Discover how to penetrate the Small & Mid-Sized Business segment more effectively.
This paper focuses on helping sales and marketing executives cost-effectively penetrate the Small & Mid-Sized Business segment (SMB). You will gain a better understanding of the market opportunity, the importance of capturing share in this fragmented market, the sales and marketing pitfalls to avoid and an analytically-driven, vertically-integrated solution that has consistently produced results.
The SMB market is generally defined as any company with less than 1,000 employees. The Small Business Administration (SBA) breaks it down into three segments: Micro (1-9 employees), Small (10-99 employees) and Medium (100-999 employees). According to SBA’s recent survey, there are a total of 6 million companies in the U.S. in the SMB category broken down as follows:
• Micro — 3.8 million companies
• Small — 1.2 million companies
• Medium — 1.0 million companies
In contrast, there are only 17,000 companies in the U.S. with employees greater than 1,000. Because of their sheer size, the vast majority of a company’s sales and marketing time, money and focus are centered on these 17,000 corporate and enterprise accounts. Yet the SMB market accounted for $5 trillion in U.S. GDP in 2014—equal in size to the large enterprise sector.
Individually, any one of these accounts lacks the size to draw the attention of B2B sales and marketing executives. Collectively, this segment simply can’t be ignored. With U.S. GDP growth rates averaging 2.4 percent for the past 18 quarters—ranging from (1.3 percent) to 4.9 percent—and forecasted to be only 3.6 percent for the foreseeable future, B2B sales and marketing executives must diversify their revenue portfolio by lessening their reliance on large, enterprise accounts and finding a cost-effective way to gain market share in the widely unchartered SMB market. Companies who break the code of tapping into this market will realize above-market growth rates, as historical trends indicate the SMB sector is the fastest growing segment after a prolonged economic downturn or recession.
A recent eMarketer study provided a very favorable forecast for the SMB market in 2014:
• 55% of businesses saw growth last year
• 10% “boomed” by achieving more growth than expected
• A whopping 81% of small businesses expect to outperform their 2013 results
Recognizing the tremendous growth opportunity within the SMB market, two-thirds of the top brands plan to increase their focus on it in the next 12-18 months, according to the Chief Marketing Officer Council. Sixty percent of these businesses plan to spend up to forty percent of overall marketing resources on SMB campaigns. But will this investment return the desired dividends? This is a legitimate question as the CMO Council admits to shortcomings in their ability to access and penetrate this market.
SALES & MARKETING PITFALLS
Finding a cost-effective method to consistently sell into the SMB market is not a new topic in the conference rooms of sales and marketing leaders around the country. Higher sales targets each year, combined with increased competition (much of it from foreign, lower-cost manufacturers), has made SMB sales part of business plans for 20+ years. But, for every company successful at selling to the SMB sector, 20 companies fail. What follows is a partial list of the reasons why.
They Think All SMB Companies Are Created Equal
Most companies have a multi-tiered segmentation strategy that divides accounts into groups based upon—at a minimum—SIC code and size (number of employees, revenues etc.). Top-tiered accounts get field sales personnel, while lower-tiered accounts typically don’t. That’s where the segmentation strategy ends. The assumption is that all accounts too small to warrant field sales resources are similar in buying potential, complexity and likelihood to purchase. Not true. Falling into the trap of thinking they are equal, sales and marketing leaders spend the same amount of time, money and resources pursuing each account. By doing so, they invest too much chasing lower-probability accounts, exhausting resources they could use to win higher- probability targets. By extending their segmentation strategy tofurther stratify SMB accounts, smart organizations will improve their ROI by allocating resources based upon their likelihood to purchase.
They Lack Key Account Information To Sell Cost-Effectively
The study by the Chief Marketing Officer Council cited that only eight percent of the companies surveyed had a “complete view” of the SMB customer. According to the study, a review of data gaps revealed an even bigger challenge—a key deficiency in customer contact information and difficulty connecting with actual decision makers. Many act as though a list of SMB accounts purchased from a list broker is sales-and marketing ready. It’s not. Lists like these are a necessary starting point, but lack the data density required to justify spending money marketing to them. A list purchase is generally good for company name, mailing address and main phone number. However, it lacks critical information such as decision-maker’s name and contact information, purchase volume, buying cycle, timeframe, and so on. This information can’t be purchased, but it can be acquired. Smart organizations find cost-effective ways to unearth key account information and resist sending sales and marketing communications until this information is in hand.
They Engage Too Early or Too Late
This pitfall is a by-product of the previous one. Not knowing when an account is entering the evaluation phase of the buying cycle results in sales and marketing efforts that are typically too early or too late to be effective. Think about it: if you buy a list and begin marketing to it, even if your sales and marketing communications made their way to decision-makers, the most optimistic estimates would suggest at least two-thirds would be to organizations with no intent to purchase in the immediate future, or to ones who are too far through the buying process to affect the outcome of their decision.
Recent studies suggest most buyers engage with sales personnel after they have done their own research. Sadly for sales organizations, these companies are already 70 percent through the buying process. Smart organizations group accounts by purchase intervals and deploy varying sales and marketing treatments for each group or segment,
utilizing multichannel lead nurturing campaigns to educate the buyer during the evaluation phase of their purchasing process. By deploying this approach organizations can position their product or service for consideration during the education phase while reserving valuable sales resources for accounts entering the critical buying phase.
