What Your Customers are Worth (and Why it Matters)

 

What is the value of a customer? What profit can they bring this week? This year? Over a lifetime? It may seem like a simple concept, but many small businesses have no idea what a regular customer is worth to their business. This creates two problems:

  • Uncertainty about effective marketing. What is the number of new customers you’d like to attract and what is an appropriate budget to do that? Defining a customer value will guide your marketing strategies!
  • Ambivalence regarding customer retention. With a metric for measuring customer values, you can navigate appropriate parameters for retaining them or expanding their business. Research shows that increasing customer retention rates by merely 5% increases profits by 25% to 95%!

Customer Lifetime Value

While there are many complex formulas for calculating a Customer Lifetime Value (CLV), a basic approach is to break calculations into five digestible portions, like this:

  1. Average Order Value (AOV). On the most basic level, AOV is calculated by how much money is spent per customer in a year, divided by how many orders are placed by that customer in that timeframe. 
  2. Purchase Frequency (f). Take the number of orders/visits/transactions from the past year and divide it by the number of unique customers you had. The total equals frequency, or how often an average customer purchased from you. 
  3. Customer Value (cv). The base value of a customer can be calculated by multiplying the AOV by the purchase frequency (cv = AOV * f). In this instance, the customer value is being calculated for one year. 
  4. Average Lifespan/Time (t). A customer’s lifespan is how long they actively connect with your business before they move on or go dormant. This can be a complex calculation, but to keep things simple you can either give a broad estimate (an educated guess) or you can calculate an average based on a select number of known customers (adding the length of each of their commitments and dividing by the number of customers). For example: Total Length of Commitment/Number of Individual Customers = Average Customer Lifespan (t).
  5. Customer Lifetime Value (CLV). Now that you’ve got a general idea of a customer’s value for a year and the average customer lifespan, you can use these variables for a lifetime value: Customer value (cv) * Average Lifespan (t) = Customer Lifetime Value (CLV)

While this is a very simplified equation, even a ballpark CLV can give you a more accurate idea of how valuable each client is to your business. What should you look to spend in order to gain a customer? How much should you spend to extend their loyalty? A benchmark CLV will give you a helpful base for marketing, loyalty programs, and sales goals for the upcoming year. Take a look at a more complex approach Starbucks has taken to determine their CLV as a whopping $14,099!1 

Your Customers Are Your Future

A customer represents the future of your success and your livelihood, and it will be difficult to thrive if you aren’t willing to risk or invest to attract new business. What are your obstacles to expanding your reach or enlarging your advertising? Has the uncertainty of direct mail marketing kept your business from growing? Why not rely on our expertise? We offer sophisticated, simple ways to reach a mass audience for an amount that works within your budget. Need a creative concept or help to carry it to completion? We offer prompt, knowledgeable service for every custom design mailing. Give us a call today!

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The Power of A/B Testing: The Difference Small Changes Can Make for Your Marketing

The Power of A/B Testing: The Difference Small Changes Can Make for Your Marketing

Marketing is a decision-based world. At any given moment, you’ve got a variety of options floating in front of you. Which of those two headlines should you use in your next e-mail? Which of those three font choices looks the best on your print flyer? Which of the three graphics will ultimately reflect your brand in the best way?

If you’re wondering how small changes will affect the greater success of your marketing campaign in the eyes of your users, why don’t you just ask them? That, in a nutshell, is what A/B testing is all about.

What Is A/B Testing?

Sometimes referred to as split testing, A/B testing involves comparing two or more versions of something to see which one is more effective. In marketing terms, it’s easy to see the value of this approach almost immediately. Do you have two similar, yet different, versions of an e-mail subject line and are wondering which one might be the most effective? Get an e-mail list of 100 of your average customers together and try both at the same time. Send one version to a group of fifty customers and the second version to the other fifty. See which one performed better (and why) before making the decision of which one to use for your whole campaign.

A/B Testing Statistics

Don’t just take our word for it – there is a wide range of statistics that prove just how valuable A/B testing can be. According to a study conducted by Steelhouse, A/B testing is THE most used method for improving conversion rates in marketing campaigns. It isn’t just marketing companies that are getting in on the action, either. During his re-election campaign, President Obama was able to raise an additional $60 million dollars through a carefully designed, calculated A/B testing regimen.

