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 growing pervasiveness, there initially was a tremendous amount of hype around how the Internet "changes the rule 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
Today, 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 1-2 percent response rates from traditional direct mail can often get results 10 times greater by using HTML e-mail, at a fraction of the cost. And advanced personalization and "dialog marketing" technology can help companies create virtual "corner store" 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 out the future, marketers should be guided by the past. Here are six "Old Economy" steps that marketers should follow to ensure success in the post New Economy world:
Step 1--Focus on customer assets
One positive by-product of the New Economy "grow fast quick" approach to Web marketing is that many companies have already built a sizable audience. Fortunately, this demographic is likely to be the most responsive given previous response to the value proposition. In fact, 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- and up-sell opportunities to generate additional revenue.
Step 2--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 begin to approach them with a meaningful dialog. Your best customers and prospects are the repeat purchasers, visitors and subscribers on your file that will deliver the greatest return on investment.
Step 3--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; 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.
Step 4--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.
Step 5--Think Longitudinally, Act Individually
Now that there's a highly targeted and manageable audience segment, don't carpet-bomb it with marketing messages. Instead, leverage the information you've gathered to script the scenario that guided them into the profitable customer segment. What were key events or attributes that converted them to a high value customer?
Remember, this exercise is not a short term acquisition tactic but a longitudinal customer lifecycle management strategy. The ultimate objective is to build the relationship to a point 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, dialog and scenario are in place, a business can truly begin to deliver one-to-one experiences that deliver greater value to a customer since it directly speaks to their needs. A customer that sees value in a relationship will be a loyal one.
Old Rules Win the Day
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.
Reprinted from NewMedia.