The UK Window Industry: Balance Sheets & Quicksand

Whilst there are some very successful businesses within the UK window industry, unfortunately, too many are seriously challenged due to their weak balance sheets. This may not have mattered so much during the long years of growth and comparative prosperity but, in today’s saturated market, it’s a crippling disease that the industry ignores at it peril.

Let me support this statement with some facts.

The Plimsoll Report analyses the financial performance of the 1,000 largest businesses in the industry. The table below shows some interesting data from their latest report, published in April 2014.Figure 1

Only 368 of the 1,000 largest companies saw their net worth increase during the previous year and 160 saw theirs remain static. So less than 50% actually increased their net worth. The report also shows that the average net profit for this group of businesses, during the last year was 2.3% of sales, which is a very low average indeed and suggests that there are a significant number of serious loss makers, balancing out a few star performers.

The pie chart below shows Plimsoll’s categorisation of these 1,000 businesses in terms of their strength and sustainability. 227 are classified as being “in danger” and another 90 categorised as “caution”.Figure 2

So, although 578 are either strong or good, a very large proportion of these businesses are relatively weak and, as we see from the above table, are either stagnant or declining.

The report also points to increasing polarisation between some highly successful businesses, building on their success and, at the other extreme, a very significant number of businesses in decline, to the extent that, without some form of intervention, they are at an increasing risk of failure.

Remember, we’re talking about the top 1,000 businesses in the industry, which according to Insight Data has around 14,000 businesses active within it. So, if this is the picture painted of the top 1,000, it’s fair to assume that the collective position of the smaller businesses is even worse.

To test this hypothesis, I undertook a small experiment.

From the GGF website I selected 10 businesses that were GGF members. I disregarded the larger names that would have been part of Plimsoll’s top 1,000 and I also disregarded all smaller businesses, of which I had any prior knowledge. So all ten that I selected were completely unknown to me; but to try and provide some regional balance, I ensured that my selection was distributed around the country. Having made my selection – and it’s important to note that I selected the companies, without any prior knowledge of their financial status – I then obtained their latest accounts from Companies House. For all but one company, the accounts were abbreviated, in line with small company rules.

The table below shows, in an anonymised format, some key balance sheet figures for all ten companies.Figure 3

Of the ten, there are two really good businesses (Company A & Company B) with strong or fairly strong fixed asset bases, good liquidity, represented by high net current assets, and significant shareholders’ funds (net assets). What isn’t shown, in the table, is the fact that Company A substantially increased its net worth over the previous year. So here we see two businesses in comparatively strong positions.

By contrast, Company J is balance sheet insolvent, having net liabilities of circa £20k. It’s difficult to tell from abbreviated accounts how the business is able to continue trading. It has net current liabilities of £30k, indicating a significant liquidity problem; and it has minimal fixed assets of £12k. So it’s either hanging on by the skin of its teeth, lurching form crisis to crisis, or it’s being supported by a kindly creditor or shareholder. Realistically, this business needs to embark on a major transformation strategy, which, in the absence of any significant cash, may be very difficult. But without this, the prognosis is unlikely to be very good.

The remaining seven businesses are all solvent, from a balance sheet perspective; but their nets assets (shareholders’ funds) range from virtually nothing to not a great deal; so none of them is in a strong financial position and two of them, Companies G and I, have net current liabilities, suggesting a very tight liquidity issue. Of the seven, only Company G has significant fixed assets; but that’s offset by its net current liabilities.

Based on this analysis, I’ve classified 20% as stars or stronger performers, 40% as chugging along but quite vulnerable, 30% as more seriously challenged and 10% as insolvent. This is a significantly worse position than that shown by Plimsoll for the top 1,000 companies. But if the systems companies and some of the large trade fabricators were to analyse the balance sheets of the companies, making up their customer networks, I have little doubt that they would find a very similar pattern. And this is the nub of the industry’s problem. We have a comparatively small number of larger capital intensive players, at the core, dependent on supply chains that are built on quicksand.

Roughly, 80% of the industry’s output to the final customer is via these small businesses, 80% of which range between vulnerable or insolvent; and that isn’t a foundation for a successful long term future.

So what can we do about it?

In my view we need to consider this very serious challenge on two distinct levels, namely strategic and cultural.

At the strategic level we need to move away from the current laissez-faire supplier-customer relationships, with each level of the supply chain and each business, within the supply chain, doing its own thing, in its own way, and often not very well. And we need to move towards strategic alliances that enable entire supply chains to act in a co-ordinated way, based on common standards, systems and processes and under the umbrella of a single brand.

