Marketing: Overcoming underspending

With the application of some ‘Marketing 101’ strategic principles, argues Peter Budd, photo retailing in Australia can grow into a $3 billion a year industry.

I recently read the highlights from the Photo Information Council’s latest findings into the digital imaging purchase behaviour of Australian consumers. (See previous pages). Consider these tantalizing facts from that report:

• 69 percent of households now own digital cameras, with younger, Gen X parents with children, twice as likely to own a digital camera;
• Household income is an important differentiator as three out of four households with an income over $35,000 own a digital camera;
• While males make 54 percent of camera purchases, females are reported as being the primary picture taker in the family, especially when younger children are present in a household;
• In 2007, 66 percent of digital camera households printed pictures with the share of prints made at retail, instant kiosks and minilabs being 60 per cent;
• 22 percent of Australian digital camera households purchased photo books, calendars, posters and canvas prints in 2007;
• Photo books are the most prominent custom photo gift with 7 percent of households claiming to have made at least one in 2007;
• A majority of households rely on their CDs and hard-drives as the method to keep their “original” images rather than printing;
• Online printing has increased and now gained a 4 percent share of market as of 2008.

Based on societal shifts and technology changes alone, I’m sure these statistics will only improve over the next few years, so from a strategic marketing perspective this study makes exciting reading. At the same time the report raises a couple of key questions for every player in our industry:

1.What should retailers be doing to optimise growth from the households in their local market?

2.How big and how quickly can this industry really grow?

While I have no crystal ball in which to find the answers to these questions I believe that ongoing consumer research of the type shown above, including other surveys such as Photo Direct’s 2006 study into consumer behaviour, can provide many invaluable insights and potential direction. Especially if research like this is further analysed and matched with consumer demographics and customer transactional data.

Mix in other qualitative tactics such as customer exit surveys with a number of store visits and suddenly I get very bullish on how much more this industry can grow.

To underscore my point let’s step back one pace – we all know the photo imaging market is a $2.5 billion industry experiencing massive internal competitive pressures and dynamic change. Externally, however, consumers have been relatively oblivious to our internal issues.

And this latest research shows yet again that consumers increasingly continue to purchase cameras, capture images and make prints.

Indeed, they are experimenting with new channels like the internet, and telling us about their mobile phone behaviour and even how they are safe-guarding their images – albeit not the way we (the industry) believe they should.

And the more you peel away the surface layers of this particular study and start to model the opportunities for growth based on various parameters such as households’ identification with our industry and interaction with retail and online stores, the more it’s possible to hypothesize that many of these households are potentially underspending in key sub-categories that help make up the total market.

Based on research findings and customer exit surveys the reasons why they’re underspending appear to be:

• They don’t know how many valued digital images they’ve got;
• They don’t know who to turn to help sort and classify their old analogue photos, slides and film;
• They are unaware of what value each of the new products mean to them;
• They are unaware of the variety of services now available to them;
• They haven’t been offered a demonstration or trial;
• They don’t know who to trust for advice and service.

So here’s my thoughts on the answer to the second question. Based on everything I read and observe I’m convinced the majority of “active” Australian households, like mine, will definitely continue to upgrade their cameras and continue to repeat the basic purchase behaviour they’ve demonstrated over the last 12 months.

And given relevant and targeted marketing offerings that address their reason(s) for under-spending, perhaps like me they’ll also purchase over the next 12 months some digital frames and make a few photo books or design some calendars or purchase a canvas print or two! If the majority of households followed this model and its hypothesis then the average spend per household could easily increase by $200 per annum above the current average, using any combination of the products shown on the slide above.

Here’s another key point – our household has spent its share of industry dollars with no fewer than five retailers and one online provider over the last few years, and not one retail “brand” is trying to create a relevant and valued relationship with us. So our household will continue to be “habituals” without a trusted retailer relationship.

And now to answer question one: If I was a retailer here’s the BIG things I’d focus on to ensure that I increased my annual turnover above the industry average and gained myself a bigger share of my local market.

1. I’d invest more into LOCAL consumer research and customer analytics so I could identify my true market potential and model my business and its performance measures around that targeted potential.

2. I’d invest in a strategic marketing plan and sales forecast that looked at the direction I should take over the next few years so that I was creating my success rather than reacting to everything that goes on around me. I’d ensure my plan addressed and integrated the online and offline aspects of each of the 7Ps of marketing – PRODUCT, PRICE, PLACE, PROMOTION, PEOPLE, PROCESS, PHYSICAL.

3. I’d invest in building a customer marketing information system so that I could rapidly and easily identify my customer offerings based on customer knowledge rather than guesswork.

4. I’d invest in my own personal development to improve the skills that help me work on the business, NOT in it all the time!

While all the above points represent key strategies in their own right and each one adds to the power of the other, today I’m going to focus only on point one – local consumer research. Why? Simply because the better you understand the consumers who make up your market the more effectively and efficiently you can grow your market and position your business.

I am amazed at how little research is conducted at a retail level in an industry of our size. Gathering market knowledge is not difficult – in fact every day you have the opportunity to learn at least one NEW thing about your store’s offering or performance. And it takes just 30 valid responses to genuinely give you a statistical insight into your market!

Over the last few months, based purely on consumer insights I have developed at least three different models for what the store of tomorrow could look like, and I can confidently say the majority of retail stores today look nothing like these concepts.

Why – pretty much because we’re not listening to our customers and what their real needs are! Perhaps that’s why online sales are growing so fast – consumers like the consistency and standard of what’s being offered by an ever-improving, quality service.

And because the competitive barriers to entry in our industry are getting lower and lower, it may well be an entirely new player who delivers one or all of these three concepts before someone in our industry does!

So when was the last time you conducted customer research – what did it tell you about how well your store is competitively positioned in the market or where you need to be in two years time (or less)?

Remember research impacts all 7Ps of your marketing mix – if you fail to understand the consumers in your market, let alone your actual customers, your marketing mix will get out of control, leaving you wandering what to do about your decision-making on such factors as pricing, positioning, people, products and process.

So please start building your local market information NOW and incorporate the knowledge into a strategic marketing plan.

Not only does this become your compass for where you can take your business over the next 12 months and beyond, it is also the cornerstone for all your other strategies, as well as this industry’s key to turning itself into a $3 billion market.