ROI-Driven Marketing for B2B

Tags: Hard Sell, Views
The small and medium business (SME) sector offers significant growth opportunities, and marketing to this large segment of business in India makes sound sense for growth. Although many companies of local and international origin have positioned their products and services for the SME sector, many still have not been able to make a mark in a significant way. SAP, Oracle, Microsoft, IBM….you name it, they are all targeting the SME segment, if you just take IT sector companies alone. Perhaps Amazon is making more inroads into this sector disrupting established players’ business models.

In order to minimise the risk and optimise resources in reaching out to SMEs, there are some interesting things companies can do. First thing they all should understand is the buying mechanism in this sector. Even though we term this sector as SME, there are some big differences as to how marketing executives should look at a 15-people company from a 4-employees firm. Remember, this segment is pretty volatile as compared to a normal medium size business. Therefore the propensity to buy more may not be there. If you analyse the SME industry in India, you will find that majority falls under micro business category of less than Rs 1 crore turnover and with less than 5 employees. Mostly they work out of home-offices; and sometimes they are part-time businesses. Their lifetime value to a marketer is pretty low, as they do not buy much during their short lifetime.

It is best to avoid marketing to the micro business segment at least in the initial phase of your marketing campaign. You would find both ROI and response to your queries stay low in this segment. Therefore in order to show success with your marketing and have a wider acceptance within your company, it is best to plan differently.

Secondly, marketers should know who their best customers are. Do they know when reaching out to the SME sector that it is a good playing field to generate revenue? Will intuition pay off, as the data available is almost useless? How can a marketer really know where to put the initial marketing funds? The ideal way is to profile existing customers in several business sites against employee count. Marketers can then analyse the types and sizes of the businesses that buy their products. By knowing approximate share of penetration within various employee-size firms you can have many analysis done on various buckets. Marketers then can target the prospects that behave like their best customers, thereby minimising risk and maximising profitability of prospecting. By taking the first step of understanding the actual profile of your existing customers, you will be able to align your marketing investment with the right opportunities. Remember what a direct marketing guru said: "Success is dependent upon 40 per cent lists, 40 per cent offer and 20 per cent everything else."

The third interesting marketing tip is about mixing market segments with channels for driving better performance. As we all know no channel optimally provides access to all required SME profiles you need for your products and services. Therefore it is imperative that you test and measure several of such channels to find the suitability in getting better response rate and ROI. In our experience, the following three channel options should indeed be tested: Direct mail, e-mail and telemarketing. If you intend to succeed in SME sector these three channels must be used proactively. Typical utilisation should be in the range of 50-60 per cent for direct mail, 20-30 per cent for email and the balance for telemarketing. By doing so you will indeed be utilising multiple channels in the true sense. This weightage is from the overall marketing budgets perspective including costs to acquire database and lists, and personnel costs of telemarketing.

The logical question now is how you can know the ROI of your activities. Since many variables are involved here, you need to analyse which mix of channels is most effective. The key is in finding the most effective combinations and frequencies with order costs. As an example, consider segmenting the MSME sector by the number of channels and frequency as follows: Micro segment receive one mailer only; small segment receives one mailer and one e-mailer as follow up; and medium segment receive all the three: Mailer, e-mailer and telecall. You can also change the above by mailing three people at a medium size company, two at small and one at micro. Or perhaps you should altogether drop micro segment, as these are probably not worth pursuing in the initial stage, as mentioned earlier. It takes some experience before you climb the learning curve and understand what works for you based on various mixing options.

Finally, marketers should also focus on getting accurate analytics to ensure that the marketing strategy is appropriately framed. Both number crunching and interpretation are important in this respect. One of the biggest mistakes we see marketers making is in equating success of a campaign by measuring the response rate. This is especially true when we do thought leadership seminars with many IT companies. We engage a thought leader to build relationship and prospecting, and till recently most companies measure the success by the number of target customers attending the free dinner and speech session. It took several such events before one of our key customers decided to change the measure into business won from such gatherings. And this marketing head became their worldwide star marketer for that year because of the number of businesses he could close!

In the SME sector, as much as 90 per cent who respond to your marketing campaign will not come to the purchase gate. So you may have done the best surgery, but the baby did not survive! Even with a fantastic response rate, your products or service can fail to take off if measures are not done right. What can you do in such a situation? Concentrate on measuring average orders, second orders and cross-sell propensity. By doing these activities you can segment the SME market appropriately and execute ROI-driven marketing programmes.

The writer is the CEO and managing director of CustomerLab Solutions

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