| p>Why do your current customers buy from you? | | | | instead of placing the $1,000 newspaper ad, you |
| There may be several reasons for this, including | | | | direct this promotion to your current customer base. |
| convenience and other things, but it is highly likely | | | | Your database contains roughly 500 boat owners. |
| that you have established a fair amount of credibility | | | | You have mailing addresses for each of these |
| with them. It is not easy to establish this because it | | | | owners and you send a mailing to them. |
| takes time and money, the main resources of any | | | | Since you get a bulk mail rate of.20 per item, the |
| business. | | | | cost to communicate the promotion is $100. This is |
| Since you have already established that credibility, it | | | | already a significant savings in dollar terms alone. |
| makes sense to leverage it by marketing to those | | | | The other big factor is that you have reached 500 |
| customers. This credibility establishes a certain | | | | boat owners instead of 100, and if the conversion |
| amount of customer loyalty. | | | | rate is 10%, you will sell 50 titanium props instead of |
| If you advertise a new marketing promotion in the | | | | 10. This is a dramatic difference and it goes to show |
| newspaper, on TV, or on the Internet, you will gain a | | | | the hidden power of this relatively unknown |
| few prospects and possibly add a few customers to | | | | marketing approach. |
| your customer base if it is a good offer and you | | | | The other thing to consider is the conversion rate. It |
| convert some sales. This will add to your revenues, | | | | will likely be much higher than 10% because of trust |
| but what most businesses fail to do is offer the | | | | and credibility. In practice, sales from scenario 2 will |
| promotion directly to their existing customer base. | | | | probably exceed sales from scenario 1 by 20% or |
| Sure, their customers read the paper, and many of | | | | even 30%, and these results are truly amazing. |
| them will see the ad, but this is not enough. An | | | | In effect, what you are really doing is targeting your |
| explicit effort is required to direct the promotion to | | | | marketing efforts and resources to a more particular |
| the existing customer base. Specifically, get the | | | | group. The amazing fact is that many businesses do |
| names and addresses of current customers and print | | | | not have an explicit plan to do this; most of their |
| mailing labels and send them the offer directly. | | | | marketing campaigns are directed generally, and. In |
| To illustrate the hidden power of this marketing | | | | fact most traditional advertising methods |
| strategy, suppose that you sell boat propellers, and | | | | (newspaper, TV, Magazine etc.) can only offer to |
| one of your vendors has created a new propeller | | | | direct your advertising generally. |
| made of titanium, and it is specifically designed for | | | | You may believe that many businesses are doing this, |
| riverboats. The propeller blades are so hard that | | | | but if you check your own mail of a three to six |
| instead of breaking a prop on a rock every 2 years, | | | | month time period, you will discover that you receive |
| the mean time between failures (MTBF) is every ten | | | | very few such directed promotions. For some |
| years. | | | | reason, not many businesses take advantage of this |
| Since you are the only distributor for this vendor in | | | | marketing strategy. |
| your geographic region, you are the only reseller of | | | | So rather than spend thousands of dollars on the |
| this product and you stand to sell a lot of them. | | | | shotgun-like method of advertising to the masses |
| Wow! This is quite and advance in technology. You | | | | hoping for a few sales conversions, you are directing |
| can run an advertisement in the newspaper and you | | | | your resources to a "target-rich" environment. You |
| are sure to realize some sales. This is because | | | | can compare this scenario to mining for gold. Why |
| possibly 10,000 people will see the ad and of those, | | | | would you want to just start digging around, creating |
| 100 are riverboat owners, and of those, 10 will come | | | | hundreds or thousands of holes in the ground, when |
| down to purchase the new prop so they can replace | | | | you already know where the vein of gold is? |
| their own (or carry it on board to replace the current | | | | Your current customer base (as emphasized so many |
| prop when it breaks). | | | | times in this book) is your own guaranteed vein of |
| So you have spent maybe $1,000 on advertising and | | | | revenue gold and it makes sense to take advantage |
| you have reached 100 riverboat owners. Suppose | | | | of this knowledge. The bottom line is that it's far |
| that 40 of these owners are already in your | | | | cheaper to sell to your current customers than to sell |
| customer database and 60 are not. Let us call this | | | | to customers that do not yet exist. You should have |
| Scenario 1. | | | | a well-defined program to do this. |
| Now let us consider another scenario. Suppose that | | | | |