B-to-B Insights: What Are We Doing Here? (Part One)
Why B-to-B direct marketing works for me
June 2007 By Russell Kern
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Regular readers of this column may be surprised to learn that, although I’ve spent my entire career in marketing, I didn’t start out in B-to-B direct marketing.
Yes, Russell Kern got his feet wet as a general advertising account guy! And you know what? I’m glad I did. Experience in the general advertising world has equipped me—and, by extension, The Kern Organization—to better balance the requirements of direct marketing with those of branding on behalf of our clients.
But when it came to my own career choice, I found the requirements of B-to-B direct marketing to be considerably more interesting, more stimulating and ultimately more fulfilling than those of general advertising. I’ve never wavered in that assessment.
For the benefit of those who are still figuring out which advertising discipline is their true calling, I thought I’d use this month’s column to explore what it is I find so appealing about B-to-B direct marketing.
Knowing Exactly Where We Stand, Where We’re Headed, and How Much It’ll Cost to Get There
In B-to-B direct marketing, we eat, breathe, live and die by the numbers. Starting with revenue targets, average sales prices and number of sales reps, we work backward to set lead goals and program scope. Tangible goals are what determine that scope and allow us to map out our strategies.
Consider a hypothetical, but entirely typical example of a revenue goal of $100 million. Marketing activities normally are expected to contribute 25 percent to 40 percent toward the achievement of any revenue goal, so for the purposes of our hypothetical example, let’s set marketing’s contribution at 30 percent. This means our task is to generate $30 million.
As B-to-B marketers, we never leave an input meeting without learning the average unit price of the product being sold. After digging in our heels and pounding on the conference table, we’ve gleaned this number from sales: $150,000 per unit. Armed with this information, an easy calculation (revenue goal ÷ average unit price = number of unit sales needed) tells us we’re going to be held responsible for moving 200 units.
This is where the fun begins. Through a series of educated assumptions and backward calculations, we determine the scope of our program. We’re seasoned B-to-B direct marketing practitioners, remember, so we know we can assume the following:
• 50 percent of proposals lead to closed sales;
• 20 percent of qualified meetings result in proposals; and
• 20 percent of inquires convert to qualified meetings.
Ergo, to meet our client’s revenue goal, we must generate 12,500 raw inquires, which will convert to 2,500 qualified meetings. These meetings, in turn, will result in 500 proposals, which will lead to those precious 200 closed sales, which will equal our $30 million revenue goal.
And with that, we’re halfway to the promised land. In fact, with another quick calculation or two we’ll have our budget and contact numbers. The typical B-to-B cost inquiry runs between $50 and $200, so we’ll arbitrarily take $100 for the purposes of our hypothetical example and multiply that by the number of raw inquiries: $100 x 12,500 = our marketing budget: $1,250,000.
But wait! We also can calculate our marketing budget using the gross margin. If we assume the gross margin is 30 percent of the sale price, then we know that each sale we generate will contribute $45,000 to our client’s revenue goal. Multiply that gross margin number by the acceptable cost per sale—say 10 percent (our hypothetical management is very easygoing)—and you get $4,500. Now, multiply $4,500 by the number of products to be sold, and you get a marketing budget of $900,000.
Which budget, you ask, will we be presenting: $900,000 or $1,250,000? The answer depends on what sort of mood the executive vice president is in that day. OK, so not everything in this business is by the numbers.
What’s Hard to Do, Requires Maximum Flexibility, and Isn’t Yoga?
I love a good challenge. Now that we’ve run the numbers and leveraged our B-to-B background to establish our parameters, it’s time to reach out to our audiences. That’s right, I said “audiences.” And these audiences are diverse—from operations and technical managers, all the way up the food chain to the CEO. Since multiple, diverse audiences call for multiple, diverse messages through multiple, diverse channels, we B-to-B marketers have to be hardworking, creative, adaptable and very quick on our feet.
On any given day, we might be writing a letter to the plant manager telling him how to keep his machines up and running and output at peak capacity while, on that same day, writing another letter to the CEO detailing how our shop floor software can deliver a 20 percent boost in her ROI. If you’re keeping score, that’s two very different letters in service of the same sale of the same product to the same company.
As B-to-B marketers, we’re required to know how to connect with the needs, pains, hopes and fears of different people with different titles and job functions within the same firm. If that isn’t sufficiently disorienting, remember that as the size of the company changes, all those needs, pains, hopes and fears change, too.
Let’s consider just three of the targets that routinely reside in the same company.
