The institutional part of the economy is not represented well by marketing databases based on the SIC classification system. One reason is that the services part of the economy has grown proportionately much more important since SICs were introduced in the 1930’s. In addition, SIC-based databases typically use the same metrics to describe all members of the databases. These metrics are not adequate to usefully describe the institutional part of the services economy. For example:
- Number of employees doesn’t represent the buying power of a church. You need to target churches by congregation size and denomination.
- Sales Volume doesn’t apply to schools. You need to target schools by grade level, subject, enrollment, or wealth score.
Businesses are different than institutions.
B2B marketers must understand the critical differences between business and institution behaviors prior to developing an institutional marketing strategy. Key contrasts include:
- Businesses are profit-driven and their success is measured in terms of profit and loss. Business managers are rewarded when they come in under budget. Institution managers spend every cent of their budgets. If they don’t spend all of the funds, they risk having their budgets cut in future years.
- Institutions exist to fulfill a purpose. For example, the success of a fire department’s operation is determined by fighting fires and saving lives—not by focusing on year-end profits.
- Institutions do not spend money they don’t have. They are governed by conservative accounting principles making them extremely creditworthy.
It can be difficult to identify the institutional decision maker.
The rules of institutional purchasing make the decision maker difficult to identify because the Purchase Order process “hides” the decision maker’s name.
- Institutions have different job titles and decision-making processes than businesses.
- Purchase decisions are often made by highly trained, front line-staff: doctors, teachers, professors, office managers, and local government administrators.
- Decision maker names may not appear on response databases because they are either unavailable or not easily identified on purchase orders.
Use an appropriate marketing strategy.
B2B marketers need to adopt specific strategies to achieve increased profits.
- Align your marketing message with your customer’s mission. Institutional decision makers make purchasing choices based on their mission.
- Take advantage of the key ‘use it or lose it’ budget cycles. The three months prior to a fiscal year end are a golden opportunity for marketers to profit from clean-up spending. June 30th, September 30th, and December 31st are typical institutional FYE dates.
- Segment your current customer base to accurately identify institutions so you can track the results of your institutional efforts.
In summary, institutions mirror your best B2B customers. They are larger than average, unlikely to go out of business, pay their bills, and represent a tremendous opportunity.