection with consumers, a stronger sense of loyalty results.
• A Digital First Mindset - When consumers need to search for something specific, they flock to digital – especially via their mobiles phones – to do it. The same can be said about how consumers engage with brands. A brand’s website, blog, or social channels are typically the first stop when searching for information about products and services. About one-third of adults say they are likely to spend more on products and services from a brand that communicates with them (32%) and shares entertaining and engaging content with them (31%) via social media.
• No Such Thing as Second Chances - As consumer expectations become increasingly intense, brands have got only one shot to make a good first impression. Otherwise, customers will gladly move on. They no longer have to tolerate a bad brand experience. Over 8 in 10 adults (83%) say they would stop using a brand after one bad experience while nearly 9 out of 10 adults (87%) agree that they would look elsewhere if a brand made them unhappy in any way.

COMMENTARY:   In-store shopping beats the e-commerce experience across numerous customer service and relationship measures, while online shopping wins for research and pricing, according to the results of a survey of consumers who have used their mobile devices to shop. The survey, conducted by Dimensional Research and sponsored by Wanderful Media, identified several shopping-related activities and asked respondents whether they thought those experiences were better in-store or online.

Respondents more often chose the in-store option for measures such as a great customer service (40% vs. 16%), having their questions answered (50% vs. 13%), and establishing a relationship with the merchant (51% vs. 12%).

The biggest gap in favorability, though, was for the ease of making a return (64% in-store vs. 12% online). Frustrations with the return experience certainly appear to plague online shoppers, per results from a ShopRunner survey conducted by Harris Interactive. About 7 in 10 online shoppers surveyed feel that returning items purchased online is a complicated process, while an even greater proportion (81%) said they are not likely to make additional purchases from websites that charge shipping on returns.

Online Shopping Makes the Grade for Research, Savings

Further details from the Wanderful Media survey suggest that consumers who use mobile devices to shop may favor the customer experience in-store, but they prefer the research and savings possibilities offered online. The online shopping experience was overwhelming favored for the breadth of information available to research purchases (71% vs. 12%), the ease of finding a specific item (59% vs. 14%), and getting the best price (57% vs. 11%), among others.

Store Browsing Leads to Impulse Purchases

Notably, respondents were far more likely to favor the online path for discovering a previously unknown product (40% vs. 16%). Still, more respondents had made an impulse purchase in the last month in a store than had done so online (74% vs. 65%), suggesting that while they find new products online, they’re more likely to try something new while shopping in a store.

In fact, browsing in a store (60%) was the leading driver of impulse purchases among respondents, ahead of email promotions (42%) and window shopping (36%). Interestingly, newspaper circulars (23%) influenced more shoppers than social media channels such as Facebook (22%), Twitter (13%) and Pinterest (13%).

9 in 10 Have Visited a Store Due to An Online Experience

Of the shoppers surveyed, the vast majority (91%) said that something they have done online has spurred them to visit a store. Emails held the biggest sway: 60% said they had visited a store after receiving an email about a special price or promotion. Close behind, finding a coupon (59%), seeing an online ad for a sale (56%), searching for a product and finding a store location (55%), and browsing an online circular (52%) also did the trick for a majority.

Other Findings:

• Of various factors that may contribute to a positive experience when shopping in-store, respondents named the absence of shipping charges (64% citing as “very important”), the ease of making a return (60%), the ability to touch, smell, and see the item to be purchased (55%), and getting the item immediately (55%) as the most important.
• To get the most positive online shopping experience, respondents were most likely to say that the ability to compare prices from a broad range of sources (63% citing as “very important”), the depth of information to research purchases (59%), and the ability to stay home to shop (54%) were very important.
• Generally speaking, respondents preferred buying books, gifts, and consumer electronics online, and clothes, personal care products, shoes, and furniture in a store.

About the Data: The Wanderful Media data is based on an online survey conducted in December 2012 of 1027 consumers. All participants live in the United States and use a mobile device for shopping. 62% of respondents are female and a plurality (40%) are aged 36-50.

The ShopRunner survey was conducted online within the United States by Harris Interactive from December 7-11, 2012 among 3,036 adults ages 18 and older. This online survey is not based on a probability sample and, therefore, no estimate of theoretical sampling error can be calculated.

Courtesy of an article dated March 20, 2017 appearing in Lithium.com and an article dated March 30, 2017 appearing in MarketingProfs and an article dated December 17, 2012 appearing in Marketing Charts

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THE ZENO GROUP'S THE HUMAN PROJECT™ 2016, SAYS MILLENNIALS HAVE A LOVE/HATE RELATIONSHIP WITH TECH

Surprisingly, Millennials have a love/hate relationship with technology, according to a study from Zeno Group and research firm CEB Iconoculture.

Teens and 20-somethings have a more balanced relationship versus the dependency that generations before them have, says Therese Caruso, managing director, global strategy + insights for Zeno Group. 

Therese Caruso says.

“There has never been a youth generation that looks and acts like this one, and that wields more influence. They are shaping the global conversation and workplace of the future. The only way for brands to connect is to act like a best friend – the values young people assign to their deepest relationships are the same values they want to see in brands. The Human Projectconnects brands through shared values and beliefs and tells the story about what compels this audience to become advocates and evangelizers.”

 

Caruso continues.  

“They acknowledge that technology can support their goals, but also that it can work against them.  Since youth are hyper-aware of health/wellness and the connection between health and tech overuse, they do put their tech down in a less ceremonious, more practical way than Millennials.” 

Barby K. Siegel, CEO of Zeno Group said.

“The goal of The Human Project is to challenge marketers to view key audiences not as targets or even consumers, but as real human beings.  It is no longer enough for marketers to understand category-specific behavior, but must now tap into a deeper set of core values.”

Kate Muhl, Research Director, CEB Iconoculture Consumer Insights, said.

“It’s urgent that marketers understand today’s global youth. Not just because they’re important consumers in their own right, but because youth are reshaping the culture in which brands are operating. It’s time for brands to take the level of research focus and priority they’ve given to Millennials and apply it to this new generation of consumers.” 

The Human Project Infographic - Zeno Group from Zeno Group

According to the global study, "The Human Project," Millennials feel particularly bullish about their future:

• 60% are optimistic about their personal finances, compared to only 40% of the general population.
• 67% are optimistic about their jobs compared to 40 % of the general population, according to the global study, “The Human Project.”

The biggest takeaway for marketers is how influential and different global youth are from past youth generations, Caruso tellsMarketing Daily.

Caruso says.  

“They are leading change through a different conversation around education, lifestyle and entertainment, purpose and politics.  Their influence and vast differences in values and behaviors are two aspects that feed into other key insights.”

It’s really important that marketers understand global youth now, she says.

“Not only are they influencing everyone, including the purchase decisions of their own parents and siblings, but they’re reshaping the culture in which brands are operating,”

Caruso continues.

“And it’s not enough to study what they’re reading or purchasing because simple demographics are not a reliable measure. The only way for brands to really connect is to act like a best friend — the values young people assign to their deepest relationships are the same values they want to see in brands.”

Youth are extremely health aware and guided by a life of balance. They know how to indulge and practice prudence/integrate foods and habits that can live together in a healthy body and mind, she says.

Caruso says.  

“Today’s youth views happiness differently — there must be a mix of success, balance and purpose.  Happiness is more practical and personal: being informed/connected, achieving goals, feeling good mind + body, indulging and practicing prudence, choosing to live their own life of purpose.”

Ultimately, their favorite brand is themselves — they use brands to build their own personal brand, she adds.

