Strategy: Learning From Fiascos
We all make mistakes. They are usually pushed out of sight and you don’t hear much about them. Marketing articles are usually about successful campaigns, but there is a lot that can be learned from those mistakes.
1. Catalogers ‘Mailing Down’
Story: A cataloger was trying to cut mailing costs on a comprehensive catalog, without losing revenue. That meant looking for ways to trim the mailing list.
Fiasco: The marketer ranked each of the catalog customers by revenue and then “mailed down” the list until the return was unprofitable. But costs kept rising faster than revenue.
Failure: Catalogers are under pressure from increasing print and postage costs, but more heavily from customers switching to the Internet for purchases. In this case, the cataloger failed to recognize that knowing a customer’s main sales channel could offer a more profitable approach to a better mail strategy.
Lesson learned: Rather than using a historical metric like past revenue, use “expected revenue” from catalog sales to rank customers. To save postage, don’t mail customers so often who are primarily buying through the Internet.
2. Ignoring Lifetime Value in Acquisition Marketing
Story: An e-commerce company with a preponderance of “one-and-done” customers was addicted to acquisition. The marketer was making deals left and right, in addition to offering rich promotions to acquire customers to feed the revenue stream.
Fiasco: This organization was giving away gross margin without realizing it because its marketers didn’t know customer lifetime value (CLV) by segment. Its acquisition programs were costing more per new customer than the newly acquired customer would be worth.
Failure: Not recognizing easier revenue gains could be realized by smarter marketing to existing customers. But acquisition is important, too. Not knowing CLV took away an important data point from management in the evaluation of different acquisition programs.