Using the internet to market to SMEs

29 January 2007 | Source

The internet is making the job of marketing to notoriously hard-to-reach SMEs much simpler. Andrew Blackwood, UK country manager of Companeo, explains.

It is a curiosity that while the UK boasts more than 4.3 million small and medium sized enterprises, many suppliers struggle to tap in to this potentially lucrative market. So what is the cause of this disconnect?

Firstly, suppliers are effectively shooting fish. Generally, SMEs conduct between eight and 10 significant supplier searches each year. These searches tend not to follow any discernible pattern, but they are usually based around key events in their business life, such as an office move or ownership change. This means that suppliers can only second guess when one of these major changes is likely to occur. This is in marked contrast with larger enterprises, which tend to buy goods and services on a contractual basis, meaning suppliers know – or can find out readily – when a contract is due for renewal and pitch the account. Even if the supplier doesn’t win the contract at the first attempt, it will invariably know now when the contract is due for renewal and invest resources in winning the business the second time around.

Secondly, it is far easier for suppliers to target the appropriate person in a large enterprise, as such organisations often employ a procurement or facilities manager whose responsibility it is to negotiate contracts with suppliers. Conversely, the person responsible for purchasing decisions in SMEs varies from business to business. In some SMEs, it may be the managing director or the finance officer that pulls the purchasing strings; in others it may be the office manager. For suppliers, cold calling just to establish the right contact at an SME is a time and cost-intensive process.

Finally, even if a supplier does know intuitively when an SME is looking to buy, and it has the right contact, it still may not consider pursuing a sale to be worth its while, as any purchase is likely to be relatively low value. Compare this to a large enterprise with, for example, 1,000 employees and it is not hard to predict where suppliers are going to invest their resources.

And so we’re left with a situation where SMEs need supplies but feel that large organisations will not be interested in them; and those large companies believe that the SME represents another source of revenue but one that is simply not cost effective to pursue.

Until now.

The internet – what else? – is bridging the SME-supplier gap. It offers the opportunity, through an online marketplace, to connect SMEs and supplier organisation in a way that is beneficial to both. The premise is very simple. An SME visits an online marketplace and searches for the required products or services by categories, such as ‘finance’ or ‘IT’, then completes a short online questionnaire outlining its specific requirements. Customer service teams working behind the scenes at these websites then match the requirements to produce a shortlist of prospective suppliers that meet the SME’s requirements. Then they respond to the SME and pass on the lead to the chosen suppliers.

And so the hitherto problem of forging a lasting relationship between supplier and SME is solved. SMEs benefit because they can concentrate on their core business and let someone else do the running around to research the right suppliers for them – free of charge. Suppliers are obliged to respond promptly to the SME. For SMEs, this is a welcome departure from purchasing experiences past, when many did not receive a response at all, believe it or not, when contacting suppliers directly.

The system pays dividends for suppliers, too. When the supplier gets a lead, they are already on the shortlist for an SME at a time when the SME is actively looking to buy. As a result, suppliers are competing for the sale with far fewer companies than in an open marketplace, and users only get responses from suppliers that can meet their defined requirements.

It’s a marketing vehicle that’s proving to be as effective as it is simple. Research conducted by Companeo found 92 per cent of SMEs using the service are either ‘satisfied’ or ‘very satisfied’. Suppliers, too, are getting in on the act. They pay an annual fee per proposition, plus a cost per qualified lead generated, and are reaping the rewards – the average return on investment is 7 to 1.

So, the internet has done it again. Forget being the conduit for millions of burgeoning relationships born on social networking websites; one of its most understated achievements has been reconciling the SME with the supplier.