The report also lays out what Zeno Group has branded as the “7 Global Truths” about this generation -- what brands and businesses believe to be the most important consumer constituency, from the influence they will wield in the upcoming election, to their relationship with technology, to how they are redefining the role of leader, and how they are connecting with the world's top companies; and maybe most importantly, how the world’s most successful companies are connecting to them.

1. Youth Wield Powerful Influence. There has never been a generation with more influence both inside and outside the family and this has changed the dynamic of the modern family. Seventy-eight percent of parents with children in this group feel that their kids are more involved in their family’s decisions than they themselves were as children.

2. The New Leadership Paradigm. Global Youth do not view leadership by the traditional, top-down mode. Rather, they prefer a lead-by-example, collaborative model – “leaders bring people together to get things done.” On a scale of 92 values, leadership is ranked extremely low at 65 or high, while equality is ranked number two by the U.S., the U.K., Canada and Australia.

3. Friendship Built on Values vs. Shared Interests. Global Youth build friendships not on proximity or convenience, but on shared values, like morals, ethics and beliefs, and priorities. Thanks to this group’s strong sense of identity, peer pressure is also starting to fade.

4. Technology + The Love/Hate Paradox. Global Youth work to maintain a balanced relationship – not a dependency – on technology. They are keenly aware that technology can support their larger goals, but also know it can work against them.

5. Youth Are Health Aware, Guided by Balance. Global Youth research and educate themselves on all-around health and wellness, and they aren’t interested in “traditional diets.” Out of 92 values, health was ranked number one among Chinese youth – differing greatly from the values of their parents.

6. Happiness Re-Defined: The New WE/Z Happiness Equation. Global Youth view “happiness” as equal-parts balance, success and purpose. Success tops the list as the highest-ranking value among Global Youth in the U.S., Canada, U.K., India and Australia. Purpose is overall a high-ranking value among Global Youth with parents in Canada, Australia, the U.S. and the U.K. ranking purpose significantly lower than youth.

7. A Brand Called “Me”: Youth vs. Brand as Status Symbol. Global Youth are passionate about brands that help to enhance and build upon their own, personal brand. In order to earn this group’s trust and loyalty, brands must understand their mindset and personal goals.

The study gathered data from more than 5,000 individuals in the United States, Canada, China, India, Australia and the United Kingdom. The study defines “Global Youth” as those born between 1991 and 2001 and divides them into two distinct groups:

• “Gen WE” (14-20)
• “Gen Z” (21-25)

Examining the nuances into how Youth think, act and behave is imperative for companies and brands as they look to maintain relevance with today’s most digitally intuitive generation, Caruso says. Gen WE and Gen Z are masters of platform, more self-aware, success-driven, socially responsible and more global-minded than any generation before them.

About Zeno Group

Zeno Group is a global, integrated communications agency, born from PR. The award-winning agency is committed to work that delivers true business value for clients across consumer, corporate, health and technology industries. Zeno is the unprecedented three-time PRWeek US Mid-Size Agency of the Year winner (2011 – 2013), winner of PRWeek Malaysia New Consultancy of the Year (2015), recipient of the SABRE Silver Anvil (2015) and most recently recognized at PR Cannes Lions (2015). Zeno Group is a DJE Holdings Company.

Courtesy of an article dated March 3, 2016 appearing in MediaPost Marketing Daily and an article dated March 2, 2016 appearing in Zeno Group

 

THE TOP 20 MOST POPULAR SURVEY SOFTWARE SOLUTIONS [INFOGRAPHIC]

SurveyMonkey is the most popular software program for conducting online surveys and analyzing the resulting poll data, according to a recent report from Capterra.

The researchers ranked the popularity of survey software solutions based on three criteria: the number of customers (unique companies/organizations that are actively using the software), the number of users (employees who create and manage surveys), and social media presence (Facebook likes, Twitter followers, Google +1s, LinkedIn followers, Klout scores, and number of online reviews).

SurveyMonkey has the most customers (2.35 million) of any survey program examined, as well as the largest social media presence; it is tied with QuestionPro for the most number of users (2.5 million).

QuestionPro received the second-highest composite popularity score, followed by Qualtrics, SurveyGizmo, and FluidSurveys.

Check out the infographic for the full rankings from the report.

Click Image To Enlarge

Courtesy of an article dated October 22, 2015 appearing in MarketingProfs

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THE STATE OF DATA-DRIVEN MARKETING, MARKETING BENEFITS, KEY GROWTH DRIVERS AND THE 15 ESSENTIAL MARKETING METRICS

Data-driven marketing, in theory, is about better using the flood of customer-related data to integrate and optimize marketing efforts in the age of an empowered consumer and Big Data.

What matters most is the optimization of the customer experience, relevance and (perceived) customer value as a driver of business value. Data-driven marketing certainly is not (just) about advertising and programmatic ad buying as some believe. Nor is it just about campaigns. On the contrary: if done well, data-driven marketing is part of digital marketing transformations whereby connecting around the customer across the customer life cycle is key.

The Role and Evolution of Data-Driven Marketing

One of the pioneers and leading voices is data analytics and marketing software vendor Teradata. A while ago, the company recently released the results of its Teradata 2015 Global Data-Driven Marketing Survey. According to Teradata, marketers who adopt an integrated and data-driven marketing approach become more empowered across all areas including the various stages of “engagement” as described in the illustration below from the page of the 2013 survey the company conducted.

The Various Stages of Customer Engagement - Teradata (Click Image To Enlarge)

At the occasion of the launch of the 2015 edition of the survey, Teradata said it saw some “dramatic shifts in how companies and marketers are deriving business value from data, integrated marketing platforms, and customer-centric data-driven marketing strategies” as compared with its 2013 report.

Among the key findings of the Teradata 2015 Global Data-Driven Marketing Survey:

• A large majority of marketers (90%) wants to move beyond segmentation towards one-to-one personalization in a real-time interaction context.
• Faster decisions and more accurate decisions are reported as key benefits of using data in this real-time economy. Two-thirds of respondents cite speed and accuracy in decisions as key benefit.
• For 38% of respondents the major challenge is improving both customer acquisition and customer retention.
• 78% of marketers in the survey claim to use data systematically. In 2013 this was only 36%.

Omni-channel consistency and silos remain hurdles

Respondents see data-driven marketing as a means to an end and for several an integrated marketing cloud approach seems like the way forward from a platform perspective. Of course, Teradata is one of several major providers of such a marketing cloud (like Adobe, Oracle, Salesforce.com, IBM, Microsoft etc.).

Obviously there is a gap between what marketers would like to achieve with data-driven marketing and what they actually achieve. Many hurdles remain, among others regarding consistency in an omni-channel marketing context whereby silos are the eternal challenge, also from a campaign marketing perspective.

More about the evolutions, challenges, customer data issues (privacy, regulation, ownership) etc. in the press release, the report and the infographic below.

Given the huge attention for data-driven marketing (and, admittedly, the big marketing cloud wars we see happening), there is of course more research looking at the state of data-driven marketing and the drivers of it. In a second infographic below the one from Teradata, we’ll take a closer look at more research – with a second infographic.

Data-driven marketing: customer-centricity and customer experience first?

It’s not just the vendors and marketing cloud providers such as Teradata who come up with research.

Recently, the GlobalDMA, “an organisation that represents, supports and unites marketing associations from around the globe that focus on data-driven marketing”, looked at the state of data-driven marketing and data-driven marketing practices in 17 global markets.

It did so in collaborations with strategic consultancy for the advertising and marketing industry, Winterberry Group.

