People: The 5th P Will Bring Highest ROI

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ADOTAS EXCLUSIVE — As a CMO my most important role is that of a mentor.

Marketing departments seem to be perpetual training grounds for employees who have arrived from sales, services, and product development in search of a new career path: hence the importance of being a mentor.

For years the memorable, powerful 4P marketing mix mnemonic has been a staple in this role. When a new product manager delivered a product strategy that is inevitably less of a strategy and more of the world according to Employee X, I reminded him of the 4Ps, starting with the P for product. The employee was then reminded that product strategies are driven by customer (current and prospective) needs.

Next, we would move to pricing, place and promotions, repeatedly reiterating the customers defining role. Normally the employee offers a threefold answer, something like, needing to check with: Finance to get costs and margin requirements, sales about distribution, and a colleague about promotions. These answers are all wrong, prodding me to politely say, “It’s called the marketing mix, not the sales and finance and marketing mix for a reason. Marketing has responsibility for knowing everything about the customer and then translating this knowledge to define the right mix. No other department has these responsibilities.”

The predominant role played by the customer when deciding what products to build, what prices to charge, how to distribute products, and what promotions to execute, is something that needs to be repeated so often I feel like a broken record.

Frequently an employee responds that there isn’t time to do customer research, presenting the opportunity to choke on another repetitive phrase: Do we have the time to launch a product with a high probability of failure? There are so many ways to quickly and cost-effectively conduct customer research, saying there isn’t time to do this job is a pretty unimaginative reply. Any marketer who wants to go to marketing’s school of hard knocks can see how easy it is to conduct research by launching a non-customer driven product. Social networks that catch the scent, in no time at all, will offer an embarrassing supply of customer research.

Conducting customer research that will give the marketer the tools they need to embrace the customer’s position as the driver of the 4Ps is so essential to the creation of successful marketing strategies that I have incorporated customer orientation as a 5th P into the mnemonic. This P is for people, and its role is to define the behavioral profile of the people or consumers in targeted segments. Even though it’s labeled the 5th P, it should guide the definition of the other Ps and squarely place the customer at the fore and the core of all marketing mix decisions.

Marketer’s who think first and foremost about the behavioral profiles of targeted consumers can have a profound effect on the development of marketing strategies, while eliminating one of the strongest criticism of the 4Ps: their seller rather than buyer orientation.

Now, when it comes to products, the marketer will first contemplate what products consumers in different segments want to buy. This is followed by how and if their company can reasonably meet the consumer’s needs with a competitive product. When determining price, understanding what consumers will pay in each segment, will take precedence over defining a required margin.

If a company can’t meet their margin requirements, they’ll need to return to the cost reducing drawing board or forgo the opportunity. When deciding on the P for place, attention will first be given to how and where different consumer segments prefer to buy, and their expectations for pre- and post-sales service. Then a company can decide how and which segments to serve. Evaluating promotions first requires an understanding of consumer media and messaging preferences by segment. This will then guide the media mix, the messages related to competitive positioning, branding considerations and calculating ROI. Voila. Like magic, just by placing the consumer foremost in the marketer’s thought process, we can eliminate the greatest source of reducible error in marketing strategies.

Creating these behavioral profiles does take a bit of work, but it’s an effort with an attractive return. These profiles are central to creating segmentation strategies that drive success and ROI by permitting resources to be used more efficiently than that required to execute a targeting strategy that is loosely defined and reaches unqualified segments.

I generally find that absent a concerted effort, profiles are austerely defined. They usually consist of variables like, company size, job title and prior purchases in the case of B2B or slicing and dicing limited demographic data and purchase histories, in the case of B2C. In either case the actual definitions are hamstrung by data availability within company databases or third-party-data-broker services. These sources, besides being behaviorally light, have another constraint; the data is often dated. Situations change: people change jobs, companies merge, employees get promoted, they move, change email carriers, their incomes change, etc. and many companies lack the processes or commitments to maintaining what should be the company’s crown jewels. Even when data is accurate, the limitations noted above prevent painting the picture needed for adequately defining the 5th P.

The data has to be current but getting it right also requires a little more data on consumers and their behaviors than is normally collected. Developing consumer profiles that really give the marketer data to build solid segments requires collecting data in four categories: (1) psychographics, (2) product usage, (3) demographics and (4) clickstream data (when it’s available). A consumer profile that pulls from all of these sources will define who buys, what motivates them to buy or why they buy, and in the case of online consumers where they are likely to be in the buying process.

Psychographic data gets into the nitty gritty of what people do, what they enjoy and think. It answers the question: What motivates a person to buy a certain product? To do this it looks at product-related activities that consumers participate in, such as, work, hobbies, memberships, reading, athletic activities, social events, social networking, web surfing, dining out, community involvement, traveling, and shopping preferences. It looks at more cerebral interests like are they followers of fashion, gadget freaks, music lovers, health conscious or sports fans. It also looks at what target consumers think about any number of topics or issues, such as, themselves, varying social issues, politics, technology, economics, business, certain products, cultural differences or the future.

