Data Strategies: Six Steps for Defining Growth Strategies

May 22, 2006 11:07 PM  By

You attend a lot of meetings. The question always come up, “How are we doing?” And it’s easy to answer with vague comparisons while shuffling through papers with the hope that other attendees aren’t asking prepared questions. Sound familiar?

What if you could set the tone, answer questions before they’re asked, and frame the conversation to support what is answerable? It’s easier than you think. When asked “How are we doing?” translate the phrase into what marketers understand: Growing the customer file. In rough terms, growth is categorized as simply more new customers (prospecting) and current customers buying more (reactivating.) Follow these six steps to help you build a realistic and achievable growth plan.

1) Define growth within your own department or organization. Examples include, but are not limited to:

  • 12-month buyer count
  • First-time buyer count
  • Cross-channel shopping
  • E-mail address captures
  • Inquiry conversion percentages
  • Multibuyer counts
  • Retention rates
  • Club membership
  • Credit card activation

Once you understand how your company defines growth, you can develop one or two key marketing strategies to support growth.

2) Benchmark current performance. For example, if growth is measured as both the first-time buyer count (customers who make their very first purchase in a 12-month period) and the cross-channel shopping percentage (how many of our customers shop both catalog and Internet in a 12-month period) then purposefully review prior year performance for each. For your own edification, establish not only last year’s performance but two and three years ago. Look for annual and monthly trends as well as the circulation plans (marketing efforts) corresponding to those years. Knowing what the previous prospecting efforts were is an important barometer for reasonable new customer acquisition plans this year. Understanding what marketing initiatives motivated cross-channel shopping is a critical building block for identifying annual strategies.

3) After analyzing historical performance, build the plans to support growth. If you need a 5% increase in new customers vs. the prior year, will you need to increase circulation by 5% or 10%? If circulation quantities must stay relatively flat, what changes to creative, offers, or messages are needed to boost response rates? Is this the year to try new media and perhaps buy space ads or newspaper inserts? The answer lies within each component of your plan—the cost (advertising expense) vs. benefit (response rate) for each campaign you outline.

4) Double check the logistics of your plan. Great ideas become the greatest failures when the infrastructure of the company is unaware, ill prepared or incapable of executing them. Is marketing offering a percentage discount to motivate a purchase but the order-entry system recognizes dollars-off? Is the free-gift offer reeking havoc on the margin calculation or inflating the items per order tally? Always, always, always, involve key managers from the call center, customer service, IT and the warehouse early in the process. They can offer solutions and work-arounds prior to a problem occurring (and won’t staff meetings be less of a war zone!)

5) Regularly monitor the progress of your plans. Continuing with the example of growing the new customer counts, set up a simple database query to count the number of new customers by week. You can use a spreadsheet to review weekly counts as well as aggregate monthly, quarterly, seasonal, or annual totals. Even without a sophisticated forecasting system, a quick calculation can reveal if you’re on track. Here’s how: Review last year’s new customer count by month, and calculate the percentage each month represents to the total. For ease of use, if the annual total is 7,200 and each month earned 600 new customers, then each month represents 8.33% of the total. Continuing, cumulate the percentage each month; after two months 16.66% is complete, and by July (the seventh month) the percent complete is 58.3% (8.33% x 7.) Once you have the percent complete by month, review your current year-to-date new customer count. If the count after seven months is 3,350, divide by 58.3% to project an annual count of 5,743. This number falls short of last year’s total of 7,200. Knowing this projection allows you to react and suggest alternate plans. (Note: Calculating the projection won’t work if you’ve drastically changed the overall flow of contacting customers. If this year you stopped all prospecting second quarter and shifted efforts to fourth quarter, using last year’s percentages will indicate a false negative.)

6) No matter how you forecast the progress of the marketing strategies, the important aspect is that you have time to react. It’s certainly better to know there is an anticipated shortfall and make adjustments than it is to be surprised in January when you don’t meet the growth goal. Equally important is the evidence of achieving the growth goal early. This distinctive situation provides the organization with a choice to reallocate dollars into other areas or instead, as a growth opportunity, add more dollars to this highly successful program.

These six steps allow you to focus on key programs that support the overall objectives of your organization as well as the specific goals of your department. Monitoring the performance with regular analysis, you’re able to react in a timely. And communicating the progress becomes a tidy and specific answer to “How are we doing?”

Gina Valentino is owner of Kansas City, MO-based catalog consultancy Hemisphere Marketing, LLC.