Monthly Archive for October, 2008

Retaining Current Customers

Published on October 12, 2008 in Kurt's Notes. Closed Tags: , .

This month’s newsletter is about retaining your current customers and getting them to spend more. Small business owners call us daily to discuss their marketing issues and look for ways to grow their business. Overall, the emphasis is usually on attracting new customers. Overall, this emphasis is correct, but the sales “funnel” should be looked at in terms of the “leaky bucket” it’s filling. To keep the bucket full, it’s always easier to fix the leaks first.

 I think it’s important to think of your business as totally forgettable. I know this is difficult. You’ve spent so much money on signage, and your people are nice and you can remember all of their names. But the truth is, your customers do other things throughout their life and you are the last thing they are thinking of.  They forget.

Also, business owners have a perception that their best customers bring all of their business to them. This is usually not so. Usually your best customers are also your competitor’s best customers. This is called the Polygamy Theory.  If you’re an antiques dealer, a shoe storeowner or a car dealer, it’s obvious that your customer is going to shop around at competitors.  It’s less obvious for other businesses, but many times just as true. Do not take your best customer for granted.

So the easiest and best marketing dollars to spend are on your current customers. Again, fix the leaky bucket before filling the funnel.  Use postcard to keep your customers continually aware of your business. Real estate marketers say that Realtors need to be in front of their customers monthly. We recommend that most business be in front of customers and identified good prospects at least quarterly.  You best customers will have a purchase pattern.  For a dry cleaner it may be weekly or monthly. For a car dealer, it may be every 3 years. Anticipate the pattern and be in front of that customer at the time they are ready to make a purchase decision or, in the case of a dry cleaner, when they have broken that pattern. The articles below will give you more specific information.

Be Memorable. Kurt

What’s My Response Rate?

Published on October 7, 2008 in Kurt's Notes. Closed Tags: , .

This note is about response rates and return on investment (ROI).  When doing a mailing people desperately want to know what to expect for a response rate. Of course there is no easy answer to the question because, though there may be an average of say 1%, any individual’s response will vary considerably. So if we give them a number, the chance of us being wrong and misleading the customer is very, very high.

I think a better, alternative way to look at response rate is to first look at ROI. Ask the question, “What does my response rate need to be to break even?” To get at the break-even, you need to know what the Marketing Cost per Sale is. Here’s an easy cheat sheet: First, we assume that the total loaded cost per piece mailed is 50 cents. Then at .25% your cost per sales is $200 (.50 / .0025); at .5% the cost per sale is $100; 1%, $50; 2%, $25; 3%, $16.67; 5%, $10, 10%, $5. So, what does your cost per sale need to be to break even?

The next question is, “Can I achieve the response rate needed to break even?” We can help you there. Most home improvement companies can get a .25% response rate on a mailing (though they still have to close those respondents). Retailers can get 1% or better. If you have a customer list, you get 10% response rates. We can also let you know what is not achievable and unrealistic. I had a call from a person that had a new kitchen item for pealing vegetables. That person wanted to do direct mail. I know that the best response rate is probably 1%, so I asked if they could live with a cost per sale of $50? Well, the product only sold for $20, so obviously not.

So, the alternative way to look at response rate is to know the rate needed to break even and understand if that is achievable. Then the challenge is to test the mailing to get at break-even or better. The drivers of response are, #1 – the list, #2, the offer, and #3 the creative. Again, we can help you there. Give us a call.

Be Memorable. Kurt