Stop Wasting Marketing Dollars
We all know the classic John Wanamaker quote, "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." Unfortunately, not much has changed.
According to Tim Suther, senior vice president of multichannel marketing service for Acxiom, about $112 billion of advertising spending is considered wasted each year in the United States alone. That equates to about 47 percent of the total advertising dollars spent, Suther said during his presentation last week at Acxiom's Global Marketing Performance event in New York. What's more, only 22 percent of Americans trust advertising.
How can marketers end the waste and gain customer trust? Suther recommended that marketers make their advertising more relevant by better understanding customers. He suggested four steps to take toward doing so:
- Learn from every interaction.
- Interactions are interrelated; it's a big undertaking to determine exactly how, but you need to connect the dots.
- Expand your field of vision; that is, what are customers doing when they're not engaged with you?
- Have an optimization mind-set across customer segments and channels over time.
He also advised spending wisely. About 30 percent of customer delivers the majority of profits, 50 percent add nothing, and 20 percent cost companies money, according to SAS. Suther reminded attendees that they need to invest proportionately. This means knowing who your customers are. Once you know which customers are which you can better determine how much to invest, if anything, and what to say without having to guess. "In absence of knowing who your customers are, you're likely to overspend on low-value customers and under-spend on high-value customers," he said.
Another problem Suther cited is marketers' focus on acquiring new customers without considering the potential future value of those customers. He warned against acquiring three customer types:
- Leaky buckets - customers who quickly leave
- Zombies - they sign up for an account but never buy anything
- Quiet types - they never advocate for your brand
Suther recommends five steps marketers can take to help improve marketing and advertising effectiveness and ROI.
- Identify customer value
- Invest proportionally (i.e. treat different customers differently and concentrate your investments on high-value customers with the expectation of getting a return of three to fives times the value of the dollars spent.
- Find, recognize, and engage customers accordingly
- Measure acquired value (remember: a customer who cost little to acquire may also turn out to be a low-value customer over time)
- Have an institutional memory (i.e. learn from customer behavior)
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