Re-embracing the Idea of Differential Marketing

In the 1990’s-era book All Consumers Are Not Created Equal, Garth Hallberg introduced the concept of Differential Marketing Pyramids, a category value segmentation that quantifies the differences in value between key consumer groups. Even though the practice of segmenting customers on the basis of past and future profit value has been around for a long time, consumer marketers still need to be reminded about the benefits of implementing such a strategy.

Implementing a differential marketing strategy is ideal in settings where there is a relatively large assortment of product categories with regular and frequent transaction volume.

Grocery and retail are excellent illustrations of this. Consider the behavior of shoppers in a grocery store where expenditures are spread over multiple product categories for a select set of product items. As time goes by, customers will establish some form of a purchase footprint. The footprint will reveal certain tendencies that are characteristic of a customer’s purchase activity. The trick is to determine whether the purchase footprint has changed significantly. When a customer begins to stray from their footprint this could be a precursor of negative consequences. Differential marketing in this context might call for some type of marketing intervention to mitigate the impact of undesirable behavior.

The footprint will reveal certain tendencies that are characteristic of a customer’s purchase activity. The trick is to determine whether the purchase footprint has changed significantly.

With differential marketing you can take a proactive stance when developing product offers and related marketing communications. The marketing action could be a BOGO offer to reengage a defecting customer or a promotional offer to stimulate trial in a new category. 

When thinking about your current customer retention strategy, where does the concept of differential marketing fit into the mix?

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