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Targeting with Industry Codes

Olin Hyde

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In this episode of the Green & Greene Show, the LeadCrunch B2B podcast, two seasoned marketing experts talk about the challenges in B2B regarding targeting with industry codes.

Hosts: Dave Green

Topic: B2B Targeting

Subtopic: Targeting with Industry Codes

Duration: 14 minutes


The Scope on Standard Industrial Classification (SIC) codes

The Development of the SIC Replacement:  NAICS

The Accuracy of Firmograhics                          

The Problem with Revenue and Employment Ranges


Podcast Transcript



[0:00:05.5] ANNOUNCER:Live, from deep in the heart of Galveston, Texas all the way to the gleaming shores of Jacksonville, Florida, it’s the Green & Greene Show. Here are your hosts, Dave Greenand Jonathan Greene, ready to unlock the mysteries of scaling demand gen. The Green & Greene show is brought to you by LeadCrunch, which has reimagined how to find B2B customers at scale.


[0:10:06.6]DG:I have my good friend Bernice Grossmanon today. If you don’t know Bernice, she is a world-class database marketing expert. I first met her when data.com was a going concern at Salesforce at one of their customer councils a while back. She is just a wealth of knowledge. She has helped many, many companies with a wide range of things and actually can help make that mess that is your data a little bit more functional. Bernice, thanks so much for coming on the show.

[0:10:51.9]BG:Thank you for inviting me.

[0:10:54.8]DG:Bernice, I wanted to talk a little bit about one of my favorite topics. That is the existing state of B2B data out there. For those people who are a little uninitiated, I’ve always found that data is the key to lead generation success. If you can’t actually reach the audience you’re after, it makes it pointless how great the message or the call-to-action is.

Maybe we could just step back a little bit and educate people who maybe are not familiar with some of the terminology, like industry codes, for example. Can you help people understand what NAICS code is, or an SIC code, or some of the common industry codes and the pros and cons of each?

The Scope on Standard Industrial Classification (SIC) codes

[0:11:57.8]BG:Absolutely. The first thing I’d like people to remember is that SIC code, or the Standard Industrial Classification code, was developed in the 1930s. I can’t imagine anyone on this podcast being around in the 1930s. Moving right along, it’s important to remember that, because it was originally established to be able to identify what activity a company was primarily engaged in. It was hopefully going to be used to promote the comparability between companies or enterprises in the US and those in Canada.

The next thing that’s important to remember is that the SIC code hasn’t been updated since 1987. You can’t imagine anything not being updated since 1987. Neither can I. The other thing I would want you to remember is that the SIC code is a four-digit number which identifies what a company does. Sometimes people talk about the NAICS code, or the North American Industry Classification System, which was established in 1997. Don’t ask what happened between ‘87 and ‘97.

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The government was working to replace the SIC system which they considered to be no longer sufficient. This time, they were going to include Canada as well. Now we were going to have the US and Canada and Mexico. It was going to allow marketers to be able to compare various kinds of business statistics once we could find the same kinds of business.

It’s important to remember that the SIC was developed by our government and it looked at what companies said they did. Along came Dun & Bradstreet, and they have created their own extension to the original SIC number. They noticed that the initial numerics weren’t sufficient. What if I said that my company was in agriculture, a pretty big area? It wasn’t enough to give me, the marketer, the opportunity to understand what do I do in agriculture. Do I manufacture agricultural equipment? Do I grow agricultural food for the animals? It was too broad a category.

The Development of the SIC Replacement: North American Industrial Classification System (NAICS)

Now we have SIC. Now we have Dun & Bradstreet. Now we have NAICS. Again, NAICS was developed by our government to become more succinct as to the logical structure of a company. We could look at agriculture; that could be the big category. When we look at agriculture, we could look at manufacturing items in agriculture, or we could look at something different, like developing food or handling animals. Each of these things has something to do with agriculture

In the beginning, this was better. Why was it better? It was better because we had nothing. Remember, this was started in the ‘30s, then it went to the ‘80s and the 90s. However, if a company came into existence and said that they were in agriculture, and they were as specific as possible, great. Most of the companies that were making these calls identifying themselves were big.

