Miglautsch Marketing has pioneered automated modeling since the early 90's. Many of our clients produce four or more models per month, we have built more customer models than virtually any other direct marketing company. MMI is considered one of the world's leading modeling companies. With clients such as Guitar Center, Adobe The Bay and dozens of catalog companies, our systems have proven themselves in the real world of direct mail marketing for some of the biggest mailers in North America. In the past 6 years we won 11 blind tests against 8 of the world's best modelers. Click->John's Welcome to hear more.
For as long as I have been in the Direct Mail Marketing Business - there seems to be greater focus on customer acquisition than on customer service. The reason is simple... no matter what you do, you are always losing some of your customers... so you need to replace them. If you gain them faster than they go, you grow.
Iit seems fairly easy to maintain customers - we have RFM after all - so we can just keep contacting. But to get NEW customers takes genuine creative energy. So, as illustrated above, we take time, money and creativity and sow to the wind. There are even accounting methods to help us. A major business catalog client allocated all his fixed overhead to customer orders, but none to initial new-customer ones. He said, "The warehouses are for customers - not for prospects." When someone orders for the first time, the merchandise still ships from the same place... but this allowed the customer acquisition to look more profitable - have a better break-even, to get more money allocated to it - to fuel growth.
Another great justification for putting new customers ahead of old is Lifetime Value. Tom's cartoon could have said - we'll pay for it by spending their future value. We look at what the current customers are worth and assume our new ones will be comparable. The tricky part with this thinking is - if anything is significantly different - the future value will change. So, if the economic climate changes, or competitive forces, new technology, different acquisition sources, different offers, different merchandise, different customer handling procedures... then your new customers will very likely not be of the same value as your existing ones. The more you amp up the incentive to buy... the better the price, a better rebate, higher quality, extended terms... the more incentive to buy now, the more likely it is that they ONLY buy now - unless you re-incentivize them to buy again... further lowering their value in comparison to existing customers. Two of my clients waded into Affiliate Marketing. After a year, their sales had grown, however, they found that between the affiliate commissions and the low price offer, they didn't make any money. Worse yet, these new customers, gathered in a completely different way, did not return to re-order.
The truth is, one cannot spend 'future value' for anything. Savy mailers know that you do not count your chickens before they are hatched. The cartoon is doubly true if you bank on future value.
So how do we pay for customer acquisition? The most important concept is the opposite of Lifetime Value. Rather than thinking of siphoning profits from the customers, we need to think about how we can increase existing customer value. The more we serve, find new things they would enjoy, make sure we keep in contact and do our very best to help if there is a problem... the more they will stay with us. My CRM video explains that it is very hard to spend enough on your best customers... it is an overflow concept (plus the fact that your customers will find you more customers).
How is this different? It sounds just like the cartoon. Perhaps it is more of a mind-set. First, we need to stop thinking of our long time customers as the dying group and our new ones as the resource. Second, it is a principle of stewardship... what you value, you will attract. Spend your creative thinking on ways to become more attractive to our customers, to work with them, to get them to send us their children (as customers). Stop trying to wring every last drop of their blood - just to find more to attempt the same.
I've been calling myself a "Junk Mail Expert" for years (decades?). One night I was at the head table with Dr. Gene Del Polito. After introducing myself, I explained that people feel empowered when I use the term. We are actually giving our recipients the right to throw away our beautiful (or not) creativity, GUILT FREE.
Lest you think that trivial... tell me what else fits? Even the spoilage in the fridge lets us know that we bought too much, didn't cap the bottle or haven't cleaned regularly. Only junk mail can be tossed aside with no thought that "I might need this some day." No worries, more will come! This is the foundational basis for the Supreme Court allowing us to directly intrude peoples' homes.
"The distance from the mailbox to the trash can is sufficiently short not to constitute an invasion of privacy." Read More...