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Dear Dr. pROfIt

By Kevin Hillstrom

About Kevin

Kevin Hilstrom is president of MineThatData, a consultancy that helps CEOs understand the complex relationship between advertising, customers, products, brands and channels. His clients include billion dollar retailers, international direct marketers, publishers, catalog brands and online pure-plays.

Prior to founding MineThatData, Kevin spent nearly 20 years in multichannel retailing at some of the most well-known brands in the U.S., including Nordstrom, where he was the vice president of database marketing, Eddie Bauer and Lands’ End. Kevin is also author of numerous books, including his most recent, “Online Marketing Simulations,” available at Amazon.com.

 

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The Evolution of Prospecting

By Kevin Hillstrom | Posted on December 28, 2009
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Early in my career, I learned that there was an enormous gulf between retail marketers and direct marketers.

Direct marketers had the ability to literally control their businesses. If direct marketers wanted to acquire 500,000 new customers, they could acquire 500,000 new customers. If direct marketers wanted to become more profitable immediately, they stopped customer acquisition activities. If they wanted a large, growing business five years from now, direct marketers hit the customer acquisition gas pedal.

Retail marketers have almost no control over new customers. Retail marketers simply don’t control who walks in stores. Retail marketers learn that comparable store sales — to some extent — can be controlled via marketing. But in reality, retail marketers don't control their audiences.

The future of direct marketing is online, of course.

And online marketers don't have control over their audiences. Paid search, for instance, is a wonderful channel, but one that doesn't effectively differentiate between new and existing customers.

This fact fundamentally changes online marketing. In reality, it makes online marketing much more similar to retail marketing than to classic direct marketing.

Classic direct marketing has always been about controlling lists. Direct marketers used to rent lists — lists composed of customers who were directionally similar to the type of customers they wanted to acquire. Then direct marketers executed a “merge/purge,” enabling them to avoid mailing customers who'd already purchased from them.

Co-ops owned customer acquisition during the past decade. Co-ops represented an important step in the evolution of direct marketing because they determined the customer acquisition audience, not direct marketers. Instead of asking for “Crutchfield customers,” direct marketers asked for “prospects who like electronics.”

Paid search is the next step in the evolutionary process. Instead of asking for “prospects who like electronics,” paid search enables marketers to ask for “individuals who want to buy electronics right now.”

As direct marketing evolved, the type of customer being marketed to evolved. Direct marketing is less and less about audience, more and more about customers with needs at particular points in time.

This is a critical distinction from a return on investment standpoint. In the past, marketers controlled the future trajectory of their businesses. In the future, your customers will control the trajectory of your businesses.

Merchandise analysis will become critically important going forward. Always important, merchandise analysis takes on an even greater role when designing prospect vehicles for new customers. Marketers won’t be targeting new or existing customers in the same way they have in the past.  
Instead, you'll be targeting “needs,” and those targeting activities will have to focus on merchandise that fills a need. Knowing that consumers are increasingly searching for a specific product or service will yield a merchandising strategy that's tailored to meet the needs of your customers.

There will be a period of transition as you go from determining your audience to tailoring a merchandise assortment to customers with specific needs at points in time. Undoubtedly the future will be more efficient, less wasteful and, hopefully, more profitable.

Kevin Hillstrom is president of MineThatData, a database marketing consultancy. Kevin can be reached at kevinh@minethatdata.com.

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