Since the start of the downturn there were signs that this would happen.
Back in Oct/Nov 2008 timeframe we started seeing price (as a purchase trigger) shift a bit in terms of importance. Don’t get me wrong, price was still important, but it was starting to become part of a bigger story about the real reason to purchase IT for SMBs. Price, and even more so promotion, dropped in double digits (YoY) for key reasons to purchase IT like PCs. As small and medium businesses started to first evaluate where they could cut costs (e.g. headcount and travel) they started to look at IT investments in the context of fulfilling on other needs such as helping them reduce telecommunications spending, improve productivity so they could get more work done with fewer people. The story became bigger than just price/promotion. SMBs wanted more from their IT purchases, but with clear ROI that mapped directly to running their business.
What we didn’t know back in October is that SMB’s cost cutting exercises evolved from targeting big obvious ticket items to more granular budget item cuts. For example, back in October most SMBs were busy cutting FT/PT staff, bonuses and some benefits, but by late December over 64% of medium businesses planned to cut office supplies/printing supplies and 71% planned to cut travel costs (AMI Q Pulse Dec./Jan 2009). Of course IT budgets (along with all budgets) were being cut as well. But then something happened. Something every IT marketer should be dancing on the roof tops about. A window of opportunity opened that has been arguably shut (or at least very infrequently opened) in the SMB space. That opportunity is solution selling.
Before you look at the calendar, or look at the post date of this entry to make sure it wasn’t posted during the late 90′s, please hear me out. Now, more than ever over the last 15 years, SMBs are more receptive, more interested and more willing to explore and purchase IT solutions that deliver on business needs. My case is that “solutions” are not just wanted by SMBs on the IT front they are required for two reasons:
1) SMBs have to (and are) finding ways to embrace new technologies that help them address their greatest pain points during the downturn. I’ve heard this numerous times during interviews with SMBs who are looking at SaaS solutions and other technologies that just 6 months ago they would have completely ignored.
2) IT marketers will largely be unsuccessful in targeting SMBs unless they: a) resonate with these urgent pain points of SMBs, b) position their IT device/service as part of the bigger solution to target key verticals that do plan to spend and c) show a clear and tangible ROI of IT solutions that reach outside of traditional speeds/feeds of IT. This broadening of value prop helps SMBs connect the dots that an IT purchase could alleviate other pain points that businesses are desperately trying to manage (e.g. reducing travel expenses by implementing VoIP solutions, web conferencing, etc.)
So what does this mean? It means that the IT industry, marketing to the SMB market, has an opportunity and a challenge wrapped into one. It goes something like this:
Make the solution sell that delivers on compelling/tangible promises to improve the business or be relegated to the constrained IT budget of SMBs. The choice is yours.
The question is how to do this effectively. One way is to identify those SMBs who plan to purchase and analyze how to get these more robust value propositions across to this high value group. Often times these value props require more attention from customers during the purchase process. For example, I am not just selling you a notebook I am selling you part of a POS system that can help you better optimize your inventory during the downturn or help you reduce your travel budget by $X.
During all of my years analyzing the SMB market I’ve never seen such clear distinction between those SMBs who ”don’t plan to purchase” from those who “do plan to purchase” IT. In a recent AMI study we analyzed 3, 6 and 12 month planned IT purchases down to the category level. The delta between the “high value customers” vs. the “low value” is astonishing but once you analyze where these SMBs tend to get their IT information from it becomes an even better story. As it turns out, in some cases (e.g. U.S. SB PC market) “high value customers” are significantly more likely (between 10-12 times more likely) to use such marketing resources as social networking sites and blogs compared to low value customers. The differences are striking, and the opportunity is huge because marketers can justifiably spend 3-5 times more on this high value group (and avoid low value customers) and still optimize their ROMI.
The economic downturn has opened a window of opportunity. If marketers attempting to target SMBs manage to successfully take advantage of this situation we could see IT play an even more critical and integral role in the ways SMBs manage their businesses.
Who says the economic downturn isn’t a marketer’s dream?
Chad Thompson is the Vice President of Market Strategy at AMI-Partners and can be reached at CThompson@ami-partners.com