Choosing a marketing strategy

All marketing involves some strategy, even if it is as simple as providing quality merchandise at low prices in a convenient location. How can you decide what is the best marketing strategy for your product? There is no single answer that has universal validity. For some products, mass marketing through retail stores is the best possible strategy. For some business-to-business products, a web site that lets customers rummage through the inventory and warehouses beats all other methods.

There are thousands of situations where database marketing -- relationship building -- in conjunction with other methods, is the most profitable solution. If you have such a product or service, you must devise an effective method of using your database to build profits.

To develop a workable strategy, each marketer must come up with clever ideas, using, among other things, the hundreds of ideas being tested by others. Each clever idea should be examined to determine to what extent it would modify customer behavior to improve lifetime value.


Strategy Development Steps

The steps in strategy development are these:

  • Group your customers into profitability, demographic or behavioral segments
  • Determine the lifetime value of each segment
  • For each segment, determine whether you can modify their behavior to make them more profitable or to increase their retention rate. 
  • Put yourself in the shoes of the members of the segments whose behavior you want to change. Think like a customer saying:  “What would I want to receive in the way of information, communications, rewards or services from this company? What could I get from them that would make me spend more money, or be more loyal?”
  • From the answers to these questions, develop a list of possible services, benefits, rewards, premiums, or relationships that you could develop with the customers in the segment that the customers would value, and which would nudge them towards greater lifetime value.
  • Imagine that you have implemented these new strategies. Visualize how the strategies would affect the customer’s spending habits, retention habits, or referrals. Put those changed behaviors and their costs into a lifetime value table. See whether lifetime value goes up or down. Play with the benefits until you have maximized lifetime value.
  • Run little tests to make sure that you are right: that the rewards and relationships really do change customer spending and retention. Make sure that you test before you do a rollout.

 

Written by Arthur Middleton Hughes, VP, Solutions Architect