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 through advertising than by referral from an existing relationship. Yet even while pulling out of a recession 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.
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. 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 an economic climate that requires 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- increasing loyalty and gaining 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 (yes, it’s that word again) is a home run because the transactional communications budget also supports your marketing program.
Cost-savings score big, but the game-winner is that TransPromo (or as I prefer, Transactional Response Marketing or 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.
TRM 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 do you make the business case for Transpromo or Transactional Response marketing based on immediate response rate, long-term customer retention and value, or substantial operational efficiencies? Does it taste great or is it less filling? Is TRM as switch hitter? Have I been watching too much baseball? It’s a nice hot Sunday afternoon– I think I’ll go grab a beer and ponder this at length.