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Something new in SIC codes.

Something New in SIC Codes

If you are not yet into using Standard Industrial Classification (SIC) Codes to classify your customers and identify prospects, you should be. With the government's recently available 1987 revisions, segments of business and industry have now been expanded to 1006 four-digit categories. And further enhancements have enlarged their scope to 2500 six-digit codes and more than 15,000 eight-digit codes.

SIC Codes are a valuable marketing tool for foundries, since their careful use can dramatically reduce the cost of direct mail promotion and allow you to more accurately identify prime prospects. If you think your foundry is too small to go to all this trouble of defining where your markets are, just consider the high cost of calling on people who are not good prospects. Also consider the profit opportunities that are missed by failing to contact your best prospects.

State manufacturing directories are still a useful tool but their utility does not compare with some of the more sophisticated data bases such as the new Dunn's 2 + 2, which classifies industry SIC segments by six- and eight-digit codes.

When defining your foundry's prospect universe, you will be concerned with both geographic parameters and SIC Codes. Your marketing area will be determined by your ability to be competitive with certain customers who are remotely located from your foundry.

Increasingly, foundries in the Midwest consider their marketing areas everything east of the Rockies. West Coast foundries routinely ship into the Midwest; New England foundries ship to California; and vice versa. Canadian foundries ship to Texas.

However, you should go where the action is and where you can be competitive and generate acceptable levels of profit contribution. In serving more distant areas, you'll find the cost of sales and service tends to be the most limiting factor, not freight costs.

Building a Universe

After defining your geographic marketing area, the next step will be to build an SIC universe, or list of SIC Codes that you believe represents your best potential prospect industries in the states you've decided to cover. Our principal area of concern will be plants in the metalworking sector. There are at least 50,000 of these with 20 or more employees, divided into about 2500 six-digit SIC categories.

In foundry marketing, this six-digit segregation is vitally important because it provides a means of selecting small segments of much larger industries, which are defined by four-digit codes. For example, the four-digit code for pumps and pumping equipment is 3561, which is divided into 13 six-digit segments. Further segregating these 13 codes into eight-digit classifications defines these pump equipment segments even further.

In practice, we would probably use only three or four of these six-digit pump equipment groups. So we specify just those six-digit codes in which we are interested and save ourselves a lot of time and effort that might be spent on contacting plants that are not really prospects. The limited four-digit coding of most state and national directories is a serious and unnecessary handicap.

In building your SIC universe, first get a copy of the four-digit SIC Code listing. This is available from the U.S. Government Printing Office. Next, you would be well advised to contact Dunn's Information Resources Division for a six- and eight-digit SIC listing. Start out by selecting those industries to which you already sell. This will serve as your SIC nucleus and will provide a group of prime prospect industries that constitute your present customer's competitors--an area in which you have demonstrated your ability to be competitive and produce to known quality and other customer requirements.

Next, look for industries with casting requisites similar to those of your customers. Let's say you produce pump housings. There is a great deal of commonality between some of these and compressor housings, some valves, gear cases, etc. What you're looking for here is similarity in size and weight, configuration, coring, metallurgy, etc. Add these to your first group.

Finally, include those industries with which you have little familiarity but think that there could possibly be a fit between your capability and their casting requirements.

List of Prospects

By now you'll have a list of probably 100 SIC Codes across perhaps 15 states. Including all plants with 20 or more employees, this will provide a prospect universe of about 3000 plants--enough to give you a good start on an effective market prospecting program.

In making the selection of SIC Codes, by all means consult with your production people, salesmen and manufacturer's reps. Get a consensus of which markets are best for you. If there is a question of whether to include a particular SIC Code or group of codes, by all means do so. It is better to have 50% more data than you need than 10% less. And it is quite inexpensive to increase the size of your list once the initial programming is accomplished.

Once you begin defining customers and prospects by their SIC Codes, you will wonder how you ever muddled through without this important marketing tool. And recent refinements in classification make SIC data even more valuable than ever.

T. Jerry Warden Foundry Marketing Services Estero, FL
COPYRIGHT 1989 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:standard industrial classification
Author:Warden, T. Jerry
Publication:Modern Casting
Date:Oct 1, 1989
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