I find that people often misunderstand cold marketing versus relationship marketing. Entrepreneurs typically try to apply valid cold marketing principles to relationship marketing, and that is a massive mistake.
Let’s get clear on the definitions first. Cold marketing targets prospects who don’t know who you are, what you do, or that you’re even in business. They can be challenging to warm up.
Relationship marketing is designed to create customer loyalty and long-term customer engagement rather than just achieving short-term goals like customer acquisition and individual sales. The goal of relationship marketing is to create strong, emotional customer connections to a brand or individual that can lead to ongoing business, free word-of-mouth promotion, referrals, and other resources from customers that generate leads.
With cold marketing, you must have a clearly defined goal, such as “I want to send a targeted campaign to these 5,000 people to get webinar registrants and make sales through the webinar.” Once all the sales are counted, you can clearly check your campaign’s return on investment. This type of marketing clearly falls into the direct-response marketing category.
However, if you don’t have a clear call to action that says, “Sign up for the webinar,” then you’re no longer using direct-response marketing. For example, if you send a campaign to 5,000 people and simply tell them who you are and what you do and provide them with no reason to respond, all you have is a branding piece and nothing more. The easiest way to spot a brand-based piece is to look at the mailing list. The people receiving the pieces have never purchased from your brand before.
Thawed And Ready To Go
Now, on the flip side, we have relationship marketing. Pieces using this strategy are designed to play the long game by building a relationship with your customer or prospect. These pieces also allow you to add value and promote products, services, or specials. Relationship pieces allow your customers to get a glimpse behind the curtain of your business and maybe even gain some insight on you personally.
Done correctly, relationship marketing builds trust, authority, loyalty, and long-term leads to get more sales, more referrals, and an increased customer lifetime value. My tool of choice for relationship marketing is newsletters.
Relationship marketing also works well for nurturing your leads. A lead is trying to make a number of choices. Do they want or need your product or service? Which vendor should they buy from? Who is going to take care of them after the sale? By using multimedia content like newsletters, emails, videos, etc. to build a relationship with your prospect, you drastically increase your odds of closing the deal because people like to do business with people they know, like, and trust.
Trust Is Everything
In many cases, prospects will even pay more to do business with a trusted source, such as choosing Apple products over PCs. Apple has spent decades building a trusted brand, focusing on customer experience, and they’ve reaped the rewards.
There are times when a call to action in relationship marketing is both warranted and needed. This is even truer when talking about prospects, but expecting to get a 100% ROI for every relationship marketing piece is crazy town. That is just playing the short game with your marketing.
Understanding the numbers before you launch a campaign is one of the best determining factors of success or failure. For example, I was chatting with a friend who was planning to send out 8,000 emails via a cold list he was renting. But the price of the list was high, and he wanted a second set of eyes on it. So I asked him for the numbers.
On average, these 8,000 names had a 12% open rate, so only 960 people would even see the email. Of those 960, this list averaged a 2.5% click-through rate. That means just 24 people would click on the product he’d priced at $47. If 30% of the people bought the product they clicked on, he would only sell 7 units. The customer lifetime value didn’t justify the ad spend.
Regardless of whether you’re using relationship marketing or cold marketing strategies, you have to look at the numbers to set your expectations and see if the campaign makes sense.
Now that you understand cold versus relationship marketing and how to have a framework for calculating ROI, make sure you use this newfound knowledge before you engage in your next campaign.