JNC-Web-Blog-Home-Header-Banner-Image-1200x800.jpg

J&C Blog

Find all the latest marketing trends on the J&C Blog.

Growing or profiting from customer marketing. There’s a calculation for that.

Posted by Ron Jacobs on March 27, 2014

When times get tough, businesses often shift their focus from creating new customers to creating the greatest amount of revenue from their existing customers. Most of us know that creating customers costs money. And we have seen the math that describes how marketing to customers can contribute anywhere from five to 10 times the profit of marketing to prospects. So, if profits are an organization’s goal, then organizations should invest more money on marketing to customers than on customer acquisition, right?

Customers are the source of any organization’s profits. Creating a real long-term advantage evolves from a business strategy that focuses efforts on improving the effectiveness of overall customer outcomes. So marketers need to focus where they are most likely to generate the greatest amount of profit. It seems like an open-and-shut case.

The only problem with this notion is that the customer bucket is always leaky. No matter how good a CRM or customer marketing program your organization has, it is going to lose some customers through churn and attrition. So, if an organization only focuses on marketing to customers, at some point there may not be enough customers to sustain the business long term. And growth?

It is true that organizations cannot shrink their way into becoming larger, more efficient enterprises. They may have to slow down their growth if their marketing programs start to become inefficient. This happens when organizations grow too fast and get ahead of profitable sales or expand their marketing program beyond the size of the best, most responsive customers. For example, when organizations overmail, they first clear all the low-hanging, then the mid-level fruit. This leaves behind the least likely to respond. Mailing the least likely to respond generates less response and a higher cost per response. Marketers that measure can see this effect and react to it.

So you say you follow direct mail best practices. Your organization has developed successful email marketing programs. And you have mobile optimized email, so that it looks great on any screen. Anyone assessing your CRM programs would conclude that they are well oiled. So what’s all this about growing too fast and not meeting your goals?

This is where it gets a little more complicated. When you are establishing your marketing goals, growth and profit are not usually mutually exclusive ideas. A lot of organizations have set their goals on both. But growing your customer base requires months of planning, and considerable resources from which you may not see a return for months or even years. Increasing your profit from existing customers is easier than growing your customer base, but not unless you have some tools that allow you to measure your performance.

Organizations still seem confused about how they can improve the effectiveness of their growth strategies while gaining advantage from the efficiency of their customer marketing efforts. Does it require a Big Data approach? A lengthy analysis? Do you need help from your quants at one of the top direct marketing agencies? Luckily, the answer can be much simpler than that.

In his new ebook, Profiting from the Magic of Marketing Metrics, Peter Rosenwald describes how, armed with just a spreadsheet, you can calculate how much to invest in new customer relationships, how much to spend retaining existing customers or how to determine which segments of customers are really your best, most profitable. In fact, Profiting from the Magic of Marketing Metrics is full of clear formulas that simplify all aspects of customer measurement, from acquisition to conversation to attrition. You will learn how to calculate Return on Marketing Investment, Allowable Cost per Order and the Future Value of Non-Purchasers. But wait, there’s more!

Not only is Profiting from the Magic of Marketing Metrics full of easy-to-understand calculations that marketers should be using every day, Peter has included a set of spreadsheets that are easily downloaded and have all the formulas programmed into them. As quick as you read the book, you will be able to input your own data, and use these spreadsheets yourself. You will be able to use this data for establishing your marketing goals and measuring your results.

Albert Einstein was fond of saying, “If you can't explain it simply, you don't understand it well enough." Peter Rosenwald really understands the economics and measurement of data-driven marketing. He was the founder and first chairman of Wunderman Worldwide, one of the world’s top direct marketing agencies. Peter has spent the last decade and a half in Brazil, helping companies such as Grupo Abril become Latin America’s largest magazine publisher. Now a much in demand advisor, Peter’s Consult Partners continues to help companies around the globe establish their own performance marketing frameworks.

Topics: CMO

Recent Posts