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Applied Marketing Strategies

2 Target Markets / Page 2.3 Targeting Current Customers On this page: 4 of 4 attempted (100%) | 4 of 4 correct (100%)

Targeting Current Customers

Finding and attracting new customers is generally far more difficult than retaining your current customers. Think about how much time and energy you spend when you switch your patronage from one business to another, even when you’re buying something as simple as a haircut. If you aren’t happy with your hairdresser and want to find a new one, you first have to talk to people with haircuts you like or read reviews of salons. Once you decide on a particular salon, you have to find it and explain to the new hairdresser how you want your hair cut and hope they get it right. You also have to figure out what type of payment the new salon will accept and whether tips can be put on your credit card. Likewise, finding new customers, getting to know them, and figuring out what they really want is a difficult process fraught with trial and error. That’s why it’s so important to form close relationships with current customers and to focus your selling efforts on them.

Backroads, a California company focused on adventure-based travel, increased its revenues by creating personalized marketing campaigns for people who had done business with the company in the past. Backroads looked at customers’ past purchases, the seasons in which they took their trips, the levels of activity associated with them, and whether customers tended to vacation with children. Based on their findings, Backroads created three relevant trip suggestions for each customer. They then sent postcards and emails with links to customized webpages reminding each customer of the trips they had previously booked with Backroads and suggesting new ones. “In terms of past customers, it was like off-of-the-charts better [than past campaigns],” says Massimo Prioreschi, the vice president of Backroads’ sales and marketing group.5

NOTIFICATIONS

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MULTIPLE-CHOICE QUESTION

British Airways is known for pampering its customers with premium dining options and attentive service. Successful businesses give special care and attention to current customers to keep them satisfied and loyal.

Peter Jordan/Alamy

How did travel company Backroads encourage past customers to book trips with them again?

Correct. Backroads looked at customers’ past purchases, the seasons in which they traveled,

the levels of activity associated with them, and whether customers tended to vacation with

children. Based on their findings, Backroads created three relevant trip suggestions for each

customer.

Saved moments ago.

by urging their customers to travel at a different time of year than they had before

by prompting their customers to visit different types of places than they were used to

by suggesting new trips similar to those their customers had taken previously

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In addition to studying their buying patterns, companies also try to get a better understanding of their customers by surveying them or hiring marketing research firms to do so, utilizing loyalty programs, or using analytical tools to determine where they go online and what they buy. (A good source for finding marketing research companies is GreenBook.) For example, if you sign up to become a frequent flier with a certain airline, the airline will likely ask you a number of questions about your likes and dislikes. This information will then be entered into a customer relationship management (CRM) system, and you might be emailed special deals based on the routes you tend to fly. British Airways goes so far as to track the magazines its most elite fliers like to read so the publications are available to them on its planes.

MULTIPLE-CHOICE QUESTION

Twitter is another way companies keep in touch with their customers and boost their revenues. Many chefs at high-end restaurants tweet their customers about the specials offered for the evening, and include pictures of ingredients and the final products. The tweets make diners feel like they have an inside track at the restaurants and that they are getting special attention from the chefs.

Likewise, Hansen’s Cakes, a Beverly Hills, California, bakery, has about two thousand customers who visit its Facebook page. During her downtime at the bakery, employee Suzi Finer posts “cake updates” and photos of the goodies she’s working on to the site. Along with information about the cakes, Finer extends special offers to customers and mixes in any gossip about Hollywood celebrities she’s spotted in the area. After Hansen’s Cakes launched its Facebook page, the bakery’s sales shot up 15–20 percent.6 Finding ways to interact with customers in a way they enjoy—whether it’s meeting or “tweeting” them, or putting on events and trade shows they want to attend—is the key to forming relationships with them.

MULTIPLE-CHOICE QUESTION

Which of the following activities do companies engage in to target current customers?

Correct. Customer retention is very important for a company. Companies often gather survey

data and study buying patterns to better serve their current customers.

