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A Short Guide to Consumer Targeting

2010 August 25

Marketing’s most basic question is who to target.  You need to know who you want to sell to before you can determine market potential, promotional budget and overall positioning.  In other words, you can’t do much of anything without a viable target.

Probably because it’s so important, people can get very passionate about one targeting method or another.  However, what’s most important about building a consumer target is that it’s clear, understandable and actionable.  It’s a means to an end, not an end in itself.

Here’s a short guide to targeting consumers more effectively:

Targeting Basics

The essence of targeting is defining attributes that make your consumers different  from other people.  It does no good to describe your consumer as “an intelligent, sophisticated consumer” (as opposed  to stupid and naive?).  While we all want to think of our customers as attractive people, nice phrases don’t lead to meaningful action.

Furthermore, you want to direct your efforts to your most profitable prospects: the heavy using, high yield consumers.  These people usually make up only a small fraction of your total client base, but account for the majority of sales.  Even more importantly, they tend to be vastly different from the rest of your customers.

Effective targets usually fall into one of three categories:

Demographics: Basic characteristics such as sex, age, education and occupation tell us a lot about a person.  Sometimes, simple life stage questions, such as whether somebody is married or has children can also be highly be highly revealing.

An advantage of demographics is that they are concrete.  Someone was born on a certain day, is male or female, has a certain job, etc.  There’s very little room for respondent bias or misunderstanding.

Psychographics: How a person feels about certain things can tell us even more about their intentions. Some categories such as cigarettes, beer and cosmetics are almost  indiscernible demographically.  Even expensive durable goods can be very responsive to psychographics, as was aptly describe in the book, Trading Up.

Consumer research routinely monitors attitudinal statements like “I like to be the life of the party” and “I wish I could spend more time with my family.”  So targeting psychographically isn’t much harder than targeting demographically, although you need to make sure that you have agreement among a group of statements and pay careful attention to the wording of the question.

Targeting the Consumer “Job”: Clayton Christensen, most famous for his work on disruptive innovation, points out that consumers hire products to do a job, and different people will use the same product to do different things.  Therefore, it’s  important to know what type of activities potential customers are engaged in.

His most often used example is of a fast food company whose research revealed that a lot of milkshakes were getting sold in the morning to commuters who wanted a quick snack that they could consume with one hand.  These people needed to be courted much differently than kids using milkshakes as an after school treat.

While many marketers like to champion one form of targeting over another, in my experience, all three can be effective (just as sometimes all three can seem ridiculous).  The most important thing is that the segmentation is clear and actionable.  If you aren’t getting distinct separation or the analysis doesn’t point you in one direction or another, it’s not very useful.

Future Targeting

While the methods described above are effective and will probably remain so, things are progressing.  As I wrote a while back, digital technology is making new kinds of targeting possible.  Two of the most exciting ideas are:

Social Targeting: Who you are connected to says a lot about who you are and what you will do because your social interactions often reflect your interests.  As  data becomes more robust and the processing power needed to break it down it become cheaper, social network analysis will increasingly play a role in how we target consumers.

Adaptive Targeting: Salespeople know a good prospect when they see one because they learn through interacting with consumers over time.  They also sense when things change and new consumer behaviors develop.

In the future, neural network algorithms, similar to the ones credit card companies use now to spot fraud, will be utilized to adapt consumer targets to changing market conditions.  These will be able to combine a wide variety of attributes and self calibrate according to response.

Common Sense Targeting

It’s better to be generally right than precisely wrong.  Probably the greatest pitfall that marketers fall into is taking their targets too seriously.  Any realistic framework will leave a lot of viable consumers unaccounted for.  Marketing is about gradients, not on/off switches.

The reason we use targets is to focus our efforts where they are most likely to have the greatest effect.  That doesn’t mean you should ignore those that don’t fit narrowly defined parameters, it just means that every budget is limited and choices have to be made.  As I wrote before, one of the problems with digital media is that it tempting to make campaigns too precise.

In the end, probably the most important thing to remember is that targeting is just a starting point.  Just because you can define a group of people, doesn’t mean you can engage, or even understand them.  That takes time, patience and real passion.

– Greg

2 Responses leave one →
  1. Andrew permalink
    August 25, 2010

    I had a prof in my intro to marketing course who just drilled he importance of targeting into our minds bit was a very tough course and he really was ruthless abou it – but it was an important lesson for us smug second an third year students. And this of us who took the course with he difficult prof benefited later on – it really made a good foundation for the senior marketing courses that would follow.

    [Reply]

    Greg Reply:

    Andrew,

    I think, (at least I hope) we’ve all had great professors like that to whom we owe a lot. It seems like you were lucky to find one in marketing.

    Incidentally, I’ve been thinking about one of my favorite professors a lot lately. He’s the head of the Richmond Fed and, unfortunately, one of the holdouts for a more expansive monetary policy. Anyway, he’s still a great guy:-)

    – Greg

    [Reply]

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