There were not a lot of companies that were small, or even midsize, that were saying who they were and/or what they did. It turns out that more and more companies, especially the larger ones were creating different segments of what they did. An agricultural company could be both a company that grew food and manufactured equipment.

This becomes very difficult as a marketer trying to determine how to use maybe the SIC code, maybe the NAICS code, possibly the Dun & Bradstreet code, to begin to identify their customers.

This was done was done by appending. It was done by you sending your list of customer names and addresses to various companies that were offering to append SIC, NAICS, or you could send your data to Dun & Bradstreet. All of these entities came back with numbers. How could the agricultural cupcake company, the company that dealt with animals, a company that dealt with baking began to notice that there was less of a consistency when the appending was done by looking at the name and address? You then had to decide which of these numeric identification systems you were going to use.

Now, the United States has been pushing for moving from SIC to NAICS. Do I think this is a good idea? Maybe. It’s a guide to know, first, only what you want to do. You want to know what companies you have. Do you want to take that information and put it alongside revenue, so that you can begin to see that, when you offer your widget, those companies that are in agriculture spend more money with you than those companies in technology? There are lots of questions. What happens when you ask a lot of questions?

[0:20:33.6]DG:Well, I get a headache.

[0:20:37.1]BG:Okay. Well, I was going to say that most people find they go off in so many different directions that it’s difficult to remember why you asked the questions. Secondly, as more and more companies came into existence from the ‘30s, the names of companies began to make less and less sense. You couldn’t take the name of a company and figure out what it did. The number of companies was exploding. There were probably close to 20 million companies in the United States.

Was every company calling to say, “Hi, I’ve just started a company, and this is my name, this is my address, and this is what I do”? No. Now you were left with various entities, enterprises that were going to take the existing information created by the government and try to append it to your customer list.

[0:22:00.1]DG:One thing that you see a lot is neither NAICS or SIC, LinkedIn, for example. You come across, on lots of web forms, a list of industries and there’s no standardization. Everybody seems like they have their own homegrown group of names, and you’re supposed to select the one that either describes you or that you’re targeting, in the case of a media company like LinkedIn. What are your thoughts? I’m guessing that you’ve come across marketing databases for your clients where it’s not just one thing. They have some SIC codes, maybe they have some NAICS codes, and then they have some of these homegrown codes, all in the industry thing.

[0:22:52.3]BG:Absolutely. They have four. They have some that are SIC and NAICS. Just looking at those two, within the same companies, you will notice differences. A lot of marketing enterprises took a look and said, “All right, if we have to have something like SIC or NAICS, we will. Let’s put together our own list of what companies do, and let’s make that the most important, or the most unique, or the best way to sell our data, whether it’s reselling the data or we’re just selling the attributes, the codes that describe it.”

What’s the best reason to buy something that just came on the market? It’s called new. The second thing you’d be interested in is free. When you begin to look at all the negatives in SIC and NAICS, it doesn’t seem to always be consistent. Other companies that were offering coding and ways to distinguish types of companies decided to develop their own numbering system.

What do I think? I think it just makes it into a vegetable soup. I think you, as the marketer, have to really understand what you want to do with this information. How important is this information? How much are you going to depend on this information?

 [0:24:54.8]DG:You’ve talked about some of the consistencies between the systems and the consistency of the system. I know you do RFPs and evaluations on behalf of your clients all the time. What do you see, without naming names, about the accuracy of these codes?

The Accuracy of Firmograhics

[0:25:16.3]BG:You know what? I turn it around. If I’m going to do a comparative, competitive RFP, I will send all the companies that are good and bid 1,000 to 5,000 of my customer names. I’m going to send all those companies the identical list, and I’m going to ask them to code it with what they perceive as their SIC, their NAICS, or any other coding system they have.

