Commentary

Leveraging Existing Customer Relationships

by Dave Hendricks , April 6, 2009

Successfully navigating your business through today's tumultuous economic climate is a challenge at best. With consumers avoiding malls and brick and mortar stores in droves, there has never been a better time to engage your company's email subscriber database in an effort to make up for lost sales. However, while this is a smart step for marketers to take, it must be done in an intelligent manner that recognizes each consumer as an individual with a unique response and demographic profile.

Focus on your company's strongest assets -- your existing customer list. It often plays second fiddle next to acquiring new customers, but it shouldn't.

According to a report by Frederick Reichheld of Bain & Company, acquiring a new customer can cost 6 to 7 times more than retaining an existing customer. What's more, marketers that increased their customer retention rates by as little as 5% saw increases in their profits ranging from 5% to a whopping 95%. So, marketing to this audience would seem to be a no-brainer, right? Not always.

It's common to overlook your existing customers because the idea of driving new business can feel more rewarding, plus you may believe these older customers are no longer interested in your brand. But these customers are your best source of business stability and growth. This is one of the myths debunked by Razorfish's Jamie Schissler in a recent MediaPost column: "In challenging economic times when budgets are under increasing pressure, maximizing the value of your house list and keeping existing consumers engaged while deepening their relationship with the brand is critical."

Once you've recognized the inherent value of your existing customer list, you need to ask yourself, what is the appropriate way to reach them? Many of the names are sure to be dormant, and you do not want to risk damaging the relationship and driving the costs of your email programs higher and higher. The cost of resending to the dormant names can actually be invested into the reactivation effort if it is conducted cleverly.

According to analysts, more than 80% of all email addresses are unresponsive to offers, even from retailers with whom they have prior purchase relationships. Despite the failure of these list members to respond, email marketers will continue to market to them again and again.

Mailing campaigns today are flawed for one basic reason: offers are not timed for the recipient. Marketers tend to send offers in batches, ignoring the fact that their subscribers may not be able or available to open the mail when it's sent. By the time they have a chance to check their inbox, the message is buried by newer messages and also loses relevance.

Despite paying the same amount to deliver email to addresses that don't open as to those that do, marketers continually target unresponsive addresses in the hopes that the next message will be the magic bullet that leads them to open, click and purchase. So, why do marketers dedicate more than 90% of the email budget to sending to these addresses? Because, when done right, email produces the highest ROI of any marketing tool available today.

It's easy to get overwhelmed by the enormity of today's economic challenges and feel the need to drive new business as the only way to stay above float. But be sure to leverage your past customer relationships; they are the ones that can help you get through these challenging times. Don't pass the insanity test and do the same thing over and over and expect different results. Treat your consumers like the individuals they are and you will see the difference in your bottom line.

4 comments about "Leveraging Existing Customer Relationships ".

Check to receive email when comments are posted.

Ryan Deutsch, April 6, 2009 at 11:51 a.m.
Great points Dave. Too often companies pass over lucrative reactivation opportunities. StrongMail's Peter Norton shared a mini "case-Study" on the topic in a blog last week, detailing how a client generated $67,000 from a "cleverly conducted" program. Click here for the details: http://www.strongmail.com/resources/blogs/email_marketing_insights/2009/04/spring-cleaning-time-to-dust-o.php
Reply

Larry Roache from CPI, April 6, 2009 at 1:15 p.m.

Great observations Dave, In delveloping customer retention programs it's amazing the number of new clients we see that do not see the value in reaching out to past customers after they spend time, money and evergy into developing them. We urge them to practice the three C's (Care, Custody and Control)

Dave Hendricks from LiveIntent, April 6, 2009 at 1:24 p.m.

Hey Folks:

Thanks for the comments. Since this article is meant not to be 'promotional' I couldn't comment that Datran Media recently worked with one of the largest department store chains on one of these projects. We reactivated 450,000 customers who had not responded in a year. While doing that, we reduced the amount of mail sent by the company's ESP. So they realized a cost savings and re-engaged with their clients.

These customers were once interested in your brand. You can reignite their interest. Don't let them drop out of the bottom of the bag!

Dave

Bill Kaplan from FreshAddress, Inc., April 7, 2009 at 6:24 p.m.

Excellent points. While customer acquisition has always garnered the lion's share of most companies' marketing budgets, the fact remains that less sexy customer retention and re-connection services almost invariably produce a higher ROI.

As regards to the 80% of non-responders in one's email files, your best bet is to try to reconnect with these former customers or donors at their current preferred email addresses rather than some old email accounts they stopped checking months ago. An Email Change of Address and email hygiene and correction service can remedy this situation. Others approaches include postcarding and calling in an effort to rebuild these former relationships and obtain updated email addresses for going forward.