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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

A Direct Marketing Strategy for a Weak Economy

I don’t want to suggest that I’m the only one who can come up with this strategy.  Any seasoned direct marketing person, who is thoughtful about it, would probably reach the same conclusions.

In a weakening economy, it’s typical for direct marketers to focus on promotions to their customer base.  After all, response rates from customers are dramatically better than response rates from non-customers.  Pretty obvious.

And, with what will likely be shrinking budgets, the pressure will be on to produce more with less — and leveraging the customer base is the easy solution to such pressures.

But every direct marketer knows there is constant attrition in the customer base.  And that attrition will likely increase in a weakening economy.  Under normal circumstances, we balance the customer acquisition efforts to at least offset the customer attrition, if not actually grow the customer base.

Thus, the conundrum of a weakening economy for direct marketers is how to acquire customers in sufficient numbers to offset customer attrition while maintaining profits from customer promotions, all with lower budgets, when most expenses are increasing.

Well, it should go without saying that you cannot do all of those successfully.  But you can have some traction in all those areas.  Let me suggest how that may be possible.

First a couple of working hypotheses:

  1. Your best customers buy thru multiple channels — they visit your stores, get your catalog, order over the phone and over the net.  They’re not just multi-channel buyers; they’re cross-channel buyers.  They use one channel to facilitate buying in another channel.
  2. Customers and Prospective Customers with disposable income are comfortable with email and web.  There are certainly some marketplaces where this is not true, but they tend to be marketplaces where cost the sole criteria for purchase — but even Wal-Mart has a significant web presence.
  3. There’s a difference between shoppers and buyers.  While it’s getting better, shopping on the web is still more difficult than buying.  By this, I mean, if I have some idea of what I want to buy, the web is easy to use to find something to buy.  Conversely, if I have no idea what I want, then the web is a difficult place to go to narrow down the possibilities.  This is one of the reasons that sending catalogs to customers and prospective customers results in online purchases.  I can browse the catalog for ideas and then go online to buy.
  4. Email and Search are so cheap it scary.  The problem, if you call it a problem, is that the response rates are 1/10th of response to paper mail; but the cost can be as low as $0.001 per message.  It may actually cost more to create the message than to send it prospects.  Natural Search has no direct cost (it’s all indirect, because it’s based upon how well you construct your web pages).  Paid Search only costs, when someone clicks thru, so you get impressions for zip.
Okay, with those working premises, here’s a strategy for you:
  1. Focus most of your marketing budget on your customer base with the goal of maintaining revenue streams and profit margins.
  2. Emphasize natural and paid search to identify prospective customers because the cost is so much smaller than paper mail.
  3. Construct an email tree of emails which takes a prospective customer from inquiry thru their second purchase.  This means sending multiple emails, each constructed to build on their prior response/non-response to take the prospect closer to buying.  It’s a weaker strategy to simply construct messages and blast the same email to everyone and their grandmother — you should still be concerned with Offer, Copy and List Segmentation.
What do you think?
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