Shifting sands of new business

It is not that difficult to identify and target businesses in the UK. What is hard is getting them interested in your products and services. Enter a new generation of prospect development that changes the nature of this data space, says David Reed.

Overhearing conversations is one of the fringe benefits of public transport. Travelling by train through Colchester last month, it was interesting to listen in on four Essex traders discussing lead generation. One working in property broking was explaining how a £5,000 email campaign had yielded ten leads and two conversions. Another working in fine wine investments was interested, but concerned about the downside risk if no leads or sales resulted.

Such is the dilemma for any business-to-business marketer – is it possible to shorten the prospect-to-customer lifecycle by acquiring qualified leads or does the company have to do the hard work itself of developing contacts from a universe of target businesses? For the world of B2B data-driven marketing, this issue is more polarised than in B2C because the differential between potential sales numbers (usually measured in single figures) and total prospect volumes (up to 2.7 million UK businesses) is high.

Recent developments on the data supply side suggest the pendulum may be swinging towards the lead generation model. Business telcoms provider Daisy Group recently announced that it had signed up as the sector exclusive client of B2 Group.

Stuart Cordingley, marketing director at Daisy Group, notes that, “over the last five to eight years, telecoms in B2B has been a tough place to be. There are a lot of organisations around in the marketplace.”

That has led to a commoditisation not only of the products and services on offer, but also of the way in which sales have been achieved. Many providers outsourced the first stage of the process to call centres, deduplicating their client list against a B2B universe so that large-scale outbound calling could be targeted at prospects.

Burnout has been one consequence of this approach, with data eroding fast and the target companies becoming worn out by the constant calls asking if they are happy with their existing provider. That has contributed to a decline in campaign performance, which SME marketers have struggled to live with.

“We have a small existing base of 70,000 B2B customers for lines, data and voice solutions,” says Cordingley. “We sell a lot through indirect business, taking the approach of working with local businesses who have relationships with SMEs. That tends to create a really loyal base of customers who come through that channel.”

Retention rates are very affected by the nature of the initial contact, which is one reason for Daisy Group working closely with its channel partners. “They are respectable business partners in their local business community,” he says. Direct marketing is an additional channel for his company which runs in parallel and which has historically struggled to yield the right volume and quality of customers.

That is one of the main reasons why the company has signed on with the newly-launched supplier. One of the core elements of B2 Group’s proposition is the concept of the SME Census – rather than just capturing data on product and service usage plus intention to switch providers, it is positioning itself as a commercial relationship hub. “The survey takes away the association of it just being a telecoms sales call,” notes Cordingley. “It is a Census around their products and services and we are a respected partner in that. That already makes the prospect warmer towards our company before we start. Trust starts further back than the first sale.”

If this model proves to be sustainable, both for business marketers who adopt it and for the company operating it, it will go a long way towards resolving the problem of burnout. Business owners recognise that they will be purchasing a wide range of things across a year, so sales calls are legitimate. Equally, they have limited time to answer questions about these needs – even if they can all be foreseen at any given time – which causes much of the pushback against tele-research.

Jeremy Whitaker, CEO of B2 Group, says that his company’s business model has been formed as a direct result of listening to both sides. “It is based on feedback from B2B companies and also on feedback from the SME community. Listening to that gave us the confidence to go to market with something different from the traditional model.”

From the marketing side, it became evident that many companies wanted to reduce their fixed costs. Licensing or renting a universe of business data represents a substantial overhead for most clients and does not in itself yield any value. “Many would prefer to by-pass that data stage of prospecting and go straight to a lead,” says Whitaker. “If you have to buy a raw data file, it always contains some incorrect data. That incurs a further cost to put right or is a cost for something of no use. You only generate value when you put that data through your call centre or sales force,” he says.

This is where the drive for greater cost-efficiencies has really started to bite. Labour costs within call centres and sales teams are substantial, so anything that reduces their productivity needs to be stripped out. If headcount can be significantly reduced by starting further up the cycle, that has become very attractive. For clients who want to go that far, B2 is offering support for prospect development up to first sale.

