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Businesses grow either by new customer acquisition or by getting more business from their existing customers. For postcard mailings, advertising and even online marketing, many experts say a 1% response rate is good. When you compare the costs of marketing to new customers with the cost of marketing to existing customers, it’s much more cost efficient to market to existing customers – the old adage is, it costs five times as much to gain a new customer than it does to keep an existing one.

 

I’d like you to compare the costs of two recent marketing campaigns: one “general” campaign directed to potential new customers, and one targeted campaign to existing customers. Which resulted in the highest response rate? If you’re getting a high response rate from existing customers without the same revenue results than a campaign targeted to new customers, you may need to sweeten the offer. Not by offering one-time discounts or coupons, but by offering savings and rewards via a loyalty program, or offering “peace of mind” with a pre-paid maintenance program. These programs are designed to encourage existing customers to purchase more frequently. Which group of customers do you think provides a greater return, new or existing? Do you track which group adds more to the bottom line?

Tags: LoyaltyTrac, MediaTrac, customer, loyalty, programs, retention

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Great questions, and despite the preconceived ideas I have on the subject, unless we do a decent job of measuring the costs and then accurately tracking the results, the assumptions we have are not valid.

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