Variety Is The Spice of Marketing
One common theme in current marketing punditry goes something like this: "consumers are overwhelmed by choices and are seeking simplified offerings." As an example, these writers point out that thousands of new consumer products are introduced onto grocery shelves each year, but only a handful will survive.
While there may be some merit in the core argument that at least some consumers find the array of choices overwhelming, I think it ignores the fact that a more complex process is at work. Here are some things not considered in the simple statement of the problem:
The assortment of items within categories has been going up, because it is a winning strategy for retailers and manufacturers. Imagine a grocery store that took an approach to merchandising that only permitted two products in each category: regular Coke vs. regular Pepsi; Diet Coke vs. Diet Pepsi. Sales would be restricted to those consumers who like one of these choices. Walk down an actual aisle in an average grocery store, and you will see up to a half-dozen different formulations each of Coke and Pepsi, plus many smaller brands. The incremental cost of producing a new selection is relatively low given modern manufacturing processes, and therefore all a new product or flavor needs to do is to attract a small minority away from competing lines in order to be profitable.
Variety is not just a variable independent of any other factor. In fact, the availability of product choices can heavily influence purchasing behavior. For example, let's say we have two competing companies offering dish detergents: one sells for $2.25 a bottle and the other for $2.50 for the same-sized container. The introduction of a premium brand selling for $3.00/bottle by the second manufacturer might cause some interesting changes. First, the premium brand may take relatively more market share from the more expensive choice. However, it may also stimulate its sales, as the previously more expensive selection may now be perceived as a relative bargain.
There is good evidence that a greater number of choices can spur consumption directly. For example, researchers in obesity know that increasing the number of food choices increases caloric intake. For example, one well known research study showed an average 14% increase in caloric intake when subjects were offered two types of pasta shapes instead of one in a meal. There is also a sequential aspect to this phenomenon: when consumers are offered a choice of items and have them served on a single plate, consumption is lower than when consumers are offered the same items, but each time as a single course.
All of these aspects of assortment suggest that data-driven marketers would do well to pay attention to ways that variety may be influencing customer behavior. Here are a few things to consider:
- Many marketing tests use simple methodologies. For example, one set of customers will be shown Product A, and another set, Product B. In the real world, products and services compete in a wider ecosystem where decisions are unlikely to be binary.
- The phenomenon of "early adopters" is well accepted in product marketing. Early adopters are those customers who purchase soon after a product's introduction. A good percentage of these customers may be "variety seekers," buyers that like to try new technologies or products, but who will move on when new products appear. Basing product roll-out primarily on such customers can lead to misleading approaches
- Variety seeking may also be higher among a company's "best customer" segment. Ironically, for some companies, attrition is quite high among segments that spend heavily and might be considered "engaged" or "brand loyal." There may be sub-segments consisting of variety seekers who need a steady stream of new product or feature introductions in order to remain loyal.
- Much of marketing is still planned around discrete campaigns that try to maximize the sales of a single product or service. Here, too, there may be segments that can be grown more effectively by a longitudinal approach that offers a "menu" of items in sequence.
Posted at 03:31AM Nov 10, 2009
by David King in Analytics |
