Suppose that you had 50 people in a room, and asked each of them to flip a coin. Those whose coins came up "tails" were instructed to sit down, and those who had "heads" flipped again.
The law of averages suggests that twenty-five of your people would flip a second time. Twelve, or possibly thirteen would flip a third time. Six would still be standing for the forth flips. Three for the fifth. And one, possibly two, would flip a sixth time.
If the coin came up "heads," our flipper would have successfully tossed six heads in a row.
What are the odds that his seventh flip would also be heads?Fifty percent.
Each time a coin was tossed, there were only two possible outcomes. The law of averages says each has an equal probability of occurring each time. Did our last coin flipper standing beat the odds?
No. The laws of probability played out exactly as they always do.
If you understand the cause (law of probability applied to a large number of people) you won´t be so impressed by the effect (one guy flipped six heads in a row). Understanding the cause also makes the effect predictable.
Sometimes otherwise intelligent people mistake the effect of an action for the cause of an action. When this gets applied to marketing, the results can be disastrous.
The Case Study
In 2002 a Midwest grocer, who shall remain nameless, came across some research that compared the number of visits a new shopper made to a store to the tendency of that new shopper to return. The data indicated that after the sixth visit, the shopper became "loyal" to that store.
I´ll explain which is the cause, and which is the effect, in a minute. First, though, let´s look at Mr. Grocer´s logic. If it took six visits to make a customer loyal, he would to mount a big campaign designed to bring new shoppers into the store at least once a week, and keep bringing them back for at least six weeks.
Mr. Grocer purchased game pieces with liberal prize pay outs which were passed out with each sale. He scheduled serious price reductions in specific departments. And, he purchased massive numbers of GRPs to make sure the community knew of the discounts, the prizes, and the quality of each of his departments.
The short-term result? A huge influx of new shoppers for the six-week period of his campaign. Long term? Only a small percentage of them became loyal and returned regularly after the promotion.
What went wrong?
There were two major factors. First, a lack of understanding of the difference between relational and transactional shoppers. Second, the assumption that six visits to the store CAUSED shopper loyalty.
Transactional shoppers are only interested in today´s purchase. Give them a bargain, and they´ll buy. They´ll drive across town to save money on that purchase. They consider the time spent in comparison shopping part of the challenge of getting the most for their dollar.
They have no loyalty. As soon as someone else offers them a bigger bargain, they´re gone.
And which shopping mode did Mr. Grocer´s promotion appeal to? He heavily advertised low prices, discounts, and free prizes. It´s no surprise that he drew a large contingent of transactional shoppers.
When one considers the number of dollars spent on this promotion, even the most experienced marketer is going to wince.
Look at what was likely recorded in the research.
People shopped a new store for the first time. A large number of them had a generally favorable shopping experience. They came back and shopped again. A few had a disappointing experience and failed to return.
We see the same thing happen thesecond, the third, the fourth, and the fifth time shoppers visited the store. Each time, most of them had a generally favorable shopping experience, and a few didn’t. The few refused to come back and shop again.
By the sixth week, all of those who had previously had a negative shopping experience had dropped out of sight. Those who had six positive shopping experiences in a row were generally so pumped by the treatment they´d received they could find no reason to shop elsewhere.
It wasn´t six coin tosses that caused one coin to come up heads six times in a row. It´s that all of the tails outcomes had been removed by the sixth toss.
It wasn´t the six visits to the grocery story which caused the loyalty. It´s that all of the shoppers who didn´t feel good about the place after their earlier visits had already sat down.
What should Mr. Grocer have done? He should have focused on the relational shoppers who will return even when they don´t have a coupon. He should have gone out of his way to delight them with each shopping experience.
– He could have increased the number of checkers so that people didn´t have to wait in line.
– He could have set up a baby sitting area so that Mom could shop without trying to keep the kids in tow.
– He could have offered free coffee and cookies, or sodas, or other beverages and snacks.
– And he could have implemented these changes permanently. He could have heavily advertised those changes.
He could have focused on things which appeal to relational shoppers.
And please don´t tell me that these changes cost too much. They are insignificant when compared to the cost of his disastrous six week promotion. And they pay off much longer.
Who are you targeting?
What´s the logic that´s the foundation of your advertising?