The Five Advantages Local Businesses Have Over Big National Brands

by | May 4, 2016 |

Historically, it’s been an accepted reality that bigger, national chains have the power to out-market and out-perform local businesses.  Wal-Mart is the classic (and tired) example of a large, well-funded brand coming into a small market and destroying the local competition.  Without minimizing the very real advantages that a national brand has –their distribution, merchandising, brand awareness, and volume capabilities are formidable – it’s also important to recognize that there are advantages in competing against the ‘big chain’. In other words, it is possible for David to still beat Goliath.   Let me tell you about the kind of slingshot you may want to consider if you are facing your own Goliath.

My digital media colleagues and I have often been amazed at how the ‘playing field’ is getting leveled for most marketers in a way that is unprecedented.  Additionally, I’ve observed other trends at the local advertiser level that lead me to believe that local advertisers – the “David’s” – actually have a really good opportunity to not only compete with the big national brands, but out-compete the big brands!  Here are five areas where this opportunity is most obvious:

#1 YOU’RE MORE RELEVANT TO LOCAL CUSTOMERS

I have been observing a trend for local advertisers that runs counter to general assumptions and trends in digital advertising for national brands.   And it comes down to the relatively mundane metric of ‘click-through rate’ (or “CTR”) for display banners.  The below chart from Google  (http://www.richmediagallery.com/tools/benchmarks )demonstrates the average CTR for a standard 728x90 banner (one of the most common) over the past five years

Average click-through rate for 728x90 banners

Despite a few outlier ‘spikes’ in click rates, the average click rate for the 728x90 banner is about 0.09% – 0.07% in the last 12 months – that’s less than 1 person in every thousand that clicks (for a standard, non-rich media banner).  You’ll also notice the above chart shows a downward trend – so it’s getting worse! I can personally attest that over the past fifteen or so years, the humble banner has often been a relatively uninspiring performer.

But then we began to notice that when we ran targeted display campaigns for local advertisers we observed that our click rates were well above this average.  At first, we assumed there may be something wrong – is there an issue with fraud? Is the data size still too small? But as these concerns were addressed and dismissed, and this pattern of click rates at 0.30% to 0.40% continued to repeat itself, I realized something.  The click rate is higher because the relevance is higher!  That means the local digital audience is seeing a local advertiser – who they know from their own shopping experience, previous advertising exposure, driving past their store, etc… and responding due to relevance.

#2  YOU DON’T HAVE TO INVEST IN BEING “LOCAL”

It may be easy to take for granted, or to assume a disadvantage, what it means to be the ‘local business’.  But if you understand the changes in how consumers want to interact with brands in the digital age, that may not be the case.

As evidence, let’s take a look at “Goliath’s” digital marketing strategy and begin to identify some inherent advantages your business may already have.  Whole Foods is now a national chain of over 350 stores, but for their customers, the ‘local relevance’ is extremely important given the importance of values like sustainability.  So how does this national chain counter what could potentially  be a negative aspect of their brand?

Every Whole Foods store – all 350 of them – has their own Facebook and Twitter account. This is their attempt to ‘appear’ local and relevant to the communities they are competing in.  It is also a considerable challenge to manage, coordinate and ensure that all 350 accounts stay ‘on brand’ consistently.

However, for the local competitor this is ‘just the way it is’ – and its meaningful!  It should give us time to think about how to best leverage social media and other content marketing tactics in your addressable market area (ensure that you have a consistent plan, provide diverse and relevant content, are interacting and engaging with your ‘followers’ consistently, etc…).  As you already are the ‘local option’ for customers in your area, you already have a potential advantage over the big, national chain.

# 3 YOU HAVE THE SAME TOOLS

I mentioned earlier that my colleagues in the digital ad industry often remark on the amazing shift in the power and capabilities of digital media in the past few years.  It’s a new approach to buying and selling of media that is enabled by technology.  One of the best examples of this is what Google has created with its Adwords tools.  Years before most companies considered this, Google decided to build a ‘self-serve’ tool to allow any advertiser – regardless of size or budget (as long as they had a credit card!) – the ability to ‘bid’ on the same search results as any other advertiser.  This approach has been expanded by Google beyond search, and it is now ‘the model’ used by other media and technology companies.

In short, it means that every advertiser now has the same ability to buy advertising regardless of size.  You don’t need to have a Madison Avenue agency part of a large holding company to place national upfronts to get access to your customers: in regards to digital, you have almost as many choices as that large, billion dollar buying outfit.  The second price auction method and the programmatic targeting capabilities combined with self-serve platforms have dramatically changed the landscape from one where ‘buying power’ meant hard core negotiations and confrontation, to one where analysis of performance and diligent review of data mean more than the size of the budget.

#4 SMALL IS BETTER

Here is something you may not realize about your smaller organization. In all likelihood you may be more efficient, productive and effective at your jobs than your big, global competitor.   That may seem like a counter-intuitive statement – after all, don’t these large companies have a lot of specialization of functions that allow them to “laser focus” on just one thing and do it well? Sure, but they also need to focus on the ‘big picture’ and can miss the smaller details of an audience or a customer.  But even if they are really good and don’t miss some obvious local details, the very fact that your organization is smaller than your competitor is an advantage.  This is one of the themes uncovered by Jim Collins in his seminal business book “Good to great”.   Collins’ research discovered that once an organization exceeds 350 employees, effectiveness, productivity and other metrics begin to decline; requiring more and more people to manage, administer and execute the same tasks that were previously done – relative to their scale – by fewer people.  Additionally, at this size, the “CEO” or owner no longer has the capacity to know each employee by name, or what their role is.  Anecdotally, I can tell you from my own experience in large corporations that employees start to prioritize their time to ensure they are noticed or acknowledged for their accomplishments – rather than actually focusing on just those task that create those results.

#5 LOCAL EXPERTS

Of course, one of the advantages of a large organization is its specialization and the diversity of experiences and skills that they can utilize.  A small 10 or 30 person company does not have the number of people with different ideas that can contribute.  To use a sport’s analogy; EVERYONE is out on the court – all the time! There is no ‘bench’!   Whenever I talk to the owners and employees of local companies, it’s a given that they all wear multiple hats and are constantly ‘multi-tasking’ in different roles to help keep the business moving forward.

There is no easy way around this fact; none of us will ever have the time, resources, skills, education, training or experiences to be the best at every possible role that we must support.  But that’s where tapping into professional networks, partners and services is a place to look to add that additional capacity.  Engage with industry groups that have firms or organization similar to yours in other markets; identify vendors or partners that share your passion for local success and have the experience and knowledge that they’ll share with you.

Keep an open mind, investigate your options, and find a local partner or colleague you can talk to, or work with, that will help you navigate these choices.   One of the fundamental truths about the digital economy is that you need partners to help you succeed.  After all, it’s not entirely clear that David actually built his slingshot, is it? The evidence is sparse, but we may assume that David got his slingshots from a good, perhaps local, solution provider.

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