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Best-Practice Marketing: Divide and Conquer

Segment and target your way to optimized marketing that produces sales.

An increasing number of entrepreneurs are taking a cue from Julius Caesar: They’re dividing (segmenting) and conquering (targeting) their empires.

Saturation marketing is dead. The cost-cutting frenzy of the ’90s startled many business owners into realizing that they were wasting thousands of dollars on blitz campaigns aimed largely at unlikely customers. That shot-gun marketing approach has since evolved into target marketing, a critical element in the success of emerging-growth companies.

The concept is simple: First, segment the market into groups that would predictably buy your product or service. For example, if you sell high-end sports equipment, isolate consumers who have demonstrated an interest in sports and have purchased higher-ticket items. Why waste time aiming at unemployed couch potatoes? The trick: Identify the aspects of your product or service so that market segments can be quantifiably and accurately “matched.”

Next, target your list: Once you’ve figured out who’s likely to buy, analyze those segments carefully and tailor a marketing mix of special offers, incentives and promotions — according to what you learned about your most promising prospects.

A Universe of Ideal Customers

Where do you find this goldmine of ideal buyers? Start with your own database, which contains a compilation of current customers and worthwhile prospects, as well as rented lists.

Got database? Thanks to the advent of affordable software, smaller companies can keep up with the Fortune 500 — at least on the database front. You can organize and cross-reference customers by zip code, product interest, dollar value, buying frequency … whatever criteria helps you to better target potential customers (and sell more product).

If you don’t have a database, get a software program and create one with these basics:

  • Consult point-of-sale records and develop profiles of ideal customers, buying patterns and name/address/purchase-history information.
  • Commission a customer survey to supplement basic records with demographic and psychographic information. Use incoming calls as an opportunity for customer service reps to ask pointed survey questions that fill in the blanks.
  • Include all imaginable criteria; it’s easier to include at the start than add on later. A consultant can help here, but at a minimum you should be tracking name/address/phone information, purchase history (date and product details), inquiry history, dollars spent per customer, purchase frequency, customer comments (coded) and service-rep notes.

When your database is up to speed, examine your top-dollar customers, most loyal customers, worst customers and non-customers. Then detail when and what they’re buying. Use this information to paint a picture of your ideal prospect. What do your best customers look like? Once you’ve developed this profile, you’re ready to go list shopping (or media buying; see sidebar).

Renting lists. A competent but naive Midwest marketing director hired a professional copywriter/designer team to put together a direct-mail package ($11,500), a merge/purge house to perform that function ($2,600) and the area’s most expensive printer ($25,200). However, this marketing manager decided to take matters into her own hands and personally compile the lists with staff help. The response was a dismal .03%, a far cry from the acceptable standard of 1%-2%. Moral: Hire a professional list broker. It’s like plumbing; the more you try to do it yourself, the worse it gets. Hundreds of list companies exist exclusively to find masses of people who fit your ideal customer profile — this is one of the best ways to find customers outside the boundaries of your in-house database.

Exploring Your Customer Universe

Now that you have determined who’s likely to be a customer, find out as much as possible about them. Market research is your tool, but first consider your approach:

  • Do you need a firmer grip on how prospects perceive your product category, its lines and buying patterns? Focus groups may be the way to go; large-sample, random surveys will cost more, but they provide more statistically reliable data. It depends upon your needs and resources.
  • Do you want to confirm a trend or theory about market direction? A telephone survey may be in order, as may an industry review or feasibility study.
  • Need to do product testing? Conduct blind tests (in which brands, packages and product names are not revealed to the test subjects). Look for statistically reliable results at the 90%-95% confidence level. If you’re past the infancy stage, you can commission a prototype field test.

Unless you have an in-house research arm, you need a professional market-research firm to help you. Expect to spend time and money, and probably more of both than you’d prefer. The best ones don’t come cheap, but you can shave some of the fees by following these guidelines:

  • Impose strict limits on the project, both in scope and budget. Get acknowledgment in writing from the research firm. If they “don’t do contracts,” head for the door.
  • Anticipate extras and obstacles, and head them off before they add line items to your invoice.
  • Cutting corners means sacrificing varying amounts of validity. Be prepared to accept lesser statistical “oomph” if your budget precludes replication of the study, a totally random or large sample. But it’s not necessarily the end of the world. Sometimes the cost doesn’t justify validity to the nth degree.

Researching on Your Own

Large companies can segment their markets by commissioning extensive (and expensive) market-research studies, often consisting of multiple rounds of complex exploratory research and analysis. Smaller businesses rarely have these financial resources and often have to resort to rolling up their sleeves and doing it themselves. For the amount you can save — which can be tens of thousands of dollars — you may want to go it on your own. Here are a few cost-effective techniques for in-house research:

  • Staff interviews. Glean valuable input from your customer service representatives and front-line sales personnel. They probably know your customers better than you do.
  • Secondary sources. Talk to your distributors, buyers, manufacturers and suppliers. What do they observe about your customers? Request material from subscription-information services, trade associations and industry experts. Also investigate information offered by the U.S. Census Bureau and other government agencies. Online resources abound; search and you shall learn.
  • Watch your competitors. If they’re succeeding at something, “borrow” it. Why reinvent the wheel? During its biggest expansion period, Burger King spent virtually nothing on site location. They just built wherever there was a McDonald’s. Brilliant.
  • Do a needs analysis. What are customers asking for in your current line? What do they want that you don’t yet have?
  • Always ask “Why?” Why do our customers buy from us? Why don’t they buy from our competitors? Why do customers continue buying from us?

Targeting: Hitting the Bull’s Eye

Now that you’ve identified your segments, a “targeting plan” is in order.

Let’s say you’ve determined that senior executives are a superior target for your product. The core question: “How do you reach them?”

The answer comes from more questions:

  1. Are senior execs always involved in the decision-making process?
  2. What’s the best way to get an appointment with a senior exec?
  3. Why do senior execs agree to see a salesperson?
  4. What makes a senior exec say “yes”?
  5. How does a sales rep establish a long-term buying relationship with a senior exec?

Don’t turn to your salespeople for the answers. Instead, seek the insights of your existing customers whose characteristics best match those of your target market. It’s their perspective you’re after.

By asking the right questions of the right people, you obtain a wealth of information that you can immediately put to use, such as:

  1. More than three-quarters of senior executives become involved early in the buying cycle and again at the end, but rarely in the middle.
  2. The most direct line to an appointment is via an inside referral.
  3. The promise of value will gain an appointment. During the first meeting with a senior exec, salespeople must convey their accountability and prove that they understand the customer’s business goals and hazards.
  4. Senior executives like to “test” persistence. Once a salesperson overcomes that, he must prove the value his product or service provides. Only then is a “yes” possible.
  5. Long-term relationships depend upon the salesperson’s ability to demonstrate his comprehension of crucial business factors, his ongoing level of accountability and his problem-solving skills.

Now that you’re fully aware of what your targeted prospects want, your implementation plan should virtually write itself.

The challenge is to design a workable plan that remains cost conscious. The catch is that targeting, by its more specific and thereby more labor-intensive nature, is naturally more expensive. But if done properly, it should more than pay for itself over time.

Targeting methods with the biggest impact include:

  • Direct mail.
  • Telemarketing.
  • E-mail (within spam restrictions).
  • Web advertising.
  • Local newspapers.
  • Cable television.
  • Billboards.

Note: All the targeting in the world won’t keep your customers after you get them; only your commitment to complete satisfaction will accomplish that.

Case Studies

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