This topic came up in a conversation with Steve Rae, one of my partners, over dinner. It is very common for businesses to give their advertising people the following mission. You may even have done so yourself. I’ll include 3 different categories to illustrate the point.
- Financial Planner says, “Target investors with $500,000 or more in their portfolio. It takes the same amount of work as a $50,000 portfolio, only you make ten times the money. Bring me these people.”
- Boat Retailer says, “Target consumers of 35’ boats. They take roughly the same amount of time and space as a 21’ boat customer, but you earn thousands more with each sale.”
- Casino owner says, “Target ‘Whales,’ those high net-worth gamblers who lose ten grand in a single session. Bring me those people. I don’t want to bother with the small-timers who only lose $100 bucks a night.”
These are, of course, simply three ways of saying the same thing. And marketing people are presented with this objective, or a variation on it, every day. There are two ways the ad-guy can respond.
- He can do his best to follow the instructions of his client, even though he knows (if he has any experience at all) that it won’t work. That being said, there’s nothing evil in charging money to do as you’re told. It’s not malicious, and this is what most ad people will do.
- He can tell the truth, and admit to his client that the plan cannot possibly succeed. Although it’s a more honest approach, it usually means losing the client’s business. Clients don’t like being told, "No." Nevertheless, this is the path I take. And it’s the reason I don’t have any financial planner clients, even though I have a pile of great ideas for financial planners.
All of the details in our three examples above are factually correct. So why will targeting high net-worth consumers ultimately fail?
- Financial Planner: An investor with $500,000 in her portfolio already has a financial planner… and a pretty good one. He’s made her a half million dollars! She won't jump ship easily.
- Boat Retailer: 35’ boat customers tend to buy from the same guy who sold them their 31’ boat, their 29’ boat, and so on. This customer already has a multi-year relationship with his boat retailer. You can’t steal him away with advertising. That’s not how it works.
- Casino: “Whales” can gamble anywhere they like. Every casino on the planet will give them perks and gifts. So forget about incentives; they're all interchangeable. The whale chooses a casino because the concierge knows his personal preferences and asks about his kids. It is the relationship that fuels the decision, not marketing.
If you think you can succeed by only targeting high net-worth customers, you’ve missed an important point about how people choose where they spend.
In each of my examples, the customers can be described a different way. They are all, by definition, loyal customers. Advertising does not bring you loyal customers. Good advertising is about persuading people to change their minds and that’s the antithesis of loyalty. Do you see it yet?
Let’s change categories again, and it’ll be crystal clear.
- Restaurant/Bar Owner says, “Bring me ‘regulars.’ That’s who pays the bills: customers who come in week after week."
But wait. ‘Regulars’ don’t switch restaurants. That’s what makes them regulars. They’re loyal. Advertising speaks to the disloyal, the changeable, the undecideds. Advertising does not affect ‘regulars.’ They’re exactly who you want, but you can’t target them.
Here's the fun part. I’m now going to explain how to get wicked-rich in any of these categories in four easy steps.
Financial Planner:
- Hire an advertising professional to build a campaign targeting those with $50,000 portfolios. These customers likely either don’t have a financial planner, or are receiving poor service by their current money-guy due to their small portfolio. Added bonus: none of your competitors are targeting this group. There's a lot of them and they're all yours.
- Give them excellent service. Treat them the way others treat their high net-worth customers. They will tell their friends.
- Wait. Seriously, we’re talking years.
- Sell your company. You’ll eventually build those small customers into millionaires. They will be loyal to you and your brand due to your excellent service and track record. When you sell your business, they’ll trust whomever you tell them to trust.
Boat Retailer:
- Hire an advertising professional to build a campaign targeting first-time boat buyers. Specialize in that. Added bonus: none of your competitors are targeting these entry-level consumers. There's a lot of them and they're all yours.
- Give them excellent service. Treat them the way others treat the cruiser customers. Give them the full VIP treatment. They will tell their friends.
- Wait. For a long time. Get comfy. You're gonna be here a while.
- Sell your company. Your sales staff will have been keeping in touch with those first-time buyers, and eventually, will sell them their second, third and sixth boats. Congratulations, you’re selling 35’ cruisers and not even working that hard to do it.
Restaurant/Bar/Casino:
- Hire an advertising professional to build a campaign that aims for the demographic bulge in the middle. Be attainable, not exclusive. Make your message appeal to more people, regardless of status, net-worth, or class. Added bonus: none of your competitors are targeting these low-price consumers. There's a lot of them and they're all yours.
- Give your guest an excellent experience. Treat every customer like her last name is Kardashian. Word about this will get out on its own.
- Wait. Many of these people will become regulars. This is what happens when you do a great job. But it doesn’t happen overnight. Bring a book.
- Sell your business. Once you have a brand that people relate to, investors will line up to buy it. Your only concern will be where to park your Ferrari.
Q: Can I own a hugely successful million-dollar business but skip the first 3 steps?
A: Absolutely 100% Yes. And I’ll explain how in Part 2