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Focus Groups, Surveys Boost Research
By Jim Wheaton
Principal, Wheaton Group
Original version of an article that appeared in the
June 7, 2004 issue of “DM News”
Although we live in Chapel Hill, North Carolina, the Wheaton family
recently began subscribing to a newspaper in Durham, North Carolina.
What on earth, you might ask, does this have to do with direct and
database marketing? As it turns out – plenty!
For years, the Wheaton family received several calls a month from
this Durham newspaper, asking us to sign up. For years, the response
was, “Why on earth would we want to do that? We live in Chapel
Hill.” Finally, someone in the Wheaton family put a stop to
the calls by requesting that we be placed on the paper’s “do
not call” list.
However, our eleven-year-old son is a fanatical Duke Blue Devil
basketball fan. Duke University is located in Durham, about ten
miles from Chapel Hill. In fact, we joke that our son leads a Duke-centric
existence. For him, life is all about Duke. He owns Duke hats, Duke
shirts, Duke shorts, Duke socks, and Duke just-about-everything.
Duke’s archrival, The University of North Carolina, is located
in Chapel Hill, about five minutes from our house. Nevertheless,
the town contains quite a few Duke fans and employees. This is especially
true on the north side, which shares a border with Durham.
Recently, I happened to stumble upon the Durham newspaper’s
Website. It soon became apparent that it has by far the best coverage
of Duke basketball in the area. Suddenly, the subscription price
seemed a mere pittance. Well, perhaps not a pittance. But, certainly
worth 365 days a year of coverage of a team that is the focus of
just about every minute of my son’s leisure hours.
Interestingly, during the dozens of calls over the years to get us to subscribe
to Durham newspaper, no one ever had an effective response to our
question, “Why on earth would we want to subscribe to a Durham
paper when we live in Chapel Hill?” If someone had once listed
a few possible compelling reasons, including the best coverage of
Duke basketball in the area, then the subscription annuity from
the Wheaton household would have started much, much sooner.
Focus Group and Survey Research for Understanding Non-Response
Consider the transactional details of the subscription information
available to the Durham newspaper – things such as dates,
dollars and renewals. There is nothing intrinsic about these data
sources that screams, “Lots of people in Chapel Hill subscribe
to your paper because of its superior Duke basketball coverage!”
The only way to arrive at this insight is to ask for it. This is
where focus group and survey research plays its all-important role.
Once you have probed your customers for the motivations behind their interest
in your product or service, the next logical step is to do something
with it. For the Durham newspaper, it could be as simple as altering
the scripts of its Telemarketing Sales Representatives, to provide
them with several compelling reasons to subscribe to the paper.
And, perhaps making sure that certain scripts and compelling reasons
are reserved for specific times of the year, such as during basketball
season to highlight coverage of Duke basketball.
Extending Focus Group and Survey Research to Outside Lists
Focus Group and survey research can also be applied to non-customers.
Most direct marketers are lucky to generate a 1% response rate from
outside lists. In other words, 99% of everyone who is contacted
will not respond. However, how many direct marketers have ever done
focus group and survey work to probe the reasons for the non-response?
Certainly, not many! Of course, certain steps must be taken, such
as securing list owner approval, and carefully wording the scripts
Invariably, much of the non-response will be a reflection of the
inevitable imprecision of targeting. However, some will be because
the optimal argument for purchase has not been identified and incorporated
into the promotion. Going back to the Durham newspaper example,
Duke basketball coverage was never highlighted.
Some would say, “How can I ask non-responders why they did
not respond? After all, doesn’t their non-response suggest
that they will not cooperate in focus group and survey work to probe
their motivations?” Anyone who has been involved in the focus
group and survey process understands the fallacy of this perspective.
There are all sorts of ways to get people to share their thoughts
and opinions, including paying them for their time.
The net effect can be significant. If just a single non-responder out of every
500 could be convinced to purchase, the overall response rate for
the corresponding promotion would increase by 20%, from 1.0% to
1.2%. That is a very significant difference!
A Case Study
Some time ago, a client employed focus group and survey research
to identify a new and important target market. This market, it turned
out, was significantly more affluent than the core customer base.
As a result, the client revamped its merchandise offerings within
a specific high-margin category, and significantly altered its prospecting
strategies and tactics. Here is how all of this unfolded:
First, some background. The company sold a wide range of hard goods
across a number of merchandise categories. And, its target market
was decidedly middle-class.
During the course of a data mining assignment on the Marketing Database,
it was discovered that a small portion of the client’s customers
were responsible for a dramatically disproportionate percentage
of revenues and profits. Interestingly, most of these customers
had one thing in common: a large number of purchases within a single,
high-margin merchandise category. The decision was made to perform
a “deep dive” analysis of this customer subgroup.
The first step was to examine the specific merchandise that was
being purchased by this very profitable customer group. Interestingly,
the purchases turned out to be concentrated within the highest price-points
within the aforementioned high-margin merchandise category. It turned
out that a confluence of three factors – high average number
of purchases, high margins, and high price points – had resulted
in the creation of a small but powerful revenue and profit engine
within the client’s customer base.
The second step of the analysis was to probe the demographic characteristics
to this very profitable customer group. In order to do so, demographic
overlay data was applied to the Marketing Database. Interestingly,
it was discovered that this customer group was significantly more
affluent than the balance of the customer base.
The third step was to understand the motivations behind the purchase
behavior of this customer group, via focus group and survey work.
Out of this came several important conclusions:
First, most of the company’s merchandise offerings, and especially
within the aforementioned high-margin category, were too downscale
to be of interest to this customer subset.
Second, despite the small degree of overlap between the customer
subset’s socio-economic status and the client’s merchandise
offerings, the customer subset had developed significant loyalty
to the company.
Third, with well-considered line extensions, and revamped prospect
and customer cultivation strategies and tactics tailored to this
subset, overall loyalty and corresponding revenues and profits could
be enhanced even further.
As a result of this research, the company methodically tested its
way into enhanced product offerings. It then featured these offerings
in revamped specialty catalogs and standalone-direct mail pieces
to both customers and prospects.
For existing “core” mailings, additional high-quality,
high price-point merchandise pages were included in catalogs directed
to targeted prospects and customers. Likewise, ink-jet “call-outs”
and cover-wraps to this audience subset highlighted the pages of
core catalogs featuring merchandise of particular interest. And,
these sorts of prudent targeting initiatives were carried over to
the e-commerce arena, via analogous strategies and tactics applied
to the company’s Web site.
Ultimately, the company was able to test its way, over time, into
a very profitable program of mass targeting.