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A recent article from Wired discusses the hidden sales potential in marketing innovative products to laggards. (A fragment of the consumer segmentation scheme borrowed from the Diffusion of Innovations theory, laggards refer to traditionalists who are generally wary of innovation and tend to wait till a product has become accepted and established before purchasing.) Writer Clive Thompson forwards a theory belonging to marketing professor Jacob Goldenberg, who posits that disregarding laggards in marketing efforts for new gadgets and toys could prove to be serious negligence.
Goldenberg believes that laggards tend to ‘leapfrog’ over generations of technology. In essence, let’s say that while laggards may have shied away from buying an iPod, they would be first in line to buy the iTouch. Given the group’s fairly broad base, it would be foolish not to target their buying power. Goldenberg’s study led him to conclude that if a mere 10% of the group leapfrogs to a particular new gadget, their purchases could drive sale profits up by 89% – which may prove the “difference between succeeding and not succeeding,” as he puts it.
The argument is logically viable, so let’s assume his findings are accurate. How does one toggle between messages speaking to savvy adopters and resistant lagg
ards? Purchase motivations for the two groups, while not necessarily mutually exclusive, are disparate enough to warrant unique marketing strategies: adopters want a revolution; laggards, a tried-and-true evolution. Capturing both types of consumers will require a firm understanding of how aspects of your products can be framed in such a way as to meet one group’s needs, without alienating the other.
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A recent article from Wired discusses the hidden sales potential in marketing innovative products to laggards. (A fragment of the consumer segmentation scheme borrowed from the Diffusion of Innovation theory, laggards refer to traditionalists who are generally wary of innovation and tend to wait till a product has become accepted and established before purchasing.) Writer Clive Thompson forwards a theory belonging to marketing professor Jacob Goldenberg, who posits that disregarding laggards[k1] in marketing efforts for new gadgets and toys could prove to be serious negligence.
Goldenberg believes that laggards[k2] tend to ‘leapfrog’ over generations of technology. In essence, let’s say that while laggards may have shied away from buying an iPod, they would be first in line to buy the iTouch. Gven the group’s fairly broad base, it would be foolish not to target their buying power. Goldenberg’s study led him to conclude that if a mere 10% of the group leapfrogs to a particular new gadget, their purchases could drive sale profits up by 89% – which may prove the “difference between succeeding and not succeeding,” as he puts it.
The argument is logically viable, so let’s assume his findings are accurate. How does one toggle between messages speaking to savvy adopters and resistant laggards? Purchase motivations for the two groups, while not necessarily mutually exclusive, are disparate enough to warrant unique marketing strategies: adopters want a revolution; laggards, a tried-and-true evolution. Capturing both types of consumers will require a firm understanding of how aspects of your products can be framed in such a way as to meet one group’s needs, without alienating the other.
Few fans of the magazine Gourmet expected the November issue of 2009 to be its last. However, a struggling economy, along with the internet, has made it hard for many magazines to survive.
After nearly 70 years, publisher Condé Nast abruptly stopped production of the monthly magazine due to lack of advertising sales and a shift in consumer interest. At the time of Condé Nast’s decision, both Gourmet and its sister magazine, Bon Appétit, were struggling with ad sales. Bon Appétit made the cut. Gourmet didn’t. Bon Appétit was offered as a substitute for Gourmet for the remainder of almost one million subscriptions.
Since then a slight margin (a slim 20 percent to be exact) of past Gourmet subscribers have chosen to switch to Bon Appétit. This seems odd for such highly dedicated and long-term subscribers. The lack of transferred subscriptions poses a hard question. Why did Condé Nast choose not to research the niche market of such an obviously successful magazine like Gourmet in order to keep those dedicated subscribers?
On the cover, the magazines look similar. Both share great recipes. Both feature articles about food, culture, and politics. However, the audiences of each magazine differ greatly. This is evidenced through both magazines advertisements as well as their contrasting takes on good living. Gourmet was luxurious and indulgent. It stressed extravagant travel and an elitist lifestyle. Bon Appétit stresses a comfortable home life, centering on family cooking. It offered complex, yet more accessible recipes.
