Engaged Marketing Blog

Consumer Segmentation in a Recession

By Chris Roberts | September 20, 2009

I was invited to attend a presentation by TNS Brisbane the market research company a few weeks ago. The topic was “How the Global Financial Crisis is Affecting Australian Consumers”.

Prior to this I had attended a few business presentations about the impact of the Global Financial Crisis and how businesses should cope with this new challenge. Typically past presentations about this topic follow the usual sequence of topics as outlined below.

Slides with economic indicators and trends –GDP etc
Quotes from respected financial commentators.
Outlining why this recession unique
No clue as to how long it’s going to last or how bad it’s going to get.
Consumer confidence is low
Consumers will buy less and defer purchases
etc, etc

Pretty ho hum. Effectively these presentations tell you stuff you either already know or can easily read about in the newspaper. You wonder why you wasted your time attending.

But rarely will a speaker cover with certainty and authority exactly what you should do as a business to survive and maybe even thrive in tough times.

My expectation was this would be different and interesting as it was conducted by a respected research company that I have worked with for many years.

As the speaker was setting the scene in the introductory slides it initially appeared as if this presentation was also going to head off in the same old direction.

Economic indicators were displayed followed by consumer sentiment and impact on spending. I started to feel restless.

My concerns were unfounded as the TNS speaker was just setting the scene for the key messages. .

Key Message 1 - Not all consumers react to the Global Financial Crisis the same way.

This was interesting as reading all the gloom and doom in the Media you cannot help but become hypnotised and believe it’s all BAD news.

Key Message 2 - There are two variables that determine how consumers react to the Global Financial Crisis.

The first variable is whether consumers take responsibility for the situation as a Collective (We will come out of this together) or as an Individual (I need to deal with this myself). The second variable is how consumers react to change namely high stress or low stress.

If you imagine this on two axes where on one axis you have responsibility (Collective or Individual) and on the other axis you have ability to deal with change (High Stress or Low Stress).

Based on these two variables they broke up the entire consumer market into 6 segments. In addition they also provided a profile of each of these segments outlining exactly what makes them ‘tick’.

Imagine targeting consumers based on how they react to the Global Financial Crisis! Used strategically the opportunities for business especially in these tough times are absolutely staggering. Imagine if you were in the finance sector and you wanted to determine the key messages messaging you needed to attract investors who were happy to invest in challenging times. Or imagine knowing the communications messages you need to encourage patrons to continue to attend the opera in tough times. As an example one of the segments was quite ‘bullish’ and ‘defiant’ and strongly ‘confident’ about the financial crisis. This segment would be relevant target market for both the above scenarios.

This goes way beyond traditional segmentation methods and the thinking behind this should be applauded.

Of course there is a lot more information about this segmentation methodology and if you would like to know more please contact Damian Hampton Director TNS Brisbane on 61-7-38479800 at their Brisbane offices.

My best customer experience ever!!!!

By Chris Roberts | August 7, 2009

On my last business trip to India I had the pleasure of staying at the Orange County Resort in Coorg outside, Bangalore in India. The Orange County experience is one that I will never forget as it was truly memorable.

A great welcome

It started with us arriving at reception to receive a traditional Indian welcome. This is where a hostess put the red colour dot on our foreheads and greeted us with the traditional ‘namaste’. Orange County is set amongst coffee plantations with cobblestone paths winding through the beautiful resort. Our rooms were spacious and comfortable and our stay at Orange County was very rejuvenating.

Exceptional food and amazing variety

The food was absolutely exquisite. Orange County provide a buffet style breakfast, lunch and dinner. At every meal there were 25 to 30 different dishes. Around 7 to 8 of the most popular dishes stayed constant but the others changed at EVERY meal.

Staff that truly care

However, the most memorable thing about Orange County is their staff. Wherever we walked around Orange County all staff would make it a point to greet us whether they were security guards, gardeners or staff at reception. The activity co-ordinator would enthusiastically and passionately promote each night’s cultural event. The waiters were not only polite and prompt but very attentive. As a guest such behaviour made you feel as though your patronage was highly valued and that staff were committed to making the Orange County experience one you would never forget. In short you felt ‘spoilt’.

A sacred duty of care

A perfect example of this was the Ayurvedic massage offered at Orange County. Before the massage starts you’re introduced to the 2 masseurs who explain the process and benefits and then do something quite amazing - they inform you that will say a prayer before they start your massage. The prayer and the accompanying music creates an amazing ambience.

The fact that they pray before the massage makes you feel that they are not just ’doing a job’ but that they have a ‘sacred duty of care’. This and the fact that they are personally committed to make the experience great by making sure you feel completely at ease creates an experience at a whole different level.

The 2 masseurs massage you at the same time and are in perfect harmony with one another. The quality of the massage is amazing and you walk away feeling amazingly relaxed and truly spoilt.

Looking back at my Orange County experience I have to say it was very memorable experience and I have since recommended it to several friends and family members. I also present this story when I conduct presentations at various marketing and management forums and seminars.

So what’s the key to their success???

The key is that they measure everything. They do this with a short customer survey of 5-7 questions. By everything I mean - every meal, massage, health spa experience, resort activity and finally when you leave. Filling the survey after every meal and after every activity might sound irritating but soon it becomes the norm. It is also becomes very easy to do as every aspect of the experience is great. By measuring every experience Orange County can not only gain insight on how to improve their experience but they can also ensure consistency throughout the whole Orange County experience.

