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Micromarketing to Microbusiness Owners — Experian hits the target Bring your customers into sharper focus An Experian white paper Micromarketing to Microbusiness Owners Small businesses represent more than 50 percent of the nation’s gross domestic product. Many marketers have begun targeting this lucrative segment. As this desired population is increasingly saturated with marketing solicitations, it is becoming necessary to deliver relevant and targeted direct-marketing offers that stand out from the crowd. However, the traditional approach to segmentation within the business-to-business market has relied solely on business firmographics. While important, these business attributes do not provide enough insight into the small business to enable effective communication and targeting. So how should B2B marketers differentiate themselves from the competition? An analysis of the smallbusiness owner can provide the answer. The vast majority of businesses are small businesses, with approximately 75 percent of them having no employees. We define these approximately 18 million businesses as microbusinesses. Because of their size, these microbusinesses are as much consumers as they are businesses — making it critical to understand the business owner as well as his or her business. The key to making your marketing message stand out rests with your understanding of the small-business owner. An effective marketing strategy engages owners with a relevant, precisely tailored message that motivates them to respond. Of course, not all microbusiness owners are alike. They have widely varying demographics, lifestyles and attitudes. Effectively reaching these microbusinesses relies on the marketer’s ability to identify distinct characteristics, behaviors, attitudes and triggers to engage them. This consumer information on the smallbusiness owner, blended with the attributes that describe the business, provides a more thorough view of the needs, behaviors and attitudes that will drive response. This white paper explores methods for understanding a microbusiness owner’s personal demographics, lifestyles and attitudes and discusses the best way to effectively implement that knowledge and reach the owner with the most relevant messages. Understanding the microbusiness owner Let’s begin with understanding the microbusiness owner. There are approximately 27 million businesses in the United States, and 99.7 percent of them are considered small businesses.* Adding to the complexity of capturing this market, these businesses are in constant flux, with more than 3 million new businesses started every year. On average, twothirds of new businesses survive just two years, with only half making it at least four years. Of the microbusinesses, 54 percent are under two years old, and 71 percent are under five years old.** As supported by the findings above, this can be a lucrative but elusive target market. The key is communicating to business owners in ways they find relevant. *Source: U.S. Department of Commerce, Bureau of the Census and International Trade Administration; Advocacy-funded research by Kathryn Kobe, 2007 (www.sba.gov/advo/research/rs299tot.pdf) **Source: “Business Employment Dynamics Data: Survival and Longevity, II,” by Amy E. Knaup and Merissa C. Piazza, Monthly Labor Review, Volume 30, Number 9 (September 2007), pages 3–10 An Experian white paper | Page 1 Micromarketing to Microbusiness Owners Learning more about the business owner In today’s business climate, marketers must have more information at their fingertips in order to reach microbusiness owners. Trends reveal that the value of mass media and mass marketing has diminished dramatically. Competition for the microbusiness owner’s share of wallet is stronger than ever. Marketing to these microbusinesses is increasing and will soon reach a maturation point. That’s why looking at business information alone does not give marketers the whole picture — far from it. Having reliable information on the owner is especially critical in evaluating microbusinesses and making sure your direct-marketing offer is targeted and relevant. To successfully penetrate the microbusiness category, marketers must have a thorough view of their targets. The firmographic perspective is not sophisticated enough for the current competitive marketplace. B2B marketing campaigns primarily have been targeted based on some core firmographic criteria, such as Standard Industrial Classification (SIC) code,*** employee size, sales size, geographic region, business credit, years in business and contact title. These standard business characteristics, while important to understand the business, are too superficial when targeting the microbusiness segment. The business firmographics do not capture information that truly delineates and personalizes small-business owners, such as their lifestyles, tastes and habits. Having this perspective on the microbusiness owner is necessary for marketing messages and product offerings to be accurately targeted for maximum impact. Remember that within this segment, business owners are the decision makers. Therefore, their consumer influence on business purchases and decisions cannot be overlooked. Consider the example of microbusiness owners who have primarily financed their businesses on their consumer credit and then used the rewards points from their consumer cards to finance their annual family vacations. Also consider business owners who open a business relating to what they love to do, with the growth of the business helping to further the work they love. Their attitudes and interests are a direct reflection of their business. Segmentation: appending behavioral and