March 2009 Big Grower

Marketers Reach Out to Loyal Customers By Visions Group

As the economy worsens, retailers tap statistical models relying more on targeted ads and promotions than a shotgun approach to the general consumer. It’s an adage of business marketing: Persuading a satisfied consumer to return and purchase is easier and cheaper than attracting a new one. With budgets under pressure, doing more with less has become even more critical.

Acquiring a new customer costs between five and seven times as much as maintaining a profitable relationship with an existing customer, according to Ogilvy Consulting. With existing customers, you don’t have to tell them where the store is or explain the virtues of the brand. All you have to do is thank them for shopping and let them know you have more products and values to offer. With a gloomy outlook for retail sales, every promotion or marketing effort is receiving increased scrutiny for effectiveness. Some retailers identify product categories that individual customers have purchased in the past and offer customized promotion and even discounts based on the likelihood that they will purchase them again.

Some discounts are even tied to the future value of the individual customer, not the product being offered. Retailers have long tracked the habits of consumers but were overwhelmed with the volume of data collected. Recently, however, new technology and sophisticated software have allowed retailers to sort the data and tie it to value points to better leverage the habits of their existing customers. The places where retailers engage potential customers are also changing. Traditional print and broadcast spending is in decline while electronic and digital communications are steadily increasing. Even if retailers get closer to predicting what is on consumers’ “want” lists, convincing them to actually make the purchase will still be difficult with a worsening economy and shrinking disposable income.