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Make your best customers even better

    Eddie Yoon
    Steve Carlotti
    Dennis Moore
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Companies that focus on superconsumers can realise benefits far beyond an opportunity to drive sales growth,as the Velveeta example shows.

Just over a year ago, managers at Kraft believed that their Velveeta brand had only moderate growth prospects. With the consumer migration toward natural and organic products, sales of Velveeta — a processed, unrefrigerated “cheese food” — had languished.

The customers who did buy it typically used it once or twice a year, usually to make a party dip. But as we began working with Kraft and analysing supermarket scanner and consumer panel data, we found a hardcore group of Velveeta fans.

They constituted 10 per cent of buyers but accounted for 30 to 40 per cent of revenue and more than 50 per cent of profits. In focus groups, these buyers — whom we dubbed “superconsumers” — said that they think of Velveeta as superior cheese. They love the way it melts smoothly and easily, and they have myriad uses for it, ones that range far beyond dips.

To restart Velveeta’s growth, Kraft decided to focus on these superconsumers, a group whose size we estimated at 2.4 million. The product team had recently launched refrigerated Velveeta slices, for use on burgers and sandwiches. It had also introduced refrigerated shredded Velveeta, for use in casseroles.

Both launches had been surprisingly strong, but they now took on much more importance in the light of the superconsumer strategy. Some retail partners began moving the product to the refrigerated dairy aisle, where products have a much higher rate of sales. The strategy inspired a pipeline of innovations to meet new uses. Kraft also began gathering customers’ recipes and finding ways to circulate them among the faithful. The new product launches have generated more than $100 million in sales. Just as important, managers believe they have found a viable growth strategy for the first time in years.

Every marketer is familiar with the Pareto principle. Known colloquially as the 80/20 rule, it suggests that one-fifth of a product’s buyers are responsible for four-fifths of sales. A similar effect applies to superconsumers. Using Nielsen supermarket scanner data, we analysed the top 124 consumer packaged goods categories and found that on average, superconsumers represent 10 per cent of a category’s customers but account for 30 to 70 per cent of sales and an even higher share of profits.

Most managers take care to offer VIP treatment to these big spenders in order to ensure their continued loyalty, but few make them a focus of growth plans. In our work with CPG companies, however, we routinely see brands that are able to grow sales by finding new ways to appeal to these customers. And the phenomenon isn’t limited to CPG categories: We have seen companies successfully execute superconsumer strategies in industries as wide-ranging as apparel, consumer durables and financial services.

Reaping benefits

beyond sales

It’s important to distinguish superconsumers from other segments of buyers. They aren’t quite the same as “heavy users,” who are defined simply by the quantity of their purchases. Superconsumers are defined by both economics and attitude: They are a subset of heavy users who are highly engaged with a category and a brand. They are especially interested in innovative uses for the product and in new variations on it.

Superconsumers tend to have more occasions and “jobs” for a product. Think about hot dogs: While many consumers view them primarily as a food for backyard barbecues, superconsumers see them as an ideal fast meal or an after-school snack.

As companies build up their analytic capabilities, they are becoming increasingly adept at identifying and engaging superconsumers. When they do, they not only find that these shoppers have good reasons for buying so much, but also often discover a hidden appetite to buy more — even in the most unlikely product categories.

Staplers are a prime example. Most people have just a single stapler, or maybe two. But in our work with an office supply company, we identified stapler superconsumers, who own eight staplers each, on average. These consumers don’t do more stapling than other people. Their stapler buying is related to a need to be highly organised: They believe that the presentation of the papers they staple together matters as much as what is on the papers. So they want just the right stapler for each stapling occasion. Absent these findings, common sense might suggest that there would be little return on investment in trying to sell someone who owns eight staplers a ninth or a 10th one. But the analysis proves that selling those additional staplers to superconsumers is a smarter growth strategy than simply selling replacements for broken or lost staplers to “normal” consumers.

Companies that focus on superconsumers can realise benefits far beyond an opportunity to drive sales growth. Because superconsumers are already buying your products, it’s easy to reach them. Instead of trying to activate lapsed users through expensive mass-market campaigns or paying large sums to deliver coupons to customers who haven’t bought your product in months, you can focus your efforts on a narrow slice of your customer base. Direct and digital marketing are often much more effective with superconsumers than with others. That effectiveness can be especially valuable to large CPG companies, some of which spend billions of dollars a year on advertising — and for which a 1 per cent increase in the efficiency of ad spending can therefore be worth tens of millions of dollars.

Many superconsumers are superb at offering insights that can drive product strategy. Because they are passionate about the category, they are an ideal audience for testing out new product ideas, and in many cases, they themselves are the source of new ideas.

The most important thing we’ve learned in our work with companies that have decided to focus on superconsumers is that the new strategy can become a rallying cry for an organisation. Like many of the best strategies, it is simple to explain, it appeals to logic and it is easy to back up with data. “To be honest, I was a non-believer at first,” says Cannon Koo, the director of analytics at Kraft Foods. “I thought, How are these consumers any different from heavy users? But as we did more and more research, we began uncovering more and more insights that were quite different from what we were used to seeing from heavy users.” Today the Velveeta team uses the superconsumer strategy to plan its media buying, trade promotions and new product lines. The brand’s general manager says that in his nine years at the company, he’s never seen a more tightly integrated brand plan.

The superconsumer phenomenon points to a virtuous circle: Often companies can do well by showing more love to the customers who love them the most.

Eddie Yoon is a principal, and Steve Carlotti is the CEO, at the Cambridge Group. Dennis Moore is the executive vice-president of advanced analytics at the Nielsen Company.

© 2014 Harvard Business School Publishing Corp.

Superconsumers are defined by both

economics and attitude: They are a subset of heavy users who are highly engaged with a category and a brand.

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