Jeff Judy

Jeff's Thoughts - November 19, 2014

Small Business: Local, Convenient, Targeted, Relevant

In the most recent issue of Jeff's Thoughts, I wrote about some disruptive developments -- from peer lending to Bitcoin -- in our industry. And I suggested that even though big banks may have a lot more resources to throw at a world where customers do so much electronically, community banks can leverage their deep knowledge of their customers, especially small businesses, to enjoy their own competitive advantages.

So let's look at a few areas where we need to pay attention to how we are serving, in particular, these smaller businesses.

Buy Local! You are probably well aware of the growing interest among many consumers in where their food comes from. If you think that the "Buy Local" movement has nothing to do with financial services, you may be missing a powerful marketing opportunity.

In a recent article about a growing ($4 billion assets) credit union that is adding branches, University of St. Thomas finance faculty Mufaddal Baxamusa made the observation that even in an era when many customers bank purely electronically, they still like to know they live or work near their institutions. And in a Better Business Survey (2012) quoted by Brian Higgins in his excellent blog post, "Small business success requires fresh thinking", a majority of respondents reported visiting their physical branch at least once a month.

Now, of course, the big banks can put branches all over the place. But they cannot claim to be local with the authenticity that you can, any more than a big box retail store can claim to be the neighborhood provider. Leverage that distinction as much as you can in your messages to customers and prospects.

Time and Convenience. Higgins emphasizes the importance of time to small business customers. But that doesn't mean the e-version of every single service is always their first choice.

Sometimes convenience means stopping by a branch -- perhaps a micro-branch, really -- and sometimes it means doing things on-line. The key is to get beyond "everything electronic" thinking to targeting the services and delivery channels that will best fit their preferences. That means looking at the kinds of business customers you serve most and focusing on the services they use most often, rather than trying to keep up with the full spectrum of e-services the big banks offer.

It also means that because you can have long-term relationships between steady employees and loyal customers, you can handle a lot of personal interactions, on the phone or in person, much more efficiently than any big bank. Remember, business customers hate starting over every time they talk to their bank!

Targeted. Is every small business customer of equal value to you? Probably not. Could you describe your target for small business marketing beyond "small business"? Is small defined by number of employees, or dollars in annual sales or revenue? You'll have to serve a wide range of businesses, no doubt, but if you define a "sweet spot" in your marketplace and make that a priority, you can establish a reputation for expertise and exceptional service in that space. That makes marketing more effective and more efficient, especially as customers in your defined niche talk to other potential customers.

Relevant. The Better Business survey indicated that, for example, cash flow management was one of the major concerns of small business owners. Yet the majority of respondents were not receiving any cash flow assistance or advice from their banks.

Sure, big banks can lay out countless services. But you have the relationship with your customers to help them see their needs and to expertly deliver what they need most.

Remember that small business owners are not insulated from their daily financial practices the way the CEO of a huge corporation might be. When you address the needs that offer the biggest payoffs if solved, it definitely gets the ownership's attention.

Specialization is what all this boils down to, like being a cardiologist or a neurologist. Focusing on a specific set of customers, needs, and solutions positions you to be a valued resource in a way that no national, "everything under the sun" financial institution is ever going to match.