Y L F M A E T Team-Fly® Drilling for Gold Drilling for Gold How Corporations Can Successfully Market to Small Businesses JOHN WARRILLOW Copyright © 2002 by John Warrillow. All rights reserved. Published by John Wiley & Sons, Inc., New York No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4744. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 605 Third Avenue, New York, NY 10158-0012, (212) 850-6011, fax (212) 850-6008, E-Mail: [email protected]. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional or advice or other expert assistance is required, the services of a competent professional person should be sought. This title is also available in print as Bookz ISBN 0-471-12890-2. Some content that appears in the print version of this book may not be available in this electronic edition. For more information about Wiley products, visit our web site at www.Wiley.com To my team at Warrillow & Co.: Master your craft Deliver what you promise Know the small business market And do unto others as you’d have done unto you Contents Introduction 1 1 Step #1: Forget about the Small Business Market 5 2 Step #2: Find an Aggregator 81 3 Step #3: Speak their Language 105 4 Step #4: Find a Simulator 129 5 Conclusion: Your Four-Step Action Plan 149 Appendix A Partnership 2.0: The Next Generation of Partnership Strategies for Reaching the Small Business Market Successfully 151 Appendix B Small Business Marketing Campaigns That Resonate 173 Index 223 vii Introduction he small business market is the most im- portant on earth. The majority of our family and friends depend on small businesses for their paychecks. Most of America’s economic output is generated by small business. The world’s great inventions—from the light bulb to the au- tomobile—are gifts from the mind of an entrepreneur. More college graduates would rather start a business than be the president of the United States.1 And for marketers the fruits of B2bTMY—big business to small business—are just as ripe: the vastL majority of compa- nies in the United States are small businesses.F The small busi- ness market expands as corporate America retracts. When you sell to small business, yourM profit margins are under less pressure than when you sell to big business, and entrepre- neurs have more importantA things to do than leave you for a few dollars a month. E But for every great challenge worth achieving, a long, hard battle must beT fought. The small business market is a slippery prize that easily wriggles from the hand of the most skilled marketer. To master it, you must be humble and wade deep into the murky trenches of entrepreneurship. You must cast a skeptical eye on the reports of overzealous analysts and market promoters and drill deep into the mind of the entre- preneur. I started Warrillow & Co. in 1997 in order to help Fortune 500 companies get access to the most important market on 1. Survey conducted by Harris Interactive, sponsored by Northwestern Mu- tual, Generation 2001: The Second Study, 2001. 1 Team-Fly® Introduction earth. Since that time, our firm has had the opportunity to work with some of the world’s great business-to-business brands. Through all of our client work, hundreds of focus groups, and thousands of interviews with small business owners and marketers, our company has discovered four fun- damental steps marketers must take to successfully capitalize on the small business sector’s potential. This book is broken into four chapters corresponding with each of these funda- mental steps: ■ Step 1: Forget about the small business market de- scribes the importance of segmenting the small busi- ness market and reveals some of the unique sectors you can target. ■ Step 2: Find an aggregator explains how to acquire small business customers cost-effectively. ■ Step 3: Speak their language explains how to commu- nicate with small business owners and describes some pitfalls to avoid in your advertising. ■ Step 4: Find a simulator describes how to keep small business owners loyal without breaking the bank. Before we get started, I want to explain how I use the la- bels entrepreneur, small business owner, and business owner. For the purposes of this book, I use all three terms to refer to an individual running a company with fewer than 50 employees. Great debate surrounds the issue of whether dif- ferences exist between so-called entrepreneurs and small business owners. Many see entrepreneurs as risk-taking, growth-oriented go-getters. Others attach less desirable qual- ities to the word entrepreneur; for them, the word conjures up images of sleazy snake oil salesmen. For the purposes of this book, however, I use entrepreneur, small business owner, and business owner interchangeably in an effort not to bore you by repeating one label. In any case, as we go, you will discover much more appropriate labels for the different segments within the small business market. My purpose in writing this book is not to be a cheerleader 2 Introduction for the small business market. My guess is that you already believe it is an important market or you would not have picked up this book. Instead, my mission is to give you a new framework for considering the small business market and an action plan for capitalizing on it. Finally, we have tried to use the most current data pos- sible in all of the research statistics presented. However, one of our main sources for nuts-and-bolts demographic data was the United States Census Bureau, which only updates its in- formation every five years. Given the lead time to getting a book published, some statistics are inevitably more dated than others. If you crave more current small business market research and insights, join our community of Fortune 500 marketers by subscribing to Warrillow Weekly. A subscription form for this free weekly e-mail communiqué is available at warrillow.com. 3 CHAPTER 1 Step #1: Forget about the Small Business Market he first rule of marketing to small busi- nesses successfully is to forget about the Tsmall business market. It doesn’t exist. Think about it: what does a dry cleaner have in common with a photographer, and what does either of them share with a biotech entrepreneur? Very little, yet the United States Cen- sus puts them all neatly into a category called small business owners. The problem with calling the small business sector a mar- ket is that markets traditionally have something that binds them together, a common theme about which all members generally agree. The entire small business market is ex- tremely diverse, so the first thing you need to do is figure out a way to slice and dice this market into chunks that are more homogeneous. This chapter reveals what segments of the small business market exist and how others have successfully gone about carving it up into manageable slices. Forget about the so-called small business market. 5 Step #1: Forget about the Small Business Market Carving off the Sludge As a small business marketer, one of your first tasks is to size the market. You need to be careful here. Look at any press re- lease relating to small business and you will see wild esti- mates about the size of the small business market. A large population of small businesses that make it into those esti- mates will never buy your product or service. In 1997 (the most recent data available for this writing), the United States Census Bureau calculated 21 million small businesses in the United States. However, a huge population of bottom feeders within that 21 million figure will never buy your product. They form the underbelly of the small business market, made up of get-rich-quick schemers, dreamers, and diet pill push- ers. Go to any networking event for so-called business own- ers and you will find them lurking to take advantage of a new entrepreneur. You can see them advertising on the telephone poles of any major North American city—you can’t lose 30 pounds in 30 days and neither can you sell your product to these shysters. After you carve off the sludge, another layer of small busi- nesses needs to be removed from the 21 million estimate; this layer consists of the shell companies that lawyers fabricate to make sure their wealthy clients pay as few taxes as possible. Then you must get rid of all the dormant companies that have been abandoned for one reason or another. You are then left with the legitimate companies, which probably number con- siderably less than the number your boss told you to target. Unfortunately, calculating this layer accurately is impossible, but our best guess is that it amounts to somewhere between 10 to 15 percent of the 21 million small businesses in the United States. Take small business market size estimates with a hand- ful of salt.