customer-based segmentation approach within the company, or it won’t work. To effect this movement from a product-based to a consumer-based segmentation approach, there frequently is a need for education—from someone on the outside—on the benefits of this approach. Often when I work with clients in the marketing communications department, I find that they have been preaching this change to others within the organiza- tion, all to no effect. The phrase “familiarity breeds contempt” applies here, as most product managers only want to view the world from a prod- uct perch. Yet when someone like me arrives on an airplane with a brief- case, the message is credible and can help initiate the culture change. It’s also hard to get the product-oriented people to marketing conferences or a seminar, so bringing the knowledge in-house works wonders. Same mes- sage, different result.
area codes are a form of geographic description as well, even though they are being revised frequently. The Ruf Company in Kansas City has one of the best applications of the geo-demographic segmentation discussed here. The company has an econometric-based model that calculates eco- nomic health and activity by geographic areas and can be a predictor of business potential, particularly for small businesses, which are more dependent on the local economy than are larger companies. See the Resource Directory for the company’s contact information. The most common use of geo-demographic descriptions of the market is to define sales territories and balance workload and potential.
• Industry type or SIC/NAICS code.This demographic description was detailed in the preceding chapter and is the primary building block to understanding and segmenting any B2B market. For any company data- base that is still SIC-reliant, it is recommended that the new NAICS codes, which replace SIC codes, be appended for all customers and prospects.
This may require that a manual lookup be performed in some cases. Any major list compiler, such as D&B, InfoUSA, or Experian, will be glad to provide you with all the details on new NAICS guidelines.
• Company size.This also was detailed in the preceding chapter and, following industry type, is the second most important building block in developing an understanding of the marketplace. Unlike the industry NAICS code, this demographic fact does change over time as companies grow, shrink, or merge. As mentioned in Chapter 3, my recommendation is that the number of employees be used as the definition of size, since revenue is a much more closely guarded statistic.
• Location type. The type of facility may be an important piece to help define your marketplace. Most companies are single-location firms, but typically, as the size of the company grows, so does the specializa- tion of the site. Here are the most common site definitions for larger com- panies (in decreasing order of frequency, based on my experience):
• Headquarters or HQ
• Plant
• Research center
• Retail store location
• Regional or district sales office
Most of the vendors who supply compiled database information con- tain these definitions or ones similar. Your decision is to determine if site definitions are important and, if so, record them on the database.
• Fiscal year.Most companies are on a calendar fiscal year, and this is certainly true of any private or Sub S corporation, as the IRS requires this. On the other hand, C corporations are allowed to select a fiscal year, and by a rough estimate, about 80 percent are calendar/fiscal. The other 20 percent are spread to the other three quarters, which almost always start on the first day of the calendar quarter, for their fiscal year. Why could this be an important demographic data element? Well, if you’re sell- ing a product or service that needs to be in the company’s budget, you better communicate to the company before or during its budget cycle, or you will miss the internal biorhythms that occur during planning time.
When I was with Quaker Oats, we were on a fiscal year that started July 1. That meant if you wanted to sell me sales training programs, you bet- ter start talking to me in the spring. We, all too often, make the assump- tion that the fall of the year is when companies are in the planning process, so we launch campaigns at that time. By having the fiscal year defined, you can segment your list and communicate to companies based on their proper planning cycle and beat the competition to the budget.
• Year founded. In my seminars I included the date of founding as a demographic element to consider, but over the years, it began to seem useless. That is, until I said it was useless once, and a marketing man- ager from National Pen Company piped up with the comment that it was a key demographic way for the company to segment its potential cus- tomer base, as they sold pens to organizations on their one-, five-, and ten-year anniversary dates. So, I continue to list it. Likewise, some peo- ple claim that new companies need different products or services from older ones—so if the distinction is applicable to your marketing analy- sis, use this element.
Relational Demographics Relational demographics are an enhancement to demographic segmentation and are defined as factual information that is related to the sale of your product or service. The most common rela- tional demographic elements are equipment or processes in use by the cus- tomer. Incorporating this single piece of information may well completely
change the message, offer, and total marketing approach. It can be the most powerful piece of information by virtue of making whatever you do more relevant to the targeted audience. In fact, salespeople have been using this type of information for years without ever calling it by a name. It’s just smart selling to adjust the approach and presentation based on infor- mation about the company. To make this clear, let’s assume that you are selling a plastic material such as polyvinyl chloride, or PVC. Knowing if the target company is an extruder, blow molder, rotational molder, or cal- ender operation would make a great deal of difference in not only what you say but even the type of PVC you offer. Another easy-to-understand example is selling software for sales and marketing applications. Know- ing if the target company has outside versus inside salespeople would make a big difference in the opportunity. Recently a client, Square D, was tar- geting hospitals for an automated energy-monitoring solution, and the age of the hospital became the key relational demographic fact, as hospi- tals built before 1990 were far better targets than those built after that date, due to the capabilities of the newer-generation equipment.
While there may be numerous relational demographic facts to con- sider, I recommend the following process: Call or visit one or two of your best salespeople, and ask the following question: What single piece of demographic information would you like to know about a company that would make the most difference in your sales effort? Not only is your sales group your best source of input, but also the fact that you ask for the input can help the integration process.
Several years ago, I served as a consultant to a large chip manufacturer on developing the company’s database. We wanted to identify a relational demographic fact to use and brought in a regional manager for the meet- ing. After some discussion and struggle, a lightbulb went on, and he said,
“I know what it would be: what type of processor are they using—16-, 32-, or 64-bit?” That turned out to be just what we wanted, and it took a salesperson to give us the obvious answer. Once he said it, all the mar- keting people, who had been trying to come up with it for about a week, said, “Yes, that’s it.” Salespeople are smart!
This relational demographic fact to use for microsegmentation is an untapped opportunity for most companies and can be very powerful in constructing highly relevant communications that cut through the clutter.
In addition, don’t think that your competitors are not working on seg- mentation schemes. Just like you, they will add the standard demographic
data to their files and be able to segment the market based on the data.
But if you go one step further and establish a relational demographic field on the database and populate it, then you have a segmentation scheme that is not easily duplicated. In other words, you may be able to perform
“stealth marketing” and outsmart the competition. Granted, the data will have to be obtained on a company-by-company basis, and the task will most likely involve the sales group, but I guarantee that it will be worth every dollar of effort. To start, try for only one relational demographic ele- ment and then use it to good effect, and enjoy the results.