1. Persuade your existing customers to buy more often from you and to buy more services per transaction.
2. Get your inactive customers (the ones who once bought from you) to start buying from you again.
3. Win some new customers.
Plumbers’ Success Internation-al, a membership consulting organization for contractors, recently conducted a survey to determine how plumbing businesses spend their marketing dollars. The survey found that these contractors were spending 93% of their advertising dollars chasing the new customer or non-customer.
But PSI also has determined that marketing strategies targeting new customers are the least cost-effective. The typical medium for chasing the non-customer is Yellow Pages advertising. Yet contractors often tell me that the main purpose of their Yellow Pages ads is not to target non-customers, but to make it convenient for their existing customers to find them.
If you have the same notion, better think again. If you are forcing your existing customers to go to the Yellow Pages to find your company, you’re making it much too difficult. There are many other ways to help customers find you when they need you. Instead, the goal of a marketing program for a customer-service company should be to achieve “top-of-mind” awareness among customers and potential customers.
If you’re doing your job well, your existing customers already trust you and already like you. It makes sense, then, that it’s easiest to influence these customers; so marketing to them is the most cost-effective. Doesn’t it also make sense to appeal to them before spending your marketing dollars chasing the unknown?
These customers have already granted you permission to enter their home. Now they are likely to allow you to educate them about a service or product they may not have known existed.
When you draw up your marketing budget, start by developing a marketing program directed specifically at your existing customer base.
For example, let’s look at a company with $1 million budgeted for annual revenue and 3,000 customers in its database. It would be reasonable for that company to invest 5% of its budget in marketing, or $50,000 per year.
One way for this company to reach out first to its existing customers is through a quarterly newsletter. It costs about $2 per customer to print and mail a newsletter, so our sample company could reach them four times a year for $24,000. You’d now have $26,000 left in your marketing budget.
Believe it or not, you can persuade a good portion of these customers to come back to your company simply by letting them know that they are important and that you want to work for them again. Don’t laugh; one of AT&T’s most effective advertising campaigns was a direct-marketing letter stating that the company was sorry you weren’t using its long-distance service anymore. It contained an apology for any oversight and an invitation to come back to AT&T — along with a discount coupon.
Let’s say our sample company pulled its records and discovered 500 inactive customers. We could reach all of them with a direct-mail campaign for $4,000.
We now have $22,000 left in the marketing budget to reach the third group, the non-customers. We need to remember that this is the most difficult group to influence. Before we sink the whole amount in the Yellow Pages — where every other contractor in the market will be competing for this same non-customer’s attention — let’s consider some other strategies.
Each market is different, and you, the local business owner, will have the best idea of what will work for you. It may be newspaper or broadcast ads, sponsorship of youth sports teams, or some other marketing method.
You may need to experiment some to find out what works best. Take these expenses out of your non-customer marketing account. The remainder is your investment in the Yellow Pages.
My experience has shown that this priority list is the most effective way to maximize marketing dollars: existing customers first, former customers second, and non-customers last. Unfortunately, though, many contractors do it upside down. They devote nearly their entire effort to reaching the least obtainable customer.
This usually happens after the Yellow Pages salespeople come in and twist their arms. It seems like every year they tell us, “To get noticed, you have to increase the size of your ad.” You may begin to wonder, just when does it get big enough?
You may know the feeling of having that salesperson walk out the door, and you’re left saying, “Oh no, what did I do now? How am I going to pay for that ad?” You’ve devoted your entire marketing budget to chasing the most elusive customer, and now you have nothing left to target your active base — the ones you should reach out to first.
Avoid this trap by making out your marketing budget a year in advance. Base it on a percentage of the previous year’s sales. Be sure to first allocate funds to reach active customers, then an amount for inactive customers, and finally budget for reaching new customers.
That way, your marketing drives your sales, instead of the other way around.
Nicholson is president of TNI Inc. He can be reached at 877-862-8181 or firstname.lastname@example.org (e-mail).
Publication date: 10/23/2000