IPA|ED:final - existing customers

The heroin of CPAs: why marketing communications are addicted to customer acquisition

…because I believe brands should only invest in marketing
communications through existing users of their brand


The three quarters we misspend

In yesterday’s post I identified the value that existing
customers hold for marketers.  Yet despite
this, most brands seem addicted to investment in marketing with the sole
purpose of attracting new customers.  Brands
are determined to talk to those who don’t love them.  Think about the last dozen briefs you wrote
or received.  How many were instigated to
recruit new customers?

A survey conducted for my IPA essay asked eighteen major
brands, who between July ’07 and June ’08 collectively invested £380m in
communications; “What proportion of your marketing budget is spent with the
specific intention of acquiring new customers?” 
The average – weighted by spend – across those brands was 78% (see note
one).  Over three quarters of their
marketing investment is deployed to communicate to those with whom their brands
have no proven relationship, and from whom no immediate profits will derive.

Hooked on an immediate fix

It’s not difficult to identify the sources of our
addiction.  We measure ourselves and are
judged by immediate-term sales metrics. 
Peter Doyle observes that “marketers have often allowed themselves to be
trapped by accounting-orientated management into seeking to justify their
marketing strategies in terms of improving immediate earnings” (see note two).

Weekly and even daily acquisition is what drives personal
and departmental targets.  One senior
agency figure commented to me that “this is part of the trap that most
businesses find themselves in: uncertain economic environments and hyper-competition in commoditised markets mean that most estimations of a company’s
success are based on evidence of growth ie headline sales”.

It’s also Google’s fault. 
One consequence of the emergence of the internet has been the precision
with which we can track online behaviours. 
The granularity of information around acquisition of new customers in
particular means that marketers who know they are focusing on the wrong
measures are nevertheless hooked on the heroin of CPAs and CPRs that drive


1. Collectively between July 2007 and June 2008 the brands
surveyed spent in the region of £380m on media and direct marketing (direct
mail and door drops); 78% of this – £294m – on acquisition.  If this were representative of the spend of
the top 200 brands across the same period it would amount to £4.6billion being
invested purely to communicate to non-users of their brands.  All spend figures sourced from Billetts.

2. Peter Doyle. 
Value-Based Marketing: Marketing Strategies for Corporate Growth and
Shareholder Value.

Tomorrow: The loyalty debate
Friday: Advocacy and the power of word of mouth


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