Technical buyers: These are the folks who want to know the specs—the feeds and speeds, as they’re fond of saying. And why wouldn’t they? After all, they’re generally engineering types, which means they’re analytical and technical by nature. They’re also extremely jaded when it comes to product claims for which we marketers have only ourselves to blame.
Strategic/economic buyers: This group is in search of solutions that will help their firms gain a competitive advantage, solve a big problem, make money, cut costs or save time. They’re generally top-level executives, ranging from president/owner of a small business to CEO, COO or CFO of a Fortune 1000 behemoth, but this isn’t a given. They might just as well be senior director and operations managers—the executives who are responsible for making something happen—which, of course, makes them more demanding. They want to see proof of performance, hear the financial story or be shown how others like them have benefited, either from our product or one like it.
User buyers: These people—in the event we make the sale—are actually going to use our product. They’re struggling with a problem; wasting too much time doing something the current way; or wanting to find a way to do something faster, simpler, easier or all of the above. This group needs to have its heartstrings tugged. Empathy, as well as a credible explanation of how our product is going to make their lives better, are key with this lot. If we do our job well, they’ll start the sales process and get upper management to sign off on what we’re selling.
While all of these decision makers may be employed by the same company, perhaps even at the same address, they are not identical. Treat them as though they are, or as though their peculiarities don’t figure into the sales process, and we’re toast—with a capital “T,” and that spells trouble, to paraphrase Professor Harold Hill in “The Music Man.”
But we’re B-to-B marketers, so we know better. We look forward to the challenge of identifying each of these individuals by name. What’s more, we want to get their e-mail addresses and phone numbers, which is no small task. Why are we like this? Because we appreciate a fundamental reality: In B-to-B, people buy, companies don’t. We reach out, not to companies, but to people, one at a time. Depending on the size of a given company, we can have anywhere from two to 20 contacts, each of whom must be reached and persuaded at some point—or points—along the purchase cycle.
That takes work, and lots of it. But if you ask me, it’s fun work. And there’s more of it to come—as I’ll explain in another column or two that will follow in the fall after I’ve delivered my summer reading list. I’m looking forward to it.
Russell Kern is the president of The Kern Organization, a fully integrated offline and online direct marketing agency in Woodland Hill, Calif., and is the author of “S.U.R.E.-Fire Direct Response Marketing” (McGraw-Hill, 2001). He can be reached at (818) 703-8775 or via e-mail at russell@thekernorg.com.
Yes, Russell Kern got his feet wet as a general advertising account guy! And you know what? I’m glad I did. Experience in the general advertising world has equipped me—and, by extension, The Kern Organization—to better balance the requirements of direct marketing with those of branding on behalf of our clients.
But when it came to my own career choice, I found the requirements of B-to-B direct marketing to be considerably more interesting, more stimulating and ultimately more fulfilling than those of general advertising. I’ve never wavered in that assessment.
For the benefit of those who are still figuring out which advertising discipline is their true calling, I thought I’d use this month’s column to explore what it is I find so appealing about B-to-B direct marketing.
Knowing Exactly Where We Stand, Where We’re Headed, and How Much It’ll Cost to Get There
In B-to-B direct marketing, we eat, breathe, live and die by the numbers. Starting with revenue targets, average sales prices and number of sales reps, we work backward to set lead goals and program scope. Tangible goals are what determine that scope and allow us to map out our strategies.
Consider a hypothetical, but entirely typical example of a revenue goal of $100 million. Marketing activities normally are expected to contribute 25 percent to 40 percent toward the achievement of any revenue goal, so for the purposes of our hypothetical example, let’s set marketing’s contribution at 30 percent. This means our task is to generate $30 million.
As B-to-B marketers, we never leave an input meeting without learning the average unit price of the product being sold. After digging in our heels and pounding on the conference table, we’ve gleaned this number from sales: $150,000 per unit. Armed with this information, an easy calculation (revenue goal ÷ average unit price = number of unit sales needed) tells us we’re going to be held responsible for moving 200 units.
This is where the fun begins. Through a series of educated assumptions and backward calculations, we determine the scope of our program. We’re seasoned B-to-B direct marketing practitioners, remember, so we know we can assume the following:
• 50 percent of proposals lead to closed sales;
• 20 percent of qualified meetings result in proposals; and
• 20 percent of inquires convert to qualified meetings.
Ergo, to meet our client’s revenue goal, we must generate 12,500 raw inquires, which will convert to 2,500 qualified meetings. These meetings, in turn, will result in 500 proposals, which will lead to those precious 200 closed sales, which will equal our $30 million revenue goal.