Experiences that drive growth

The Orange County experience really is a perfect example of how listening to customers and taking action at an operational and granular level can create experiences which exceed expectations and are truly memorable. It is experiences like this which customers cannot stop recommending and businesses like these are the ones who break through the clutter in the marketplace to attract AND retain customers who actively recommend you to others. This is what is required to thrive in tough times.

Their Net Promoter Score would be absolutely HUGE!

I bet if Orange County conducted a Net Promoter Score survey they would achieve an extremely high score. This is not surprising as this is exactly how a Net Promoter Score operational survey works. NPS operational surveys are conducted at a granular level and track each key customer interaction so that the insight gained can be fed back to the right operational area for action and improvement. NPS loyalty leaders also have engaged staff.

Back to adequate service.

After my Orange County experience I then came back to Australia and went to one of the top Casino’s and experienced service that was best described as ‘transactional and bland’ and definitely not worthy of recommendation. So here you have two luxury hotel experiences. The Orange County experience drives growth via repurchase and positive word of mouth. The Casino experience was only transactional and therefore only an operational cost. Of course we have not even factored in the detrimental economic impact of negative word of mouth.

So here are a few key questions.

Are your customer experiences worthy of recommendation? OR are they just adequate and transactional?

Are your customer experiences generating incremental growth via increased loyalty and recommendation? OR are they merely an operational cost?

Are your staff truly engaged and personally committed to creating experiences worthy of recommendation? Or are they just doing a job?

Here is a link to the Orange County Website

Cut costs or increase customer focus? That is the question

By Chris Roberts | April 27, 2009

The response to the current economic crisis in Australia is a bit bipolar. On the one hand:

· A fast food chain had a value meal with a burger, fries, drink AND an ice cream sundae for just $4.99 which is very unusual.

· The local coffee shop offered me a free cake with my coffee.

· A HR recruitment agent emailed me and thanked me for referring a candidate to her even though my candidate did not get the job. This is a 1^st for me as I constantly get calls from HR recruitment agents asking if I know candidates but never a thank you post event.

On the other hand a more traditional response:

· I heard a legal firm in the city offered their lawyers a 12 month sabbatical at 25% of their current salary

· A leading construction firm got rid of 150 out of 200 office staff

· Pacific brands, an iconic Australian business, moved their manufacturing overseas

· More jobs are moving to India

Strangely it’s either a feast or a famine. So to survive businesses are either cutting costs or increasing customer focus.

At such a time it’s easy for businesses to consider the short term and lose sight of the long term impact. Cutting costs and shedding staff can result in disenfranchising customers and staff over the long term. Both stakeholders will remember how they were treated during tough times.

Once this recession ends it will be costly to recruit and train new staff and difficult to win back lost customers. Customer relationships are just like personal relationships you remember which friends supported you in tough times.

On top of this we are taught that increasing customer focus costs money.

So businesses are stuck between a rock and a hard place. So what do you do to survive in this financial crisis? Cut costs or increase your customer focus?

But what if you could do both? That is, increase customer focus and cut costs.

It seems impossible but studies by Bain & Co and Satmetrix show that NPS® loyalty leaders (brands with the highest Net Promoter Score in a category) typically grow at approximately 2 times the category average and ALSO enjoy lower operational costs.

Net Promoter Score® measures the likelihood that your customers will recommend you to others. It was co-developed by Satmetrix and loyalty expert Fred Reichheld of Bain & Company and starts by asking the most important question you could ask your customers which is “How likely are you to recommend us to a friend or colleague?” on a scale of 0 – 10 followed by the reason for the score.

A score of 9 or 10 is classified as a Promoter, 7-8 is a Passive and a 0-6 is a Detractor. The Net promoter score is the percentage of Promoters less Detractors.

So let’s look at why these organisations grow AND have lower costs.

Growth is simple. A high NPS score means customers are more loyal, more likely to buy other product lines and recommend you to their friends and family creating a new and highly trusted sales channel.

But what about lower costs? How does that work?

Again it’s quite simple, think about what happens when an organisation is focussed on increasing promoters and reducing detractors. Detractors are those customers who typically spread negative word of mouth about a business. However, they strongly believe they have a valid reason to do so.

In best practice Net Promoter Score® implementations organisations listen very carefully to detractors and take strategic and systematic action based on their comments.

Naturally the end result is that the organisation improves and streamlines their systems, processes, products and channels making the organisation more effective and efficient.

Additionally, those customers who are promoters for your brand become a trusted sales channel, which means that loyalty leaders can easily afford to spend less on advertising and other customer acquisition costs again saving costs.

In fact, if you flip it around the additional cost that organisation’s spend on advertising can be interpreted as a tax as a result of the organisation providing bland or even unsatisfactory customer experiences. Why? Well such organisations rely more heavily on advertising to attract new customers as their existing customers may not buy from them again, let alone recommend them to others.

So if you are truly looking for a long term strategy that may put you ahead of the pack in terms of growth now and in the future AND potentially also help you reduce costs then NPS may be the answer.

Net Promoter and NPS Net Promoter Score are registered trademarks of Satmetrix Systems Inc., Bain & Company and Fred Reichheld.

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