Got A Niche? Scratch It.

By giving under-served niche markets the attention they deserve, your business could reap incremental revenue now and for years to come.

It’s an inevitable consequence of success: You’ve found the largest markets for your products and services. You’ve served them well. And justifiably, you’ve assigned them the lion’s share of resources - your prized employees, advertising dollars, customer retention efforts and more.

But sooner or later, these markets mature, competition increases and margins dwindle.  As a sales or marketing professional, where do you find new revenue opportunities without some of the competitive pressures inherent in the larger segments?

Take a close look at niche groups.  You may find that in certain vertical markets, trade associations, geographically-advantageous areas and buying consortiums, you can realize double-digit percentage sales gains and lifetime customer values that rival those of your most profitable accounts.  And in today’s challenging economic environment, this one idea may mean the difference between the year ending in black ink or red.

Does your business have a new customer opportunity in these areas?

• Sectors of primary markets where smaller prospect numbers discourage in-person selling.
• Classes of trade where the emphasis needs to shift from commodity pricing to added value.
• Exploratory or new markets where direct sales people lack contacts or experience.

By directing highly-focused marketing programs to these niche groups, you just may find new long-term sources of revenues and improved share.  Ask yourself these 3 questions:

1.  Do you have customers who provide only a small amount of revenue to your firm right now but who, potentially, could provide much more?

2.  Are there industries or geographic regions which you suspect could represent good revenue potential if you had the time or resources to direct toward them?

3.  If you could be shown a customer acquisition program that promised a rate of return in line with your business case analysis, would you allocate funding for a test?

If your answer to any is “yes,” you’ll want to carefully consider the following case studies.

3 Studies in Fulfilled Potential

Case Study #1 - Insurance

A national insurance broker handles the property and casualty insurance for a trade association of 4,500 engineering firms.  The broker built up the business to cover 950 members - about 20% of the total - but couldn’t get beyond that threshold.  So it engaged its marketing partner to research a sample of the total, qualified non-participating members through outbound telemarketing, develop specialized advertising and direct mail programs, handle incoming telephone inquiries and put the broker’s agents in touch with only the most qualified candidates.

The result:  After one year, the program added 105 new members to the association’s insurance plan and generated $1,004,736 in new premiums - its best year ever.

Case Study #2 - Energy

A natural gas marketer operated in a section of one city in which the company’s gas mains ran parallel to those of its competitor.  The marketer’s objective was to acquire its competitor’s customers - those who were proximate to the parallel main.  While small in number, these accounts represented good gas volumes and excellent long-term incremental income.  Its marketing partner developed a program to identify prospects, verify the gas decision maker in each company, create direct mail and advertising to compel prospects to consider the marketer’s product, help the sales force with appointment setting through follow-up telemarketing, and assist in new customer orientation.

The result:  Out of 576 prospective accounts, the program generated 110 new customers, representing $140,000 in annual net incremental income.

Case Study #3 - Automotive

A major automotive parts manufacturer competing for a $77 million contract felt the 79 members comprising the prospect’s buying consortium had an incomplete understanding of the company’s capabilities.  Its marketing partner developed an image modification plan and executed a complex direct marketing program to change the consortium’s view of the company.

The result:  The program worked so well, the manufacturer won the full $77 million contract.

Program Costs and Lifetime Customer Value

These case studies are impressive as far as they go.  But when one factors in lifetime customer value (LCV), one can really see the payback that niche group marketing promises.  In case study #1, the insurance broker’s LCV is approximately 10 years, so it will generate $10,047,360 in premiums from the 105 newly acquired participants.  The costs to execute the customer acquisition marketing program were about $72,000, or about $686 for each new participant - up to 6.1 times more cost-efficient than the traditional personal sales call customer acquisition method.

Over the entire 10-year LCV period, the insurance broker’s investment in the program will represent a minuscule .0071 (0.71%) of total premium dollars earned.  Case studies 2 and 3 - using more conservative LCVs of 5 years - also show impressive revenue returns.

Your company may be able to generate similar results.  In this difficult economy, it pays to look at every opportunity.

 

What is Your Brand?

If you were to ask fifty people the question, ‘What is a brand?’ you’d likely get fifty answers. I know, because I have asked that question, hundreds of times. And I often hear these and other responses: ‘A brand is a logo’ ..or.. ‘an ad campaign’ ..or.. ‘our sales force’ ..or.. ‘the sum total of all impressions’ ..or dozens more.

All of the above are symbols or elements of a brand. But the brand, itself? Sorry. None of the above quite hits the mark. Here’s the answer:

A brand — your brand — is a promise to your customers that your products or services will meet or exceed their expectations each and every time. All of these other elements — the logo, the website, the sales force — are merely distributors of the brand promise.

Companies with strong brands work very hard to integrate the brand promise throughout every aspect of their organizations, so when customers have an encounter or transaction with the brand, that promise is continually reinforced. And then that continual reinforcement ultimately creates a belief system among customers.

BMW owners, for example, have bought into the belief system that BMW is ‘the ultimate driving machine.’ And that promise is reinforced every time they drive, by BMW’s precise handling, quick acceleration, exacting engineering and fine appointments. John Deere owners have bought into the brand promise of durability, because ‘nothing runs like a Deere.’ The consumer who enjoys a Budweiser has bought into the belief system that Budweiser is the ‘King of Beers.’

Bold promises (backed by facts) create strong believers. And strong believers create strong brands. What do your customers believe? What’s your brand promise?

Mark’s email address is markt@mediacross.com