Is now the time for acquisition marketing?
The gloves are off
Merkle's Tim Berry and Queensboro Shirt Company's Fred Myers weigh in on acquisition marketing.
YESTim Berry, Co-president, Merkle
More than 20 years in CRM marketing
First, I want to go on the record and say how important both acquisition and retention marketing are for maintaining a strong brand. Pulling back focus or spending on either of these areas could send your marketing performance into a rapid descent.
Forgoing acquisition marketing is the first step to sending your brand into a death spiral. It is the lifeblood of a company's health, and depriving your company of new customers is like depriving your body of food because you can't afford it. You eventually die.
A down economy provides one of the best opportunities for marketers to invest more in acquisition programs. History shows that many companies pull back on marketing spend as the economy declines, resulting in less competition and stalled growth. Today's hurting economy gives you an opportunity to gain a competitive advantage by acquiring more customers than your competitors and creating a platform for sustainable growth.
The tension between acquisition and retention marketing is not new, and statements like “Your next best dollar spent is on retention marketing” are shortsighted. I for one don't buy it! As a statistician who focuses on marketing accountability, my nature is to look at the numbers, and they just don't support that statement.
These arguments are based on flawed metrics that compare the cost per acquisition (CPA) to a metric that tries to get at the cost of retention. I have yet to see a company do this accurately. Instead, I suggest companies look at the incremental effect that marketing spend has on acquisition or retention gains and at the lifetime value of the customer or prospect.
The decision on how to spend your marketing dollars is dependent on the industry, the competitive landscape and the performance of your programs. Retaining your customers is often more difficult and costly than acquiring a new customer. Be smart with your marketing dollar, and use predictive modeling and other analytical techniques to optimize your marketing spend. If winning in business is about growing, then acquisition marketing is an absolute necessity for your company.
NOFred Meyers, Chairman and founder
The Queensboro Shirt Company, more than 29 years in b-to-b marketing
Our b-to-b customer acquisition costs, on a per-customer basis, essentially doubled in 2009. Compounding this challenge was the fact that our average order value from existing customers, on prices that we cut to try to increase purchase frequency, fell by about 30%. This strategy worked to a degree, but really cut into margins.
So not only did it cost us twice as much to acquire a customer,it was taking those customers much longer than normal to become profitable to our company.
Like many others, we have nipped, tucked and in some cases resorted to all out amputations within our business model as we have dealt with this retrenchment of demand. Like many others, we are currently making as much, if not more, money than ever.
However, these profits have come without meaningful growth. We simply have not figured out a way to aggressively acquire new customers and make our business model work with current acquisition costs. From everything we are seeing and hearing, our situation is not uncommon.
On the business-development side, we have lots of exciting things going on with technology and a number of projects around the edges of our business that could be transformative. However, with the banking and credit situation as tenuous as it is, it would be sheer insanity to ratchet up acquisition with demand still as obviously weak as it is today.
The way it looks is that until the banks loosen the spigots, money will just not flow, unemployment will remain high, the recovery will remain tepid, and trying to achieve growth through new customer acquisition will be a fool's errand.
In this environment, retention has to be the primary focus of our marketing efforts, while at the same time, we continue innovation, find new things to test, and watch, wait and are ready to jump at the first signs of improved demand.
Today, there is just not enough tide to float the boats. Smart marketers need to stand on the shore, waiting and watching other foolhardy souls diving in headlong.
Direct Marketing News DECISION
Marketers, history has shown, are wise to conduct both acquisition and retention programs. Yet in these troubling economic times, marketers would be wise to follow Meyers' advice and wade carefully into customer acquisition
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