Breaking the Middle Market out of SMB

The term SMB is easy to visualize, easy to talk about, but not so easy to market to.

Representing a small to medium-size market of up to 25 million entities – depending on how you set your filters, the SMB segment is often irresistible to technology companies that are reaching maturation in the larger enterprise market or are facing tougher competition and declining profit margins.

It is true that the SMB market is more attractive than ever, as suppliers and service providers can take advantage of the web and cloud to reach SMB buyers and to distribute products and services. During the past few years, for example, a number of startups have latched on to major inefficiencies in financial services and the ability to go direct to customers in a manner that disintermediates traditional distribution channels that aren’t adequately serving the needs of smaller businesses.

But going “down market” is not as easy as it seems. Last year, a CMO Survey found that 70% of marketers says the SMB market is extremely important to their business, but “only 8 percent of respondents reported having a complete view of the SMB customer,” according to CMO.com’s analysis of that report.

The SMB segment is volatile with large churn rates. More problematic is that the number of prospects is just too overwhelming. And even when you find them, smaller companies are going to be resistant to the upselling and cross-selling pitches needed to build a profitable and sustainable relationship.

So the first task is to segment this vast market into manageable targets. Once you cull out the 1-person sole proprietor firms you’re down to 5 million prospect companies. But that’s still a huge market, and most of those companies are still relatively small and their individual needs are so diverse and span so many market segments that you’d go crazy trying to come up with a cost-effective strategy.

So let’s get rid of that simplistic and misleading SMB label we previously assigned – there are small companies and there are midsize companies. And let’s not focus on the number of employees, but rather on annual revenue of prospects.

The sweet spot is in the midsize market, of companies with annual revenue of $10 million up to $1 billion – in the U.S., this is a more manageable universe of approximately 200,000 companies. According to the National Center for the Middle Market, those firms make up just 3% of all U.S. firms but account “for a third of U.S. private sector gross domestic product (GDP) and jobs.”

Now that’s a segment that’s a more realistic target on which to build a marketing strategy. Unfortunately, many midsize technology companies are fumbling the opportunity to go after midsize targets in all industries. “Midsized software vendors often lack essential experts, especially for solution and customer strategies, and strategic market intelligence,” writes software industry consultant Julie Hunt. “Midsized software vendors often lack essential experts, especially for solution and customer strategies, and strategic market intelligence. Usually these vendors don’t have the resources to continuously update strategies. But just as often it’s because strategic decisions aren’t based on data and intelligence – they’re based on ‘gut’, previous experience or even ego.”

As Hunt points out, continuously updated market intelligence is the key to understanding what you should be selling and determining which customers and markets are your best target.

At SimplyDIRECT we believe the combination of custom-built contacts, web surveys and content marketing is the best way to create an effective marketing strategy that helps our clients reach, qualify and nurture management-level contacts.

It all starts with building the essential target account list with up-to-date, role based contacts of the decision makers in your key accounts. Unlike typical lists-for-rent, we phone qualify all contact data. Even if you think you have a great custom list in-house, be aware that those lists decompose at a rate of 24% a year as prospects leave their company or take on new roles and responsibilities. Cleaning a list saps resources that can be better utilized in more direct revenue-generating activities.

With the 100% verified list you can use survey a sample of the prospects to gain crucial account intelligence to assess opportunities and generate content to nurture leads, along with identifying prospects that have indicated they’re open to calls from the sales team. To learn more about reaching, qualifying and nurturing management level prospects check out this short video.