WHAT IS TARGET MARKETING?
by Thomas M. Maher
The beat goes on. Yes, target marketing is still up there near the top of the corporate charts. But, according to an industry activist, many marketers are dancing to the wrong tune.
'Some companies say they tried target marketing and it didn't work. Others say they do it but on a closer look finds they are restricting themselves to just doing target selling,' says Jack R. Snader, president of the Systema Corp., Chicago.
Mr. Snader, an observer of industry trends and issues for 15 years, heads a sales consulting organization that seeks to improve the productivity and performance of field sales organizations. Among his clients: Lincoln National, Connecticut Mutual Life, Bankers Life, and Union Central Life.
His organization's latest drive to get the true meaning of target marketing to what he sees as a largely misinformed public is via a newsletter, Agency Marketing.
'We hope to add thought-provoking dialogue on the subject of marketing for agency managers and home offices of life insurance companies. If we can give a fresh perspective to the marketplace with our brief articles once every two months, the newsletter will prove worthwhile.'
'Let's call our newsletter a reinforcement device. Most professionals in the industry are aware and interested in applying state-of-the-art marketing principles to increase bottom-line results. Unfortunately, upon analysis, we often find that companies allow their agents to 'wing it' in their approaches to clients and prospects,' he told us.
Fortunately, he continues, life insurance companies realize that they must become more marketing-oriented. But he sees confusion regarding what a marketing-oriented objective should be and how it should be enacted. Many companies, he notes, historically have delegated selling and marketing responsibilities away.
'Quite simply,' he says, 'the marketing issue to be resolved is to determine, in looking at a market, what it is that these people want. Consumers are now sophisticated and extremely diligent in examining the value of their investments and/or protection.'
Again, he sees a lot of target selling going on, but not enough target marketing. Another common dilemma is: who's doing the marketing-and who indeed, should be doing the marketing? What are the roles and duties of the home office, the agency manager, the agents?
Mr. Snader, in his travels hither and yon, encourages all within earshot to change from a selling to a marketing mindset, and to set mechanisms to get cited questions answered. He acknowledges that this may sound like Marketing 101, but adds:
'Look at industry retention rates for agents and the high cost of housing and the often lengthy periods of non-productivity for new or career-change agents. You can see that greater diligence and determination need to be applied now if companies are to survive or thrive.'
The life insurance industry, he notes, is not known for its ability to respond rapidly to new conditions. However, he believes enlightened companies are destined to spot profitable opportunities while overcoming the challenge of new competitive forces (brokers, bankers, and full-service financial companies) in the marketplace.
How can a company go on the offense? First, scratch thoughts about quick-fix panaceas. Then, he suggests, keep remembering that no outside provider knows the neighborhood (clients and prospects) better than the insurance industry does. He further suggests that this knowledge base can be transformed into a dynamic marketing program, one which competes successfully against new and traditional competitors. Listen:
Strategic Tool
'A strategic tool can be applied to penetrate new markets, boost retention rates of good agents, and increase their loyalty. Directly, insurance companies can tap into a vast reservoir of revenue-producing opportunities by opening up target marketing channels before outsiders get up to speed.
'Many companies recognize that they are not doing enough to support career-building agents by helping them to stimulate and access focused markets. Excellent agents devote careers to counseling prospects and clients. Surely they are at least as concerned about their own professional goals.
'Agents are becoming more easily distracted by new marketing noises these days. They are bombarded with opportunities to sell many kinds of products. So it is increasingly difficult to get agents to give the company the same percentage of business they have delivered in the past.'
Accordingly, target marketing is a virtually untested avenue to employ to enhance agent loyalties, he says. Once in place, it becomes a visible way to signal agents that a company is strengthening the steps on its career ladder. With company support, Mr. Snader says that motivated agents can vigorously climb the rungs to greater growth, satisfaction and increased income potential.
With all this said, Mr. Snader confesses that target marketing is not a cure-all and shouldn't be on the top of every insurance company's priority list. But for many companies, he insists, target marketing moves well beyond the use of traditional routes in soliciting business. He explains:
'That is, qualifying suspects, doing needs analyses, talking about product features and benefits, overcoming plan objections, closing sales, collecting payment, delivering the policy-these are all sales functions.
'A target marketing company does pay attention to these matters. The difference is that it formulates new business opportunities into segments, moving beyond the 'business as usual' routines. The key in target marketing is to segment prioritize targets into an identifiable and systematic construct.'
A target marketing company, he continues, doesn't just serve its marketplace with hope that '84 bottom-line profits will increase. Rather, it sensitizes and stimulates the needs and wants of particular groups, ones which the company thinks is worth the time and energy to go after better than anyone else can.
