Refire: Focus on Targeted Marketing

As the economic climate becomes more challenging, businesses must carefully consider where to allocate their marketing resources (remember the Three R’s for 2023 from our newsletter). While it may be tempting to focus on acquiring new customers, it often makes more financial and strategic sense to recognise the value of existing customers and the role they play in driving business growth. Research has shown that it can be up to 5 times more expensive to acquire a new customer than it is to retain an existing one. A good rule of thumb is 60% of your resource should go on existing customers and the remaining 40% on acquisition.

A cost effective and measurable approach for both retention and acquisition is direct marketing (aka targeted marketing). Direct marketing involves communicating with customers through targeted media and personalised content. This can take many forms, including email, text messaging, website portals, social media, mail and telemarketing. By personalising the benefits of your products and services using the right message, in the right media at the right time, you increase the likelihood of engagement, response, loyalty and advocacy.

Personalisation requires a deep understanding of your customers; what they value, what motivates them, who influencers them, along with behavioural information like when and where they shop. Analytical modelling is the nirvana of direct marketing, but any effort to understand your customer base can help make your communications more relevant and more personalised. Most businesses starting out focus on having an accurate database with customers ranked from High Value to Low Value, so, for example, highly valuable customers can receive better service, products and communications. Medium Value customers can be nurtured to full potential and Low Value customers can be maintained (or 'Dear John-ed').

Another key part of direct marketing is the use of storytelling. Using storytelling through your brand identity, images, tone and various communication vehicles (sponsorship, PR, social media) helps explain what your business cares about. It also differentiates you from competitors. Science shows that when deciding between equivalent products or services, it is the emotional connection or perception of a brand (formed by storytelling) that drives the final purchase decision. Customers may cite the product features as the reason for their choice (using the logical part of the brain), but in reality, it is an emotive decision (driven by the limbic part of the brain). You can shape these emotive decisions through the storytelling of your brand and core values creating a deeper emotional connection with customers. This can help customers understand and relate to your brand on a personal level, which can lead to increased loyalty.

And finally, as we see in other industries, marketing is being driven more and more by technology and AI, particularly in direct marketing. Technology can provide better messaging, more targeted advertising, more media options and reduce the need for human involvement, freeing up capacity. For some businesses, social media algorithms, Google advertising and digital workflows are their wheelhouse and help reduce marketing spend. For others, it adds complexity and cost. If you are in the latter boat, it may make financial sense to partner with specialists who can deliver smarter communications more cost effectively. Before deciding which way to go, think about what business you are in, speed to market, how this technology fits into your team development programme and lastly, whether these skills and technology are a strategic capability that will benefit the business in the long run.   

Direct marketing has much to offer businesses including improved retention and acquisition as well more visibility of return on investment. It is important to note that in times of recession, brands need to be louder, more relevant, and more accessible, rather than disappearing (and having budgets slashed). To quote Warren Buffet, “if you can’t [don’t] communicate, it’s like winking at a girl [customer] in the dark – nothing happens.”