The hunt for new customers returns
The hunt for new customers returns
“I do see customer acquisition activity starting to pick up. It's a good indicator that people believe the recession is moving behind us and they are starting to devote dollars to customer acquisition again,” says J. Patrick Bewley, VP of global marketing strategy at Acxiom, an interactive marketing services provider. “I think we are seeing a new interest in righting the wrongs of the past. Acquisition marketing in the past had been a volume game. The folks responsible for acquisition marketing were tied more to the gross number of acquisitions – that's the way it historically had been done.”
Bewley explains that marketers are now trying to add customers who will have high lifetime value, instead of acquiring larger groups of customers regardless of their long-term buying power.
“As someone responsible for customer acquisition, I got paid for the number acquired and how quickly I acquired them. The problem that caused historically is that the customers acquired may not turn into the most profitable customers for my business,” he says. “Now we are talking more with marketers about acquiring customers that will have the best potential lifetime value.”
Mark Smith, EVP of Portrait Software, a marketing software provider acquired by Pitney Bowes in June, agrees that brands are beginning to move their focus back to acquisition marketing. He adds that marketers are also more often tying analytics to their acquisition campaigns.
“The trend I see is that everyone is trying to do acquisition in a smarter way. They want to know how they can use analytics to conduct their acquisition marketing even more intelligently,” he says, adding that financial brands in particular are quickly moving back to customer acquisition. “In the past, they had done customer acquisition by blanket mailing, but what they are doing now is being much smarter and trying to figure out … what is the right amount to pay in incentives and what is needed to win the customer, and how can we do that at the next level of communication?”
Many marketers are trying to reach potential new customers via online social networks, such as Facebook and Twitter. Dave Tryder, director of interactive and relationship marketing at Dunkin' Donuts, says his company uses a “blended approach to balance quality and cost per action,” including search, promotions, social media and portal partnership programs. His company has embraced social media for acquisition in recent years, he added.
“Social media has changed the way we look at acquisition because there are new places where our brand fans congregate naturally, like Facebook and Twitter,” says Tryder. “It's easy to make a real connection with our fans in these places very cost effectively, and these places provide a great environment to grow our internal data-base as well.”
However, marketing executives are split on the effectiveness of using social media for customer acquisition. Bewley explains that the financial and travel sectors are moving online very quickly, focusing on targeted display and other platforms. He adds, “I don't think in general [social media] is widely accepted yet.”
However, brands are decidedly taking advantage of other consumer technology improvements for customer acquisition. Craig Dempster, EVP and CMO at database firm Merkle, says marketers are increasingly using the mobile space for acquisition campaigns, along with other media.
“Another trend is mobile, and mobile interaction with other media. If I am using print and outdoor advertising, but my call to action is to text a message to a specific shortcode, I am allowing for response basically anywhere or anytime,” he says. “So mobile is a key channel of communications for acquisition. Mobile couponing is also playing a big role and on the fundraising side, we are doing a lot more text-to-give campaigns.”
Mobile isn't the only evolving platform that marketers want to combine with their existing campaigns. Dempster emphasizes that the splintered media environment places the onus on brands to distribute a consistent message across platforms.
“Marketers want to know, ‘How do I use display and direct mail together and how do I use direct mail and social media? And as I send somebody a direct mail piece, how can I offer them the opportunity to respond online, or to share that offer through their social network?'” says Dempster. “Three years ago, you had someone very focused on direct mail acquisition and someone else very focused on digital media. Today, those barriers are starting to break down in terms of how those media play a role.”
Ash ElDifrawi, CMO of online retailer Hayneedle.com, says his company continues to focus more on customer retention than acquisition. However, he notes that retailers are more often using flash sales and retargeting to attract new customers in their acquisition efforts, while also mixing in various channels, including social media.
“Right now, retailers are trying to diversify their acquisition channels, but having a great brand is clearly the best way to do that,” says ElDifrawi. “Social media is a great tool to engage your customers, and a great way to create stickiness around your brand, but I think we are still in the very early stages of that.”
Many marketers are noting a shift from use of e-mail and direct mail customer acquisition lists since the beginning of the recession (See sidebar, page 54). As brands spend more on social media and other newer – and more interactive – acquisition platforms, they are turning to lists considerably less, according to industry experts. Their reasons for doing so include dilution of acquisition lists, financial difficulties in other industries and low return on investment.
Dempster explains that the financial troubles of the publishing, catalog and fundraising industries are partially to blame for the financial troubles in the list industry.
“When you look at the response list world – the catalog lists, the fundraising lists and the publishing lists – all three of these industries are having challenges, and that is fueling the changes in the list marketplace,” he says. “If you think about it, they are all going online. They used to use tons of lists to drive acquisition activity, and now they're cutting back on their costs and trying to move more business online and to change their businesses.”
Bewley contends that marketers themselves contributed to the downfall of the list industry by overusing their prospect files.
“What's killing the lists slowly is that markets have abused them and have not had a rigorous way to bring relevance to them,” says Bewley.
Smith argues that marketers are using acquisition lists less often because they can no longer justify spending on platforms that show smaller ROI.
Smaller budgets had an impact, says Smith. “We may get a few new customers through the lists, but we know we won't get very many. Those were the things that got cut when people reduced their budgets.”