5-Step Process to Understanding the DNA of the New Consumer

According to a survey by the Department of Labor, the average U.S. consumer spends nearly $50,000 annually. Where do these dollars go? The portion that marketers are competing for is a small part of those expenditures. In order for today’s marketer to capture a portion of wallet share, they must have a deep understanding of the consumer and be able to anticipate their interests, needs and expectations. With this data in hand, marketers can reach consumers through targeted, relevant communications that speak directly to them and create unique customer experiences.

It's no surprise that consumer spending declined from 2008 to 2009 as the economy struggled. Consumer spending was down 11 percent last year, according to the Abacus Cooperative database. Several factors contributed to the decline, including fewer transactions per household and less spending per transaction.

Where consumers spent also shifted. Spending on apparel and home décor, for example, declined 12 percent each in 2009. Consumers spent 3 percent less on children’s products and 4 percent less on gifts last year. Marketing has changed more in the past five years than the past 50 years. Consumers are in control and choose when and where they want to interact with brands and receive communications. Therefore, it's critical that marketers understand customer channel preferences and behaviors within each channel. Campaigns should be strategic and used in conjunction with other channels for a fully integrated approach.

A successful marketing campaign can be built on an understanding of where, when and why consumers shop. We’ve seen a notable shift in the channel of purchase over the past three years. In 2006, 35 percent of purchases took place via phone, fax or mail vs. 28 percent in 2009. Online transactions have grown from 36 percent in 2006 to 43 percent in 2009. While the internet continues to grow as the preferred channel of purchase, marketers should test a combination of offline and online activity.

From Abacus’ analysis, we’ve found that customers who receive a mail piece along with regular emails have response rates 32 percent to 130 percent higher than customers who only receive email communications. This indicates the effectiveness of an integrated marketing campaign that combines direct mail and email.

Key events and life changes trigger shifts in purchase behavior. A great example is the new mover. Over 1 million people move every month, creating marketing opportunities, particularly when data is coupled with previous and new home values to reveal who's “moving up” and who's a candidate for more budget-conscious offers. Seasonal changes also affect spending patterns. The Abacus co-op database shows that gifts peak in Q4 and that nearly one-third of overall consumer spending happens during the last quarter.

With all this data, what’s a marketer to do? Follow this five-step approach to getting to know your customers better in order to optimize your direct marketing efforts:

• Step 1: Get a single view of your customer.
• Step 2: Append data to allow for segmentation. Data types available range from demographic and psychographic to transaction and survey data.
• Step 3: Create custom groups based on clusters of behaviors and profiles. Overlay third-party personas on your housefile to improve information about new files or older buyers.
• Step 4: Develop contact strategies specific to each cluster. Clusters may be based on near-term value, channel preference, merchandise category penetration, frequency of purchase, demographics, history of spend, among any number of factors.
• Step 5: Monitor results and make adjustments as needed. Make sure you update clusters, as behaviors and profiles change over time.

An understanding of the individual consumer is key to an effective marketing program. And as consumers change over time, so should your marketing strategy.

Stacey Hawes is senior vice president, account management & business development for Abacus, a division of Epsilon Targeting. Stacey can be reached at stacey.hawes@epsilon.com.

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