±±¾©Èü³µpk10

Large organisations are the obvious hunting ground for marketers, being highly visible with huge budgets. Small and medium-sized firms, by contrast, have often been ignored on the grounds that they are harder to identify and less profitable.

In the past two years, however, this accepted wisdom has been turned on its head. Profit margins from corporates have been slashed under pressure from their procurement specialists, and many direct marketers are instead turning their attention to the comparatively neglected small and medium-sized enterprise (SME) sector.

"Our clients are saying that large organisations are no longer that profitable, because they require a lot of effort and do not deliver a good yield," says Simon Lawrence, joint managing director of Information Arts. "Decision-making in smaller businesses is much less structured and they tend not to drive such hard bargains."

Untapped resource

Marketers are also waking up to the fact that SMEs are much thicker on the ground, representing about half of British business. A mere 6,000 companies, 0.1 per cent of the total, are officially classed as large, having 250 or more employees (see box, page 39). Medium-sized companies, with between 50 and 250 workers, number 26,000, but the vast majority of companies have fewer than 50 employees.

"Large organisations no longer want to maintain their own print room or in-house services department, and by outsourcing they are creating more companies," points out Adrian Cutcliffe, senior marketing manager at Dun & Bradstreet. "That could be one reason why the SME sector is growing so rapidly."

The Department of Trade and Industry estimates that at least 300,000 new enterprises were created last year and, according to the Small Business Service, a staggering one in four people currently run or are considering starting their own business.

Indications that marketers are widening their net come from the Direct Marketing Information Service, which says B2B volumes in the second quarter 2005 increased by two per cent. B2B email volume is also on the up, according to a number of specialists.

Key individuals

Certainly SMEs offer important advantages. In large organisations it is usually necessary to hunt for the key individuals who influence purchasing decisions - they can be hard to identify and do not remain in one job for long. In practice, it makes more sense for sales teams to go in and seek face-to-face contact. So it is the SMEs that are emerging as more of a focus for direct campaigns.

"The huge advantage with SMEs is that the rate of change in job role is less - the contact is the company, so they change together," says Michael Howe, agency head of 100 Percent Direct Marketing and a member of the DMA's B2B committee.

In a smaller business, it is a safe bet that the managing director is the person to target, and because of the firm's size, a properly addressed mail pack is likely to reach their desk. That greatly increases the chance of a quick response and means more marketing ground can be covered in a shorter space of time.

"You can often reach people when they are hot, find out what will catch their interest, and get them to make a decision straight away," says Jon Cano-Lopez, UK group services leader at Acxiom.

Data suppliers say that SMEs have been more on clients' radar in the past 18 months, and have been expanding their databases to meet the demand.

Volumes are provided by companies such as Thomson Directories and Dun & Bradstreet, much of which is collected over the phone to ensure it is fresh and accurate. Detailed lists are also provided by publishers and conference organisers, and these often include named individuals with specified interests.

One of the largest is Mardev, whose DecisionMaker covers all business sites within the UK and contains more than a million records. The company also offers more detailed files on key business areas including farming, food retail, hospitality, small industrial businesses and transport.

In the past year, some suppliers have also been offering data on "one-man bands", the teleworkers, sole traders and partnerships that make up a growing proportion of firms. Earlier this year, Wegener DM Business Data Solutions - which has since become Market Location - launched a database under the name REALsoho, which now contains more than 2.4 million records.

Of these, 400,000 are of business owners with up to five employees and a small office at home or elsewhere. The file also includes nearly two million business professionals considered likely to have an office at home. The data is derived from a combination of lifestyle questionnaires and calls to businesses, as well as regular updates from BT and Companies House. "Being real and not simply modelled data makes it more accurate, and hence more responsive," claims Steve Cook, managing director at Market Location.

Data accuracy

Suppression products are also now available that can help ensure data accuracy. This is especially vital in B2B: The REaD Group records 5.7 million company and individual detail changes every year.

You need to get even small details right, stresses managing director Mark Roy: "By nature, owner-managers tend to be an entrepreneurial lot with high impatience levels. Consequently, a mailing that is wrongly addressed or mis-spelt will end up in the bin."

There has also been a breakthrough in targeting techniques over the past couple of years. Conventional variables such as the Standard Industry Classification (SIC) code, turnover and number of employees are too vague to rely on alone. Instead, data suppliers have developed clever new ways to segment markets, particularly with very small companies.

A popular method is to identify the consumer attributes of directors from independently sourced lifestyle data. This is the idea behind Information Arts' Business DNA, which supplements conventional data with insights about the business owner's interests and attitudes.

"If you understand what they think and do, you can predict how they behave at work," says Lawrence.

Abbey used the product when it launched a small business bank account 18 months ago, segmenting SMEs by lifestyle attributes to understand how best to approach them. Another client is Fiat, which wanted to identify the attributes of van owners to structure its marketing communications.

Experian also uses lifestyle data in its Commercial Mosaic to drive understanding of how businesses behave.

"Where there are three or more directors, their lifestyle has little or no impact on purchasing decisions," says Richard Lloyd, director of B2B Marketing at Experian. "In smaller companies, however, it can be highly relevant."

Two businesses might appear identical under traditional segmentation, in terms of their activity as revealed by SIC code, location, and turnover.

But when you look at them closely, important differences can be revealed.

In one case, the directors might turn out to be young and well-educated city dwellers, with interests in the media and arts. The other company might be a more traditional family business, run by older and less well-educated people.

