Dos and Don'ts of SME Marketing

FF Fashion

Thu, Nov 06, 2008
The Business Times

By Rachel Sim


REGARDLESS of a company's size, marketing is the key to creating a successful brand and producing good turnover.

With major companies looking to business hot spots in Asia for relocation, expansion and new developments, small and medium-sized enterprises (SMEs) here will face stronger threats than before. And they must pro-actively adopt effective marketing so that they do not lose out in the competition that this dynamic will create.

Helen Blanchette, go-to-market strategy manager of Fuji Xerox Asia-Pacific, is clear about the marketing mistakes that SMEs should avoid and the direct marketing strategy that they can adopt.

For a start, she says that a client-centric approach is better than a product-centric approach for small companies. 'A product-centric approach is a major mistake for SMEs because they lack the mass volume to work the scale-and-price game and can tire themselves while eating major profits,' she says. This approach makes for little personal contact with the customer because the focus is on the product, with no differentiation among customers.

A client-centric approach, on the other hand, allows a company to differentiate its top and second-tier customers and apply one-to-one personalised marketing strategies to make bigger customers feel special.

As a general rule in business, 20 per cent of customers contribute 80 per cent of profit. SMEs should leverage on this and conduct segmentation to classify customers and market accordingly; or if possible, on an individual platform to optimise results. Studies have shown that a 5 per cent customer retention rate can bring about an increase of 25 to 100 per cent in profit. A survey showed that 80 per cent of customers switched products even though they were satisfied. They changed not because of dissatisfaction, but because they were incognito to the company.

Keep existing customers

The cost of acquiring a new customer is seven to 10 times more than that of developing the potential of an existing customer. 'SMEs would be more cost-effective if they strategised to keep existing customers rather than gain new ones,' says Ms Blanchette.

Direct marketing favours SMEs that have a reasonable-size customer base for it to occur. This method of marketing yields an average return on investment of $11.65, while non-direct marketing yields $5.29. At the same time, the client-centric approach narrows competition, as big corporations tend to rely on a product-centric approach.

When SMEs take the product-centric approach, they tend to make another mistake of being in a constant marketing mode of trying to capture the mass, rather than trying to grow existing customers. 'If you want to play the mass, lead by products and prices only - but only when you have many advantages over your competition; and often, this is where the giants and Walmarts of this world excel,' says Ms Blanchette.

To capture the growth market, SMEs must first know the market, and this is where the need for reviews and assessment at least once a year arises. To maintain customers, SMEs must be able to provide products in line with the changing needs of those customers.

Know your customer

For SMEs, knowing their customers makes for a leading edge and platform for one-to-one marketing strategies that yield substantial benefits. When it comes to dealing with customer data, a strong integrated database is essential. Scattered data will decrease efficiency of a business and waste an opportunity to consolidate client profiles. To implement common one-to-one market strategies such as direct mail, it is important for an SME to have good database infrastructure.

This database will be a major factor in improving return on investment (ROI). 'Instead of calculating the lowest cost of advertising and marketing, SMEs should base their marketing costs on how to maximise expenditure efficiency by differentiating customer potential and acting to keep the top and second-tier customers,' says Ms Blanchette. An effective way to improve ROI is to spend less on the bottom-tier customers and up-sell and cross-sell to the first and second-tier customers.

She says that SMEs should try to improve the customer experience, rather than systematically imitate competitors. 'It is often scary to question a marketing manager or business owner on marketing actions, as the response is often that it's because the competition is doing the same,' Ms Blanchette says. Companies need to understand and cater to the needs of the customer, as customer preference is the driving force of the market. Like a product-centric approach, the technique of imitating competition may not well tailored because it does not address the fundamental rule that the customer is king.

As consumers change with the times, SMEs must evolve their approaches to create their own niche markets though product differentiation and good customer relations.