Transcript Hyper-Targeting Your Best Prospects for Better Marketing

Hyper-Targeting Your Best Prospects
for Better Marketing & Advertising ROI
Jed C. Jones, Ph.D.
Presented to:
Austin Small Biz Operations & Gorilla Finance Group
The Perennial Business Challenge
There are two conflicting realities that, together, create a
challenge for almost every company on the planet:
• Companies always need more customers (customer
quantity) and/or more revenue per transaction (customer
quality)
• At the same time, companies’ marketing (sales,
advertising) resources are finite
A Solution to the Perennial Challenge
In marketing speak, the two related practices of
segmentation and targeting go hand-in-hand:
• Segmentation is the practice of differentiating your
prospects before you approach them with marketing
outreach in order to separate those most likely to buy
from you (your “best prospects”) from those less likely
• Targeting is the practice of allocating resources and doing
planning in order to tailor your marketing to speak directly
to the motivations and needs of your best prospects
Segmentation and Targeting
The Cruel Truth about Marketing ROI
Given that you are most likely competing for the same
prospects with one or several other companies, to be
successful you need to continually find smarter, more
innovative ways to improve your marketing return on
investment.
Otherwise, your competitors will beat you to it.
How To Calculate Your Marketing ROI
The equation for marketing return on investment (ROI)
for a given campaign is:
Marketing ROI =
(Profit* – Investment in Marketing Campaign)
Investment in Marketing Campaign
* where Profit = (Revenue – Cost of Goods Sold)
How To Positively Influence Your ROI
You only have a limited number of ways to improve
marketing ROI. These are:
• Increase revenues by either increasing per-unit prices
and/or doing more effective marketing*
• Decrease your cost of goods sold (but this is not always
easy and could carry risks)
• Decrease your marketing costs (you need to increase your
marketing efficiency*: get more “bang for your buck”)
* targeting can help you influence the items in yellow
So . . .
How Do You Do Effective Targeting?
You Are Already Doing Targeting
You are no doubt already doing targeting at some level,
even if it is very basic. For example:
• (B2C) If you have a swimming pool installation business
that advertises via direct mail, you are likely not sending
mail pieces to prospects who live in apartments
• (B2B) If you sell electro-plating services to electronics
manufacturers, you are probably not approaching fitness
gyms for contracts
Four Levels of Targeting Sophistication
Level 1: Common sense targeting: (see previous slide)
Level 2: Demographics-based targeting: choosing prospects
based upon age & income (B2C) or company revenue,
geography, other factors (B2B)
Level 3: Proprietary clustering systems (e.g., Prizm, Mosaic)
which leverage geo-demographics and psychographics
Level 4: Predictive analytics and data mining
What Most Companies Do . . .
Most companies who engage in targeting today engage in demographicsbased (Level 2) targeting. While this is better than just common sense
(Level 1) targeting, it is limited at best. In other words, it leaves money on
the table.
L1: Common Sense Targeting
L2: Demographics-Based
Why Level 3 and Level 4 Are Superior
• Level 3 targeting is superior because it leverages your
own historical sales data – in conjunction with
sophisticated segmentation systems - to build a model of
your best prospects.
• Level 4 takes targeting to another level of complexity by
combining multiple variables into a more sophisticated
model. It can build upon Level 3 data, as well as many
other inputs, to create a sophisticated, hyper-targeted
model.
The Predictive Model-Building Process
Customer
Addresses
Historical
Revenue
Data Inputs
Products
Purchased
Application
Direct
Response
Ads
Processing
Clean
Model
Applies To:
Output
Select
Combine
Online
Advertising
Traditional
Advertising
Typical Predictive Model “Inputs”
(B2B):
•
•
•
•
Industry classification (SIC/NAICS) codes
Company Employee count
Company Revenue
Geographical factors
(B2C):
• Customer address, which is used to append geo-demographic and
psychographic factors
• Customer historical revenue spend
• Types of products purchased in the past
Required Skill Sets
• Data cleansing and organization
• Informed understanding of potentially relevant variables
to be selected for further testing
• Understanding of which segmentation systems to
leverage (for B2C)
• Sourcing business lists (for B2B)
• Statistical correlation and regression (bivariate and
multivariate)
• Artificial neural network creation and data mining
• Knowing how to apply results to actual marketing needs
Benefits of Hyper-Targeting
• Allows you to create a mathematical model of your
existing “best customers” which you can project onto your
trade area to find your “best prospects”
• Can be applied to multiple types of marketing campaigns,
including direct response media, online advertising, and
traditional media
Benefits of Hyper-Targeting
• Not only helps you find your best prospects, but the geodemographics and psychographics component can help
you get to know who your customer is, with the goal of
developing for more targeted messaging
Does This Stuff Really Work?
IBM seems to think so. They are heavily pushing their
predictive analytics services in major publications:
(For large-scale enterprise applications)
There are also packages available for smaller companies:
(Do-it-yourself software)
And, there are consultants who do everything for you, like
MindEcology and others. (Full service for any size company)
Where To Apply Hyper-Targeting
• Economic development: helping cities attract companies
• Site selection: determining where to build next
• Understanding internal employees: detailed profiles for
better messaging
• Geo-targeting Adwords/PPC campaigns: targeting those
zip codes rich in a company’s best prospects
• Direct mail: mailing to best prospects’ homes, not others
• Media buying: buying the right traditional media
• Finding upsell opportunities: determining which products
should be bundled or targeted for upsell
Questions?
[email protected]
512-310-7837
www.MindEcology.com