Crackers at Christmas

The summer holidays are over, the schools are back and, increasingly, our focus is now on Christmas. We Brits love our Christmas; don’t we just? But, as much as we might love it, Christmas creates huge distortions in the annual trading cycle. For some businesses, for instance many high street retailers, the run up to Christmas and the January sales account for a large slice of their annual sales; so, if they don’t do well over the December/January period, their budgets are knocked for six. For other businesses, probably the majority, sales in the run up to Christmas fall away dramatically, order books run down very quickly and, during the aftermath of Christmas, output is depressed until order books recover. Furthermore, a full month’s overheads are incurred during December, whilst trading is restricted to about three weeks. So you can see why many businesses find their cash flow very stretched at that time of year and why January to March is the danger period, when many weak businesses fail.

So, if your business is one of those that are hit badly at Christmas and the early part of the New Year, what can you do about it?

Well what you can’t do is fight it. It’s part of our British culture and there’s not much you can do to change that. The real issue is how you manage your business through this period with the least amount of damage.

The first action that you need to consider is right now. During the autumn you need to build your order book as much as you can. Increase your advertising, while your market is active, and maximise your flow of enquiries/leads. At this time of year, you’re targeting customers, who are a long way through the buying cycle and are ready to buy; so create some urgency by running a time related offer that requires your product or service to be delivered before Christmas. The orders you take need to be well priced, giving you good margins that will sustain your business and deliver some decent profits. So don’t be tempted to cut prices. The offer you run needs to be product related – an upgraded spec: a free extra etc. And what you’re looking to do is make it something, whose perceived value is greater than its true cost to the business.

However, at some point prior to Christmas, you’ll cross a threshold. Market activity will start to drop off very quickly and your order book will reach the point where you can no longer offer a pre-Christmas delivery. There’s no clear rule as to which of these will come first; but whichever does come first should trigger a complete change of tactics.

Your advertising must change to target a different type of customer. You’re now looking for customers, for whom buying your product or service isn’t influenced by the timing of Christmas. You’re after bargain hunters looking for good deals. They’re not tempted by free upgrades; for them, it’s all about price. You want orders that are placed before Christmas but with delivery in the New Year. The incentive is a significant discount that makes your product or service exceptional value for money. Whilst the market may be generally inactive, serious bargain hunters, with a genuine interest in your product or service, will still respond, if the deal is good enough. For you, low priced business is better than no business; and your aim is to keep your business’s output up, in the aftermath of Christmas. So not only is this cut price offer for a limited period in the run up to Christmas, it must also stipulate that the product or service must be delivered within a limited time frame after Christmas; perhaps by the end of January or maybe February. The actual cut off will depend on the length of your delivery period. Your objective will be to attract enough low priced volume to keep your output up, in the immediate aftermath of Christmas but not to impede the delivery of higher priced orders that start to build up in the New Year. It’s a tricky balancing act designed to fill a gap; and you probably won’t get it 100% right. But even so, it’s far better to have this type of strategy in place than to let your business be a helpless victim of market distortions caused by the British being crackers at Christmas.

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Is your lead generation targeting the right prospects?

“I never respond to Junk mail; I just throw it in the bin”.

“If people knock on my door trying to sell me anything, I just shut the door on them”.

“When people phone me up selling things, I just put the phone down”.

How many times have you heard comments like these? Indeed, how many times have you made comments like these? And yet there are lots of businesses in the UK that rely heavily on direct mail, door to door distribution, telesales and door to door canvassing. These businesses collectively spend huge sums of money on activities of this type; and, if they didn’t work, it’s reasonable to assume that the companies involved wouldn’t invest in them. So how can we reconcile the perceptions of most consumers with the experience of many B2C businesses?

The simple answer is that, it’s all about appropriateness and timing. Let me give you an example. A close neighbour of mine retired a couple of years ago as CEO of a reasonably substantial business. He and his wife have decided that they want a new kitchen; and he was talking to me about it. Whilst they had the money in the bank, ready and waiting, they were busy with family and other things and just hadn’t found time to start researching the local market for an appropriate supplier/installer. And he said that, “if any kitchen company knocked on his door or phoned him, he’d almost certainly, at least, give them a fair hearing”. This is a man who normally never buys from door to door or telephone sales people and who is very adept at saying no to them. But despite that, in these particular circumstances, a direct approach would actually be welcome because he and his wife are in the market.