You can access the report for free on the website of the GlobalDMA (registration required). Just like Teradata, the report found that marketers – obviously – increasingly see the importance of a smart use of data in marketing, customer experience and advertising (the whole programmatic advertising concept).

In an infographic on AdWeek, infographist Carlos Monteiro summarized some of the key takeaways from that research (and from Teradata’s 2015 Global Data-Driven Marketing Survey).

How Data-Driven Marketers Outperform Their Competition - Adweek by Carlos Monteiro (Click Image To Enlarge)

Data-driven marketers outperform their competitors according to The State of Marketing 2013 by IBM – another contender in the marketing cloud wars – source: presentation by Jason Heller of McKinsey at Integrated Marketing Week 2013

Among the key takeaways of the data-driven marketing report by the GlobalDMA:

• 77% of marketers are confident in the data-driven approach and 74% expect to increase data marketing budgets this year.
• Data efforts by far focus on offers, messages and content (marketing) first (69% of respondents). Second ranks a data-driven strategy or data-driven product development. Customer experience optimization unfortunately only ranks third with 49% of respondents.
• Among the key drivers of increased data marketing: first of all a need to be more customer-centric (reported by 53% of respondents). Maximizing efficiency and return ranks second followed by gaining more knowledge of customers and prospects.

The question is what will be done with this knowledge. And here we see that 20% reports a need to align with digital consumer preferences.

So, it seems the digital customer experience does matter as it’s essential for a more customer-centric approach and the – for many in practice – extremely urgent need to align with (digital) consumer preferences or, maybe better, catch up with the changed customer reality, in the end the essence of what digital marketing transformation is all about in the first place.

Infographic – via AdWeek and made by Carlos Monteiro – below. You can download the Winterberry Group/ GlobalDMA report here.

 Click Image To Enlarge

COMMENTARY:  Customers today expect—and demand—a seamless and relevant experience. They have grown accustomed to marketers’ knowledge of their preferences and anticipation of their needs. Fractured or conflicting messages from a brand make marketers seem unorganized and annoy customers, sometimes even driving them away.

For marketers, the only solution is data-driven marketing for individualized insights. Teradata defines data-driven marketing as

"the process of collecting and connecting large amounts of online data with traditional offline data, rapidly analyzing and gaining cross-channel insights about customers, and then bringing that insight to market via a highly personalized marketing campaign tailored to the customer at his/her point of need."

Data-driven marketing is the means that leads to the end of individualized insights: moving beyond segmentation to true one-to-one personalization in a real-time context— achieving the capability to distill insights at the individual level, and the ability to target known customers in a digital marketing ecosystem that often settles for “close enough.” 

A well-integrated data-driven marketing program that provides a single view of the customer is the path to such individualization, and can result in business benefits that are just waiting to be tapped. The data in this report is based on a survey of 1,506 marketing and communications executives worldwide, representing all major industries. The survey was conducted in the fall of 2014, and follows a similar survey conducted in 2013.

According to Mark Jeffrey, Kellogg School of Management, Northwestern University, and author of "Data Driven Marketing," there are 15 essential marketing metrics that all marketers should know.

Click Image To Enlarge

People-Centric Targeting Across All Screens

What is it: Media consumption habits are more fragmented and diverse than ever, as consumers engage with multiple screens and devices. And in this multi-channel world, isolated, one-off marketing strategies and closed technologies no longer make sense. Advertisers don’t need a social plan or a mobile plan; they need to take full advantage of all available data to develop a people-centric plan that zeroes in on customers wherever they are and when they are most likely to engage. This requires platforms that can integrate data across channels and provide transparent, objective analysis of performance across every marketing touch point.

In the following schematic, Mark Jeffrey illustrates the process of gathering customer data from multiple sources, the flow of that data through the processes of validation, cleaning, transformation, aggregation and loading that data into a centralized data warehouse for business intelligence purposes.   

Click Image To Enlarge

Why it’s important: People-centric marketing is even reaching the world of linear TV, where new streams of data from set-top boxes and connected televisions are making it possible for advertisers to programmatically buy specific audience segments rather than focusing only on shows and time slots, which is how TV has traditionally been bought and sold.

Data will continue to blur the lines between TV and digital, between mobile and display, and even between direct response and branding. It all comes down to the person — whether the screen they are looking at is on their wall, at their desk or in the palm of their hand.

Why it’s hard: Cross-channel engagement is the cornerstone of people-centric marketing. The challenge, though, lies in evaluating attribution — an understanding of how well channels performed in engaging targets. Several years ago, this degree of accountability was impossible to achieve because data analysis tools hadn’t yet innovated to the point of granular attribution. Today, however, multi-touch attribution platforms, driven by more recent advances in machine learning and predictive analytics, have made this a reality.

Courtesy of an article appearing in i-scoop, an exerpt from the Teradata's 2015 Data-Driven Marketing Survey and an article dated August 28, 2015 appearing in VentureBeat

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WHY DEVELOPING BUYER PERSONAS IS CRUCIAL TO YOUR MARKETING AND BUSINESS SUCCESS

Buyer personas (sometimes referred to as marketing personas) are fictional, generalized representations of your ideal customers. Personas help us all -- in marketing, sales, product, and services -- internalize the ideal customer we're trying to attract, and relate to our customers as real humans. Having a deep understanding of your buyer persona(s) is critical to driving content creation, product development, sales follow up, and really anything that relates to customer acquisition and retention.

"Okay, so personas are really important to my business. But ... how do I actually make one?"

Ahh ... the million dollar question. The good news is, they aren't that difficult to create. You just need to ask the right questions to the right people, and present that information in a helpful way so the people in your business can get to know your persona(s) better than the backs of their hands.

Now for the even better news: Hubspot put together an interview guide and a free template for creating buyer personas, so it's easy as pie to do your persona research and compile it all into a beautiful, presentable, palatable format. So follow along with this interview guide, and download the persona template so you can start plugging in your research. Before you know it, you'll have complete, well thought-out buyer personas to show off to your entire company!

Why Exactly Are Buyer Personas So Important To Your Business?

Buyer personas help you understand your customers (and prospective customers) better. This makes it easier for you to tailor your content, messaging, product development, and services to the specific needs, behaviors, and concerns of different groups. In other words, you may know your target buyers are caregivers, but do you know what their specific needs and interests are? What is the typical background of your ideal buyer? In order to get a full understanding of what makes your best customers tick, it's critical to develop detailed personas for your business.

The strongest buyer personas are based on market research as well as insights you gather from your actual customer base (through surveys, interviews, etc.). Depending on your business, you could have as few as one or two personas, or as many as 10 or 20. But if you’re new to personas, start small! You can always develop more personas later if needed.

What About "Negative" Personas?

Whereas a buyer persona is a representation of your ideal customer, a negative -- or “exclusionary” -- persona is a representation of who you don’t want as a customer.

For example, this could include professionals who are too advanced for your product or service, students who are only engaging with your content for research/knowledge, or potential customers who are just too expensive to acquire (because of a low average sale price, their propensity to churn, or their unlikeliness to purchase again from your company).

How Can Personas Be Used in Marketing?

At the most basic level, developing personas allows you to create content and messaging that appeals to your target audience. It also enables you to target or personalize your marketing for different segments of your audience. For example, instead of sending the same lead nurturing emails to everyone in your database, you can segment by buyer persona and tailor your messaging according to what you know about those different personas.

