There are over 400 million small and medium-sized businesses (SMBs) across the globe, making up 95% of all companies and 60–70% of all employment worldwide. Given the enormity of the market, SMBs are a gold mine for companies that can figure out how to successfully sell to them. The problem is: not many companies have mastered it. Based on our experience working with some of the world's largest companies that sell to millions of SMB businesses, we've identified four main challenges of trying to market to SMBs.
1. Segmentation. Given the size and complexity of the SMB market, companies selling to them must clearly segment the market and identify which part(s) to target – including by company size, industry, and geography.
Rather than boiling the ocean with generic marketing to all SMBs, companies that spend time on segmentation will identify the SMBs with the biggest growth and profit potential. The key is to focus on specific segments of SMB, based on the size of those segments, and their likelihood of purchasing the company's products or services. In a 2019 Gartner survey, over 40% of the SMB respondents reported competitive pressure as a top consideration when defining business goals. Understanding the level of competition in a particular segment means you can align sales and marketing strategies to the main criteria for vendor selection, giving you a better chance of winning their business.
2. Customize your product offering by SMB segment. When it comes to selling products such as IT solutions, SMBs don't want a dumbed-down version of what you sell to larger customers. But because many of them are first-time users, they will value features such as pre-built templates or wizards to guide their use of the product. Spending time educating SMBs on your product or service will pay dividends. The 2019 Gartner survey reported that nearly 50% of SMB companies found identifying the right technology to invest in the biggest challenge they face
3. Profitable operations. Though the size of the SMB market is huge, individual SMBs have limited budgets and typically spend less than their larger counterparts do. This means selling to them becomes a volume approach – trying to reach thousands of SMBs with lower budgets, which in aggregate can drive high revenue. Therefore, companies need to quantify the cost of each aspect of the customer lifecycle – from marketing to sales to customer support. This determines a profitable cost structure relative to the lower average revenue per SMB customer. Scale, created by automated tools such as targeted electronic marketing, self-sign-up products, and self-service and automated customer support, helps drive down the cost of operations, reduces operational costs, and increases profitability.
4. Segment customer support by systems-based support and employee-based support. Because SMB employees typically wear many hats, they may not have in-depth expertise in your product or service, meaning more product-related questions and customer support tickets compared to larger customers. Customer support is one of the biggest operational costs for servicing SMB customers, so you need to look for ways to optimize these costs. Companies with successful SMBs sales strategies will segment SMB customers by potential churn rate and spend levels. They use data signals derived from customer interactions to determine which customers are likely to remain and which are likely to leave. High-spend customers who are likely to leave receive personal customer support calls, whereas low-spend customers and those more likely to stay receive more automated customer care. This increases customer retention (especially with higher-spending customers) and the overall customer lifetime value.