TARGET MARKETING: Expanding your universe

In the ongoing quest to grow their universe of customers, some business-to-business catalogers seek prospects beyond their target market. By targeting a different type or size business, or by expanding into new product lines aimed at serving new customer segments, catalogers can significantly boost their buyer file – and their sales.

National Hospitality Supply, a $6.5 million cataloger of low-end hotel and motel supplies, realized in 1997 that it could be selling most of its goods to food service companies and small restaurants as well as to hotels, says Michael Hans, president of the Menomonee Falls, WI-based company. This would help not only grow the business, but also level out the company’s demand curve. Most hotel and motel operators buy the bulk of their supplies between spring and fall, whereas demand from the food service industry is more consistent year-round.

“We sized up the competition, concluded there was room for us in the food service market, and determined that restaurants represent a universe of 800,000-1 million,” Hans says. “And that’s significantly larger than the 80,000-hotel/motel universe we reach.”

The spin-off restaurant catalog sells most of the same products as the original catalog. To adapt the book to its new target market, National Hospitality deleted its linens offerings, concentrating on such food service items as flatware and plastic glasses.

National Hospitality mailed 125,000 copies of the new catalog to restaurant and food service prospects, avoiding the larger cities and certain regions of the country so as not to run into larger competitors. To find prospects, the company used compiled lists from American Business Lists and Dun & Bradstreet. In the two years since its launch, National Hospitality has built up a restaurant house file of 10,000 active customers, and has reached $1.5 million in annual sales from the food service title.

In going national with the spin-off this year, National Hospitality will mail 300,000-350,000 restaurant catalogs, in addition to the 500,000 catalogs it mails to hotels and motels. Over the next two years, the company hopes to build up the restaurant book to $5 million in annual sales; at that point, Hans expects to expand again, perhaps to the service station market, applying the same model. To find the approximately 500,000 service stations and adjoining mini-marts across the U.S., Hans plans to use compiled lists and again will extract other relevant product lines from the hotel/motel book, including cleaning supplies, coffee makers, grills, pretzel warmers, and welcome flags.

Speaking a new language

Using a different expansion model, $438.5 million New England Business Service (NEBS), a cataloger of business forms, checks, and software, in 1997 tested the Hispanic business market. Targeting geographic regions in which small Hispanic businesses are most likely to exist, such as Miami and Los Angeles, the Groton, MA-based NEBS sent Hispanic retailers, contractors, wholesalers, and manufacturers a bilingual catalog similar to its core book of business forms, says Ed Bolesky, president of NEBS Direct Marketing. “We even established a 10- to 15-person bilingual telesales group to focus on it.”

But in the two years that NEBS has mailed its Hispanic catalog, “I wouldn’t say that we’ve had tremendous success. But we’re learning a lot about the market,” Bolesky says. For instance, NEBS has discovered that Hispanic businesses prefer to be reached via other media, such as newspapers, TV, and radio. “And there aren’t that many good Hispanic b-to-b lists,” Bolesky adds. “Some customers contacted us to say they received the catalog, but noted that they were Greek, not Spanish.”

That’s not to say that NEBS has given up on the Hispanic small-business market. “It’s the fastest-growing b-to-b segment in the country,” Bolesky says. “We just have to find stronger mailing lists and come up with a more effective strategy to contact this market.”

To find the right lists in new markets, NEBS is doing research “to determine the need for our products in a particular geographic or demographic market,” Bolesky says. “Then we take a look at the markets close to those. We have models against which we run those markets. We try to find as many new businesses in particular markets as we can and get those names as soon as possible.”

In terms of getting those names, although NEBS rents catalog buyer lists and compiled lists, it also works with local chambers of commerce to get lists of recently incorporated businesses. “Sometimes we can get them free; other times we have to pay,” Bolesky says.

Segmenting your offer

In the case of $1.73 billion Computer Discount Warehouse (CDW), the company is exploring niches within its merchandise segment that will appeal to a different market. “Computer supplies and accessories have higher margins than some of the hardware we sell,” says vice president of advertising Dan Gordon. “So in May we mailed a 252-page catalog selling only supplies and accessories.”

To find prospects for the niche catalog, Vernon Hills, IL-based CDW is taking a closer look at the companies in its customer database. Because buyers of computer supplies and accessories at a given company aren’t necessarily the same people who buy hardware, Gordon says, “we’re doing a fair amount of outbound telemarketing to determine who should receive this catalog.”

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