Spring Forward with Transaction Communications

By | March 23, 2010

I’m ready for purple crocuses and buds on the trees.  Baseball teams are at spring training and here in Boston fans are starting to gulp down the Red Sox kool-aid.  Why shouldn’t 2010 be a winning year?

There are signs that the economy is also coming out of its long winter, but no company I’ve interviewed lately will be spending like Steinbrenner’s Yankees.  The common theme is expense management and the mantra is “do more with less”.  For marketers, it’s a spring to think about spending smart.

Spend Smart. Work the Bench.

For years we’ve been told that it’s smart spending to market to our current customers.  Patricia Seybold, Don Pepper and Martha Rogers have written volumes about how it is good business to keep and grow a customer. As far back as 1996 with One Stop Marketing, Jonathan Trivers concluded that it costs three times more to acquire a new customer than it does to re-attract an existing customer — and it costs 30 times more to acquire a new customer through advertising than by referral from an existing relationship.  Yet still in 2010, shiny new ad campaigns draw the majority of our budget and our attention.  We don’t work the bench; we spend big bucks to bring in a marquee shortstop. 

Generating New Fans

According to Trivers, about 95% of marketing dollars are focused on attracting new customers at the bottom of the “loyalty ladder”. I like the image of moving customers up a loyalty ladder.  Customers atop this ladder are so satisfied that they won’t leave you at any price and they are active promoters of your business. A more recent incarnation of this is the Net Promoter score (See more about the Net Promoter Score concept at http://tinyurl.com/y8kq4g8  ) Rather than pouring out all the budget at the bottom of the ladder, companies should be spending at least 30% at the top half of the ladder leveraging existing customer communications.  According to J.D. Powers, in the auto insurance industry 56% of highly satisfied customers will recommend your business to a friend; such customers report making 2.5 actual recommendations and 46% of them say they would never leave you. Results are similar across industries.

So in this spring of smart spending, consider winning by increasing focus on your customer base. Know that this can be a really big win—like a Red Sox win against the Yankees in late September.  Why?  Because the most effective way to market to your base, to increase their loyalty and gain new sales and referrals, is also highly cost-efficient.  You can leverage the transactional documents your company must produce and deliver to customers.  In lean times, more than ever, a TransPromo strategy (or more accurately, a Transactional Response Marketing strategy) is a home run because the transactional communications budget also supports your marketing program. 

Scoring Points with Transactional Response Marketing

Cost-savings score big, but the game-winner is that Transactional Response Marketing (TRM) can achieve significantly better results than more costly traditional forms of marketing such as direct mail or print/TV/radio advertising.  TRM can achieve these powerful results for two reasons.  First, research shows that transactional communications are important to customers so they pay more attention to them – and therefore to the messages you integrate with these communications.  The average person will give a statement nine times more attention than a piece of direct mail.  (Less than half of direct mail is even opened.) Again, according to J D Powers, transaction documents are a key driver of customer satisfaction, comprising 41% of the consumer finance satisfaction score and 17% of the credit card industry satisfaction score. Second, the data that drives transactional communications enables you to integrate specific, personalized, highly relevant messages and offers that are more likely to please customers and/or to get them to take action.

Transactional Response Marketing is powering winning marketing teams today.  A March 2008 study by Aberdeen Group showed that among companies meeting best in class standards, those utilizing closed loop marketing exceeded other best in class peers.  The closed loop group achieved on average 6% greater ROMI and 7% more lead conversions. Revenues per account were 3% greater and average return on marketing campaigns was 14% greater. Transactional Response Marketing is closed loop marketing applied to transaction documents. Company success stories include Avis Australia which saw response rates rise from 2.5% to 10% when invoices were utilized to extend offers vs. other approaches such as direct mail or advertising.

So as you move into spring think about customer marketing using your transaction communications as a smart, cost-effective area of focus.  Think about TransPromo as a winning strategy to reach your customer base and move them up the loyalty ladder.

Stay tuned for more on the business case and, because excellent execution is an absolute requirement for TRM success, lots of ideas on how to form the right team and find the right tools to play your best game.

I’ll be presenting “The Business Case for TransPromo” at On Demand in Philadelphia on Tuesday April 20th with Tom Lee Director of Customer Experience and Advocacy. Too bad the Phillies will be in Atlanta that day.

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2 thoughts on “Spring Forward with Transaction Communications

  1. Aaron Savage

    Excellent article, and you are spot on with your baseball analogy (which if it’s ok I would like to borrow and use with credit given to you). It is incredible the way that money is thrown at an advertising campaign but more effective marketing communications are left to pick up the scraps. I think it’s to do with being visible and big that somehow endorses the big invoice.

    We developed a online marketing strategy along the same lines and launched it as a new company last year (right when things got challenging). The aim was to move the focus away from individual tactical disciplines and place the focus on a strategic approach to customers and create a ladder to develop customer relationships. This is very much a different approach to a lot of digital agencies (who focus on tactics and more often than not have an advertising solution).

    It’s been a tough year but we are starting to get through to customers now and our existing customers are seeing incredible results coming through, so it does work and the approach you talk about does deliver the results promised.

    Best of luck with the conference and feel free to refer to any of this if it helps you.

    Kind regards

    Aaron Savage
    Interactive Mix Limited

  2. Bob Raus

    Great article Elizabeth!

    Many companies with an established base of customers generate new sales via a “churn” strategy. It makes sense to market next generation replacement products, and complimentary products and services to existing customers in order to try and gain more “wallet share”. Examples could include workflow software products to hardware customers, professional services to workflow customers, advanced finishing & tracking ADF solutions to hardware customers and more.

    Finally, having income from several product lines can help balance revenue peaks/valleys as markets and economies shift and adjust such as when print volumes decline, but electronic communication volumes increase.

    Look forward to seeing you and Tom Lee at On Demand!

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