Improve Customer Acquisition with an Engagement Strategy
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- Jonathan Newman
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1 Improve Customer Acquisition with an Engagement Strategy
2 INTRODUCTION If you re focused on acquiring new customers, but you don t have a program for keeping them engaged, stop what you re doing immediately. Customer acquisition strategies and tactics are simply a waste of time and money without a rock-solid plan to keep those customers coming back. Here s why. You re probably spending a big chunk of money to entice new customers through advertising, SEO, your website, and your social marketing. But their initial interaction with you is just the tip of the potential iceberg. A customer s true value emerges over his or her lifetime with your company. Engage your customers throughout their lifecycle and you ll drive more revenues from the relationship; leave that relationship to flounder, and your company loses out. And that loss won t just be in potential revenue from customers and those they d refer, but also in higher costs you ll need to spend even more on your acquisition strategy to achieve your growth goals. That s because it s more cost effective to grow business with an existing customer than to acquire a new one. A customer is a person who becomes accustomed to buying from you. Without a strong track record of contact and repeat purchase, this person is NOT your customer; he is a buyer. A true customer is grown over time. Jill Griffin, Customer Loyalty: How to Earn It, How to Keep It 01
3 YOUR CUSTOMER DATABASE IS YOUR MOST VALUABLE ASSET Consider all the money you dedicate to acquiring new customers, and the database you ve built as the result of your investment in acquisition. Now picture that money flying out the window when your customers disengage either explicitly through an opt-out, or subtly by withdrawing their interest. When you lose permission to interact with those customers, you are left unable to approach them about additional products or services. In this way, the value of your acquisition investment declines whenever legitimate contacts with purchase potential unsubscribe or opt out of hearing from you. On the other hand, when you maintain permission, you earn loyal customers and loyal customers are worth up to 10 times as much as their first purchase, according to the White House Office of Consumer Affairs. But engaging throughout the lifecycle isn t just about the value you can drive from the relationship it s also about the value you can deliver. True engagement marketing the process of engaging with customers as individuals, based on what they do, wherever they are is a continuous process. As you keep your database healthy by continuously engaging with the people it contains, you re also helping those people extract the maximum value from their purchases. Over time, you gain a true understanding of who your buyers are, and where they are in the customer lifecycle. Acquisition marketing without a continuous engagement strategy and plan is just wasted dollars. Kathy Hawkins, Director of Engagement Marketing, OpenTable 02
4 ENGAGING CUSTOMERS YIELDS THE HIGHEST MARKETING ROI A study by King Fish Media found that marketers spend 56% of their marketing budgets on new customer acquisition and 33% on customer retention. But marketers seem to grasp the need to invert this ratio according to econsultancy, 82% of companies agree that retention is cheaper than acquisition, and 49% said they achieve higher ROI from relationship marketing than from acquisition marketing. And the numbers confirm what marketers suspect Bain & Company has found that it costs between six and seven times more to acquire a new customer than retain an existing one, but that repeat customers tend to spend more as much as 67% more. But in today s interconnected world, marketing to customers isn t just about their individual value it s also about the value of their networks. A happy, loyal customer is more likely to refer new customers, improving your acquisition. According to Forbes, 80% of all purchases include some form of word-of-mouth recommendation during the purchase cycle. Better yet, potential buyers who were referred by customers are 3-5 times more likely to convert to customers. 03
5 ENGAGING CUSTOMERS YIELDS THE HIGHEST MARKETING ROI As you can see below, McKinsey s DataMatics 2013 survey found that strategically engaging customers can pay off big in terms of profitability and revenues: Low performers 2 Performance Index 1 High performers Strategic KPI s Customers acquired Customers retained Tactical KPI s x23 Sales to existing 10 x7.4 customers 74 x6.5 Customer profitability 4 75 x18.8 Why spend your marketing budget and efforts trying to reel in new customers when you can more easily and cheaply interact with existing ones? Customer loyalty 9 80 x9 Value delivered to customers 5 76 x15 Customer satisfaction 14 x Migration to profitable segments 3 63 x21 1. Based on Please decribe the perfomance of your firm s/business unit s marketing group in the following areas relative to your average competitor (consider the immediate past year in responding to these items). Above competition defined as 6 to 7 on 7 point scale 1 Well below competition, 7 Well above competition. 2. Based on Please describe the performance of your firm/business unit in the following areas relative to your average competitor ; Aggregate index derived from the dimensions Sales, Sales Growth, Profit, ROI. Comparison of bottom vs. top quarter. SOURCE: CMAC CLM Serviceline DataMatics team 04
