July 29, 2007

Best Customers

There is an amazing difference between "new" forms of direct marketing (like paid search) and classic direct marketing.

Paid and natural search is all about intercepting a customer when the customer has a need. You don't necessarily know if this customer is your most loyal customer, or one who has never heard of your brand.

Classic direct marketing is all about "pushing" a message at a customer. And in order to get the best return on investment, it is perceived that it is best to "push" your message at "best customers".

Take your average multichannel retailer. If you believe in the old adage that "multichannel customers are your best customers", then your marketing efforts have to be focused on these individuals.
  • If you are launching a new catalog title, you'll send it to this individual.
  • If you are moving from one e-mail campaign per week to two e-mail campaigns per week, you'll want the new campaigns blasted to the best customers, giving them the best chance to succeed.
  • If postage costs are chewing up your profits, you are unlikely to pull back spend among your best customers, who spend enough to offset increased costs.
  • If you're having a store event, you'll want to notify your best customers about the event.
  • If you're opening a new store, you'll want to notify the best online/catalog customers in that trade area about the new store.
  • If you have a loyalty program, you want to reward your best customers, right?
In each situation, direct marketing activities are going to be focused on "targeting" best customers.

The majority of companies employ this type of strategy --- each marketing campaign is unique --- ignoring the targeting strategies being employed by future/concurrent/prior campaigns.

Is the "best" strategy one that focuses on "best customers"? We'll talk a bit about this topic this week. You are encouraged to offer your thoughts.

2 comments:

  1. Great food for thought. I think that the 'best' strategy is the one that a) best serves the customer and b) makes you the most $. For example, if a multi-channel buyer has told you (either directly or through actions) that they prefer to come to you (via your website) vs. having you come to them (via direct mail), then you may not want to waste a dm piece on this individual. Your revenue may just remain equal (high) and your costs may be lowered (by not wasting that DM that this individual will never respond to).

    Then, there's that pesky question as to how to define 'best'. Simply because someone deals with you through multi-channels doesn't make them your best, right? I think best usually equates to most profitable, which considers transactions (how much/often are they buying from you?) and costs to serve (how often to they call customer service or return merchandise?). Longevity (how long you'll enjoy their patronage, or lifetime value) is another component of the equation.

    There are a ton of factors. I'm not solving this on my own this Monday morning :)

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  2. I'm always a fan of classifying "best" customers as those who are "most profitable".

    In direct marketing, we get to play a big role in determining which customers are most profitable.

    In retail, we play a very passive role.

    Online is somewhere between direct marketing and retail.

    Thanks for the comment!

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