Features
Who's Buying What?
That new T-shirt could be the start of a beautiful relationship
BY TERESA PITMAN
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| Prof. Tanya Mark studies how companies reel in customers or unintentionally push them away. Photo by Martin Schwalbe |
When you pick up your morning coffee at Tim Hortons or a T-shirt on sale at Zellers, you probably aren't thinking much about what that purchase — or more accurately, your pattern of purchasing — means to the company. You just want your shot of caffeine or a T-shirt to wear while you're working in the garden.
The company, however, can look at that transaction as the beginning of a relationship with you — a relationship it hopes will be profitable. And that's where researchers like Prof. Tanya Mark, Marketing and Consumer Studies, come in. She's studying how those relationships evolve and how the marketing decisions made by companies can pull customers in closer or unintentionally push them away.
“Each time you make a purchase, if you use a credit card or purchase online, that gives the company more information about you that can be tracked,” says Mark, who joined the University last summer. “In my research, I've developed statistical models to analyze these data and categorize the customers.”
For example, if you continue to buy from a company for a long time and buy significant amounts of its products, you're a valuable customer. Buy expensive items? They like you even more. If, on the other hand, you buy only one or two inexpensive things and then end up returning one, your value level is (understandably) not as high.
Mark looked at marketing promotions to determine if certain types would be more likely to influence customer-firm relationships to switch from non-loyal to loyal.
“We found that price promotions — offering a discount — were more effective in encouraging customers to form loyal relationships. Sending out direct-mail pieces such as brochures and catalogues was less effective, and when too many catalogues were sent out, there was actually a negative effect. Instead of buying more items, customers spent less.”
There seems to be an optimal number of catalogues to send out per customer, says Mark, but she admits she doesn't yet know what the number is.
In this research, she found she was able to identify several types of customer buying patterns.
“One group of customers tends to increase its buying behaviour over time, resulting in an upward sloping pattern,” she says. Maybe they start by just buying coffee at Tim Hortons, but soon they get a muffin and then they begin dropping by for lunch.
Another type of customer goes in, buys a coffee once, decides it's not as good as the coffee at home and never goes back. That's the “not-a-good-fit” group.
Other shoppers tend to be good customers for a while, then suddenly disappear off the radar. An example of this might be someone who eats lunch at Tim Hortons three times a week for months, then decides to brown-bag lunches instead to save up money for a vacation.
And yet another pattern is the “stable” customer — the person who buys a coffee at Timmy's every morning but never graduates to “coffee and a muffin” and never comes in for lunch.
“It had generally been assumed that people stayed in one segment,” says Mark. “If you were buying according to one particular pattern, it was expected that you'd keep buying that way. But what I found was that between 20 and 25 per cent actually changed buying patterns from one year to the next. So our statistical model had to account for this change in segment membership from one period to the next.”
She's now estimating the model with another sample to see if she finds similar results. She's also doing research to discover that elusive “optimal number” of direct-mail marketing efforts. Once she's found a theoretical answer to that question, she intends to put it to the test in a field study.
“This could potentially save companies a lot of money because marketers can improve their resource-allocation decisions,” she says.
Another area of interest for Mark: those shoppers who have stable buying patterns over time. Her research reveals the pattern, but she's interested in knowing why they shop that way.
“Is it out of loyalty or is it habit? We're trying to explain the difference. If it's habit, then money spent on promotions will not be effective with this group. They won't buy more. If it's loyalty, however, then the right promotions might get them to buy more or more often.”
Along with this research, she is exploring a newly discovered passion: teaching.
“I really enjoy teaching,” says Mark, who earned her PhD at the University of Western Ontario and still commutes from London to the U of G campus. She's particularly proud that the students in her product development course became so involved in their projects this year.
“The students had to form teams, write a business plan for a new product and compete against each other in class. The students voted on the best teams, and those teams got to compete again in front of a panel of judges that included other faculty and people brought in from industry.”
The winning team received $500 and an opportunity to participate in a competition at Queen's University and in the Nicol Venture Creation Competition at U of G.
“Although this year's teams didn't get into the finals, I'm looking forward to more success next year,” says Mark. “I've already arranged for industry experts to participate in the panel of judges, and I'm looking for corporate sponsors.”