Grow Your Customers

WoodWing

Life event-driven marketing (EDM) can be a useful tool in unearthing new opportunities to find or serve customers. Very different from an RFM-driven, transaction-based approach, EDM seeks to find changes in prospect and customer circumstances that signal a break from past behaviors.

When life events occur, abrupt changes in behavior often accompany them. Graduations, marriages, buying a home, the birth of a child and retirements are examples of life events that signal when past buying behaviors may not relate well to future behaviors.

Focusing on past behavior, in the short run, does an excellent job of predicting future behavior. In the long run, however, “best” customers still leave or buy much less. Expanding targeting to include life events can explain why some customers are leaving and uncover ways to find new customers who will be tomorrow’s “best.”

The Shrinking 
Customer Base
One problem with targeting customers based on past buying behavior is that targeting is not so much selection as it is deselection.

Another problem is focusing on short-term marketing objectives. Because prospecting often is done at or below breakeven, focusing more tightly on customers and placing less emphasis on prospecting improves ROI in the short run.

A third problem is a tactical marketing focus as opposed to strategic. For example, response rates, average order and product sales goals are tactical objectives. Methodically building a customer base that supports future sales goals is strategic.

Strategy is priority-
driven—and if one has more than three priorities, he really doesn’t have any. Fortunately, marketing strategy can be built around just three priorities:

  • getting customers
  • keeping customers
  • growing customers

Marketers often focus on only one or two goals—usually acquisition or retention, the “getting” and “keeping” part. They often ignore that sales swings frequently are driven by customers spending more or less, rather than by customers arriving or leaving.

Relationship Marketing
Whether in marketing or life, having a relationship with someone is more than just a series of transactions. People’s wants, needs, desires and feelings change over time and result in different responses throughout different situations. While firms often measure the relationship based on transactions, the transactions themselves are not the relationship but merely a measurement of the activity in the relationship up to that point.

Life events are sign posts in the relationship that signal when a contact’s wants and needs likely are to change, often in dramatic fashion. Even if there is a very long train of transactional history with a customer, when certain life events occur it signals the train is about to switch tracks.

Overtargeting can occur in relationship marketing when life events are ignored. For example, in the marketing classes I teach, we use the word “Oldsmobile” as a verb. It means “to follow one’s best customers into the grave.” Oldsmobile had happy, loyal customers, right up until the end. It focused on its best customers—older, repeat buyers—without replacing them with future best customers.

EDM brings another discipline to database marketing in general but does not replace transaction-driven direct marketing. EDM is a tool that gives marketers additional insight into why customers do what they do, helps explain why loyal customers move away and guides what to look for when building toward tomorrow’s loyal customer base.

Applying EDM
A good example of how EDM can be applied is the program premium dog food brand Eukanuba developed in Europe. Breeders were invited to join special clubs, which entitled them to trial kits (including free food, brochures and coupons) they could hand out to their customers upon purchase of a puppy. At this point, the dog breed and date of birth were captured and fed into the central database, earning the breeders certain amounts of free dog food.


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