Turned on and Topped up Everyone that endured the recent recession has different experiences and stories to tell and mine began around June of 2009. As an avid home shopper, it has never been a surprise for me to open up my letter box and find it filled with a wide variety of catalogues. Personally, I have always loved the choice that these catalogues offered as they gave me the opportunity to find new, interesting products and put different companies on my radar.

Something started changing though... the number of catalogues I received slowly began tapering off - especially catalogues from companies that I was unfamiliar with or hadn’t previously purchased from. I was struck by the thought that a lot of these mail order companies were missing a trick by not mailing me as I was a frequent, engaged home shopper and in the economic climate of 2009, surely they would want all the business they could get their hands on. Looking back on it though, it all makes perfect sense. Customers were golden – prospects could wait.

Ask any business owner about 2009 and the majority will probably give you a similar answer -  it was a turbulent year filled with many challenges. Cash was king and many companies within the home shopping arena focussed heavily on survival through customer retention as it offered the most value for money. Armed with the knowledge that the cost of acquiring new customers was significantly higher than retaining existing ones, acquisition was put on the back burner as marketing budgets were cut and spend was scrutinised at every level.

Retention proved to be a smart strategy and enabled many mail order companies to come out of the recession with their businesses in a relatively stable position. When used effectively, it allowed them to mail deeper into their enquirer and buyer files, suppress poor performing names and reactivate their lapsed customers. This approach demonstrated how ‘back to basics’, simple marketing could effectively contribute to the bottom line and how the adoption of good habits would help a business to function effectively during a tough economic climate.

Importantly, as the UK emerged from the financial gloom, it became clear that a retention strategy was not sustainable over the long term as effective customer acquisition was vital for business growth.By correctly targeting active mail order shoppers most receptive to their offer, these marketers could significantly increase the size of their customer file in a stronger market.

Regardless of the type of mailing campaign carried out, a database is at the core and to demonstrate its inner workings, imagine it as a bath tub filled with water representing your customer base. By turning on the tap, prospecting data flows in and allows newly acquired customers to enter the pool. However, this pool needs to be constantly replenished and a customer retention strategy alone is not possible as your customer database has a certain attrition rate - imagine the bath plug being pulled regularly from the tub and the available pool of buyers reducing as the bath tub empties. Customers can stop buying for any number of reasons and this reinforces the importance of striking the right balance between customer retention and customer acquisition to ensure your bath tub remains filled to a satisfactory level.

After a cautious start to the year, consumer confidence appears to be on the rise and the remainder of 2010 seems set to continue on stable footing. Direct marketers are realising the importance of an effective customer acquisition strategy to target the right prospects, fill their depleting bath tubs and effectively grow their businesses once more.

A potential setback to this rise in consumer confidence is the recent emergency budget announcement increasing VAT from 17% to 20% on the 4^th of January next year. This increase will undoubtedly cause apprehension in the home shopping market.However, it is important to remember that certain positives have also been outlined, for example, corporation tax is set to be cut to 27% next year and by 1% annually for the three years that follow, until it reaches 24%. Also, the small companies' tax rate will be cut to 20%.

Marketers need to remain focussed and continue drawing on the expertise of sophisticated data providers to maximise returns from their mailing campaigns and maintain a strong position for 2011.

The depth and breadth of current, transactional data gives these marketers the power to identify valuable names. Accessing this intelligent data provides a clearer picture of their customers purchasing patterns and enables them to drive successful prospecting and retention campaigns that will increase the profitability of their direct marketing. With the majority of mail order companies sharing data with cooperatives, they can effectively gain access to top performing names at a lower cost per thousand than regular rental lists.

As the saying goes, ‘Every cloud has a silver lining’ and data providers offered that silver lining at the height of the recession by enabling direct marketers to enhance the value of their customer databases in the short term. Continue trusting your preferred partner in the future to grow your business, maximise your returns and develop a strategic long term mailing strategy embracing the concept of the bath tub.

Claire Maiwald
Marketing
Abacus – The Transactional Database Specialist