If enterprises build trust, SMBs will spend

Qualities at the heart of a thriving personal relationship – trust, caring and understanding – are all essential for a great business relationship too. But the perception of those qualities must be mutual. If one party believes the other is not delivering, things rarely go well. That’s exactly what’s happening between enterprises and small and medium-sized businesses (SMBs) for years. Yet even with enterprises focusing more than ever on SMBs, there’s a persistent perception gap. In our first essay in this series, we uncovered the size of that gap between enterprises and SMBs. Enterprises believe they are serving SMBs well. Do SMBs believe they are well served? Not so much. In fact, there’s a discrepancy of 32% between how well enterprises think they are serving SMBs and what those SMBs themselves think.

One of the largest perception gaps is in trust. Nearly half (49%) of small and medium-sized businesses (SMBs) don’t trust the enterprises that they work with . Eighty-three percent of enterprises believe that SMBs do trust them. Does this mean that enterprises could be missing out on SMB spend? The answer is a decisive yes. Overall, SMBs who trust the enterprises they work with spend 5-15% more on products and services than SMBs that don’t trust the enterprise.

Trust plays a more influential role in driving SMB spend when the value or results from a product or service are slower to realize or less tangible. Take digital advertising and marketing. Here, the return on investment is usually harder for SMBs to recognize. Enterprises that can clearly articulate the value proposition to SMBs will likely earn more trust. And SMBs that trust the enterprise providing those advertising and marketing services spend 12% more than those that don't trust them. Even if a buyer may not fully understand the product or service (and with a complex service like digital advertising, that's likely to be the case), they'll likely spend more if they trust the provider. But in other instances, in which value is more easily and quickly grasped, such as providers of office supplies, for example, in general, there's no difference in spend whether the SMB trusts the company or not.

We wanted to find out what’s behind the numbers and identify the factors that impact trust.

Running deeper analysis, we found that relative digital maturity – i.e., the extent to which key business functions are performed online or offline, measured through a self-assessment survey – is the single most important factor driving trust. Digital immaturity leads directly to lower trust due to those SMBs’ perceptions and lack of understanding of enterprise products and services. Their needs remain unmet because most enterprise products are made for digitally mature businesses. Improving both the digital maturity levels of SMBs and how enterprises address their needs is the only way for an enterprise to truly increase trust.

Update Digital maturity is the strongest predictor of SMB trust in enterprise chart.

But wait, aren't all businesses now supposed to have undergone accelerated digital transformation driven by the pandemic? According to our research, that's far from the case. Comparing our July 2020 survey results with our January 2021 survey, we find that one-third remain digital stragglers. Still, all categories of digital maturity, including digitally emerging and digitally savvy SMBs, have remained the same. Across all SMBs, we have not seen a material change.

When assessing the differences between digitally immature and digitally mature SMBs, there’s a dramatic variation between them - both in the extent to which their needs are being met by enterprises and the extent to which they trust enterprises. While only 42% of the least digitally mature SMBs (the stragglers) say their needs are being met, that leaps to 81% of the digitally mature (the savvy). Trust levels show a similarly dramatic difference - 37% for stragglers vs 70% for savvy.

So, what do SMBs want from enterprises? Most of them want more affordable products, better support, and more personalization. But when asked, SMBs told us the relative importance of each of those factors, what we saw was that the least digitally mature SMBs place much more emphasis on all three compared with their digitally mature peers.

Top 3 actions that digitally immature SMBs want enterprises to take to win more of their business.

Why does this matter? It only further shows the impact of an SMB’s digital maturity on their engagement with enterprises. The digital maturity of an SMB is driving their expectations and how they want to interact.

Take support channels. Less digitally mature businesses favor personal, one-to-one interaction and support. But the more digitally mature an SMB becomes, the more they are likely to prefer online self-service. Enterprises therefore have both a responsibility and a strong dollar incentive to help SMBs move up the digital maturity curve. At the same time, enterprises also need to find the right ways to support those SMBs that prefer not to advance their digital maturity or are slow to do so.

Coaching and training will be essential to advance SMB digital maturity. But today, we see that the less digitally mature SMBs don’t have access to, or focus on, training. Twice as many digitally mature SMBs (43%) as stragglers (21%) use training and upskilling services. There’s a clear opening for enterprises to engage with less digitally savvy SMBs to promote and perhaps even subsidize training to accelerate their digital maturity.

To close the trust gap, enterprises need to understand the needs of different types of SMBs and harness that understanding to do things differently. That means building products and services that are designed for SMBs rather than simply rebranding enterprise products.

Enterprises also need to establish dedicated teams to support SMBs specifically and holistically. Our research reveals that only 41% of enterprises have created a centralized team focused on the goals, needs and support of SMBs.

All of the data and analysis shows that SMBs need to be segmented differently. One-size-fits-all or today’s approach of segmenting by spend on specific products do not work. Our research demonstrates that digital maturity is a far more useful guide to both how SMBs want to be supported and the best way to meet their needs.

It’s a step-change that enterprises will have to make if they want to access all the potential value that SMBs’ business truly represents. Cosmetic improvements won’t be enough. In the next article, we will focus on recommendations for impactful SMB segmentation and continue to share the changes enterprises can make to engage with SMBs differently.

Sources:

¹Accenture Survey, 2021