attitudinal profiles to microbusiness owners Traditionally, marketing decisions often have been based solely on the business firmographic data. We often see marketing campaigns targeted on the business size, geographic location and business type. The type of small business as defined by the SIC codes often is heavily weighted within the campaign targeting. However, making assumptions based solely on the SIC code may be too restrictive or even flawed. ***SIC codes are the numerical codes assigned by the U.S. government to business establishments to identify their primary business. Page 2 | Micromarketing to Microbusiness Owners — Experian hits the target Micromarketing to Microbusiness Owners Based on observations, we have concluded that there is significant delineation within SIC code groups when looking beyond the business to understand the business owners. By appending behavioral and attitudinal profiles using a B2B behavioral segmentation solution, the small-business owner is seen holistically and personally. Let’s look at an example of the differences you can see within a small-business segment when you examine the dominant profiles within similar SIC categories. Experian® analyzed more than 6 million microbusinesses and their business owners to look for consistency and differentiation within the business owners’ profiles. If we look at the retail trade industry and then break it down into two similar business types — Apparel & Accessory Stores (SIC 56) and Food Stores (SIC 54) — we can see a difference in the predominant behavioral clusters. Apparel & Accessory Stores are heavily weighted within the wealthiest segment in the U.S. Members of this group tend to be educated and live luxurious lifestyles. These small-business owners love to vacation abroad, belong to country clubs and drive luxury vehicles. They are early adopters of technology and support philanthropic and environmental causes. Even though they have business lifestyles, they are socially active. In contrast, Food Store owners fall predominantly within the Ethnic Urban Mix segment. They are a classic portrait of young and diverse city dwellers, with high disposable incomes. They engage in a variety of athletic activities. They also like to buy the latest technology and fashion. They enjoy lively lifestyles and can’t sit still for traditional media. While the behavioral segmentation helps you better understand small-business owners, this information also can be used to further classify the target market based on the messages and positioning that will resonate with them. For example, the Food Store owner (SIC 54) is more likely to act upon campaigns that deliver “no time like the present” messaging. Convenience and instant gratification are key. Icons, logos and celebrity testimonials are more appealing to their “it’s all in the name” mentality. Again, the difference is clear when you consider the messaging that will appeal to the Apparel & Accessory Store owners. They relate more to the “work hard, play hard” message that shows the prestige of the products offered and can elevate status based on the “premium” offer. They are motivated by image and social status. They like creativity and culture. The message that leads with strong facts and evidence will appeal to their interests. An Experian white paper | Page 3 Micromarketing to Microbusiness Owners Evaluations demonstrated other distinct differences across similar industries. For example: • Photographic Studios owners (SIC 7221) are college-educated baby boomer families and couples that reside in homes for 15 or more years, with property values between $200,000 and $299,000. Although married, they tend not to have children. Considering themselves “brand loyal” shoppers, they pay their credit cards in full and have little interest in technology. Here’s how to engage them: – Make it easy to respond, reply or apply. Present multiple benefits, including whether the opportunity can elevate status or privileges. Offer immediate discounts, rebates, coupons and incentives. • Commercial Art & Graphic Design owners (SIC 7336) typically are families with school-age children who live in a suburban setting. These owners belong to business clubs and always keep up with the latest technology trends. Here’s how to engage them: – Highlight new, cutting-edge and premium high-value offers. Reward them with new products and services to reward them and demonstrate the prestige that accompanies the product or service. • Financial Services owners (SIC 738909) are some of the nation’s wealthiest entrepreneurs, having expensive tastes and luxurious lifestyles. They are financially savvy, active investors, early adopters and extreme “newshounds.” Here’s how to engage them: – Communicate the strength, pride and quality of your brand. Relationships and customer service are important, and face-to-face contact is a real plus. Promote quality and service aspects and reward them with trial offers to help establish products or services. • Legal and Tax Services owners (SIC 738913) are mature singles and couples living in middle-class urban neighborhoods. Conservative and adverse to risk, they prefer traditional media, such as television, print and radio. Here’s how to engage them: – Appeal to altruism, activism, and appreciation for ecology and the world around them. Stress the natural versus the man-made, ecofriendliness, and healthy, sustainable living. Describe benefits in detail. Page 4 | Micromarketing to Microbusiness Owners — Experian hits the target Micromarketing to Microbusiness Owners Result: improving contact strategies for great success With this information in hand, marketers can begin to learn much more about the business segment they are targeting. They can