Targeting The Customer
August 25th, 2007 Filed under: Uncategorized — Advertising AuthorMuch has been said regarding targeting your advertising messages to the right consumers. Count how many times youll hear your friendly media sales reps say, The secret is to reach the right people, and our people are the right people for you!
The logic of reaching the right people is extremely appealing, mainly because its common sense. The problem with advertising is that it often defies common sense.
So who do you target? According to Myers-Briggs, there are 2 main types of consumers: Transactional and Relational. Consumers are split evenly with 50% preferring a transactional style of purchasing and 50% preferring a relational transaction.
Characteristics of the Transactional Shopper:
(1) Transactional shoppers focus on todays transaction and give little or no thought to the possibility of future purchases.
(2) Their only fear is paying more than they had to pay. Transactional shoppers look at price above all else.
(3) They enjoy the process of comparing and negotiating and will most likely shop several stores prior to purchasing.
(4) Transactional shoppers do their own research. They rely on Consumer Reports and not your sales staff to provide them with expert information.
(5) Because they enjoy the process, transactional shoppers dont consider their time and expense spent shopping to be part of the purchase price.
Characteristics of the Relational Shopper:
(1) Relational shoppers consider todays transaction as one in a long series of future purchases. The product they want (or need) today is not as important as making sure they have found the right store to buy from.
(2) Their only fear is that of making a poor choice. Relational shoppers will purchase as soon as they have confidence.
(3) Relational shoppers do not enjoy the process of shopping and negotiating.
(4) They look for experts they can trust and rely on for information.
(5) Their time (and expense of shopping) is considered as part of the price.
(6) Once they are confident that they have found the right place to buy, relational shoppers will most likely become repeat customers.
The following is a simple example of a Transactional VS. Relational purchase:
Ten shoppers leave their home intending to purchase the same product. Five of these shoppers are transactional, the other five are relational. The price of the product they seek is $100.00.
The transactional shoppers spend the day visiting multiple stores before making their decision to buy. They ask lots of questions and then leave. Once theyre done comparing, these shoppers will return to one store to make one purchase. Since transactional shoppers enjoy negotiating, we can safely assume the sales reps provided substantial discounts to make the sale happen. This leaves a score of frustrated sales people without a sale and lower profit margins for the stores that made the sale.
Compare that with the five relational shoppers who visited their favorite stores, made their purchases, and returned home satisfied they have made a good choice.
The following will add further clarity to what happened:
TRANSACTIONAL Consumers Shopping & Purchases
Shopper Stores Visited Dollars Spent Gross Profit #1 3 $70.00 $20.00 #2 2 $80.00 $30.00 #3 5 $65.00 $15.00 #4 3 $75.00 $25.00 #5 5 $70.00 $20.00
Total # of visits made: 18
Total Purchases: $ 360.00
Gross Profit: $110.00
RELATIONAL Consumers Shopping & Purchases
Shopper Stores Visited Dollars Spent Gross Profit #1 1 $100.00 $50.00 #2 2 $90.00 $40.00 #3 1 $100.00 $50.00 #4 2 $100.00 $50.00 #5 1 $90.00 $40.00
Total # of visits made: 7
Total Purchases: $ 480.00
Gross Profit: $ 230.00
(* Above figures assume cost of goods are 50% of the suggested retail price.)
The Business Research Yearbook reports that 72% of gross profits earned come by relational shoppers with 28% of gross profits earned coming from transactional shoppers.
78% of all store visits were made by transactional consumers and only 22% of store visits being made by relational consumers.
When it comes to advertising, the majority of ad dollars are spent on promoting sales events and price & item campaigns. These campaigns always attract transactional shoppers.
Transactional shoppers represent higher store traffic but yield lower closing ratios, lower average sales and smaller gross profits.
Relational shoppers represent a smaller share of store traffic & visits but yield a larger share of sales, higher closing ratios, higher average sales, and higher profit margins.
Want to improve your advertising response rates and ROI?
Start targeting relational shoppers.
