There are two types of inactive customers in your database: people who won’t ever buy again and people who are resting. People who have completed their buying life cycle are dead as far as your company is concerned. You need to erect a R.I.P. marker and let them go on to the next life because any money you spend sending promotions to them is a waste of marketing dollars. The trick is knowing the difference between the dead customers and those who are simply resting.

People take a break from buying when there isn’t an immediate personal need or the company isn’t creating a sense of urgency. When they are in this stage, they can be motivated to return to the buy cycle. The best way to motivate them to reactive their accounts varies by individual, product line, and company. Here are seven ideas to get started testing so you can find what works for your business:

1. “We Want You Back” Postcards ~ There’s something about postcards that have a personal feel even when the information is obviously mass printed. Yes, they can cost almost as much as mini catalog, but they have a different effect on the recipient. This makes them a good reactivation vehicle.
2. Targeted Emails ~ Sending customized emails that target the customers’ specific interests and include a special “we want you back” promotion usually has a good success rate. It works because it reminds the customers why they shopped with you in the first place and gives them a sense of urgency to return.
3. Handwritten Postcards ~ There’s a difference between personalized and personal. If you are really missing your customers, there’s nothing like a handwritten postcard to communicate your feelings and endear them to you. You can save money by having your customer service representatives write the cards while they are waiting for the telephone to ring.
4. Personal Emails ~ Even the best customized emails lack that “here’s a message from my friend” feel. Sending personal emails from an individual within your organization’s address let’s your customers know that you are serious. This is also something that can be done during wait times.
5. Telephone Calls ~ Notice that I didn’t say “telemarketing” calls. Call your best customers who have stopped buying to find out why. If there is a problem, fix it. The worse case scenario is that you will learn why you are losing customers. The best case is that you’ll win them back.
6. Social Media ~ Privately message your lost customers using social media platforms with exclusive offers. Yes, this means that you have to know who they are. Sometimes that requires extra work, but if you reactive a valuable customer, it will be worth it. (Note: If you are not capturing social media information at point of sale, you need to start now.)
7. Mobile Messages ~ Personalized text messages will get people’s attention. If you have a mobile program now, plan on using it to bring people back. If you don’t, get one.

The meeting began with the marketing director explaining the company’s new strategy. “We’ve reduced our mail plan by 20%. It will save us $132,000 in marketing costs. We did this by dropping the people who only buy sale items. We found that they were costing us $23 per year in marketing expense, but only generating $14 in gross profit so we are reducing costs and eliminating a segment that loses money.”

After the congratulatory comments subsided, I asked, “What is your new inventory liquidation strategy?”

The people around the table looked at me as if I’d accidentally wandered into the meeting and didn’t have a clue why I was there. The marketing director snipped, “This is a marketing meeting. We aren’t here to discuss inventory management.”

“Okay. Fair enough. But, what happens to the bottom line when inventory liquidation shifts from a profit center to a loss? Wouldn’t it be better to mail smarter than not at all? Are you prepared to answer the ‘what happened to our customers who bought the sale items?’ questions from the C-Suite?”

Discount customers are less valuable when compared to other segments because the items they purchase have a lower margin.

Some may even be below cost. If your marketing strategy doesn’t have a plan for these special customers, you’re wasting money. But, with a little analysis and planning, they can be a profitable group for both marketing and inventory management.

Projecting inventory requirements is a balancing act. Order too little and customers are unhappy because you are in a backorder position. Order too many and you’re left with dollars collecting dust in your warehouse. It is impossible to purchase exactly what you need when you need it to fill your orders. If you have a top-notch inventory management team, you’ll have a 5% – 15% variance. Most companies don’t have that luxury and end up with a 15% – 25% fluctuation.

Your discount customers are extremely valuable.

They buy your over-stocks so you don’t have to sell them to a liquidator for pennies on the dollar. And, if you plan your marketing strategy well, they’ll be a profitable segment.

