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It's the Customers, Stupid
While you might not appreciate or agree with James Carville, when he essentially coined the phrase, "It's the Economy, Stupid" for then Governor Bill Clinton, he was stating the obvious. (And with the approach of Election Day, I really just wanted to use that headline.) It sums up the essence of customer loyalty and relationship marketing as a strategy to grow a business.
While the global markets and economies tank and (hopefully) find a bottom, we are seeing many companies taking not-so-smart approach, best illustrated by a recent quote from a retail CEO: "Given the business climate we are trying to cut costs and grow sales." Last time we checked, hope was not a strategy.
Smart companies will turn to their existing customers as a way to achieve growth, or at least stability. Unfortunately, too many will try and find their way out of the financial morass through "me too" loyalty programs, an approach likened to "lemmings off a cliff" by a leading industry analyst. They are choosing tactics over strategy, replicating competitive programs and probably not doing the math.
If companies are to grow their business in this climate, they have to invest in those customers that present the best potential to give them more business. Yet too much of "loyalty marketing" is about best customers, top brand promoters, etc., making many of the initiatives in the market misguided.
The opportunity however is in the middle.
It is very easy to overinvest in your best customers and in some cases, it is reasonable to do this. Where you have high value but vulnerable customers and intense competition, there is a lot to lose at the high end.
But in order to justify the investment in preserving these customers, there should be offsetting gains to fund these losses.
Here it is worth taking a look at the Presidential campaigns. One key lesson can be taken from how both candidates are solely focused on the so-called swing states. These states are up for grabs and this is where the candidates' are investing their marketing dollars.
In fact, if you look at www.fivethirtyeight.com, you'll see how they have nicely calculated an ROI index for the election:
Here the tipping point states are clearly "the middle" - the states that will decide the outcome and can swing in favor or either candidate and drive the victory or defeat. They are also highly correlated with providing the highest potential ROI for the candidates' campaigns.
Although elections are more lasting than customer relationships for many companies, they always provide great marketing lessons.
Happy Halloween.
