Marketers hold line on spending, boost measurement

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Refining marketing techniques, selectively targeting the most profitable customers and measuring campaign effectiveness were common themes that emerged during a roundtable discussion BtoB hosted last month at the Direct Marketing Association's B-to-B Conference in Scottsdale, Ariz.

Most participants agreed that focusing on highly successful programs or media channels while jettisoning lesser performers has been a prudent plan. The group also touched on the advantages and drawbacks of media channels, including e-mail, traditional direct mail, telemarketing and search engine marketing.

The roundtable, moderated by BtoB Senior Reporter Carol Krol, featured the following marketers: Allyson Eman, VP-marketing at SouthStar Funding, a commercial mortgage company; Mark Graves, VP-CRM at Cole-Parmer Instrument Co., a scientific instrumentation products cataloger; Gary Sulentic, senior brand manager at Intuit, an accounting and tax software company; and Steve McLean, general manager of Seton Canada, a catalog marketer of safety and identification products.

The following is an edited transcript of the discussion.

BtoB: Are your marketing budgets more, less or about the same compared with 2003?

McLean: We're spending the same amount as we did the previous year, and the expectation is there to generate more with what we have.

Eman: I work for a wholesale mortgage company and, while everyone else has not grown that rapidly, we have grown unbelievably. I'm spending more this year, and I'll probably spend more in 2005. We went from doing business in 30 states to 48 states, so we keep spending more.

Sulentic: We're keeping our spend this year about the same as last year. One of the things we're doing, though, is narrowing in on the things that are working, and what that's allowing us to do is open up our ability to test. While we're spending about the same, I think we're tighter in terms of our focus on the things that are going to be successful and hopefully that will then lead to deeper investment in the next fiscal year. No one is saying it's getting worse, but no one is jumping for joy that things are taking off.

Graves: Our 2004 budget was basically flat to 2003. 2003 was a relatively large decrease from 2002, though, which was also a large decrease from 2001. In 2004 we've been improving a lot of techniques measurement in performance evaluation, figuring out which spending is working the best, which has really positioned us to spend more in 2005. So we will be spending more in 2005.

BtoB: What's the prognosis for b-to-b marketing overall?

Sulentic: Companies are going to continue to be fairly conservative in their spending. The last couple of years have burned a lot of companies and forced them to become more cautious in their spending and purchasing decisions. There may be a little bit of an uptick in terms of capital expenditures and things like that, but it's not going to be a stellar year.

Graves: There are more players competing for the same dollars. You have to be smarter to maintain or win share. There's not a lot of intrinsic growth. We sell scientific instrumentation. If you look at our business space, it's 3% to 4% growth, which if you factor in inflation is roughly zero growth. If you win, you're winning at somebody else's expense, and that means that you have to be smarter than the next guy.

Sulentic: Two years ago, we were kind of surprised by the downturn, and this year we're better prepared. It feels more optimistic because there's a lot of upside opportunity and there's a sense that we know where things stand now. We've adjusted our planning and our forecasting to reflect a more conservative understanding of where things are going.

BtoB: Have your marketing programs changed in the past year? What media channels are you using, and are you shifting budget from one medium in favor of another?

Graves: One of the major transitions we're making is moving away from treating the company as our customer to treating the individual as our customer. It has changed significantly how we mail. We're a very big direct mail catalog company. We mailed our catalog of industrial products this year, which we mail regularly. The last time we mailed this catalog, we mailed 450,000. This time we mailed 152,000 copies, but we touched more companies. We did that by not mailing every name that we had. We were very selective. You had to have the right title, you had to have purchased the right products, you had to have been working at the right type of company to qualify to get that piece, as opposed to, "Well, this company did some business with us and they might want some of these products, so we will mail them."

BtoB: Did you seek out specific lists to rent?

Graves: That was all from our internal file. What we have been doing is adding more attributes with D&B [data] overlays, and augmenting with demographic information on the [customer], so that we can really understand what their individual needs are. We sell 100,000 different products, and obviously not every person is going to want every one of our products. We need to focus on what the individual might need. That focus involves a large shift in how spending is allocated. We're doing two things: One is more, smaller pieces. Instead of mailing one piece to 500,000 customers, and treating them generically, we'll mail three pieces to 350,000 customers and hopefully get an aggregate greater response. The second thing is taking some of those dollars that we're saving and applying them other places, either in retention programs, which is one big area we're focused on, or in new customer acquisition.

