In the 1865 Lewis Carroll novel, Alice in Wonderland, there is an exchange between Alice and The Cheshire Cat that sounds a lot like the conversation many marketers are still having with their prospective customers more than 150 years later:

Alice: Would you tell me, please, which way I ought to go from here?
The Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don’t much care where….
The Cheshire Cat: Then it doesn’t much matter which way you go.
Alice: … So long as I get somewhere.
The Cheshire Cat: Oh, you’re sure to do that, if only you walk long enough.

In the modern marketing world, you are The Cheshire Cat. Alice is the prospective customer wanting to get somewhere – even though she’s not sure exactly where.  She’s looking to you for guidance; but it’s up to you to understand her goals and sell her on a destination that is a win-win for you both.

The journey from “prospect” to “customer” isn’t a random one.  It’s a meticulously engineered labyrinth designed by [dueling] marketers that – no matter where the prospect begins and however long they wander through it – always leads to the same place: a sales win or a sales loss. (Though parenthetically, with modern marketing automation tools, sales losses and no-decisions aren’t as final as they used to be. Prospects today are on kind of a catch-and-release program: even if they get away, are out-of-season, or are undersized for now, you can always re-catch them later.)

It goes without saying that the more you know about your prospects – all those Alices in your Marketing Automation or CRM system – the higher your lead-to-sales conversion rate will be. If you are going to be an effective marketer, here are 10 things you need to learn, know, and track about your customers and prospects:

1. How many of them there are (TAM and SAM)
2. Your share of the market, and how fast that market is growing
3. Customers’ and prospects’ SWOT
4. Whose solutions they currently use and why
5. Their business goals and their points of pain
6. How long it takes to convince them (sales cycle)
7. Demographics
8. Psychographics
9. Who their influencers are
10. How much they are willing to spend

1. How many of them there are (TAM and SAM)

Before you can truly assess how you effectively you are penetrating a market, you need to first know exactly how many prospects there are. You might be giddy to learn that 1000 people downloaded your retail automation app; but when you find out that there are 4.6 million retail employees in America – and that for all of your efforts, you only acquired only 0.0002 percent of the market – you realize you still have a lot of work to do. 

The absolute number of prospective customers for your products and services is called your “Total Addressable Market,” or TAM, but unfortunately it’s usually a huge, unwieldy number and not really practical for marketing planning purposes.  A more relevant number is your SAM, or “Serviceable Addressable Market.” 

Drawn as a Venn diagram, SAM is a subset of TAM – the smaller and more focused the better – that lets you focus your marketing efforts on those prospects who have a high likelihood of actually buying.  Here’s an example of the difference:

• TAM: If you are an airline with coast-to-coast routes all over the continental United States – from Los Angeles to Boston, and Seattle to Miami – you could consider your to be TAM to be all 323.1 million people living in America, since that’s the number of people whose heads you fly over. Because of the geographic breadth of your routes, you might conclude you are a nationwide carrier, and your marketing efforts should be national in scope (and therefore, expensive.)
• SAM: But if you only take-off from and land in the 25 largest cities in the U.S., those MSAs (Metropolitan Statistical Areas) and the 35.9 million people living in them are probably your real serviceable market (SAM.)  From a marketing strategy standpoint, you would probably be best served running regional marketing campaigns in a 50-mile range from the airports you serve (not the ones you fly over, since boarding a plane mid-flight is rather difficult.)  As you add routes, it is easy to add new MSAs to your marketing plan.

By using SAM instead of TAM, you can focus your marketing energy and dollars on those higher-probability prospective passengers who are actually likely to buy, e.g. you serve the airport closest to them.  Rather than paying to reach 323 million nationwide one time, you’d be better off focusing on the top 10%, reaching the 35 million people in your 25 cities.

