Dare to Share
The cost to acquire a new customer is arguably the most critical expenditure to manage in any business. Reasons vary, but most involve the uncertain and unpredictable nature of activities designed to acquire new business which do not always move along the cost curve at an increasingly profitable pace. In our hyper-marketing world, yesterday’s successful tactics are soon copied, over-used, and/or misused at an alarming rate causing momentum loss quicker than ever before (see ALS ‘Ice Bucket Challenge’ and copy-cat charities attempting to replicate its success). In this environment the foundation of new customer acquisition – prospect data – is morphing into more of a commodity and less an asset to be guarded at all costs. This blog has made previous mention that prospect data is becoming increasingly less costly to acquire, maintain, and utilize than ever before; naturally, this has led to an over-abundance of opportunists pedaling data that is less than desirable and who should be avoided at all costs (so yes, there still is a very definite need to retain trusted data brokers as independent analysts/gate-keepers of quality data sources).
So how do we best utilize others’ data to best grow our new business initiatives? Sharing. Now I’m no intellectual elite but I at least know that sharing requires at least two willing partners. And sharing also implies that giving up some of what we have to gain some of what others have requires either a sense of philanthropy or steely resolve that our gains will outpace our losses. The non-profit community as well as commercial catalogers both embraced the latter which has largely underwritten their customer/donor acquisition efforts. Other commercial marketers have been slower to accept and adopt this reality but they should … and here’s why:
Most acquisition direct response campaigns achieve a .5%-2% response rate. For illustrative purposes, let’s work with a 1% response rate. If I’m in the business of sharing my customer data – transactional, behavioral, demographic, etc. – I realize that I stand to lose 1% of my business to myriads of offers in need of discretionary spending that is currently funneling into my coffers or to offers that are directly competitive to my product/service. But let’s look closer at that 1%: If I were to guess, those who most quickly abandon ship are my least loyal customers anyway. Perhaps they are habitual flippers, they aren’t really my ideal customers, or fall into a slew of other categories why they aren’t long for my product/service. Do I really want to spend my valuable time/resources trying to convince those customers to stay? Probably not. I’m better off spending time with my most profitable and loyal customers who primarily pay the bills.
On the flip side, by accessing competitors’ data sets and acquiring their weakest customers, there is at least an equal if not better chance of solving their causes of disenchantment compared to the 1% that I just relinquished. We can’t be all things for all customers; at some point our strengths are viewed as weaknesses and vice versa. It makes sense to swap our weakest customers with competitors if in the end we both improve, even if addition by subtraction (i.e. taking on less problems).
Sharing our data makes sense to speed the acquisition curve as it’s easier to attain new business if we can target prospects based upon recency, category, monetary amount, and frequency of transactional spending. Layered on top of strong demographic profiling and we have a rich database of who to approach, when, and how. Whether such sharing occurs in an advanced co-op database, long the preferred strategy of heavy direct mailers, or simple reciprocal data share agreements between two entities, commercial marketers stand to recognize significant gains in new business acquisition by loosening their grip on past and current customer data assets.