Furthermore, when combined with lifecycle stage (i.e. how far along someone is in your sales cycle), buyer personas also allow you to map out and create highly targeted content. You can learn more about how to do that by downloading our Content Mapping Template. 

And if you take the time to also create negative personas, you’ll have the added advantage of being able to segment out the “bad apples” from the rest of your contacts, which can help you achieve a lower cost-per-lead and cost-per-customer -- and see higher sales productivity.

Now, are you ready to start creating your buyer personas?

How To Create Buyer Personas

Buyer personas can be created through research, surveys, and interviews of your target audience. That includes a mix of customers, prospects, and those outside your contacts database who might align with your target audience.

Here are some practical methods for gathering the information you need to develop personas:

• Look through your contacts database to uncover trends about how certain leads or customers find and consume your content. 
• When creating forms to use on your website, use form fields that capture important persona information. For example, if all of your personas vary based on company size, ask each lead for information about company size on your forms.
• Take into consideration your sales team's feedback on the leads they're interacting with most. What generalizations can they make about the different types of customers you serve best?
• Interview customers and prospects, either in person or over the phone, to discover what they like about your product or service. This is one of the most important steps, so let's discuss it in greater detail ...

How To Find Interviewees For Researching Buyer Personas

One of the most critical steps to establishing your buyer persona(s) is finding some people to speak with to suss out, well, who your buyer persona is. That means you'll have to conduct some interviews to get to know what drives your target audience. But how do you find those interviewees? There are a few sources you should tap into:

1) Customers

Your existing customer base is the perfect place to start with your interviews, because they've already purchased your product and engaged with your company. At least some of them are likely to exemplify your target persona(s).

Reach out to both "good" and "bad" customers. You don't just want to talk to people who love your product and want to spend an hour gushing about you (as good as that feels). Customers who are unhappy with your product will show other patterns that will help you form a solid understanding of your personas. For example, you might find that some of these "bad" customers have bigger teams and thus need a collaboration element to the product. Or you may find that "bad" customers find your product too technical and difficult to use. In both cases, you learn something about your product and what your customers' challenges are.

Another benefit to interviewing customers is that you may not need to offer them an incentive like a gift card (a typical incentive for participating in surveys or interviews). Customers usually like being heard, and interviewing them gives them a chance to tell you about their world, their challenges, and what they think of your product. Customers also like to have an impact on the products they use, so you may find that, as you involve them in interviews like this, they become even more loyal to your company. When you reach out to customers, be clear that your goal is to get their feedback and that it's highly valued by your team.

2) Prospects

Be sure to balance out your interviews with people who have not purchased your product or know much about your company. Your current prospects and leads are a great option here because you already have their contact information. Use the data you do have about them (i.e. anything you've collected through lead generation forms or website analytics) to figure out who might fit into your target personas.

3) Referrals

You'll probably also need to rely on some referrals to talk to people who may fit into your target personas, particularly if you're heading into new markets or don't have any leads or customers yet. Reach out to your network -- co-workers, existing customers, social media contacts -- to find people you'd like to interview and get introduced to. It may be tough to get a large volume of people this way, but you'll likely get some very high-quality interviews out of it. If you don't know where to start, try searching on LinkedIn for people who may fit into your target personas and see which results have any connections in common with you. Then reach out to your common connections for introductions.

4) Third-Party Networks

For interviewees who are completely removed from your company, there are a few third-party networks you can recruit from. Craigslist allows you to post ads for people interested in any kind of job, and UserTesting.com allows you to run remote user testing (with some follow-up questions). You'll have less control over sessions run through UserTesting.com, but it's a great resource for quick user testing recruiting.

Tips For Recruiting Interviewees

As you reach out to potential interviewees, here are a few tips for getting a better response rate:

1) Use incentives. While you may not need them in all scenarios (e.g. customers who already want to talk to you), incentives give people a reason to participate in an interview if they don't have a relationship with you. A simple gift card (like an Amazon or Visa credit card) is an easy option.

2) Be clear this isn't a sales call. This is especially important when dealing with non-customers. Be clear that you're doing research and that you just want to learn from them. You are not getting them to commit to a one-hour sales call; you're getting them to commit to telling you about their lives, jobs, and challenges.

3) Make it easy to say yes. Take care of everything for your potential interviewee. Suggest times, but be flexible; allow them to pick a time right off the bat; and send a calendar invitation with a reminder to block off their time.

How Many People Do You Need To Interview?

Unfortunately the answer is, it depends. Start with at least 3-5 interviews for each persona you're creating. If you already know a lot about your persona, then that may be enough. You may need to do 3-5 interviews in each category of interviewees (customers, prospects, people who don't know your company).

The rule of thumb is, when you start accurately predicting what your interviewee is going to say, it's probably time to stop. Through these interviews, you'll naturally start to notice patterns. Once you start expecting and predicting what your interviewee is going to say, that means you've interviewed enough people to find and internalize these patterns.

20 Questions to Ask in Persona Interviews

It's time to conduct the interview! After the normal small talk and thank-you's, it's time to jump into your questions. There are several different categories of questions you'll want to ask in order to create a complete persona profile. The following questions are organized into those categories, but feel free to customize this list and remove or add more questions that may be appropriate for your target customers.

Role

• What is your job role? Your title?
• How is your job measured?
• What does a typical day look like?
• What skills are required to do your job?
• What knowledge and tools do you use in your job?
• Who do you report to? Who reports to you?

Company

• In which industry or industries does your company work?
• What is the size of your company (revenue, employees)?

Goals

• What are you responsible for?
• What does it mean to be successful in your role?

Challenges

• What are your biggest challenges?

Watering Holes

• How do you learn about new information for your job?
• What publications or blogs do you read?
• What associations and social networks do you participate in?

Personal Background

• Describe your personal demographics (if appropriate, ask their age, whether they're married, if they have children).
• Describe your educational background. What level of education did you complete, which schools did you attend, and what did you study?
• Describe your career path. How did you end up where you are today?

Shopping Preferences

• How do you prefer to interact with vendors (e.g. email, phone, in person)?
• Do you use the internet to research vendors or products? If yes, how do you search for information?
• Describe a recent purchase. Why did you consider a purchase, what was the evaluation process, and how did you decide to purchase that product or service?

The #1 Tip for a Successful Persona Interview: Ask "Why"

The follow up question to pretty much every question in the above list should be "why?"

Through these interviews, you're trying to understand your customers' or potential customers' goals, behaviors, and what drives them. But keep in mind that people are not always great at reflecting on their own behaviors to tell you what drives them at their core. You don't care that they measure the number of visits to their website, for example. What you care about is that they measure that because they need a number they control to show their boss they're doing a good job.

Start with a simple question -- one of our favorites is, "What is your biggest challenge?" Then spend a good amount of time diving deeper into that one question to learn more about that person. You learn more by asking "why?" than by asking more superficial questions.

How To Use Your Research To Create Your Persona

Once you've gone through the research process, you'll have a lot of meaty, raw data about your potential and current customers. But what do you do with it? How do you distill all of that so it's easy for everyone to understand all the information you've gathered?

The next step is to use your research to identify patterns and commonalities from the answers to your interview questions, develop at least one primary persona, and share that persona with the rest of the company.

Use Hubspots free, downloadable persona template to organize the information you've gathered about your persona(s). Then share these slides with the rest of your company so everyone can benefit from the research you've done and develop an in-depth understanding of the person (or people) they're targeting every day at work.

Here's how to use the template to do it ...

Fill In Your Persona's Basic Demographic Information

If you didn't feel comfortable asking some of these demographic-based questions on the phone or in person, you can also conduct online surveys to gather this information. Some people are more comfortable disclosing things like this through a survey rather than verbal communication.

