April 27, 2011

Growth Opportunities: Pay, Permission, Probability

In the eBook (Amazon Kindle, B/N Nook, $0.99), the Executive Team struggles with the concept of improving a business that has not grown in eight years.

Frequently, I talk about how much easier it is to grow by finding new customers than it is to grow by improving customer retention (i.e. loyalty).  Out on Twitter, the pundits beat me up over this concept, but in the real world, there's the harsh reality that it is terribly difficult to find ways to measurably improve customer loyalty.

That bring us to the concept of new customers.  Catalog marketers have an enormous advantage over nearly every other discipline, in that catalogers actively rent names at $0.06+/- a pop from Abacus.  This allows the cataloger to control exactly how many new customers are acquired, on an annual basis.

To me, there are three ways to manage customer acquisition.
  1. Pay for the opportunity (catalog list rental, television advertising, paid search, etc).  Older marketers, those who honed skills prior to the advent of the internet, adore this discipline.  Getting one of these marketers to think different is very hard.
  2. Permission.  Think Groupon ... you give Groupon your email address, making you a prospect.  They have the permission to send you daily email offers, and eventually you bite, becoming a Groupon customer.  In rare cases, this methodology "blows up", and you go from zero to a billion in a year.  In most cases, you don't fundamentally increase sales in the short-term, this is a long-term proposition.
  3. Probability.  This is what new media advocates promote.  They suggest that you attempt viral, social, or mobile strategies that "spread the word", helping you grow.  I call this "probability" because the probability of success is low.  You can follow every best practice in the book, and you improve your chances of success from 1 in 1,000 to 1 in 950.  But when you have success, you leap-frog the competition.
Marketers trained in "pay" have a very challenging time with permission or probability.  Those trained in "probability" determine that "pay is dead".


In this eBook, we consider these three methodologies without ever directly referencing them.  Ultimately, it's not that we are "catalogers" or "mobile marketers", it comes down to an issue of what we believe is the most effective way to acquire new customers.  Where do you stand?  Pay?  Permission?  Probability?