The important thing to understand is that you can (and should) use and A/B test on every portion of your campaign before you bring it in front of the eyes of the widest possible audience. Take your website, for example. As the “welcome mat” of your virtual identity, A/B testing your website is the perfect way to see which of those two designs you’re thinking of is better. This is incredibly common – in fact, Pardot research revealed that Google ran more than 7,000 A/B tests on its own interface in 2011 alone.

But again: it doesn’t actually matter what you’re A/B testing, just that you are. In print marketing, this concept can be just as effective. The key is that you’re not taking anything for granted. You’re getting your collateral in front of the eyes of real people, seeing how they respond, and then using that as the basis of actionable decisions that you make moving forward.

In the world of marketing, it’s important to remember the old saying of “you can only make one first impression, so you’d better be sure that you’re making a good one.” Launching a campaign before it’s ready means you can potentially shoot yourself in the foot before you’ve even had a chance to begin. Investing in A/B testing is one way to avoid exactly that type of problem for now and for all time.

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Building Anticipation for a New Product or Service Through Marketing

Building Anticipation for a New Product or Service Through Marketing

Marketing materials that you put out into the world aren’t just a great way to introduce a new product or service to your target audience. If done properly, they can also be an invaluable way to create a huge amount of buzz and anticipation surrounding an upcoming product or service launch. That can then translate into increased sales when it is eventually ready for release. By keeping just a few, key things in mind, you can use hype to your advantage and build the type of momentum that most businesses can only dream of.

Master the Art of the Tease

One of the major lessons to be learned about building anticipation for a new product or service through marketing is to master the concept of teasing. If you were still a year out from the launch of a new product, for example, you wouldn’t necessarily want to send out a mailer detailing all of that product’s functions right away. Not only do you not want to “give the game away” just yet, so to speak, but a year is an incredibly long time in the world of business. Things can change, so you don’t want to lock yourself into something that you may end up dropping down the road anyway.

Instead, you can send out a mailer talking about the exciting new product that is on the horizon and detail all of the hard work that you’re putting into it. Instead of talking about what it specifically does, talk about the problem in your customers’ lives that it is designed to solve. Talk about the overarching goal of the product in a way that both gets people excited and makes them want to learn more.

It’s About Steady Updates

Another major technique to make use of when building anticipation is to check in periodically with your customers prior to launch. You wouldn’t want to send out a mailer teasing your product and then not check in again until it’s ready to launch. You would want to send out materials two, three, or even four times during the year, revealing larger bits of information each time. Not only does this give you a chance to build the hype surrounding your product or service a little more each time, but it also helps to keep it in the forefront of a customer’s mind – even though it isn’t released yet. Not only will your customers have a higher level of anticipation, but they also won’t have a chance to forget about what you’re up to.

Learn From Hollywood

If you want to take a master class in building anticipation through marketing, look no farther than movie trailers. Every Hollywood blockbuster usually follows the same format when it comes to their previews. First, roughly a year from release, a teaser trailer makes its appearance. This preview is usually around a minute in length, gives away virtually none of the plot and really just broadcasts the look or spirit of the movie. Six or so months later a longer, full trailer is released, which is usually about two minutes. This expands on the promise of the teaser, gives a way a bit more of the plot, but still leaves a lot to the imagination. A final trailer is released in the weeks before the movie itself, which is usually around three minutes and not only lets you know exactly what the plot will be, but also showcases amazing images that you immediately need to see more of. Building anticipation is all about escalation and Hollywood seems to have created a formula that works wonders, regardless of the type of business that you’re in.

Marketing is one of the best tools that you have to not only announce a new product or service to the world, but to build the type of anticipation that always translates to increased sales.

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Predictive Analytics: One of the Keys to Direct Mail Marketing Success in 2015 and Beyond

Predictive Analytics: One of the Keys to Direct Mail Marketing Success in 2015 and Beyond

Direct mail marketing is still one of the best and most efficient ways to connect to your target audience, even in this social-media-centric world. But that doesn’t mean you need to eschew technology altogether. Case in point: predictive analytics are quickly becoming not just a recommendation, but a requirement for anyone running a direct mail campaign.

