Monday, December 05, 2005

Value-Reinforcement Marketing

Dave and I have been thinking about this idea of value-reinforcement for a while and believe it will become an important marketing trend in the future.

Value Reinforcement Marketing is when a company affirms the benefits of existing offerings to current customers in a way that reinforces that customers' positive perceptions about the value the company delivers.

Marketers spend the majority of their marketing budgets on acquiring new customers and very little on communicating with existing customers. Moreover, when there is communications with existing customers, it is rarely value-reinforcing communications, it is often transactional or promotional in nature (such as price discounts for additional purchases).

Value-Reinforcement Marketing is different in several ways.

1. Dollars are spent marketing to existing customers. It is oriented towards someone who already receives the company's benefits, rather than someone who might receive these benefits.
2. It is designed to turn customers into advocates, not turn prospects into customers (although if often does indirectly).
3. It is designed to reinforce existing (although dormant) perceived value not create new perceived value in the customer's mind from scratch
4. More effective than acquisition marketing because recipients already have a predisposition to like the company because they are already customers
5. Oriented towards the retention of trust and value, not creation of trust and value. This, again, is less expensive
6. More relational and less transactional in nature

Benefits of Value-Reinforcement Marketing

Companies who reinforce their value receive many positive benefits including:
1. Top line revenue growth
2. Increased market share
3. Substantially improved margins through lower support costs and higher average selling prices
4. Increased stature in marketplace (brand perceptions, etc.)
5. Bigger barriers to customer switching

Companies who derive a bulk of their revenues from existing customers are strongly encouraged to better align their marketing communications dollars and begin Value-Reinforcement Marketing

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