Free customers are like the “World’s Largest Christmas Stocking.” They look good from the outside, but when you start digging in, you find that the value is missing.

A few years ago, I won a raffle for the “World’s Largest Christmas Stocking.” It was so big I needed help carrying it to my car. It measure seven foot tall, three foot wide, and was filled with toys. Winning it was fun.

Opening it was disappointing.

Instead of toys, it was filled with accessories. Every item included required additional purchases to be functional. The children’s excitement transformed into annoyance before the stocking was empty. “Bummer” was the word of the day.

When you analyze your free customers, acquired via the Internet, expect the same results. The excitement of acquiring new customers transforms into disappointment when you realize that they add little or no value to your business.

Most customers acquired through search (natural and paid) are looking for a specific product. They search for “lime green pillow” instead of “unique home decor catalog that matches my lifestyle and wallet.” When the perfect pillow appears, it is purchased, and the shopper transforms into a customer.

This is where it gets scary…

…at least for the company. The marketing cycle begins. Emails, catalogs, postcards, and other promotional pieces are sent to encourage the second purchase. The new customers are treated the same as ones acquired through traditional methods.

Your free customers are different. Most are hit-and-runners, looking for a single item or collection, never to shop again. If you spend $36 marketing to them over the next year, you have wasted $36! If you have 1000 “free” customers, that’s $36,000 off the bottom line. (Yes, I know you can do the math, but sometimes it is more effective to see it.)

Growing your house file is a good thing if you are acquiring customers with a long lifespan. Before you start celebrating the growth of your customer file, make sure that your acquisitions will improve your business. Learn how to identify hit-and-run customers before they break your bank!

Related posts:

1. The High Cost of Poor Product Knowledge in a Multichannel World
2. Why Does Marketing Get a Free Pass on Costs While Operations Twists in the Wind?
3. How Often do You Leave Money on the Table by Missing These Low Cost Marketing Opportunities?

How is business? Are your sales up or down? Are your costs holding steady or increasing daily? Do you have enough information available to accurately answer the question? Are you SURE?

If your answer is based on sales, costs, average order value, response rates, sales per foot or any of the traditional metrics, then you are missing part of the puzzle. You have to go below the surface to find out how well your company is doing.

You need to understand your customer dynamics. How and why are they shopping with your company? Where are they coming from? What are their intentions? Are they interested in a relationship or simply a hit and run shoppers? Are your customers gaining or losing value?

What about your people, products and operations? Are your employees happy? Are your costs out of balance? Is your inventory under control? Is there enough innovation? How much does it cost to acquire a customer? Fill an order?

Giving your company a checkup is mandatory if it is showing any of the signs in this guide. It is highly recommended even if all appears to be well. Call it a wellness check and look for any anomalies that may be lurking in the depths of your data. Catching them before they escalate will save you time, money, and a whole lot of headaches.

Note: This is an excerpt from 10 Hidden Signs Your Company is Sinking. Get your FREE copy when you subscribe to our newsletter using the form below.

Related posts:

1. 10 Hidden Signs Your Company is Sinking
2. What Warning Signs are Hidden in Your Customer File?
3. 4 Warning Signs that Capturing Data has Replaced Customer Service as Top Priority

Dear Jane,

Your Airline Friends

Maybe I’m wrong, but aren’t frequent flyer programs supposed to encourage customer loyalty? Airlines and other companies expect customers to be faithful and choose their services over the competition, because they provide an opportunity for free flight. Then, they change the rules at their discretion. Loyalty, between company and customer, is a two way street. It requires both parties to be committed to each other.

Airlines are altering their frequent flier programs to offset high fuel prices. It may be a good decision from a short-term, bean counter point of view, but the backdraft may torch future growth. An article in the Wall Street Journal quotes Scott Kirby, President of US Airways as saying, “I wish it wasn’t the kind of decision we felt we had to make,” but the changes and fees “are necessary realities of $125-a-barrel oil.”

His point about changing the frequent flyer program due to high fuel charges doesn’t make much sense to me. They were making changes before oil hit $100 a barrel.

Last year, I received a “Dear Jane” letter from US Airways. The wording was much nicer, but the message was the same as my sample above. It was extortion. “If you don’t use your points or add to them, we will take them away from you.”

Long before frequent flyer miles, Piedmont Airlines was my company of choice. When the airline became part of the US Airway family, I continued to use their services. My experiences were usually pleasant when I traveled with them.

When I moved to Atlanta, the convenience of flying Delta with direct flights reduced my flying time with US Airways. Upon my return to NC, I renewed our relationship. My experiences were not pleasant. Delta became my first choice with US Airways a distant second.

After receiving my Dear Jane letter, I reviewed my options. I needed to schedule a flight, so I thought that I might as well use US Airways. I didn’t have enough points for a free ticket. Purchasing the additional points cost almost as much as buying a discount coach ticket. I considered transferring them to a family member. The cost was prohibitive, so I didn’t do anything. True to the letter I received, my points went away, but their marketing didn’t stop there.

Adding insult to injury, they sent me their monthly newsletter, reminding me that I had zero miles, until I unsubscribed. It appears that while it was too expensive to keep my miles on their server, my contact information doesn’t take as much space. Since US Airways is now my last choice, I wonder how marketing to alienated customers is working for them. If someone can explain their marketing strategy, please share.

Have a great week!

Debra

Related posts:

1. Dear Customer, You are Cordially Invited to Complain
2. How to Alienate Customers without Really Trying
3. Knowing the Difference between Personal and Personalized