Geeks and Shrinks

May 8, 2008

Plugging the holes

Filed under: Customer dialog, Reputation — Tags: , , , — rvenkate @ 10:20 am

Mark Brownlow writes that “email marketing is like trying to fill a bucket with holes in it,” and describes the two schools of thought on how to solve the problem – either fill the holes (better retention), or use more water (faster acquisition).

In my experience, it’s not limited to email marketing. The “new economy” forces companies to make a choice – either supply superior products designed based on deep customer understanding at the best price, or move to a commodity business and supply products at the lowest price through those with deeper customer relationships.  The former requires a sustained trustful brand relationship, and (surprise) fits best with better retention, rather than faster and faster acquisition.

There’s another aspect to consider: good advertising inventory (online or offline) is scarce, and as a result the real price has tended to increase, even online. If a marketer pursues the “faster acquisition” path, is it sustainable under these conditions?

May 6, 2008

Trust and information sharing

Filed under: Email list rental, Reputation — Tags: , , , , — rvenkate @ 12:09 pm

JP wrote about trust a short while ago, from the perspective of transmission of information, particularly when the ownership aspect isn’t clear. However, there’s another aspect of information ownership that wasn’t in scope for his post, which is that the trust relationship that he refers to also grants license to use that information only for specific purposes (which may or may not include transmission).

One example that comes to mind is the usage of email address information. Clearly, directly selling the contact information falls into the territory that JP referred to. However, what about the usage of that information without actually passing it on? For instance, many of our customers send advertisements to subscribers on behalf of third parties (aka “list rental”). They don’t pass the contact information on to those third parties; they just enable communications. It could go even further, combining all available information sources for more precise targeting.

The key is to remember that building a reputation is expensive in time, money, or both. Regardless of the legal contract (or absence thereof) under which the information is collected, the short-term gains of selling the information are usually small compared to the acquisition cost of new customers (or new employees, new suppliers, etc.) with a tarnished brand. Without considering both aspects, it’s not possible to determine the NPV of an initiative.

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