CRM Swing Shift

After years of scarfing up the lion’s share of direct marketing budgets, retention has taken a back seat to prospecting, according to Direct magazine’s latest readers’ survey.

Companies devoting at least half of their marketing budget to retention were more likely to have increased revenue and margin during 2005 than those spending at least half of their budget on prospecting.

There’s no surprise in that: Servicing existing customers is more profitable than mining for new ones.

It’s also less expensive: Respondents who spent more on prospecting earmarked a higher percentage of their total marketing budget for DM than did those placing an emphasis on loyalty programs.

But the time is right for prospecting: “There had been a trend recently for a lot of organizations to make sure they were stabilizing their client base,” Don McKenzie, CEO of DM-focused investment banking firm Petsky Prunier LLC, said. Part of that is the industry's continued efforts to responsibly integrate online marketing into prospecting efforts. “Today they have a very strong platform [of customers], and they are focused on online growth and new client acquisition,” McKenzie continued.

This has been a steadily building trend. As recently as Direct’s 2002 survey, respondents spent more on retention, with prospecting allotted just 46% of their budgets. Today, acquisition accounts for 58%.

This progression is especially evident among business-to-business marketers: B-to-Bers are dedicating 63% of their DM budgets to prospecting, compared with 49% for consumer marketers.

Regardless of how much they are spending on retention or prospecting, an equal amount – nearly six in ten – anticipate spending more on direct marketing in 2006 than they did this year.

For additional information on the Direct magazine annual survey, see the December 2005 issue.