The first step is to identify them correctly. Discount customers purchase on a regular basis, but they only buy sale items. Once you know who they are, plan your marketing strategy around the times they are most likely to buy. Some will buy every time there is a sale. Others will make seasonal purchases. They should receive sales promotions on a regular basis and the occasional full price mail piece. A review of purchases, costs, and margins helps to find the best marketing strategy. Using economical marketing tools, like email, are effective for these customers because they get the message without requiring a heavy investment.

One of the biggest challenges with managing discount customers is accurately measuring the costs. Marketing effectiveness is often measured by revenue less marketing expense less cost of goods. This works well for customer segments where people are purchasing full price items. It is misleading for discount customers because it only shows part of the picture. You have to look at what happens if those customers go away. When we ran the numbers for the company in the example, we found that the $132,000 saved in marketing dollars was offset by a $179,000 liquidation cost for a loss of $47,000. It’s important to know how everything works together before you make major changes.

January is a great time to establish a change culture within your company. People are more receptive to change at the beginning of a new year. They have been pre-conditioned to leave the past and move forward with excitement and anticipation of better opportunities. This is your chance to implement new strategies with less resistance. Don’t miss it.

Business dynamics are changing faster than you think. Technology introduced one day is outdated months later. New channels are emerging every day. It is critical that the people responsible for corporate growth and profitability invest the time and effort required to find the best strategies for their company, employees, and customers. With this in mind, here are five things that need to be done in 2011:

1. Integrate marketing channels, departments, and divisions. There are no turnkey solutions or magic formulas to integrate your systems, processes, and communication. You have to do it one step at a time. It’s definitely worth the effort because it will improve revenue, profitability, and morale.
2. Get serious about social media. It’s here to stay. Even if your customers and prospects aren’t participating today, they will soon. And, there are great search benefits from active participation. Consistency, keywords, and links are the keys to driving traffic from your social media efforts.
3. Move into mobile marketing. This is the most intimate marketing tool available today. People zealously guard their cell numbers. If they are willing to share it with your company, it is a good indicator that they trust you and are your most loyal patrons. Use this privilege wisely and your customers will stay with you for life.
4. Establish marketing and customer care benchmarks. Yes, it is hard. Yes, it is time consuming, And, yes, it is worth it. Your customers and prospects are simultaneously becoming more accessible (direct mail, email, social media, mobile, etc.) and evasive (do not mail, do not call, do not track, spaminators, blocked calls, etc.) If you don’t have benchmarks, it is impossible to obtain an accurate measurement of the effectiveness of your marketing and customer care.
5. Utilize customer care as a marketing tool. It is the only way to differentiate your business from the competition in our global economy and establish long-term relationships with the people who matter most. Aligning your service with customer expectations improves loyalty and reduces costs. Surprisingly, your definition of customer needs may be very different from theirs. Invest time in finding the right mix and watch lifetime value increase exponentially.

That’s all for now. On your mark, get set, go!

Sometimes the best-laid plans can go awry. A marketer can spend weeks planning the perfect campaign and something completely out of his or her control sabotages it.

On January 17, 1991, I visited a catalog mail order client who had put together a spectacular marketing campaign. It was their in-home date (predictable, but not controllable) for their catalog, they were supporting it with television direct response spots, and the President of the company was scheduled to appear on a national news show. Everything was in place to kick off a great sales year.

You could feel the excitement went you walked through the door. People were smiling, happy with anticipation. The company had just finished a triple digit growth year. Every employee had received good bonuses. The plans for 1991 included increases in compensation based on growth and profitability. Everything was perfect.

Or, so we thought.

Operation Desert Storm began the night before. The company President’s national appearance was cancelled. Catalogs arrived at homes where people were glued to the television watching CNN’s live coverage. The advertising spots were useless. No one was interested in buying anything.

The thing I remember most was the silence in the call center. When people realized that the telephones weren’t ringing, their emotions plummeted. The call center team members periodically picked up the handsets to see if there was a dial tone. After about twenty minutes of silence, there was an incoming call. It was the director of operations calling to verify that the telephone system was working.

When you are a marketer, things happen that are beyond your control.

