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Mar
13
How Important is Price Versus Service to SMBs?
March 13, 2007 | Anita Campbell
Here’s an interesting tidbit that deserves some exploration. eWeek Channel Insider reports on a Gartner study of the SMB market:
Service and support trump price for small and midsize businesses. Seventy-three percent of SMBs rated the service and support they received from their technology providers as the most important factor in a buying decision, according to Gartner’s “User Survey Analysis: IT Evaluation Criteria and Channel Preferences in the SMB Market, United States, 2006.”
With that in mind, Gartner analysts recommended that VARs put a premium on those factors and place them high in the sales pitch.
“For [an SMB], receiving poor service and support is actually more of a catalyst to unseat its incumbent provider than receiving a better purchase price … in some cases it even outranks functional satisfaction of the product itself,” said Tiffani Bova, Gartner’s research director for worldwide IT channel sales, programs and alliances.
Ease of integration with existing systems was the No. 2 concern for SMBs making technology purchase decisions, Gartner analysts said, recommending that VARs perform a site audit before recommending upgrades. Technologies that require major upgrades to infrastructure are likely to get deferred because of the costs.
While SMBs agreed on those top two factors in making a buying decision, after that opinions diverged. Smaller SMBs — from 20 to 99 employees — placed a high value on the “ease of doing business with my provider.” Gartner said this factor was driven by small businesses’ lack of internal resources to put into managing the vendor relationship.
Lower-midsize businesses, from 100 to 499 employees, and upper-midsize businesses, from 500 to 1000 employees, ranked total cost of ownership as third on the list of important factors that played into their buying decisions.
This is why size still matters when it comes to small businesses. As this article points out, the issues of most concern to a small business will vary depending on the business’s size.
Let me take it one step further, even. This article does not mention very small businesses (under 20 employees), but I’d be willing to bet that if it did, the finding would be that price ranks a lot higher on the list of considerations. The smaller the business, the more price-sensitive it is likely to be. Also, the more conscious it will be of the difficulty of implementation, for the very reason mentioned in the article quoted above: lack of internal IT resources to manage the implementation.
You have to keep in mind, too, this general rule: when IT analysts make reference to the “SMB market,” they are really referring to a group of rather largish small businesses. They are not talking about the single-person business or the 5-employee business or even the 10-employee business (the size categories making up the vast majority of small businesses in the United States and most other countries).
So take their conclusion about price sensitivity with a grain of salt and put it in context. Otherwise you could reach the wrong conclusion.
Comments
1 Comment so far
I thought your comments warranted me to clarify our definition of SMB. We consider “S” to be companies with 20-99 employees - “M” to be 100-999.
You are correct when you get below 10 employees - not only does price play a greater role in decisions, but so does how they purchase technology.
Very small business have many things to consider which those with larger IT budgets and internal resourced don’t which makes their business needs significantly different.