target these microbusiness owners either at their homes or business addresses — positively and effectively reaching the primary decision makers with messages tailored to their business needs. All aspects of a contact strategy should work together to generate truly effective connections with microbusiness owners. As your marketing strategies become more sophisticated, additional challenges must be addressed: • Are you addressing the most responsive audience with your offers? • Are you communicating the right messages and offers? • If you’re marketing through multiple media channels, is the audience more receptive to direct mail, e-mail, telemarketing or mobile communications? • Are you reaching your prospects at the appropriate time of day? Again, the B2B behavioral solution can address these pain points. Knowing the appropriate channel and timing completes the 360-degree view, arming marketers with the knowledge that gives them the greatest potential for success. Conclusion In this aggressive market, understanding the small-business and microbusiness owners’ attitudes and preferences becomes a necessity for delivering on the promise of communications effectiveness. To be profitable during these challenging economic times, marketers must capitalize on new ways to make their messages stand out. They must devise and implement an effective marketing strategy that moves beyond traditional firmographic segmentation to reflect their understanding of microbusiness owners and engages them with relevant messages precisely tailored to motivate response. A winning formula for reaching the microbusiness segment incorporates a sophisticated household segmentation system and a comprehensive contact strategy, along with firmographic targeting. By using behavioral segmentation of microbusiness owners along with the B2B targeted marketing lists, marketers can match their offers to owners’ needs, making campaigns more relevant. With nearly pinpoint accuracy, marketers now can determine who their best prospects are by knowing how they will likely respond to an offer, exactly where they live, and the best method and time to contact them. These critical key characteristics differentiate business owners, allowing marketers to understand their customers to increase lifetime value, retain profitable customers by reducing churn, identify cross-sell and up-sell opportunities, and efficiently acquire new prospects. An Experian white paper | Page 5 Micromarketing to Microbusiness Owners Find out more To learn more about this B2B behavioral segmentation solution, contact your Experian account executive or call 1 800 850 4389. About the authors Denise Hopkins is Vice President of Marketing and Product Development for Experian Marketing Services. With nearly 20 years of experience in direct marketing and data management, she is responsible for the planning and strategic development of B2B and B2C marketing for Experian, as well as the development of new data products to assist clients in better targeting prospects. Kelly Jo Crantas is a Solutions Specialist with Experian’s Marketing Information Services. Her focus is specific to solutions that draw upon analytics and data. Before joining Experian eight years ago, she worked in the direct-marketing industry for more than 25 years. In addition to having B2C experience, she has worked extensively in the B2B, business credit application and automotive fields. National Business Database The National Business Database is Experian’s premier B2B marketing database that features demographic and credit information updated monthly on more than 18 million businesses. The National Business Database covers the largest companies found in the Fortune 1000 and provides extensive coverage on millions of hard-to-find small-business owners. Directly target new prospects and gain intelligence on your current customer base. Experian’s unique and proprietary sources supply data on millions of small businesses not found in other B2B databases. These unique and often undermarketed records help drive product campaign results. Sources for the National Business Database include Experian’s proprietary business credit contributors, yellow pages, state and federal public records, marketing data suppliers and compilers, and Experian’s televerification phone surveys. Mosaic® USA Mosaic® USA is Experian’s premier consumer lifestyle segmentation system that classifies and describes American consumers. It is a household-based segmentation system that categorizes all U.S. households into one of 60 unique Mosaic segments and 12 groups that share similar household composition, behaviors, demographics, and cultural and socioeconomic conditions. The result is a classification system that paints a rich picture in terms of household lifestyles to provide marketers with an accurate and comprehensive view of U.S. consumers. Business Owner Link Business Owner Link identifies small businesses within Experian’s National Business Database and links small-business owners to their consumer home address information. From there, users have access to demographic and credit data on owners to enhance the business information. This creates the best tool in the industry for assessing both risk and opportunity for small businesses. It’s also excellent for identifying the best customers within consumer portfolios for crossselling and up-selling. Page 6 | Micromarketing to Microbusiness Owners — Experian hits the target 475 Anton Blvd. Costa Mesa, CA 92626 T: 1 800 850 4389 www.experianmarketingservices.com © 2008 Experian Information Solutions, Inc. • All rights reserved Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein may be the trademarks of their respective owners. 11/08 • 9004/1031 • 4888-CS