“King of the Hill” with Marketing Messages: There is no such thing as a marketing message that can’t be made more effective. Challenge yourself and your staff to perpetually discover new and more effective ways to articulate your Meaningful Marketing message.
Develop low-cost test systems, such as direct mail or point-of-purchase testing systems, to quantify improvement. On a regular basis review the collection of tests you’ve conducted to identify patterns and trends regarding what’s working and what’s not.
Improve Marketing by Spending More on Product: Most marketing spending is a meaningless, Mindless waste. Challenge yourself to consider what level of product or service improvement you could deliver if you dramatically cut marketing expenses. Short term, the volume may take a hit, but long term, when word of mouth from customers kicks in, you could realize substantial growth.
{ 8 }
SCIENTIFIC
ADVICE
NEW PRODUCTS AND SERVICES THAT ARE CONCEPT EXTENSIONS GROW SALES AND PROFITS, AND CAN HELP GROW YOUR PARENT BRAND
The most obvious reason to pursue new products and services is to grow sales and profits. However, if we’re smart about it, we can also use them to grow our existing businesses. Note that concept extensions are not the same as concept variations, which might represent other flavors or sizes. Concept extensions belong in separate categories.
Research shows that the introduction of new products and services can revitalize customer perceptions of an existing Flagship brand. Research was conducted on the “halo” effect on the parent brand of introducing line extensions (new flavors or varieties of the same product) as well as new concept extensions (leveraging the Flagship Brand’s Overt Benefit in NEW PRODUCT CLASSES).
After just a twenty-five-second exposure to ideas for line extensions or concept extensions, consumers’ attitudes toward the parent brand improved significantly. Important, too, is that the attitude improvement remained even a week later to those shown the ideas for concept extensions.
Net: When you introduce concept extensions, i.e., take your trademark and benefit into new categories, you place a sustainable halo over your existing brand.
Research also shows that in the event that the concept extension is a failure, there is less risk of a negative effect on the parent brand’s image. Customers don’t appear to blame the parent brand for the failure of a concept extension.
Net: With Concept Extensions you gain a positive halo for your Flagship Brand with less risk of damaging that brand in the event of a failure.
PRACTICAL IDEAS
Think “could do” not “would expect”: A classic mistake when looking for concept extensions is to follow a path of asking consumers or customers what other products or service they would expect the Flagship Brand to offer. It’s a mistake because you’ll be sent chasing variations that are not true CONCEPT EXTENSIONS but rather minor, micro-niche line extensions. Instead, take responsibility and think “COULD DO” not “WOULD EXPECT.”
List the OVERT BENEFIT you deliver to customers. Then challenge yourself to think of categories beyond your current category, your current channel of distribution, your current knowledge base. Challenge yourself to think of categories by focusing on your loyal and your occasional customers. Where else do they shop? What do they do? What are their interests?
Having identified potential category extensions, now get customers to react to the ideas YOU’VE DEVELOPED. Check out the research article based on this advice (“The Dynamic Effect of Innovation on Market Structure”) in the Technical Appendix. Conduct a study similar to the one described, and quantify for yourself the impact of the Concept Extension on your Flagship Brand.
Don’t Forget Licensing or Acquisitions: If you’re adventurous in your thinking, you will create ideas that make NO SENSE to develop and market. No problem. If the idea is big enough, it might justify your purchasing another company that has skills in the new category. Alternatively, if your Flagship Brand is well respected, it might be that you can license the idea and your trademark to another company to execute. Remember that the research indicates Concept Extensions offer significant opportunities and little risk.
{ 9 }
SCIENTIFIC
ADVICE
IF YOU WISH TO GROW BIG, FINDING NEW CUSTOMERS IS 2.8 TIMES MORE IMPORTANT THAN BUILDING CUSTOMER LOYALTY
A common debate when attempting to grow sales is, Should the primary emphasis be on increasing the number of customers or on increasing loyalty by selling more to existing customers?
Common wisdom is that it’s easier to build sales through increasing loyalty than it is by cultivating new customers. For small growth—1 to 20 percent—this might be true. But for mega growth—25 to 400 percent—the common wisdom is flawed.
This truth is based on analysis of 9,804 brands scanned by UPC (universal product code) numbers in grocery, mass merchant, and drug stores. A statistical model was created to explain total annual sales relative to the number of customers the brand had and dollars spent per customer over the year. Analysis found that the number of customers was 2.8 times more important in explaining big brand success than loyalty was.
As a secondary check, the 9,000-plus brands were divided into three equal-size groups based on total annual sales, and the relative importance of the number of customers versus loyalty was compared. Again, the number of customers was found to be about three times more important than the amount purchased per customer.
Specifically, versus small brands, big brands had 978 percent more customers who purchased on average 331 percent more per year. Clearly both factors are important. However, if your resources are limited, the data indicate that your first priority should be on increasing your total number of customers.
Research also indicates that the smaller your brand, the more likely you are to lose customers—“churn.” Research shows that small brands have nearly twice as many customers switching to another brand as big brands do. In category after category, research shows that brands with the greatest number of customers also have the greatest loyalty.
I recognize that many will resist this learning. That’s fine. As Dr. Deming said, “Learning is not compulsory … neither is survival.”
PRACTICAL IDEAS
Quantify Your Customer Count: Quantify how many customers you currently serve and determine whether that customer base is growing or declining. Identify where they are coming from or where they are going. Set a numeric and specific goal for growth. With data, you can make quantitative progress.
Perpetually Focus on Finding New Customers: As part of every sales and marketing plan, devise an overt and specific program for bringing in new customers. Regularly seek referrals from existing customers. Hold educational seminars that demonstrate the virtues of your product or service.
Relentlessly Seek New Customers, Occasions You Can Serve, and Problems You Can Solve: Think beyond people. Think of occasions when your product or service is