6 HOW TO IMPLEMENT A WINNING ENGAGEMENT MARKETING STRATEGY It s a no-brainer that in most cases, your customers will be more profitable when you move them from a single transaction to multiple transactions. So how can you capture more time, attention, and revenue from existing customers? It starts with building relationships. We all know what relationships are or at least we think that we do. But when it comes to your marketing, what actually qualifies? We believe that relationships with your customers must meet the following criteria: 1. Relationships are individual. A relationship can t be between one company and 1,000,000 people. It has to be between a company and one person, which means it has to be relevant to that one customer. 2. Relationships are mutually beneficial. One-sided relationships don t last long. The company and the customer must both benefit. 3. Relationships are continuous. Relationships die when there are long gaps in communication. 4. Relationships are long-term. A relationship inherently must progress beyond that first interaction or it s simply a transaction. So how do relationships turn one-time buyers into lifetime customers? Building and maintaining relationships with your customers gives you permission to stay in touch, and greatly increases the chances that your messages are actually getting through. It s a lot harder for a customer to tune you out when they have a relationship with your company, assuming your company respects the tenets of a solid relationship. 05
7 HOW TO IMPLEMENT A WINNING ENGAGEMENT MARKETING STRATEGY Relationships are at the core of engagement marketing. But the kinds of relationships described on the previous page haven t really been possible between companies and their customers until recently. Today, marketers can develop these types of relationships, as long as they re leveraging an effective engagement marketing strategy, and they re supported by the right organizational structure and technologies. In fact, marketers can start building relationships with customers the second they re first acquired. Here are the three tenets of effective customer relationship-building: 1. Your marketing organization must be customer-centric 2. Marketers must have a single view of customers that spans acquisition through engagement, across channels 3. Marketers must have the ability to automate and personalize based on where the relationship starts and where a marketer wants it to go In the following pages, we ll dive into each tenet in more detail. 06
8 A CUSTOMER-CENTRIC ORGANIZATION Organize your team around customers, not channels. Your marketing should feel seamless to your customers, regardless of which channel they re engaging with. If the experience isn t seamless, your customers will feel that your company doesn t truly know its customers. And nothing shatters customer trust faster than feeling like a number, rather than a known entity. Unfortunately, many marketing organizations are organized around channels, with separate teams managing , display ads, mobile marketing and so on. This makes it hard to coordinate efforts and without coordination, you can t ensure a seamless customer experience. More importantly, channel-based organization makes it difficult to take into account all of the behaviors a customer is demonstrating, across every channel. As a result, each channel will likely interact with customers in a bubble, without insight into what messages that customer is seeing on other channels. This can often result in your customer seeing disconnected and at times irrelevant messages on your website, in s, on social, and in display ads. The ideal state is when marketing is organized so that every person on the team works together to provide a coordinated customer experience across channels. 07
9 A SINGLE VIEW OF YOUR CUSTOMER To develop a comprehensive profile of your customers, you ll need a unified view. You can t engage customers without an understanding of how they interact with you across channels. Unfortunately and understandably lack of single customer view is one of the key reasons that companies do not tackle engagement marketing. 42% of CMOs told Accenture they agree that technology is siloed and too difficult to use for cross-channel experiences. So the key is to find a platform that makes it possible for every marketer on your team to understand what s working, and to make changes for optimal results. Start with information about your customer s initial engagement, which will help you ensure a seamless experience as you continue nurturing the relationship. It will also give you insight into how that person likes to be engaged with and marketed to. Lastly, information about customers initial purchases can provide insight into their future buying preferences. The information about your customer s initial engagement, as well as ongoing interactions, will help you deliver relevant information and content addressing your customer s interests and lifecycle stage. You ll be helping your customers realize the full benefit of engaging with your company, and see the value of investing in additional products or services. 08
10 A SINGLE VIEW OF YOUR CUSTOMER Of course, it s critical that your customers actually welcome these communications. According to McKinsey & Company, marketers must listen for the signals that indicate customers are ready to engage and design programs that respond to those signals quickly. Those signals could include visiting your website, walking into a showroom, or opening your s. Listening in this way can yield big returns. According to a 2013 survey by McKinsey DataMatics, receptive companies are more than twice as likely to generate above-average profits as those that aren t. Plus, they outperform their peers across the entire customer lifecycle and are nine times more likely to enjoy superior customer loyalty. Integrating different data sources into a single, actionable data set for marketing is vital to success with engagement marketing. It s the only way you can develop a unified customer view and respond in a timely way to your customers signals. 09
