December 11, 2011

Dear Catalog CEOs: Low Cost Customer Acquisition

Dear Catalog CEOs:

There are many ways to acquire new customers.

Some companies (probably yours) pay a co-op $0.06 per prospect, for the right to mail a prospect one single time.  Of course, the cost is far greater ... you owe your printer $0.17 per prospect, you own your paper rep $0.17 per prospect, and you owe the USPS $0.17 per prospect.  You owe the company that delivers the catalog deep into the postal system a penny or two per prospect, and when that customer visits your website, you owe a series of vendors who keep your website buzzing a penny as well.  You owe the power company a fraction of a penny for providing the coal that runs your website.  I could go on and on.  You pay a ton of people money for the opportunity to "maybe" acquire a new buyer.

It's no different online.  Instead of paying your printer/paper rep/USPS/co-op money, you owe Google $0.57 per click.

Those are the old-school ways of acquiring customers, and they're expensive.  So expensive, in fact, that you can only acquire a small number of customers ... paying customers that generate enough profit to offset the costs associated with acquiring the customer.

Co-ops provide you with Traditional customers.

Google provides you with Transitional customers.

And, for many of us, that's more than enough.

But if you want to see something interesting, pay attention to the ways that businesses catering to Transformationals acquire customers.

It's different.  I'm not saying it is right or wrong.  But it is worth paying attention to.  Social isn't a Twitter feed that 129 customers follow to learn about 15% off plus free shipping today only!  Social and Mobile are built into the fabric of the entire experience, the entire experience attracts users, users attract users, and a percentage of users pay money.

I know, I know. You sell widgets to 57 year old customers, and 57 year old customers don't care about any of this.  I agree, your 57 year old customer is a Traditional customer, and is not going to change. You're going to have to mail catalogs to get this customer to purchase, and you're going to have to pay co-ops for a long time to find customers that will be 58 years old next year, 62 years old in five years, and 67 years old in ten years.

So, I'm not asking you to create some viral customer acquisition program built into the fabric of Facebook, because that won't work when you target a 57 year old customer.

But I am asking you to pay close attention to how Transformational customers behave ... pay close attention to the businesses they purchase from ... pay close attention to the ways that these businesses generate network effects ... pay close attention to how these businesses acquire customers at a very low cost.

Here's an example, click here.  I realize this isn't your business model, but I'm not asking you to follow this business model, I'm asking you to pay attention to what other people are doing.

The future of direct marketing is low cost customer acquisition.

And while the catalog business model is effective for at least a decade while the baby boomer generation eases into retirement, we'll eventually need to become efficient at marketing to the Transformational audience, in order to improve our odds for long-term success.

1 comment:

  1. Things are definitely changing, and quickly. Sending anything via snail mail is slowly becoming a thing of the past. The costs just don't justify its effectiveness anymore


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