Saved moments ago.

administering surveys to diverse groups of people

gathering survey data and studying buying patterns

gathering information about potential new customers

Why does Hansen’s Cakes communicate with its customers through Facebook?

to collect personal information on their customers that they can sell to other businesses

to encourage their customers to try recreating the store’s baked goods at home

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Regardless of how well companies know their customers, it’s important to remember that some customers are highly profitable, others aren’t, and others actually end up costing your business money to serve. Consequently, you will want to interact with some customers more than others. Believe it or not, some companies deliberately “untarget” unprofitable customers. Best Buy got a lot of attention (not all of it good) when it was discovered the electronics retailer had categorized its buyers into “personas,” or types of buyers, and created customized sales approaches for each. For example, an upper-middle-class woman was referred to as a “Jill.” A young urban man was referred to as a “Buzz.” Pesky, bargain-hunting customers that Best Buy couldn’t make much of a profit from were referred to as “devils” and taken off the company’s mailing lists.7

The knife cuts both ways, as the saying goes. Not all companies are equal in the minds of consumers, who will choose to do business with some companies rather than others. To consumers, market segmentation means: meet my needs—give me what I want.8

One-to-One Marketing

Steps companies take to target their best customers, form close, personal relationships with them, and give them what they want—a process called one-to-one marketing—are outlined in “Steps in One-to-One Marketing.” In terms of our shotgun vs. rifle approach, you can think of one-to-one marketing as a rifle approach, but with an added advantage: now you have a scope on your rifle.

One-to-one marketing is an idea proposed by Don Peppers and Martha Rogers in their 1994 book The One to One Future. The book described what life would be like after mass marketing. We would all be able to get exactly what we want from sellers, and our relationships with them would be collaborative, rather than adversarial. More than 25 years later, are we there yet? Not quite, but it does seem to be the direction highly targeted marketing is heading.

Steps in One-to-One Marketing

1. Establish short-term measures to evaluate your efforts. Determine how you will measure your effort. Will you use higher customer satisfaction ratings, increased revenues earned per customer, number of products sold to customers, transaction costs, or another measure?

2. Identify your customers. Gather all the information you can about your current customers, including their buying patterns, likes, and dislikes. When conducting business with them, include an “opt in” question that allows you to legally gather and use their phone numbers and email addresses so you can remain in contact with them.

3. Differentiate among your customers. Determine who your best customers are in terms of what they spend and will spend in the future

Correct. Hansen’s Cakes communicates with its customers through Facebook because it

enables the bakery to interact with customers in a way they enjoy, which is key to forming

relationships with them.

Saved moments ago.

to form relationships with their customers by creating experiences that their customers

enjoy

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(their customer lifetime value), and how easy or difficult they are to serve. Identify and target customers who spend only small amounts with you but large amounts with your competitors.

4. Interact with your customers, targeting your best ones. Find ways and media in which to talk to customers about topics they’re interested in and enjoy. Spend the bulk of your resources interacting with your best (high-value) customers. Minimize the time and money you spend on low-value customers with low growth potential.

5. Customize your products and marketing messages. Try to customize your marketing messages and products in order to give your customers exactly what they want—whether it’s the product itself, its packaging, delivery, or the services associated with it.9

MULTIPLE-CHOICE QUESTION

5 (July 9, 2009), “Lift Sales with Personalized, Multi-channel Messages: 6 Steps,” http://www.marketingsherpa.com/article.php?ident=31299.

6 Jefferson Graham (April 1, 2009), “Cake Decorator Finds Twitter a Sweet Recipe for Success,” USA Today, 5B.

7 Meg Marco (March 18, 2008), “LEAKS: Best Buy’s Internal Customer Profiling Document,” The Consumerist, http://consumerist.com/368894 /leaks-best-buys-internal-customer-profiling-document.

8 “Market Segmentation,” The Market Segmentation Company, http://www.marketsegmentation.co.uk/segmentation_tmsc.htm. Accessed December 2, 2009.

9 Curt Harler (December 2008), “Reaching the Unreachable,” Smart Business Cleveland, 92; Don Peppers and Martha Rogers (May 1, 1999), “The Short Way to Long-Term Relationships,” Sales and Marketing Management, 24; Don Peppers, Martha Rogers, and Bob Dorf (January–February 1999), “Is Your Company Ready for One-to-One Marketing?” Harvard Business Review, 151–60.

Which trend, proposed in a book by Don Peppers and Martha Rogers, is seen as a vision of what life will be like after mass marketing, where collaborative relationships would enable customers to get exactly what they want from marketers?

Correct. Don Peppers and Martha Rogers describe one-to-one marketing as a series of steps

companies take to target their best customers, form close, personal relationships with them,

and give them what they want.

Saved moments ago.

one-to-one marketing

customized marketing

differentiated marketing

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close

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