How Small Businesses Can Win The Large Business Game

How Small Businesses Can Win The Large Business Game

Written By: Ethan Rosen

​In business, competition is both good and inevitable. Whether it is producing and selling higher-end goods, better prices, or pure marketing, there will always be someone trying to outperform you. That is the nature of commerce, and frankly, the American way.

It is a common belief that there lies correlation between business size and chance of outperforming smaller, more localized competition. There is rationale to that- think Home Depot and your neighborhood hardware store.

Yet, smaller businesses have all the potential to outsell and outmaneuver these large businesses. You may say: “Of course, Ethan. Clearly small businesses can outperform a bigger business, it is easy!” And yes, concerned small-business owner, it is easy! Yet many SB owners shy away from opening a physical location near competition and in the market of large businesses’ existing customers.

SB owners, if you are going to remember anything from this article, remember the famous Mark Twain quote: “It’s not the size of the dog in the fight, it’s the size of fight in the dog.” Your businesses' size is unimportant; it is your determination and perseverance to compete against the larger business for the customers and their loyalty. There are multiple examples and white papers that explain how small businesses can gain an edge on their large business competition.

Brand Loyalty vs. Interpersonal Skills

Let’s look at an example between franchise Domino’s and local pizza shop, Stevie’s Pizza. Customers of Domino’s choose to order from there because of their expressed loyalty to the ease and convenience that Domino’s provides. Their prior orders with Domino’s all resulted in problemless service, quick delivery, and tasty pizza. What could lead a consumer to Stevie’s Pizza- a company with two employees, no delivery, and very average pizza.

Here is how Stevie’s Pizza outperforms Domino’s. When one orders from Domino’s, they are just another average customer, another $12 delivery. Yet to Stevie’s, they are (name), the unique, pizza loving customer that is known, respected, and needed. While waiting for their pizza, they are having conversation with the employees of Stevie’s, creating an experience and emotional connection. These interpersonal skills will outweigh one’s loyalty to a specific business. Everytime they walk into Stevie’s Pizza, they are greeted, and remembered by name and order.

Stevie’s has chosen to get to know their customer more than just as a typical person or an average check. Their use of social skills has given them a competitive edge over Domino’s, giving pause to the consumers’ loyalty to Domino’s. Although some may have a continued history of being consumers of large businesses, SBs’ use of social skills can cause the shift from large business loyalty into a small business personalized experience. So, SB owners, get to know your customers and engage them deeply, all the time. Your social skills and relationships formed will have a larger effect on the consumer than a good pizza will.

Another example I have encountered in the brand loyalty vs. interpersonal skills debate is between two local coffee shops. One well known in Starbucks, and another lesser-known establishment called Glencoe Roast. Both are coffee shops in Glencoe, IL., located approx. 177 ft. apart. That competition is inevitable.

One may be puzzled as to how Glencoe Roast has managed to succeed, let alone stay in business, with powerhouse Starbucks nearly a latte throw away. Put simply, Glencoe Roast adds that personal touch to each order. Everytime I order a cappuccino from Roast, I am given the cappuccino in my choice of a mug or to-go cup, topped with a little design of foam on top. These little things, as minor as they seem, continue to lure in customers and help Glencoe Roast succeed in an environment with Starbucks right next door.

Glencoe Roast did not find this competition to be a disadvantage; rather, they used it as a way to differentiate themselves to the same market. Both Stevie’s Pizza and Glencoe Roast give a personal touch and experience to each customer, which causes customers to consistently value their treatment and relationships over a history of loyalty to other businesses.

Prioritizing Price or Quality

As a consumer, this is one of the questions that I continuously fail to find the answer to. Everyday, I am placed in situations where I can either choose the ‘better-quality option,’ or the ‘cheaper option.’ Yet, I have not found any trend in my consuming history. I find a similar trend in choosing between being a consumer of a large business or small business. Often times, small businesses sell their product at a high price to position themselves in the higher-end of the market, while also considering making profit and covering their OpX. The higher pricing is also caused by less purchasing power resulting from smaller goods and inventory purchasing. 

As I mentioned earlier, small businesses are almost forced to develop personal relations with their customers in order to differentiate themselves from larger competition. Similarly, they may produce and sell higher quality goods to pertain to a higher budgeted customer segment willing to pay more for better goods. Although the SB’s prices may be higher, they will be justified by the quality of their goods and personalized service. According to Scott Gerber in article on sba.gov, “ The key...is figuring out what’s going to get you the best penetration in the market as fast as possible, and broadening your client base according to what your competitors are not doing with their pricing models.”

SB’s flexibility allows them to determine their price based on seeking profitability, covering expenses, and competition. On the other hand, a large business has the operational efficiencies and available capital to sell cheaper goods while still being successful. So, we, as consumers, feel that paying a higher price will be justified if we are sure that we are paying for a higher quality product than a larger business may offer.

Being A Community Member vs. Using The Community As a Market

In this author’s opinion, this is the most under-looked differentiation between small businesses and larger businesses. Most times, small businesses are owned and operated by members of the community in which it is located. Small businesses often sponsor local events and sports teams, as well as show other forms of community involvement. These businesses are by the community and for the community.

Referencing the theme of interpersonal skills, small businesses see the community as more than just a customer segment: they see it as a group of people. On the other hand, larger businesses see the community solely as a market to sell into. They often do not get involved with supporting the community and its residents. The difference in how small businesses and large businesses get involved and support the community further prove that small businesses’ social skills and uniqueness gives them a leg-up on larger business competition.

Small businesses, competition is not a roadblock to your success. These consumers are a part of an open market; so, if a small business proves that they are better than their competition, consumers will not be hesitant to shop with the small business. In Darwinian theme, survival of the fittest will always prevail.

As outlined earlier, there are many ways for SBs to outperform larger businesses. Ultimately, it all comes down to the consumer’s relation to the business. If a) the consumer is appreciated and known by the business b) the business establishes trust in their customers to pay higher prices for higher quality goods, and c) if the small business shows involvement in the community and its members, then the small business should have no problem overpowering the larger business competition.

*Disclaimer: This post is by Ethan Rosen, and is not an official statement of LinkedIn. The views expressed by this article are mine, and are not representative of anyone or anything else.

Link to original publication: https://www.linkedin.com/pulse/how-small-businesses-can-win-large-business-game-ethan-rosen/



Sources:
https://www.sba.gov/blogs/how-price-your-small-business-products-and-services
http://www.euquant.com/wp-content/uploads/2012/03/Small-Businesses-vs-Big-Businesses.jpg