Lead generation isn’t primarily about creating markets or developing brands; it’s about generating enquiries from people, who are already predisposed to buy. It’s about getting the right product/service offer in front of the right people, in the right place, at the right time. Get all of that right and you’ll sell; get it wrong and it’s much more difficult.

Lead generation invariably means some sort of unsolicited sales approach and, if this is undertaken in a random, untargeted way, it can have a very damaging effect on the brand and its brand values. A few years ago, I was involved in some market research, for a client, who relied heavily on random, untargeted lead generation activities, on a large scale. And we discovered that for every customer gained through these unsolicited sales approaches, three other people, who could have been potential customers, in the future, were alienated. It became clear that whilst this company was successfully exploiting the market in the short term, it was undermining its brand for the longer term. And sure enough, as the market became increasingly alienated, the business started to lose market share; sales went into decline and eventually the business went into administration.

The problem with many unsolicited sales approaches is that they tend to be very poorly targeted; so most recipients of them aren’t like my neighbour; they’re just not in the market, for that product/service, at that time. As a result, they tend to see the approach as intrusive and can often feel threatened by it; so they develop a very negative view of the brand and/or the business.

Obviously few businesses, selling into B2C markets, can guarantee to target only those people that are in the market; that’s neither practical nor possible. But the more you can target your lead generation towards people that are in the market for your type of product/service, the more cost effective it will be. Conversely, the less you target, the more damage you will do to your brand and the less cost effective your lead generation will be.

I’d now like to turn to a third aspect of targeting, namely the profile of the prospect, who will be most likely to buy from you. Even if you offer the right product/service at the right time, you may still have a fight on your hands if your brand values don’t gel with the aspirations of your prospect.

Much of this is subliminal; but it’s still very real. Different types of people will tend to buy similar products/services from different types of businesses.

Some buyers are looking for premium brands; some for budget brands; and some for value brands. Some people place local suppliers above national; some the reverse. Price, specification, delivery period, quality, local reputation, image, length of time in business, knowledge and experience plus many other factors influence different people in different ways in their selection of a product/service. And this is why the customers of one supplier of a product/service may have an entirely different profile from that of another business, supplying a similar product/service. And if the first business tries to sell to prospects, whose profile is similar to that of the second business, it will find it much tougher to win sales; conversion rates will be much lower and selling costs will be much higher. Think about Marks & Spencer v Primark: Asda v Waitrose: Everest v the local window company: Magnet v the Alno kitchen studio. Different people shop in different ways for broadly the same thing.

To summarise all this so far, B2C businesses need to target the right profile of customer with the right product/service, in the right place at the right time. The closer you get to this, the more sales you’ll achieve; the more you’ll strengthen your brand position; and the lower your selling costs will be. The further away from this you stray, the lower your sales will be; the more you will undermine your brand; and the higher your selling costs will be. So the $64,000 question is, “how can you get your targeting right”? So I’ll try and give you some pointers.

The first thing to focus on is your existing customer base. These are people who have bought from you already; so they’ve accepted your product/service, your brand values etc. and by definition, these are the type of people that will buy from you or your business because they’ve already done so.

They are, therefore, likely to be warm to approaches for additional sales; additions or enhancements to what they have already bought; upgrades; linked sales; replacements of old models etc. And this should result in low lead generation costs, high conversion rates and good margins. But for this to be effective, you need an appropriate Customer Relationship Management (CRM) System to support the effective control of the process. I can’t stress how important this is and I’m regularly surprised by the number of B2C businesses that either don’t have one or have one but don’t use it effectively.

A good CRM system provides a full audit trail of the entire interface between the business and the customer, including contact details, a record of what the customer has purchased, when he/she purchased, the price paid, issues/complaints that may have arisen, how these were resolved etc. It should also record selling opportunities for the future. For example if you’ve supplied and installed replacement windows, there may be doors that have not yet been replaced or an opportunity for a conservatory. If you’re installing central heating or a new boiler, there’s an opportunity for a service contract. If you supply kitchens and bathrooms and you’ve fitted a kitchen, there may be an opportunity for a bathroom. These are just a few examples, within the home improvement sector; but most B2C businesses will have similar opportunities to record on the system. Add to this, records of conversations with customers and you have some really good information, which you can use.