It's also helpful to include some descriptive buzzwords and mannerisms of your persona that you may have picked up on during your conversations to make it easier for people in your sales department to identify certain personas when they're talking to prospects.

Here's an example of how you might complete Section 1 in your template for one of your personas:

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Share What You've Learned About Your Persona's Motivations

This is where you'll distill the information you learned from asking "Why" so much during those interviews. What keeps your persona up at night? Who do they want to be? Most importantly, tie that all together by telling people how your company can help them.

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Help Your Sales Team Prepare for Conversations With Your Persona

Include some real quotes from your interviews that exemplify what your personas are concerned about, who they are, and what they want. Then create a list of the objections they might raise so your sales team is prepared to address those during their conversations with prospects.

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Help Craft Messaging For Your Persona

Tell people how to talk about your products/services with your persona. This includes the nitty gritty vernacular you should use, as well as a more general elevator pitch that positions your solution in a way that resonates with your persona. This will help you ensure everyone in your company is speaking the same language when they're having conversations with leads and customers.

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Finally, make sure you give your persona a name (like Finance Manager Margie, IT Ian, or Landscaper Larry), and include a real-life image of your persona so everyone can truly envision what he or she looks like. Purchase an image from a stock photograph site like Thinkstock, or download one of our royalty-free images. It may seem silly, but it really helps to put a name to a face, so to speak!

COMMENTARY:   

Customer Profiles vs Customer Personas 

Most business owners have an ideal customer in mind. However, far too many of them fail to do more than scratch the surface when describing that person. Their customer profiles contain generic, basic information: age range, geographic location, household income, whether they have children or pets, rent or own their homes, etc. In the B2B environment, the customer profile may focus on business information, such as number of years in business, the market served, annual sales and length of time in operation. Taken together, the customer profile provides a marketing starting point.

The first step in developing customer personas is to develop the ideal customer profile. Again, the profile is different from the persona; the profile is generic, overarching information. You can cull this information from your customer data, as well as based on the market research you’ve done to determine who your product appeals to. As you develop the profile, it should include:

B2C:

• Age
• Gender
• Marital status (if applicable)
• Geographic data (country, region, ZIP code)
• Household income
• Household size
• Homeowner status
• Education
• Special characteristics (children, pets, hobbies, interests, political affiliations, etc.)

B2B:

• Industry
• Products
• Geographic data (country, region, ZIP code)
• Number of employees
• Number of locations
• Length of time in business
• Annual revenue

Once you have a customer profile, you can move on to creating a persona. The first rule of creating buyer personas is that you cannot make them up, based on assumptions, your existing customer data, and anecdotes from your sales and marketing staff. You can’t base personas on what you glean from the social media profiles of the people who engage with your company online. That information may be useful in creating a customer profile in that it provides some general demographic insights, but it doesn’t give you what is referred to as the “customer archetype.”

The Science Behind Creating Buyer Personas

To help you get started developing your customer personas, I found this very helpful infographic titled, "The Science Behind Creating Buyer Personas," which encapsulates much of the above information into a concise format that walks you through the process of creating buyer personas.

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To know today’s B2B buyers more deeply involves the use of qualitative contextual inquiry. Contextual inquiry has served the fields of social science, qualitative research, and journalism very well.  It can serve B2B Marketing and Sales very well also.

Strategic Management

Buyer persona development is an exercise in formulating customer and buyer strategies.  To formulate strategies requires informed knowledge about your customers and buyers.  One way to characterize buyer persona development is to call it a strategic modeling initiative.  An initiative every level of management should go through to make informed decisions.  One piece of advice Zambito can give after being at this for a dozen years – do not skip strategy and jump to tactics.  You are going to miss out on plenty about your buyers.

Strategic Modeling Tool: The Buyer Persona Canvas™

Zambito utilizes a strategic modeling tool designed for buyer persona development: the Buyer Persona Canvas™.  (Zambito drew inspiration for the canvas from Alex Osterwalder’s, founder of Business Model Generation, wonderful creation of the BUSINESS MODEL CANVAS  commonly used in start-ups. NOTE: But should be a key element for developing business models for any company regardless of its stage of development)   It is designed to serve as a strategic guide for understanding your buyers more deeply.  The model highlights ten (10) areas where we need in-depth knowledge about buyers to make informed strategy decisions.

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I have actually been involved in the process of creating buyer personas.  However, instead of calling them personas we called them lifestyles.  Lifestyles is a pseudonym used in marketing that describes how customers spend their time and money.   To determine the lifestyles of our customer database, which numbered almost 100,000 customers spread over 17 national geographic areas, we used the services of a professional marketing analytics firm.  This was an expensive process which took over three months to complete.  I don't recommend this for everyone.  The lifestyle analysis that we compiled utilizes demographic data, consumer credit data, census data, and behavioral tendencies about consumers by specific geographic locations.

Courtesy of an article dated May 28, 2015 appearing in Hubspot Blog and an article dated June 30, 2014 appearing in Digital Currents and an article dated September 2013 appearing in Tony Zambito Blog and an article dated May 20, 2014 appearing in WSI Blog

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A PARADIGM SHIFT FROM BRANDS TO CUSTOMERS MEANS BRANDS MUST PROVIDE PERSONALIZED EXPERIENCES OR RISK LOSING THEM

It’s true that you never get a second chance to make a first impression.

The proof? Customers are breaking up with retail brands that can’t deliver on their evolving expectations. The tech-savvy generation and their time-pressured parents are rapidly adapting (and perhaps outpacing) retail brands.  Customers are demanding a shopping experience that is intuitively seamless, fast, authentic and personalized.

So how do you answer the increasing demands of your customers?

The paradigm shift: from brand to customer

The customer experience has become the “final frontier” for retailers. It used to be all about the brand. But a lot has changed. Because of increasing customer expectations and falling store sales, retailers are learning that they have to make a big shift. It’s not about the retailer’s brand any longer.  It’s all about the customer—and how the brand can create a shopping experience built on this new-found focus.

Let’s face it. Most shoppers can find similar or better alternatives online. A large part of why they are coming to the store is for the experience itself.  

"Customers not only want, but expect a personalized experience. They expect retailers to know their preferences and interests. A recent Infosys study reported that 78 percent of consumers are more likely to be a repeat customer if a retailer provides them with targeted, personalized offers.”

But the pendulum swings both ways. The CMO Council reported that more than half of North American consumers would consider breaking ties with retailers that do not provide offers that are relevant and personalized.

So we’ve come to a place in time where retailers are forced to change their ways. The shift of focus must come away from the brand and, instead, highlight the customers’ expectations and needs at an individual level. Brands that succeed in this change will see increased loyalty and profit margins. But those that do not will be faced with a serious decline in sales and brand loyalty.

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Unless you’ve been hiding under a rock, you probably already know all of this. But the real question is:  What do you do about it? How do you create an experience for each and every one of your shoppers that will make them feel that when they enter your brand’s store, they are entering their store?

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Today most retailers realize the power of personalization and the in-store experience. The problem is that they don’t know how to craft an experience that is unique, and they don’t have the information they need to get started.

The materials for change: personas, shopper history and real-time decisioning

To get started along the journey of creating a shopping experience that is built around your
customer, you will find that personas, your compiled shopper history and an organized real-time message engine are your keys to success. However, before you can cross these items off your to-do list, you need one very important thing—data.

