Should I Use Relevancy Marketing?

Relevancy Marketing creates a pattern that allows any business to engage in it. It uses simple steps to create a powerful system of increasingly targeted communications to enhance customer retention and acquisition. So, every business should use it, right? Not necessarily!

To answer this question, let's look at retention and acquisition separately. First let's look at retention and begin by defining it. Customer retention is the act of keeping customers as long as possible because it generally costs significantly less to keep a customer than it does to find a new one. This is a mindset. It involves customer service. It permeates a company. It effects everything from how the phone is answered to how often the trash is emptied. It is about being "easy to do business with". But, it is more than that.

Larger companies calculate something called customer lifetime value to project the results of customer retention efforts. This is a fairly involved calculation. Play with it if you like. I propose the we simplify our approach at this time. (CLV is an important concept to understand, and I encourage you to see where you stand, as more and more data becomes available through Relevancy Marketing.)

Let's look at the value of a customer over time by determining total projected sales for a customer. Of course, I am counting on you business having relationship customers that stay with you over a period of time (relationship marketing). It also assumes that the value of that customer staying with you is high enough that the cost of customer retention activity provides a positive return on that investment. This calculation is a very simple one:

Total Projected Sales = Avg Customer Lifespan * (Avg Frequency of Sale * Avg Sale $)

Customer retention activities can impact each of the above variables. It can result in a longer lifespan, a high frequesncy of sale and a higher average sale value. It also allows you to examine the effect of marketing to current customers with the penetration/saturation mindframe; "Am I selling everything to every prospect the I can?" This is cross sell/upsell thinking. And if you aren't thinking this way about your customers, believe me, someone is.

Customer acquisition on the other hand, is adding customers. More importantly, the right customer. You may engage in some form of advertising now; print advertising, cable, radio or transit bill boards, to name a few. But, unless you have planned properly, you can't tell what the results are of these efforts, and you certainly can't be sure that your highest vale prospect is reacting to your promotional efforts. relevancy marketing will allow you to not only target your audience, but more importantly, to determine the effect of your effort as well as make them more effective as time goes on and the data is compiled.

There are two ways that Relevancy Marketing empowers customer acquisition: the first is using data available about your current customer to develop a profile that will be used to identify the most likely prospects. We'll talk more about this later. The second is by making the communications with these prospects more effective.

Determining the value of customer acquisition activities involves answering the following questions:

• What does it cost me to gain a new customer, presently?
• What is the value of the average new customer over time (Total Projected Sales)?
• Who is my best customer?
• How much more is my best customer worth to me than my average customer?
• How can I get more of my best customer?
• What does it cost to get more of my best customer?

If the value of your best customer is in accordance with conventional wisdom, they are on the order of four times more valuable to your company. (This is just applying the 80/20 rule.) More than likely it pays huge dividends to go get more of them.

Relevancy Marketing will allow you do do just that.