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The Five Tech Behemoths Poised to Dominate the SMB Space (and how you can survive the coming apocalypse)

Small businesses are trending up these days, and as they grow across all industries, the Fortune Five Million will need more capital, more resources, and more business partners than ever before.

To address growing needs in the SMB space, data driven social networks and tech behemoths are zeroing in on an SMB market that’s ripe with opportunity–and data. Incumbent companies with long histories of serving the small business market may soon be displaced by competitors many of them never saw coming.

 During Facebook’s Q1 2014 earnings call, Sheryl Sandberg revealed that she is personally interested in conquering the SMB market for Facebook’s online advertising platform. More precisely, she called SMBs the “holy grail” of advertising. Facebook purportedly serves 25 million engaged SMBs.

With casual indifference, Jeff Bezos announced that Amazon is launching a POS system. Amazon also has the capability to offer website development, data analysis, and massive distribution, as well as big discounts on the products SMBs need to operate. They currently maintain credit card information on 230 million users.

Google’s VP of Payments, Ariel Bardin, acknowledged at the Money2020 conference in 2013 that people don’t think Google has a real role in the payments world. He then referenced the one billion plus products Google has indexed to which Google can achieve a 500% boost in queries. He also referenced data from a recent Google survey that found 45% of smart phone users want loyalty products from merchants on their mobile devices, while only 4% actually have them. “This is an area we can help,” he said. And Google is fortifying its payments division with a set of data and analysis for participating merchants to help them build loyalty programs.

In December, Apple unveiled iBeacon, which tracks customers inside Apple stores and sends push notifications about products. At the end of 2013, a patent belonging to Apple was published with this description: “Effecting payments by utilizing mobile devices equipped with digital camera, software for decoding optical codes, and an infrastructure of network-based clearinghouses for maintaining the anonymity of a plurality of customers and protecting their private and financial data.” Apple currently has 600 million consumer credit cards on file. As Apple pursues mobile payments, as patent US 13/481,916 implies it will, the company’s consumer data will more than triple.

Just under 25% of SMBs advertise on Twitter, according to new data from BIA/Kelsey. This number has steadily grown from 16% in 2011. 3 in 10 SMBs advertising on Twitter perceive the value of their investment in Twitter advertising to be “excellent” or “extraordinary.” Twitter also released its own data report, which reveals that 85% of SMB followers feel more connected with businesses after following them. Twitter is taking on the local advertising market, and the social network has so far posted impressive success.

Microsoft just appointed a new CEO: Satya Nadella, a technologist with a background in SMB software. Nadella was the primary driver of Microsoft’s shift towards the cloud. Microsoft has a massive SMB installed base.

If you sell to small businesses, the threat of your traditional competitors will become insignificant when a company like Amazon jumps into your industry. And if you sell to small businesses, the threat of Amazon, Google, Facebook, LinkedIn, or Twitter becoming a direct competitor in the next decade is a very real danger.

To understand why data-driven businesses pose such a threat to more traditional businesses, we first have to understand what sets them apart.

Technology Orientation vs. Sales Orientation

Companies like Facebook, Twitter, and Google use data signals, technology and systems to market their products grow revenue. They also build engagement-oriented products, which provide them with instant feedback to make their products and services more appealing and engaging. A technology-oriented company learns about prospects and customers through data; a sales-oriented company learns about prospects and customers through sales teams.

Facebook, relative to the market opportunity, won’t need to build a massive sales team to go after the SMB market. Using the data they already have on the 25 million SMBs with Facebook pages, they can predict which businesses are most likely to spend a lot on Facebook ads. They can then use Facebook ads to target prospects.

Consider, on the other hand, a company that provides an online business directory to small businesses that don’t have the resources to maintain their own websites and social profiles. To grow their business, this company employs a large sales team that cold calls businesses they find on purchased lead lists.

Google, Facebook, Amazon, Twitter, and LinkedIn possess more consumer data than the U.S. government, and they have the technological resources to turn those data into actionable sales insights. When Amazon sells a POS System, it doesn’t have to build a technology to find customers–it already processes transactions for millions of small businesses, and it also has tons of customers it can match to merchants with transaction histories and billing information on file.

In the next decade, the businesses that use data to understand their customers will surpass the businesses that use sales teams to understand their customers. If one of these data-driven technology companies comes blowing into your industry, will you be able to stand your ground?

The Shifting Value of the SMB Sales Team

New circumstances have sparked major shifts in the ways companies do business with each other. The function of the sales team within the organization has shifted. The challenger sale replaces the hard sale and inside sales has risen to replace autodialing. Building a team of savvy sales reps is no longer enough to compete with the growing threat of technology driven businesses like Amazon and Google.

A number of business conditions support this hypothesis.

