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Marketing with precision

October 28, 2004

Precision-marketing is yet another recent addition to the management lexicon. It has just begun to appear in a wide range of business publications and as yet, it appears to have no precise definition.

However, it is generally being used in the context of consumers across the globe becoming less homogeneous and hence the increasing need for companies marketing products and services to take a sharper focus on targeted consumer group.

For some time now, major global consumer product marketing companies have seen increasingly diminishing returns from mass marketing spends.

Leaders such as P&G, Unilever, and Sony have an impressive array of brands that enjoy almost universal recall but yet, in many cases, local brands/companies have ended up taking a higher share of the market (and profits in most cases).

Many oft-quoted examples in India's context include companies such as Cavincare, Priya Gold, and Kanpur (Ghari) Trading Company. In the more developed markets, marketing organisations have begun to take note of this paradigm shift and plan their strategies.

Using highly evolved data bases of customers, mined diligently using cutting-edge data warehousing and mining tools, and supported with substantially increased spending levels on understanding and forecasting consumer behavioral trends, companies are identifying micro-segments of customers, developing specific products for these micro-segments, and then using the most appropriate marketing communication and a multitude of channels (brick-and-mortar retail stores, the Internet, catalogues, telemarketing, door-to-door selling, etc.) to reach out to these micro-segments.

In India, it still seems that most of our leading purveyors of consumer products and services are operating at the Marketing-101 levels. Many of the market leaders in various FMCG categories are, seemingly, still content with traditional market research followed by traditional mass advertising and communication.

Customising products is limited, in most cases, to variants in pack sizes. Information dissemination is largely limited to what may come out through press releases in the media.

Marketers in other large consumer product categories such as consumer durables, telecom products, jewellery, and clothing and footwear are even more distant from connecting with various consumer groups than the FMCG companies.

It is, therefore, no wonder that more and more Indian consumers are showing fickle behaviour when it comes to brand loyalty.

Even where they are loyal to a particular brand, they are showing reduced loyalty to the retail channel and therefore use a variety of tools including peer-to-peer information collation, media, the Internet, shop-hopping, etc. to find out the lowest price and then buying from that particular source.

As obvious, the risk potential, both for the brands as well as their channel partners, is extremely high.

What should be the strategy for consumer goods marketers? In the Indian context, I would recommend the following.

Step I: Invest heavily (in terms of time, and some money) in getting a deeper understanding of the fundamental shifts in the Indian economy (age- and income-profile of consumers across regions), and in Indian consumers (demographic, social, educational, lifestyle, aspirational).

An understanding of the causes of the shifts (such as education, work profile, access to information, national and international exposure) is also essential.

Step II: Use this newly acquired knowledge to spot current (latent or overt) and emerging consumer needs, wants, and desires and then have a team (internal/external) brainstorm to put some estimates on the volume and value of potential spending from various sub-segments of consumers for these current or emerging business opportunities.

Step III: Go back to the drawing board to make a serious effort to come out with products or services that are "custom" designed for these specific sub/micro consumer segments with an objective to provide a cost- and time-effective solution for these unmet needs.

Adapting existing products may not yield the desired results, and just replacing one advertising film with another or tinkering with pricing may yield only temporary results.

Step IV: Devise the appropriate strategy to deliver highly personalised messages to small customer groups (or even individual customers, if so needed).

In the current context, multiple channels have to be used for communicating, including the print and electronic media, Internet, demonstration/user trials in high-target customer traffic areas, direct mailers, etc.

Marketing organisations must build internal competencies to understand the role technology can play in identifying such micro customer segments and the needs of these customers, as well as in communicating the marketers' message to the targeted segments.

Unfortunately, so far, most marketers have chosen highly intrusive and largely ineffective carpet-bombing tools such as the obnoxious cell phone-based tele-marketing, or paper/e-mail-based spamming.

It seems that very few companies in India have realised the potential of the Internet as an effective medium to build one-to-one relationships with potential and existing customers.

Much more can be done using this powerful channel, provided companies spend enough time to think through this innovatively and meticulously.

In the precision-marketing philosophy, companies tend to focus on optimising the "lifetime" value of such acquired customers/customer segments, and utilise the very precise information obtained from nurturing such an intimate relationship, to either acquire new customers through the process of referrals or by way of cross-selling other value-added products and services.

Hence, the marketing effort has to sustain beyond a mere initial acquisition of customers.

It is difficult to list all industries where precision-marketing can yield superior results, compared to mass marketing. However, some high-potential ones include banking and financial services; travel, leisure and hospitality; consumer durables; clothing and other fashion; and personal housing.

Hopefully, we will see some more precise-marketing efforts in these sectors (and others) in the near future.

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