While many Gourmet readers feel heartbroken about no longer receiving the magazine each month, Condé Nast’s decision makes good sense, especially when considering the economic forecast that sunk Gourmet. Foodies aren’t paying for exotic trips to experience food anymore. They’re cooking at home with their families, growing their own gardens, or buying local food. Despite a large fan base, Gourmet’s attention to life’s luxuries and hefty subscription fees failed to keep advertisers interested. In the case of Gourmet and many other magazines, ad money trumps readership and loyalty.
But after loosing 800,000 subscribers, it seems that Condé Nast missed a really great chance to study their Gourmet readers. The magazine may have been out-of-touch with the current economic reality, but its subscribers were still writing checks every year. If Condé Nast saw the end of Gourmet magazine in sight, why not find out what it was that appealed to readers and kept some subscribing for decades. That sort of insight would have been exactly what Condé Nast could have used to align Bon Appétit toward the views and preferences of Gourmet’s readers in order to boost the number of subscription transfers and keep those loyal consumers.
Well, maybe not an app but a text will certainly suffice. According to a recent study by Boston-based marketing research firm, Cone, nearly 13 percent of Americans ponied up the money for Haitian relief assistance via a text donation. While this number may seem like small potatoes, Cone says that it is actually an indicator of the building traction of the “text-to-give” trend.
The new percentile, acquired through a brief two-question online survey held in February 2010, represents a 100 percent jump in text donations in comparison to Cone’s 2009 Consumer New Media Study where only six percent of adults reported donating to any cause via mobile phone in a 12-month period of time.
With the impressive success rate of the recent text relief fund – the American Red Cross raised more than $32 million during the aid campaign for Haiti- organizations are taking note and striving to change the face of charity. A new campaign revealed during the Super Bowl by the United Way is a clear indicator of future text-to-give marketing strategies as philanthropic organizations implore cell phone users to use their digits for the greater good.
Working for a market research firm, inevitably you see things from a market research perspective. I remember distinctly thinking that NBC must have done some extensive research before trying the Leno in prime time experiment. Jay actually mentioned the research that was conducted earlier in the week during his monologue:
“They said, ‘how about prime time?’ I said, ‘that will never work.’ No, no, we want to put you on at 10:00. We have done focus groups. People will love you at 10:00. Look at these studies showing Jay’s chin at 10:00. People will go crazy.”
Now I don’t want to pile on NBC and obviously I have no idea how extensive the research was, but this seems like a potentially good example of placing too much weight on a research study instead of utilizing research as a component of an overall decision making process. Let’s hope that NBC didn’t make a decision with hundred of millions of dollars worth of consequences based on a couple of rounds of focus groups. But feel free to mention this example the next time someone complains about a product launch not going as well as the research predicted. Below is a link to the article with more quotes from Jay Leno.
At what price would you consider this product to be cheap?
At what price would you perceive this product to be too expensive?
At what price would you consider this product to be priced so cheaply that you would worry about its quality?
At what price would you consider this product to be too expensive to even consider buying it?
These four very direct and intuitive questions form the basis of the Van Westendorp pricing exercise – a quantitative research technique that can actually yield robust and compelling data reflecting consumer demand. We’ve been thinking about the wide variety of quantitative analytical techniques we use in our work, and thought we’d provide a quick overview on this one.
The Van Westendorp pricing exercise is a price sensitivity measurement devised by a Dutch psychologist, Peter van Westendorp. This technique uses four questions about a product or service (drafted more or less like those above) and requires the respondent to gauge prices that are too cheap and too expensive in context with the product or service’s offerings and perceived benefits.
Frequency distributions from these questions are derived and plotted, yielding the range of pricing options for the product. As the final step in this process, purchase intent is measured at the highest and lowest prices in the range of pricing options. The optimal price (i.e., the price which maximizes market share while generating the highest possible revenue) can then be computed, along with the precise range of acceptable pricing.
