Month: April 2020

Like most suburban kids, I never really understood the proverb, “a bird in the hand is worth two in the bush.”

Why is a bird in the bush worth anything? A bird in the hand sounds like a lot more trouble than it’s worth. Is the bird a pet? Is it a friendly bird? I was not envisioning a friendly bird.

As unattractive a prospect as “a bird in the hand” sounds, the lesson that the proverb is trying to impart is backed up by no-end of research.

Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. 

Consider a stunning insight that a friend of mine who worked at a major telecom imparted onto me about five years ago, as I was founding Postalgia.

The year was 2015, and cell phone saturation in North America was around 80%. My friend’s job was to help increase revenue, which was largely driven by mobile phone sales. If 80% of the population had mobile phones, there was still 20% of the population left to sell to, right?

Well… not so much.

80% is approximately the adult population of the United States – so unless they were going to sell mobile plans to 10-year olds (basically a non-starter), they had essentially saturated their market.

They had two ways, and two ways only to increase their revenue:

1. Retain customers through loyalty
2. Take customers from other telecoms

This is what where the conversation got interesting – while other telecoms were cutting margins, running expensive ad campaigns and promotions, and spending fortunes on new products and services to try to poach customers from one another, my friend told me that the telecom that he worked for was going to double down on retaining and selling to their existing customers.

I love a good contrarian strategy, but I was worried that my friend was playing with fire. His telecom was playing defense, trying to keep their customers, while competitors were actively trying to lure them away with free hardware, predatory pricing, and temporarily attractive services.

He ended up switching jobs a few years later, but I recently asked him how the strategy played out. Apparently, it was a huge success.

They were able to engage their existing customers and promote a positive customer experience, loyalty-inducing programs, and attractive offers for existing customers instead of new customers.

While competitors swapped new customers back and forth, this telecom saw a churn rate way below the industry average. Their competitors spent a fortune acquiring new customers – they passed many of those savings on to their existing customers.

Their competitors had customers jumping from company to company, plan to plan, chasing new deals, while they promoted referrals, family and group plans, and new products to their existing customer base.

This lesson really stuck with me, and I decided to do a bit more research beyond the anecdotal evidence that this strategy had worked for a friend.

Fred Reicheld at Bain & Co has a great study on customer loyalty, chalk full of insights.

KPMG also has a solid overview on what inspires loyalty

Finally, if you’re looking for something more scholarly, Roger Hallowell of Harvard Business School has a paper on the intersection of customer satisfaction, loyalty, and profitability.

Here are a few of the key takeaways:

Switching has a cost

In the field of consumer behavior, there are conventional costs, and there are invisible costs. Things that cost your customers time, energy, or comfort may not be readily visible to them, but play a huge role in their purchasing decision. Switching has an invisible cost for your customer, and it has an invisible cost for you.

Don’t believe me? Well, would you move to a new, identical house or apartment, across the street from where you currently live, if I promised you $25 savings on your rent or mortgage every month?

I didn’t think so.

Return customers spend more than new customers

Maybe it’s because they have more time to consider their spending decisions, or maybe it’s just because they’re more comfortable spending money with your brand, but a 5% increase in customer retention produces more than a 25% increase in profit.

Putting a face to a company makes it harder to leave

No one feels guilty when they shop at one supermarket instead of another, but I’ve walked 40 minutes in the rain and passed dozens of barbers to get to my barber. He gives a great haircut, but that’s not why – it’s because he would know if I went to a different barber, and I would feel bad about that.

That’s why my aunt may forget to send me a birthday card, but my wealth manager never does; I’m not very likely to shop around for a new aunt.

Cross-sell. Up-sell. Retain.

Selling to an existing customer is the easiest sale you’ll ever make. You have a captive audience.

Servicing return customers is cheaper than servicing new customers

Not only is acquiring new customers more expensive than marketing to and retaining, cross-selling, and up-selling existing customers, servicing new customers is also more expensive.

You would be amazed how expensive it can be to on-board someone new. Just think of the 20 minutes you spend talking to the receptionist at your dentist’s office on your first visit, versus the 45 seconds you spend talking to them on every subsequent visit. Someone is paying for those 20 minutes of that receptionist’s time.

Let your loyal customers do the marketing for you

Check out this blog post on turning your donors, customers, and clients into your salespeople and fundraisers.

You’re jogging across an intersection when a city bus turns the corner a little too fast. You jump out of the way and narrowly avoid being run over.

Okay – I’ll admit that it’s a morbid beginning for a blog post about marketing.

But if it’s jarring, it only further illustrates my point.

There is a pervasive fiction in the marketing world that marketing materials are subject to a law of increasing returns. This is sometimes represented as some variation of “the rule of seven,” which proposes that a viewer needs to see or hear advertising from a brand 7 times for it to be effective.

Obviously this so-called rule benefits whoever is trying to sell you the ad space or marketing services. Obviously this rule is just more pseudoscience.

