It’s All About the Offer: Marketing on the Left Side of the Brain
The surprise is that soft inventory—the customer and customer behavior—also can be quantified. In fact, measuring loyalty and purchase behavior is the secret to improving customer performance and long-term profit. Quantifying and promoting from a customer perspective can be more difficult analytic work, but inevitably yields a greater return on marketing investment.
Marketing from a customer perspective requires three initial steps:
1. Segmenting customers into groups with shared characteristics.
2. Determining which customers are most likely to buy in the near future.
3. Deciding what offer to make.
While products are built to standards of conformity, in customer-based marketing no two customers are exactly alike. So grouping according to shared characteristics becomes a marketing necessity. They might be grouped by geography (you’ll sell more mittens in Minnesota than in Florida) or by attitudes (Porsche owners and Corvette owners share a passion for sports cars, but little else).
But while demographics and psychographics can be used for targeting, the customer information that matters most is behavioral:
• Who’s going to buy next?
• When will they buy?
• What will they buy?
• What might they add to their market baskets that they’ve never bought before?
A customer perspective asks, first of all, which customers are ready to buy—a segmentation that’s derived from using transaction data to establish past purchase patterns and, using this knowledge, to project the next expected purchase time. Marketing to customers who are ready to buy will always yield better results than a “spray-and-pray” random effort.
The customer analysis that asks who will buy next also can lead to a list of customers who should have bought but didn’t. If follow-up marketing to this list doesn’t generate sales from these laggards, it suggests that you’re looking at a list of potential defectors. It’s generally less expensive to take special measures to retain potential defectors than to prospect for new customers to replace them. Of course, a certain amount of attrition is natural and, in some cases, might even be beneficial. However, being able to predict how customers will behave and then marketing accordingly will yield more sales and greater profit both now and in the future.