1.        SMBs have grown web-savvy.

small vs large

While a 36% difference separates small and large businesses on website presence, notice how the gap narrows on social media. Small businesses are catching up to big businesses when it comes to social media, and as a result, we’re gaining incredibly valuable insights about their interests.

Businesses with 100-250 employees are the most active online, but in some markets–such as those of Seattle and Denver–98% of businesses with fewer than 50 employees maintain websites. Detailed information about SMBs is becoming more prevalent online.

BIA/Kelsey’s Local Commerce Monitor (LCM) study reports that SMBs allot 17% of their total ad budgets to social–second only to Other Traditional sources, which receive 24% of the advertising pie.

As small businesses move online, we have access to tons of data about their needs and business statuses. If we don’t consider these insights in our sales approaches, we miss a huge opportunity to capture their attention.

2.        The amount of information available online is mounting.

Richard Sim

Reaching small businesses is growing increasingly difficult. Just advertising on Facebook isn’t enough; we have to develop more distinct customer segments to cut through the noise that a growing volume of online content creates.

A Google search for a small business may return 6,237 results and not a single piece of information that’s valuable to a sales rep. In order for humans to make sense of the enormous quantities of data available, we have to rely on technology that sifts and analyzes data.

Technology-oriented organizations already have the capacity to understand and speak to mass stores of information on the Internet. If you sell reputation management to small businesses, what will you do when Facebook develops a reputation management solution? A human sales rep cannot compete with a Facebook algorithm; without technological assistance, the Facebook ad will reach the target customer before the sales rep’s phone call.

3.      A shifting workplace dynamic undermines longstanding SMB/provider relationships.

As older business owners retire and a younger generation takes their place, they’re going to leapfrog incumbent relationships and look to new solutions. With 54% of their ranks planning to build or already growing their own startups, millennials are going to flush the SMB market with new businesses–and new sales opportunities–in the next five years. They’ve had relationships with Facebook and Twitter since they were thirteen; they bought college textbooks on Amazon; they connect with people on Facebook. To this market, Google is the incumbent. Long-standing, loyal relationships with account executives will go out the door when this generation takes over the workplace.

The new generation of SMB owners isn’t just millennials; the number of boomers opening SMBs is rapidly growing. In 2008, the number of founders over fifty was twice the number of founders under twenty-five. Boomers are retiring from their corporate jobs and starting small businesses, and they will need a new set of resources. Many of these new entrepreneurs spent years in managerial roles at large companies where they had to navigate corporate politics and think in terms of long-term careers. They will approach their small businesses with an experience that many small business owners don’t have, and they will demand different resources than their younger, web-savvy competitors. We know very little about this group of entrepreneurs, and even less about their spending habits and preferences, and we can’t rely on standard customer personas to define their needs. By the time most of us figure them out, the data-driven companies that can provide the resources they need will have already won.

4.        The Internet has blossomed into a wealth of options in nearly every marketplace.

Small businesses have greater access to options than ever before. They no longer have to sustain relationships with vendors they know overcharge; they no longer have to rely on broken solutions because they don’t have time to search for options. Small business owners can find the exact resources they need, and they will drop any legacy solutions that slow them down. The most innovative businesses truly will win.

For a sales-oriented business to survive in a world that’s shifting towards technology, the old school sales approach has to change.

How to Build a Data-Driven Revenue Strategy

By the time a completely sales-oriented business faces competition with a large data-driven organization like Amazon, it has already lost. The threat of the data-driven behemoth lies in the depth of its data. Amazon has years of data about the search and purchase preferences of millions of customers. You can’t build that overnight.

However, you can build a strategy that focuses less on cold calls and more on insight selling, and you can build a marketing strategy that centers on data. You can partner with companies that have just as much data on your target audience as Facebook and Google do.

Data-Driven Marketing

Every business has one unequalled advantage that, when properly understood, can counteract a competitive threat: its own customer base. Every account in your CRM tells a story–whether you lost a deal, won a deal, disqualified a deal, or left an account open for six years reveals valuable information about your strengths and weaknesses. The patterns amongst those stories expose an even greater asset: the secret to your own success. You may not be able to build in-app ad networks to reach a new market segment, but you can enlist the help of external data technology to understand which attributes predict which behaviors.

Today’s marketers don’t have to rely on large data lists to acquire new leads; using marketing analytics tools like the one Radius offers gives marketers an opportunity to learn which qualities define their best customers and find more customers with the same qualities.

A number of companies also have access to proprietary customer data because of the nature of their solutions. Intuit, for example, keeps track of financial and tax information on thousands of small businesses that use their products. If Intuit can use the customer data they have to maximize the relevancy of their products, their business will grow and thrive in the coming decade.

Data is changing the way we live and the way we do business, and companies have to innovate. It’s no longer a matter of thriving, it’s a matter of surviving.

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