Is New Customer Acquisition Too Expensive in This Environment?

On Tuesday the Wall Street Journal stated that major retailers such as Sears, Target and Gap are refocusing their holiday marketing efforts to encouraging existing customers rather than obtaining new ones.  From a financial perspective, this makes a lot of sense – Marc Fleishhacker from Ogilvy Consulting estimates that acquiring a new customer costs 5 to 7 times as much as maintaining an existing one. Given the level of frugality that this economic environment has exerted on marketers, it is logical that we place extra emphasis on gaining more revenue from loyal customers.

There are a few areas of online marketing that will benefit this strategy:

• Search: It’s no secret that search is already one of the most cost-efficient marketing channels, especially among branded terms. Search marketing offers a targeted method of reaching loyal customers and ensuring that they (a) can reach the site and (b) are given an incentive (read: promotion) for doing so.
• E-mail: Now more than ever it is crucial that marketers understand the strengths and pitfalls of this potentially enormously profitable channel. Companies need to understand what messaging works, how often to send e-mails, and how to differentiate their language and offers by audience. Surprisingly, a recent eMarketer article stated that more than half of US retailers do not currently test e-mail campaign subject lines – this is something that will certainly need to change in order to maximize the profits from this channel.
• Behavioral Retargeting: While they don’t necessarily market to customers who have already purchased, behavioral retargeting campaigns are along the same lines. It’s reasonable to believe that if a user has already been to your website, they are more likely to convert than a consumer who has never clicked on your ad. Many marketers have experienced success with retargeting campaigns, and they tend to have a higher return than a regular display media buy. (Though it is somewhat humorous when I get constantly retargeted by a client on random sites, since I obviously regularly visit their website without purchasing.) Of course, the success of retargeting will depend on the length of the consideration period and other factors that vary among companies.

With this said, it is important that we do not allow ourselves to become stuck in a marketing rut. While focusing on existing customers may prove successful as a survival strategy during the economic crisis, we must not ignore the long-term value of new customer acquisition in the future. As measurement capabilities continue to expand we will gain deeper insight into the way different marketing channels interact. We may find that channels deemed to have a low return when measured by last-click conversion attribution (such as display) perform better than we currently believe.

Let’s do what we need to in order to keep our heads above water right now, but never lose sight of the future.

Comments

[coach bags]

Wow! Great info. I wish, I could have such a writing skills.*

[Air Jordans]

Life is a struggle, accept it.