If you have a CRM system full of the type of information I’ve described, you can start making direct approaches (subject to appropriate approvals for TPS, MPS etc.) to your customers with product/service offers that are both timely and relevant; and if they are timely and relevant, you have a much greater chance of a good response than if they are not. In effect, you will be developing strategies for individual customers rather than a “one size fits all approach”. In a very much more sophisticated way, this is what Tesco does with its Clubcard and the promotions it develops from it.

Still focussing on your customer base, the next step is to generate new customers from your existing ones. Most of your customers will have friends, relatives and neighbours that are similar to them; similar circumstances and similar values. So a higher proportion, of these people, is likely to look favourably on your products/services and brand than is an entirely random group of people elsewhere. So, once again, you’ll find them easier and cheaper to sell to than people, to whom you are entirely unknown.

There are really two things you should do.

The first is to have a good recommendation scheme with an appropriate reward for every customer that makes a successful recommendation and an incentive to the prospect that the customer is recommending. This means that both the customer recommending and the prospect are incentivised. Once again, this has to be properly managed on the CRM system and effectively promoted to your customer network. It should all be date driven with triggers for each part of the process so that every customer receives the correct details at a predetermined time and frequency. Good well managed recommendation schemes can be a highly effective way of generating new customers very cost effectively.

The second is to promote your products/services in the neighbourhood of your customer, shortly after that customer has completed his/her purchase. A variety of media can be used, depending on the type of product/service involved. It could be anything from knocking on neighbours’ doors to leafleting or direct mail. But the main point is that these people are more likely to have similar profiles to those of your customer than would be the case with a random group. And whilst the response may not be as strong or positive as it would be with recommendation schemes, it is likely to be stronger and more positive than would be the case with a random group.

We’ve looked at additional sales to existing customers and developing new customers from existing customers. But now we now need to consider how to target entirely new customers that don’t fall into either of these groups.

The key lies in understanding the detailed profile of the type of people that are most inclined to buy from your type of business and then identifying where they live.

Consumer profiling has become a very sophisticated process. And there are some very effective profiling tools on the market. However, rather than discuss these products in general terms, I’m going to concentrate on one particular product called ACORN. But when reading about ACORN, you should bear in mind that there are other similar types of products, some of which are even more sophisticated and some sector specific. However ACORN is a very useful product that is applicable to most B2C businesses; and it is the brainchild of a company called CACI.

So what is ACORN?

ACORN is a geodemographic segmentation of the UK’s population which segments small neighbourhoods, postcodes, or consumer households into 6 categories, 18 groups and 62 types.

 ACORN provides understanding of the people who interact with your organisation. It helps you learn the who, what, where, when, how, and why of their relationship with you.

This can help you to target, acquire, manage and develop profitable relationships and improve business results. The classification also gives a better understanding of places and the people who use them.

Who uses ACORN?

Retailers, financial organisations, and over 200 public sector organisations use CACI data to provide an accurate picture of the needs of their customers and local communities.

ACORN is used to understand customers’ lifestyle, behaviour and attitudes, or the needs of neighbourhoods and people’s public service needs. It is used to analyse customers, identify profitable prospects, evaluate local markets and focus on the specific needs of each local community.

You can learn more about your customers’ behaviour and identify prospects who most resemble your best customers by adding ACORN codes to a customer database.

Such an understanding of the ACORN characteristics of a market can also be used to drive effective customer communication strategies.

CACI Ltd is the company that has developed Acorn and it describes itself as follows:-

CACI was founded in 1975 in the UK and operates from several offices across the country.

Headquartered in London, CACI Ltd is a wholly owned subsidiary of CACI International Inc. CACI International Inc. is a publicly listed company on the NYSE with annual revenues in excess of US $3.8bn and approx 14,000 people worldwide.

CACI offers an unrivalled range of marketing solutions and information systems to local and central government and to businesses from most industry sectors.

