Reuvers Responds to ‘SMB Segmentation’

Last week, I posted “Alternative Segmentation of the SMB Market.” There were lots of comments about the math and some about definitions. Live Technology Holdings CEO Wayne Reuvers, who was the source of the segmentation I posted about responded in a detailed comment. I thought that was worth highlighting so I’m reposting his remarks vertabim:

Nice debate - but let me clarify a few things as these figures come from me:

Firstly, I see the local marketing opportunity made up of SMEs, not just SMB. In our view, “enterprise” is an enterprise that operates as it’s own entity. For example, a Best Buy store is actually an SME - they have complete responsibility for their own P&L - and they do advertise locally. So is a Home Depot store, as is the local Deli (SMEs encompass SMBs).

Let’s look at Branded Branches (60-65%):
These are enterprises that are required to execute all marketing, advertising and communications under a brand. It includes everything from a branch of a large bank, a McDonald’s franchise, a Century21 agent, a Best Buy store, a Lowes Theater, a Chrysler dealership, etc. Interestingly, a huge number of these also advertise in the YellowPages (almost all of them).

The co-operative sellers (30-35%):
These are companies with their OWN brand that sell products or services branded by others. The Best Buy does sell other companies products, so they do also “sorta” fall into this category, but it’s easier to leave them in the Branded Branches category. Examples here include a local deli that is selling P&G, General Mills, Pepsi and Coke products, a restaurant that receives co-op from the beer distributors, Joe’s Cellular that sell T-Mobile, VZW, etc., and the local hardware store, the local appliance store, etc. ALL of these execute marketing an communications with the help of the larger brands that do not have branded branches - Coke, P&G, Sony, Nike, Boar’s Head, a huge list. These folks also advertise in the Yellow Pages.

The independents (1-5%)
These are folks that typically sell services only. Local contractor, small law firm, accountants, small agency, independent plummer, etc. Yes, they do advertise in the Yellow Pages, but are the total base of the $14bn in advertising. I estimate they are about 40% of YP. And they do very little outside advertising, mainly stationary, a flyer in the local deli or a small classified ad in the local paper.

In terms of the local market expenditure, I include measured media (about $110bn-$135bn) and unmeasured which includes DRM, FSI, in-store, alternative media, stationary, sales materials, merchandise, directory, event, which ads up to about $125bn. Total is around $240bn. Chrysler’s 4257 dealers spend $384,000 on average each - a total of $1.6bn. That’s 60% more than the brand spends nationally.

For some reason, everyone thinks that local marketing will be dominated by SMB’s. SME’s will continue to dominate, those with brands will continue to account for 60%+ going forward.

As for co-op collection, the largest co-op advertising industry is cellular - and the wireless operators cover 60-70% of the media spend. 28% of Whirpool’s products are sold through non-branded co-operative sellers (small appliance stores), and they contribute about $240m a year to these. Most of these brands fight to get their brand out through the players. Coke and Pepsi are great examples, as are MillerSAB and AB.

Finally, Brand is about Emotion, Local is about Promotion.

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