Hyper-Targeting Your Best Prospectsfor Better Marketing & Advertising

ROI

Jed C. Jones, Ph.D.Presented to:Austin Small Biz Operations & Gorilla Finance Group

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

The Perennial Business 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

A Solution to the Perennial Challenge

Segmentation and Targeting

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.

The Cruel Truth about 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 Calculate Your Marketing 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

How To Positively Influence Your ROI

So . . . How Do You Do Effective

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

You Are Already Doing Targeting

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

Four Levels of Targeting Sophistication

What Most Companies Do . . .Most companies who engage in targeting today engage in demographics-based (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

• 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.

Why Level 3 and Level 4 Are Superior

The Predictive Model-Building Process

Products Purchase

d

Customer Addresse

s

Historical

Revenue

Combine

Select

Clean

Output

Direct Response Ads

Online Advertising

Model Applies To:

Traditional

Advertising

Data Inputs

Processing

Application

(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

Typical Predictive Model “Inputs”

• 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

Required Skill Sets

• 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

Benefits of Hyper-Targeting

• Not only helps you find your best prospects, but the geo-demographics and psychographics component can help you get to know who your customer is, with the goal of developing for more targeted messaging

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)

Does This Stuff Really Work?

• 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

Where To Apply Hyper-Targeting

Questions?

jed@mindecology.com512-310-7837

www.MindEcology.com