When bigger isn’t better

Almost 30 years ago, E.F. Schumacher urged nations to consider applying economics on a human scale in his landmark tract “Small Is Beautiful.” It appears as if some business-to-business merchants are finally getting the message.

Companies for years had targeted most of their efforts toward the firms with the most employees or the largest revenue, the theory being that such clients were more likely to spend more than their smaller counterparts. But many marketers are learning that smaller customers can generate higher profit margins. Not only can smaller buyers often be serviced less expensively, but also they’re not likely to demand sweetheart deals and outsize discounts.

“There are certain large accounts we don’t make a profit on,” says Peter Howard, vice president of marketing at Staples Business Delivery, a division of office supplies giant Staples. “There are times when we’ve parted ways with large accounts that were not a good match.”

In fact, more and more b-to-b merchants are reconsidering how they approach modest-size prospects. “If companies analyze their customer base, their so-called enterprise accounts are not necessarily the most profitable,” says Ruth Stevens, who runs eMarketing Strategy, a New York-based marketing consultancy that specializes in b-to-b. “Companies that do wake up to the fact that they need to analyze their customers by value can end up with surprising results.”

Good things come in small packages

Gift Box Corp., a Carlstadt, NJ-based seller of wrapping and packaging to gift retailers, has geared much of its back-office operations around smaller retailers for most of its 70 years. With 35,000 customers, most of them of modest size, Gift Box allocates its energies — and 57 field sales reps — toward its most profitable clients, which aren’t often the largest. For instance, it will focus more resources on regional chains such as Fortunoff than on a national behemoth such as Macy’s.

“The large guy always demands his due, and that’s not always the case with the small guy,” says Gift Box vice president of sales Dave Spendiff. “The service we provide [smaller retailers] they can’t get anywhere else. They may not be sought after by anyone else, but the large retailer typically is. Everyone wants Macy’s, but not Joe’s Hallmark.”

Like the corner store that understands it has to substitute outstanding service for the discounts that the chains can offer, Gift Box tries to emphasize service to its smaller clients. For example, twice a year the cataloger will send out automatic reorder forms to customers. These forms include records of what each customer has ordered during the previous six months. “That way,” Spendiff says, “clients can gauge inventories vs. sales before placing their order.”

In addition to its print catalog and sales team, Gift Box has a transactional Website (800giftbox.com) and 14 showrooms in major markets nationwide. It also attends 85 trade shows a year. “We try to make it very convenient for anybody to come and see us, big and small,” Spendiff says.

Branford, CT-based CyberResearch, which sells computer hardware and software to scientists and engineers, only started attending trade shows last year. “I don’t think of trade shows as about acquiring names to mail catalogs. It’s not cost-efficient,” says president Robert Molloy. “We have to be very focused. What we are really looking for is to meet half a dozen of our best existing customers. We hope to energize them.”

CyberResearch — and other business marketers — need to retain their customers more than ever because acquiring new ones has become much more costly. “Now people are so inundated with catalogs they no longer respond the way they used to,” Molloy says. “The size of the customer is probably not as relevant anymore.”

In fact, a prospecting catalog is less likely to reach a decision maker at a large company than at a smaller one. “A [large] business’s buying decision is sometimes a group decision — a whole bunch of people — or with a purchasing agent,” notes Mary Anne Kleinfelter, principal of Milford, NH-based consultancy Marketing Solutions Today. “And with a group buying decision, who do you mail to? Do you mail everyone? Some of the people you don’t have information on, they make recommendations but don’t make the order. Some catalogers just mail to everybody. It costs a lot of money.” That some corporations have cracked down on distributing the massive numbers of catalogs that come through their mailrooms further complicates matters.

Not surprisingly, companies are looking at new, less expensive ways of attracting and serving customers. To that end, Framingham, MA-based Staples tries to lure small businesses to its Website by emphasizing service. The Easy Button feature enables customers to store item information online for easier reordering; the Business Services section of the site provides a range of links, articles, and resources to aid small businesses. “We find you can’t really force a customer to do something you don’t want them to do,” Howard explains. “You have to make it easier for them to do business.”

Mighty oaks from little acorns grow

Howard’s unit serves small businesses and home offices as a division of Staples North American Delivery (NAD), one of the company’s three primary businesses. Staples declined to reveal revenue for Howard’s division, but said NAD accounts for about 30% of the parent company’s $13 billion in sales. NAD services smaller companies — typically those with fewer than 100 employees — via telephone, the Internet, or fax. Inside sales reps provide assistance and are also responsible for tipping off field reps if a modest-size client has the potential to become especially profitable.

“We work well together on the prospecting front,” Howard said when asked if inside reps might be reluctant to turn over leads that could end up generating large commissions. “Our inside sales rep would understand the potential [of the lead] and realize they could lose the account because they couldn’t service them as well.”

The company uses inhouse database models to home in on its more lucrative customers and help identify potential new customers. “We know for certain who has the highest share of wallet and retention with us,” Howard says. “They tend to be service industry customers.” These larger clients are served by field sales reps; if the company is valuable enough, Staples will dedicate a single salesperson to the account. “We can integrate them with an inhouse ordering system, set them up with customized pricing, and really develop a relationship with the buyer so that he feels comfortable,” Howard says.

New Rochelle, NY-based freelance writer Andrew Grossman writes for Variety and Multichannel News, among other publications.

A selection of solutions

Offering online glossaries, providing toll-free service lines, and doing away with minimum order requirements are tried-and-true ways of winning over smaller companies. Here, a sampling of more innovative offerings from b-to-b merchants:

MobilePlanet, which specializes in mobile computing solutions, has on its Website a one-page Workforce Automation Questionnaire. Answer questions about your company’s size, budget, and requirements, and MobilePlanet promises to reply within one business day with a personalized mobile solution plan.

Computer seller TigerDirect, a division of Systemax, offers several services tailor-made for smaller businesses. It has a team of licensing specialists who, according to its Website, “demystify the licensing concept, opening new ways to save you money.” In conjunction with Key Equipment Finance, it offers leasing options. And it promises to respond to requests for quotes within 20 minutes, regardless of the size of the job: “No bid is too small or too large.”

Small businesses aren’t the only ones that can benefit from the Customer Reference Service offered by Grizzly Industrial — but given their relative lack of resources they’re bound to find it especially useful. If a prospective buyer is interested in a specific machine, the manufacturer/marketer of woodworking and metalworking tools will locate nearby customers who had bought the same machine to get a first-hand unbiased report from someone who is actually using its product.

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