Data is the building block for creating shopper personas built in reality. Data that you store of your
shoppers’ past transactions with your brand will provide critical information that will deliver a truly
personal experience for them. And data will help you to make decisions about what message or offer your shopper should receive in any given moment. To be successful, you need to be sure that data is your foundation for all things moving forward and that your decisions are grounded in actionable insights.

Personas: Going beyond segmentation

Retailers have long used customer profiles as a representation of their marketing segments. personas take these profiles beyond the basic demographic makeup of the customers. A well-developed persona incorporates the basic demographics with financial information (e.g., ability to pay, credit worthiness, net worth), interests and—perhaps most importantly—transactional behavior and categorical spend.  True, it does take work (and often money) to create accurate shopper personas. But once this task is done, these can be powerful tools for getting marketers and store employees to understand and obsess about customer needs.

With personas, your brand has a holistic view of who is shopping at your stores. To be successful,
marketers have to use personas consistently.  They should serve as a reference at every step of the design process so that it’s clear who they are designing the experience for.

It’s also important to note, that building personas is not just a one-time job. Once you have created
your personas, they should serve as living, breathing documents that need to be evaluated on a regular basis. If your customer base changes, then so should your personas. Measurement is crucial to ensure that the personas remain an effective guide.

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Shopper history: the more you know

Personas are only one element of the personalized shopping experience.  Shopper history is another. Capturing a customer’s history with your brand empowers you with hugely valuable information. What have they purchased in the past? What are their preferences? What are they buying with your competitors?

Having the answer to these questions can make you a master of the retail universe.  But, knowing them is not enough. You have to ensure that they are easy to access.  How many databases are the answers to these questions stored in currently? Do your store associates have access to them? Are they fueling the messages that are being served on your ecommerce site? If your answer is no, then you have some work to do.

It is one thing to capture this information—but the most important thing you can do is to be sure that it is readily available so you can use it at every step of your customers’ shopping journey.  

Real time: Making it happen in the moment that matters 

Now that you have created your personas and you can access your shopper history at any stage of your customers’ journey, you have one more very important thing to do. You need a real-time decisioning engine.

Sound complicated? Well, in a way, it is. But you already have most of your legwork done with your personas and your shopper history database. Now it’s time to map all of the possible journeys your shoppers may take and think about their experiences.  At every step, what offer would be relevant to them in that moment?

This exploration takes time and a lot of thought. But in this mapping process, you’re actually creating a database of offers and messages for your customers that will make their shopping experience feel personal and relevant. After all, that’s the goal, right?

Bringing it together: Joining the elements of your new shopping experience

Forrester notes,

“Combining the user-archetype information that personas contain with an individual’s history, preferences and current environment can help companies engineer experiences that feel like they were designed for a specific user, even if they were not.”

In essence, this is the secret formula. It’s not possible to make every experience individually and uniquely personal to a single customer.  But if you can combine the persona + shopper history + real-time decisioning engine, you will be delivering on an experience that feels custom fit for your shoppers.

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Your customers don’t have patience for you to figure it out. They just want an intuitive experience that feels as if it was authentically created with them in mind. Shoppers’ expectations of instant gratification aren’t changing. If you can deliver on their expectations, you’ll reap the marketshare of the brands that are not.

It’s a lot to tackle if you haven’t already started. Remember, you don’t have to climb the mountain in one attempt. Focus on one aspect of your customer experience and use it as a beta project. Then build upon your customer experience from there.

According to Forrester,

“Organizations that have failed in personalization initiatives often tried to do too much at once. Instead, successful organizations we spoke to avoided these pitfalls in new contextualization initiatives by starting small and adding a personal touch for certain experiences before ramping up to large personalization initiatives.”

Avoiding the breakup: how to build trust with your customers

Just as in real-life relationships, your consumers are looking for authentic relationships with the brands and products that they buy. The evolving digital landscape has created competition and endless shopping opportunities. With all of these endless options, consumers want to be inspired.

However, through all this evolution, the premise of buying and selling goods hasn’t fundamentally changed. The old adage “Nothing happens until someone decides to purchase something” still applies. The difference is that now shoppers are more equipped to demand an intelligent, transparent, unique and meaningful experience with the brand of their choice. They have more choices than they ever did before when selecting a brand to have a relationship with.

Where the brand used to hold the power, now it is the consumer with all the power of choice. To be successful, you need to be strategically prepared to set your brand apart from the competition. To do this, you need to know your customer in a way that feels unconsciously unique and authentic. In the end, this is what will inspire trust for your shoppers. It’s that trust that will kindle a loyal relationship with your brand.

Conclusion

Today the customer is in control. They decide if, when and how to interact with their favorite retail brands. With all the channels of interaction available to the consumer, retailers need the ability to develop well-grounded engagement strategies to maximize the customer experience every minute of every day.

As a new breed of marketing partner for this customer-empowered world, our approach harnesses the power of rich data, world-leading technologies, engaging creativity and transformative ideas to connect customers to brands and deliver dramatic results.

Customers today have many options. We can help you create meaningful customer connections, resulting in increased revenue, more frequent engagement and more efficient marketing spend.

COMMENTARY:   Improving the customer experience is a strategic priority for 73% of businesses, yet only one percent of companies deliver an excellent customer experience, according to the 2015 Forrester Research Customer Experience Index™., 

Based on a survey of 46,000 consumers, the CX Index measured and ranked 299 large US brands, across 17 industries, on the quality of their customer experience. USAA is ranked number one. Other companies among the top 15 include (in alphabetical order): Ally Bank, Amazon.com, Charles Schwab, Discover, Edward Jones, Etsy, HSN, JetBlue Airways, Lexus, Navy Federal Credit Union, Newegg, PNC, QVC, and Zappos.com.

In the Forrester index for 2015, retailers remain the best at providing a great customer experience, but it is interesting to see that parcel shippers and hotels dropped way down the index – last year they were up there at the top with retailers. And there is an important distinction to make with retailers. Digital-only online retailers are much better at providing a great customer experience than those with a store network.

Megan Burns, Forrester Research principal analyst serving customer experience professionals said.

“The emotion that an experience elicits influenced loyalty in nearly every industry.  And making customers feel valued is the holy grail of CX emotions. Customer experience leaders made customers feel valued almost twice as often as CX laggards did.”

Megan explained that this year's CX rating used different methodology that now incorporates customer loyalty in determing the overall CX rating.    

"The biggest change in our new approach is the way we judge CX excellence. To hit a home run, the 299 brands we studied had to do more than make customers happy. They had to design and deliver a CX that actually helps the business by creating and sustaining customer loyalty.  Our new rules shook up the standings and pulled a bit of a Billy Beane, tipping conventional CX wisdom on its head.  For example:  Customer loyalty is undergoing a rapid change from being the way that you manage a points-based program with plastic cards to a strategy that requires engagement with customers and an ability to improve their experience with your brand."

Megan said that there is a shakeup on the CX leaderboards for 2015. 

"For the first seven years of the CX Index, retailers, hotels, and parcel shippers dominated — but not this year. As industries, hotels and shippers dropped to the middle of the pack. Retailers held on to first place, but there’s an asterisk on that particular stat. We broke the retail industry into two groups in 2015 — those with physical stores and those without. Retailers without stores (we call them digital-only retailers) kept the top spot. Those with stores fell multiple places in the industry standings."

Megan cautions that a high CX rating may not always be worth it and that there maybe a point of diminishing returns that brands may not want to cross.   She says.