And with that, we’re halfway to the promised land. In fact, with another quick calculation or two we’ll have our budget and contact numbers. The typical B-to-B cost inquiry runs between $50 and $200, so we’ll arbitrarily take $100 for the purposes of our hypothetical example and multiply that by the number of raw inquiries: $100 x 12,500 = our marketing budget: $1,250,000.
But wait! We also can calculate our marketing budget using the gross margin. If we assume the gross margin is 30 percent of the sale price, then we know that each sale we generate will contribute $45,000 to our client’s revenue goal. Multiply that gross margin number by the acceptable cost per sale—say 10 percent (our hypothetical management is very easygoing)—and you get $4,500. Now, multiply $4,500 by the number of products to be sold, and you get a marketing budget of $900,000.
Which budget, you ask, will we be presenting: $900,000 or $1,250,000? The answer depends on what sort of mood the executive vice president is in that day. OK, so not everything in this business is by the numbers.
What’s Hard to Do, Requires Maximum Flexibility, and Isn’t Yoga?
I love a good challenge. Now that we’ve run the numbers and leveraged our B-to-B background to establish our parameters, it’s time to reach out to our audiences. That’s right, I said “audiences.” And these audiences are diverse—from operations and technical managers, all the way up the food chain to the CEO. Since multiple, diverse audiences call for multiple, diverse messages through multiple, diverse channels, we B-to-B marketers have to be hardworking, creative, adaptable and very quick on our feet.
On any given day, we might be writing a letter to the plant manager telling him how to keep his machines up and running and output at peak capacity while, on that same day, writing another letter to the CEO detailing how our shop floor software can deliver a 20 percent boost in her ROI. If you’re keeping score, that’s two very different letters in service of the same sale of the same product to the same company.
As B-to-B marketers, we’re required to know how to connect with the needs, pains, hopes and fears of different people with different titles and job functions within the same firm. If that isn’t sufficiently disorienting, remember that as the size of the company changes, all those needs, pains, hopes and fears change, too.
Let’s consider just three of the targets that routinely reside in the same company.
Technical buyers: These are the folks who want to know the specs—the feeds and speeds, as they’re fond of saying. And why wouldn’t they? After all, they’re generally engineering types, which means they’re analytical and technical by nature. They’re also extremely jaded when it comes to product claims for which we marketers have only ourselves to blame.
Strategic/economic buyers: This group is in search of solutions that will help their firms gain a competitive advantage, solve a big problem, make money, cut costs or save time. They’re generally top-level executives, ranging from president/owner of a small business to CEO, COO or CFO of a Fortune 1000 behemoth, but this isn’t a given. They might just as well be senior director and operations managers—the executives who are responsible for making something happen—which, of course, makes them more demanding. They want to see proof of performance, hear the financial story or be shown how others like them have benefited, either from our product or one like it.
User buyers: These people—in the event we make the sale—are actually going to use our product. They’re struggling with a problem; wasting too much time doing something the current way; or wanting to find a way to do something faster, simpler, easier or all of the above. This group needs to have its heartstrings tugged. Empathy, as well as a credible explanation of how our product is going to make their lives better, are key with this lot. If we do our job well, they’ll start the sales process and get upper management to sign off on what we’re selling.
While all of these decision makers may be employed by the same company, perhaps even at the same address, they are not identical. Treat them as though they are, or as though their peculiarities don’t figure into the sales process, and we’re toast—with a capital “T,” and that spells trouble, to paraphrase Professor Harold Hill in “The Music Man.”
But we’re B-to-B marketers, so we know better. We look forward to the challenge of identifying each of these individuals by name. What’s more, we want to get their e-mail addresses and phone numbers, which is no small task. Why are we like this? Because we appreciate a fundamental reality: In B-to-B, people buy, companies don’t. We reach out, not to companies, but to people, one at a time. Depending on the size of a given company, we can have anywhere from two to 20 contacts, each of whom must be reached and persuaded at some point—or points—along the purchase cycle.
That takes work, and lots of it. But if you ask me, it’s fun work. And there’s more of it to come—as I’ll explain in another column or two that will follow in the fall after I’ve delivered my summer reading list. I’m looking forward to it.
Russell Kern is the president of The Kern Organization, a fully integrated offline and online direct marketing agency in Woodland Hill, Calif., and is the author of “S.U.R.E.-Fire Direct Response Marketing” (McGraw-Hill, 2001). He can be reached at (818) 703-8775 or via e-mail at russell@thekernorg.com.
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