To a technology vendor, this would indicate that two quite different approaches are required, Lloyd suggests. "For the first company you characterise the technology as must-have and leading-edge. To the other you adopt a reassuring approach, explaining that it is not scary or difficult, but simply a way of controlling costs and running the business more efficiently."

Clients can combine this with conventional modelling techniques to identify hot prospects, in what would otherwise be a large and undifferentiated business universe.

Protec, a safety equipment supplier, began to analyse its customer database with Experian in May to identify industry areas it had not previously considered for new business. This has boosted mailing response rates by a massive 220 per cent, and overall sales by 15 per cent.

Target sector

What channel to use depends largely on the activity in the target sector.

Some will be especially open to new media approaches, while others are more accessible by conventional mail.

John Edwards, head of B2B strategy at agency Meteorite, explains: "An estate agency is likely to be technologically savvy, with its staff using PDAs to send digital photos of properties to a web site. But a firm of solicitors down the road with the same number of employees and a similar turnover might still be doing practically everything on paper."

Know your prospect

Not all businesses are office-oriented, Edwards points out. When Meteorite carried out preliminary research on behalf of GasForce, a gas maintenance company, it found that customers consisted of, typically, hospitals, pubs and restaurants, which usually do not use the internet as a matter of course.

Similarly, 3M wanted to reach health and safety managers in the construction business, and these were often to be found on-site, rather than sitting in front of a computer. In both cases, mail packs were judged a better alternative to email.

Few companies can be blind to the advantages of targeting SMEs, but for those that still worry about the hazards, the good news is that they are becoming ever easier to approach.

With the quality of data improving all the time they can now be properly targeted and, as a result, are likely to be responsive to direct approaches.

Considering their growing importance in the economy SMEs represent an opportunity not to be missed. P

CASE STUDY: REGUS/METEORITE

Regus, an office space provider, wanted to target growth companies that might be planning a move into larger premises. The campaign was carried out earlier this year by Meteorite.

Prior to sending communications, Meteorite carried out research that revealed a lack of understanding about Regus's proposition among its target market group.

Most respondents said they were aware of the company, but some said they thought it primarily offered services to large companies. Others thought the opposite - that its customers were mainly smaller firms. All had mistaken views on the typical cost of office space, imagining rates were higher than is actually the case.

Accordingly, the main objective of the campaign was to change perceptions and build brand comprehension. Lead generation was a secondary aim, once the right people had been encouraged to respond.

Prospects were targeted by sector, from profiles derived from Regus customer data to indicate what kinds of companies were likely to use its office space. Analysis was also carried out on drive-time, as the research had shown that the key decision-maker, usually by definition the owner-manager, would always choose offices within 45 minutes either of their home address or the business's current location.

A total of 130,000 companies were contacted. The response was slightly lower than previous, less targeted campaigns, but the rate of conversions rose by a third and revenue for the period grew by 50 per cent.

KEY FACTS

The SME numbers game

There are estimated to be 4.3 million businesses in the UK. More than 99 per cent are classed as small, having fewer than 50 employees.

Only 0.6 per cent are medium-sized, with between 50 and 249 employees.

- SMEs are thought to account for the bulk of the 300,000 (7.5 per cent) increase in the number of UK businesses in 2004.

The number of sole traders is estimated to have grown by 230,000 (13 per cent) and partnerships by 20,000 (13 per cent).

- SMEs account for 58 per cent of UK employment and 51 per cent of turnover.

Of these the bulk are small businesses, which account for 49 per cent and 37 per cent, respectively.

One-man-bands make up 73 per cent of all businesses at 3.1 million, with the highest number in construction and the lowest in hotels and catering.

Source: Department of Trade and Industry, August 2005.

TOP TIPS

Make the most of small business relationships

1. Analyse your existing customer base to understand the opportunities that exist for your company within the SME marketplace.

2. Identify the key factors about your service or product offering that will interest the SME community.

3. Recognise the huge disparity in the SME market, which ranges from one-man-bands to companies with 250 employees. A one-size-fits-all solution will not work.

4. Getting the message right is one of the biggest challenges in targeting SMEs. Communications need to be sufficiently well-targeted to be of interest, while remaining broad enough to be cost-effective.

5. Do not make the common mistake of lumping SME mailings in with your normal marketing activity to save money. Just as with consumers, SMEs need to be treated differently to larger companies.

6. Implement a multi-channel strategy to help maximise return on investment. This will also aid in developing the strong relationships that will boost confidence in your service or product.

7. Ensure data is as clean, accurate and up-to-date as possible. This is essential for targeting SMEs as the B2B universe is significantly smaller than B2C. Also, data decays rapidly, with businesses constantly closing, moving or opening, and key employees leaving or starting.

8. Ensure you have as much information as possible. Enhance your SME data using third-party data sources. There is a wealth of information on the market, including lifestyle data on directors and owners.

9. Increase response rates through propensity modelling. This allows you to prioritise prospects with great accuracy, and is crucial for understanding and maintaining existing customers.

10. Empathise with the individual motivations of SMEs. Most people in the SME sector tend to be very driven and ambitious, and communications need to reflect this.

Source: Broadsystem

txt2email

You can send a copy of this article to a colleague's email account by texting: 'DRM 10026' 'recipient's email address', to 86222. Text messages are charged at standard network rates.

Powered by DATA LATERAL.