Now I can take a look and see, well, these four companies all have decided that this enterprise, my customer, is SIC whatever. Even if it’s wrong, I know this is not going to make you comfortable, but it’s consistent. You’re working in large numbers. I would look for vendors that compare favorably and consistently with my data, because the only thing I care about is my data. I want my data coded with some industrial classification. I don’t care about anybody else’s. When I go to look at someone who wants to sell this information, I can only make an evaluation based on my data, not based on their conversation.

[0:27:21.3]DG:Do you have any way of knowing how accurate the data is that you get from the various entities out there? Does it accurately describe?

[0:27:39.1]BG:Okay, let me answer your first question first. You can call, because it’s your customer list. After your list has been coded by one or several competitive SIC or NAICS or other coding companies, ask your client, “Are you…?” Then fill in the blank. One of the things that you’re going to learn is, by and large, large public corporations are all going to show up as the same SIC and they will be relatively consistent.

What you’re going to find is you get into the SMB market, the small and mid-sized market, that’s where the numbers are going to go, perhaps, in one direction and the correct answer is going to go in the other. I would say, in those cases, you have two choices. One is to use whichever of the coding systems seems to have the best, or most accurate information, or develop your own, which I don’t recommend.

[0:29:17.8]DG:You alluded to something that I’ve noticed, which is companies, while they may have an assignment of a NAICS code or an industry or whatever, are, it seems, increasingly not one thing. At the low-end of the market, you have a gas station that has a fast food restaurant in it. At the high-end of the market, you have a company like Google where they make software, they make phones, they make all kinds of technology. You know what I mean?

[0:29:51.1]BG:Yes, I do.

[0:29:51.9]DG:They’re not one thing. Yes, they’re a giant search engine company. Yes, they have YouTube

[0:29:58.4]BG:You’re absolutely right, Dave.

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[0:30:00.5]DG:What do you do about that? If you’re really trying to target an industry or a group of industries, what do you do?

[0:30:10.9]BG:Let’s say that what you care about is that small food court, or opportunity to get food. Now you can get that at a gas station. You can get it at Google. There are two things that I think you have to do. First, you need to really learn and use either the SIC and/or the NAICS codes. They’re still the best we have. They may not be perfect. It’s just the best we have. It’s whatever’s available. That’s good. They’re in a category called good. Not perfect.

The NAICS code was developed to begin to break down those silos in enterprises that did different things. The gas station would have a primary NAICS or a primary SIC of gas station. Google would have a different primary. If we began to look at the secondary or tertiary businesses within those enterprises, we would find that the additional NAICS and SIC codes show us.

Now, you, as a marketer, can say, “Terrific, I now see that the gas station and Google both have the codes for food.” Now you have to determine if that is good enough for you. Do you think there might be some other differences between the gas station and Google, like maybe the size of the company? Maybe the number of employees would make a difference in terms of what you’re selling. We’re now going to look at all the secondary and tertiary and below business segments within the total enterprise.

The best I can tell you is that, if it’s really important, you should spend a lot of time doing this. It is very difficult to get the right numbers, but it’s very important to put the effort against it, because the gas station and Google probably both buy bottled water. That’s what you sell. That’s what matters. What makes it different is the gas station buys a lot less bottled water than Google. Now you’ve found that secondary market within the companies you’re looking for. Now you have a lot more work to do.

The Problem with Revenue and Employment Ranges

[0:33:34.7]DG:You hit on another thing that I’ve found problematic in my career, which is employment and revenue data. Just as you were saying, that can give a perspective and a context to the industry coding you have and tell you a little bit about the buying capacity of that organization. Sometimes you see an exact number of employees or revenue, and sometimes you see a range. The ranges can be different from source-to-source. I’m assuming you’ve run into that and just wondering what problems that can create for the marketer.

[0:34:16.0]BG:Many. Many. It actually helps the alcohol and beverage industry. A lot of marketers just go out and have a drink. However, there are several ways that that information is obtained. One is calls made the corporation where they ask, “How many employees do you have?” Usually, you call either that portion of the company that’s providing public information, especially if you’re a public company, or that area within any company that you call.

