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Many years ago, in the 1970s—when I was starting out as a freelancer after 15 years of corporate misery—I was lucky enough to have a rather fanciful article on direct mail accepted by FOLIO: The Magazine for Magazine Management. FOLIO headquarters was just up the pike in New Canaan, Conn., and I was invited to lunch by the editor, Charles I. “Chuck” Tannen. That lunch was pivotal in my business education.
Tannen was (and is) a lovely guy—short, with a mop of curly hair and owlish spectacles. For Tannen, true bliss was flying his own plane. He was low-key, accessible and very easy to talk to. At one point I asked him whether FOLIO was profitable. He waved his right hand in an up-down motion that indicated “comme çi, comme ça.”
“The magazine is the flagship with about 10,000 subscribers,” Tannen said. “It’s break-even to marginally profitable. But we have other products and services to sell—books, special reports, the big FOLIO show in New York every year, consulting services and card decks. Whenever we get a new subscriber, customer or attendee, or exhibitor at the show, it is our license to go after that person and sell anything and everything we have. Our business philosophy is to surround the market.”
Acquisition vs. Retention
Once you have followed Tannen’s advice and surrounded your market, the next challenge is to surround the individual customer—create dependency. The Madison Ave. buzz phrase for this is to “increase share of wallet” (as opposed to “share of market”). An old rule: It costs five times more to acquire a new customer than to sell a product or service to an
existing one.
Given the cost of postage, the incredibly complex media mix, myriad competition and the blizzard of offers out there, my sense is that it is more like seven or eight times more expensive to bring in a new customer than wring an order out of an existing one. Maybe even more. Here’s what the late, great Joan Throckmorton wrote in Don Jackson’s and my “2,239 Tested Secrets for Direct Marketing Success”:
As direct marketers we’re not here primarily to make a sale; we’re here to get a customer. Sales are important, of course. (Where would marketers be without them?) But the name of this game is repeat sales rather than one-shots. And to have that, you need a customer. Some marketers today use a form of advertising that I call “response advertising.” It consists of customers who answer their promotions via coupon redemption or electronic means like telephones and computers. But generally these marketers do not record customer names and establish a database; therefore, this is sampling—or coupon redemption or sales promotion. It is not direct marketing.
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