Maximise your marketing spend

Maximise your marketing spend and get the best out of your existing customer

What percentage of your marketing efforts or budget is spent on customer acquisition and how much on sales to current customers?

Many small businesses focus on the first sale and spend too much time and money trying to find new customers.

Three reasons why this is flawed:

· Acquiring a customer costs 5 to 10 times more than retaining one (eMarketer, 2002)
· A 5 percent increase in retention yields profit increases of 25% to 95% (Bain and Company, 1990)
· 20% of your customers bring you 80% of your revenue (the old 80/20 rule which still holds)

There's gold in them thar hills -

...but first you've got to get at it. How? You need to:

1. Collect customer data and use it intelligently
2. Have different strategies for each broadly identifiable 'type' of customer, spending time and money proportionate to the value of each segment
3. Keep an ongoing, appropriate dialogue with customers  such as individualised offers, timely reminders of your products or services, requests for feedback
4. Understand what causes customer attrition and address it
5. Keep the contact with past customers by forging alliances with businesses offering complementary services or products

Turning information into knowledge

If you're not already doing so, it is vital to capture your customers' contact information. Be prepared to give them a reason, even an incentive to do so - they are doing you a favour after all. The simplest and yet the most powerful information to ask for is an e-mail address. You can always ask them more detailed questions later - it's essential to discover their needs and also their potential value to you.

Don't ask the same old questions just because they are what forms always ask for. Take time crafting them so that end up with not just information, but knowledge.

Customer data should be kept on a secure database, and you should have a privacy statement available for customers to read at the point they give you their data. It's crucial to familiarise yourself with the 8 principles of the UK Data Protection Act 1998 - a good self-assessment guide can be found at http://www.dpr.gov.uk/notify/self/front.html

Transactional information is just as important. You may already have a huge amount of information about your customers which is practically ready-to-use. Starting and keeping a dialogue going with customers after their purchase requires forward-thinking and a truly customer-focused approach, asking yourself questions such as:

- What other issues can I help them with?

- If they bought x from me six months ago, what might they be interested in now? Who do I know who supplies that and are they a potential partner?

- What's the best way to appeal to Type X customers, and what's best for Type Y?

Not all customers are created equal

A commonly-quoted statistic is that on average people have to be exposed to your message seven times before they respond to it.

Some advertisers (and, I'm ashamed to say it, e-mail marketers in particular) have taken this to mean that you should hit people over the head again and again. Whilst that can work for certain markets and products, it's crude and works on the old 'interruption' marketing principle that you have to force people to pay attention.

When it comes to talking to those who are already your customers, go easy on the hard sell. You have already won them over, don't irritate them by being too in their face.  Try instead to find out more about their needs so that your dialogue with them is appropriate.

Here's an example:

I'm a customer of stationery suppliers Viking Direct, and have been for some time. When I need stationery, I get it from Viking. They work hard at personalising their mailings based on previous purchases ('Dear Robin, we notice that you haven't ordered Manilla Envelopes A5 since February!') which I admire.

What I don't like is their habit of sending a new catalogue every week - in its plastic wrapping. I don't even bother to unwrap it, it goes straight in the bin. I know that there's a major new catalogue every six months, and that's the one I refer to. When I tap the details into their website, I sometimes get a lower price, which is great. But all those interim catalogues (perhaps 30 or 40 each year, I haven't counted) are a huge waste of resources. To be honest, if there was another comparable supplier I might change allegiance, but I haven't found one yet. So I go on putting up with the endless mailings and catalogues.

Viking have made the mistake of not categorising me correctly - they have made some assumptions based on transaction data, but know very little else about me. If they did, they would probably find there were thousands of others like me who would respond better to a quite different approach.

"Don't you want me?" - Why customers quit

Viking aren't going to go out of business if I decide to go to another supplier. But if there are thousands feeling the same way, or if I were one of their top 20% of customers, then it would be an issue.

On average, you lose 20% of your customers each year. 82% of those leave because they are unhappy. I've never complained to Viking about the catalogues - but apparently I'm not alone in this. The Strategic Planning Institute based in Cambridge, Pennsylvania conducted a study that uncovered some interesting facts:

- The average business never hears from 96 percent of its unhappy customers. 

- Of customers who have a complaint, 95 percent will do business again if the problem is resolved quickly.

So the lesson is: encourage customers to complain, or at least tell you what's working and what isn't. And respond promptly to customer enquiries. An August 2002 survey of US businesses found that 60% of customer e-mails were responded to within 24 hours (38% of those within 6 hours). In the UK we've got a long way to go before we achieve even those figures, and they're hardly stunning.

Putting it into action

Even if you regard your product or service as a 'one-off' you can still continue to earn off the back of previous sales - by partnering with other businesses offering complementary services or products. In this way you're anticipating your customers' needs and providing them with additional services. And even if they don't buy anything else from you, they may well be impressed by your customer care and refer others.

Here's an example. A ladies' clothing retailer has a premium range of jackets or suits. When each is sold, the salesperson asks if the purchaser would like to be a member of their Priority Club - invitations to view new ranges, exclusive offers, etc - for free. (This makes a nice change from the usual 'would you like to apply for a storecard?') All they need to supply is name and e-mail address, and the sales person notes the item sold and the size. In addition to sending out Priority Club mailings, the retailer can use this information, for example, to offer individual customers deals on end-of-range or exclusive items in her size.

A professional services provider is in an even better position to mine customer data, since he or she is likely to have full contact details, a record of which services were bought and when, and far more 'face time' with the customer than a retailer usually gets. In this situation there is no excuse for not building up and acting on this sitting goldmine of information. (Hairdressers, solicitors and estate agents take note!)

It makes sense to ensure you don't let sales slip through your fingers having paid all that money to attract a new customer. You get a better return for your marketing spend if you nurture your existing customers rather than continually going after new ones. All it takes is a strategic approach, a customer-focus and creative thinking.

 
 

ROBIN HOUGHTON (http://www.robinhoughton.com) advises small businesses and non-profits on how to make the most of their
marketing budget, specialising in online marketing. She has over a decade of experience in the sports industry and international marketing and was Nike's first UK Women's Marketing Manager. With a masters degree in Digital Media, she writes for a variety of offline and online media.