"In most of the industries, we saw a strong positive link between CX quality, loyalty, and loyalty-driven revenue. But that wasn’t always the case. Our models for one industry showed a very clear and compelling point of diminishing return. Taking CX from poor to okay is more profitable for brands in this space than going from okay to excellent. That doesn’t mean that anyone can afford to ignore CX. Many aren’t even hitting the okay mark right now. But it gives executives something to think about as they refine their company’s overarching CX strategy."

Courtesy of the Epsilon's "It's Not You, It's Me" , an article dated April 20, 2015 appearing in MarketWatch, and an article dated April 20, 2015 appearing in Forrester Blog

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HOW TO DRIVE A CUSTOMER EXPERIENCE-FRIENDLY CULTURE AND THE TEMKIN EXPERIENCE RATINGS FOR 2014

The challenges of creating a great customer experience extend from the tactical to the strategic, from remaking processes to encouraging innovation and from building new skills to integrating an array of technologies.

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Despite the varying maturities and consumer habits that are bound to exist on a regional basis, the criticality of customer centricity has remained consistent. The challenge is for organizations worldwide to create memorable experiences that also make a difference to the bottom line.

Further evidence of the ubiquitous focus on customer experience can be found in Figure 7. More than three-quarters (78%) of company respondents are attempting to differentiate through CX, with 28% strongly agreeing with the statement. In comparison, only 5% of companies are not trying to use customer experience as a point of differentiation.

It is clear that the coming year will see plenty of activity in this area. Organizations have spent considerable time getting their respective houses in order. The next step for many is execution; pulling together mobile, content, data and the various other building blocks and deploying them in a harmonious fashion.

Creating an excellent customer experience is a complex process, but the respondents’ enthusiasm and dedication to using it as a point of differentiation bodes well. Companies have committed to customer experience for the long term. This is critical, as a commitment to customer experience means a commitment to a structured, longterm view on delighting the customer.

Simply put, customer experience isn’t simple.

For many organizations, the goal of turning customer experience (CX) into a competitive advantage means recreating themselves. That’s because the customer’s experience is the result of every part of the company working together, or failing to. Decisions made in fi nance and human resources can have just as much impact as those in marketing and product teams.

This interconnection is one reason that a cultural shift should underlie any strategic priority around CX. It’s not easy to get hundreds or thousands of employees to realign their thinking, but it’s essential if the shift to the customer is genuine.  Here are some fundamental building blocks necessary to create a CX culture at your company.

• Unified Team or Company - Perhaps the most powerful element of culture is the potential for unity. When teams or entire companies are unified around a vision, it energizes them and can counteract some of the normal tensions between departments.
• Common Customer Experience Perspective - In a business environment where there are far more options for how to spend time and money than the ability to follow through, nothing is more useful than focus. When the organization begins to share a common perspective that the customer experience drives growth, it focuses everything from budgets to daily priorities.
• Customer-Centric Business Organization - Declaring that CX will be a defining organizational characteristic is a choice that means prioritizing customer-centric qualities over other business goals. As this permeates the organization, this new direction can galvanize innovation. In a business, creativity is often at its best (or most useful) when it’s given context and boundaries. The move to build a great CX opens the door for creativity in every team and at every level.

The five-year plan…

How important is CX? Thousands of companies tell us that it’s the number one way they hope to differentiate themselves over the next fi ve years. The product and service commoditization in many sectors means that while offerings must be competitive, they’re less likely to be a competitive advantage. Even starker is the end of the price war; only 5% of respondents see themselves as being able to set themselves apart with their pricing strategies.

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Experience starts with strategy and culture

Strategy is the easy part. As challenging as it is to discover and define corporate direction, strategy is a malleable set of ideas that depends on the buy-in of a relatively small group of people.

It’s within the context of culture that strategy becomes practice. Its success or failure depends on whether the wider audience of employees, partners and other stakeholders understand and support it.

Redefining culture

A cross-team approach – building a truly customer-centric enterprise means working together. It’s not simply a marketing initiative. Product, fi nance, customer service, sales, marketing and management have to work together. The good news is that a cross-team approach that transcends the silos of the past is a powerful and more effi cient way to work.2 The bad news is that it’s very hard work to change internal structures.

Realignment through incentives – at the heart of any effective transition is using fi nancial and other incentives to reset priorities. For example, this might mean a simple redefi nition of how bonuses are calculated to include a customer satisfaction component. But, it could also be using a more sophisticated set of goals around cross-team cooperation and customer evaluation.

Supporting experimentation and understanding failure – a great customer experience combines existing best practices with new discoveries and innovations. One of the hardest challenges for some organizations to overcome is to make experimentation a part of the culture. Risk and failure-averse companies actually risk failure when they don’t embrace a vigorous campaign of experiments in the name of superior customer experience.

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Everything is part of CX. From the moment a prospect sees an ad the customer experience has begun and it doesn’t end until the relationship does. Although Figure 9 shows organizational priorities around CX, it doesn’t draw a line between what’s important and what isn’t. Everything is important, but some are differentiators while others are simply part of the new cost of doing business. Elements of the CX with the potential to separate a brand from its competitors:

• Personalization depends on technology, but it is human insight that moves it beyond the algorithms relating products and people. Great personalization can be fundamental to relevance, while bad personalization feels intrusive and unnecessary.
• Value is an expression of cost and benefit. The benefits to a customer are a mix of what they get and how they perceive it, which is why marketing has to be both the voice of the customer to the enterprise, and the voice of the enterprise to the customer.
• Making customer experience fun or fulfilling is a challenge and only 7% cite it as their path to differentiation (Figure 10). It’s powerful for those that can connect brand with experience in ways that delight customers3 but most companies should first focus on getting the basics just right.

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Fundamentals for every CX-focused company:

• Customers want to know what to expect. Consistency in experience should go far enough to make them feel safe and to fulfil on expectations set in other media. At the same time, every medium has its unique traits. A mobile site should be simple and useful above all, which should be balanced with overall brand consistency.
• Safety and speed are the first steps of customer experience. Digital customers who are concerned for their data will never buy, nor will they return if they find the experience slow or awkward.
• Similarly, while mobile can be a differentiator today, marketers looking at the future recognize that it won’t be one for long. The growth in visitors and buyers is forcing every digital marketing team to be mobile-ready.

2014 Temkin Experience Ratings

Bottom line, marketers know great customer experiences are good for business, and the 2014 Temkin Experience Ratings report shows consumers rank several grocers and fast food chains as the best providers of overall excellent customer experiences. The report, based on a survey of 10,000 consumers in the U.S., evaluates 268 companies across 19 industries— including everything from healthcare and cable service to airlines and hotel chains. Rising above the pack are grocer H.E.B. (88%), Trader Joe's (84%), Chick-fil-A (83%), Publix (83%), and Aldi (82%), each rated “excellent” by customers.  Here's their list of the top and bottom organizatons:

Courtesy of eConsultancy's Quarterly Digital Intelligence Briefing Digital Trends 2015 and the Timkin Customer Experience Ratings

ASPIRATIONAL LUXURY CONSUMERS: THE EXPANDING LAP OF LUXURY AMONG U.S. CONSUMERS

 

In the U.S. retail market, the word luxury doesn’t have the same connotation that it once did. Or perhaps it’s just that the consumers who shop for luxury goods aren’t who they used to be. Either way you look at it, defining luxury today is no easy task—and neither is identifying how people view the term.

For many consumers, luxury is a way to signal that they’ve “made it,” but the ways they choose to showcase or express their status can be as varied as the consumers themselves. For example, some convey it subtly through the scarcity and heritage of the products they purchase. Others take a more forthright approach by purchasing eye-catching products they want to showcase for everyone to admire and covet.

