Six Dysfunctions of SMEs: Undifferentiated Offer

Addressing the most common six SME dysfunctions which regularly inhibit effective scale-up

The SME Productivity & Innovation Centre (PIC) at Edge Hill University is an internationally recognised Centre of Excellence supporting SMEs to achieve growth through scale-up. The scale-up phase is typically the quickest and most significant stage of growth, based primarily on the most effective use, allocation and tracking of resources, and one that can bring the most challenges for an SME.

The six articles in this series will share the experiences of PIC’s scale-up experts in addressing the common six SME dysfunctions which regularly inhibit effective scale-up: Undefined demand, Undifferentiated offer, Ineffective communication, Undefined organisational structure, Unclear processes, and Ineffective use of data.

Undifferentiated Offer

For SMEs, possessing and presenting a clearly articulated, segmented product or service offering that will resonate with segmented target audiences, is crucial to attracting, sustainable and high quality new business opportunities.

In a well-meaning effort to appear as though they treat all customers as individuals and that they are able to tailor all solutions to the exact customer needs, SMEs can often end up making their offer to the market appear opaque, lacking in clarity and focus. Customers need clarity and to see a value proposition that is based on impact and benefits, over features.

Long lists of products or services, without clear segmentation along the lines of specific customer profiles and needs, can quickly merge into a homogeneous offering. This makes it far harder for prospective customer to recognise their needs being reflected in the available services.And it also makes it harder for sales teams to reach their maximum productivity when engaging with new customers.

Both issues impact revenue, profitability, and sales pipeline productivity. An undifferentiated offer can create real areas of vulnerability in the business:

1. Low sales productivity. Possessing an undifferentiated offer creates challenges for the business in attracting appropriate inbound enquiries, difficulties when proactively explaining the offer during outbound sales, and for salespeople, problems converting leads into customers.
   
   Where an SME’s product or service offering lacks focus, it can be difficult for target audiences to recognise themselves as a potential customer of the SME and quickly switch off or be diverted to an alternative, more clearly segmented offer based on specific customer needs.
2. Challenges getting maximum performance from sales staff. Having an undifferentiated offer makes it more challenging for new staff to understand the product/service offer and less able to easily articulate that offer effectively, hampering sales conversions.
   
   The other knock-on effects are a reduction in motivation and job satisfaction, which ultimately can result in staff attrition.
3. Profitability challenges. A lack of segmentation inevitably leads to a drain on profitability. Effective scale-up rests on the ability to use, allocate and track resources more effectively. If the offer lacks segmentation, impacting sales performance, then its highly likely that resource allocation will also be affected, reducing productivity and ultimately profitability.
   
   Many SMEs experience this most acutely with their legacy customers; those spending too little for the service they are given. When SMEs address this they often see rapid uplifts in their profitability.

Resolving the challenge of an undifferentiated offer

The route to resolving the challenge of an undifferentiated offer starts by developing a more intimate understanding of the customer base. Not by individual customers, but based on buying patterns and trends.

By critically analysing internal customer and sales data effectively, patterns can be identified to create a more clearly segmented offer and value proposition. Combine this with an effective sales process, then profitability levels can be increased, new staff trained more effectively, and a better return from sales activities achieved.

See also from the series: Six Dysfunctions of SMEs: Undefined Demand 

Author: Steve McArdle, Business Development Manager The SME Productivity & Innovation Centre has worked with over 190 SMEs in Lancashire and the Liverpool City Region since 2018 to address exactly the types of issues and inconsistencies described here, helping SMEs drive on average 29% growth.

Until June 2023 places on the Rapid Innovation Sprint Programme are fully-funded via the European Regional Development Fund. If you recognise these challenges in your business, then we would be pleased to discuss if we can help.

Would you like to see your business grow? So would we. To speak to someone from the Growth Hub about business support, contact Boost online or call 0800 488 0057.