Myth: The Internet created a new economy where the old rules of marketing no longer applied. The new rules were to attract eyeballs at all costs.
Reality: The Internet is a powerful new marketing channel that should be used as an extension of fundamental old-economy marketing principles.
The Internet has proliferated faster than any communications medium in history. Because of its pervasiveness, there initially was a tremendous amount of hype around how the Internet “changes the rules of the game” for marketers.
By now, though, it's clear that the new-economy mandate to attract eyeballs at all costs was fundamentally flawed. As pure-play Internet companies poured millions of venture capital dollars into promotions, banner ads and aggressive e-mail campaigns, there was not a commensurate rise in brand loyalty and customer lifetime value. As a result, the dot-coms that once scoffed at old-economy companies have fallen off the map like so many e-dinosaurs.
Meet the new rules, same as the old rules. It is clear that old-economy marketers had the rules of the game right all along. Indeed, the Internet does not change the fundamental rules of marketing; rather, it provides the capability to get better results from the old rules. For example, direct marketers who are used to getting 1 percent to 2 percent response rates from traditional direct mail often can get results 10 times greater by using HTML e-mail at a fraction of the cost. And advanced personalization and dialogue marketing technology can help companies create virtual corner stores, one-to-one relationships with millions of individual customers.
This is why smart marketers are going back to basics and focusing on using the Internet and e-mail to build stronger relationships and greater customer lifetime value rather than simply attracting buzz and eyeballs. They are also seeking new ways to integrate the interactivity of the Web and e-mail with their traditional channels. These are the mandates for success in the post-new-economy world.
Thus, when plotting the future, marketers should be guided by the past. Here are five old-economy steps that marketers should follow in the post-new-economy world:
Focus on customer assets. One positive byproduct of the new-economy “grow fast quick” approach to Web marketing is that many companies have already built a sizable audience. This demographic is likely to be the most responsive, given previous response to the value proposition. It's reasonable to expect customers in an existing database to respond far more frequently than those from a list vendor.
Given the high cost of customer acquisition, marketing to an existing audience is likely the least expensive route to profitability. Companies should maximize their previous investments by nurturing and growing their existing customer relationships, seizing cross-sell and upsell opportunities to generate additional revenue.
The 80-20 Rule: Who are your real customers? As companies raced to acquire a million-name database of prospects in recent years, they picked up a few worms along with the apples. With new cash conservation rules imposed on businesses, it's important to spend resources wisely.
Decide quickly who the best customers and prospects are from the database, and immediately approach them with a meaningful dialogue. Your best customers and prospects are the repeat purchasers, visitors and subscribers on your file that will deliver the greatest return on investment.
Keep your best customers — they hold the most promise. Customer acquisition is many times more expensive than customer retention. And the investment in acquiring a new customer — list procurement, media buys, offer costs, fulfillment, etc. — typically yields a far lower return than an investment in growing existing customer value. Know whom to target, and once the most valuable customer segments have been identified, build relationships. If this segment has been delivering value without managing the relationship, focusing on this relationship will yield even greater value.
Clone your customers. Following the first three steps will yield a small, targeted group of customers; perhaps too small to meet revenue goals. Thus, the pool will have to be expanded. Because the profile of your best prospects will resemble those of your existing customers, you will need to identify the characteristics of the latter group. Analyze every characteristic of existing customers to determine what made them loyal customers. The key is to identify those existing customer assets that have the greatest value. Then to grow the customer base, first target the prospects that resemble high-value customers. This is where data mining and analysis comes into play and can take the form of primary and secondary research, demographic and behavioral modeling, or online/offline surveys.
Think longitudinally, act individually. Now that there's a highly targeted and manageable audience segment, don't inundate it with marketing messages. Instead, leverage the information to script the scenario that guided them into the profitable customer segment. What were key attributes that converted them to a high-value customer?
Remember, this is not a short-term acquisition tactic but a longitudinal customer life-cycle management strategy. The object is to build the relationship to where the business becomes a trusted agent. Once a business has those quality relationships, commit resources and time to secure high-value accounts and provide revenue stability.
Once a long-term customer strategy, dialogue and scenario are in place, a business can truly begin to deliver one-to-one experiences that deliver greater value to customers because it speaks directly to their needs. A customer who sees value in a relationship will be a loyal one.
Database marketing tactics like these prove most useful during bear markets. Given the budget constraints and fixed revenue goals during a market downturn, the object of the game has shifted from sheer audience growth to revenue generation. Traditional direct marketing professionals have used these tactics for a long time, and they should be re-embraced as critical tools during the current economic downturn.
New rules for the new economy? Smart bear marketers know that the old rules are still the best rules of all.
