Bad Targeting Leaves Money On The Table

(By Bob McCurdy)  The first step toward creating an effective media campaign is determining who should be targeted with the messaging. Get this wrong and the odds of succeeding drop dramatically. 

More often than not, when it comes to selling high-end automobiles, the “default” target is something like college-educated A25-54’s with a HHI of $75,000+. After all, high-income households buy “luxury” automobiles and mid-lower income households don’t, right? Sounds logical but it is not necessarily true. 

Upper-income households are more likely to purchase a luxury automobile but a bunch of mid-low income households also find a way to own them due to something we all do when making decisions — we “trade-off.” 

There are some products/services on which consumers spend extravagantly, and others frugally, regardless of household income or personal circumstances. It boils down to the degree to which a product/service is coveted and the sacrifices or trade-offs required to own it. 

Some might settle for a smaller home/apartment to afford a more expensive car or decide to repair their current automobile instead of buying a new one, to fund a luxury vacation. It’s these “trade-off” decisions that result in luxury automobiles, and luxury goods in general, not being the exclusive domain of high-income households. 

I recently spoke with a luxury auto dealership in Ft. Myers and walked them through the following. It opened their eyes. 

Per the chart below, focusing only on the A25-54-year-old is a risky marketing strategy as only 25.9% of luxury car owners in Ft. Myers fall within this age group, with 111,891, or 74.1%, of luxury car owners falling outside this target demo.

It would be difficult to effectively argue that marketing to only 25% of potential customers is a sound advertising strategy designed to maximize revenue.

The Ft. Myers luxury automobile owner’s income profile follows. 

While $75,000+ households are more likely to own a luxury vehicle (index), it’s less obvious, if one were to only focus on indices, that 40% (39.8%), or 59,853, Ft. Myers luxury auto owners have a HHI of less than $75,000. 

It would be difficult to effectively argue that marketing to only 60% of a potential customer pool is a sound advertising strategy designed to maximize revenue.

 

It’s a similar story with education. While the college educated are more likely to own a luxury car (index) in Ft. Myers, 62.3% (almost 2/3) of luxury automobile owners, or 94,053 of them, do not have a college degree. Note that an index of “92” and “90” just means that those with that level of education are only slightly less likely to own a luxury automobile than the average Ft. Myers resident. Interestingly, there are almost as many high school graduates who own a luxury car, as those with a college degree or more. 

It would be difficult to effectively argue that marketing to only 38% of a potential customer pool is a sound advertising strategy designed to maximize revenue. 

Too often, index plays an inordinately large part in determining who to target. And while it is an important metric, it is a measure of concentration, not penetration, shedding light on who is more likely to purchase a product, not who has actually purchased the product. 

The bottom line is that it’s to an advertiser’s benefit to focus more ad weight against those more likely to purchase a product (index), but it’s not to their benefit to completely ignore those who are less likely to purchase a product, but do actually purchase the product. 

As Jenni Romaniuk of the Ehrenberg-Bass Institute wrote in the Journal of Advertising Research wrote several years back, “The first step toward smarter targeting is to make sure your targeting efforts reach, at a minimum, all of your current customers.” 

In the example above, there’s a good argument to be made that the demographic and qualitative target to maximize this dealership’s revenue should be A25+, skewed high-income A55+, and not the “default” demo to which they’re currently marketing.

There are times when the simplest of research reports, like the Instant Qualitative Profile, can generate insights that enable us to engage our clients in meaningful marketing discussions, providing them with guidance that can be used to maximize the impact of their ad spend.

As illustrated above, when it comes to a target demographic, what sounds “right” might be “wrong,” as viewing indices alone without “volume considerations” is a recipe for decreased sales.

 

Written by Bob McCurdy, Vice President of Sales for the Beasley Media Group.
This article was previously featured in Radio Ink.