2. Your share of the market, and how fast that market is growing

To understand your standing in the market, there are four essential things to watch: the size of your SAM and how fast it’s growing, cross-referenced with YOUR market share and how fast YOU are growing.  The ideal, obviously, would be that you control the largest chunk of a growing market, and you’re growing faster than the market at-large.  On the flip side, the time to start looking for another job is when you’re a minor player in a declining market… and your company is declining faster than the industry average.

How do you know where you stand in your industry and how you’re performing against the competition? You start by doing a lot of shovel-and-pickaxe research on your market, learning the market size and ranking of major competitors, entering your findings into a spreadsheet, and calculating the comparisons, which will be very revealing the first time you see them.

Let’s say your company markets revenue cycle management software for Sports Medicine clinics, and you charge a fee of 5% of clinics’ revenue for your services; it’s fairly easy for you to determine:  

• SAM Market size: There are 22,865 sports medicine businesses in the U.S. Their combined revenue is $22.7 billion and profits were $2.3 billion; they employ 111,842 people with a total payroll of $9.6 billion.
   
• Your share: Of the 22,865 clinics in America, you have 3000 under contract, or about 13.12% of the market. The remaining 86% of the market might be held by a small number of much larger competitors (tough competition) or split up between a large number of smaller players (easier competition). If your clients’ total revenue is $297.82 million, your 5% fee would put your revenue at $14.89 million. 
  
  
• SAM Market growth: Sports medicine revenues grew 3.2% the past five years, and are expected to grow 3.4% over the next five years.
  
  
• Your growth: If your year-over-revenue grew 6.5% last year over the previous year, you are growing twice the industry average, meaning that you’re taking share from weaker competitors. Congratulations… but now that you know your competitors are vulnerable, you should be targeting them and trying to triple the industry growth rate.

3. Customers and prospects SWOT

For those of you who forgot the finer points of your Marketing 101 class, SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.  Your company has a SWOT chart; so do all of your customers and prospects. But theirs comes with a twist: your customers and prospects all list one another in their own “opportunities” and “threats” sections… as in, they are seeking opportunities to put the other out of business, and are worried about the threats of it being done to them.  

The heightened suspicions that can result when competitors start looking over their shoulders at one another become a great opportunity for savvy marketers who are able to channel their inner arms dealer and apply it to their prospects’ SWOT:

• Strengths: What are your prospects’ unique, hard-to-duplicate attributes that give them give them an unfair advantage over their competitors? How can your products and services help them leverage those advantages for your mutual benefit, e.g. will they be able to market to new customers, serve existing customers betters, or enjoy better margins?
  
  
• Weaknesses: How are your prospects disadvantaged in sales situations against select competitors? How can your products and services help them overcome those disadvantages, e.g., does partnering with you fill a hole in their offering, fix a quality concern, or enable them to lower their price?
  
  
• Opportunities: What present or future market conditions could be seized upon by your clients, due to sudden market development, absence of competition, or the demise of a major player in the space? How can you help a client seize these new opportunities, e.g. launch a new product or service, move into a new SAM, or outflank a competitor?
  
  
• Threats: What present or future market conditions could worsen your clients’ prospects for success and make competing difficult? How can you help your clients defend against them, e.g. fight off incoming competitors, lock-up their customers to prevent them from switching, buy time until they revamp their product line?
  
  

Understanding your clients’ and prospects’ business goals and SWOT, as well as having win-win solutions to offer them, will make you not just a vendor… but a very valuable business ally.

4. Whose solutions they use and why

Very rarely in selling situations will you have the luxury of approaching prospects where there isn’t already an incumbent in place.  Depending on your industry, you might never run across a prospect throughput your entire career who rolls out the red carpet, pulls out their checkbook, and tells you, “This is our first [fill in the blank], so we’re a clean slate.”

Knowing that a prospect has an incumbent whom you are trying to displace – typically a competitor you already know well – you probably have an uphill battle ahead of you, even if they’ve come to really dislike the firm they chose the first time around.  Depending on the product, switching can be a very complicated, costly, and lengthy process that most customers are reticent to even undertake; it’s often easier to “deal with the devil you know” than go through the risk and expense of breaking ties.

