Anyone remember those TV adverts, with a guy trying to disguise himself as a new customer in order to get a better deal from a brand he already buys from? I can’t remember the brand it is advertising, but it strikes a familiar chord. We have all suffered the frustration of being suckered in by a great introductory rate only to get screwed on the year two cost. In fact, one of my friends was lamenting recently about how his one-year introductory price from his broadband provider was over and now the price was being hiked up.
At the same time, the Government has encouraged energy suppliers, banks and mobile phone providers to make it easier to switch. All you need to do now is send a text to move your mobile provider and it is incumbent on the bank to move all your Direct Debits to make it easier.
In the insurance sector, the aggregators have completely broken the model. Switching and checking prices across suppliers is easy. To win business, insurers are cutting costs and losing money on year one. This has created some bad PR, and new legislation to ensure that existing customers are not penalised is being suggested. To be fair, there has been a lot of activity recently to try and rectify this balance, and convince existing customers that they are getting as good a deal as new customers. That may even be what the advert is trying to tell us.
Attracting new customers is hard!
Despite all of this, and maybe what this shows, is that attracting new customers to your brand is hard. There is more competition than ever before. New entrants are increasing across all markets, many of whom need to “buy” new customers to demonstrate scale, as well as intermediaries who promise to find new customers at cheaper costs.
During the ‘80s, there was an adage that attracting new customers was six times more expensive than keeping an existing customer. I’d love someone to look at doing that calculation now. I would wager the price to acquire has gone down but that the movement between brands has increased massively.
As part of my role at the DMA on the Customer Engagement Committee, we have been looking at the role that brand engagement plays in the acquisition of new customers. It has thrown up some really interesting insights. What the brands who have a low year one cost are relying on is inertia: that once we move to a brand we won’t change. And in general, that is true, although inertia does vary by sector. However, 70% of people in the DMA survey said that they would consider moving if there was a better price available. So, while that inertia still exists, by chasing customers with lower prices we are actually creating more switchers every year – the irony.
The role of brand and channel
It is also true that brand plays a big part in acquisition. Only around 25% of people consider new brands when they are looking to buy for the first time. Having exposure to a brand name and feeling confident that they are quality and secure makes a difference. So new entrants do struggle, which is probably why they compete on cost.
The other interesting area is around channel and how brands find new customers. Nearly three-quarters of consumers chose email as either their first or second most preferred way to receive comms from new brands and nearly half suggested post was their favourite. At REaD Group we spend a lot of time helping people recruit new customers. And most of that happens through very traditional media channels – direct mail, telephone and e-mail.
We have a travel client, for example, who do really well recruiting new customers using PPC, SEO and digital display, but also do really well with off-the-page adverts. We worked with them to introduce good old direct mail into the mix – primarily to drive new brochure requests. And the results have been stunning, with people buying expensive holidays straight off the mailing. The ROI is over 500 to 1 and growing with each campaign.
While it is clear that what are generally considered as newer and more exciting media channels such as programmatic, social media and digital TV are playing an ever-increasing role in acquisition, what is also clear is that great use of data and targeting “offline” also works well. And actually, in reality, the clever brands are those that use all media channels to engage and then convert new customers.
As individuals we don’t think of channels at all. What we see are adverts for new and interesting products delivered in the most relevant ways. Whether that is on our favourite sites, on Facebook, through the post or in our inbox will depend on us as people. One size does not fit all!
So, overall, maybe chasing new customers based on price works but probably not for the long term. In the longer term, whether you are a new and exciting disruptor or an established brand looking to consolidate your market share, building a programme that starts with the brand and is backed with well targeted direct communications across a range of relevant channels is going to create a much more sustainable outcome.
Getting to know your customer
And at the heart of this is knowing the customer, knowing where they spend their time, what they are like and what they respond to. Whether inbound or outbound, the more we know about the consumer, the better our marketing will be. And this is equally true for new prospects as it is for existing customers.
In general, brands know a lot about their customers, particularly the behaviour they exhibit both in terms of how they come to buy the product they have and also what they buy while a customer. For example, brands like Sainsbury’s and Tesco have had detailed insights for years due to loyalty schemes. Online brands can see every transaction and tie it to an individual, they can see what is browsed before buying, how they have found the brand, and which offer they have come in on.
However, whether they understand their customers outside the context of their brand is up for debate. There is so much more to a person than what they buy from one brand. There is definitely a role for data sharing to help understand consumers more. Before GDPR there was the idea of data triangulation where brands considered swapping data to help infill what they don’t know. GDPR has pretty much killed this idea so that then leaves third party data and what can be done to enhance what is known about a customer.
Fortunately, there is more data than ever before that can be used inside what is legal, and what is ethically right, to enhance what brands know about their customers, where they live and the areas the live in. Third party data, open source data and other non-PII data can be transformative if applied correctly and intelligently.
No one needs to wear a disguise anymore: brands should know enough about both prospects and customers to be fair, clear and transparent on pricing.
With our data and insight, REaD Group can tell you more about your customers and prospects that any other provider.