Suppose that over the course of 4 weeks, you see the name of a real estate agent 7 times.  Once in a community newsletter, once on a sponsored post on your twitter feed, twice in your mailbox as you toss their flyers into the recycling bin, and four times on a park bench that you pass on your jogging route.

Now suppose that you’re jogging across an intersection when a city bus turns the corner a little too fast. You jump out of the way and narrowly avoid being run over. Gripping your knees and panting from the safety of the sidewalk, you stare incredulously at the smiling face of a different real estate agent on the back of the bus.

Which name are you more likely to remember?

I’m not suggesting that you should advertise on the side of city buses in the hopes that the drivers recklessly endanger your prospects, but I am suggesting that it is ridiculous to push the idea that you need to hit someone over the head with your brand 7 times when one strong impression will do the job.

In fact, to the extent that there is research on whether or not advertising has increasing returns, it implies that advertising experiences diminishing returns in the long run. 

So why am I, someone who sells handwritten direct mail marketing services for a living, telling you this?

In short, it’s because I know that what I’m selling you doesn’t suck; the other guy hopes that if you throw enough of his stuff at your customer, some of it might stick.

In my previous post, I wrote about how another marketing myth – that humans have an attention span shorter than that of a goldfish – is used to justify putting out barely passable printed marketing products that don’t even try to stand out or catch anyone’s attention.

The theory goes that if you are sent a flyer, or a window-enveloped piece of promotional direct mail, once a month for 2 years, you may eventually recognize the brand, having seen it 24 times for a second or two on each occasion.

The sender is gambling on the fact that if they spend all that money making you throw out their flyers once a month, scroll past their videos, drive absent-mindedly past their billboards, and tune out their radio ads on your morning commute, you (or a few of the other 1,500 people on your city block) are going to choose them next time you need a ______ (fill in the blank with real estate agent, food delivery app, insurance broker, wealth manager, bank, charity, politician, or whoever sends you the most annoying mail).

So what they lack in the ability to stand-out, command your attention, or engage you enough that you remember their name – what they lack in quality – they make up for in quantity.

Like that old joke about the restaurant with the terrible food, but at least no one can complain that the portions are too small.

And if you have no idea what I’m referring to, do yourself a favour:

If commonly cited statistics are to be believed, it’s a miracle that you clicked on this article.

If it took you more than 4 or 5 seconds to read that first sentence, I can’t be expected to hold your attention to the end of this one.

If you’ve made it to this – the third sentence – it was nothing short of a herculean effort that got you here, because according to conventional wisdom, average human attention spans are down to 8 seconds, (from 12 seconds in 2000).

Time Magazine thinks that I have a better chance of holding the attention of a goldfish than of holding your attention, and based on the media that most marketers are putting out, those marketers seem to agree.

The thing about conventional wisdom is that it is often another word for bullshit. Do I have your attention now?

According to British psychology professor Dr. Gemma Briggs, measuring “attention span” is a meaningless pursuit: “How much attention we apply to a task will vary depending on what the task demand is.”

In other words, treat your prospects and clients like goldfish, and you’ll get the attention of a goldfish.

Forget about the egregious crimes against attention committed by email and digital marketers, who give us our daily thumb workout as we furiously scroll past their videos and swipe their unopened emails into the trash bin of our inboxes.

Let’s turn our attention to physical marketing for a moment. You’re familiar with the scene:

You open your mailbox, and it’s filled with admail – some addressed, some unaddressed; you quickly shuffle through the pile, dealing piece after piece straight into the recycling bin.

The pieces don’t demand your attention, so you don’t give it.

Marketers continue to spend the money printing high definition photos on sturdy card-stock thousands of times over, because even conversion rates of 0.05% (that’s one in every 2,000!) enable them to turn a profit. And the lifetime value of the two or three customers that they win (out of every few thousand to whom that they market) is enough for them to make money.

But it shouldn’t be enough for them to be satisfied. Forget about all of the brands and companies for whom this strategy doesn’t work – innovative brands getting new solutions to market, small companies with great products who don’t have a million dollar marketing budget to waste, etc… – anyone who uses this kind of brute force approach to marketing is leaving a ton of money on the table.

That’s because not all attention is created equally – or more accurately, not all attention is demanded equally.

If you’re like me, you are thrilled to be competing in a market full of people who take this kind of approach to marketing. The more that their media all blends in together to create this ubiquitous white-noise of printed and digital materials, the more that truly unique, attention-grabbing marketing stands out in the mailbox.

That’s why we founded Postalgia, and that’s why our clients, from huge multinationals to independent professionals, from century-old nonprofits to scrappy startups, see massive spikes in conversion rates, retention, customer engagement, and above all else – attention.

The less people send handwritten mail, the more it stands out amidst the clutter of coupons and bills.

Since you made it this far, enjoy one of the most attention-grabbing scenes in movie history – but make sure your kids are out of the room.

Thank you for your attention!