How to Gain Thousands of Small Business Clients Without Overspending on Acquisition Costs

CHALLENGE
Back when Birch Telecom was founded in the late 1990s, getting new customers was relatively easy.

Congress had just passed a law taking away the Bell's local monopolies. So, small- to mid-sized business customers who were fed up with their phone company were ripe for the picking.

"We started with just a field sales force -- feet on the street walking door to door --- and in those days they were very, very productive," says Marketing Director Tom Edmondson.

Birch Telecom's small marketing department didn't have to do all that much work, mainly creating support materials such as brochures and a basic website.

They also had a heck of a lot of fun creating a low-cost branding campaign of billboards featuring company "spokesdog" Buddy who they picked up at a local animal shelter. (Link to samples below.) The premise was simple: if you are sick of the Bells, switch to the underdog competition who will be loyal to your needs.

The strategy worked. Birch Telecom grew to a $119 million company in just three short years. Then marketing suddenly became a lot more difficult.

Turns out the sales force had plucked all the low hanging fruit -- most angry Bell business customers had switched. Plus, the local Bells' marketing departments had roused themselves to counter local guerilla campaigns with bigger guns.

Relying solely on door-to-door and a few cute billboards wouldn't cut it anymore.

Birch Telecom's marketing department found themselves in the classic marketing-to-small-biz conundrum. With a universe of five million potential accounts, the market was vastly bigger than a typical b-to-b vertical. But, profit margins were far slimmer.

And, small business owners are often more overworked and distracted than their big business counterparts. There's often no telecom or IT director, just a frazzled president or office manager who has more critical things on their plate than considering phone service.

These prospects weren't searching for new phone service online or off, nor were they attending telecom trade shows. They weren't ever going to be voluntary hand-raisers.

How can you get hundreds of thousands of new customers in a mass marketplace that's not interested in you, while keeping acquisition costs at a minimum?

CAMPAIGN
Birch Telecom's marketing team launched a three-step process mingling best practices in database marketing, telemarketing, and brand marketing...

Step #1. Build a Fantastic Prospect Database

With help from outside data providers including InfoUSA and D&B, Edmondson and the marketing team began to build a prospect database of all the small- to mid-sized companies in the 12-state area Birch Telecom served.

This wasn't just a mailing list. Edmondson wanted to keep acquisition costs low by zeroing in on the best prospects. So, he added overlays of survey data, company size, number of phone lines, SIC code, number of employees and "anything else we could think of."

But, when using this wonderful resource for predictive modeling to feed the best leads to sales, Edmondson quickly bumped a barrier. "I only have three-to-four million prospects, so I can't skim off the top and target just the top deciles.

"Database marketing in a limited universe takes on many of the attributes of CRM. We need to learn something from every interaction, why we're losing business, to help shape the future of marketing and products. If I don't sell you something today, my attitude is I'm going to sell you someday."

So, Edmondson began to feed results of all sales touches back into the database and build better and better predictions .... The goal was to predict which sales channel, which individual rep, and what sort of benefit statement each particular prospect would respond to best.


Step #2. Launch Inbound & Outbound Telemarketing Programs

Next Edmondson used the database to slice out customers into three main groups based on average acquisition preferences and costs:

-> Most expensive: targets for the field sales team
-> Middling expense: targets for outbound telesales
-> Least expensive: targets for direct mail campaigns featuring call to actions leading to inbound call centers

He visited lots of call centers to select the team who would handle his account. "You need to talk to several vendors, talk to the reps, see the environment they work in, and listen to a lot of randomly selected calls."

The vendor Edmondson chose had multiple locations, so he carefully visited each of these to pick the one that would handle his business. He wanted to tie individual telephone reps' response rates back into the database to continue optimizing the campaign, so he picked a facility with a wide demographic mix of reps and a low employee churn rate.

He also tried to select phone reps from a service background rather than those from sales. Again, the goal was to close sales but not to close the door if a sale couldn't happen. So telesales was also about relationship building rather than strictly dialing for dollars.

Step #3. Invest in Ongoing, Steady Brand Messaging

During the worst days of the recession when most business marketers were slashing at anything in their budget that wasn't a direct response vehicle, Edmondson kept a steady branding campaign going.

He kept up billboards in target markets, refreshing creative to match current times. The team also launched a steady stream of community campaigns designed to generate PR and local goodwill, such as scholarship contests and donations to local animal shelters.

Rather than focusing on the sales offer du jour, all campaigns included photos of company spokesdog Buddy. (Worth noting, studies show entrepreneurs often have unusually intense, strong relationships with their pets.)

RESULTS
During the recession, Birch Telecom almost tripled in size, from $119 million in 2000 to $340 million in 2003, and now has half a million lines in service. It's one of the largest non-Bell telecoms in the central and southern US.

Buddy is also doing fine.

Edmundson says that while he's not been able to discover one particular demographic of telemarketing rep who does the best closing accounts, he's noticed reps from Joplin, MO, (which is near Kansas City) consistently do the best. "I couldn't swear it's a huge factor, but those folks have been successful."

He's also learned that a verbatim script doesn't work for the type of selling he hopes the telemarketing reps will do. "We give them some points, as much about Birch as possible. They have to become a knowledgeable consultative coach instead of reading a script. That's one of the big lessons we learned."

Last but not least, Edmundson has learned it's possible to create a predictive database that can model what time of day, type of offer, and style of rep a particular prospect is most likely to respond to. In fact, his database has been so successful that he's been asked to be a featured speaker at the National Center for Database Marketing conference next week in San Francisco.

Useful links related to this article:

Samples of Birch Telecom billboards
http://www.marketingsherpa.com/birch/ad.html

RedF - the company that helps Birch Telecom rent lists, and build and maintain its database
http://www.redf.com

Aegis Communications - the company Birch Telecom relies on for outbound telemarketing and additional data analytics
http://www.aegiscomgroup.com/home.html

Birch Telecom
http://www.birch.com