Boom or Bust, For Most Small Businesses, Branding Remains A Mystery, Marketing A Misery And Tomorrow Is Likely To Be History…

by Gene Stark

A recent PwC survey “Private Business Barometer IV” paints a depressing yet realistic picture of the Australian small business state of play - about 92% are considering cutting their marketing budget. Gregory Will, partner at PwC, rightly points out that these are the very areas that are the source of most small businesses' competitive advantage. The reality seems to be that we’ve gone from riding on a sheep’s back to acting like them at a time when we need leaders not followers! You can call farmers “battlers”, but not the majority of SME business owners – their droughts are mostly self inflicted.

The following is a statistic I found on the CPA Australia website – 3 years ago - and it estimated that one in three new small businesses in Australia f ail in their first year of operation, 2 out of 4 by the end of the second year, and 3 out of 4 by the fifth year, with only approximately 8% of small businesses succeeding beyond 5 years.

Failure to plan is a plan for failure.

Conducting a business without a formalised plan is much like trying to drive a car to an unknown destination without a map. Yet the estimates are that only 3% to 5% of Australian small businesses starting from scratch prepare a business and marketing plan; that is, know that their business is feasible and have a formal plan to steer that business towards success.

Based on the fact that a Feasibility Study, a SWOT Analysis and a Marketing Plan are a part of any Business Plan, I suggest that approximately 70% of all business failures and almost 100% of lack of business growth are due to inadequate Marketing.

Peter Drucker, the grandfather of modern management said business is about 2 things and 2 things only - innovation and marketing!

A number of studies conducted since WWII showed something that marketers have known all along - keep marketing through the downturn. The following quote is from Professional Marketing, Oct-Dec 2008 – article titled "All Hands On Deck": "...companies that increased marketing spend (relative to market size) during a recession, increased their return on capital employed by 5% in the recovery, compared to a 1% decline for the budget cutters."

Most businesses are either ignorant or choose to ignore the empirical evidence for maintaining or even increasing marketing investment in a weak economy:-

1. Competitors tend to be less active & cut spending, thereby creating opportunities
2. Maintaining promotional spend will sustain or even grow market share
3. Consumers don’t “go away” during a recession, they become more conservative

For most SM E’s marketing is an expense and not an investment.

Most SME business owners do not understand the meaning of marketing or branding let alone have any basic understanding of advertising principles to effectively and efficiently reach their target audience. Much of the SME marketing efforts are wasted anyway - just open your local paper, look into your mailbox and see the standard or the lack of it in SME marketing communication.

Only a few weeks ago the ABS released a frightening statistic that 66% of Australian businesses do not have a website!Attitudes have to change. "Ego and advanced ignorance have killed many a business, and continue to do so.…ignorance is acceptable because it means we don't know. Advanced ignorance, however, is 'knowing we don't know ' and doing nothing about it! It's deadly….there's information readily available on every conceivable issue relevant to growing a healthier business, but it's far easier not to seek anything at all.” Says Brett Lowe of Business Planning Works. There are businesses still around today, that perceive customer service to be a “Thank You” on the invoice.

A study of 460 B2B organisations that employed 100 + people, conducted by Strike Force Sales, found that only 6% of Australian companies pick up the phone and respond to a web generated sales inquiry with a phone call. The MD of the company, Chris Moriarty brings this reality home with another statistic that shows 46% of the time auto- response emails are never followed up.

In the last 3 years, I have met hundreds of SME proprietors and completed over 50 SME marketing projects. I have discussed the SME challenges with colleagues and other consulting professionals and have to say that there are glimmers of hope.

These generally lie with the younger more entrepreneurial SME business owners who have grown up on the ‘brand rich media diet ’. 

There is plenty of professional help out there, admitting you need it, is the hard part…

• Find-a-Consultant search facility is available at www.imc.org.au, the website of The Institute of Management Consultants (IMC),  the only organisation setting standards for management consultants in Australia. You can search this website for their database of accredited consultants

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Gene Stark, Author, is the principal of Stark Reality www.starkrealitymarketing.com.au a marketing consultancy working with B2B and Professional Services Companies who find it difficult to find, attract and retain customers with ever decreasing budgets.Stark Reality provides SME’s with simple, effective, and accountable marketing solutions that increase their marketing R.O.I using brand communication disciplines and processes previously only available to and affordable for, large corporations.

Gene Stark has given ABA permission to publish this article on ABA’s website 2009