The Hidden Switching Power of Recessions in the Small Business Market

In the initial three articles of Warrillow's four part series on the value of marketing to small businesses during shrinking economies we've covered the following topics: the historical view of the small business market during recessions; the resilient nature of small business owners; and the drivers of sub segments of the market that will succeed despite economic headwinds. In this final installment, we look at another compelling reason to keep the small business market at the top of your enterprise's priority list: small business owners' current supplier relationships are disrupted.

Warrillow has conducted extensive studies on the concept of relationship inertia, investigating what makes small business owners stay with and switch from suppliers. This research finds small business owners are usually inert towards their suppliers. In good times, small business owners take an "if-it-ain't-broke-why-fix-it" approach to their business and stay loyal to their providers (and your competitors). There are a series of key events, however, that jar small business owners out of a complacent attitude toward their suppliers. Two events that are both highly disruptive and highly correlated to new process adoption across an entrepreneur's business are declines in cash flow and losing a supplier. In 2007, these were infrequent events for small business owners.

In recessions, the vast majority of small businesses experience profitability and cash flow pressure and suppliers begin dropping like flies. The National Federation of Independent Businesses's (NFIB) data on sales expectation shows a 38 point swing in small business owners' sales expectations from January, 2007 to October, 2008.

This sort of sales decline is creating significant changes in small business owners' day-to-day cash flow and month-to-month profitability. The end result is that recessions create some of the most disruptive environments possible for small business owners.

Enterprise companies tend to lockdown current suppliers during recessions, focusing on reducing spend rather than switching providers. Small business owners, conversely, will react to downturns by reexamining the list of companies with whom they do business, looking to switch suppliers to get a better deal and become more productive. If your product can make a small business do more with less, is better priced than the market leader, or helps small business owners sell or market their product, the small business owner will be more receptive to your marketing message than ever before. There is perhaps no better time to steal share in the small business market than the next 6 to 12 months.

Members can view this series in its entirety by downloading Marketing to Small Business in the USA: an Open Letter to CMO's from www.warrillow.com or by contacting their relationship manager. Members can learn more about how markets leader have seized recessions to make sweeping changes in Warrillow's Executive Education Program, Bold Moves in Tough Times, at the MIT Endicott House Jan 20th through 23rd. Contact your relationship manager for more details.