The ACORN User Guide provides a detailed description of ACORN and gives a full description of the lifestyles and values of each of the 56 ACORN types. You can view and print the “ACORN User Guide” by following link below: –

ACORN User Guide

The first step for most B2C businesses is to profile their existing customer base using ACORN. Each customer record will be tagged with its ACORN type and the entire customer database can then be compared with the base population. From this you will see the ACORN types, with which your business does very well and those, with which it scores less well. Typically most businesses score highly with a few ACORN types – perhaps five or six – and then moderately well with another five to ten groups. Thereafter the scores tend to fall away.

The high scoring ACORN types are those, whose lifestyles, life stages, incomes, values etc. gel with the brand values of your business. These are the people most likely to respond to your promotions and the most likely to buy from you. Apart from existing customers and customer related prospects, these people represent the most cost effective target group for your business. As you move further away from these key ACORN types towards ACORN types that are less well disposed to your brand, response rates and conversion rates will decline and the cost of generating sales will increase.

Once you have established which ACORN types are key to your business, you can obtain maps, showing the concentration of these people, by postcode delineation and you can buy or rent mailing lists, including only people that fall within your key ACORN types. With this information you can develop well targeted advertising and lead generating campaigns, using a wide range of media that can be structured to focus primarily on your key ACORN types. And because you have a considerable amount of detail about these peoples’ lifestyles and values, you can ensure that the advertising messages are relevant and appropriate for the target audience involved.

As I’ve already said, I’ve focused on ACORN but there are other similar products available that do much the same thing. What is important for B2C businesses is that they start using these types of tools to improve the efficiency and effectiveness of their marketing and advertising and that they take a more structured, focused and targeted approach to lead generation. In so many markets, creating competitive advantage through product USPs, quality and service issues is becoming much more difficult, as playing fields level out; so competitive advantage is becoming increasingly dependent on smarter marketing, an important part of which is targeting the right people with the right offer at the right time.

If you would like to discuss any of the issues in this article with me or would like any further information.

Log on to my website: www.apbusinessconsultants.co.uk

Email me: anthony.pratt@apbusinessconsultants.co.uk

Call me: Office: +44 (0)1962 715899 – Mobile: +44 (0) 7770 816468

Marketing has never been more important. But what exactly is marketing?

To some people this may be a silly question; but, there are many businesses, in many different sectors, that talk about marketing but mean advertising and promotion. Undoubtedly, advertising and promotion are part of marketing but, on their own, they are not marketing.

So what is marketing?

Probably the best place to start is the Chartered Institute of Marketing (CIM), which is the world’s largest organisation for professional marketers and is based here in the UK. The CIM’s definition of marketing is: –

“The management process responsible for identifying, anticipating and satisfying customer requirements profitably”.

I would argue that advertising and PR, whilst extremely important to most businesses, represent a relatively small part of the marketing mix. However, they may well account for a disproportionately large share of the budget, particularly in businesses that sell B2C. This implies that there is a significant risk factor because, if a business gets the identification and anticipation elements wrong, the advertising and PR expenditure, which is part of satisfying customer requirements, may be wasted, in part or even entirely.

I’m afraid to say that I have seen this happen all too often, particularly in small and medium sized businesses, within which there tends to be less sophistication and fewer really experienced marketers. Typically, SMEs tend to develop strong operational and selling skills but marketing gets tagged on to the sales director’s responsibilities. He/she then becomes the sales and marketing director with a relatively junior manager heading up marketing, which is predominantly advertising and PR.

I’ll come back to how SMEs might consider addressing this problem, without spending large sums of money that they don’t have. But first I’d like to look at what a more rounded marketing process might look like.

We should probably begin with asking, “Who is our customer?” Because, if we get that wrong, everything that follows will also be wrong.

Whichever market your business is in, it is likely to consist of an array of sectors and segments; and even within these, there will probably be many different profiles of customers at both B2B and B2C levels. It is generally a mistake for SMEs to try and cover too wide a spectrum; and the risk of trying to do so is that the business never really succeeds in becoming a significant player in any part of the market. So there is a need to evaluate the market you’re in and build up a profile of the type of customer, with which your business is or can be most successful. In a B2B environment, this may require some market research. In a B2C environment, there are some extremely sophisticated and accurate profiling tools available. In both cases, these don’t have to cost huge sums of money; but, even so, relatively few SMEs use them.