Replacement strategy marketing is an art all its own.  Here’s a few suggestions for tipping prospects your way:

• Know the prospect: Find out exactly why they are dissatisfied with the incumbent. If you can, find out the business and financial costs associated with the problems, workarounds that failed, and other ways the incumbent fell sort (or oversold from the outset.)  If nothing else, prospects will be impressed by your knowledge of their business, which is the first step in establishing trust.
  
  
• Know the incumbent: Memorize their SWOT, especially their weaknesses, and create a point-by-point checklist of how you’ve addressed those weaknesses in your own products and services. Explain the risks associated with your competitors’ weakness, and have hard data – including references, if possible – to back them up.
  
  
• Know yourself: Be honest about your own SWOT, and your reputation in the market for weaknesses (real or imagined.) Explain why your shortcomings are less their serious than the incumbent’s; denying your weaknesses or thinking you can huff-and-puff your way around them is a fool’s errand.  Prospects have already been told all the reasons not to trust you; don’t fuel their mistrust by trying to downplay problems that are legitimate.  Concede them, explain them, and go straight to explaining why your strengths far outweigh them.  Prospects will admire your candor.
  
  

Enlist your customers: This will be your silver bullet.  Document the results your customers – those who have already made the switch from the incumbent you are trying to displace — have realized. Have references and case studies already prepared and send them to the prospect, ideally with “Before and After” ROI.  Contact those references, and see if they would be willing to take a call from the prospect to share their positive experience.  (BTW, this isn’t something you should be doing at the last second: in the case of case studies and references, it is Marketing’s job to be developing new ones every week.  Remember that in “The Art of War,” Sun Tzu writes that “Every battle is won or lost before it’s ever fought.”)

5. Their business goals, and their points of pain

There’s few things more impressive to a prospect than speaking with a sales rep who truly and deeply understands the day-to-day problems they are grappling with… and has a clever, effective, and affordable solution in mind.

I saw great recent example of this recently, at a company that automated the workflow of healthcare practices.  Their value proposition, “IDM” stood for “Increase, Decrease, and Minimize,” with the goal of increasing practices’ revenue 8-12%, decreasing operating costs 25-35%, minimizing time to collections 35-40%.  Awesome sales pitch, right?  The problem was that it sounded too good to be true on the surface: prospects couldn’t understand how simply automating parts of their operations could really deliver that kind of ROI.   

So days before our biggest trade show of the year, the marketing, sales, Customer Success, and Client Satisfaction teams sat down for a whiteboard session with our in-house clinical operations experts, to draw a process flow chart for all of the steps between registering a new patient (Step 1) and collecting payment from their insurance company (Step 29).  The finished diagram looked like an old Rube Goldberg cartoon, brimming with ready-to-go-wrong manual tasks that were fraught with potential for error.

Over the next 48 hours, Marketing distilled that 14 ft.-wide whiteboard of executive scribblings into an easy-to-follow, two-stage infographic, rendered in a PowerPoint: Stage One (“How you are doing it today”) looked like a 29-square checkboard with squares all the same color; but when you clicked, Stage Two appeared and 21 of those squares changed colors, to show that those tasks were now automated (plus three more that were coming in the next release.)

We hastily prepared signage and handouts for the trade show, and they worked like magic.  Prospects we’d been pitching for months suddenly had the scales fall from their eyes: for the first time, our message came through and it made sense.  They saw where we really did our homework to understand the pain, uncertainty, and unpredictability they were grappling with on a daily basis… and better, we’d come up with something that was an easy implement, learn, use, and pay for.

Showing prospects that you understand their business, and have developed solutions grounded in their reality, creates the ideal environment for earning their trust and creating a situation in which they are receptive for a sales call.  Again, it’s Marketing’s job to be continually cultivating market-facing materials that reinforce this trust, in the form of case studies, references, and whitepapers that document ROI attained by real-world users.