What Are Predictive Analytics?

At their core, predictive analytics leverage statistics, data mining, and similar techniques to create a prediction about future behaviors. The idea is to take the past behavior of your target audience and use it to make educated guesses about future activities.

The concept is used in Internet advertising on a daily basis. Have you ever wondered why you suddenly see advertisements for home audio and video equipment or Blu-ray movies right after you purchase a high-definition television set online? It’s a combination of programmatic advertising and predictive analytics at play. Marketers know that based on your purchase, there are certain types of accessories you can definitely use.

If you just bought an HDTV, it goes without saying that you could probably use some shiny new Blu-rays to play on it. By targeting you with advertisements based on that information, businesses know they have a much better chance of making a sale than if they randomly targeted 10,000 people, many of whom might not have an HDTV at all.

Many businesses don’t realize this same idea can also play a very important role in how their direct mail marketing campaigns are conducted.

How Do Predictive Analytics Help in Direct Mail Marketing?

The major benefit predictive analytics brings to the world of direct mail marketing is one of precision. You no longer have to spend time and money each month to send mailers out to all 3,500 people who live in a particular ZIP code. The fact you were sending out materials to many people who ultimately had no interest in your products or services was always just an accepted “cost of doing business,” but that doesn’t have to be the case any longer.

Thanks to predictive analytics, you now have a better chance of targeting the RIGHT people within a particular ZIP code based on their past interests and behaviors. Instead of sending out 3,500 mailers and achieving a 20% conversion rate, you can save time and money by only sending out 1,000 mailers while achieving an 80% success rate at the same time. It’s about giving you a much smarter way to spend your marketing dollars. It’s also about empowering you to stretch your marketing campaign’s strength even further.

In direct mail marketing, success doesn’t mean spending as much money as possible. Instead, true success and market penetration are achieved by spending every dollar the right way. Whether you have $10 to spend or $10,000,000, that theory will always hold true. By making excellent use of advancements like predictive analytics, you can make sure your important materials are actually getting in front of people who find them valuable. This will go a long way toward increasing not only the efficiency of your campaign, but also its general return on investment.

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Lessons from Vacation Planning

Lessons from Vacation Planning

It was almost the end of senior year at the university. Four close friends — Sarah, Maria, Andrea, and Kaitlin — were preparing to celebrate the momentous achievement of earning a degree. To make their upcoming graduation even sweeter, each had found employment that would begin a few weeks after they received their diploma. These girls had plenty to celebrate.

To make some final memories before they headed off into the work world, they decided to take a trip together. They quickly realized, however, that each one of them had a different idea of what constitutes the perfect vacation.

Sarah dreamed of spending days relaxing by the ocean, doing little besides napping by the water, swimming, and enjoying fantastic food by night.

Maria desperately wanted to explore some fantastic cities. She had never been to New York City and thought the excitement of the Big Apple would be perfect.

Andrea agreed that cities sounded perfect, but she thought one of the historic cities of Europe sounded more appealing — a dose of culture along with the excitement of a city.

Kaitlin was interested in an active vacation, and exploring the Grand Canyon sounded like the perfect adventure to her.

As the girls worked to reconcile their different ideas of vacations, Sarah started laughing. The girls turned to her with confusion and asked what could possibly be so funny. Sarah sighed and said, “I’m going to work for a marketing firm in two months, and I know part of my job is going to be developing buyer personas for a startup. I learned in class how important it is to really understand your buyers, but we’ve all demonstrated this lesson far more clearly than any textbook.”

Here’s what Sarah meant.

Marketing one-on-one

Customers expect personalized marketing. General information that leaves questions about the value of products and services won’t engage them. Thanks to the Internet, customers are now in control of the beginning of the buying process. They can read online reviews and research companies long before they make a purchase.

To answer this consumer need, companies must learn how to market to their customers on a one-to-one basis. This requires knowing customers on a personal level and knowing what they seek. In-depth buyer personas are essential for this task.

Using buyer personas for personalized marketing

A well-developed buyer persona will mean understanding details far beyond gender and level of education or job. For example, all of the girls in the opening story were college-educated women in their early 20s, but they also had vastly different interests. A quality buyer persona will include information about budgets, pain points, goals, and roles within a company.

