How much of a discount? Depends on how much you're worth.

Excerpted from WSJ “Marketers Reach Out to Loyal Customers” by Emily Steel, November 26, 2008

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With the critical holiday-sales season at hand, there’s a new character joining Santa and his elves on the advertising circuit: the analytics geek…Marketers…are mining their customer databases and reaching out to loyal consumers with targeted ads, instead of relying on the traditional yuletide blitz.

Rather than create one TV commercial or send out a single, shotgun email promotion, uneasy retailers…are tapping statistical models and other technologies to send specific consumers promotions based on what is potentially on their shopping lists…

Persuading a satisfied customer to return is cheaper than attracting a new one…in the struggle to do more with less, that concept is becoming even more important. Acquiring a new customer costs about five to seven times as much as maintaining a profitable relationship with an existing customer…

Sears and Ogilvy have developed a system to identify the categories of merchandise Sears customers have purchased in the past and to measure the chance that they will buy those sorts of items again this season. That helps Sears determine the type of emails and point-of-sale offers to aim at individual customers. When customers buy an item online, Sears confirms the purchase with an email including a promotion tied to that product. A person who buys a new appliance at might get an email offering a deal on the store’s extended-warranty program.

Sears is even offering customers differing discounts based on its predictions about the value those customers will bring to the company in the long term.

Companies have long tracked the habits of their consumers, but they have been overwhelmed by the reams of data they collect. Only fairly recently has the technology become sophisticated enough to allow marketers to link all the data points together — and work effectively with their advertising partners to leverage that data in ad campaigns…

Even if marketers get closer to predicting what’s on consumers’ wish lists, it’s going to be a tough sell, with people strapped for cash. Growth in e-commerce sales has already slowed significantly this year…

Edit by SAC

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It is clear that marketers can benefit from targeting customers based on Customer Lifetime Value (CLTV).    This is especially important for retailers facing a challenging economic situation with trimmed advertising budgets and customers who are cutting their spending.  The retailers that take advantage of the technology available to more accurately calculate CLTV and then target the more profitable customers have a better chance at a profitable holiday season. 

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