Focus on your distribution channels to beat the big boys.
Big brands hold most of the aces when it comes to seizing competitive advantage - huge communications budgets, an established market presence, funds for research, funds for product development, etc, etc. But there's one crucial battleground where SMEs are turning the big boys' strength against them: distribution.
You might think that this is yet another area where big brands excel.
Often, it is. But the need of the big brands to achieve maximum availability makes them guilty of what could be termed 'promiscuous' distribution. Because they must push themselves through every possible channel, the corporate giants dare not favour any one of them. While many smaller firms worry themselves to bits about how to differentiate their particular product or service, they fail to see the opportunities that distribution presents. By focusing all their energies on one or two particular channels, they can offer their product or service in a unique manner, thereby creating a huge potential for growth.
Recent high-profile examples of companies which grew from minnows to household names by this route include direct distributors such as Dell in computing, First Direct in banking and Direct Line in insurance. Going direct is just one route to success. Another is to create a more appealing package for the customer. The home-delivery local pizza parlour and low-tech scooter versus the grocery superstore's lavish property development and huge chilled distribution fleet may seem like a horrible mismatch.
But the route of convenience carries powerful conviction for today's couch potatoes.
A clear focus on the appropriate channel of distribution can work as long as marketers devote their energy to offering the channel real added value. Specialist credit-card marketer MBNA has grown rapidly by offering low-interest affinity cards to special interest groups such as charities, trade unions and pressure groups. It gives these organisations something extra to offer, and in return they make their membership lists available to MBNA.
Channel focus is even being used successfully to sell hair shampoo.
Hair products firm Paul Mitchell, for example, avoids going head-to-head against giants like Procter & Gamble by selling solely through hair salons.
At the same time this gives its products an air of exclusivity chez le coiffeur. The salons are not just a distribution outlet, however. Through a sister company, Paul Mitchell offers all sorts of extra services: training for hairdressers, accounting systems, business and marketing advice, point-of-sale material - anything to help the salons offer a better service.
In the UK, Paul Mitchell has notched up double-digit sales growth for each of the last eight years. But with salons accounting for less than 5% of all shampoo sales, it's still small fry. In the US, however, salons now account for 25% of the market and the company has grown from small beginnings to become a recognised major brand. What's more, its major rivals are finding it's almost impossible to attack the company on its chosen home ground. Their TV ads don't reach inside the salon, where the firm has become closely associated with haircare professionals.
The globalisation of business also has distribution potential for SMEs.
Smaller companies have advantages in export marketing because of their ability, in some cases, to make faster decisions. They also enjoy a slim-line management structure, have fewer overheads and can be flexible in repositioning their products when a market demands change. Global networking in order to establish an effective distribution channel is not necessarily the preserve of multinationals. All you need is an ability to develop a deep understanding of how particular export markets work, an eye for a niche product - and a suitcase.
Too often, when asked about the challenges facing marketers in SMEs, experts' advice boils down to a platitude: 'think smarter', but we all know that big boys can be smart too. The trick is to find strategies that rivals cannot or do not wish to emulate. For SMEs, a clear focus on distribution channels is fast becoming one of the best ways of doing so.
Alan Mitchell was editor of Marketing and now works as a freelance journalist.