Marketing is often a challenge for small-to-medium enterprises (SMEs) of fewer than 50 employees, which make up around 97 percent of businesses in New Zealand. We spoke to the experts about how SMEs can get the most out of their limited marketing resources.
It’s been a tough few years for SMEs in New Zealand. According to figures from accounting software firm Xero, SME revenue fell by around a third (34 percent) year-on-year in April 2020 during the first Level 4 Covid lockdown. Although the pandemic restrictions have since been lifted, Kiwi businesses are still battling the economic after-effects, including higher interest rates, rising input costs, and consumer wallets emptied by the cost-of-living crisis.
In a challenging economic environment, getting your marketing right is crucial, but SMEs are at a disadvantage in several respects compared to larger, more established corporates. Not only do they have much smaller budgets, limiting the scope of what they can do, but they usually have very small marketing teams, if they have specialist marketers at all. And if they do want to seek external advice, they may find agencies and consultants to be prohibitively expensive.
According to James Roberts, Head of Insight at Lassoo Media, many SMEs are faced with contradictory advice on how to assess their marketing efforts. Part of the issue is that many small business owners and operators don’t have prior marketing experience, “but even for the more medium-size enterprises, setting any marketing objectives, let alone constructive ones, can be challenging,” he says.
“It comes from a lack of understanding of category context. Very rarely do they have budgets to invest in research to understand who their consumers are, why people are or aren’t buying stuff, where their awareness
is at alongside their consideration. I can understand how it seems like an unnecessary cost when you’re starting a business, but it’s almost impossible to plot a path to somewhere if you don’t know where you are.”
James says some media organisations are “very quick to take the money” from SMEs for advertising campaigns and not worry too much about the results, which can lead to these businesses getting “burned” early on and becoming reluctant to continue investing in marketing. “That just creates a self-fulfilling bias around the effectiveness of marketing. If you’re not setting objectives in the first place, you can end up doomed to fail.”
Picking your battles
For SMEs with marketing budgets that are in the thousands of dollars rather than millions, it can be easy to look at the big brands with envy as they pop up on radio, TV, and in print, as well as the various digital channels. However, James says it is important that SMEs avoid trying to be all things to all people, and instead figure out a few key channels that are likely to be the most effective for them to focus on.
“Quite often, we’ll see people trying to do a lot of things, as opposed to doing a few things well, and just not generating any scale.” He says it’s easy when you first get into business, to focus on easily accessible tools delivering short term results, such as social media and Google Ads, but you still need to be strategic about how you approach these channels and allocate your limited resources.
“They’re both great, powerful tools, but you need to really focus and spend enough money, and it’s hard to know how much money to spend, unless you know what your competitors are spending. Share of voice planning applies to every single category, whether you’re a small player or a big player,” he says.
“If you’ve got no brand awareness, you need to invest in brand awareness. If you’ve got heaps of brand awareness, but no consideration, you need to invest in stuff that drives consideration. Understanding where you are from a consumer perspective, probably would tell a lot of people they need to invest in brand, but without that understanding of your audience and where you are, you just end up second-guessing yourself all the time.”
James says the most important piece of advice he can give SME clients is to have some decent creative. “Any channel can be effective with the right message. You listen to the radio for 30 seconds to one-minute, and every second ad is about price, and it’s got a little jingle, and you can interchange the brands, it’s basically a whole lot of nothing.”
This often comes back to a lack of focused marketing objectives, he says. “Unless you have a thorough understanding of what you are trying to achieve, you’ll end up expecting your campaigns to drive both sales and awareness, while creating ads that aren’t good at either.”
Wasted potential
Struan Abernethy, CEO of REACH Media, says the reality is “really sobering” in the SME space, and a lack of marketing knowledge is contributing to the struggles of some of these companies. “It is so disheartening to see the number of businesses that have been opened and closed within six months. They just don’t know how to connect with an audience even at a very basic level.”
He says the philosophies of good marketing are largely the same, regardless of the size of your company or your business. “I think we’ve got a huge problem in the number of businesses that go out of business, and they didn’t have to. They had a really good product or a really good service, they had the passion, they had good people, and it all falls apart. It’s actually quite devastating.”
The small brands may not be able to invest as much in marketing as the big ones, but Struan says many New Zealand brands need to place way more value on marketing in general, not as a cost but as a strategic way to secure a market position and generate loyalty.
“People want to be entertained, valued, given ease in their lives and access to stuff that improves them as individuals and households. We need to get a lot smarter about tapping into desires, needs, and people’s pain – rather than just the next ‘offer’ or deal.”
Another issue he often sees is SMEs failing to get to know their audience, and the data, before making their marketing decisions. “A lot of businesses don’t know that, or they haven’t even really sat down. They’ve just got an idea for a restaurant, or they’ve got an idea to sell something in a retail store. What they haven’t done is go, ‘Oh, who’s actually going to want this stuff?’ And it sounds basic, but when you look around SME New Zealand, they haven’t thought about it.”
Getting the right advice
One of the biggest barriers SMEs face with regards to marketing is having access to the sort of expertise used by bigger businesses, either in-house or via third-party agencies and consultants. Struan says SMEs that do decide to use an agency for advice need to ask the right questions to make sure they are suitable and will be worth the money.
“What’s the makeup of your customer base? Have you worked with other businesses like me? Have you got any results that you could discuss? What do you guys value in terms of how you treat people? If they stumble and can’t answer it, well then they haven’t really thought about it. And to me, that’s a bit of a black mark straight away.”
