By Venkat Krishnamurthy, Co-Founder & President of Alignable
I’ve spent seven years now in the “SMB space,” well past the 10,000-hour mark at this point, so you might say I’m a grizzled veteran. But it was my first time at the Local Search Association (LSA) Conference (an institution in the local and small business space) this past month.
Greg Sterling and I had an entertaining chat about Alignable and, more generally, about the SMB & Local space. It’s interesting to look at an industry with fresh eyes – and I’ve had the good fortune to do it many times for a variety of industries. Enough to spot significant patterns that might be harder to spot for veterans that might be even more grizzled. Here are some observations from the show:
1. Is Starbucks A Local Business?
Don’t mean to pick on Starbucks (sorry Starbucks – I love you), but when we talk about local business use cases should we be talking about Starbucks? Yes, they have local stores and employ local folks (with excellent benefits, I might add). But in terms of market and brand power, they’re about as different from a small, local business as you can get.
There’s a very obvious spectrum of scale in local: from large (Starbucks) to medium (Ace Hardware — Yes, I love you, too), to medium-small (auto dealerships – I do love some of you, not all of you), to small (your local kitchen store, salon, etc.) to super small (my future yoga instructor).
As a business selling into this market, it’s easier to build products and services for large and medium businesses. It can be tough to serve the truly small + local businesses, because they all have diverse needs and are tough to reach. As one agency owner I met put it, “It’s hard to build a business on $200/month per customer.”
I get that. But it’s also the most socially important, personality-rich, and rewarding end of the spectrum to serve. Let’s keep helping those high LTV accounts like Starbucks, Ace Hardware and auto dealerships, but we need to be more innovative to help the truly local + small. The good news — they’re not that tough to reach anymore. We have millions of them talking to each other on Alignable about what products and services to buy. Come talk to us, maybe we can help you out.
2. Are Marketing Agencies “Boxing Themselves In?”
A futurist who happens to work at a marketing agency (you know who you are :-)) was speculating about the plethora of companies offering “agencies in a box” software, the increasing smarts in offerings from Facebook, Google et. al., and what it all means for the future of agencies. “Push a button to manage your SMB accounts” doesn’t seem like a sustainable strategy. Marketing automation is awesome. But missing out on the human element of customer service could ultimately leave marketing agencies, and their customers out in the cold.
There are tens of thousands of advertising and marketing agencies on Alignable, but less than a thousand are “Highly Recommended” — recommended in writing by at least five of their clients. Even allowing for an engagement multiplier of 2 or 3X, you’re still looking at a small percentage of SMBs that are happy with their marketing agency. Or at least happy enough to recommend them to new customers. Some soul searching is in order, for sure.
3. 10 Billion Messages
A talk by Facebook’s Philip Rather mentioned that 10 Billion messages have been sent between business pages and consumers in the past year. That’s a 4X improvement over the prior year.
It’s not clear what percentage of those businesses are in the U.S., or how many are small + local. Or how many of those messages are to Starbucks requesting out-of-season concoctions. (I told you, I love Starbucks). No matter how you look at them, those are impressive numbers. Alignable isn’t at 10 billion messages yet, but we’re seeing a tremendous growth rate in B2B messaging between small business owners in group chat.
Messaging dominates our lives as individuals. And it’s clear we’re in the early innings of a sustained acceleration of both B2B and B2C conversations. This means that small business owners who want their conversations to have a strong impact need to provide solutions that stand out based on know-how, customer service, and most importantly, personality.
4. Networks Fuel Marketplace Momentum
Both Facebook & Nextdoor’s local consumer marketplaces have momentum. It points to the leverage engaged networks have in scaling marketplaces. I’ve heard mention (no hard data) that Facebook is one of the largest auto marketplaces already. (Man, that didn’t take long!).
And Nextdoor’s local recommendations seem to have some traction for home services. While Nextdoor isn’t strictly a social graph, it is a unique sort of graph – a disconnected set of complete local community graphs. Does the future of local marketplaces belong to networks? The trust and engagement that’s baked into successful (identity-based) networks helps them scale certain marketplaces rapidly.
The greatest trust comes from high-affinity relationships where the graph aligns (yes, we use that word a lot) well with the products or services being sold through the marketplace. So Nextdoor is connecting small, local neighborhoods of consumers. It’s logical that they’d ask each other about plumbers, electricians, and perhaps, local businesses to frequent.
We see relationships being formed between business owners based on prior relationships, proximity, business category, and around topics of interest. The graph aligns (ahem) well with a vendor marketplace. And sure enough we see a high level of activity, as well, around vendor search and selection.
5. It’s All About Trust
So, speaking of trust I made the point on stage that “Trust isn’t just important. Trust is everything.” A bit hyperbolic, perhaps. But considering that 60% of brand vendors on our SMB Trust Index have a negative NPS, very relevant.
Small & local business owners (i.e., not Starbucks) look at their vendors as either trusted partners or as vendors helping them with a specific solution. Churn doesn’t just hurt vendors. It’s tough for business owners to find a good vendor, invest in using them only to discover it wasn’t doing the job as advertised. Especially when those business owners are busy, can’t delegate the job to someone else (read: definitely not Starbucks), and don’t have a whole bunch of time to research those vendors.
For networks like ours or LinkedIn, trust isn’t just the relationship between our members and us (as it is for most vendors). It’s actually the relationship of our members to each other. And that, in turn, rubs off on the vendor and the entire network.
Regardless of what you’re selling, if a vendor sees a small business owner exclusively as a target for a sale – that sentiment will show up in their products/services, and interactions with the business.
Conversely, If they see it as a relationship, over time it shows. And as that relationship grows, trust is fostered and leads to more opportunity for both the vendor and the small business owner.