Many B2B companies focus their work on key accounts to the detriment of their smaller customers.
Particularly in economically strained and uncertain times, more stable business can be achieved with a large number of minor transactions with many small customers than with large customers. Targeting small customers holds promising potential for diversifying risk and reducing dependence on individual large customers.
From small customers to smart accounts
For most suppliers, small customers make up the majority of the customer base. They are differentiated by turnover, business size and order quantity or volume. Attractive small customers that have a positive trend in the market and can be dealt with in a profitable manner are what we refer to as smart accounts. These can be small customers or large enterprises with small purchase volumes. On the whole, it is important to recognize that this is a heterogeneous group with requirements that differ.
Where to get started in smart account management
For suppliers, the challenge is to bring in a wide variety of orders from their smart accounts and then fill these orders effectively and efficiently. Valuable approaches to successful smart account management are based on (1) increasing margins and revenue or (2) reducing the costs associated with each transaction. However, less than half of B2B companies have dedicated approaches to dealing with their small customers, and it is not infrequently the case that this circumstance is based on a misconception.
The trials and tribulations of small customers
In the following, we would like to dispel five myths about small customers that persist to this day. Learn why it pays to put your focus on small customers and establish dedicated smart account management.
Myth #1: You can’t make any money with small customers
Suppliers often see small customers as unattractive because they do not generate as much turnover as large customers. Small customers are also perceived to be particularly price sensitive.
HOWEVER: The reality is that it is often easier to maintain and raise prices with smart accounts than with key accounts. It is not uncommon for key accounts to use their negotiating power to demand steep discounts in price. Smart accounts are also more willing to accept minimum order quantities or surcharges for small orders. This frequently makes it possible to achieve better returns with many small transactions than with the never-ending practice of “key discount management.”
Myth #2: Small customers are unprofitable
Suppliers often feel that dealing with small customers is very cost-intensive and not commensurate with the order volumes associated with them. The underlying assumption is that small customers – particularly in industry-related sectors – are not very digitally savvy and prefer personal contact with suppliers.
HOWEVER: It is often the suppliers that do not yet offer their smart accounts the right ways to work with them in a streamlined and professional manner. It can generally be said that the acceptance of digital procurement solutions has significantly increased among smart accounts. Another reason for this skewed perception is that small customers are addressed with the same scope of services as large ones. Reducing the scope of services and standardizing the services on offer is associated with great potential for increasing the profitability of dealings with small customers.
Myth #3: Servicing small customers takes too much time and effort
From a supplier perspective, working with small customers can take a great deal of effort. The amount of advice and consultation provided by suppliers is disproportionately high, particularly when dealing with small businesses that lack professional purchasing staff and rely on the boss to make procurement decisions.
HOWEVER: Even though smart accounts do not always have specialists in the product or service to be procured, the overall procurement process is simpler and less complicated. This means that fewer people need to be involved, making for speedier procurement decisions. If smart accounts can directly access the information relevant to their decisions (e.g. product data sheets, access to customer support) or perform certain activities on their own (e.g. self-service, online stores), it is possible to deal with small customers in a streamlined manner.
Myth #4: Small customers are the key accounts of tomorrow
Sometimes suppliers work intensively on meeting the needs of individual small customers, hoping that they are the successful customers of the future who will eventually deliver orders of the century. Unfortunately, such key account management based on hope rarely leads to the desired success. The large orders announced become smaller and smaller or are not placed at all in the end.
HOWEVER: Suppliers can reduce their workload by remaining grounded in the reality that the majority of smart accounts will always remain small and that not every customer will develop into a key account. In order to deploy resources to the most promising customers and thus increase the chances of success, suppliers should realistically assess the growth potential of smart accounts. In this situation, data and facts are better guideposts than vague hopes and promises.
Myth #5: Every small customer is the same
Another misconception many suppliers have is that their small customers are all the same. This leads them to lump small customers together and address them with a uniform offer while developing custom strategies and solutions for key accounts.
HOWEVER: In reality, smart accounts have exacting standards and wide-ranging needs. If suppliers fail to deliver on their promises, this can often have lingering effects on the business relationship. It is worth defining differentiated solutions to meet the various needs of smart accounts (e.g. cost-effectiveness, carefree all-inclusive packages). For example, marketing automation can make it possible to address customers in a highly efficient and personalized manner.
Further reference literature (German only):
Belz, C., Schmitz, C. (2008). Smart Account Management: Erfolg mit kleinen Geschäften im B-to-B marketing. Direkt Marketing, 4, 44-47.
Belz, C., Schmitz, C., Lee, YC., Ahlers, M. (2014). Herausforderungen und Stellhebel für die erfolgreiche Betreuung von Kleinkunden. Mark Rev St. Gallen, 31, 14–25.