They Lack Collaboration Between Marketing and Sales
Because of the high number of accounts and the relative low value of each individual customer, most organizations deploy a marketing- centric solution to SMB accounts. One approach is to send a series of direct marketing communications to stimulate interest and drive inbound inquiries to a website and/ or a contact center. Another common approach is to send a series of marketing communications in advance of an outbound telemarketing campaign in search of businesses ready to purchase. Within the technology sector, manufacturers provide funding and marketing support for their lower-end channel partners in the hope that they can capture share in their local markets. Similarly, medical device and pharmaceutical companies rely on distributors to sell to small and mid-sized accounts and provide co-op dollars and general marketing support. It is rare to find a strategy where sales and marketing work collaboratively to develop an approach that integrates disparate sales and marketing functions to form a dedicated, costappropriate channel. Smart organizations have found a way to accomplish this and have a distinct advantage over their competitors.
They Hire Inside Sales People Like They’re A Commodity
According to CSOinsights.com, less than half of inside sales teams make their revenue goals each month. Most organizations assume that if they have a good sales process and great product, anyone can sell. Wrong. The biggest mistake companies make is hiring inside sales people on the cheap. Companies understand it doesn’t make sense to do that with outside sales, and why should inside sales be any different? Sadly, it’s done all the time and turns out to be more expensive in the long run.
A SMB SALES CHANNEL SOLUTION
A smart SMB sales solution will do more than just avoid these pitfalls; it will use the unique characteristics of this segment to its advantage. A successful approach prioritizes accounts based on value and purchasing probability, develops dense data assets, deploys timely and targeted direct marketing communications to educate the potential buyer, and it uses high-end sales personnel to navigate a complex sale remotely. It should intelligently integrate these separate elements and pull collaboratively from sales and marketing disciplines. For maximum results, this channel should be assigned specific accounts with a corresponding revenue target and receive appropriate funding to enable it. Sales and marketing organizations successful in selling into the SMB market have a common four-step business process. It is iterative, becoming more intelligent—and therefore, more targeted—as the cycle repeats.
Since not all SMB targets are created equal, they should be prioritized based on potential value and probability of becoming a customer. Communications, offers and programs become increasingly relevant the more these segments are differentiated, and you can allocate resources more intelligently. Another best practice is predictive analytics— using a look-alike model to compare profitable SMB customers with those on the target list, resulting in six distinct segments ranked by how closely they resemble the ideal customer.
Purchasing lists and having inside sales people make 4-5 attempts before closing out the record is a waste of time. Most lists are “tall and skinny,” meaning the number of records is large (tall) but the amount of relevant contact and sales data is small (skinny). Alternatively, leading sales and marketing organizations invest in appending rich data fields to their list purchases in order to make marketing more targeted and sales calls more effective. This appended data cannot be purchased; it must be gathered. And, because it changes frequently, it must be collected on an ongoing basis.
You don’t want sales people performing this function. Leveraging lower-cost, offshore contact center resources to conduct account profiling calls and build out the data density is an essential step and a best practice smart companies have deployed.
This team gathers account-specific information such as:
• Decision-maker’s name, title, phone number and e-mail address
• Current vendor and services provided
• Buying cycle timeframe
This information is captured daily and stored in a CRM application, then transmitted weekly to a dedicated B2B sales center to be staged into one of three segments (based upon purchase timeframe) for corresponding treatment.
Leading sales and marketing organizations develop content, templates and messaging for targeted direct marketing in support of the SMB sales channel, which can also be used for lead generation activities within corporate or enterprise accounts. Once the marketing communication library is created, lead nurturing campaigns are launched according to a pre-scheduled plan for frequency, channel (direct mail/e-mail) and sequence.
The number and frequency of marketing communications is determined by which phase of the buying cycle (i.e. awareness, consideration, evaluation) the individual account is in, as determined by the profiling activities. Marketing templates for personalized direct mail (printed on a full-color digital press) and e-mail are created and populated with data gathered during the profiling phase.
These marketing campaigns are very effective in educating the buyer, building brand awareness and differentiating your company from your competitors through constant reinforcement of your value proposition. These critical activities are best done through this high-touch, low-cost, targeted approach. It is considerably better than having sales personnel leave an endless series of voice mail messages or, alternatively, traditional direct mail drops where every prospect gets the same piece.
High-end Sales People Working an Active Pipeline
Once targeted accounts have been prioritized, key data elements have been gathered, and lead nurturing campaigns have been delivered (based upon buying cycle), it’s finally time to engage a sales person—and now you can afford the best ones. By offloading key marketing functions away from theinside sales team, saving money by not chasing low-probability accounts, using offshore resources to profile accounts, and spending judiciously on targeted direct marketing to build awareness, smart organizations can reinvest those savings to hire high-end sales people.
Top sales people are attracted to this environment and love their job because they are wildly successful working a qualified and educated pipeline of accounts and don’t have to do all the front-end grunt work. They don’t spend 90 percent of the day leaving voice mail messages to unknown buyers. Smart organizations create profiles of their successful agents and hire new agents with similar traits, characteristics and backgrounds. They also pay them what they’re worth and reap the benefits with less attrition and more sales
With a lackluster GDP growth rate and an SMB market collectively equal in size to the large enterprise sector, sales and marketing leaders must find a cost-appropriate and effective way to sell into SMB accounts. By deploying this approach, sales and marketing leaders can expect:
• A favorable return on their investment within 12 months of launch
• An increase in overall market share
• Mitigation of risk through greater diversity in their account portfolio