6. How long it takes to convince them (sales cycle)

In the Olympics, running the 110 meter hurdles is way harder than running the 100 meter dash.  Not just because it’s 10% further, but because there are 10 42-inch hurdles, put directly in your path to the finish line. 

Same goes in marketing and sales.  As if selling wasn’t hard enough, prospects have a way of adding hurdles – called objections, which enable them to say keep saying “No” – between you and closing the sale.  Anticipating and preempting those objections effectively can remove those hurdles, and greatly accelerate the sales process.

Shortening the sales cycle is a paramount priority for the Marketing team; the team needs to understand why the cycle is as long as it is, by taking an honest look at the real-world hurdles for their company’s products and services.  It could be that:

• They are expensive, requiring approval high up in the customer’s organization
• They will be used pervasively by many employees, requiring a very broad approval cycle
• They will fundamentally change the company’s operations, culture, or way of doing business… and thus necessitate an implementation plan, roll-out, training, and Q&A
• You are attempting displacing a competitor’s product that is already in use, and there are substantial transition, migration, conversion, shut-down/start-up costs that will need to be factored into the decision to switch

As your company gets into the selling process, your sales reps will learn more about prospects’ objections, which should be shared freely with the Marketing team. Common objections include:

• Price: You are more expensive than competitors, and the justification for the added cost is not apparent or quantified
• Features & Functions: A competitors’ product simply does more than yours does
• Availability: You might not be able to produce enough to meet their needs
• Services: A competitor might have better financial, delivery, or replacement terms
• No change: You don’t offer something so unique that it’s worth the trouble of changing

The Marketing department should already know, and should have preemptively addressed, objections raised by prospective customers.  Objections/Responses should be part of every sales training PowerPoint, battlecard, and sales cheat sheet.  They should also be subtly addressed and circumvented in messaging on the company Website, blogs, whitepapers, etc.

7. Their demographics

In the movie, Collateral Beauty, Will Smith – portraying an advertising executive named Howard Inlet – gives an impassioned speech to his agency staff that marketing types should think about:

“Love. Time. Death. Now these three abstractions connect every single human being on Earth. Everything that we covet, everything that we fear not having, everything that we ultimately end up buying is because at the end of the day we long for love, we wish we had more time, and we fear death.”

Though I would add the desires for “wealth” and “recognition” as well, Inlet’s message is insightful on many levels; it accurately describes the foundation of many marketing appeals and hints at the demographics behind each appeal: young people spend a lot of money trying to find love… working parents of youngsters spend a lot of money to save time… older people spend a lot of money hoping to cheat death.  It all comes down to demographics and dollars.

Demographics attempt to classify consumers – or in the case of government, citizens – into groupings that make them easier to reach and target in marketing and messaging efforts.  Demographics are the core of most marketing and advertising activities, because many products and services are designed to appeal to specific groups of consumers along the following attributes:

Physical Demographics – Age, race, gender, illnesses, disabilities, size (i.e. plus sizes, big-and-tall, etc.).  Sometimes, the only significant differences between products for certain demographics are the packaging, messaging, and ad buys. Examples: Gillette markets nearly-identical shaving supplies to men and women; General Mills packages sugary cereals for kids, whole grain to parents, and high-fiber to grandparents; Nike sells the identical workout clothing in sizes small through XXXL.

Social Demographics – Marital status, income, education, occupation, home ownership, children.  Marketers have different appeals for marrieds vs. singles, homeowners vs. renters, and with/without children, as their purchasing needs – and available discretionary income – evolve with changing life stages. Messaging and offers vary widely by income, especially in the case of big-ticket items like cars, jewelry, and vacations.

