Direct marketers embrace customer retention

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Many b-to-b direct marketers, under continued pressure from legislative and economic constraints, plan to
focus on retention strategies in the coming year. Their reasons are simple: Retaining customers is less expensive than acquiring new ones, and marketing to existing customers doesn’t leave marketers open to as many legislative pitfalls.

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"Cross-selling, upselling and customer retention is as high or higher than it’s ever been," said Tom Gaither, VP-marketing for D&B’s Sales & Marketing Solutions. "As a result of business conditions, that’s where marketers are spending their money, and I think that will continue."

Gaither said customer acquisition is slowly starting to come back, but he noted, "People are focused on high-potential new customers and not just any new customer."

Hewlett-Packard Co. has realigned its marketing strategy to concentrate on seeking out receptive customers rather than pushing marketing at them.

"Our [marketing strategy] has shifted from intrusive or assumptive to consensual," said Garry Dawson, HP manager of marketing communications. "We want to be where people are already and present something of value in that context."

An example of this strategy is the company’s use of search marketing, while forgoing banner ads, Dawson said.

Michele Bottomley, chief CRM officer at interactive and direct agency OgilvyOne, said that while she’s seen an upturn in prospecting investments among the agency’s
b-to-b clients, marketers primarily are refining their retention marketing strategies. "IBM right now is doing a lot of work around nurturing relationships," she said.

Bottomley also foresees a growing trend toward b-to-b telemarketing, even as the federal government tries to clamp down on consumer telemarketing. "I think there’s a lot of testing into outbound telemarketing," she said.

Gaither said his sales and marketing teams are "asking for more phone numbers" than ever before.

Overall, b-to-b direct marketers appear more optimistic about their business in the year ahead. The Direct Marketing Association predicts b-to-b direct marketing spending will increase 6% this year to $105.9 million, with next year’s growth pegged at 6% to 6.5%.

D&B is approaching 2004 "with a more positive outlook in terms of sales and marketing activity," Gaither said.

The DMA says many marketers are increasing their use of direct marketing as a cost-effective tactic."There are lots and lots of companies who’ve cut back on their sales force and upped their direct marketing efforts to make up for that," said H. Robert Wientzen, DMA president-CEO.

A recent study from database consultant Customer Connect Associates confirms this trend. According to the study, the number of companies projecting higher budgets for direct marketing rose from 18% in May to 38% in August.

Legislative threats

Forecasts for industry growth, however, are tempered by legislative threats. "Given recent do-not-call legislation and pending do-not-spam bills, companies are understandably gun-shy about how to communicate with their customers," said Chris Selland, managing director of Reservoir Partners, a CRM consultancy.

In the past year, federal legislation was enacted that restricts telemarketing and fax marketing. In addition, with 36 anti-spam laws already signed at the state level, including the most restrictive one to date in California (see story, page 3), and eight federal bills pending, spam issues will continue to pose a big challenge to b-to-b e-mail marketers.

Whether it is a do-not-e-mail registry or one of several other proposals, most in the industry agree that enactment of anti-spam legislation is not a question of if but when.

"I think there’s an excellent chance we’ll see legislation this year," the DMA’s Wientzen said.

Some say e-mail legislation may shift dollars away from that medium, at least temporarily.

"I think spam will reduce e-mail marketing substantially," said Arun Sinha, chief marketing officer of Pitney Bowes. The company, building on a significant branding campaign this year, plans to roll out two new direct mail campaigns in the fourth quarter as well as increase online activities and event marketing.

Spam has also had an effect on list rentals. While retention e-mail marketing is a key part of many marketing plans, acquiring new customers through e-mail has never taken off for most marketers. "Our experience with e-mail from an acquisition perspective has been pretty disappointing," said D&B’s Gaither.

With the continuing debate over what constitutes spam (see story, page 1), many companies are wary of renting e-mail lists. This is compounded by the fact that many marketers have found e-mail lists are not as robust as postal lists and that response rates tend to be low.

John Papalia, president of list company Statlistics, said some companies that have ordered e-mail lists in the past are now saying, "I’m not going there, period."

Legislative efforts to restrict telemarketing have generated even more attention than anti-spam efforts because of the hugely popular National Do Not Call Registry.

At least one b-to-b direct marketer could directly benefit from the registry—Pitney Bowes, which sells products that handle direct mail.

"If there is a do-not-call list, I expect direct mail to go up, and that would have an impact on our products and services in a positive way," Sinha said.

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