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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Charity Follow Up

A very close and dear friend from the Seagram days told me the following story about another charitable dinner event that I’d like to share…

One of the Seagram companies in the past was Four Roses and they had a metro New York manager named Nick Cotter. Nick was not only an ex-cop in NYC but he had been shot five times in a police action/raid. He nearly died and in fact was taken for dead if not for the persistence of an emergency medic.

After months and months of recovery and rehabilitation Nick was on his feet and decided on a new line of work. Four Roses hired him. Nick turned out to be very important to Seagram inasmuch as he became a conduit to the police and fire departments when things needed to get done. (More about this at another time.)

Well, as the story goes, shortly after joining the company he was at a charity dinner. But, in those days there were no pre-meeting to announce your “gift” – you were expected to announce it publicly in a ballroom with 500+ people.

As they were going down the list, someone from Schenley was called and announced, “Schenley Distillers is proud to donate one million dollars.”

Nick Carter, who didn’t know what to expect or make of this event in the first place, was called next. His colleagues were hysterical thinking that they put one over on him.

He stood up, was very calm and announced, “I donate one million and twenty-five dollars from Schenley and Nick Cotter.”

The room erupted in laughter.

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