Occupational Demographics: Jobs by standard occupation code (SOC), U.S. standard industry classification (SIC), or North American Industrial Classification System (NAICS).  This type of segmentation is more prevalent in business-to-business (B2B), small-to-mid-size business (SMB), and small office/home office (SOHO)

Geodemographics – Focuses on where people choose to live and why.  Not just “country people” and “city people,” – or the suburbs of major city – but all of the permutations of those.  It also considers regional preferences: why are people drawn to New England… the Gulf States… California (and why Northern California vs. Southern California?)  Certainly jobs are a factor, but with automated job search tools, many job seekers focus on a location first, and then companies in that location second.  Marketers seek to understand and leverage those preferences.

If you are conducting research on your target demographics, you might start with The U.S. Bureau of Labor Statistics, which maintains an incredibly expansive database of demographic data for occupational research purposes, based on:

Age
Certifications and licenses
Disability
Educational attainment
Families and marital status
Foreign-born workers
Older workers
Race and Hispanic ethnicity
School enrollment
Veterans
Volunteering
Women
Youth

8. Their psychographics

Psychographics can be described as “Demographics of the mind,” that are independent of any other demographic trait.  You might look across the room at someone, and get good clue to their age, race, and gender (physical demographics)… you have no idea what’s going on in their head (their psychographics). 

Psychographics are frequently categorized as:

• Activity, interests, and opinion (AIOs)
• Attitudes
• Opinions
• Values
• Behavior
• Lifestyle
• Political inclination

You will frequently hear researchers speak types of “consciousness” or “aversions.”  New ones seem to arise every day, but the most recognized ones include:

• Brand-conscious: Your friend with the Rolex, Armani suit, Magnanni shoes, Stefano Ricci shirt, and EMPA gold tie? There’s a very good chance he might be brand-conscious.
• Price-conscious: Up to 80% of consumers are price-conscious; getting lowest price is their primary goal, over brand and everything else.
• Value-conscious: They aren’t looking for the best price, as much as the best deal; they will pay more, if they feel they are getting a lot more value in return.
• Tech-conscious: Those people who drive their Tesla downtown, so they can camp outside the Apple store overnight for the privilege of plunking down a thousand bucks for the new iPhone? Definitely tech-conscious.
• Risk-averse: Often paralyzed by the fear of taking chances and possibly losing. Won’t walk across the room to introduce themselves to that attractive person they’ve been wanting to meet all night, for fear of rejection.
• Loss-averse: The opposite of risk-adverse: hates the idea of someone realizing a gain, and it wasn’t them. Can’t stand the idea of leaving the party without introducing themselves to that attractive person they’ve been wanting to meet all night, for fear of missing out.

9. Who their influencers are

It’s very unlikely that you’ll close a sale on the first cold call, as prospects increasingly rely on third parties to “triangulate” on the information they’ve received from the seller.  Just as many of us rely on social media – or use review sites like Yelp, CarFAX, Consumer Reports, etc. –before making purchase decisions, most business and consumer buyers have their own trusted favorites.

Every industry has its own unique influencers.  It is Marketing’s job to know who the major players in their own industry are, and then effectively “influence the influencers.”  To begin, ask yourself some questions about the ecosystem in which your customer and prospects participate:

• What blogs do they read? Who writes them?
• Are there review sites serving your industry?
• What industry associations do they belong to?
• Who are the most-read industry analysts?
• Who are the recognized trendsetters in the industry?

Once you’ve begun to identify these influencers, make it your mission to develop an in-depth understanding of their reputation, their coverage areas, and their positions on key industry issues.  Read everything they’ve published; get a feel for their hot buttons.  Go to their Websites, and see with whom they are partnered.  See if their speeches and presentations are available on YouTube.

Once you learned everything there is to know about the major players, learn where your interests are aligned, figure out a win-win proposition, and approach them.  Look for ways to develop common interests and public service/education programs that advance both of your reputations in the eyes of industry stakeholders. 

10. How much they are willing to spend

(I list this last, because you really needed all of the previous information to make sense of this one.)