McLean: With our budget the way it is-year over year no change-we've had to make some real modifications to our direct marketing programs, which means we continue to shift business wherever possible to e-business. We have taken all our direct marketing pieces and we've simplified our [direct mail] programs. Where we may have had test upon test, we've simplified it dramatically. The pieces themselves are larger catalogs, we've culled a lot of products out of the catalogs that have been marginal earners and have really focused on more profitable products within those catalogs. We continue to focus on the selling portion of our business, the inside sales group, where we get a lot of benefit. Our direct marketing business is fully complemented with our inside sales group.

Eman: We had a huge shift to e-marketing and e-business strategies. ... We do a lot of print advertising, a lot of direct marketing, and now our e-mail system, where we went from maybe 5,000 e-mail addresses to 75,000 e-mail addresses in the last couple of years. We're doing a lot more surveys. We're doing more focus groups. We're in the middle of a huge rebranding campaign. We've gone from 30 states to 48 states, so we're advertising in national publications. We still do a lot of trade shows and seminars. We do the whole spectrum of things. We don't focus entirely on e-marketing, but we have spent a lot more dollars there. I was doing probably four or five [direct mail] campaigns a year, and this year I think I did one. But we're sending e-mails out every single week.

Sulentic: We haven't dramatically shifted our programs in the last couple of years, although with the tight budgets, we've kind of focused down on the things where we're having the most success. We have, up to this point, used TV, radio, newspapers, magazines, direct mail, e-mail, search engine marketing and now, if you look at where we're focused going into this year, it's much more around direct TV, direct mail and search engine marketing.

BtoB: Are you doing any prospecting?

Sulentic: QuickBooks' financial software has been around for a little while, and there's a very significant install base of QuickBooks users. The temptation is to focus on going after upgraders as you come out with new versions of the software, and that's obviously a ready-made revenue stream. But you can't continually just go after existing customers. You need to continue to invest in prospecting. Over the last three or four years, there's been renewed focus on the need to be smart about the way we prospect. Things like understanding lifetime value and making the proper investments to acquire and bring in new customers have been really important to us.

McLean: I would do more prospecting if the opportunity presented itself. And that's not necessarily from a financial perspective. That's more from the quality of the lists. Aside from the quality is that a lot of lists are smaller than they were a few years ago, which adds to the problem, and the privacy law is creating some concern for us as well. We know that we need to spend money on acquisition as much as retention programs. But from a prospecting perspective, I don't know that I see a bright future for prospecting in the next 12 months. I see it as probably 18 months or further out, before we're able to prospect or ramp up prospecting to where it was.

Eman: The quality of the lists is one of my biggest beefs. We talk to [list] companies and [they promise] 95% deliverability, and my contact wants to kill me every month, because I call him back and say, "OK, here's my stack of mail. Based on what I bought, I got 80% deliverability, so credit me back now."

Graves: We can mail a specific individual and the order will come from a totally different individual, potentially in a totally different location. It's virtually impossible to track the sequence of events. We have been trying to get a closed-loop cycle in place, but it has been extremely difficult. One of the downsides of the Internet is it's ubiquitous. So I run space ads to generate leads, but instead of responding to my lead vehicle, they go to the Internet. That's great. But I can't attribute it to all my space advertising, which seems like it works abysmally now, but do I stop advertising in space?

BtoB: Spam has clearly impacted many marketers' ability to do e-mail marketing. Are you running e-mail campaigns? Are you handling them differently this year since CAN-SPAM became law?

Eman: We have a system on our Web site called SouthStar Online Services, so everyone actually signs up-and we have different subscriptions that they subscribe to-and then we send them our e-mail campaigns. We rarely get people opting out. We might get five a week out of the thousands we send. We try to not send too much. That's when people are going to opt out.

