Marketers Focusing on Loyal Customers Instead of Masses

15 12 2008

According to the Wall Street Journal, many companies will not be using the shotgun approach to get new customers this holiday season. Companies simply want to keep the customers they have.

Targeted ads to existing customers are the smart choice this holiday season for many retailers who don’t want to risk the time and money to attain new customers.

Retailers such as Sears and Gap are using statistical models and other technologies to figure out how to send specific consumers promotions based on what those consumers are more likely to buy for gift giving. This goes back to old advertising 101 techniques. Getting a satisfied customer to return is cheaper than trying to attract new customers. With the economy in a recession, this is adage is more important than ever.

Trying to get a new customer into your store can cost as much as five to seven times as much as maintaining a relationship with a current customer, says Marc Fleishhacker, managing director at WPP’s Ogilvy Consulting, who directed Sears’ holiday campaign. “I don’t have to tell you where the store is, I don’t have to tell you the virtues of the brand,” Mr. Fleishhacker says. “I just have to say, ‘Thank you for coming to Sears. We have even more products and opportunities for you.’”

Ogilvy and Sears have created a system that identifies the categories of goods that customers have purchased in years past and measures the probability that they will buy those kinds of items again this season. Sears takes that info and emails specific offers to individual customers. Whenever someone buys something from Sears’ Web site, Sears send a confirmation email that includes a promotion tied to the product, such as a warranty for a new appliance. The info gathered by Ogilvy and Sears even allows Sears to offer customers different discount based on the predicted value of the customer in the long run.

Gap, on the other hand, isn’t buying TV commercials, instead opting to up their dependence for sales on targeted emails and online promotions. But even if marketers target the right consumers with the right technology, that doesn’t mean consumers will be spending. The Monday before Thanksgiving, research firm eMarketer lowered their holiday online buying prediction to $30.3 billion for November and December. That’s up only 4 percent from last year; earlier predictions had the growth at 10.1 percent.

Gift spending per person is expected to drop this year, but with banks touting lines of credit and credit card offers still floating around, we’ll see in a month’s time if consumers can really stay loyal to those marketing to them or if they go elsewhere.

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