The vast of business owners have a business which can be classified as small so why is it that so much of the marketing to small business owners is so bad?
What Is A Small Business
In the UK official statistics we have two classes of "small business"
- micro businesses have up to 10 employees
- small businesses have 10 to 50 employees
but they are often lumped into a generic SME category which includes medium sized businesses from 51 to 250 employees.
Strange really as there is a big difference between being a sole entrepreneur and knowing that everything depends on you to employing 3 or 4 people and having the burden of much of the employment legislation to being an established small business with 25 employees.
Traditional B2B Marketing
In traditional B2B marketing - which of course is mainly based on big companies selling to big companies, the emphasis is on competing on value because it is assumed that logic dominates emotion in the B2B buying decision.
So B2B decisions show be based around how buying can make the business more profitable and more competitive:
- Helping the business to sell more
- Helping the business differentiate itself and command a higher price
- Helping the business to become more efficient and reduce costs.
Effectively this means showing that the prospective buyer can expect a better return on investment if he or she buys from you rather than your competitor.
Buy my widget for £2,000 and get a lifetime return of £20,000 - 1,000%.
But widget B costs £2,500, is likely to give you a lifetime return of £17,500 and that is only 700%.
It doesn't always work like that in big business since the numbers can be subject to bias and influenced by the "know, like and trust" elements of the personal relationships between buyer and seller.
It certainly doesn't work like that in a small business which is dominated by one key personality who brings his or her own values, beliefs, emotions and prejudices to bear - however subconsciously - in every buying decision.
Derived Demand, Compliance Demand And Discretionary Demand
Businesses buy different things for different reasons.
If you are a steel stockholder and selling commodity steel, if a customer places an order for a particular steel specification, then you have to buy and supply that precise specification. You have a choice of who to buy from but not what to buy.
That's called derived demand since sales are ultimately pulled through the supply chain by the consumer.
It's why the car industry is in such a desperate situation at the moment.
Yesterday it was reported that UK car production is down 59% on the previous year. The recession and credit crunch has stopped people buying cars, stocks of finished cars are too high and the car makers have cut back sharply and those cuts ripple back along the supply chain.
If you are own a grocery shop, you need to be stocking the staples - bread, butter, cheese, cans of soup and baked beans...It is still derived demand since you will replenish your stocks when you sell although you do have more control over the precise commodity since you can decide to stock Heinz or HP beans, Coca Cola and/or Pepsi...
Other items you buy as a small business owner are forced on you by law. This is what I call compliance demand.
You don't have a choice and in the UK it includes employers liability insurance and motor insurance. It also includes all those costs associated with complying with the laws where you don't have the time or skills required - the cost of the tax returns, employment law advice, environmental regulations and many other forms of red tape.
The last category of demand from small business owners and entrepreneurs falls into the discretionary demand or discretionary purchases (depending on which side on the table you are).
These are purchases that the business owner can choose to make based on his or her own beliefs and the relevant priorities and importance.
So should that £5,000 be spent on re-painting the shop and sprucing it up, on advertising to potentially attract more customers or on a six months business coaching program?
Each would be nice and should benefit the business but, as there is only £5,000 of discretionary cash, perhaps the business owner shouldn't do any of them - and is better keeping that £5,000 in reserve in case business gets even tougher.
[Totally biased note - clearly in this situation the business owner should immediately contact a business coach and not waste any time considering the other options.]
The buying decision and therefore the B2B marketing to the small business owner becomes more complex as you work down these categories.
Commodities are often bought on price, availability and convenience but brand preference becomes more important further down.
The Difference Between Small Business Owners and Entrepreneurs
To many, entrepreneur and small business owner mean the same since they often both own small businesses.
To me the difference is one of ambition.
The "small business owner" is happy to have a small business and has limited ambitions. There is no intention of building a big business with hundreds or even thousands of employees. Small business owners just want a better business over which they have total control. There is a emotional strong bond between the business and the owner.
"Entrepreneurs" are different.
"Entrepreneurs" want to create a big business although they may sell it to a conglomerate once it becomes too big for them to be comfortable. The emotional attachment is not to the business but to the creation of something new and special.
For most of the article I am going to continue using entrepreneur and small business owner interchangeably but I will use the inverted commas if I want to make a particular point about "small business owners" or "entrepreneurs".
How Does Your Solution Benefit Small Business Owners?
