November 14, 2016

Reconciling Sharp And Ritson

I'm much more interested in advertising than I am in marketing. But there are a couple of marketing people I pay particular attention to. They are Byron Sharp and Marc Ritson.

They are both professors and both work in Australia. Sharp wrote "How Brands Grow" which is a wonderful marketing book.

Ritson is one of the most entertaining and sensible speakers and writers on marketing you'll ever come across.

Unlike me, they're not just bomb-throwing blowhards with strongly held, ill-informed opinions. These guys actually know things.

They agree on a whole lot of stuff regarding the clown show that is contemporary marketing. But there's one thing they disagree on -- the value of segmentation and targeting.

At the risk of mischaracterizing their positions, let me be clear that these are my words and interpretations, not theirs. And this is my dumbass distillation of their positions on the subject.

Sharp thinks that in mass marketed consumer product categories segmentation and targeting are often empty exercises. Ritson thinks that segmentation and targeting are one of the essentials of marketing.

Sharp's argument is that for mass marketed brands, growth is a function of how many customers you can acquire, and that the best way to acquire as many customers as possible is to advertise to as many people as possible.

Sharp does a good job of convincing us that one of the attributes of leading brands is that they have a long tail of light users. He asserts that the best way to acquire a long tail is by talking to everyone.

Ritson argues that no one can afford to reach everyone efficiently. He would say that without segmentation and targeting, strategy becomes dangerously nebulous and media dollars get sprinkled lightly everywhere instead of focused where they can do the most good.

I'm somewhere in the middle.

I'm a big believer in mass media. But my experience in the real world of agency life taught me that this is often not practical, and that somewhere along the line the reality of budget constraints will interfere with the desire to talk to everyone.

In other words, every budget decision becomes a targeting decision.

So the key issue is what is the most efficient way for a major brand to use advertising dollars to acquire new customers?

I believe the answer is somewhere in between their positions. To the extent possible mass media should be utilized. But it should be tempered by a bias toward targeting heavy users of the category.

So when targeting and segmentation are employed they should be based on behavior, not demographics, psychographics, or any other thingographics.

As Prof. Sharp points out in his book, heavy users in a category tend to be promiscuous - they often use several brands in the category. Consequently, there is plenty of opportunity to attract new users to your brand from within the segment of the population that is already active in the category.

For example, the dominant brand of soft drink in the U.S. is Coca-Cola. But Coca-Cola only has about an 18% share of market. This means that 82% of the time people who drink soda don't buy Coke.

It seems reasonable to me that the best use of one's advertising money is to spend it against the component of the population that likes and participates in the category but has not been converted to your brand. This is an argument in favor of segmentation.

However, it ain't that easy to identify these people because in mass marketed categories like soft drinks they tend to be widely dispersed throughout the population. In this I agree with Sharp.

While I would love to spend all my ad dollars focused on actual soda drinkers, and particularly heavy using ones, it's hard to see how you can put up a billboard that is only seen by these people.

That leaves me in between the two professors. To me, the usefulness of segmentation and targeting have been oversold, but are still valuable. But the idea of spending money against light or non-users has also been oversold.

If, as Sharp asserts, heavy category users tend to be promiscuous, I would suggest that acquiring a long tail of light users for your brand is best achieved as a by-product of targeting the frequent users in the category.

It seems that this hypothesis could be easily verified or refuted by studying the category habits of light brand users. In other words, is the long tail of light Coke users comprised mainly of light users of soft drinks or frequent users of soft drinks? (Professors, have at it.)

While finer segmentation and targeting may be useful in niche categories and B2B, I believe for most mass marketed products there are only a few important segmentation distinctions that provide significant value and they are mainly behavioral (e.g., category users vs. non-users; luxury vs ordinary.) You will certainly sell more golf balls by targeting golfers rather than tennis players, but once you make that cut I suspect the returns of further segmentation diminish quickly.

So I guess I'm in the middle.

What makes advertising and marketing endlessly fascinating is that nothing is absolute. It's all about likelihoods and probabilities. I wrote a mostly incomprehensible little pamphlet called "Quantum Advertising" a few years ago that I'm strangely fond of and that speculates on the duality of the nature of advertising.

Sharp and Ritson are wonderful examples of how contradictory theories can exist side by side and still both be valuable and convincing.

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