Improving Customer Loyalty for Mission-Driven Companies by Wisely Focusing Your Marketing Dollars.
By Scott Cooney
Friday, 6th May 2011
How can a startup in the green economy effectively use its limited advertising and marketing resources in order to get the biggest bang for its buck?

Obviously, there is no easy answer, but a recent study published in the Harvard Business Review by a McKinsey and Company Online Marketing Specialist gives companies a solid suggestion about where to focus their dollars to effectively improve customer loyalty.

Adapting that strategy for the green economy is a no-brainer, as people who buy green WANT to love the companies they buy from, and this method gives startup entrepreneurs great advice to do just that.

One challenge that almost always faces startups is marketing...and the money to do enough of it. Many green startup entreprenenurs I've worked with for the last 10 years have confided that they feel they are literally throwing their marketing dollars in the trash. Marketers often advise new business clients to target particular places or niche groups with their limited ad dollars.

In the new age of social media and a coming transparency economy, perhaps focusing on "when" in the purchasing decision framework to use their marketing dollars might be more prudent, according to David Edelman, McKinsey and Company's Global Digital Marketing Strategy coleader.

Social media, he argues, allows even companies with limited budgets to do just that. The key, he says, is not to focus marketing dollars on the competitive timeframe, when customers are choosing between multiple brands. This latter idea is more the traditional viewpoint in marketing, which is why Point of Sale marketing has traditionally been very popular with companies.

With the new era of social media, however, when most customers get much of their product information from people they trust (other customers who are like them), spending money wisely may help you build a brand loyalty that many other companies are missing out on.

Edelman's Customer Loyalty Loop

Edelman conducted an analysis of firms he worked with and found that 70-90% of their advertising budgets, on average, went to promotions at the stages he called "Consider" and "Buy." If, instead, companies were to use more of their marketing dollars post-sale, they would get a leg up the next time that person goes to the store.

Consider it--isn't that what brand loyalty is all about? One of the basics of marketing is that new customer acquisition costs far more than keeping current customers.

So why the discrepancy in ad spending? The reason, according to Edelman, is that historically, it was harder to reach those customers post-sale. Nowadays with social media, the ways to do this are ample, inexpensive, and, if done right, highly rewarding to both customer and company.

Focusing marketing on existing customers and giving them incentives to bring their peers to you can backfire if it seems pushy, but consider Groupon's model of friends suggesting deals to other friends. After all, people know what their friends like, whether it's a gym membership, a yoga class, or an organic smoothie. Getting that referral means everything to the company, and getting customers to act as ambassadors creates engagement.

One of the benefits of working in the green economy is that green consumers want to be loyal to your brand. Utilize this technique of following up with your customers post-sale, providing them with terrific incentives to stay your customer, and you will build what Edelman calls the "Loyalty Loop," wherein the customer completely stops evaluating and considering other brands because they are so happy with yours.

Scott Cooney
Scott is the principal of GreenBusinessOwner.com, advising entrepreneurs on executive strategy and implementation of sustainable principles as a driver of business success. Scott is an author, professional public speaker, sustainable strategy advisor and serial eco-entrepreneur who has started, grown and sold several green businesses.

Scott's book, Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill), has been hailed by green business professionals, including Horst Rechelbacher (founder of Aveda), as a great starting point for aspiring eco-entrepreneurs to understand the wealth of opportunities available in the green economy for entrepreneurs, no matter what level of formal education or startup capital they have.

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