Be Different or be dead

April 17, 2023

Why offering special deals only to new customers is a bad marketing tactic

Why offering special deals only to new customers is a bad marketing tactic.

I am absolutely against offering special deals and promotions to attract new customers while not making them available to existing customers.

Yet many, if not most, organizations do it.

▪️“Come to us and we’ll give you a free iPad.”
▪️“Come join our team and we’ll give you 2 months service FREE!”
(small print: this offer is available for new customers only…)

These are the main reasons I have no time for this kind of marketing tactic.

#1. The economics of this type of marketing program are flawed to say the least.

Advocates say that each new customer acquired by “giving goodies” and additional benefits away to them generates new revenue for the company, and hence value to the bottom line.

NFW!

First, ‘New Deal Customers’ are fickle (because generally they left someone else to come to you) so expected revenues from them will likely fall short of expectations because they will leave you when they sniff out a better deal.

Second, the costs of acquiring these new customers are HUGE, and will likely never be recovered due to the short life cycle of New Deal Customers. They leave or spend far less than the marketing business case assumed.

So you may get a short term upward blip in revenues but margins—due to acquisition costs—suffer.

#2. It disregards the existing loyal customer. Focusing on New Deal Customers refuses to benefit those who have supported the organization and got it to where it’s at.
It’s insulting.

I find it interesting that organizations are starving to be inclusive, to support local communities and be advocates for the environment, for example, yet can turn their backs on their ‘loyalists’.
Hypocritical? I think so.

#3. There are conflicting internal cultural issues created when this approach is used.

On the one hand, most organizations espouse the importance of the customer, and to serve them in a way that engenders their sustainable loyalty. Many talk about creating memorable experiences for their customers as the vehicle to get there.

And yet in practice they push them aside to binge on attracting New Deal Customers.

No wonder employees are confused about what’s important. Leaders say one thing and do another.

#4. It’s a misallocation of investment. Costs of acquisition are HUGE in comparison to the costs of keeping a loyal customer which argues that investments should be targeted to the existing customer base FIRST.

#5. It’s an illusion to think that the new customer will be loyal. These are false benefits. Short term at best.

If the New Deal Customer came to you for the Deal, what makes you think they won’t leave YOU for a better deal elsewhere?

#6. It amounts to competing on price in a different form. Giving value away for free essentially drives down the price of the product or service being purchased.

#7. A focus on New Deal Customers damages your brand.
It signals to new customers that you want to appeal to them based on price, not building relationships.

It shows you’re willing to get new customers AT ANY COST.

It shows you’re an uncaring organization with no consideration for the customers who helped build your success.

If you must use freebies as bait to lure new customers to you, at least do the right thing by offering the deal to your existing customers FIRST.

Cheers,
Roy
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• Posted 4.17.23 at 05:06 am by Roy Osing
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