Five SME Marketing Traps
I recently completed an assignment to help a good little company re-invent themselves. They had been losing market share for a number of years, but had superior niche products at competitive prices. They had reasonable distribution, advertising and promotion programs, and excellent branding. They could not understand why they would be losing their market.
To cut a long story short, they had fallen victim to the following traps:
- Followed the competition. The company had been the market leader, developing and innovating new designs for their products. When competition started bringing in some new features, the company followed their lead, imitating the new features and surrendering their advantage.
- Tried to out-spend. Especially a bad tactic for a small company. They engaged in promotion and price cutting to try and retain market share. Even when they continued to lose share they kept on spending in “dumb” ways.
- Out reached themselves. They embarked on a big export drive. They almost simultaneously appointed distribution agreements in Australia, UK and USA. For a small company, this meant that they did not have the resources to properly market and establish any of these markets. This drained more resources.
- Exceeded their ability to deliver. The business is quite seasonal, meaning demand peaks in a three month period, when customers want the products “yesterday”. The local promotions and export orders were also focused on these peak times, meaning that it was physically impossible for the factory to produce to meet obligations. As a result customers were very grumpy.
- Too many products. There were so many models and versions, trying to cover every possible customer wish. This meant too much complexity in explaining the product to the customer, in order taking, and in the operational requirements (inventory, version control, low runs). Increased complexity lengthened delivery times and decreased profitability.
The result was increasing customer dis-satisfaction, more competitor trial, and falling sales.
In response to these ills, the following symptoms appeared:
- Blame culture – in particular, blame the sales team.
- If not, blame the factory workers for easing up.
- Lack confidence in the product, even though intellectually you know it is the best
- Lots of fire-fighting but little work on fixing the underlying problems.
- Poor quality of information flow.
- Lots of mistakes throughout the chain.
- Poor profitability and cash flow.
In this situation, band aids will not work. A new direction is needed, probably coming from outside the company. In SME’s the Board or Advisory Board may not be able to provide this objective assessment and direction, although either should if properly constituted and empowered.
Once these types of traps are recognised, solutions are much easier. The important thing is to really get an objective view on what’s happening in the company, rather than keep on going in the same direction (with the symptoms as above).