You need to see your product or service as a solution to a problem or a potential opportunity.
So how do you make it relevant to entrepreneurs and owners of small businesses?
What Are "Small Business Owners" Concerned With?
- Survival - the recession has been a shock to the system and many small business owners are facing up to their first recession. If the good times seemed tough, then what is in store during the bad times?
- Staying independent - the thought of going back to an employed position is horrendous and many small business owners scrape a living which is well below the level they could earn as a manager of a big company.
- Making the most of time - there are always more things that could and perhaps should be done. That task that is being postponed could be the one that takes the entrepreneur past the tipping point. But business owners are also under pressure from home to improve their work life balance.
- Money matters - many small business owners earn little from the business and may have borrowed extensively to start the business. Money is often tight and buying from you means not buying from someone else or making a personal sacrifice or going further into debt. This makes small business owners cautious or wasting their money - especially in the recession.
- Being in control - the majority of successful small business owners believe that they control their own destiny. It is their decisions and their actions that matter and not what is going on in the wider economy.
How Does The "Small Business Owner" Feel
- Threatened - the recession has made the world seem more dangerous.
- Cautious and sceptical - nervousness about the economy has made the small business owner look more carefully at the offers being made. Bad choices were an irritation and inconvenience before - now they could be much more damaging since cash is tighter.
- Harassed - winning business is even harder than before as customers create extra hoops to jump through and there is so much to do.
- Reflective - the many good years strengthened the belief in control over their own destiny but those who are suffering in the recession are finding the are blaming others. "It's the government's fault. It's the greedy bankers to blame." This will cause some to reflect on the success of the good years and wonder whether they weren't as good as they thought.
- Proud of what they have achieved. If you have seen the failure rates of small businesses, you will know that it is a great achievement to survive three, five, ten years or more and small business owners want respect. Their business may be small to you but often they have chosen to stay small.
What Are "Entrepreneurs" Concerned With?
The "entrepreneur" is a professional risk taker while the "small business owner" is more conservative.
The recession has raised the stakes. It is more difficult raise finance and it will be more difficult to get the business established.
Consumers and the majority of businesses will be cutting back and will be more cautious on what they do buy.
The classic, skilled "entrepreneur" will rise to the challenge and see it as a more exciting game with bigger stakes.
- Opportunity - is the opportunity getting bigger as competitors fall away
- Raising finance - it is difficult at the moment and difficult trade-offs have to be managed for a "launch on a shoestring".
- Bringing it all together quickly - there is so much to do, so many people to talk to - there is little time to stop, reflect and learn.
- Where is the next opportunity? Some entrepreneurs flit from market to market whilst others seek to innovate in one market but they can't stop the generation of ideas in their heads.
How Does The "Entrepreneur" Feel?
- Excited - this could be THE time
- Frustrated - why can't others see the huge opportunity being presented? Why are bankers, investors, customers and suppliers so cautious?
- Confident - he or she can see the way forward so clearly
- Impatient - this is taking too long. Why are others putting so many obstacles in the way?
How Do You Market To A Small Business Owner Or Entrepreneur?
- You have to get into the conversation that is going on inside their heads. As you have seen, this is very different for "small business owner" and "entrepreneur"
- You have to gain their attention and be relevant - it is the only way you are going to be given more than a moment of their precious time. Don't waste time with irrelevant waffle and a standard pitch. Ask about special needs - the small business owner and entrepreneur are both proud of what they have achieved or what they will achieve.
- You have to be able to answer "what's in it for me" clearly and precisely. It's what they are thinking so how can you help move them to where they want to be.
- Prove it. Explain your methods, remember the desire for control means the small business owner wants to know what is going to happen and agree to it. Use testimonials, case studies and free trials to demonstrate the value and let the buyer experience it for himself or herself.
- Offer a guarantee. If your product or service is so good, have the confidence to stand behind it.
- Be easy to do business with. It is back to the time issue but try not to put barriers in the way of buying or if there is some legal or professional reason why, explain it and make it as easy as possible.
- Deliver on your promises. The typical small business owner wants to develop trusting relationships and save the time which shopping around takes up. Do what you say you will plus a bit more and you will be rewarded with a loyal customer.
This is a work in progress - please bookmark and come back when finished. Your thoughts are appreciated as I write this.
I see this as a huge topic that does not seem to be well covered on the Internet.