Customize the brand – or disappear like a dinosaur

The ‘one size fits all’ type of marketing is rapidly disappearing – today companies are challenged to combine the benefits of mass-marketing with the appeal of customisation.

To proclaim that the era of mass-marketing is over has been part of the marketing mantra for the last 20 years. While it is true that the ‘one size fits all’ type of marketing is rapidly disappearing – a trend that started with the decline of Henry Fords model T about 80-85 years ago – that does not mean that mass-marketing is destined for the scrap heap, rather the reverse. Instead, the future belongs to those who will be able to combine the benefits of mass-marketing, in particular the fantastic economies of scale in branding, with the appeal of customisation.

To achieve this transformation requires a change of method and attitude. Currently almost all marketing decisions are made on the basis of ‘averages’, because that is the type of information that is available. But average information delivers average conclusions and decisions, leading to average marketing and in the end an average brand. Not a road to success, nor much fun. Who wants to be average, and more to the point, who wants to buy something average if you have a choice?

The opposite of average is focus. To be able to deliver a compelling proposition, the brand must be focused on the target group. That is why people respond to marketing that is customized to their needs and situation. By fitting the brand proposition to each individual’s personal life, whether professional or private, the brand is seen as friendlier, more approachable and trustworthy, and above all more relevant.

Customize the Brand

For the future, and indeed in many markets already today, the choices are:

  • to move the brand into a small niche position – taking the focus idea to an extreme conclusion, or
  • to apply customized branding – the only way to stay big in the longer term, or
  • to stubbornly continue with average marketing and slowly sink into the morass of mismanaged and defeated brands with only one purpose and that is to act as an example of ‘how not to do it’.

To customize the brand is to adapt the different parts of the marketing mix so that each individual decision-maker has a feeling of ‘this brand is for me’. This means that all the elements of the marketing mix will have to be adapted in a co-ordinate way.

Fig 1: To customize the brand

Fortunately it is in most cases not necessary to adapt to each individual customer as we are not that different. The principle is that we are all different but not that different so 8-10 segments may well make the brand proposition sufficiently relevant.

The logic behind customizing the brand is simple: use available information to ensure that the brand is as relevant and interesting as possible while still maintaining the coherence of a well-defined brand. So, why is it not done? In most cases because the marketers have not been given access to the necessary driver of such a strategy, that is customer information in an understandable and useful format. The lower left-hand box in Fig 1 is in these cases not full of useable customer data, only average information about the customers, without sufficient detail.

Doing it – but not properly

What has surprised us when we have looked into this in more detail is that many companies already use the tools needed for a customized brand but do not apply the strategy and thus do not get all the benefits. Indeed, if the tools were not available, we would not be able to advocate so strongly that this is the way forward.

From a product point of view, if you buy a car, it is available in thousands of combinations. Different engine, colour, inside trim, extras, etc. and, of course, different versions from coupé to SUV. So you can design your own unique vehicle to your own specification – a customized product!

When it comes to pricing most companies apply different models in different situations – and the customer accepts it. The price per litre of Coca-Cola is not the same if you buy a 1.5 litre bottle in a supermarket on promotion, a 33cl can from the same store off promotion, a glass from a bar or at a luxury restaurant. Four different price levels with a difference factor of more than 10 to maximise profits – customized pricing!

In the world of marketing communication, every media planner will segment the communication plan, and almost all direct mail campaigns are segmented and adapted to each recipient. To reach the audience most effectively, segmentation is applied – customized media selection!

And new media and competition have forced suppliers to use different channels of distribution. It used to be that the only way to get money from the bank was to go the branch office between 09.30 and 15.00 in person. Now you can get money from the ATM any time of the day and you can bank via the Internet, telephone or the post in addition to the branch.

The local franchised car dealer used to be the only way to buy a new car. Now the local franchisee is experiencing intense competition not only from other dealers but from hypermarkets and even suppliers in other countries. The rigid systems are breaking up and the channels of distribution are changing to give customers greater accessibility – customized distribution!

Customized branding is still not happening

If most of these tools are available, then why is customized branding not happening? One reason is lack of insight. Marketing training is still stuck in the ‘averages’ syndrome so most consider segmentation only a method for analysing a market, not a tool for building a brand more effectively.

Another reason is a conservative view on costs. Most companies have not realised that the main economies of scale are in branding and distribution, not in production and administration. Consequently all customization is frowned upon while in reality with modern technology it is neither difficult nor expensive to mass customize.
This is really the clue to customization. Customers only accept a non-customized offer if it is cheaper or more convenient. Otherwise people would all go to the local butcher to get meat cut to the buyer’s wishes and to the baker for the bread each one has got used to and likes. But people don’t, they go to the supermarket because it is cheaper and quicker. However, there is no more any need for the supermarkets, or any other supplier, to offer a ‘one size fits all’ product range. It is possible to customize without incurring high costs.

The perception that customization is expensive is currently stronger than the realisation that it is the way to be the number one choice in each customer segment, and thus giving excellent return on the total activity. A reason related to the previous one is that this strategy lends itself best to organisations with access to transactional data, i.e. purchasing information. The traditional innovators of marketing excellence, the FMCG companies do not, as a rule, have access to transactional information with sufficient detail. It is organisations such as retailers, financial services companies and telecoms plus, of course, almost all business-to-businesses that are best suited for building a customized brand.

