A detailed analysis of any mailer’s internal house file presents numerous opportunities for improving the ROI of customer retention marketing campaigns. This is especially true when looking to classify existing customers into meaningful sub-groups and peer groups using insights from past purchase behaviors. One approach for matching key customer targets with relevant offers and promotions is to apply a differential marketing strategy.

The idea of differential marketing comes from the 1990’s-era book All Consumers Are Not Created Equal, where Garth Hallberg  introduced the concept of “differential marketing pyramids”—a category value segmentation that quantifies the differences in value between key consumer groups. Even though the practice of differentiating customers on the basis of past and future profit value has been around for some time, direct mailers need to remember the benefits of implementing such a strategy.

Think of differential marketing as the science of identifying changes in individual consumer purchase patterns—largely as a result of the passage of time—compared to a relevant benchmark. In other words, how different is a customer’s spending, purchase behavior, transactional activity, etc. compared to an expected norm? What types of marketing activities should be initiated as a result of these differences?

Continues at:  Differential Marketing: Purchase Behavior and Peer Groups for Direct Mail Retention : Page 1 of 2 : Target Marketing.

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