Next, how many people do you know that know the right number of employees at any company, assuming there are more than four? One source might answer, “Well, we have about 17,000.” Somebody else is going to say, in answer to the same question, “We have about 16,000.” Ranges began to be applied. Then models became popular. You could look at the SIC of a company and other attributes and a modelled score of “number of employees” was going to be provided as with everything else that I’ve been saying so far. Then, overriding the overarching thought is let the buyer beware. You’re not going to get perfect information. You’re going to get, at best, predictive information.

You want to use as many sources as possible, not necessarily to get the right answer, but to get the same answer. Multi-sourcing of a single question is going to be the best way to determine accuracy, unless you can actually call a company and get the exact number. I know that doesn’t make you happy, but my job, as a consultant, is not to make you happy. It’s to tell you what is. It’s to tell you the truth and then help you learn how to use what you get.

So far, we have, as best as possible, the kind of companies, what they do, the divisions or different products or selling areas within those companies. Now we have, as best as possible, some close estimates on number of employees. This is all going to the same place. You want to find as many places that you are going to go and look at, to possibly buy attribute information, that are going to give you the same information. It’s the best we have. It may not be right.

The Challenge with Targeting with Titles

[0:38:11.6]DG:The other very common challenge that I think marketers have is trying to get to the right people inside those companies. To do that, they will use the title quite often. They’ll either infer the level, a manager versus a VP, and department or function of individuals as a means of trying to get at the right people to sell whatever it is they’re selling. I’m just wondering what challenges you’ve seen that marketers have with that data in terms of accuracy and just trying to get at the people they’re trying to get at through that mechanism.

[0:39:02.2]BG:There are huge problems. Back in the ‘30s, ‘40s, ‘50s, ‘60s, and ‘70s maybe, our titles were pretty similar. There were presidents. There were vice presidents. There were directors. There were managers. We could even make a decision on how high a manager or director was, based on if the word “manager” or “director” was the first word in the title or the last word, as in “director of new products” or “new product director”. These are very different people. The first is far higher in level than the other.

Then the ‘70s, the ‘80s, the ‘90s, and on and on and on came along, and we now have titles that seem to have come from another planet. My favorite, (this is true, although I cannot tell you the company) was in one company I worked for where I reported to the “goddess of marketing”. This is a very, very, very large international company. Yeah, I got with it also, but it is important. What we’re saying is everybody wants to be unique, everybody wants to be different. Somewhere along the line, just like we created some strange-sounding, I don’t want to pick on Google, but that would work well in terms of the name of a company. You can’t exactly figure out just from that word what they are.

It became the same thing with titles. I’ll tell you what I do. I take the names of people on my customer list and the company names, and I match them in test for a basis, to find out what other companies are saying is the title of the same individual. You will get a much, much, much lower hit rate than you will with the type of company or the number of employees. That’s because the title of people has become so monumental, so huge.

I would suggest, at best, you can do certain kinds of data searches where you focus on a word in a title. Let’s use the word “marketing”. Then at least you can begin to segment. Also, B2B tends to allow its marketers to develop what are called additional titles. How about if you do some testing to your customer list and direct it to the director of marketing, and then direct another communication to the name you have on your file who is the director of marketing? This is a very small test and it’s very personally directed. You’re going to tell these people that you’re trying to develop consistency and accuracy of titles.

If not, I think you are going to become more and more frustrated as you go deeper into, “Oh, what is a company? What does it do and who are the people that work at that company?” I know you don’t like these answers.

[0:43:52.9]DG:No, they’re totally good.

[0:43:55.4]BG:No, they’re not. They’re good because they’re true.

[0:44:00.1]DG:They’re true. Right.

[0:44:02.3]BG:They’re difficult, because business, in and of itself, is an entity that wants to make itself unique. Why are you going to buy ABC’s envelopes as opposed to DEF’s? They’re going to try to make themselves unique. They do it with the name of their company. They do it with what they do and now they’re going to do it with the people you’re going to be working with.

