When I read emails promoting marketing services, it seems they think I should be pursuing customers because I want to make a sale.
Although getting new customers is important, that isn’t where most of a company’s marketing effort should go. Getting new customers is expensive and difficult. It may well be the seller will lose money on the initial sale. Why would a seller do that?
The purpose of getting a customer isn’t to make a sale. The purpose of making a sale is to get a customer.
When a business makes an initial sale, hopefully the customer will have a good experience, and start to build a relationship of trust with the business. The customer becomes receptive to buying more from the business. A “bounce back” offer might be included in a delivery package or online confirmation of order sequence.
With continuing communication and effort, the customer might become a customer for life.
An important metric in direct response marketing is the “lifetime value of a customer”. For all of the customers of the business, how much average profit is generated for the total time customers continue doing business?
For new businesses, there is no experience to compute lifetime value. It can only be estimated with a guess.
Businesses generally can’t produce enough products and services to satisfy the ability of their customers to consume. They might license selling products and services of other companies or make earn commissions from making affiliate sales to offer more to their own customers.
In 1926, Maxwell Sackheim, Harry Sherman, and Robert K. Haas started the Book of the Month Club — the first direct-mail book club in the U.S. Customers would receive a popular book every month, with the option to return or pay for the book. The subscription continued until the customer requested that it stop. This is called a “negative option” subscription.
This subscription model created a way to predict future income and estimate the lifetime value of a customer.
It has been imitated for countless items, including music recordings, cosmetics, blemish treatment cream (Proactive), dietary supplements, DVDs, wine, clothing, and more. Cellular telephone service and most online streaming services use the subscription model.
The subscription is usually initiated with a free offer or a package of items for a very low price.
If you wonder if this strategy is effective, look at your own monthly credit card statements.
The most valuable assets of a business usually don’t appear on its financial balance sheet. The most valuable assets are the business’s customers.
Some direct response businesses earn a profit by renting mailing lists or email lists of their customers.
If you are a business owner, how can you sell more, more consistently, to your customers?