Using this information can help you determine the questions buyers are likely to have. This can guide the creation of content and marketing materials that speak directly to potential customers.

The more precise you can make your marketing materials, the more effective they’ll be. Identifying buyer personas is an excellent way to refine marketing efforts and better understand exactly who will be responding to campaigns. If you’re interested in improving your marketing efforts, speak to us today. We’d be happy to help you learn more about how to market to your intended audience.

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How Social Media Can Help With Market Research

How Social Media Can Help With Market Research

Anyone who has ever worked in marketing understands the value of market research. Solid research can teach you about your intended audience and what your customers are looking for, which will allow you to grow your company and position it for success.

Imagine if nearly everything you needed to know about your customer base existed in a single space, and all you needed to do was find a way to listen to the conversation. Well, it is — and you can. That space is social media.

Social media (and the Internet in general) has come to dominate nearly half the globe. Customers use the Internet to communicate and connect with each other and the brands they want to do business with. These customers are telling you what you need to know about the needs of your intended audience. Here are a few ways you can put social media to work for you.

Pay attention to how your customers speak

You likely already know you should be monitoring social sites for mentions of your brand in case customers register complaints or talk about experiences they had with you. There’s more you can get out of these basic brand mentions, though.

Pay attention to how people speak about your company and the services you provide. Listen to what your customers are mentioning as the most important aspects in their buying experience. What matters the most when developing customer loyalty? What draws people to your products and services? What causes them to go to your competitors? This insight will help you improve the customer experience and better meet their needs.

Get quick results for surveys

Rather than spending weeks or months gathering data from surveys and study groups, you can use social media to learn about your customers significantly quicker. Pose questions to your followers, and encourage customers to share experiences with your brand to get a feel for what matters most to them.

In many ways, the information you glean from social media might be even more valuable than what you learn from focus groups. Nearly 3/4 of all people with Internet access use social media in some form. Using social media for your research, therefore, has the potential to help you gain a much more complete picture of industry trends and customer preferences.

Using social media for your surveys can also be a fantastic way to control costs related to social research. There are a variety of free tools available across a number of social platforms, but even the ones that have a cost tend to be more cost-efficient than spending the time and money to conduct surveys and poll focus groups.

Get real-time results

Traditional surveys often take several weeks or months to process and analyze. When you use social media to gather this important information, you get your answers in real time. This can help you implement positive changes for your customers and take advantage of the information you learned, while remaining confident that trends have not yet shifted.

Social media is a valuable tool for market research. It can help you learn more about your customers so you can better meet their needs and grow your business.

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The Rise of Big Data and Its Growing Importance in Marketing

The Rise of Big Data and Its Growing Importance in Marketing

Big data has made quite an entrance into the world of marketing. Though it’s largely been the playground of big brand names, many marketing professionals predict it will soon become an important piece of the marketing puzzle for companies of all sizes. Digital marketing has the power to produce an enormous amount of data about consumers and their spending habits, as well as what they seek. Companies that learn how to master this information to improve their marketing campaigns will be far better equipped to meet customer expectations and improve their bottom lines.

What big data can do for your company

With so many customers doing their shopping and research online, a nearly infinite amount of information can now be gathered on each potential lead. These details can provide you with clues to help you market your products more effectively and encourage visitors to convert into paying customers.

Why big data will become so critical

While the Internet has made it possible to work on a global scale and find your own individual niche, it has also produced a marketplace where countless businesses now perpetually vie for the attention of customers. Many people have started tuning out the perpetual marketing messages they encounter on their favorite websites, in their email, on the radio, and even on the buses they see on the way to work. Big data can give you the tools you need to better understand exactly what customers seek, so you can reach the right people at the right time with the right content, rather than broadcasting more general messages to larger audiences. Big data is all about learning to communicate better with customers and figuring out exactly what they seek. It’s bringing personalization back into marketing.

Using data to refine your marketing campaigns

Your company can use big data in a number of different ways. Analyze your sales records over the past few years. Look for seasonal trends and how various outside factors have influenced sales. Use the information to adjust your expectations and prices. You can also use big data to determine a more exact profile of your ideal buyer and how to reach them.

