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April 2009

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by Glen Emerson Morris
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Throughout the age of mass media economies of scale always worked against the smaller business in the local market. Newspapers, radio and TV offered ads on a citywide basis, with no greater granularity of market segmentation, on a take it or leave it basis. If a business only served a quarter of a city's geographic location, any ad with the major media would be largely wasted, as 75% of the ad's viewers would not be potential customers. The smaller the area the business served, the proportionately smaller the effectiveness of its mass media advertising would be.

Over the past decade two highly contradictory trends have been emerging that indicate a new deal is coming for the SMB. While the major media kept raising cost per thousand on the basis that getting an increasingly elusive mass audience was worth a premium, internet based advertising offered an increasingly lower cost per thousand for reaching ever more precisely targeted market segments. For a change, larger advertisers saw their ad budget reach fewer people for more money, while smaller advertisers found they could reach more people for less money.

The chances for a new deal for the SMB will only increase in the next decade as several major technological trends continue to evolve that will inevitably destabilize the status quo in favor of the SMB over the Fortune 1500. These major trends include:

Improved access to local customers via new media
Mobile technology will enable businesses only serving areas of a few blocks to reach not just the hundreds of people in their immediate neighborhood, but the thousands of additional people who move through it every day. The idea that the ads people will see on their mobile Internet devices will be continuously updated as they change their geographic location is no pipe dream, and it will probably happen sooner than later. When this happens, SMBs will have the most cost effective advertising ever available to them.

Improved availability of marketing data
We're only a couple of years away from Census 2010, and the wealth of marketing data the census will produce. This will be the second annual census since the Internet Age began, and promises to be to the best, fastest and most efficient collection and distribution of census data ever. SMBs will have access to demographic and economic data on a block by block basis for literally every city, town and hamlet in the country.

Another force leveling the playing field is the increasing amount of other useful marketing data online from the Department of Commerce. The Statistical Abstract of the United States is available for free download from the DOC, with all 1300 tables of statistics in Excel files. There are literally millions of more localized data sets available for the SMB if you know where to find them.

Export process easier to learn and execute
Another advantage SMBs have now is that it is far easier and less expensive for a SMB to find out how to export than it was 10 years ago, and it will become far easier over the next ten years.. The DOC has set up a separate Website, that has gone to great lengths to document the entire process of what it takes to export goods to another country. Most of the 250,000 US businesses that export are SMBs. However, only a fraction of those that could export, do. Over the next decade exporting will become commodity priced, and as common and easy as selling to someone in the next state.

SNB social network marketing improving
Another long term trend that may favor SMBs over the Fortune 500 is the development of pervasive online social networking services. So far the primary participants on social networking Websites have been individuals and large corporations. SMB management teams and owners haven't learned how to use social networks to market their businesses. It's only a matter of time before they do, especially considering how the collapse of traditional advertising media is forcing them to consider alternatives. When SMBs show up in force on social networks, they will be a force to be reckoned with.

Decline of the large corporations' political power increased
In the wake of America's financial and corporate meltdown the continued dominance of the country by a limited number of large corporations has come into serious question. The adage “What's good for General Motors is good for the USA!” hasn't been true for some time. Washington is finally beginning to realize that, and the 7 million SMBs that create over 100 million American jobs may start to get the support they have been denied in Washington for so long.

Having a lot of different companies producing the same goods and services can have certain advantages. For one thing there's competition, and there's less chance of all of an industry's major players going under at the same time because of bad business decisions or criminal conduct.

In addition, another reason to rethink the concept of large corporations is that large corporations inevitably become impossible to hold accountable to the rule of law. Because bigger corporations have more money to spend to pay off lobbyists and politicians to limit or prohibit any effective oversight of their conduct of business. Once accountability is gone, there is little reason or motivation for sound business decisions, and we've seen where that leads us.

And there's the now obvious long term consequences of the corporate approach. Over the course of a century the mega-corporations transformed countless American communities, replacing locally owned and operated businesses that had a stake in the community with chain stores that paid minimum wage and shipped the profits off to some remote corporation merely to be used to repay the massive debt load incurred from buying the local business in the first place.

Considering the average SMB's roots in the local economic community, it makes a lot of sense to focus on encouraging SMB recovery and growth over the large corporations, who after all, got us into this predicament in the first place.

If the current trends continue, SMBs may find themselves with enough clout with the public, and in Washington, to demand support, not just ask for it. The only questions is whether SMBs will have the initiative to take advantage of changing political realities, and the economic opportunities they present. We can only hope they do.

Glen Emerson Morris was recently a senior QA Consultant for SAP working on a new product to help automate compliance with the Sarbanes-Oxley law, an attempt to make large corporations at least somewhat accountable to stockholders and the law. He has worked as a technology consultant for Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius.

Copyright 1994 - 2008 by Glen Emerson Morris All Rights Reserved

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