What normally gets returned to the client is a lead that will be much more likely to convert, since it has been carefully screened and qualified. More than that, B2 hopes to fill in many of the gaps that plague business data. “SMEs are the Holy Grail and are very difficult to understand,” says Whitaker.

This runs all the way through to the design of products and services with many large corporates creating things that suit other big businesses, then just stripping them down to suit the mid-market. That is not the same thing as putting a proposition together based on specific business needs.

The ultimate goal of B2 is to create a SME Hub which would act as a business exchange, giving visibility of the needs and offers on both sides with it sitting in the middle owning the relationship. “Collecting data is just the starting point,” avows Whitaker.

Individual clients will have to test such propositions for themselves to decide if they do offer the improved ROI they are looking for. It may require a change to internal processes in order to adopt this way of working, including dealing with the impact on in-house staff who may fear it is a back stairs method of letting them go.

Elsewhere in the B2B data owner sector similar approaches have been adopted and tested before now. “It is going in the right direction. Delivering much higher qualified leads is undoubtedly what the market wants,” says Zina Manda, director of Mardev DM2. “The difficulty everybody has is getting clients to pay a proper level for those leads.”

Commoditisation of business data over the last few years is one of the reasons she identifies for innovation by data owners. Manda says that even in the lead generation space, prices have been falling. As a result, “the definition of a lead has become looser.”

SME lead data is currently trading for £5 to £10 per lead, while more qualified leads may sell for £20 to £40 each. At the same time, the number of companies offering B2B lead data has expanded significantly.

Mardev took the decision some years ago to move towards greater qualification of data, turning named contacts into true leads that sell at a premium. That process actually begins as a consultancy sell, getting into what the client is trying to achieve and what a sale is actually worth. That can mean a single fully-qualified lead commanding a price in the thousands of pounds once conversion rates and average order values have been properly assessed.

“We gain a proper understanding of what a properly qualified lead means to our clients. We start looking at their sales and marketing alignment so that marketing has a proper view of what a real lead is for the sales team,” says Manda.

Her company gets the client’s sales force to sign off on that definition of a lead to ensure there can be no arguments later on. It also insists that the client signs up to a service level agreement that leads will be followed up within 48 hours. “There is no point generating bundles of leads if they are not properly used. We have to protect the value of our leads,” she says.

Early adopters in B2B marketing have recognised this value, such as the IT sector, but Manda believes the market as a whole is one step behind. It is also a new way of working for a data owner, requiring an extended skills set that is as good at managing agencies and creative briefs as it is at understanding data.

Max Firth, managing principal of ph Group, an Experian Company, takes a longer historical view of the B2B data market that makes these developments look more like an end game than a starting point. Dividing sales people into hunters, who close deals, and farmers, who manage accounts, he says business marketing hit the mid-1990s and suddenly wondered, “where have all my hunters gone?”

“In the last two decades, it has become harder to get into companies. Gatekeepers have become very good at stopping approaches,” he says. Lead generation has arisen as a way around this problem, since it effectively aggregates those first stage contacts into fewer attempts to get information. Client-side marketing in many organisations has effectively been reduced to the role of setting up events.

He sees yet another shift taking place in the business data-driven marketing space. “We are starting to get requests to find out about tender opportunities and get the company onto that tender list. That is not quite lead generation, but it is information-driven,” says Firth.

There is still a need for the core skills of identifying potential customers, understanding their needs and qualifying them at the first stage. Increasingly, however, this involves a more rounded view, such as where they are in their buying cycle.

Firth notes that many service providers are trying to negate the prospect development process through their contract terms. “Clients can project from 12 month renewal cycles when they should make an approach. When that is moved to 15 or 18 months, it is more difficult to predict when a company will be in market,” he says.

There will continue to be a core market for the business universe data that has long been a mainstay of B2B marketing. Equally, it will not suit every company’s sales process to use a first step prospect development partner. What is obvious is that, as new business gets harder to find, new techniques are going to be necessary.

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