Differential Marketing for Direct Mail Retention
A detailed analysis of any mailer’s internal house file presents numerous opportunities for improving the ROI of customer retention marketing campaigns. This is especially true when looking to classify existing customers into meaningful sub-groups and peer groups using insights from past purchase behaviors. One approach for matching key customer targets with relevant offers and promotions is to apply a differential marketing strategy.
Reading Customer Footprints
The idea of differential marketing comes from the 1990’s-era book All Consumers Are Not Created Equal, where Garth Hallberg introduced the concept of “differential marketing pyramids”—a category value segmentation that quantifies the differences in value between key consumer groups. Even though the practice of differentiating customers on the basis of past and future profit value has been around for some time, direct mailers need to remember the benefits of implementing such a strategy.
Think of differential marketing as the science of identifying changes in individual consumer purchase patterns—largely as a result of the passage of time—compared to a relevant benchmark. In other words, how different is a customer’s spending, purchase behavior, transactional activity, etc. compared to an expected norm? What types of marketing activities should be initiated as a result of these differences?
Differential marketing is a systematic way to check for irregularities in customer purchase behavior, either positive or negative, that can signal an appropriate marketing action to reinforce or change the behavior. The marketing action could be a buy-one-get-one offer to reward loyalty and continued product usage, or a promotional offer to stimulate trial in a new category. Design elements of the associated mail piece should also take advantage of the customer’s peer group.
A differential marketing strategy helps direct marketers get out of the rut of saying the same things and repeating the same undifferentiated offers over and over again. What works best is to design a mail piece with offers, promotions, key message themes, and creative elements that make the most sense for the target audience. Combining these factors should also help drive a specific call to action or behavior that you are trying to influence.