B-to-B: When Small Is Big
The small and medium business (SMB) market is huge. Almost all of the businesses in the U.S. are in it! But while the opportunity is unlimited, SMB firms also are volatile, nomadic and subject to varied definitions. Thus, our first imperative for achieving greater rewards and reduced risk when selling to this market is:
1. Know the
Purchasing Dynamics of the Market Segments
While "SMB" is traditional B-school market segment jargon, there are big differences in how marketers should view a 20-employee company versus a four-employee company. Most of the volatility exists in the small business segment, while medium-size businesses are relatively stable and demonstrate a propensity to buy more over time.
The chart (at right) shows dramatically the largest component of the small business market is what we call "micro" businesses, or those with one to four employees. They make up the lion's share of the entire small business segment. The micro business differentiation is essential because these smallest of firms usually are SOHOs and often part-time businesses. They are low lifetime value prospects because their appetites for products and services are small and their life expectancies are short.
The key takeaway here is that you need to test your offers within buckets of employee size. If you make selects that are too broad, you can easily skew your read of the results and miss opportunities. Or worse, roll out on incorrect assumptions that assert themselves later in sometimes drastically lower response metrics. To simplify the proposition, we sometimes advise clients to avoid marketing to micro businesses altogether, particularly in the early stages of testing.
2. Know Who Your
Best Prospects Are
If you are a marketing manager, how should you approach the decision that the SMB market is, indeed, a hunting ground of good opportunity? How do you avoid rationales driven by intuition alone? How can you really know, within the huge universe of prospects, where the optimum allocation of your marketing dollars should be made?