The prime element of target marketing, then, is the selection of the market segment, and assessing and pinpointing markets that have good growth potential. Notes Mr. Snader: 'Gathering data to select target marketing requires more effort than just thumbing through the yellow pages to see who is listed under certain industries or occupations. Such superficial methods are likely to fail and may discourage a company to the degree that it turns to an equally ill-founded scheme.'
Target marketers, he contends are able to capture solid market niches because they don't allow guesswork to be their guide. They don't roll out strategies based on idle speculations that a seemingly related group constitutes a cohesive universe.
Distinctive characteristics
Nor, he says, do they apply half-baked theories and then rush tactics to judgment as less cautious zealots do. Rather, they avoid inherent structural defects by identifying a genuine market segment before an agent reaches out for his first handshake. According to Mr. Snader, a valid market segment has distinctive characteristics:
- Members share similar problems and opportunities, regardless of diversities in company size or business profile.
- Every segment member can be identified as probably having the need, resources, and authority to buy the insurer's or a competitor's product or service.
- Segment members are aware they share common bonds and interests with each other and continually reinforce such ties. Interrelationships are marked face-to-face meetings for business or professional reasons. Many belong to the same organizations and read publications that cater to their unique informational needs. They are likely to convene at the same social events and foster a number of special trust relationships with other insiders.
So the words to the wise are, according to Mr. Snader: 'Know the segment' before you track it! It must be of sufficient size within a local market to be worth probing and penetrating. A controllable size for an agent's market segment could encompass a minimum of 400 and a maximum of 600 prospective buying centers. A 400-600 range is on par with an agent's ability to serve this niche over a one-year selling period.
'In auditing a segment's viability, probe the market to such a degree that the company or the agents are able to determine precisely who 'the movers and shakers' are. This cadre of leading power centers generally encompasses a small percentage of the most influential forces in their field.'
Once the market is identifiable and a company has built its database, he continues, it's time to apply the methods to stimulate that market. Then, a company is set to access it. Possibly the most effective way to gain access is by referral from centers of influence who have trust relationships with an individual prospect.
There are other ways to access segments but, in sum, 'the access rule is to employ specific ways to build credibility with buying influencers within the target market.'
At this point, the sales approach comes into being. Too often, says Mr. Snader, an agent selects a segment, skips market stimulation and access methods, and opts to go immediately into a sales approach-either by cold calls or using other antiquated selling styles in hit-or-miss fashion to secure appointments.
A target marketing focus, he explains, is much more deliberate. 'It is modified to uncover the needs and wants of constituents narrowed into a single segment. In target marketing, conventional indirect marketing strategies can be planned to create and fulfill desires. For example, direct mail and advertising can be customized to fit the prime psychological 'hot buttons' shared by members of a common group.
'Generic, horizontal promotional tactics are totally off target. Each measure must be geared to link up with the needs of an identified, vertical group of prospects.'
Next Mr. Snader listed some indirect marketing initiatives with a promise to adapt them to an objective to put vertical marketing segments into play. Here they are:
Attending trade shows supported by target segment, presenting speeches to select organizations, gaining valid third-party endorsements, producing mailings and brochures that describe problems and solutions, and capturing center-of-influence referrals.
Also, participating in seminars, creating pre-approach letters, becoming known and accepted at social events and open houses, and preparing newsletters with thought-provoking data. To Mr. Snader:
'When an agent applies any of these promotional methods, he slants strategies based on the common bonds of his market segment. The goal is to systemize marketing methods to match the psyches and values of the target groups.
'Say the target universe includes companies that sell software services and act as distributors for microcomputers manufacturers. Each one knows a large percentage of similar providers. They talk with each other about trends and issues they've had in the same trade magazines. They frequently gather at local or national meetings.
'Once a company notes such common bonds, an agent can seek to lock in this segment, and network his contracts throughout it. Few traditional competitors or outside providers would have the ability to quickly add this group to its target list, as 'first in agents could do.'
By scoping traditional marketing mix measures into organized, segmented approaches, Systema Corp.'s president stresses that a company is less likely to be viewed by prospects as a 'me too' provider. Its agents, he says, can distinguish themselves as experts about prospect needs. Their homework (data intelligence) and knowledge of prospect self-identities could set them apart from weak researchers and cold callers, he adds.
'As the career-building agent finds success in skillfully matching prospect needs with company products, look for his loyalty and commitment to be bolstered. He'll be building awareness and interest in the selected marketplace-hopefully increasing his sales volume within a short promotional time cycle.' (It's wise, he adds, for companies and individual agents to pre-set segment goals to achieve within a specific number of months or at least during a fiscal year.)
'Companies and agencies,' he notes, 'know they are frequently getting decreased shares of their agents' total premium incomes, though they provide office space and other expensive backup support.
'As companies ask themselves how they can have better control over housing costs and retain top-quality producers, target marketing may just be the instrument to bring more business back to the primary company.'