Marketing in a recovering economy


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Over the last few months much has been said about the importance of customer retention in the recession rather than wasting squeezed marketing budgets on prospecting. This is all very well since changes in consumer behaviour and spending during a downturn make it essential for marketers to alter their strategies in order to retain customers who might otherwise defect to a cheaper competitor. Conversely, before the recession the balance was very much in favour of customer acquisition rather than customer management.

But now that we are starting to see the ‘green shoots’ of recovery marketers need to be ready to reassess their strategies once again. It is critical that retailers start looking now at how to position themselves and implement a pro-active marketing strategy when the country emerges from recession, rather than waiting until it actually happens.

Many retailers will view a more robust economy as an opportunity to start winning back customers they lost in the recession. It is worth noting, though, that a fair proportion of customers that defected in search of better prices during the course of the recession are the promiscuous shoppers who move from supplier to supplier based on price. These types usually don’t stick around and prove to be unprofitable over the long term – and so are not worth enticing back

A recovered economy also presents fresh opportunities to prospect for new customers once again. The mistake that many marketers will make at this point is to neglect the existing customer base in favour of attracting new ones. However, management of existing customers should always come first, no matter what level of attention is being given to prospects. Neglecting those loyal to you could very well lead to the loss of customers before a new one has even been recruited.

The problem with putting all efforts into acquisition is that identifying appropriate new customers it is not always as easy as seems. Theoretically, modelling and segmenting existing data to create detailed profiles of exactly who the right customers are for your business – i.e. those who are more likely to remain loyal and expand their relationship to related businesses or brands – should lead to building up a picture of the potential customers who are most likely to be interested in, and respond to, an offering. But, more often than not the profile of the best customer is the same as the profile of the worst customer, so it is very difficult indeed to say who will be a good prospect.

Another mistake that many marketers are likely to make when prospecting is once again part of the marketing strategy, is to focus on customer acquisition without thinking about how to treat new customers once they start spending. Often a new customer will spend once and then never again. However, it is during these early stages when it is vital to nurture the customer relationship. Every effort should be made to turn that new customer into a long-term, loyal customer who can then be encouraged to spend more and spend more often according to the usual customer management strategy.

In short, customer acquisition should not be carried out to the detriment of ongoing customer relationship management. The opportunities for retailers to achieve a happy medium in their customer development and prospecting activities are apparent, and with the faint glimmer of economic recovery on the horizon, they should now be starting to put themselves in a position that will guarantee them market share coming out of the recession. Those that don’t will get left behind when business is again booming.

Andy Wood
GI Insight
Andy Wood, Managing Director, GI Insight, has over 21 years of experience in the field of database marketing and vast experience in the creation and management of retail loyalty programmes. His particular skills lie in the analysis of data and its application to improving customer communication, turnover and ultimately profit


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