A homeowner in Newcastle upon Tyne, buying from a fabricator/installer of Systems Company X should receive the same product, quality and service levels as a homeowner in Truro, buying from the Systems Company X fabricator/installer in Cornwall. The processes and systems deployed should be identical throughout; and the total brand experience should be exactly the same, just as it would be if these two customers were buying from a large national brand such as Everest or Anglian.

I’ve waxed lyrical, in previous articles, about the issue of small businesses in our industry having no brand, on which to base their business/marketing strategies. The systems companies and large trade fabricators have commoditised the product to an unprecedented extent; and to an extent that does not exist in other building product or home improvement markets. Other than the 20%, or so, held by the large national brands, most of the market is price driven, with an unrealistic belief that good selling can deliver premium prices in the absence of a brand. Good sales reps can undoubtedly achieve higher prices than poorer sales reps; but there aren’t enough of them; training is a never ending journey because of the high turnover rate, within sales forces; and, in any case, the higher rates that the good reps do achieve are relative to the levels of their own sales forces not to the levels of a premium brand.

It’s no wonder that we have so many unprofitable or marginally profitable small businesses within the industry. On their own, they’re not big enough to develop strong brand positions. They rely on local reputation, which is very difficult when, at best, their product is only purchased, by the end user, a few times in a lifetime. Some do break through to become significant local or regional brands; but these are a small minority and, even then, their own perceptions of their brand strength can sometimes be considerably greater than an independent brand recognition survey would assess them to be. Many of these small businesses are left, by the systems companies and large fabricators, to fend for themselves, often without the management and business skills that they need to run a successful, profitable business.

There can be several different ways of creating more cohesive networks under a single brand; and the precise structure is not the key issue. However, there are four important requirements.

The first is that there is a core organisation, at the heart of the network, that implements and monitors performance standards over the product range, productivity, operational efficiency, quality, systems, process and service levels. This could be a systems company, a large fabricator or some other third party; but all businesses, within the network, must be contractually bound to adhere to those standards.

The second is that each business, within the network, must have real and meaningful business support available to it. This doesn’t just mean marketing support of one sort or another. It means that they need support that will enable them to manage their businesses better, achieve high levels of operational performance, make good profits and build strong balance sheets. Everything from HR to PR; from production to installation; from financial control to administration; from IT to process and systems; from management to organisation structure. Support in all of these areas needs to be available to help the businesses, within the network, build on their strengths and really get to grips with their weaknesses.

The third is that the whole organisation must go to market under a single brand, with co-ordinated advertising, PR and lead generation strategies; albeit tailored to suit local circumstances. This could mean a franchise type arrangement, where the franchisees only use the core brand e.g. McDonalds or Body Shop; or it could be a dual brand with an identifiable independent business selling a branded product range – System X from ABC Windows. Either way, there should be a single, state of the art website, enabling the brand to be properly managed, developed and controlled, rather than many small, often not very good, websites with a wide range of uncoordinated brand messages, giving rise to hopelessly confused brand values.

The fourth is that all this has to be paid for; and each level of the supply chain – systems company, trade fabricator and retailer/installer – must accept their share of the cost. Again, there are many different ways of achieving this; but one thing is for sure, neither the systems companies nor the large trade fabricators can fund it on their own; so it must be a cost to the entire network, but proportional to each layer of the supply chain and to each business within it.

Developing a network with a good, well managed product range, supplied through a group of disciplined businesses, all optimising their operational performance and service levels, will bring significant financial rewards at all levels of the supply chain. And if this happens under a strong brand, the network, as a whole, can determine where it wants to position itself in the market and the price levels appropriate to that position.

This last point is incredibly important. Not every network can be a premium brand, going to market with a premium price. Some will need to be value brands and some will need to be budget brands. The cost structures, within the networks, will need to differ accordingly, as will the brand values that are developed and promoted.

That’s enough about the strategic level. So let’s now consider the cultural challenge.

To achieve the change, from where we are to where we need to be, a significant cultural shift is required.

I’ve talked to many senior people, from within the industry, about the need for the sort of changes that I’ve described. And there seems to be an acknowledgement that the products have been commoditised and that this has given rise to some serious difficulties. There’s also an acknowledgement that, if the industry is going to thrive once again, substantial change is required. But when it comes to the specifics of what that change should be, the barriers often go up and the reasons why things can’t be changed seem to overwhelm the reasons why things can and must be changed. The result, not surprisingly, is inertia and a retreat to comfort levels, which is likely to lead to continued decline.

