Brands Improve Ad Relevance and Response Rates by Targeting Consumers Based on Price Sensitivity
CINCINNATI – According to a new research report published by dunnhumby, the world’s leading customer science company, a consumer’s sensitivity to price greatly influences their response to advertising tactics and the channel of delivery. Further, common demographically based media targets do not align with price sensitivity, suggesting that a brand buying ads targeted to “moms”, for instance, is wasting a large portion of their advertising spend on the wrong consumers. “Price sensitivity is not predictable based on a demographics and it is a critical consumer dimension for effective media targeting and planning,” said Justin Petty, Vice President of Global Partnerships & Media, dunnhumby. “Traditional media targets like “moms”, high-income households or millennials do not account for the wide-range of price sensitive behavior within those segments and therefore, brands are missing an opportunity to target the right consumers, engage them with the right messages and then understand the impact of their advertising.”
“Using Advertising to Engage the Price Sensitive Consumer”
The report, “Using Advertising to Engage the Price Sensitive Consumer”, looks at the rise of price sensitivity within U.S. consumers and evaluates the effectiveness of marketing tactics like direct mail, customer relationship marketing, TV advertising, display advertising and social media. The report challenges brand marketers to understand their shoppers, their brand and their advertising in relation to price sensitive behavior in order to optimize media plans for advertising channels and consumer segments. “As price sensitivity continues to increase and affect consumer’s decision-making, brands are increasingly using promotions, coupons, value-driven messaging and price discounts as key drivers within their advertising campaigns to increase sales. However, because these advertising campaigns aren’t restricting this content to price sensitive consumers, many brands are overemphasizing price to the broad marketplace and driving erosion in brand equity and margin,” says Justin Petty, Vice President of Media Solutions, dunnhumby.
Price Sensitive Consumers Are Cost-Conscious But Can Be Loyal, High Spending Shoppers and Active Brand Advocates
dunnhumby’s analysis found that price sensitivity does not equate to brand promiscuity. For example, they found that social brand advocates and CRM program members tend to be more price sensitive than the average brand buyer but are also more loyal and spend more on brands than the average brand buyer. In fact, very price sensitive shoppers within CRM programs spend 14% more than the average retained shopper and are 36% less likely to leave the brand. “Traditional assumptions have categorized price sensitive consumers as lower-income households that tend to spend less on brands and are less brand loyal. Our research shows that very price sensitive shoppers are more cost conscious and the most frequent coupon users but in many cases, these are often a brand’s best customers,” said Petty.
Very Price Sensitive and Least Price Sensitive Consumers Respond Differently to Promotions and Advertising Channels
dunnhumby found that for brands appealing to least price sensitive customers, TV advertising used in conjunction with in-store promotions is not as effective in changing behavior as other marketing vehicles. In fact, TV advertising used without in-store promotions are more effective than the two combined for these brands. However, if a brand appeals to the very price sensitive, a combination of TV and in-store promotions is very effective at driving sales. Products with broad appeal also benefit from targeting consumers based on price sensitivity. Display ads featuring a downloadable coupon resonate well with moderately price sensitive and very price sensitive shoppers, but had no impact on the least price sensitive shoppers.
“Using Advertising to Engage the Price Sensitive Consumer” is the culmination of a series of case studies conducted by dunnhumby performed by linking their anonymous, privacy-protected database of in-store purchase behavior for over 60 million U.S. households to the media exposure data of those households. dunnhumby partners with companies like Datalogix and TiVo Research and Analytics (TRA) to link the two. A free copy of the report please is available for download at http://www.dunnhumby.com/insight/pricesensitivity/.
dunnhumby is the world’s leading customer science company. We analyse data and apply insights from more than 400 million customers across the globe to create better customer experiences and build loyalty. Our insights and strategic process help clients create competitive advantage and enjoy sustained growth. dunnhumby employs more than 2,000 employees in offices throughout Europe, Asia and the Americas, and serves a prestigious list of companies including Tesco, The Kroger Co., Coca-Cola, Macy’s, Procter & Gamble, PepsiCo and Shell. For more information, please visit us at www.dunnhumby.com.