Struan says for SMEs looking at marketing agencies, bigger isn’t necessarily better. “If you pick ones that are too large, generally you get sucked into their vacuum and they’re only going to put their best people on the bigger accounts. Our entry point for doing a letterbox campaign is about $650, and along with that, we can provide some targeting and insights. That’s still a decent whack for someone small, but it’s not huge dollars.”
SMEs should look for agencies that genuinely care about them and have a strong focus in that regard, Struan says.
“I work in a company where culturally there’s a real goodwill towards helping these types of businesses. Everyone that comes through the doors, aside from the commercial picture, actually just has a true passion for New Zealand Inc. and making it a successful economic picture.”
Richard Pook, Chief Product Officer, at dentsu Media ANZ, says the best consultants or marketing businesses will be able to explain what’s needed in simple terms and deliver to outcomes.
“When it comes down to it, you don’t need to understand all the complexity and jargon that is rife in digital marketing, you just need to know how it’s going to impact the things that you really care about. And that all starts with setting crystal- clear KPIs. Once you have those nailed, you’ll be able to look at any marketing situation objectively and understand whether it’s delivering for you. The good news is that most SMEs do this instinctively.
“The problem is when you go in without a plan; it’s easy to be distracted and lose sight of what you’re trying to achieve, wasting a lot of money in the process.”
Squeezing the juice
One Kiwi SME brand that is doing well despite the tough economic climate is ALBA, a Tequila RTD brand that launched in early 2022 and recently reported a whopping 523 percent year-on-year increase in revenue. It was created by Michael Tutty of Brix & Co., a beverage maker that had begun as a contract manufacturer in the wine industry, based on the old Matua Valley Vineyard site, seven years ago.
The idea of making a tequila-based RTD came to him during the Covid lockdowns. “When I was in lockdown, sometimes getting to two o’clock was a pretty good reason to celebrate. As many parents will appreciate, juggling two young kids and working from home wasn’t easy. For my wife and I, a coconut margarita was our go to, though at times during lockdowns it was hard to find decent lime juice, no matter how long you queued at your local supermarket.”
Michael says one of the keys to ALBA’s success from a marketing perspective was identifying a gap in the market where there was no competition. “At the time no one was making or selling a Tequila-based RTD product, which felt like a real opportunity. I mean who doesn’t love a margarita? I think clear space when launching a new brand is important as it takes time to tell a story, so being the only one there really helps.
“We don’t have the budgets to compete with beverage giants like Asahi, Lion, or DB. So, we set about creating a brand and product that had distinct differentiation in the market, fitting into global trends which showed the rise of Tequila and canned cocktails.”
ALBA has been able to achieve its impressive revenue growth despite being priced 23 percent higher on average than its competitors on the shelves. “I remember walking into stores when we first launched and the first liquor store owner I chatted to on K Road, laughed at me when I said someone would pay $32.99 for a 10-pack of ALBA. I tried to convince him it was really good, and even offered for him to try for himself. He told me ‘No one’s going to pay it, man. No one’s going to buy that.’”
Michael says when they launched ALBA they tried not to go too narrow in terms of consumer appeal. “We didn’t get ourselves too hung up on a specific consumer group, like, males 18 to 28 for example. Instead we intentionally tried to maintain a broad appeal for the brand. We felt like that would give us longevity as a brand and we knew from consumer research that a lot of consumers loved Tequila.” Brix and Co were keen to build ALBA as a brand with high distribution into retail outlets, which shaped in a way its marketing objectives too. “We were out to △ create a brand with high engagement, which supported our focus on high distribution.”
While ALBA was conceived over a cocktail, they also did their homework prior to launch, giving them the confidence to move quickly into a new category. “We saw that tequila and spirit sales was about three percent of the New Zealand market, which in RTD terms, could represent a $15 million opportunity,” Michael says. “We had just enough data to validate the idea, and then we went about creating an inclusive brand that could capture as much of that opportunity as possible.”
Doing less, better
Like many Kiwi SMEs, ALBA didn’t start out with a big budget to splash out on marketing, but Michael says they made the most of what they had. “You don’t need to launch with lots of money. Sure, it helps, but actually what we learnt was you can be just as successful doing less, better.” One of their more unorthodox methods involved an item of branded clothing that became a cult hit among customers.
“We did a few things at the start when we first launched, like we bought some really cool denim hats with ALBA embroidered on them,” he says. “I think we bought maybe 4,000 hats, used those as giveaways instore. When we first launched Alba, people got hats, and we now sell those hats online after getting heaps of requests through socials, which is quite crazy.”
ALBA’s philosophy of doing more with less also applied to its distribution model, which in the early days focused only on a couple of main centres. “Owning the customer relationship is important for us as a business, as we know we’ll give a better service to our own customers. So, we focused on not trying to be everywhere, because we weren’t. We only had a rep in Auckland and we put one into Wellington just before we started selling ALBA,” Michael says.
“We had limited reach, but where we were ranged, we did a really good job supporting our customers to ensure it sold, which helped give them the confidence that ALBA was a brand worth investing their cashflow in stocking. At the beginning we preferred to invest marketing spend instore, rather than billboards or other Out of Home media, which, to be honest, unless you’re one of the big five or six, no one’s got money to do that anyway.”
Although ALBA won’t be radically changing its marketing strategy, it is focused on amplifying its existing messages, which doesn’t always have to be expensive. “Being an SME is about using what you’ve got. That could be in the form of free product to capture social content, or sponsoring an event to create a deeper connection with core consumers. Finding creative ways to fund marketing is always exciting, and I think New Zealand’s a great place to pitch any idea, no matter how crazy it might sound.”
This article was first published in our December/January 2024 issue.
