It’s Time To Stop Talking About “SMEs”

Last week, I received a distress call from one of our favourite clients. 

The tone of their email was not dissimilar to that of Princess Leia in Star Wars when she pleaded “Help me Obi-Wan Kenobi - you’re my only hope …”

Thankfully, their problem was a little easier to address than the threat posed by the Galactic Empire and Darth Vader. 

It was along the lines of: “Help me Giles - our new digital agency wants us to target ‘millennials’ ...”

Perhaps you’ve encountered something similar. 

My reply was simple. 

• The agency is wrong: millennials are not a segment - they’re a diverse group united by nothing more than age. 
• So tell them to get back in their box, and read the freshly-cooked attitudinal and behavioural segmentation study that we recently produced for you. 

Most serious branding and marketing people will have noticed the repeated misuse of terms like “millennials” in this way. 

“SMEs” - the B2B Answer to “Millennials”

I’m beginning to detect something similar happening with the term “SMEs” as well. 

“We’re targeting SMEs” is a common refrain in the B2B space. 

This is nonsense too. 

SMEs have even less in common than millennials. 

Smart companies are wising up to this, but they’re still in the minority. 

Back in the first quarter of 2020, our associate Neil Scaife did some research into credit card provision for small businesses on our behalf. 

While there were multiple providers with multiple offerings, these were largely indistinguishable from one another. Product details were virtually impenetrable and rarely tailored to small businesses: 

• Fees varied significantly from ￡0 to ￡595 pa!
• APRs varied significantly (from 10% to 25%)
• Benefits and rewards were largely underwhelming (eg 5% off Avis rentals) …
• Accessibility was also patchy with some offerings only available to business bank account holders (eg Metro, NatWest).

Unsurprisingly, therefore, penetration is low with only 0.5m business credit cards in circulation (less than 1% of total credit cards) and only 13% of SMEs using a dedicated business credit card. 

Covid-19 has forced a lot of providers to rethink fast, especially as innovative fintechs and challenger banks have taken the opportunity to push new products to market. 

If we did that research again now, I think the findings would be very different - especially if we included newly-developed alternatives to credit cards in the analysis. 

The economic crisis has, if anything, emphasised and sharpened the need for this kind of targeting by vertical and by behavioural drivers. 

For example, we recently worked with an enlightened young fintech brand which had the wisdom to conduct a comprehensive market segmentation instead of wasting their marketing budget on a blanket “SME” approach.

This revealed clearly differentiated segments, allowing us to assess their relative attractiveness to the business, the products that would best meet their needs, the relevant decision-makers and the messaging that would attract them.

For example, one segment driver was ‘ease of use’, another ‘transparency of charges’, a third ‘quick and inexpensive’.  

These were then correlated with decision-maker types - ‘rags to riches entrepreneurs’, ‘busy bosses’, ‘techno captains’ etc to create an understanding of what the market actually looked like in close-up detail. 

This provided the evidence to develop products offering clear and distinctive benefits, relevant messaging, and promotions targeting the segments with the greatest potential to the business (as opposed to the typical shopping list of generic category benefits).

Byron versus Obi-Wan

Now, I know that devotees of Byron Sharp will not approve, but it produces results. In this case, growth awards and nominations for customer focus. 

Do you remember what was the Number One single on your sixteenth birthday? 

And do you know what’s Number One today?

Thought not. 

The monoculture that used to exist is no more. Audiences, distribution channels, needs and desires have all fragmented. 

The John Lewis Christmas ad is pretty much all that’s left functioning of the “one size fits all” approach. 

Most people today want to be recognised and addressed in terms of what makes them different. 

Targeting an audience as wide as “SMEs” or “millennials” means glossing over all of that and creating something that appeals only to the lowest common denominator. 

Whilst most larger B2B players adopt the segmented approach, too often smaller and/or newer outfits often skip this stage in the belief they know the market well enough - and that’s rarely the case. 

As that marketing guru Obi-Wan Kenobi famously said: 

“Luke, you’re going to find that many of the truths we cling to depend greatly on our own point of view.”

Like the universe, the market is invariably wider and more diverse than you think it is.