MARKETING

Paper Trail

Looking through receipt files to target your best customers.
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To target your best customers, think about digging into your receipt files

Billy Beer. Dr. Ruth endorsing your product. "The official sponsor of . . ." Most marketing fads are pretty silly. But micromarketing -- which shows all the signs of being the next full-blown fad -- is an exception. Before your eyes glaze over, keep in mind that micromarketing is nothing more than using mail-order lists, census information, and historical buying patterns to help create the perfect prospect list. Once you have the list, you tailor your sales pitch accordingly.

With a recession circling ever closer like some hungry vulture, wouldn't you love to increase your chance of reaching the right potential customer? Joan V. Silver, president of Reeves Audio Visual Systems Inc., would. And she's figured out a way to do it that strips the concept of micromarketing to its essentials. She looked through her receipts. That's right, her receipts -- those slips of paper you give your customers to prove they've paid.

Silver found with a little bit of modification and study, receipts (used broadly here to include invoices and purchase orders) can identify who's likely to buy from you, where you're making the most money, and what product lines or types of business you should drop.

It was necessity, more than any intuitive grasp of selling theory, that led Silver to a more efficient way of marketing.

About four times a year, Silver, who runs a $5-million-plus New York City company that sells and services a full-line of industrial audiovisual equipment, does a mailing to 3,000 customers and potential customers. "Since direct mail is the only advertising we do, other than appearing in the Yellow Pages, I'd love to mail more frequently," Silver says. "But mailings are expensive." Yet Silver had a new $16,000 Sony video-projection system in stock that she wanted the world to know about. How could she spread the word -- efficiently?

The marketing "experts" would be happy to come in and set up a micromarketing program for tens of thousands of dollars. But Silver, with the help of financial consultant Ted Schlissel of Equity Information Corp., concluded she could get the same information simply by reading her receipts.

Silver came to this conclusion as she tried to figure out ways to market more effectively. Clearly, not all of her customers could afford a $16,000 projection television, but most could, she thought.

After all, weren't 90% of her customers Fortune 500 companies? They were when Reeves A/V began in 1973. But as Silver started going through her receipts -- trying to figure how to prune the 10% of her mailing list that she thought would be too small to buy a $16,000 video-projection system -- she learned an amazing thing. The Fortune 500 accounted for just 58% of revenues. The rest came from smaller companies, often with less than $1 million in sales.

Silver continued to explore her records and ranked her top 20 customers by sales, figuring that list would tell her the types of companies that were buying from her. Once she knew who her best customers were, she could then look to see what they were buying. Knowing both things would suggest marketing opportunities.

In compiling the list, Silver found some of her largest accounts of old had become victims of mergers, cutbacks, or both. No surprise there. But what was surprising were the firms that had taken their place: advertising agencies and insurance companies.

When she examined her receipts she discovered that ad agencies had begun buying custom-designed turnkey editing systems. They were setting up their own editing suites, instead of subcontracting the work out as they had in the past.

And the insurance companies? They were buying television production equipment so they would be able to make training tapes internally.

Knowing all this gave Silver a blueprint for creating a more effective marketing plan. First, she'd look through her receipts for insurance companies and ad agencies who had not bought such equipment. The sales pitch to those firms would be simple: "Since your competitors are bringing their production work inside, shouldn't you be thinking about it, too? We can custom-design a system for you."

Second, Silver started classifying the kinds of things her customers were and weren't buying from her. "We found some people knew us for our service work; others just bought equipment from us." She tailored letters to each group, underscoring Reeves A/V's full-service capabilities.

But what of the 42% of her customers for whom a $16,000 purchase is out of the question? They, too, are now the target of focused marketing programs. As a look through Reeves's receipts showed, they were just too important to ignore.

If Reeves A/V is doing a large job for a Fortune 500 company, it's not unusual for the work to cost $250,000. But potential new corporate clients tend to put jobs that size out for competitive bidding, which makes it difficult for Silver to maintain pretax margins of an estimated 10%.

Her smaller clients, however, rarely have the luxury of bidding out work. When they need a product, they usually need it immediately. And since most don't have an in-house expert to call on, they need support and service as well. They're willing to pay for the extra service.

As a result, profit on those sales can be higher. To keep that business, Silver is broadening her product line to ensure she has in stock what those customers need, and she's now providing three-hour delivery.

The result of Silver's focused marketing is clear. She can do smaller, more targeted mailings once a month for the cost of the big, unfocused quarterly mailings she used to do. Her response rate is up 10% since beginning this effort.

"We should have done this years ago," says Silver. Perhaps. But having used her receipts as a marketing tool, she's still way ahead of those who are only beginning to talk about the wonders of micromarketing.


HOW TO CREATE THEPERFECT RECEIPT

A few extra items can reveal a lot about your sales

As a matter of course, you probably have the following nine items on your receipt form: date of sale, customer name, address, phone number, product sold, quantity sold, unit price, total price, and salesperson. And that's fine. Each line by itself can yield loads of information.

But to be truly effective as a source of marketing information, argues consultant Ted Schlissel of Equity Information Corp. -- who helped Reeves Audio Visual Systems Inc. analyze its business -- a receipt should be able to answer the following four additional questions:


What was our profit per unit sold?
Clearly, you don't want to print your margins on the receipt. Still, you should be able to tell at a glance if a customer is buying your most profitable items.


How big are they?
No need to write "37 employees" after the customer's name. But devise some kind of simple system that can show you that you're serving the Fortune 500, mom-and-pops, or companies in-between. A company's size frequently dictates the kind of support it needs.


Intended use of product.
Customers have the darnedest habit of coming up with new uses for your product; you should know what they are.


Referred by?
This lets you know whom to thank. It also gives you references to check.

Last updated: Aug 1, 1990

PAUL B. BROWN | Columnist

Best-selling author (and Inc. magazine columnist) Paul B. Brown's latest book, Own Your Future, has just been published. Brown's blog appears every Tuesday, Thursday, and Sunday.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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