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my first article in this series, I spoke about one of the efforts
falling under the umbrella of installed-base marketing, which
is software upgrades. Since many software publishers are in
business selling multiple products in related categories (i.e.
accounting, productivity, graphics, educational, entertainment,
etc.), another highly-profitable marketing activity can be initiated,
which is product cross-selling.
So we are all working with common definitions, installed-base
marketing can be defined as any marketing or communications
event targeted to specifically to your existing family of
customers; the cross-selling effort, which is an installed-base
marketing event, can be defined as a marketing activity whose
purpose is to sell current customers additional products produced
by your company. An edutainment company can cross-sell other
educational titles within their product family; a software
utility publisher can sell other types of utility products,
etc.
You have probably heard the phrase mentioned many times
-- there is no better person to sell to than your own customers.
Why is this statement true? Customers who have purchased your
products are familiar with your company, have made a commitment
to your company and its products, and are (hopefully) very
satisfied with their past purchases. There is a tremendous
amount of goodwill built into your customer base. On-going
product cross-selling efforts allow you to leverage that goodwill
and turn it into real profits. Overall, product cross-sell
efforts to your installed base certainly makes sense, and
should be one of the first activities performed with the release
of a new product.
Of course, any type of installed-base marketing activity,
whether it be product upgrades, cross-sells, up-sells (the
selling of plug-ins/enhancements), or even the sale of consumables
(printed forms, media, etc.) requires a functional customer
database. And a word to the wise -- if you haven’t built a
customer database, make sure you have a plan of action (approved
and budgeted installed-base marketing activities) before spending
the dollars and effort in building one. If you are going to
make the investment in building a customer database, make
sure that you have a use for it.
What are the core components for a functional customer database?
Well, for installed-base marketing efforts, the name and address
is, of course, priority, followed by the acquisition date
of the customer (so you can calculate total revenue generated
over time), the last activity date of that customer (for the
stratification of names based on Recency, Frequency, and Monetary
Value), and the products (and versions) purchased.
If you are looking at future installed-base marketing activities,
it might be a good idea to collect the name of your customer’s
primary on-line service (i.e. Compuserve, Prodigy, AOL, Delphi
etc.) and their E-mail address. Having these two components
will allow the assembly of an Internet address (for example
JoeG on AOL would have an Internet address of joeg@aol.com)
which will facilitate future electronic marketing activities
to your installed customer base.
Since CD-ROM ownership is rapidly moving from ‘technophile’
to ‘mainstream’, identification of CD-ROM ownership within
your own customer base can be of value. A ‘special CD-ROM
edition’ of a product could be offered as an up-sell strategy,
bundled with additional add-on modules. You might consider
asking your customers if they own a CD-ROM drive for such
up-sell activities. It will also enhance your list rental
program (if one is in place) since CD-ROM names command a
high price in the list rental market.
There are several different implementations of a cross-selling
program. As with any marketing activity, the different programs
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should be tested and measured to
see which one yields the best results, profits, and cash flow.
I have seen many software publishers with highly successful
newsletters and magalogs that are circulated to their installed
customer base. Such publications will typically answer frequently
asked questions, reprint positive letters from their customers,
and also talk about both current and new products. Order forms
are either bound into the publication or are composed on the
last page. Discounted, direct pricing is offered, with ‘reserved’
copies of hot new releases allocated for current customers
to order. Some of the newsletters have evolved into newsstand
quality magazines, generating paid subscribers and securing
paid, non-competitive advertisers -- two more profit centers
from the overall effort.
You can maximize your investment in publishing the newsletter,
magalog, or magazine by offering it as a free premium to those
who return their registration cards. The premium can be offered
as a six month or yearly subscription, renewable with a discounted
paid subscription or the purchase of additional products.
To enhance your cross-sell mailing, you might partner with
another non-competitive software company to offer a free premium.
A utility might be given with the purchase of a business related
product; a game might be given with the purchase of a multimedia
edutainment product. The strategic partner offering the premium
benefits with the capture of new customers who they, in turn,
can offer upgrades and cross-sell offers.
Product codes within the internal database must be examined
so as not to send the offer to customers who have already
purchased the product being cross-sold. Suppressing such names
will save money associated with printing and postage while
eliminating customer frustration.
House file inquiry names should also be sent the special
offer, under a different key code so the results can be measured.
If someone took the time and trouble to make an inquiry on
your family of products, your cross-sell mailing might be
the final chip needed to actually convert them into a paid
customer.
Telemarketing can also be used for the installed-base cross-sales
efforts. There are many software companies that have developed
profitable sales units based upon outbound telemarketing activities
to their existing customers.
In some cases, the telephone calls are made as a follow-up
to a solo cross-sell mailing piece. If your customer file
doesn’t currently contain telephone numbers, services are
available to append them. A random, Nth name sampling of your
customers can be taken to test the effectiveness of your outbound
telemarketing efforts, analyzing the profitability with and
without the support of the solo mailing.
Common to all your cross-sell activities, make sure you
provide your customers with an easy way to order -- either
by fax, 800 number, e-mail (with proper encryption technologies
in place), postage-paid response mechanism, etc.
With the completion of this article, allow me to emphasize
one last thought - plan for future activities. This includes
the collection of E-mail addresses and identification of CD-ROM
ownership. This will give you an added edge for your future
installed-base marketing efforts.
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