Effective Marketing – a Positive Sum Equation

by James on July 9, 2010

Business often thinks about marketing as a zero sum effort.

“You pay me this much and I will give you equal value in return.”

Well, to be effective, marketing needs to be positive sum.

“You pay me this much and I will give you equal value and this much more in return.”

This is a challenging concept for companies top accept. This may be the result of the tyranny of revenue. But, if you can move past the zero sum game and embrace positive sum marketing, you can gain significant competitive advantage and generate commensurate revenue growth.

Lets sketch out the argument.

Brands and Effective Marketing

What is a brand? Four simple words that have supported the business book publishing industry for years. Everyone has an opinion on what a brand is, why it’s important and how to go about getting one. Well, me too.

It’s my hypothesis that without what I call relationship equity, or value perceived by the consumer that exceeds functional benefits, most “brands” are nothing more than products with names. And this is a what you get when you practice zero sum marketing, a product with a name.

To build relationship equity, to have a brand, you need to deliver incremental value, value that surprises and delights your best customers.

Heavy Users – Make the Market

In most, if not all categories, there is cadre of heavy users who generate the majority of activity. These are the market makers. Companies and brands with more of these consumers are market leaders in sales and in profits. This group likes what the category offers. They need what the category offers, They want what the category offers. And you want them.

But, and isn’t there always a “but,” this group knows what you and your competitors offer. They know what you’ve said in the past, and what the other guys have said. Warm and fuzzy won’t appeal to this group. They need tangible reasons why they should choose you over the other guy. Fortunately it’s not hard to find out what they want and, if you give it to them, when your competition is pandering to the middle, you will win the revenue game.

Heavy users know that they are important, that they are good customers. And good customers expect to be rewarded. Do this, reward these best customers, and they will reward you with ongoing patronage.

Is this important?

You bet it is. Loyal customers are important, because they generate revenue five ways.

  1. By keeping them longer you can recover acquisition cost and generate a positive ROI.
  2. They buy more things from you.
  3. Loyal customers will pay a higher price.
  4. They need less hand holding, which reduces costs, and improves profitability.
  5. Loyal customers are much more likely to be passionate advocates, which attracts more customers just like them to your brand.

If these loyal customers are also heavy category users you can multiply this revenue stream by 2 or 3 or 4 or more. And remember, it costs you the same to acquire a heavy category user as it does to acquire a moderate or light user. So, to be effective, marketing needs to plus up the value this group perceives.

What is Value

Another implication of how heavy users see and use your products is what they see as value. Obviously you can discount the price. They’re not dumb, they’ll take it, but this isn’t the only way to their hearts and may not be the best way. In fact, it has been my experience that most loyalty problems can be traced to the sales process.

They are heavy users because they need what the category offers. They will be less price sensitive than moderate or light users but that doesn’t mean they don’t want incremental value. Good customers expect to be rewarded. But for them, this value comes in forms that reflect their unique perspective on what the category offers: exclusive information, early access, exposure to new products that allow them to work better and smarter, or enjoy life more, or look cool, etc. Take the time to understand what they want. Give it to them in ways that show how much you value them and their business.

Effective marketing is a positive sum effort. Deliver incremental value, to create relationship equity with heavy category users and watch your business grow.

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