Extreme Retention = Profit-centric Marketing (Part 2)

Marketing Mistakes

There have been three big blunders in digital marketing over the past decade.

First, marketers forgot the basics. Instead of building deep relationships with their existing customers, they have over-emphasised the importance of new customers. The former is hard work; the latter is easy. The combination of a digitising customer base with a demand from the company leadership to show growth led them to the doors of Google and Facebook who promised to deliver the new numbers each day that made the marketers look good to the CEOs, and CEOs delight the Board. After all, if you didn’t do it, then the competitor was also chasing that same customer. There was little thought given to lifetime value; it was all about the here and now. Get that next customer in by winning the auction for the click, and then get the transaction done with whatever discount is needed. Need more revenues? Simply, increase the ad spend. The side-effect: rising customer acquisition cost (CAC) which aided the bottomlines of the adtech majors at the cost of brand profits.

Second, even among the existing customers, marketers did not segment based on lifetime value. All customers were treated the same. Uniformity became the norm instead of differentiation. Push messages sent to everyone. Each visitor’s clickstream recorded and put into a giant ever-increasing database. Website and app pages look almost the same for everyone. Marketers forgot that every brand has a small cohort of customers who deliver disproportionate value and therefore should be treated differently. With every customer just a statistic and part of an aggregate, digital’s biggest strength of being able to target individuals was forgotten. Customers may be part of cohorts, but they are also individuals.

Third, marketers forgot their responsibility. Marketing is about being the profit driver for a business – the generator of demand that the innovation teams fulfill. Innovation can be about product, price or service. Marketing is about winning customers, ensuring they come back again and again, and in some of the future visits, they bring their friends along. Retention, repetition and referrals. This means thinking through the persuasion journey; it means ensuring satisfaction at each stage from pre-purchase to post-purchase. In the pre-digital world, it was not possible to know an individual customer. Now, it is – an identity (email ID, mobile number, device ID) can be linked to a clickstream and transaction history. Ironically, marketers let the likes of Google and Facebook use this data from their own site via the cookies but forget to leverage it for their own relationship building activities. This is because they are not thinking profits; they are simply focused on the transactions. It is like a startup founder being focused not on building a long-term business but just on the next round of funding.

These three errors – an addiction to new acquisition rather than retention and relationships, not providing differentiated experiences, and not thinking profitability – have meant that marketing departments have dug themselves into a deep hole. The first thing they need to do is to stop digging. For that, it is important to identify the profit killers in the business.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.