Hey!
Thank you for being here this morning.
You might think that I am one of those people that is naturally a “marketing guy”. I don’t know if that is true or not.
My biggest marketing mistake is why you might think that.
What was it?
In my early 20s, I helped open some nightclubs in a few cities like Ft. Lauderdale, St. Louis, and Chicago.
We were crushing it in every city until we weren’t.
Why?
That’s where my biggest marketing mistake came into play.
The operation had always been built on a few key principles:
- Go to the suburbs or just outside of major cities to open our clubs.
- Repurpose an old club that we could facelift and turn into our concept in a week or so.
- Use demographic segmentation to find look-a-like audiences that we knew we could serve.
Seems like a reasonable model, right?
Wrong.
Demographic segmentation lulled us into a trap.
Why?
Demographic segmentation makes a few assumptions:
- You can lump people into a cohesive group based on their age, zip code, or earnings.
- Just because you have these characteristics, everyone who fits into that “segment” has the same wants, needs, or desires.
- The drivers of the behavior aren’t that important.
That’s all wrong.
How do I know?
I lived it.
First, living in a suburb of St. Louis is much different than living in a suburb of Chicago, Houston, or Miami.
That much should be obvious to you.
It also should have been obvious to me, but I was in my early 20s and, of course, I knew everything.
Second, go talk to any two twentysomethings you know.
I’ll wait.
How much do they really have in common?
They may both love Billie Ellish, but do they make the same amount of money?
Did they have the exact same upbringing?
Do they dress the same?
The answer is probably, “no”.
That’s okay.
Third, quick…grab those twentysomethings again, or better yet, talk to your neighbor for this one.
Ask them why they bought their home.
I live in a cul-de-sac with 5 other families and I can tell you we all bought in our neighborhood for different reasons.
- One family is empty nesters. They bought due to the proximity of their jobs to the house because they had different needs when they moved in.
- Another family rents.
- Another family has small children.
- We bought because of the public elementary school in the neighborhood.
Why did I belabor this?
Because you can see that the drivers of our decisions are different even though we would likely be lumped together in a demographic segmentation.
What happened to me?
We launched our nightclub in Creve Couer, MO with the same fanfare and playbook that we had used in other markets including:
- Nostalgia-fueled 70s disco theme
- Converting an old Baha Beach Club into a Boogie Nights
- Working with a local radio station as a promotion partner
- $1 Bud Light Happy Hour special to fuel food purchases and to introduce the club to our target demographic with the expectation that there would be some carryover from Happy Hour into the evening.
Our results?
- Disco still worked.
- People knew our location. Even though that later became a point of contention with the city and local authorities because they didn’t like the previous tenants so we were evil because we were also from out of town, opening a nightclub.
- Happy Hour went off like a bomb! Packed to the rafters from 6-8 PM. By 8:10, crickets. The bar was empty and it would remain empty every night once Happy Hour ended.
Why?
We missed a few important points by only looking at the demographics:
- Buyers in the area had been trained to move from Happy Hour to Happy Hour by bars and clubs in the area. The people had a favorite nightclub that we were never likely to beat, the cheap one.
- Customers didn’t buy much food because the special was for $1 Bud Lights and not food. We sold so much Bud Light we couldn’t keep it cold.
- The only promotion that would bring people back, another Happy Hour, later in the evening. This had unintended consequences like lower check averages, erratic demand, and more fights.
Ultimately, the nightclub didn’t work.
The margins weren’t there even when the club was packed.
At the time, the wholesale price of a Bud Light was around $.69 so you’d make $.31 a bottle, but you also had all of the other costs associated with putting that bottle of beer into a customer’s hands like staffing, electricity, rent, and more.
I also learned the lesson that you can’t beat the customer’s perception of value.
People were never going to pay full price for a beer because the target customers were not open to the perception of any bar or club being worth paying more than Happy Hour prices.
Most importantly, I learned the lesson that you have to do your research.
The demographics were comparable.
The location was similar.
Everything had to be lining up, right?
Wrong.
That’s my biggest mistake.
I trusted assumptions and didn’t ask questions to make sure what I was thinking was accurate.
I screwed up.
It cost me.
I moved to Seattle in the fall of that year with slightly more than $700 and mud on my face.
A mistake I remind myself to never make again.
So I ask questions.
Now it is your turn.
In Milwaukee, my favorite part of teaching branding to my executive MBA students was the question and answer portions.
Why?
Because their questions were thoughtful and amazing.
I got questions like:
- “Why do you tell people to only rebrand if it is ethically or legally required?”
- “You don’t believe in rebranding but Elon Musk rebranded Twitter to X and Mark Zuckerberg rebranded Facebook to Meta. Why?”
- “Many publicly traded companies practice discount–led customer acquisition strategies, but you don’t suggest we follow their lead. Why?”
Now, I want your questions.
Did you make a mistake in your marketing that you can’t overcome?
Do you want to know why I beat down on some ideas?
Let me know: email me, DM me, Tweet me, text me a voice memo, or mail me snail mail.
Get your questions in.
I’ll take the best ones and answer them in a future episode of ‘The Business of Fun’.
Dave
PS: You’ve made it this far so I know you love my emails.
Will you share this piece with one colleague or friend that you know needs to rethink their devotion to demographic segmentation?