Resonance Marketing in the Age of the Truly Informed Consumer

by Eric K. Clemons, Fellow, Cutter Consortium

As Tony Paoni of Diamond Consulting likes to remind his listeners, the new networked economy is not just the old industrial economy with a mess of wires hanging off it. Even mass-produced consumer products like detergent, bread, and soft drinks, or traditional consumer durables like automobiles, are changing. Design, production, sales, distribution, and service are all being altered by the information flows in our networked world.

Effective modern marketing enables firms to achieve greater profitability by responding to changes in consumer behavior that result from changes in consumers' access to and use of information. It's about selling more bread and cheese, or cars, or beer, or iPods, or hotel rooms; just as important, it's about selling more expensive bread and cheese, or cars, or beer, or iPods, or hotel rooms. It's not about tricking consumers into paying more, but about finding out exactly what consumers want, informing them about it accurately, and charging them prices that they are willing to pay.

The most obvious change in the marketplace is the tremendous increase in product variety (hyperdifferentiation), enabled by changes both in manufacturing technologies and in distribution. This change in product variety is profitable because of changes in consumer behavior (resonance marketing), as consumers select exactly what they want at prices that reflect how well their selections match their wants and needs, cravings and longings.

Resonance marketing is more than just trading up -- it includes trading up, trading down, and trading out, simultaneously, in a single consumer. Trading up of course occurs when a customer moves from a Chevy to a Caddy, or switches from coach to first-class air travel. Trading down occurs when a customer switches to coach air travel on a discount airline, or to a less expensive hotel. Trading out occurs when a customer switches from candy bars to power bars, or from a lager to a heavily hopped craft-brewed American pale ale. Not surprisingly, a customer may exhibit all three behaviors -- trading up in some categories, trading down in other categories, and trading out in still others.

Hyperdifferentiation and resonance activities include the long tail effect, in which far more choice is available to consumers. Changes in marketing represent significantly more than simply selling low-volume items in the long tail. The long tail stresses changes in distribution; we focus here on understanding changes in consumer behavior and the resulting changes in corporate strategy. Hyperdifferentiation and resonance focus on finding what each consumer wants and what each will pay for, as well as on making these changes in corporate strategy work in an environment of physical products, taking into account manufacturing and holding costs and the spoilage of items with slow sales velocity.

Change in Mindset

Extreme differentiation requires an entirely new mindset. It's no longer necessary to focus on getting most folks to like you, but on getting some folks to love you. Having customers like you and hate you entirely is equivalent to your sales, since neither group will pay a premium price for your products; only customers who love you will pay a premium, but they will do so gladly. The experience of Victory Brewing Company is instructive. At its creation, Victory launched two beers. Its Victory Lager was a perfect replica of an authentic German lager. Everyone likes it, and no one buys it -- it accounts for a very small share of the company's sales. In contrast, its HopDevil Ale is an intensely bitter Americanized version of a traditional British India pale ale; it tastes of pine and orange, and is hopped to a bitterness level more than 400% that of beers with which most Americans are familiar. It is the most hated of Victory's beers, but if you want a beer like this, it is hard to find anything comparable. It is not only the most hated but also the most loved, and it still accounts for close to half of the company's sales.

Resonance marketing isn't about being better in any absolute sense; it's about being better for each customer. Where once we could choose from a limited selection of candy bars, we can now choose from hundreds of power bars. Power bars are different now for men and women, for weight lifters and golfers, even for golfers on the front tee and those starting the back nine. Bars can be differentiated on any attribute, from a focus on designer whey protein for muscle building in weight lifters to the ease with which triathletes can wrap them around bicycle handlebars. There is no single best power bar -- "best" depends on who is buying the bar and what he wants from it. Mass-market fat spots with high market share now break into portfolios of sweet spots with high "margin share."

I welcome your comments on this issue of the Cutter Edge and encourage you to send your insights on the market in general to me at eclemons@cutter.com.

-- Eric K. Clemons, Fellow, Cutter Consortium