Marketing Strategies: Are You Creating Sales or Customers?

After attending a local annual motorcycle show, my husband was having a chat with one of the exhibiting dealers from whom he had purchased a new bike. The salesman told him that the dealership had sold 73 bikes as a direct result of their exhibit at the show. That's impressive and a testament to their marketing strategies and analysis techniques.

So should the dealer consider that a success and wait for the next trade show for another bump in sales? They'd be justified if they did. But here's the problem: A motorcycle is a "one-hit wonder" sale that may not recur for years (or ever!), limiting the actual number of potential sales from the regional market.

Yet every week my husband receives at least one or two "touches" from either this dealership or the manufacturer they represent: direct mail offers, email marketing and invitations to events. All this even though they know that it may be years before he buys another motorcycle from them.

This dealer knows that these rare sales are not the endgame... they're just the beginning of creating a "customer."

The barrage of marketing material raining on my husband from the dealer and manufacturer has a primary goal which is NOT to purchase another motorcycle again soon. They're selling him on everything else!

That "everything else" includes winter storage service, mechanical service and repair and brand name gear, clothing and accessories.

This is a part of a larger overall marketing strategy that focuses on the long term. Adding products and services to a company's offerings can be a major investment, but one that can pay huge dividends in terms of lower marketing costs and higher per-customer return on investment. One of the ways some companies accomplish this is through brand extension.

Small businesses may have a more difficult time pursuing this marketing strategy than larger operations. But even they should consider realistic multiple revenue streams from their captured customers to help smooth out inevitable sales slumps and peaks.

In the example discussed here, the motorcycle buyers gained from the trade show exhibit have filtered through the dealer's sales funnel and actually purchased bikes. So this has been a successful sales cycle.

But to turn these sales into long term customers, that sales funnel needs to be expanded into additional directions. In the motorcycle example here, those additional funnels could be storage, mechanical service, accessories, clothing and events.

What's interesting about an expanded sales funnel model is that a customer could fall into any or all of the directional funnels. That's why the dealer sends my husband marketing materials on all five offerings.

However, for some businesses, customers may not have potential for all of a company's offerings. In this case, the company needs to identify and promote those offerings which are most relevant for each market segment.

The example vendor discussed here realizes that what they've gained when my husband purchased a motorcycle is not just a sale, but a continuing customer with a high potential lifetime value.

With the help of accounting software, it's usually easy to calculate the lifetime value of any customer for a business. Simply filter sales search results by customer for an extended period of time, maybe even for the entire life of the company if that data is available.

Doing this exercise for each customer can be eyeopening! While this will reveal those superstar customers, some might be surprised at what a low lifetime value other customers provide. Some businesses are so busy being in business that they don't do an analysis of how much time, effort and money they're expending chasing "one and done" customers or markets.

A variation on the lifetime value analysis is to calculate the profit margin of each customer. For some businesses this may be difficult to assess. But if it can be reasonably calculated, this can turn an eyeopening exercise into downright painful if business owners realize they're losing money on every sale to certain customers.

Additionally, this also points to a need to create separate marketing strategies for various market segments. In the motorcycle dealer example here, there may be customers that only purchase the branded merchandise. For this group, a more retail focused strategy would be appropriate. Again, using the concept of the expanded sales funnel can help organize and track these efforts.