Conventional wisdom calls for running a database cleanup initiative, followed by a lead generation program. This sets into motion a “one-two punch” that brings with it high expectations within your organization.
But how well do the results live up to expectations? It’s true the data is a little better after the cleanup, and that some prospects will shake out. A few deals may even close. But all too often, the return still falls short of the potential.
The reason why? Database cleanup programs focus only on replacing dirty or absent data with fresh, correct data. They do not add the segmentation or prioritization value that is needed to pinpoint the best sales prospects. In turn, marketing lead generation campaigns target all cleaned names, because the best names have not been identified.
Shakespeare famously asked, “What’s in a name?” Plenty, it turns out.
What Marbles Cost
A traditional database marketing program targets all cleaned names in the database, when in reality only a fraction of the names actually warrants investment. In the best-case scenario, analysis is used to identify the most likely high-response segments, so that marketing resources can be focused appropriately.
To illustrate this point, think about a game of marbles. As you probably recall from childhood, different types of marbles are assigned different values. For example, Swirls might be worth $.25, Stripes worth $.50 and Agates worth $1.
While few prudent businesspeople would agree to play the game without knowing the difference in the value of these marble types, that’s exactly the way they are conducting their database marketing initiatives. They spend huge amounts of time and money making a grab for all the marbles, when they would be better off identifying and focusing on the ones of highest value.
Market segmentation lets you identify those groups of prospects within your database that are most likely to turn into bona-fide sales opportunities. Just like looking into a clear jar filled with marbles, segmentation allows you to clearly differentiate your “swirls” from your “stripes” and “agates.”
Simple Market Segmentation
If you can figure out how to identify and target only the highest-value segments of prospects (in other words, those who are the most likely to buy), it becomes possible to increase your sales performance while actually decreasing your marketing costs. Just as you can see the difference between stripe and agate marbles, it is possible to calculate the value of names you direct market to in advance.
At its simplest level, segmentation breaks down large universes of names into smaller groups based on common demographics or like characteristics. While the most typical attributes include geographic location, annual revenue, number of employees and SIC codes, other data may have value. For instance:
• Customer pain points and visions for addressing them.
• Current technology environment.
• Decision-makers within the organization and their buying process.
• Plans for short-term or mid-term purchases.
When you are able to identify and group like prospects, you can then test the specific segments to determine their value prior to rolling out a sales and marketing campaign. In doing so, it becomes possible to deploy dollars and resources against those segments that are known or predicted to generate the best return.
More Bang for the Buck
Importantly, segmentation works not only with your in-house customer and prospect databases, but also with lists purchased from outside vendors. While segmentation does add extra steps in the marketing process, it also provides the prioritization that is needed for companies to fund and roll out programs that generate a higher ROI.
As organizations struggle to do more with smaller marketing budgets, being able to find and target the very best names—instead of all names—certainly makes sense. Segmentation can be used to improve campaign results by as much as 50 percent while cutting costs by up to 35 percent.
Bottom line: When it comes to database marketing, it’s not enough for your database to simply be “clean.” Your approach has to be smart, too. Segmentation balances the principles of statistics with the realities of today’s marketing budgets. It can add the strategic intelligence you need to stop throwing money at the wrong prospects and start focusing on the right ones.
Dan McDade is the founder and president of PointClear (www.pointclear.com), a prospect development company. Previously, he served as vice president of marketing for the direct mail firm Jackson & Perkins, as well as President of UST: The Business Marketing Group.
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