- Get more customers,
- Get your customers to purchase more frequently,
- Get more revenue per purchase.
Getting new customers
For many years direct marketers have focused on getting more customers. Inevitably you will lose customers. In order just to maintain the status quo, you must replace those customers. So every company needs a customer acquisition program — and most have them. If you have a good market share, it becomes increasingly more difficult to get new customers — after all, the most logical prospects have already been converted to customers. My experience has taught me that a disproportionate amount of resources are set aside for customer acquisition as compared to increasing frequency of purchase or raising revenue per order. Almost every book regarding direct mail/direct response focuses on getting new customers.
Getting your customers to buy more frequently
Each year more and more direct marketers are focusing on frequency of purchase. The catalog companies and the continuity companies are the masters. It’s not uncommon for a catalog company to mail 15-20 catalogs a year. Some only go to their very best customers; some feature a unique line of products and are only mailed to buyers of that product category. The continuity mailers, whether they’re selling a series of collectibles, or skin care products, or music, understand the enormous difference between the average customer making 3.5 purchases vs. 4.5 purchases. More and more non-profits are asking their donors to sign up for a donation-a-month. This program drastically increases their average income per donor. In general however, the concept of frequency is not given much thought. The local pest control company is happy to service you when you have a problem. They should be offering a monthly or quarterly service that prevents the problems and increases their income per customer. The same is true for tree trimming, and many other services. The pool and lawn maintenance companies are good examples of how this works.
Getting more revenue per sale
Yes, you can get more revenue by raising prices. It can also mean offering free shipping with a $50 or $100 purchase. Offering a premium for reaching certain sales volumes increases average orders. The airlines will generate over a billion dollars in annual revenue by charging for checked bags. They also charge for food and WiFi and some are considering charging for blankets. When we sold books, we found we could offer a deluxe edition for 20% more than the standard version — with only a minimal additional cost.
The important thing is not to rely solely on one of these three methods. You should examine each element and think about how to use it to increase overall sales. You may already focus on one or two of these. When you add the others, they work together to dramatically grow your business. As you increase the frequency of purchase and average order profit – you have a higher allowable cost of acquisition since each new customer generates significantly more revenue. When you increase the allowable acquisition cost you open up your marketing dramatically to advertising programs that were previously too marginal to use.