The fourth reason is the one where most attempts to build a customized brand has ground to a halt. The marketing departments have not access to the customer data in a format needed to drive a customized brand strategy. For instance in the field of retailing and travel there are around 100,000 customer card programmes around the world, tracking what people buy. Only a handful of these use the collected data strategically. The others do not use it at all or only as a source for better tactical promotions. It has proven extremely difficult to conceptually bridge the gap between IT, which processes the data, and marketing, which use the data. Tesco, in the UK, is one of the exceptions.

This elusive insight is to use the card data to both drive better promotions and deliver insight for a stronger brand:

Reality check

Does it work? Yes it does! Tesco is an excellent practical example. The data source for Tesco is the retailer’s customer card called Tesco Clubcard. An idea that has been copied by retailers around the world, and also in Germany. The principle is that in return for showing the card at the check-out in the store, the customer gets points, which accumulate, to a money-back voucher valid in Tesco. In addition, the cardholders get various promotional money-off coupons. Contrary to many other programmes, Tesco declare openly that the money-back vouchers are a thank you for sharing the information. The Clubcard was a success from the start and is regularly covering around 80 % of the total transaction value in the stores through some 12-14 million cards of which 8 million are in active use.

While the initial launch of the card did give Tesco additional market shares, it is the long term effects that has made it one of the world’s leading grocery retailers and the leading UK grocery retailer. The customer data is used for driving all elements of the marketing mix. The range is adapted, the pricing is modified, merchandising is adjusted and of course the promotional programme is influenced by the card data. It has made Tesco a truly customer orientated company.

What does the consumer say? The Quant Marketing Company commissioned an independent national survey of 2000 respondents by RSGB Taylor Nelson to find out what people thought. The simple question was: Do you feel that the retailer where you shop has made any efforts to do something for you? The astonishing fact is that Tesco had top scores in all different segments, i.e. the brand experience is customized and the customer understands and appreciates this.

Fig 2: Response to ‘Do you feel your retailer has made a lot of effort to do something
for you?’

By using customer transactional information Tesco has segmented the customer base in a way which has made it possible to ensure that the store has something for ‘everybody’, a necessity for any company with ambitions to be a big brand and company in the grocery retailing market. The segmentation is the key to make the process manageable and this is one area where Tesco has innovated. Most retailers classify customers on the basis of value, i.e. how much they have spent over the last 12 months. Some add to this how often they have visited the store. In addition, life stage may be considered, as the requirements of a pensioner are very different from a young couple with two babies. None of these models, though, address the question ‘what will these people buy?’. Life stage may help but it is a very blunt instrument for building a range.

The key to real insight is to segment on the basis of what individual products people actually buy. ‘You are what you eat’ is not only an old saying, it is also the basis for effective segmentation in grocery retailing. Someone who buys frozen prepared meals, pre-packed cheese, traditional vegetables, etc will have different needs to someone who buys big packs of everything and picks up on many promotions. By understanding the different categories (6-10 covers most of the main ones) a buyer can ensure that the store has something for each of these different types of customers. By doing this effectively, ‘everyone’ will feel that the retailer has made an effort and reward it with spending more money and coming back more often. This example is about retailing but the same principles apply to all market sectors. It brings understanding the customer into full focus and challenges the marketers’ skills in that it is necessary not only to understand but to come up with ideas that will surprise and delight the customers.

CRM is only for support

CRM is sometimes mistaken for customizing the brand. However, CRM is only a tool for better communication, making sure that each individual is dealt with the right way so that the company can sell as much as possible. It can play a part in customising the brand in two ways. Firstly, of course, as a toll for better and more relevant communication. Secondly, if organised the right way, it can channel customer information back to the marketing department, give additional insight which in turn will facilitate a strong brand proposition by segment.

Big but not blurred

There is one danger with customizing the brand. The strategy can develop into anarchy unless the brand itself is clearly defined and differentiated. Everyone in the organisation must understand what the core proposition is. Everyone in Tesco knows what the company and brand is all about. The reason for a carefully defined and forcefully implemented brand is simply that otherwise it will all get out of hand. Then customisation will go from being an adaptation of the brand to each segment to a unique proposition in each individual case. If that happens, the brand will be blurred, people will be confused and the brand devalued. However, if all the adaptations work together to build a fuller picture the brand will be stronger, more relevant to all and more profitable.

It took a long time for the dinosaurs to disappear but in the end they did. Traditional mass marketing will also not die tomorrow, it will take some time. However, for those who want to prosper over the coming years, it makes a lot of sense to get into the customisation process as soon as possible. It took Tesco three years to get from using customer card data for promotional purposes only, to making commercial sense of the data. It took them a further couple of years to make it work properly.

Autor: Torsten H. Nilson, Director and Co-founder of The Quant Marketing Company Ltd, Tunbridge Wells, Kent, UK and author of „Customize the Brand“, published by John Wiley & Sons, ISBN 0-470-84822-7.
eingestellt am 22. April 2003