Think small for the potential of big rewards

Research shows small firms are keener than ever to review their suppliers – a golden opportunity for service providers to demonstrate how they can be of value to the SME and win new business.

Businesses from “one-man” bands to those with a few hundred staff* make up the colourful small- to-medium enterprise (SME) sector in the UK.

There are 1.26 million of these firms fighting the current recession through streamlining and adjusting the way they trade. This is proving an ideal opportunity for suppliers as businesses look for new deals that better suit their needs, according to a major study provided exclusively to Marketing Week.

The British Culture Index (BCI) research, conducted by SME think-tank CultureMap in collaboration with TGI, suggests the current climate is a good time for suppliers to target small businesses as they look for alternative providers.

As a result of the slowdown, almost a third of the 3,500 SME founders, owners or board directors questioned in this nationally representative piece of research are cutting costs across all parts of the business. As such, they are open to considering new deals.

SMEs are most likely to change their utility suppliers in the recession; 14% have already done so. Eleven per cent have changed their IT or telecoms suppliers and 7% have swapped their bank. Sixteen per cent have changed other types of supplier.

But SMEs’ cost concerns don’t mean that suppliers aiming to pick up business should focus only on price. The most important factor for SMEs changing suppliers is “product quality”, with 73% citing this as the most important reason for switching products and services. “Value for money” accounts for 58% of SMEs changing suppliers, while price accounts for 57% of respondents’ reasons for making changes.

John Owrid, head of CultureMap, says these results reflect SMEs’ understanding of what is important to their own customers in a recession.

He says: “Quality comes out on top because most small businesses recognise in their own offer that if they take their eye off the ball and let their own quality standards slip, there is a risk they will lose customers.”

Despite these opportunities, however, suppliers are falling short when they communicate their offer to SMEs. This is because they are not on the same wavelength, argues Owrid.

“Marketing aimed at small businesses tends to be heavily dominated with messages that are very similar looking. They tend to treat all small businesses in the same way,” he says.

He adds that too many supplier propositions are based on products that will save time and money and do not focus enough on quality.

He explains: “If you’re looking at something as esoteric as voice over IP (VoIP), then you probably want to know more about how this might change a business and how it might add value. There’s quite a lot of superficial marketing that doesn’t seem to recognise [this].”

Even the media channels that are being used to communicate offers to SMEs are not being utilised to their best effect, according to Owrid.

He says marketing techniques that are achieving success in consumer marketing, such as online communities and recommendations, are also effective in B2B marketing.

“There’s a very strong trend towards seeking advice from peers and other businesses, and I don’t think that is being used as effectively as it is in other markets, like consumer markets,” he adds.

SMEs are increasing looking for recommendations and reviews, just like consumers do on sites such as Tripadvisor. Suppliers that offer this kind of facility and promote reviews and recommendations of their products and services may have an advantage.

Word-of-mouth is seen as an increasingly effective tool as businesses become desensitised to traditional above and below-the-line marketing.

“The precepts are the same [as consumer marketing]. Everyone’s bombarded with more propositions for which they have a certain attention span, so they do tend to become more reliant on communities and peers,” claims Owrid.

Suppliers can also appeal by helping break down a barrier of cynicism in the SME world. Just 3% of SMEs think that corporate brands understand them and just 2% think the government understands them.

Suppliers that are able to show they are meeting the individual needs of particular SMEs and are sensitive to their demands are likely to make more headway than their competitors.

SMEs with different ambition levels also have different ways of doing business. Those with aggressive growth targets are a quarter more likely to switch supplier, compared with the average SME.

Since this type of business is open to changing the companies with whom they do business on a regular basis, suppliers that can demonstrate very clearly how they place importance in helping their clients achieve growth may be able to keep SMEs loyal for longer.

There is a big split down the middle of the SME sector with 50% claiming to be ambitious and 50% claiming they are “happy as they are”.

Owrid points out: “If only half the market is interested in growing and you’re advertising en masse to small businesses, only half the market is going to be receptive.”

So suppliers that offer products that help businesses to grow will need to consider who exactly receives this message, otherwise marketing budgets could easily be wasted on ill-advised and poorly targeted campaigns that don’t speak to their target audience.

