MarketLoop #3, January 1997

The Move Towards Micro-Marketing- A Difficult Transition?

Today we are hearing more and more discussion about the effectiveness of traditional marketing techniques, noticing the widespread use of new communications and distribution channels and seeing high-spending marketing companies shifting their budgets into numerous "niche" channels. Marketing has always claimed to be focused on the customer, differentiating it from pure sales. However, it is only now and often with the enabling of technology that a company can have a genuine customer focus. The key difference here is that the development of mass-market media and mass channels of distribution only allows marketers to target broad segments of the population rather than individuals or small groups. Customer focus is about marketing to individuals.

Fragmentation of Distribution and Communication Channels

The evolution of distribution channels is widespread. Traditional retailers are developing new channels such as different store formats for different occasions, experimenting with home shopping and direct delivery and developing their customer focus. At the same time, many manufacturers are looking for the opportunity to develop a dialogue with the consumer through direct sales, dedicated stores and other retailing concepts.

The effectiveness of traditional advertising has been questioned, especially as media fragments, and the consumer time-shifts (through video recorders) or channel-hops (zapps) during commercial breaks. Declining levels of general magazine/newspaper title readership and falling programme viewing figures can only reduce the impact of individual insertions or commercial placements. A current UK debate is whether commercial breaks can be moved earlier into the programmes to avoid the channel-hopping at the end of the programme. This is an approach which clearly misses the underlying point; it is becoming increasingly harder to reach the broad segments of the population required by mass-marketing.

However, there is an up-side to this. There is a plethora of new "traditional" media. For example, while a TV commercial may reach less consumers, the rise of cable and satellite stations covering specific interests and the imminent arrival of multi-channel digital television offer the marketer the opportunity to develop a more tightly targeted approach. The same applies to radio and especially to the press sector where an abundance of new and highly targeted magazine titles is available. The result is that while the marketer's job may be more difficult to cover all the options, the effectiveness must surely be improved and the media budget can be optimised.

The Search for a Genuine Consumer Focus

We know that the 1990s consumer is looking for a dialogue. Consumers have become marketing literate and they now look to the company behind the brand. A company that wishes to enjoy a closer relationship with the consumer through a dialogue will be welcomed providing that the consumer wants the same thing. "Tell me what to buy" has become less important than "What can you offer that fits my needs?"

Procter & Gamble has been looking into the effectiveness of special offers and other point-of-sale promotions. The reasoning is that they benefit a minority of promiscuous shoppers and are paid for by loyal consumers. Through the Loop believes that a promotional price-led strategy can only be detrimental to the brand in the long term and is too often used for short-term gain. This view has been widely supported by a number of empirical studies.

A move away from above-the-line expenditure towards other methods of communicating has been a contentious topic in recent years. Heinz's decision, subsequently reviewed, to undertake direct marketing in preference to television advertising caused much debate but it was clearly indicative of a growing trend towards more tightly-focused consumer dialogue.

Taking Advantage of New Communications Channels

Guinness has recently been at the forefront of finding new ways to communicate its brand. While maintaining a significant level of advertising, Guinness gained extensive PR coverage through being the first UK company to "advertise" on the World-Wide Web. While the actual execution of this first presence may be questioned, it is clear that it has enabled Guinness to gain a competitive advantage which has led to an extensive and highly-developed Web presence. Guinness has also experimented with the Firefly system whereby Web advertising can be very highly targeted according to demographics. Away from electronic media, Guinness has been using door-drops in London and has launched a clothing catalogue featuring branded merchandise. Throughout this extended communications mix the style and presentation of the brand has remained consistent and indicates the importance of a clear, integrated approach to the brand.

When Daewoo launched its cars in the UK, it followed a non-traditional route, fulfilling unmet requirements in the marketplace. The car market is noted for high levels of above-the-line expenditure, and very conservative dealer networks. Daewoo focused its offer on the total brand experience, setting up its own chain of dealers and emphasising the service aspect. Daewoo separated itself from the pack. This is a market where there is a widely-held belief that the relationship with the consumer ends when a new car is driven off the forecourt.

Within the retail sector, the leading players are moving into database marketing with their so-called loyalty cards. Supermarkets, in particular, have long been criticised for a low level of service and have been attempting to increase the service element in their stores and stress this in their communications. Initiatives such as Tesco's Clubcard enable the retailer to communicate with the customer on almost a one-to-one level, just like in the days of the corner shop, and develop an offer which can be heavily focused towards individual consumers according to their purchasing patterns.

The key difference here between Tesco and the corner shop is that database technology is the enabler allowing Tesco to talk to a large proportion of the population as individuals. A frequent shopper can then be sent a different message to a lapsed shopper or non-shopper. By the same token it is possible to identify associated areas where one consumer may purchase a particular product as others with similar tastes have already done so. Furthermore, the addition of Clubcard Plus, through a venture with NatWest Bank allows Tesco to offer a debit card, thus encouraging consumers to spend more in its store.

Customer magazines have been a growth area. Tesco's Clubcard holders already receive one of four magazines dependent on their typology. Unilever is sending four different magazines to consumers. Mars' Pedigree Petfoods has developed a pet owners magazine which is sent to loyal shoppers. It even personalises direct mail sent to the pets themselves. Here we move into the area of the marketer developing a content framework within which to place the brand. This takes us back to the early days of TV advertising when soap operas were devised by Lever Brothers and Procter & Gamble to act as an advertising placeholder. Today we have marketers working with production companies to develop TV shows such as Heineken's Hotel Babylon, Pepsi's Passengers and even the British Telecom-funded Now We're Talking which focuses on the importance of good communications. This takes sponsorship one step further. If a marketer chooses to develop a medium, it offers the possibility to control the environment in which the brand is seen. However, this approach must be developed with care.

Summary

The marketing environment is changing fast. Increasingly we are seeing that brand success is dependent on how well the various different aspects of the marketing mix are integrated and how well the marketer exploits all the options available. Brand success is a combination of many factors. While marketing has always claimed to be consumer-focused, it is only now that this is starting to genuinely happen. Companies that develop relationship marketing programmes for their products and brands will succeed where this approach is at the heart of the marketing strategy. All the different communications and distribution channels should act simply as support mechanisms to the brand's central consumer proposition. Consumer-focused marketing starts with the consumer.

Relationship building must play a central role in a company's long-term marketing strategy and should be free from short-term considerations. Companies should continue to revisit and evaluate the marketing landscape and be prepared to challenge traditionally-held beliefs.