Regardless of how consumers choose to bring luxury into their lives, the U.S. has the deepest pockets when it comes to luxury retail spending. In fact, management consulting firm Bain and Co. estimates that Americans spent $73.3 billion on luxury goods last year—more than consumers in Japan, Italy, France and China combined.

Despite the breadth of the U.S. luxury goods market, however, retailers have plenty of untapped potential to explore. In fact, a closer look at the luxury goods arena shows that the households that want to buy luxury goods outnumber those that already do by 8%.

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In order to engage with luxury-buying and aspirational buyers, retailers need key insight into the specific differences among these consumers. While no two consumers are exactly alike, Nielsen has identified five distinct perspectives around the meaning and value of the term “luxury,” and has categorized them into specific consumer segments. Three of them value luxury and make luxury retail purchases. The other two value and aspire to buy luxury items, but are less likely to actually make the purchases.

The aspirational consumer market is vital for luxury brands looking to achieve volume and growth. Both younger and older aspirational consumers place value on luxury products, but they haven’t traditionally been luxury consumers themselves. Lower-priced offerings and partnerships with mass merchandisers give these consumers access to the brand and build loyalty.

A luxury purchase should feel like an indulgence and a reward for aspirational consumers. Aspirationals under the age of 55 tend to live in college towns like College Station, Texas, and Lafayette, Ind., and they often shop at retailers like Burlington Coat Factory, Express and Old Navy. Aspirationals over 55 tend to shop at retailers Stein Mart and Chico’s, and live in Florida locales like Homosassa Springs, Punta Gorda and Sebring.

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In order to engage with luxury-buying and aspirational buyers, retailers need key insight into the specific differences among these consumers. While no two consumers are exactly alike, Nielsen has identified five distinct perspectives around the meaning and value of the term “luxury,” and has categorized them into specific consumer segments. Three of them value luxury and make luxury retail purchases. The other two value and aspire to buy luxury items, but are less likely to actually make the purchases.

The aspirational consumer market is vital for luxury brands looking to achieve volume and growth. Both younger and older aspirational consumers place value on luxury products, but they haven’t traditionally been luxury consumers themselves. Lower-priced offerings and partnerships with mass merchandisers give these consumers access to the brand and build loyalty.

A luxury purchase should feel like an indulgence and a reward for aspirational consumers. Aspirationals under the age of 55 tend to live in college towns like College Station, Texas, and Lafayette, Ind., and they often shop at retailers like Burlington Coat Factory, Express and Old Navy. Aspirationals over 55 tend to shop at retailers Stein Mart and Chico’s, and live in Florida locales like Homosassa Springs, Punta Gorda and Sebring.

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COMMENTARY:  When it comes to luxury products, 73 percent of luxury consumers consider quality to be the most important attribute, according to a study by the Luxury Institute and Epsilon.

“The new face of luxury: Breaking down the myths and stereotypes of the luxury shopper” aims to better understand the luxury shopper. The research study was conducted by Epsilon in partnership with the Luxury Institute.

The report focuses on defining the different tiers of luxury consumers, focusing on those who are true luxe customers and those who are aspiring to that level. By understanding their consumers, luxury brands will be able to adjust their marketing tactics based on the individual’s level of consumption.

Milton Pedraza, CEO of the Luxury Institute, New York said. 

“The only way you can have a good understanding of a human being is to have honest dialogue with them.  You have to treat people as an individual and you have to have an honest and open dialogue with them,” 

Deeper understanding

Interacting with consumers in a relevant and personal manner is key for brands looking to make a connection, especially since 50 percent of luxury brands lose their top clients every year. Also, since 47 percent of consumers say it is the customer service that defines a luxury brand, understanding and catering to the top customers is vital.

The study breaks down the luxury consumers into four categories:

• Aspirational shoppers are individual who want to own luxury items, but cannot afford to on a regular basis.  They typically shop at outlet stores or on discount Web sites and purchase low-ticket designer brand items.
• Moments of wealth shoppers may save for a specific piece from a specific luxury brand, but they are not a regular consumer of the brand.
• Dressed for the part shoppers purchase luxury items to present themselves as someone living a luxurious lifestyle, but do not have the finances to be true luxe shoppers.
• True luxe shoppers do not have any financial concerns when purchasing and buy from luxury brands on a frequent basis.

Understanding where individuals lay in the scheme of luxury shopping and where they may jump to is important for brands. With a degree or a job change, consumers can move up a level of luxury shopping.

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True luxe shoppers are:

• Predominantly Male.
• Between the ages of 25 and 44.
• 52% are single.
• 42% are college graduates.
• Their net worth is more than $500,000.
• Annual incomes between $125,000 and $250,000.

Online shopping is less than 25 percent of sales for luxury brands, since consumers are still shopping in-person, leaving an opportunity for brands to offer more traditional white glove experiences.

However, this does not mean that luxe consumers are not actively online. Here are some stats that prove this point.  

• 98% regularly use the Internet and more than 50 percent research products before purchasing.
• 75% compare prices on their mobile devices.
• 75% of these consumers are on social media, but less than 25 percent engage with brands on Facebook. 

The digital nature of these consumers allows brands to have an online presence and attract consumers online, but offer customer service in-person.

The report suggests that brands organize and analyze housefile information to best understand their consumer’s habits and purchasing history.

Big data for personal results

Luxury brands are delving into more bespoke options and marketing, according to Wealth-X’s president at Luxury Retail Summit: Holiday Focus 2014.

Mr. Friedman spoke about the necessity among brands to understand their consumer, who they are, what they do and who their friends and family are in order to gain a full understanding of these individuals in order to effectively market. Luxury brands can learn from Wealth-X’s research on the ultra-high-net-worth individuals to create specific marketing strategy for the ultra-affluent (see story).

Some brands are adopting data trackers to attempt to understand in-store sales and trends.

For instance, Italian lingerie maker La Perla has teamed with a software platform to create a platform that will be implemented for all La Perla boutiques and fashion stores where its products are sold.

La Perla worked with MicroStrategy Mobile to analyze sales and other company data points through key performance indicators. This new technology will allow La Perla to be aware of information in all its stores and make necessary alterations to tactics without too much delay (see story).

Taking these opportunities to learn about and understand clients is vital for brands looking to engage and maintain a relationship with individuals.

Mr. Pedraza said.

“I think from the targeted marketing perspective if they understand who their clients are deeply they can really target those individuals and make it personal,  People will be excited about the human approach.  It gives you a wonderful opportunity to connect with [them] in a truly unique and personal way.”

The Wealthiest Consumers Hold Positions of Power, Prestige, and Influence

After tracking trends among the wealthy for over 35 years, we know how and where to uncover the ultra-affluent. It’s not only where they live that’s important; it’s their possessions, positions and proclivities that matter in determining an accurate definition of what it is to be a member of the top 1%.

Traditional sources for identifying affluence for marketing are insufficient

• Many wealthy individuals do not live in the most affluent census tracts
• Many affluent individuals do not have typical sources of income
• Many people of means are not found in public directories

The wealthy engage in activities indicative of their status

• Exclusive association memberships      
• Luxury travel
• Golf & country club membership      
• Major gift giving/philanthropy
• Gourmet food and wine appreciation      
• Power spending
• Green awarenes                                         
• Private equity investing

Courtesy of an article dated May 26, 2015 appearing in Nielsen Newswire, an article dated December 31, 2014 appearing in LuxuryDaily and an article appearing in ALC Wealth Window