Somehow, the bigger players must start thinking outside their traditional boxes. So much of our thinking is still influenced by the sales driven philosophies of the 1980s and 90s; but those days are over and the industry needs to move on. The face of retail and direct sales has changed beyond recognition, due to the on-line revolution; and we need to look closely at what happens in other more progressive markets and at the cutting edge of both B2C and B2B developments. There’s so much to learn and we’ve been so slow to learn it. Perhaps we need to bring in more people from more dynamic retail environments; not just to teach us but to lead us and to give us the confidence we seem to lack. One way or another the major players must initiate the changes that the industry needs because it can’t continue to exist on a foundation of quicksand.

But a different culture is not just needed amongst the larger players, it’s needed within many smaller businesses as well. Many of them really must raise their games; and this is something, with which some will struggle to come to terms. But they need to manage their businesses better so they can generate more profit, strengthen their balance sheets and create greater long term sustainability. But without help and support, of the type I’ve described, this is often very difficult for them to achieve; and sometimes impossible. So whilst I’m urging the systems companies and larger fabricators to develop more controlled networks, with far more support for the businesses in their supply chains, the smaller players need to accept that they may need some help and that they will lose some independence, as the price they pay for support from the network, of which they become part. At the moment the supplier/customer relationships, within the various supply chains, are a free for all that are, in practice, damaging many more businesses than they are helping. The network approach is that each business, within the supply chain, is part of and contributing to a larger team. But the strength of the larger team, within the market, is greater than the sum of the strengths of the individual businesses.

If we can start to address these cultural issues, the changes that are needed will start to flow.

On a final note, there are actually some encouraging signs that movements in the right direction are beginning to happen, albeit very slowly.

The US building products giant Masco is now well established in the UK window industry; and, whilst it’s still a bit of a sleeping giant, it’s hard to believe that it won’t want to develop a more dominant position over here. When it does, it will start to put some real pressure on the indigenous industry to change.

Similarly, Internorm, the leading European window brand, seems to be showing some increased interest in the UK market and this may also add to the potential pressure from Masco.

On the home front, Epwin’s recent news that it’s floating on the AIM market and appointing a new Chairman is very interesting. Peter Mottershead was a previous CEO of Anglian and brings some serious retail experience to Epwin. So we could see some interesting developments and perhaps a much greater emphasis on the Swish brand, which although a household brand name, remains only a small part of Epwin’s business. Perhaps it’s another sleeping giant that is starting to stir.

Network Veka is currently by far the most advanced network in the UK window market and has created a very successful organisation focused on first class service levels and operational performance. It’s associate Veka UK, now owns the Halo brand, which was originally designed as, and intended to be, a consumer brand (As the first CEO of Bowater Halo, I wrote the original business plan!). It’s not hard to imagine a “Halo” branded product supplied through Network Veka; that could be very powerful, so who knows.

The Conservatory Outlet is almost the opposite of Network Veka. It’s a fast developing network of independent businesses, all going to market under a single brand, based on a modern, on-line marketing strategy, using a single website. It seems to have some strong legs and, whilst still comparatively small, may be showing the way to some of its larger rivals.

Imagine combining the operational disciplines of a Network Veka type organisation with the brand management and marketing strategy of a Conservatory Outlet type organisation. Eureka! We’re getting there slowly; and someone is going to join the dots up before very long. And when it happens that organisation will be catapulted into a commanding position, within the market, with others being forced to play catch-up.

It will be interesting to see who gets there first. Epwin with Swish? Veka/Network Veka with Halo? The Conservatory Outlet by extending its business model? Or perhaps a current outsider? Polyframe, the Halifax based trade fabricator, has been taking market share very successfully, resulting in controlled and profitable growth. This has involved a number of strategic alliances with other fabricators/retailers; so perhaps its next move could be to extend its business model to incorporate a Conservatory Outlet type brand and marketing strategy. Who knows?

The changes that I’m advocating are starting to happen, albeit in a small way and perhaps without all the dots being joined up yet. But to return to my starting point about weak balance sheets and foundations of quicksand, things need to speed up. At the moment there is still too much resistance to change, a lack of vision, too little mould breaking strategic thinking and not enough energy and resources being applied to shaping the future. If we’re going to create a firm foundation for the future and address this debilitating balance sheet problem, this must change; not tomorrow or sometime/never; but today.

Advertisements

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.

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