True Fans

I got a lot of comment (mostly positive so far) about my last posting on “How Small is the Market.”

Like many businesses, the market for alcohol follows the old 20/80 rule. Twenty percent of your customers account for 80% of your business.

I came across a posting on a marketing blog that goes the next step.

I follow Seth Godin, a marketing guru, a prolific writer and someone well worth following and reading. Lots of insights.

A recent post of his is called “The circles (no more strangers)” and deals with the value of a “true fan” vs. “strangers.”

He concludes his posting with:

Let’s say a marketer has $10,000 to spend. Is it better to acquire new customers at $2,000 each (advertising is expensive) or spend $10 a customer to absolutely delight and overwhelm 1,000 true fans?

Check out his blog…there’s good stuff there. Here’s a link to this posting  —  Seth’s Blog

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How small is the market?

I’m always struck by the size of the spirits category and small number of dedicated drinkers of a particular brand. (Based on US Census and Gallup’s annual survey.)

Let’s do some math (or trust me and skip ahead to the fact that there are ‘only’ 24 million core spirits drinkers)…

  • US population over 21 is around 200 million.
  • 60% of those over 21 drink alcohol at least occasionally, 120 million people.
  • People who drink spirits most often (as opposed to wine or beer) are about 20% of those who drink alcohol. So now we’re down to 24 million spirits drinkers.

(Actually the overall number who drinks spirits is much higher; perhaps 80% of alcohol drinkers or close to 100 million. But I’m focusing on most often, the core of the market.)

The size of the core market at 24 million people can be seen as huge or small depending on your perspective.

If half these drinkers consume Vodka, that’s 12 million people. But, if a brand has a 25% share, the size of the ‘franchise’ is only 3 million consumers.  (The numbers get smaller as you get into different categories.)

What this has always meant to me is, in addition to or perhaps in place of mass media, marketers need to think in terms of ‘a rifle not a shotgun’. Maybe even with a telescopic lens.

Whether aiming at increasing brand loyalty or converting users of competitive brands, it’s all about the return on investment. Efforts such as relationship building programs, digital marketing, database marketing and point of sale programs, to name a few.

Just like the old expression – fish where the fish are… but with a rod and reel not a net.

I bet you knew that.

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No extra charge

Gregg Mineo sent me the following story about Sabra Liqueur. It was originally developed and introduced in 1963 by  Edgar Sr. Currently it’s produced by Carmel wineries, I believe.

Back in the days of the Seagram Empire, before the industry centralized and contracted, there were small companies like Park Avenue Imports.  They sold cordials and niche products like Vandermint, Cherry Suisse and, of course, the inimitable Sabra.

Sabra was a quality product, made from Jaffa oranges and Swiss chocolate.  It was packaged in a unique bottle similar to a Genie bottle, but unfortunately didn’t have a long shelf life.  I think in my early days of sampling Sabra, I gave more away than I sold.  It was a hit in assisted living care facilities, and of course Miami.

Well, as the story goes, one of the established retailers in Miami started selling Sabra at a brisk pace, and developed a loyal following, especially with a particular gentleman who was buying a bottle once a month.  He began buying it before the brand took off in this store, and one day came back to return one of the bottles he purchased.  He complained that this bottle of Sabra was not the same product he was used to, that it lacked something special he really enjoyed.

The retailer asked what the difference was, and the customer responded that “it didn’t have the chocolate bits in it.”

Stifling a laugh, the retailer offered him something else; all the while knowing that the bottles of Sabra the customer was used to had passed the expected shelf life. Obviously, the customer didn’t care.

What I want to know is — were the chocolate bits available at no extra charge?

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