Marketing to the ‘Happy’ Majority of SMBs

A well-defined target market is the most important component of a business. It’s every business’ raison d’être, not to mention the pie in the sky that fuels entrepreneurial ambitions in the first place. Market definition is business-defining.

In local search, we define our market by numbers like the 29.6 million American SMBs with digital advertising in 2008 who are expected to grow to 40 million by 2014. We imagine a sizable pie out of which many can carve a slice. Unfortunately, Yodle’s recent SMB Sentiment Survey may be serving up a piece of humble pie for many hyperlocal businesses.

In its publication announcement in late August, Yodle announced that SMBs were “happy.” More specifically, 91% of respondents said they were happy with their choice to own a business. But, a closer look at the facts leads some to a stunning conclusion: SMB’s are not just happy, they’re content: “Most small businesses have little desire to grow big,” Yodle’s Louis Gagnon told Greg Sterling.

So, what does that mean for the local search industry betting its bread and butter on the promise of growth to a supposedly starving industry? According to Sterling: “X million SMBs” is an irrelevant figure when the majority don’t value growth and therefore aren’t “necessarily good prospects” for local search vendors.

So should the local search industry be content to spar over the ambitious minority which, though yet to declare a favorite, constitutes most early adopters and can’t independently provide sustained industry growth? Why not? Their ambition is something we understand. They shape general market misconceptions in part because of their track record of fueling deceptively promising industry growth.

But since settling is not in most of our natures, the question can’t be, as Sterling suggests, how to come to terms with a narrower market than originally assumed. The question should remain how to market to the huge, untapped segment of the local small and medium-sized business community.

Clearly, the local search industry needs to fundamentally re-imagine the problem and offer more responsive solutions for the average small business owner. And, in order to do that, we ambitious innovative types need to come to understand an entrepreneurial creature completely alien to the insatiable business animals typical in our own circles.

We can begin by looking at growth, effectiveness, and ambition from an angle that better reflects the perceptions of most small business owners.

Growth… of workload
Startups think little of growth’s downside. But, to be fair, the downsides are decidedly fewer from here. SMBs typically bootstrap the cost and risk of growth without hope of the kind of payoffs that would more than alleviate retirement savings woes for the 46%. For them, growth is synonymous with more work, and pouring their profits into their business — not retirements and vacations — and it’s about doing the workload of several people while saving for one hire.

Ulterior Motives: Ambitious for the little things
It strikes many as radical, even dysfunctional, that 23% of business owners invest zero dollars in marketing — meanwhile 72% invest in at least two weeks for vacation. Yet, look at the sample. Only 5% of study respondents were under 40 years old. Eighty-three percent  of respondents owned their business for at least 6 years. So, they have realistic expectations about what doubling down gets them and, at those margins, time spent with family has better payoffs than paying for more leads, spending time on following-up, and spending still more on tracking ROI. No wonder only 9% work over 60 hours weekly and 56% invest neither time nor money in ROI.

Effective (read: efficient)
In my experience, small business owners are happiest when they get big, immediate results for little-to-no additional investment. It’s the most efficient and preferable choice. Perhaps that’s what SMBs really meant when most responded that word-of-mouth (78%) and business referrals (54%) were the most effective channels for finding new customers. Though patently untrue given the reality that the vast majority of consumers research small business owners online, these channels remain the biggest bang for the buck. And the high churn rate in the local search industry shows that the margins are so narrow (in terms of, if not the quantity then the quality of leads for the price) that it’s best to save a penny and not waste any time.

So, the industry can’t simply drive more leads. It has to drive more, better-qualified, and better-paying leads at profit margins that incentivize buy-in from a business consumer that demands all or nothing. Only by catering to the “disconnected and contented majority” can the industry push itself to the highest standard of usability and convenience. Only then can the industry begin fulfilling its promise of propelling local businesses closer to achieving their goals — no matter how modest or ambitious in scope.

Manpreet Singh is Founder and President of Seva Call, a local startup that helps consumers find high quality local professionals in minutes. Follow him @MSinghCFA.