We have Gauss on sale
June 03, 2009
I think the vast majority of people know something about the Gaussian curve – that graphical representation which looks ”like a bell” with a sharp point, placed in a system of x, y coordinates. The peak area of the curve projected on the x-axis represents a small and dense set. If we represent through this curve the multitude of companies that are currently present on the market, on that small portion of the x-axis projected by the ”bell hat” we find the performers, the rest are filling, mediocre, ”me too”.
Gauss was a great person in my opinion. He found a mathematical model with such a diverse applicability that it lasted for a long period of time. I’m not a mathematician, but I still know the basics. The Gaussian curve must be a model that is known by economists, managers and even marketing directors. If I were the manager of any business that depends on the brand(s), my biggest fear would be to get out of the small and dense area of performers, of those who really differentiate themselves, of those who report real and healthy figures. Especially in these times of grace when all economic areas are being tested and forced to change.
Market share or awareness are possibly functional notions in stable times or economic growth. After 15 years in this profession, based on my experience, I allow myself to have certain doubts. Market studies that reveal a state of affairs should be replaced by those that reveal, at least partially, a future state, desires, aspirations, utility and characteristics. Focus groups are today one of the huge traps that provide so-called security on paper. The people interviewed in these focus groups tend to give quick answers to the questions. They sense the direction the moderator is heading, they want to escape quickly and receive their gifts. Today, concepts such as profit, sales regeneration, low collection time, customer retention, satisfaction or brand equity matter. What should I do with high awareness if sales stagnate or fall? Nothing, that’s an insignificant number.
A little math doesn’t hurt anyone, on the contrary. It is said that a buyer spends about 10 seconds in front of a product on the shelf before making a decision. A TV spot lasts 30 seconds and it is broadcasted as long as possible in order to reach as many people as possible. Viewing an outdoor billboard takes between 0.5-2 seconds. Conclusion? The war is taking place on the shelf. What can you see on the shelf? Packaging, product features and prices. Well, not that much. More importantly, you can make a quick comparison with other products, a recollection of previous purchases, a mental comparison with the usually purchased product or you can insert a new product in your memory. How many out of the 100% customers actually matter? Basically, about 20%. There are those who constantly buy from you and you don’t have to invest that much in them. You only need to “keep them on edge”. They are the most profitable and probably bring you 80% of your sales and profit. Brand equity is extremely high due to loyal customers. Next category, around 30% is represented by those who are a bit undecided. They are also good for business. From time to time, maybe you can convince some of them to join the first ones. The third category, about 50% of people are those who don’t pay attention to you or those who might even hate you. Yes, brands can be ugly, just like people. They are not even worth taking into account, the investments in earning them would be too big.
What has the brand, the TV spot and the war on the shelf got to do with math? The link is called branding and strategy. And they have nothing to do with the directors’ art imaginations about the aesthetic beauty and the wonderful design of a package, TV spot, awards and so on. The real world of the buyer and his spending budget is about something completely different.