Marketing: many SMEs fail through lack of marketing expertise
Britain's small business sector is booming. In the first six months of 1997, nearly 270,000 fledgling enterprises opened their doors to customers for the first time - the first sustained rise since the late '80s. Sadly, however, a high proportion will also be closing their doors for the last time, and many will close for one simple reason - lack of marketing expertise.
Most entrepreneurs accept that there is a long list of things they would like to know more about - time management, financial management, personnel skills, and so on. And yet marketing remains a blind spot. According to recent research by Barclays Bank, over two-thirds of entrepreneurs refuse to accept that they need to learn about marketing.
Yet all the evidence points to poor marketing as the prime cause of poor performance. The research suggests that three-quarters of entrepreneurs start their businesses without doing any market testing to establish whether there is a demand for their product or service. It is so important to appreciate the importance of marketing from the day the business starts. Too many businesses concentrate only on the short term. The many tasks at hand must be tackled of course but sensible forward marketing in the early stages is essential for a smooth flow of work coming into the business.
Pricing strategies are also often ill-considered. Only one in four calculate how much they need to charge to break even. And their customer focus is poor. Only 20% of them draw up a detailed profile of potential customers or seek to build knowledge about prospective customers and their buying habits. While seven out of 10 small businesses keep a database of existing customers, only one in 10 use that database to secure future business.
Small business managers need to wise up. To put it bluntly, too many of them got hold of the wrong end of the stick about marketing, thinking 'marketing equals advertising equals unnecessary cost'. What they need to embrace is an altogether different equation: 'marketing equals attracting and keeping customers equals success'.
To make things worse, small companies are not helped by Britain's growing 'dish-out-advice-to-small-firms' industry. It's time for professional marketers, consultants and government agencies to come off their pedestals.
With too few exceptions, their marketing of marketing has been awful.
They haven't even applied the first lesson they pretend to teach: look at it from the customer's point of view. Instead of offering practical advice which helps small business leaders identify immediate potential benefits, all too often what professional advisers produce is a load of highfalutin' verbiage about strategy and marketing planning, the relevance of which seems restricted to the long term, ie never. Just imagine how much more these businesses could achieve if marketing professionals and entrepreneurs communicated on the same wavelength.
Now consider the plus side. If you list the huge number of handicaps so many start-ups have to contend with, the surprising thing is not how many go under but how many survive and flourish. Choice of market and a thorough understanding of what that market wants are vital planks in the rapid and successful growth of so many SMEs. A recent survey by Deloitte & Touche suggests that Britain's fastest growing businesses owe their success partly to their foresight in positioning themselves in niche markets, coupled with a clear understanding of their customers' needs. The survey suggests that SMEs who believe they are outperforming their rivals by close and regular attention to the marketplace are far more likely to exhibit spectacular sales and profit growth. Such success can only be achieved by a continuous process of feedback, not just an attitude of 'let's talk to our customers only when we need the work'. For some businesses it can be easy to get distracted from this key thrust, but those that want to grow must not lose sight of this if they are to become the superstars of tomorrow.
Alan Mitchell was editor of Marketing and now works as a freelance journalist.