11 MARKETO S PARTNERSHIPS WITH ACXIOM AND TURN Your marketing automation platform enables you to respond to the signals sent by your customers. So make sure your primary marketing platform empowers you to integrate data and easily use that data in your marketing. One example is the partnership between Marketo and Acxiom. By combining Marketo s Engagement Marketing Platform with Acxiom s data and insights, you can append data to your customer database records. This additional information helps you better segment your existing customer base so you can send them more targeted and relevant marketing campaigns. Another example is the integration between Marketo and Turn, which offers an automated ad-buying platform with data management capabilities. You can take advantage of this integration in multiple ways: You can track the various ads your customer may have seen to understand their path to acquisition; you can retarget anyone including existing customers who visits your website without taking action, driving them back to your site; and you use information fed to you by Turn, within Marketo, to do look-alike modeling pinpointing your best, most engaged customers and building lists so you can easily market to them. Finally, when a customer has gone dormant, you can reactivate them using Turn media campaigns. 10
12 THE ABILITY TO AUTOMATE AND PERSONALIZE AT SCALE It s been proven that the most effective marketing occurs when messages and interactions are personalized. McKinsey s research shows presenting relevant messages or offers when the opportunity arises (also known as personalizing your marketing) can deliver five to eight times the ROI on marketing spend and lift sales 10% or more. With that in mind, you want to tap into a platform that makes it possible to listen to your customers activities and refine your message based on those behaviors. For example, perhaps you see that certain customers have purchased, but not yet interacted with your solution. In such cases, you could quick tips on getting started. By engaging your customers in a way that helps them realize success, you lessen the chances that an acquired customer will become part of your churn stat. In fact, you boost the odds that they ll make a follow-on purchase. While the goal is to engage each customer in a personalized way, it s not practical to do this manually when you have hundreds, thousands, or millions of customers. Marketing automation allows you to engage customers in a personalized way at scale. Finally, as it relates to your acquisition strategies, marketing automation lets you engage people based on how you first acquired them as a customer. In fact, you can start engaging them the second after you acquire them. 11
13 ACQUISITION + ENGAGEMENT: PROVING THE ULTIMATE VALUE By feeding data and insights about your customers into your marketing automation platform, and doing so in real time, you can deliver deeply personalized experiences. And that s key to initiating and building deep, enduring relationships with your customers beyond acquisition. But that s not to say you should turn your back to acquisition. True nirvana is measuring the results of your acquisition and engagement efforts to ascertain the combination of campaigns and other marketing activities that delivers the biggest return. With an effective engagement strategy in place, you can have confidence that you re maximizing the lifetime value of your customer. You can then determine the value of your acquisition channels based on which ones bring in the most customers with the highest Customer Lifetime Value (CLV). As you re defining next year s budgets, make sure engagement is getting the attention it deserves by asking yourself these questions: 1. Am I making the most of my customer database? 2. What steps can I take to ensure balanced acquisition and engagement budgets? 3. What platform decisions should I be making to gain a single view of my customer, from acquisition through engagement? One of the hardest changes to adapt to in the new world of Customer Lifecycle Marketing (CLM) is moving measurement and reporting from an emphasis on shortterm conversion to one that reflects the business impact of engagement The ultimate goal is to measure the (expected) impact on the Customer Lifetime Value (CLV) of your efforts to boost customer profitability and reduce churn. 12
14 Marketo (NASDAQ: MKTO) provides the leading marketing software for companies of all sizes to build and sustain engaging customer relationships. Spanning today s digital, social, mobile and offline channels, Marketo s customer engagement platform powers a set of breakthrough applications to help marketers tackle all aspects of digital marketing from the planning and orchestration of marketing activities to the delivery of personalized interactions that can be optimized in real-time. Marketo s applications are known for their ease-of-use, and are complemented by the Marketing Nation, a thriving network of more than 250 third-party solutions through our LaunchPoint ecosystem and over 40,000 marketers who share and learn from each other to grow their collective marketing expertise. The result for modern marketers is unprecedented agility and superior results. Headquartered in San Mateo, CA with offices in Europe, Australia and a joint-venture in Japan, Marketo serves as a strategic marketing partner to more than 3,000 large enterprises and fast-growing small companies across a wide variety of industries. For more information, visit marketo.com. marketo.com 2014 Marketo, Inc. All Rights Reserved Designed by SCORCH
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