SMBs have more options than ever.
One of my good friends owns a small fast-casual restaurant chain in the NYC area. Like most restaurants, his are on Seamless and Postmates. Those two platforms (and others like them) offer restaurants an audience of people who like the convenience of ordering food online for delivery and pickup. I’m a Seamless user, and I appreciate the convenience of having choices tailored for my work and home addresses, my credit card info stored, and a familiar user interface (UI).
If you ask my friend Kevin (not his real name) what he likes and dislikes about those platforms, he will tell you that he gets a lot of business from them, but fees range from 17–30%. They’re also often unpleasant to deal with. When he recently asked to lower his fees, the representative from one platform adopted a condescending tone and delayed delivery of a previously promised service.
Despite the incremental business they bring, the disadvantages of these platforms are quite compelling. In an industry where net margins are in the 5–15% range, fees can eat up most of the restaurants’ profit. Further, the platforms, not the restaurants, own the audience. Not owning one’s own audience is a huge issue, since you can’t communicate offers and other information directly to your customers.
Kevin is now looking for other solutions for online ordering (including loyalty programs), with great UIs and reasonable charges, and ones that enable him to own his customers and communicate with them at will. Once he makes his move, he tells me he will do whatever he can to lure customers from the platforms he uses today.
A few weeks ago, I described how financial technology firms are making waves in the banking industry with, among other things, better customer insights and better customer experiences. Whether by better experiences or significantly lower costs, once-dominant legacy brands across industries increasingly are being disrupted. While it is well known that SMBs don’t change vendors often (CEB says that 7% of SMBs change their vendor each year), the combination of newer competitors, rising costs, and raised customer-experience expectations will push many to explore alternatives.
- Review your customer experience, especially your website and customer-service and sales processes, to look for instances where you are not SMB-friendly.
- Reevaluate your prices against newer competitors. While you don’t have to be the lowest-cost provider, consider your price vs. value delivered, as well as the effect of a price decrease and its possible impact on increasing long-term customer value.
- Identify segments that might be at risk of switching, particularly those that aren’t getting full value from your offering. Here’s an example from Boostability, courtesy of the B2SMB Institute, of how one company dealt with customer churn.