One of the biggest challenges for smaller companies is learning how to use data to adjust marketing campaigns. Many big data service providers focus primarily on larger organizations. If you’re a small business owner looking to capitalize on big data, look for a program that offers flexibility and scalability, so you can pick and choose the features that matter most to you. Only pay for the services you need, rather than all-encompassing packages that can be particularly crippling for small businesses.

Big data has influenced businesses of all sizes to begin transitioning from decision-making based primarily on feelings and perceptions to decisions based on concrete information and data. If you’re interested in taking advantage of what this new technology can offer, look into finding an affordable plan. We’d love to work with you to help you integrate your new insights into your marketing campaigns.

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Just What the Teacher Ordered: The Business-Building Benefit Marketing Reports Provide

Just What the Teacher Ordered: The Business-Building Benefit Marketing Reports Provide

By the time most of us graduated from high school, we were well acquainted with researching, writing, and editing reports. College often meant more of the same.

While few would list report writing as a “highlight” of their academic career, those hours spent compiling reports were not spent in vain. Sure, report writing helped many of us learn how to plan out a project and conduct research, but they also taught us a bit about the topics we were researching, too. By forcing us to look in depth at the various subjects we were studying and analyze them from a number of different angles, we gained a far better comprehension of the subject matter than we might have if we had just read the textbook.

It’s important to remember those benefits, especially when it comes to marketing your company.

How marketing reports are like your old school reports

Like their high school and college counterparts, marketing reports can also feel frustrating. People often view such assignments as time wasters that are only done because they’re demanded by the c-level executives upstairs. In reality, however, marketing reports can offer considerable insight and help everyone better understand the company’s marketing strategies and how they can be improved.

When you sit down and really invest the time needed to complete a thorough marketing report, you’ll walk away with a much better understanding of your company’s current marketing practices, how well each campaign is performing, and how it all relates to your company’s bottom line. Without a well-researched report, it can be easy to gloss over weak spots and overlook opportunities for continued growth.

What a marketing report should exam

There are an infinite number of metrics a marketing report can examine, but some have more appeal and a greater ability to shed light on the success of your marketing strategy. Here are a couple to consider.

How much does it cost the company, on average, to obtain each new customer?

Take a look at your total cost in sales and marketing over a given period of time. Then see how many customers you obtained in that same period. Divide the cost by the number of customers, and you’ll have your average cost of obtaining a single customer.

Determine what percentage of that cost is related directly to marketing, so you can see which campaigns worked and which ones didn’t. Such insights can prove valuable in helping the marketing team improve their regular performance and illustrate the success of any changes made.

How many leads were generated directly from marketing?

Your marketing team should also be able to report how many successful leads were generated specifically from marketing efforts. Begin by calculating the percentage of customers who began as marketing leads. Then look at how many leads started elsewhere (e.g., in sales), but were influenced by the marketing department before making a purchase.

For added benefit, try to break down specifically where these marketing leads are coming from. Are prospects downloading certain ebooks? Do they subscribe to your blog? Did they take an online webinar?

Marketing reports offer valuable information about the state of your company’s marketing programs and what can be improved. Although they might be viewed with the same frustration as the school reports of your youth, they can also offer incredible insight and education. So don’t overlook the opportunity reports provide to regularly analyze the success of your marketing efforts.

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Do You Know Who You’re Talking To?

Do You Know Who You’re Talking To?

When you sit down to develop marketing materials, you know you’re trying to reach potential customers. If you’re unclear who that might be, however, you could find yourself wasting time, energy, and money. Taking the time to develop your official ‘buyer persona’ can make the task of figuring out how to reach these potential customers significantly easier.

What is a buyer persona?

A buyer persona is basically your ideal customer. It’s a profile you develop based on the type of customer you’re trying to attract. This profile includes information about gender, lifestyle, income level, where your ideal customers work, and what jobs they perform. It also contains critical information about what types of problems they face at work and how your company can solve them. A buyer persona might look something like this:

Marketing Mike is working to lead his marketing team for his small business. He’s in his late 20s or early 30s and makes about $80,000 a year. Mike is struggling to make his superiors realize the importance of marketing because they’re threatening budget cuts to his department.