They are explainable and manageable. But, there are many things that reduce marketing effectiveness that can be avoided. Here are seven items you can prevent:

1. Over promising and under delivering – Marketers tend to do this to customers and company executives. It’s better to under promise and over deliver. If this means that you don’t get that extra budget money, so be it. Your reputation for delivering will grow and you’ll get a whole lot more.
2. Dismissing marketing tools as ineffective because you don’t know how to use them – Social media is not a fad, direct marketing is not dead, email promotions are not spam, and mobile isn’t something for the future. Each of these tools is effective and efficient if they are used well. Learn how to use new tools and test them in your marketing strategy to find the ones that work best for your business.
3. Complaining about the customer care team – These people can be your best friends or worst enemies. Your actions determine their role. Constantly complaining and blaming them for marketing issues makes lifelong enemies. Working with them to find solutions makes great friends. You need them. Start building the bridge to an integrated marketing and customer care strategy today.
4. Presuming that the customer analytics that worked last year are still effective – Customer behavior is rapidly changing. Failing to recognize that and adapting as needed will cost you market share and profitability. If you haven’t been digging into your data lately, get started.
5. Thinking that customer lifetime value and lifespan aren’t important enough to measure – If you don’t know the lifetime value, you have no idea how much you can spend to acquire a customer. If you don’t know the lifespan, you don’t know when to stop marketing. Being ignorant in either or both eats away at your profits. If you don’t know how to measure them, find someone who does.
6. Focusing on the conversation while forgetting about the conversion – The purpose of business is to generate profits by serving customers. How many times does someone say, “That was a great conversation. Let me give you some money?” Never heard that one? Me, either. Conversations can lead to sales if you guide them. Mindless chatter is just noise.
7. Blaming decreases in sales and profitability on the economy – Yes, things are financially challenging. Your job as a marketer is to find a way around it. If sales are decreasing and it’s beyond your control, then costs have to decline, too. Or, you could reinvent your marketing strategy, find new customers, and improve relationships with existing ones. I personally prefer Plan B.

Many of the things that derail a marketing strategy are temporary. Deal with them and move on. Investing your time in the strategies that improve sales, service, and relationships is a lot more fun.

Last week I answered a call from one of my favorite retail clients. My friendly greeting was answered with “I have a vision that keeps turning into a nightmare.” No “hello, how are you?” or “Cold enough for you” chitchat in this call. She was clearly on a mission.

I suggested that we start with the vision. Her vision was an integrated organization where everything from marketing to fulfillment worked together. Customers and prospects could move easily from one channel to another finding what they need or want along the way. Their social media efforts would ease the way for their catalog and email campaigns.

She knew the benefits; we’d been discussing them for months. She knew the urgency because I’d been nagging encouraging her to get started. She knew the risks of inaction. Her competition was already gaining market share. She wanted to start the process but there was a problem.

She had too many channels and departments operating as silos.

Every time they started planning the integration, the details overwhelmed them. They left the meetings with more questions than answers:

How do we make our legacy systems work with new marketing tools?

Who is in charge?

Who should be involved?

How deep should the integration go?

How do we divide responsibilities?

What happens when…?

What’s a reasonable timeline?

How do we measure success?

Where do we start?

The last question is easy to answer. You start where you are and build from there. The rest will be answered as you go.

Channel integration is a process.

The first step is to identify your two strongest silo channels. They are the ones that need to be integrated first. (Remember the 80/20 rule?) Document the areas where lack of integration is a known problem. Create benchmarks before you start resolving issues.

Improvements in one area always highlight challenges in another. This is an opportunity. Treat it as such. It is easy to get overwhelmed by the continuous flow of new challenges. If you begin with benchmarks, and update them regularly, you’ll see progress (and new opportunities.)

Break your large, overwhelming tasks into bite size mini-projects that can be completed in 1 – 5 days. Your goal is to move forward one step at a time.

Recognize that sometimes you have to backtrack or detour to move forward.

If you take it slow and steady, missteps carry little risk. Avoid the temptation to look for the latest and greatest turnkey solution. It costs a lot of money and time while rarely delivering significant results.

Don’t forget the other channels while you’re integrating your best ones. Start capturing social media user id’s now. It’ll make integration and measurement easier down the road.

Get started today for a better tomorrow. Holiday 2010 is just around the corner.