Magazine article Marketing

The True Price of Loyalty

Magazine article Marketing

The True Price of Loyalty

Article excerpt

Judith Donovan is a direct mail junkie - with attitude. She also runs a direct marketing agency. These are her thoughts on keeping customers loyal

In direct marketing terms, I am highly active. I sit on lots of databases and I'm hungry for relationships, offers and invitations. Let me share with you four weeks' worth of cold mailing I received last year.

In October, 43 companies wrote to me. Half had name and address errors; six I had previously traded with didn't acknowledge the fact; one company thought I was a customer when I wasn't - and one thought I wasn't when I was and a fifth were inappropriate, inaccurate propositions.

But these were cold mailings. It's better when we work with our own customers, I hear you say. Cobblers. It's only my need for the particular product or my loyalty to the proposition that keeps me shopping with some of my suppliers. The way they treat me shows zero attempt at segmentation.

I estimate that less than 10% of companies with consumer databases are doing leading edge, mould-breaking, customer development work.

All the talk today is about one-to-one marketing. We need to start by defining it and questioning whether it is valid. Moderates, accepting that customers are not all created equal, have opted for segmentation where individuals are still subsumed within the masses, but with clusters of individuals seen as having different behaviour and potential and meriting different treatment.

One-to-one is the radical version of this. Obviously, individual customers welcome one-to-one. To be treated as an individual, to have every need and want anticipated and fulfiled - joy of joys. But if you're running anything larger than a corner shop or restaurant, it's a nightmare.

The questions we have to ask are:

* Can we do it?

* Can we afford it?

* Will it make a blind bit of difference?

And yes, you can do it - if you're prepared for a total cultural change. It also means taking your database away from the boffins and accountants and giving it to the marketing people. It means major investment in accurate transactional and relationship recording. You'll need to know not just what customers have bought, but when they last phoned, or complained.

How much will it cost? Haven't a clue! Try taking your marketing and IT budget and doubling or trebling it. The real question is, can you afford not to if it costs 12 times as much to recruit a customer as to keep one?

Typically, a 5% increase in retention gives a 50% increase in profitability. …

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