Many marketers, reluctant to miss any avenue of opportunity, define their target as broadly as possible and in so doing miss the chance to convincingly address the most potent prospects. A typical example is a company that perceives its target market to be the Fortune 1,000. That group is actually comprised of several thousand revenue reporting companies – some with centralized and some with de-centralized decision making. While is sounds contradictory, I recommend that companies identify the largest, most targeted markets to make sure that they have a tightly defined universe, but with no gaps and then build contacts and contact information around those targets for multi-touch, multi-media and multi-cycle prospect development programs (covered in detail later in this book).
Companies that more quickly see the value proposition of a vendor’s product, whether due to immediate business pains or because they are looking to enhance their own capabilities, respond at higher levels than others. So it makes sense to identify segments of the market and market to them specifically. Others, though still qualified, may be more hesitant and require different touch strategies and messaging before their sales potential can mature. They are still good sources of revenue, though, and if left behind in the rush to close will most likely end up directing that revenue to a competitor. Recognizing and nurturing all prospect potential is crucial to pipeline development, future revenue and market share.
By applying market intelligence and finely-defined segmentation strategies, I have been successful in increasing sales performance while actually reducing marketing costs.
The most misunderstood aspects of direct marketing involve lists and databases. Executives often feel that lists are a waste of their time; and database issues seem so complex that execs are willing to pay exorbitant sums to the “experts” who deal with them. Big mistakes!
Over 60% of the value of any direct marketing campaign is driven by list and database issues. To understand why, think about marbles.
For most business-to-business marketers there are a number of list choices. Response lists, subscriber lists, controlled circulation publications, compiled files. They each have advantages and disadvantages, but it is important to know that even the best lists are rarely more than 50% accurate.
WHAT MARBLES COST
Ever play marbles? Remember that different types of marbles had different values.
Machine Made Marble Price List
- Swirls - $.25
- Stripes - $1.25
- Flecks - $1.25
- Loops - $1.25
- Spirals - $1.25
- Agates - $5.00
What if I told you that your direct marketing campaigns are run as though you were playing marbles without knowing the difference between a Swirl and a Stripe? Worse, what if improving results was as simple as separating your Swirls from your Agates?
While most executives would not dream of buying a jar of marbles without knowing exactly what was inside, they approve the purchase of lists that contain the equivalent of Swirls, Loops and Agates, often without knowing exactly what they are getting.
Suppose you have a mason jar filled with the following:
100 Swirls - $25.00 100 Flecks - $125.00 100 Agates - $500.00
The average value of each marble in the jar is $2.17. Reach in and grab an Agate for $2.17 and you have cause for celebration. Pay $2.17 for a Swirl and you will feel taken.
When you execute a direct marketing program you make essentially the same choice. You mail, call or otherwise contact individuals based on their potential value to you as a customer. Some names are worth very little (let’s compare these names to Swirls at $.25), some are average in value (say the value of a Fleck at $1.25) and some are high value names (such as an Agate for $5.00).
Is it possible to market to just the high value names? Yes! It is possible to market to the “Agates” and “Flecks”, and skip the “Swirls”, in your market with just a little effort and very little expense.
Here is how:
SIMPLE MARKET SEGMENTATION
Just as you can see the difference between a Swirl and an Agate when you look into the jar of marbles, it is possible to calculate the value of names you direct market to in advance by doing a bit of testing prior to rolling out campaigns.
The secret is segmentation. Segmentation breaks large universes of names (multiple lists and/or multiple list segments) into smaller, homogeneous “cubes” or layers of like individuals or companies. Once these “cubes” are identified, response from each “cube” can be separately analyzed. Some differentiating characteristics to use when segmenting names into “cubes” are geography, revenue, number of employees, growth percentages, SIC codes, decision-making levels and/or other data that is commonly available. You should also compare each list or list segment to your customer list and the customers of your competitors to determine how many customers match your prospect lists. The higher the match you find, the better the list.
If you pay $5 for a marble you expect to own an Agate. Think of lists the same way. Find the Agates, and mail more of them than Swirls, and you will enjoy a higher ROI every time. With segmentation, a list is split into distinct strata of names “cubed” by similarities rather than a random “jar of marbles”. Just picture your Swirls, Spirals and Agates all segmented by type and you have the right picture.
The following will help you win all of the marbles (without losing yours): http://www.pointclear.com/resources/