While user targeting has its merits, its popularity has led many businesses to overlook the benefits of a broad-reach approach. Jo-Ann Foo, senior director at Analytic Partners, explains why this strategy should be higher on every marketer’s list of priorities.
Growth is the lifeblood of any business, and it is invariably a marketer’s job to fuel that expansion. For many, the easiest route to do this is targeting the people who’ve already bought their brand, rather than capture new customers.
After all, there’s that often quoted (never attributed) stat that says it costs 5-10x more to acquire a new customer than retain an existing one, so it’s better just to focus on what you’ve got. Right?
It’s a common, but massive, mistake.
Put simply, banking on targeting your marketing to your existing customer base as a way to fuel growth is just like rowing a boat with one oar – you’ll end up going in circles.
As with so many things in marketing, we’ve gone a long way down the path of granular targeting because we are able to do it, seemingly without stopping to ask, should we?
This type of user targeting, relentlessly talking to the people you know have already purchased your product, often relies on first-party data, and has become so popular because marketers believe it’s more worthwhile to build loyalty among an audience base that has already converted because they’re more likely to buy again in the future.
The alternative is often seen as a bit ‘old school’ – broad reach or mass reach, sacrificing the more specific targeted approach to get your brand seen by more eyes in more hope than expectation that they will snap it up.
And in the cut and thrust of modern marketing strategies, the idea that usually prevails is that it’s better and cheaper to target the customers you already have. This idea has only gained traction with the rise of first-party data and the increasing emphasis on this over second and third-party cookies.
But when it comes to driving real growth I’ve got news for you, because Analytic Partners has discovered in the battle of mass vs niche, broad-reach targeting strategies deliver 1.5-3x stronger returns vs first-party targeting. Because broad-reach targeting has the ability to drive more overall volume, it’s consistently more effective and efficient than any detailed use of first-party targeting.
But before you log into your data management systems and delete all your customer data I should stress that all your investment hasn’t gone to waste, because this approach is going to get you returns. It’s just not as efficient as a broad approach.
What you ultimately need is balance. And the real question is how much of your investment should be used in specific targeting vs broad or mass.
For a brand to grow it needs to either get more customers or encourage existing customers to buy more. The latter means strengthening the existing loyalty of your customer base – but, sadly, loyalty only goes so far.
The law of Double Jeopardy (which was originally coined by William McPhee in 1963, but popularised by Byron Sharp in “How Brands Grow”) has told us that small brands generally have fewer loyal customers than larger brands. So to grow loyalty, a brand must grow its penetration, which can only come if you look outside your existing database.
While logic dictates that investing in a customer who is likely to make multiple purchases is a wiser choice than someone who may never even make one, we have to remember that humans don’t adhere to the rules of logic.
The myth of customer loyalty can actually be busted in a few different ways:
Consumers aren’t ever truly monogamous: loyalty for one brand rarely ever means it’s mutually exclusive. As a consumer yourself you likely have a repertoire of brands you trust and are “loyal” to, some even in the same category.
Every brand has a long tail of light or lapsing users: This means each brand most likely has a significant proportion of users who may not engage or want to engage with any specifically targeted first-party messages because you haven’t connected with them and/or you don’t know them well enough.
Consumers don’t exist in a vacuum: Thinking that they’re so loyal as to not be influenced by what your competitors are doing and saying in the market is naïve. After all, you’re in the business of tempting them away from their current loyal brand relationship.
Customer loyalty really only exists when it suits the consumer, and these truths prove that user targeting will really only get a brand so far.
To achieve true growth brands must turn to above-the-line (ATL) advertising to reach the people who don’t know your brand and who you, in turn, also don’t know. Even if you have one of the largest databases of customers in Australia, you still need to leverage ATL ads to reinforce your brand because, as we’ve proven, loyalty and engagement from an “existing” customer is far from a sure thing.
Let’s consider bottom-funnel techniques like promotion messaging.
It’s one thing to connect a regular buyer of a brand with specific offers or discounts to get them to repurchase, but these become less effective over a long period. Our work has shown us that brand messages outperform performance messages 80 per cent of the time.
Brands need to give consumers a reason to buy beyond just price – a reason to choose one brand over their competition.
Consider instead other strategies, like contextual advertising. Analytic Partners’ ROI Genome tells us that contextual targeting is generally 1.2-1.5x more effective than other types of targeting. Contextual ads also have the added perk of generally being much cheaper to run.
There are also ways to level up what you’re already doing. We’ve seen that broader media running alongside any trade promotion or offer or personalised message will boost incremental sales, and that brand messaging that is supported by video channels will drive strong ROI for a brand in the long term.
It’s clear that just targeting your base is nowhere near effective enough to deliver the goals your business has. It’s ATL media that’s needed to get your message out there to customers you don’t already have, and that is capable of giving your consumers a reason to go to your product beyond just price.
So while the allure of user targeting is strong, it’s really broad reach that is capable of delivering the efficiency and effectiveness your business needs to grow.
Developing a robust marketing strategy should be about finding that sweet spot where broad reach and user targeting work together. That way, you can get the best of both worlds.
All statistics were found by ROI Genome, Analytic Partners.
