Confusing Volumetric Targeting With Strategic Targeting

“What makes a target “strategic,” of course, is the same thing that makes any business approach or method strategic—it is consciously chosen to secure a competitive advantage.  So many marketers are trained to engineer meaningful differentiation (for a competitive advantage) into the benefits or reasons why within their brand positioning, but not so many appreciate the target as a prime positioning plank for differentiation.  Net, what makes the selection of a positioning target “strategic” is the conscious choosing of some—but not all—consumer or customer segments in the market as a target group that the brand has the potential to attain a competitive advantage with…to thereby develop into a loyal franchise.“ (DISPATCHES, November, 2009)

As you can see, we wrote the above nearly a decade ago.  It was actually part of the lead-in to that week’s article, entitled “Why Strategic Targeting Is So Hard.”  And we then attempted to articulate the main reasons why:  market segmentation is often done without the benefit of creative thinking—our “market map” looks the same as the one done by our competitors; or, the brand always ends up with too many “chosen” segments for its positioning target; and (the overriding reason of all) truth be told, senior management actually prefers not to segment the market.  These reasons seem to remain valid today.  But in re-looking that article, we could have been even more pointedly direct as to why getting to a strategic target remains ever so difficult:  too many senior managers and their marketers continue to confuse an Annual Volume Target (AVT) for a Strategic Positioning Target (SPT).

Before laying out how we perceive the fundamental differences in these two, let’s highlight the basic “bedrock solid” argument for, the critical necessity of, building the brand with a Strategic Positioning Target: 

1. Though rarely recognized, choosing the Brand’s Strategic Positioning Target is probably the most lucrative opportunity to differentiate versus competition.
2. Since no Brand can be all things to all people, the goal is to find—and then aim to own—a Target that the Brand can win with (as in, best meet the Target’s needs, rational and emotional).
3. The main reasons why no Brand should or can be all things to all people are that (a) not all Target segments are of equal value; and (b) no brand has the resources required to adequately appeal to and win with all segments.
4. Just because a company has the infrastructure/capacity to call on or “cover” everyone in the market doesn’t mean that it should: some in the market will readily become Brand users/prescribers; some will become part-time users/prescribers; some will remain loyal to a long-time competitor; some will completely reject the Brand’s premium (or even super-premium) value-pricing proposition.  To attempt to “call on” or “speak to” all of these types—especially knowing that resources are never unlimited—not only wastes resources on low-return segments, but also reduces those that could be applied against high-return ones.
5. The most important market share to read and track isn’t Share of Total market: it’s Share of Strategic Positioning Target (SPT) Market. As we have referenced often in the past (because the SPT story is so telling), while it was impressive in late 2012 when Apple’s MacBook Pro achieved a 10% Share of the Total U.S. Laptop Market, the number that really spoke volumes was MacBook’s Share of its Strategic Target Market:  91% of laptops selling for more than $1,000.  Clearly, MacBook Pro marketers were strategically targeting laptop users who were “into” high performance, top design, and top price…and likely to remain so.

So, whereas a Strategic Positioning Target comprises customer segments consciously chosen because of their attraction—or likely attraction—to our brand over time, an Annual Volumetric Target comprises all customers whose purchases, in some way large or small, “add up” to the brand’s annual sales.  Some other important distinctions between the two:

• The AVT will always be larger in people-customers than the SPT; but the per capita dollar volume of the SPT always dwarfs that of the AVT.
• Obviously, the AVT includes customers who try the brand by mistake, or buy once because their brand is unavailable at the moment and they have an immediate need, or who simply “get talked into” trying the brand, but will not repeat. But the SPT includes only those customers who buy often and contribute regularly recurring sales; importantly, they also bring others like themselves into the franchise by their passionate advocacy of the brand.  The SPT never intends to merely drive incidental sales because positioning dollars are way too dear to expend for a pitiful 1-2 sales per year.
• The ultimate purpose of the SPT is simple: to geometrically maximize the return on always-limited company and brand-building resources.  There really is no “purpose” for an AVT:  it is simply the mathematically additive result of volume contributed by the SPT and by incidental brand buyers.
• In short, while an AVT ties to an annual volume dollar number, the SPT ties to an annual share of target segment percentage number.

Which brings us to the real question–why does any of this SPT/AVT distinction matter?  Simple: by confusing and Annual Volume Target for a Strategic Positioning Target, company resources get wasted, even squandered…which in turn, results in less “available muscle” to apply against the would-be growing, loyal brand franchise.  So, it really is time to change that ever-echoing boardroom directive to “make the positioning target bigger (because our annual volume number is tough and we don’t want to lose any potential sale)” into something much more strategically compelling…such as, “What dominant share do we plan to achieve among our SPT, and how competitively unassailable will that make us?”

Back in 2014, we wrote another DISPATCHES entitled, “It’s Time For a New Targeting Model.”  Actually, it’s way past time.  And this new model absolutely must start with the commitment to expend ever-limited resources against the most likely high-return prospects:  the brand’s Strategic Positioning Target.

Richard Czerniawski & Mike Maloney