Yet conversely, while they are open to switching suppliers, SMEs also claim to be against taking unnecessary risks in the current economic climate. Only 3% would describe themselves as risk takers, 55% as risk managers and 42% as risk adverse. Suppliers need to think about how to communicate positively that stepping into the unknown and switching to their products and services will be safe and secure.

The research suggests that SMEs claiming to embrace technology are more likely to see success on the bottom line. Those SMEs that actively use Twitter and Facebook for business purposes are 28% more likely than the average SME to have seen an increase in revenue over the past 12 months and are 41% more likely to have an aggressive growth target this year.

This gives suppliers hoping to appeal to those businesses a chance to link their services with being technologically savvy themselves. Positioning their offers like this could encourage SMEs to make the switch.

In this climate, customer service is a low priority for those looking to change suppliers. This is down to a rise in IT expertise within the SME sector and a feeling that customer service provisions come at a cost and that price is not necessarily worth paying for.

The multiple views, opinions and strategies used across the SME sector mean that it is tricky for suppliers to comprehend all the different needs these businesses possess.

But suppliers might be interested to see that the research shows that smaller businesses are coping much better in this recession compared with the one in the Nineties. If you look at the small business revenue trends over the past 12 months, 43% say their revenues have stayed the same, while 33% have seen an increase. A much lower percentage – 24% – have seen a decrease in revenues.

This is corroborated by the trends in headcount numbers. Eighty-four per cent have seen their head count stay at the same level as it was before the recession, 10% have seen an increase and only 6% have seen a decrease.

There also seems to be a disparity between media reports that suggest small businesses are struggling to get bank funding and the TGI data. The research shows that 71% said they can still obtain business credit at the same levels they could before the recession. Only 20% claim it is more difficult.

The stories of small businesses being stranded by a lack of funding may be a “red herring”; these figures suggest that most SMEs appear to be coping well and dealing with the strains of the recession.

The suggestion that SMEs may be less affected by the strain of the recession than their larger corporate peers means that despite any challenges, suppliers may have more to gain now than at any other time.

It appears that those companies able to treat SMEs as individuals with aggressive growth targets and provide the technology to help them do this may well find this is the perfect time to do business.

*Government definition of an SME is any business from sole traders up to 250 members of staff.

The frontline

We ask marketers on the frontline whether our “Trends” research matches their experiences on the ground

Robin  Mackenzie, marketing director, BT Business

Communications and IT are too critical to our customers to take the cheapest option without focusing on service as well. We are finding that our current and potential customers respond well to offers that give them good value as well as service.

Our message to customers has always been ‘helping you do what you do best’. In the current climate, we now make it clear when communicating with customers that this is ‘helping them do what they do best through the recession and beyond.’

In terms of marketing to SMEs, we recognise that some customers prefer a local adviser who thinks like them and so we advise and supply through our 50 local and independent firms called BT Local Businesses.

Since the recession we have evolved our product line to offer free-to-use and free-to-trial services that try to save customers IT and communications pounds and allow them to trial the latest technologies.

In difficult times, our customers want the certainty of a supplier that is going to be around for a long time. But when marketing to customers, we feel it is important to show that the current climate is actually a great opportunity to take stock and evaluate product choices, which will put them in the best position for when the upturn comes.

Alan McLeish, senior product marketing manager, OKI Printing Solutions

For many years OKI has been using the ‘look what you can do’ message when selling our printers, promoting the fact that our products can do more than just print paper. One of the things we have noticed [during the recession] is that people are using our printers for more than just an office printer but for marketing too – printing business cards and labels, for example.

We’ve put a lot of resources behind our web presence to provide an SME-friendly web service where people can find out about our products and how to get the best out of them. We have videos on the website of colleagues demonstrating how to use our products too.

We’ve recently introduced a package called “flat rate”, spreading the cost of using our printing service – it’s a bit like spreading your television license over 12 months instead of paying out a large lump sum.

We also do try-before-we-buy programmes giving customers the confidence to buy into the products. We see it as a proposition that helps meet a business issue.

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