McLean: The legislation in Canada is different than it is in the States. However, we still have legislative constraints. It really hasn't affected our ability to go out and promote through e-mail. We continue to do that. Any surveying that we've done of our customers indicated that we have to be pretty sensitive to the frequency of our e-mail campaigns. We always make money on our e-mail campaigns, but we don't generate a ton in sales. We continue to do the programs because we know that there is a pass-through effect, that they are calling us on the phone. They're not always placing the order on the Web.

Graves: We are actually doing substantially more e-mail, but it's a relative basis because two years ago, we did one e-mail every six months. We are up to where we probably send one e-mail every three and a half weeks. We can do it very cost-effectively. Every time we e-mail, we get incremental response. We have to not abuse the privilege. We have a very large effort to offer content relevant to the scientific community. We do industry-based versions, so when you sign up for an e-mail program, you get an option of which industry focus you want to sign up for.

BtoB: A newsletter, in other words?

Graves: Well, it's not a newsletter because we have specific newsletters. These are more, to borrow a magazine term, "advertorials." The way I try and get them crafted is there will be an article about water treatment. Embedded in there will be numerous references to products that we sell which would be relevant to treating the problem that we're talking about and links to that product. And then below that will be a product ad for the most relevant product. We do that type of e-mail campaign about seven times a year. We have specific follow-up e-mails to direct mail. Not just "Here are seven products" but "Here are some reasons why this product should be interesting to you and, oh, did you get your catalog? And look on these pages. And also click here to go to that product on the Web site." Direct Web sales from those are fairly low, but every time I do one, I can see in the week following a very large spike in the catalog-coded sales for that publication. It costs us roughly $300 to do an e-mail campaign, and we'll be getting in the neighborhood of $16,000 to $25,000 of incremental revenue off each one. It's the golden fruit. It's very hard for us to resist doing more of those.

Eman: We actually send out an e-mail every week. Our target is a mortgage broker. If there's something that's intriguing to them, they'll read it. Our account executives beg for them because they say their phone always rings.

Sulentic: We are using e-mail but we're only going out to our house file, where we can very carefully track contact preferences. We're very strict about observing privacy. All of our e-mail activities are around using house files to cross sell. We don't use any outside lists.

BtoB: Have you ever used them?

Sulentic: Yes. What we found is that they have not been effective in terms of supporting our marketing efforts. Last year we were still testing it. This year we moved away from it. We need to be more careful and strategic about our choices and a little more disciplined about what we're testing, which channels, which media. And [e-mail list rental] was an example of something where we weren't seeing the kinds of results that were going to suggest that we should continue to invest.

BtoB: Are you doing any search marketing?

Sulentic: We've been doing it the last two or three years. Search engine marketing has become much more refined-but also much more competitive. And the costs have started to align so that your cost-per-orders are starting to inch up.

Graves: We've had a Web presence since `97, `98. In February of last year we really focused on search engine optimization. It took us until August of last year to really get any traction on that. In December and January, we did more. We have a very dynamic site and it's hard to get it "spidered," so we created some static pages that have the same information. It has dramatically impacted our site. Our Google referrals are up tenfold since January. ... We're using some paid search with Google with reasonable results. Our problem is trying to expand the universe. We have some very specific terms that work quite well for us, but the number of searches on those terms is fairly small. When we go out to the broader terms: A) they're either too competitive, or B) they're too generic. We're struggling to figure out how to get a broader set of paid search terms that work for us as well as the hundred or so very specific ones that work for us. Google will allow you to very incrementally test the market. We started at $100 a day. We have built up to a budget of $1,200, which is still fairly modest.

BtoB: Do you use search engine marketing companies to help you manage your search marketing efforts?

Graves: We have dabbled with them. We've never been very satisfied with the performance. We really haven't seen the service providers give us that much more than what we can do ourselves.

Sulentic: We've actually had our best initial success working with Overture even though there was an initial investment. And Google wasn't working as effectively, but now that's coming back up to speed. Within our own company, one of the challenges we faced was that there is QuickBooks Online Edition, there is QuickBooks: Pro, Premier, QuickBooks Enterprise [Solutions] and QuickBooks [Support] Services. All these different businesses manage the different business units, and we were competing with ourselves. We needed to centralize search engine marketing very explicitly, because it needs to be managed at a corporate level in order to optimize across the organization.

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