For a company that focuses on helping clients maximize their marketing efforts while minimizing costs, this buyer persona could provide the critical insight they need to reach Mike and help solve his problem.

How do you develop your buyer personas?

Buyer personas provide the basis for all your marketing efforts, so it’s critical to develop them on solid evidence and not just who you ‘think’ would be interested in your product or service. Begin by speaking with your existing customers. Get a feel for who they are and what has brought them to you. Complement this information with some research about the industry, the market, and who is typically using services like those you provide.

As you begin to compile these different sources of information, you should start to see some patterns develop. Use these patterns to begin grouping customers into a few different buyer personas. It’s critical that you always seek to learn the ‘why’ behind the ‘what’ as you do your research. It’s not enough to know that Marketing Mike wants to find a more affordable way to market. Understanding the motivation behind his drive is what will help you effectively reach him.

How to use your buyer personas

Once you’ve established your buyer personas, they’ll run your marketing campaign. You’ll develop content that speaks to the questions and problems your personas are facing. You’ll create promotions and attention-grabbers oriented toward these specific people.

Buyer personas give you the additional edge of a targeted approach. No company can be everything for everyone. By developing buyer personas, you’ll know exactly who you’re trying to reach. You’ll have a clear goal and a much better chance of reaching the people who are most likely to buy from you.

A successful marketing campaign means reaching your potential customers and making your company’s value to them clear. That task becomes much easier when you know exactly who you’re talking to. Develop your buyer personas to refine your marketing strategy, and you’ll find your chances for a successful campaign improve drastically. If you’re ready to start refining your marketing strategy, contact us today.

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Do You Know Why Your Customers Like You?

Do You Know Why Your Customers Like You?

Most business leaders understand the importance of market research, particularly during the startup phase. Those interested in starting a business should research their potential customer base and determine how successful their product or idea will likely be within that particular market long before building their first prototype or contacting their first client.

Yes, we all know how vital market research is for startups, but it’s equally important for well-established businesses — even highly successful ones. Unfortunately, it’s easy to let research fall by the wayside once your company has begun seeing success. Don’t. The need for market research doesn’t go away once sales start coming in. Instead, it offers valuable insight you can use throughout your marketing campaigns to successfully grow your business.

What marketing campaigns can tell you

Marketing campaigns offer unique insights into what your customers are actually thinking. All too often, we as business owners think we understand our customers, only to realize our own assumptions have colored our perceptions. Perhaps you thought your customers valued low prices, only to discover when you shrunk your customer service staff in an effort to lower prices even more that what they had really valued was your outstanding customer service. Market research and surveys of current and potential customers will let you know exactly what your customers appreciate about your products and services and what needs to be improved.

Understanding the virtual customer is a bit more difficult, because people will stumble upon your website for a wide variety of reasons. Knowing customer wants can lead to higher conversion rates, a better social media experience, and a better reputation that spreads significantly faster than ever before. Customers who have good experiences on your website are more likely to spread the word about their experience on social media, which can be very valuable for growing customers. To get an accurate picture, monitor a variety of sources, including social media and web traffic.

Where can this help?

In marketing

When you know exactly what it is your customers already like about your products, you’ll have a better idea about what to emphasize to new customers. The traits that already appeal to existing customers are likely going to be the ones that appeal to new customers, too. This will help you build more targeted campaigns and reach your audience more efficiently.

In making business changes

When you’re looking for ways to improve, say, your customers service procedures, market research can tell you which steps in the process matter the most to customers. Customers will have opinions about each step, whether in the buying process, the return process, or the customer service process. It’s often too difficult to completely revise everything, but knowing which parts matter the most to customers can help you optimize your revision process and make customers happier faster and with fewer resources spent.

Knowing when and how to expand

If you follow the first two steps well, chances are there will come a time when you want to expand. Maybe you’ll be looking to add more products or expand into new markets or both. Regardless of your goals, market research and having an intimate knowledge of your customers will give you the insight you need to complete this important business step wisely.

As you grow your business, it’s easy to get caught up in the day-to-day operations and neglect market research. Understanding what makes the process so critical can help motivate each of us to stay on top of the research and find greater success. If you’re looking for help getting a research-based marketing campaign off the ground, contact us to get started.

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