Product usage refers to whether a consumer is or will be a power user, a casual user, a one-time-user or something in between. It answers questions about the frequency and intensity of product use by different segments.

Demographics refer to qualities like the consumer’s age, generation, gender, family structure, social class, income, ethnicity and geography. Demographics broadly answer the question who buys. In a couple of recent articles I’ve read, writers have questioned the value of demographics, calling it old school and praising psychographics as the new school for segmentation. There is no doubt that psychographics are powerful, but demographics still has a place in the marketer’s segmentation toolkit.

Gaining that power does require using psychographics, and right now it’s likely they are underused. In a survey of marketing professionals recently conducted we found that only 6% of those surveyed said they used psychographics when developing segmentation strategies. In part, it’s likely that there were a lot of respondents struggling with what the term meant, telling me that psychographics needed to be added to a CMO’s mentoring program if they hope to leverage this powerful segmentation tool.

As to clickstream data; most of you probably know that there are tools available to monitor online consumer activities as well as report on aggregate and visitor-specific page views and elected paths to, from and through a website. This data can identify what stage of the buying cycle a visitor appears to be in at any point in time.

Often it’s not enough to talk to employees about the importance of the 5th P – the importance of developing behavioral profiles — because they are uncertain or have insufficient knowledge to go about the process. It’s another job for the CMO as mentor to take on.

The process for developing and segmenting profiles starts with defining product-relevant psychographics. What do consumer like to do and how do they think? For business consumers (B2B), principle interests may be defined by one or more job titles. More importantly, since there are no standard job titles, what are the specific job responsibilities that would benefit from a product? There may have related interests that could vary by job title, such as memberships in relevant industry associations, or subscriptions to industry journals, ezines, or blogs. Some buyers may have strong opinions on products that are environmentally friendly, or on future product requirements, and they may have strong opinions about certain brands. For end-user consumers (B2C), what they like to do and think must again be product-related, but it will be focused on interests that are external to work.

Defining relevant psychographics gets the segmentation process underway. Defining consumer usage of a product will take the process one step further. The interests and use of a product by a power user can be quite different from those of a casual user, signaling different needs that must be addressed for either group. Relevant demographics are the next consideration. For B2B, the demographics offering the most value will generally be related to the company rather than the buyer, such as company size, industry, and geography. For B2C, demographics of interest will accommodate distinct variations in product usage by variables, such as, age or generation, social class, gender, ethnic background, geographic location and income.

Further segmentation can take place when clickstream data or other data is available that can identify where online consumers are within the four stage buying process (brand awareness, information gathering, product evaluation and decision making). Keep in mind that clickstream data is significantly different in a few ways from the other sources of behavioral data: captured behaviors are generally website (and product) specific; behaviors can be ephemeral; data is often anonymous and aggregated and cannot be directly tied to other behavioral segmentation variables; and behaviors can be random, owing to site design, or because visitors are surfing without any real purpose. We’re still at an early stage experimenting with clickstream data for segmentation. It may be that the product-specific but transient nature of this source is a better tool for realtime consumer ad targeting, than for building consumer behavioral profiles that will define strategic segmentations.

In completing the process of developing segments for each of the simple B2B and B2C scenarios above, 100 plus distinct segments were created: each different in some material way. In any exercise like this, the number of tangibly different segments will often be numerous, highlighting the value of the segmentation process for illustrating the challenges inherent in truly reaching qualified buyers with a compelling offering, and for identifying the most promising segments to target.

Fully appraising the most promising segments entails evaluating the marketing mix requirements for each segment. Moving through the evaluation, it will become evident that all segments are not created equal. Some segments may have requirements that: are not in present or future product or company roadmaps, some may require products that are unprofitable, that exceed promotional capabilities, or cannot be logistically served. Prioritizing segments based on some combination of company capabilities and ROI will almost always be required. One thing that may be worth considering in the prioritization process is looking at segments that have similar product, price and place requirements, differing only with respect to promotions.

If these segments target consumers that have a preference for online media sources, it may be possible to create micro-segmented-targeted campaigns. Having to customize the other Ps will usually be more challenging.

The 5th P is for people, or defining consumer behavioral profiles. It will be very powerful for guiding the development of targeted marketing strategies: from people to products to pricing to place to promotions. If you clearly address the 5th P as the 1st P in the marketing mix, you can be confidant that you will achieve superior outcomes to the spray and pray, skimming, low hanging fruit, or whatever name may apply to the expeditious but sub-optimal campaigns and strategies that are commonly executed.

1 COMMENT

  1. When listing 4P’s, we usually define target i.e. people or any person (individual). Without target, 4P’s don’t function.

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