Last week I was explaining to a potential member of our Industrial Channel Research program how we will compare their quantitative ratings to the ratings of the other industrial manufacturers in the program. About halfway through the conversation, the head of marketing for the potential member company said, “We’re a small company… you can’t compare us to much larger companies. They have much larger resources to bring to the table. It’s apples and oranges.”
I had to stop for a minute to ask myself if the comparison was indeed valid.
Whenever I think about the concept of big vs. small companies, I often think of large retailers like Best Buy compared to independent stores. Let’s say I’m a consumer who needs to buy a new microwave oven because mine stopped working. Through a little research, I find that Best Buy has one that meets my requirements and the store is open until 9PM. The independent appliance store down the street has a microwave oven that’s virtually identical to the one at Best Buy, but is 20% more expensive and the store closes at 6 p.m…. meaning I have to race out of work to buy it.
Which one do I buy?
I purchase it from Best Buy… same product, but cheaper and easier. As a consumer what I DON’T do is think “It’s not fair to make a comparison of these two stores because one has tremendous buying power and scale to stay open while the other one doesn’t.” Of course I make a comparison… and the answer is obvious.
This is largely why Best Buy grew very rapidly over the last couple decades and independent appliance stores are now virtually obsolete. Now if the smaller store had something unique and different I couldn’t get at Best Buy, that’s another story; but that’s not what we’re talking about.
The industrial products space is no different. If you’re a small company that sells something very similar to what bigger companies sell, expect the marketplace to make direct comparisons. Can’t afford the same field coverage, supply chain capabilities or on-line technical capabilities as the larger players? Expect customers to hold that against you when they make buying decisions. Do not expect them to say “Well, they’re smaller, so we’ll let that slide.”
This doesn’t mean smaller companies can’t compete. Far from it. It just means that the smaller company’s critical differentiator (e.g., price, specialized product, superior service) has to outweigh the negatives associated with the company’s lack of scale for enough customers to keep the company viable.
But make no mistake about it… customers won’t give you a pass because you’re small. They’re making an apples-to-apples comparison.
Bart Schwartz is President of Industrial Channel Research, a company focused on helping industrial manufacturers understand customer needs and perceptions. He can be reached at email@example.com.