How much should you charge for your product?  The glib answer is “whatever the market will bear.” Of course, there are frequently huge differences between a seller’s price and a buyer’s perceived value, which is why we have real estate agents who serve as buffers.

Your business plan and marketing strategy will be the key drivers of your initial pricing philosophy.  In general, are several popular philosophies to choose from; most business choose one, but many use tiered pricing, to broaden their appeal to different sets of buyers:

• Less for Much Less: Customers pay the lowest price imaginable for the bare essentials; no extras available, or available only on an a la carte, extra-cost basis. (Traditional airlines vs. Spirit Air, which charges for better seats, bags, snacks, etc.)
  
  
• Same for Less: Customer pay a lot less for the products sold elsewhere at higher costs, in a bare-bones transaction (Big Box stores vs. Amazon, where product are delivered right to your door, for a trade-off: there’s minimal customer service, and returns can be a hassle.)
  
  
• Less for More: Customers pay less for the products sold elsewhere at higher costs, but in a pleasant shopping experience (Traditional retailers vs. Walmart, where you can get what you want in an hour or so, prices are low, returns are easy, associates are walking the floor to help, and you can even grab lunch at McDonalds.)
  
  
• More for Same: Customer get more features and functions for the same price as the competition (Mercedes vs. Lexus, which tends to offer vehicles loaded with all of their bells and whistles than are options for other vehicles.)
  
  
• More for More: Customer pay more, but you give them more… higher quality product, better service, etc. (Department stores vs. Nordstroms, which absolutely coddles you with kindness and impeccable service.)

But be flexible to what you learn along the way: once you are selling, you learn quickly how your prices compare with competitors, as well as their discounting policies, rebates, allowances, and other inducements; these may impact your pricing strategy.  To combat competitors, many successful marketers use pricing segmentation to cater to high-end customers, without letting mid-tier and low-end prospects get away.  For example:

• For X, you get A and B
• For 2X, you get A, B, C, and D
• For 3X, you A, B, C, D, E, and F, plus first access to G and H when they become available

Other pricing options include:

Metered usage – You pay based upon how much you consume (like cellphone plans)

Fixed price – You pay one flat price, regardless of how much you consume (Netflix)

Cost Plus – Where you determine the total, all-in cost of your product, mark it up by your desired profit margin. (Costco)

Percent of savings – If you determine that you can save a customer $100,000 per year, you might ask for 25-33% of the savings; this gives you a nice sale, and saves the customer $66,000 to $75,000 per year

Percent of revenue – If you think you can help a customer grow their revenue year-after-year, you might ask for 5-10% of their total revenue.  Year 1 might be kind of lean, but as their revenue takes off, you take off with it.

One closing thought on pricing, don’t confuse the initial sale price with long-term account value.  The car dealer who gave you $1000 off on your first car did so because he knows that, on average, Americans purchase about 10 cars in their lifetimes.  With the average price of cars holding firm at more than $33,000, the dealer wants his cut of the $300,000 plus you are going to spend on cars over your driving lifetime.  It’s an investment on future repeat business.

Summary:

The most effective marketing campaigns are the result of a lot of research, and laser-guided planning.  Failing to do the proper analysis up-front research can lead to wasted resources and lower results.

Unlike the old days in marketing, where clever headlines and promotions carried the day, modern-day marketing is all about the metrics: traffic, conversions, PPC, etc. It’s about learning what works empirically, and repeating it until A/B testing finds something that works better.

To do this well, you need a system of measurement (your SAM), and the means to measure your progress; most Marketing Automation and CRM systems have powerful tools for this, but – like all power tools – they are only effective in the hands of a master craftsman.

About the author:

Jim Neumann founded Webmark Partners from IBM, where he was vice president of marketing and communications for the IBM Technology Group. Working either as a consultant or on-staff executive, he has many years of experience leading companies to +400% revenue growth, outpacing their competitors by as much as 12x, in STEM, Healthcare, MedTech, Analytics, CyberSec, IoT, Power and Energy, and others.