The data points on the example chart are plotted a little loosely, but the point at which the Too Cheap and Too Expensive responses intersect is considered the Optimal Price Point (OPP). The intersection of Expensive and Too cheap yields the Point of Marginal Cheapness (PMC). At this price point, the number of people considering the product to be too cheap is the same as the number considering it to be expensive.
The intersection of Cheap and Too Expensive yields the Point of Marginal Expensiveness (PME). At this price point, the same number of people regard the product to be too expensive as regard it cheap. The range from PMC to PME is the Range of Acceptable Prices (RAP), or the Optimal Price Band.
We also conduct pricing studies using conjoint and discrete choice designs, but the Van Westendorp pricing method is the most efficient way to evaluate price sensitivity itself, as the resulting data resulting is easy to interpret, identifies an entire range of acceptable price points, and provides a solid basis to assess future pricing strategies, ensuring that the optimal price-value balance is established. Contact us if you’d like to learn more about this research technique.
I’ve published quotes to the W5 Blog before, but we’re going to try to institute a new series pulling relevant or thought-provoking statements and linking you through to the sources. We may not add commentary for these quotes, but each will have some connection to what we do and the other topics we post about on the blog. Like our “Infographic of the Week” posts, we’ll publish these as they come up, rather than on a set schedule. To kick things off, here’s a swipe with two good quotes on the need to combine hard science and marketing, especially in this economic climate:
Do you think the push toward testing and metrics in advertising will get stronger?
Steve Cuno, author of Prove It Before You Promote It: How to Take the Guesswork Out of Marketing: Ads have to earn their keep. I can’t peer into the future, but I can tell you one thing. When a company is fat and has money to burn and just loves an ad campaign, sometimes they’ll keep it as an expression of the ego and as a personal indulgence. If you’re not fat and don’t have money to burn, the fact that you love the campaign is irrelevant. You simply want to know if it is producing.
Some CEOs are saying their companies cannot afford to market as they have in the past because of the recession. Should companies cut their marketing budget during tight economic times?
Cuno: It’s very telling when companies cut marketing budgets. The idea of marketing is to sell stuff and raise profits. If you cut your budget because things are tight, it’s an admission that deep down inside you suspect your marketing isn’t selling. Why else would you cut marketing? When things are tight and you know your marketing is working, you will increase it. Cutting effective marketing when sales are down is like cutting insulin because someone’s diabetes got worse.
Quote pulled from an interesting Deliver Magazine interview here
Big news! We have launched W5 Conjoint, in conjunction with our newest W5 white paper, “W5 on Conjoint Analysis.”
W5 Conjoint is a specialized analytical boutique of W5, a custom market research consultancy. We have launched the website to introduce the boutique, to complement the white paper, and to serve as a resource for those interested in the understanding, use, and benefits of conjoint methodologies.
W5 Conjoint specializes in the application and design of conjoint analysis for Fortune 500s and their respective advertising agencies. While we’re focused on specific analytical techniques, we’re still W5 consultants – curious, attuned to the needs of our clients, and focused on actionable results that help strengthen brands.
Check out the links and contact us for more information!
Faulkner in the sunshine- working hard or hardly working?
Over the past couple of years, we’ve seen an increase in marketing research work focused on constituencies in the south. This work has not just focused in the area in which we’re based (the Research Triangle of North Carolina – Raleigh/Durham/Chapel Hill) or in Atlanta, but all over the south. Some have been targeted to populations of certain southern states; some target hand-picked Southern DMAs; and some studies have focused on select counties or parishes in certain southern states. And this work is not just coming from clients who are based in the South.
I don’t think it’s a sign of major economic or social turnaround for the region, but it is interesting to see populations within the south considered as representative on a national scale. Marketers are not just looking to middle America for feedback before moving forward with strategic initiatives – there is an increased regional focus. There is also increased focus on the Northwest and the Southwest as regions, and we’re working there too. But the exploration of Southern lifestyles and opinions sparks a particular interest for me. Read the rest of this entry »