[0:44:34.6]DG:I have a funny story with that. I was talking to a big company whose name I will not mention. I was talking to somebody there and I was referencing someone else. I said they’re the VP of blah, blah, blah. The person starts laughing. Because that’s the title I’d seen on LinkedIn, I’d assumed it was true. They’re like, “No, they’re a manager.” Oh, man. To your point, I think people create titles to glorify themselves. There’s not a title police that comes out and goes, “Oh, no. You’re not.”

[0:45:16.9]BG:This is correct. By self-providing information, you can make yourself almost anything. It has to do, ultimately, with the response you do or don’t get.

[0:45:34.2]DG:Bernice, when people call you and say, “Hey, my data is a mess. Can you help us,” what’s the path you take them down? What do you ask them to do to get out of that?

[0:45:48.8]BG:The first thing I ask is what they mean by a mess. It’s an easy thing to say, but it’s a difficult thing to describe. If you want to say, “My data is a mess. We went to do an outbound telemarketing effort, and all of the numbers were wrong.” Okay, that’s one mess. “We went to do an outbound telemarketing effort, and we found we didn’t have any area codes.” That’s a different problem. Third, “We went et cetera and what we found was they have very little information as it relates to phone numbers.”

Let’s look at what matters to you about your data. How did you determine that it was a mess? How are you going to use the data? I recently worked for a company and when I looked at their postal addresses, I’ll just say that the mail would never get there. I said to the company, “How can you use this information?” They said, “We don’t. We e-mail everything.” It’s like the elephant and the different people touching the different parts of the elephant. What do you mean by mess? What kind of data are you looking at? What do you want to do?

Now, let’s see how we can work with each of these categories of your data. Let’s talk to the people in your company. Did they all agree? Does everybody think their data is a mess? Worse, what if they think that their data is a mess but in a different way? I suggest you use what I use, which is the Socratic approach. It means to ask a lot of questions. Once you get the answers, what do you mean by a mess? What kind of data is a mess? Where do we get our data from? What do we do to our data before it goes into our database? How many people in our company think that our data is a mess? Do sales and marketing agree? That’ll be a first.

It’s so easy to go to someone, be it me or anyone else, and just say, “Our data is a mess,” hoping that the person on the other end is going to either give you a pill or snap their fingers or wave a magic wand. Since we know those don’t happen, this is a time when everyone has to be very, very specific. This is not a pleasant exercise, but it’s very important.

For some reason, this is how you’ve captured your information. What if it turns out your information is fine. You didn’t ask for area codes, so people just didn’t bother to give them to you. Maybe it’s not the fault of the data. Maybe it’s the fault of what you’re using to ask the questions. It’s very involved, Dave, far more involved than we could ever have time in this conversation.

This is not the time to take the easy way out, because your data, your customers and the information about them, has a direct and very solid line to your revenue or the lack thereof. You’ve got to be willing to put in the time, or hire someone to do it for you and give them the authority to at least be able to report to a small group within the company that has the authority to make the decisions. Does that help?

[0:50:48.1]DG:It sure does. Bernice, I really want to thank you for being on the show with us today. Are there any final words of wisdom you’d like to leave with the audience on this topic of B2B data

[0:51:05.5]BG:I think it’s important that you say what you mean and not what sounds easy. “My data is a mess” is easy. If you take a look at your data and you break it up, you now look at the component parts, you now can start to go through the very rigorous exercise of analyzing your data and correcting it to give you the best possible opportunity to use as a channel to market your customer, product, or service.

[0:51:43.7]DG:Very good words of wisdom. Bernice, thank you so much for coming on today. I really appreciate it

[0:51:50.5]BG:Well, thank you for inviting me. I had a good time.


[0:51:55.1]ANNOUNCER:Thank you for tuning into the Green & Greene Show by LeadCrunch. Green & Greene think differently about B2B and want to start a movement to transform demand gen. If you have ideas for topics or would like to be a guest, send an e-mail to david.green@leadcrunch.ai. If you’d like to find more customers, visit our website to talk to one of our demand gen guides, www.leadcrunch.com.