Why SIC Codes are a dangerous way to target companies

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By: Jason Dilworth on 3rd April 2020, 7 minute read

If you're part of a business that predominantly provides a product or service to other businesses, you'll know that making sure your targeting is right for any given sales or marketing activity is absolutely key to success. Feed a poor level of data into any process and at best you're going to be wasting resources on a message that gets in front of the wrong person. At worst, you're going to find yourself on the wrong side of laws that exist to make sure everyone plays fairly.

With good data you can make sure your message gets to those who already need you, but just don't know it yet. Much better, I'm sure you'll agree!

The biggest mistake that UK companies make when trying to target other UK companies is to rely heavily on SIC codes, and I'm going to tell you why we're extremely careful in our use of them after a quick bit of introduction to make sure everyone's on the same page.

What is a SIC Code?

A SIC code is defined as:

“Standard industrial classification of economic activities (SIC): a description of your company's nature of business.”
— https://www.gov.uk/government/publications/standard-industrial-classification-of-economic-activities-sic

Companies House actually uses a condensed version of the list compiled by the Office of National Statistics, but theirs still contains 731 potential classifications for any business. They range from 93130 – Fitness facilities to 19201 – Mineral oil refining and almost everything in between. So there should be absolutely no problem in deciding that you want to target gyms and then finding a download somewhere of all UK companies with their SIC Code listed as 93130, right?

Case Study: Peer to Peer Business Lender

How we developed a unique targeting approach and improved lead volumes from direct marketing by more than 80%.

Unfortunately, wrong.

Where it goes wrong

Take RESPONSE PHYSIOTHERAPY LIMITED for example, they are listed under companies house with the SIC Code 93130. But when we look at their website we find that they wouldn't really be a fit for a gym equipment manufacturer targeting the businesses you'd expect under "Fitness facilities". Conversely, you can find a company like BREAKSTONE FITNESS LTD who would be a great fit but are listed with their SIC Code as 85310 - General secondary education. By targeting the first code, we'd end up with some companies who absolutely don't fit, and we'd miss some that do.

There's another big problem, too. Even with 731 potential classifications for businesses, there are still entire industries which don't have a SIC Code specific enough for them. To be honest, our first example of Response Physiotherapy is one that falls into this category. You'd expect that there would be a classification for physiotherapy in some form, but actually the closest you can get is with 86900 – Other human health activities. Much better than their current classification, but if you're specifically targeting physios then you're going to find plenty of other businesses in that group that you'll need to filter out.

How it goes wrong

The first reason that companies can end up with a SIC code that doesn't actually describe their business is the one we just discussed. When there's no relevant SIC code to put down, a company can't do much more than pick something that sort of matches. If that was the only reason that SIC codes ended up wrong, I think we could all live with that!

The second reason that I know of is laziness. Some of you reading this will have registered a company, and part of that process is to define which SIC codes your company operates under. It's easy to just get it done by picking something sort of relevant and moving on to the more important tasks you have when setting up a business. That's probably how a huge amount of Taxi companies, who should be filed under 49320 – Taxi operation end up with the rental companies in 77110 – Renting and leasing of cars and light motor vehicles for instance.

The third reason is very similar, and that a combination of laziness or ignorance by a third party registering a company on their behalf. Often companies are registered by an accountant or solicitor involved with the inception of the business and these people are far less likely to care about whether it's done absolutely correctly. Again, the mindset of get it done, get on with something else prevails, which is totally understandable.

The fourth and final reason I can think of is as a consequence of a business pivot.

“Sure, maybe we were once a gym, but now we operate an airline, OK?”
— A business owner somewhere, probably

I can absolutely see why a company would forget to update their classifications when going through a massive business change, although the argument could be made that most pivots that result in a large enough change to be in the wrong SIC code probably warranted a new company anyway...

So what can we do to avoid the targeting dangers?

Now that we know how and why SIC codes can end up being a less than perfect targeting method on their own, our thoughts can turn to deciding how to guide ourselves to the right data. In my opinion and experience, we don't need to throw SIC code targeting away completely, but we need to overlay and augment it with other sources of data.

You could find a way to gather all of the businesses from somewhere like Yell.com (with their business classifications) and combine that with your company data to find the outliers in a given SIC code, for instance. You could theoretically run the homepage of every potential website you want to target through something like Google's Natural Language API to check whether the text on the page closely matches the subject you'd expect that company to be talking about.

Those, and more, are the sorts of ways that we try to ensure that any data we're using in a marketing campaign for our clients is as likely to be relevant to the message we're sending as possible. It's not something that can be done perfectly, or at least I haven't found a way yet, but working in that direction ensures that clients are far less likely to waste resources or find themselves with legal issues.

If you want to shortcut the task and take advantage of the techniques and processes we already have in place around data discovery head to the contact page.

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Jason Dilworth

Author

Jason Dilworth

Jason rolls together knowledge of programming, automation and data analysis to provide a high level of technical marketing expertise to The Marketing Eye and its clients.

Technical Director / The Marketing Eye

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