Maximize Your Profit from Your Mailing List

When you gather your email/customer list you pay heavily for the privilege.

If you use search engines you'll spend huge amounts of time and persistence
building - and retaining - your position.
If you use pay-per-click you'll spend from a few cents to many dollars on
clicks only a small proportion of which will generate actual sales. If you
use any of the 'free'
advertising systems you'll discover they are not really free, they all cost
money or time. If you use Affiliates the commission could be anything from
50 to 75%. You may not have to carry risk but it does cost money.

To increase the price even further, ON AVERAGE 50 to 60% of customers will
buy one thing (or have one visit) and never come back. This is an 'iron-clad
average' in the direct selling business. This may not seem to matter in cash
flow terms; after all you DID sell something. But it does mean that the
cost of the real, multi-purchase customers is even higher. Your email list
is an expensive asset, very expensive. And it gets worse!

When they arrive on the list, you don't know which are going to buy
eventually, which of those that buy are one-timers, and when the
multi-buyers are going to elect to leave you. You react to this by doing
two things: (1) you spend dollars, time and energy marketing and sending
promotions to your whole list as you don't know who is going to buy and (2)
you continue to build the list through the same expensive approaches you
used initially, effectively playing a 'numbers game'.

You are leaving a lot of money on the table. If you could do better than
average finding multi-purchase customers (someone does, it is after all an
average), if you could direct your promotions to those most likely to buy,
if you could retain those 'hot' customers longer.. Clearly there is a lot of
room to improve profits. So what is the secret to success?

The Secret

It's much less expensive to retain customers than it is to acquire new ones.
Academic research bears this out*:

** The cost of acquisition occurs only at the beginning of a relationship,
so the longer the relationship, the lower the amortized cost.

** Long-term customers tend to be less inclined to switch and tend to be
less price sensitive. This can result in stable unit sales volume and
increases in dollar-sales volume.

** Long-term customers tend to initiate free word of mouth promotions and
referrals.

** Long-term customers are more likely to purchase ancillary products and
high margin supplemental products.

** Regular customers tend to be less expensive to service because they are
familiar with the process, require less "education", and are consistent in
their order placement.

All this turns into three rules for success in managing your email list:

Rule #1: When you have a valuable customer - hold on to her. 'Her': yes,
women control over 80% of all retail spending!

Rule #2: Try to make less valuable customers more valuable over time. Do
this by creating and executing promotions that focus on customers that will
respond. Isolating those who will respond means focusing on their buying
behavior -
hint: someone who has bought from you is MUCH more likely to buy again.

Rule #3: Acquire the types of customer who will be worth retaining in the
first place. But, where do you find them?
Link your high spending customers to the places you sourced them, then go
back to that well. If you get your best customers from pay-per-click on
Yahoo! Then go back to Yahoo! for more

Remember the old adage: "The money is in the list". Well it is, but there is
more to maximizing your profits than simply mailing out offers. It's no
surprise that the truly profitable web sites have their roots on established
direct mail expertise.

*Source: Buchanan, R. and Gilles, C. (1990) "Value managed
relationship: The key to customer retention and profitability", European
Management Journal, vol 8, no 4, 1990.

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Michael Kay edits the * Insights Letter* and *The Home-Based Business
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To find out more about managing your mailing list and web business in
general find "Making Money from Your List" at
http://www.HBBReview.com/Main_Index.html