July 07, 2008

Non-Traditional Customer Acquisition At The MeritDirect Co-Op

On Friday at the Merit Direct Co-Op, I will give a presentation on Non-Traditional Customer Acquisition.

In traditional direct marketing, we rented or exchanged lists, with the goal being to identify new audiences that are receptive to our message. We paid an intermediary (Millard, MeritDirect, Abacus) a sum of money for the opportunity to push a message.

In traditional online marketing, we pay for clicks. We pay an intermediary (Google, Yahoo!, MSN) a sum of money for the opportunity to allow the customer to pull content from us.

Financially, the two models are nearly the same.

Paid Search




Clicks
10,000
Conversion Rate
1.5%
Buyers
150
AOV
$100.00
Demand
$15,000
Net Sales 80.0% $12,000
Gross Margin 55.0% $6,600
Less Ad Cost $0.52 $5,200
Less Pick/Pack/Ship 11.5% $1,380
Variable Profit
$20
% of Net Sales
0.2%
Ad to Sales Ratio
43.3%
Dollar per Click
$1.50






List Rental/Exchange




Households
10,000
Response Rate
1.5%
Buyers
150
AOV
$100.00
Demand
$15,000
Net Sales 80.0% $12,000
Gross Margin 55.0% $6,600
Less Ad Cost $0.52 $5,200
Less Pick/Pack/Ship 11.5% $1,380
Variable Profit
$20
% of Net Sales
0.2%
Ad to Sales Ratio
43.3%
Dollar Per Book
$1.50

These days, innumerable pundits tell us that both models are irrelevant in a social media world. Of course, the pundits cannot even identify what form of social media is relevant (2005 = Blogs, 2006 = Facebook, 2007 = Twitter, 2008 = Friendfeed & Plurk), they just tell us we're dodo birds headed for extinction. Still other pundits say that print-based marketing is harmful to the environment, demanding that consumers be in control of how they are marketed to (as a proxy for protecting the environment).

My talk will go in a different direction, not leaning toward social media pap, not focusing on traditional direct mail or pay-per-click marketing or multichannel approaches to success or putting the customer in charge.

My talk will focus on how we can derive intelligence from our online marketing activities, transforming that intelligence into the fuel needed to find new customers at almost zero cost.