Once you know the profile of your target customer everything else should be focused on optimising your sales to that target. This doesn’t mean that you turn away sales from customers outside your target profile; but it does mean that you don’t go looking for them and you don’t compromise your position, with your target customer, by taking them.

Having identified your target customer profile, you then need to assess what products and services those customers require. This needs to be objective and realistic; so, once again, some market research may be needed. Then comes, what I think is perhaps, the biggest challenge of all. Of the products and services your target customers require, which ones can you supply efficiently, effectively and profitably? Once again, this needs to be dispassionate, objective and numbers driven. If you can’t make money from it; don’t do it. If you can’t do it efficiently don’t do it. And if you can’t do it effectively; don’t do it. Inevitably, the argument will be put forward that, “We make money on product A; but, in order to sell it, we also need to supply product B, on which we lose money”. At the extremes, the solutions are easy. If you make a substantial profit on product A and the losses on product B are not significant, you sell product B. If the profit on product A is small and the losses on product B are large you don’t do it, even if that means you don’t sell product A. The dilemma comes when the balance between the profitability of the two products is less obvious; and it is in this area that many SMEs get themselves into trouble. Often, they don’t have a clear understanding of the numbers and they do favours for their customers, without fully appreciating the cost to themselves. But with a robust marketing strategy, this would be less likely to happen.

In addition to products and services that are current today, marketing also needs to look at trends and developments of both the products/services and the market itself. Going back to the CIM definition, this is about anticipation. What will your target customers require in the future? Which product groups have growth potential; and which are likely to decline? Where are the gaps for new product initiatives; and what new products are likely to emerge through market and technological developments?

Whilst there is inevitably a degree of crystal ball gazing in this, the risk can be substantially reduced through having really good market intelligence and, of course, market research.

Having established the target customer and the product(s)/service(s) to be supplied, the next stage is to ensure that the resources and processes are in place to enable the efficient, effective and profitable delivery of those product(s)/service(s). Most of the work here isn’t a marketing responsibility; it’s down to production/fulfilment, IT, logistics etc. However, marketing does need to have a watching brief and an involvement in the co-ordination of the various activities involved, so that it can co-ordinate advertising & PR, sales training etc.

Only at this stage does marketing move into the advertising and PR phase. However, if everything prior to this has been done properly, an effective campaign is much more likely.

I’ll finish off by returning to the challenge for SMEs that don’t have a substantial marketing resource. The key is to recognise the need for good strategic marketing input. Once that hurdle has been crossed, there are ways in which simple market research can be done at low cost and much of it “in-house”. And, as I’ve already said, there are some very good consumer profiling tools available at a modest cost. In many SMEs, the missing ingredient is senior marketing expertise. But, in reality, most of these businesses cannot justify the costs of employing a marketing director as well as a sales director. Nor do they need a full time marketing director because the demand for his/her skills is likely to fluctuate considerably. The obvious solution is to engage an independent marketing professional, with strategic marketing skills, on a “when needed basis”. This could be on a project by project basis; it could be on a regular basis of an agreed number of days per week/month; or it could be on just an advisory basis such as attending monthly review meetings. Different businesses will have different needs; but this strategic input should not be confused with the role of the advertising agency, which is to work to a specific advertising brief that is developed from and preceded by the marketing strategy.

There are some good strategic marketers around. But they tend to be industry/market specific; so be sure to engage someone that knows the market your business is in; and look for someone who has a marketing qualification and/or is a member of the Chartered Institute of Marketing. By taking this approach SMEs can benefit from the strategic marketing expertise they need, when they need it and at a cost that is affordable.

I’ll be following this article with a series of articles that explore some of the issues I’ve raised here, but in more depth.

If you’d like more information about me and my consultancy business, AP Management Consultants or would like to discuss any of the issues in this article,

Log on to www.apbusinessconsultants.co.uk

Email me at anthony.pratt@apbusinessconsultants.co.uk

Call me on 01962 715899 (+44 1962 715899 from outside the UK)