SMEs suffer a disadvantage in the marketplace when competing against large brands. There are, however, several psychological consumer insights that SMEs can use to their advantage. These include personifying the producer, positioning as an underdog, using attractive packaging and crowdfunding their products.
Startups and other small and medium-sized enterprises (SMEs) operate at a severe disadvantage compared to their larger competitors. Not only do big brands enjoy higher market share but they also command higher repeat-purchasing loyalty due the level of brand salience they’ve managed to build over time.
Depending on the size of the business, SME marketers also have limited resources and have to make due with what they have to work with. It’s a rather grim picture, but SMEs can also use their smaller size and market power to their advantage.
Respecting that you – as a small business owner, SME- or startup marketer – most likely do not have the time to scour the latest industry journal and reports to find insights to use to gain a strategic advantage, I’ve gone ahead and done that for you and will present them in this article.
A quick note before you read on
The goal of this article (and the entire website really) is to give you relevant consumer insights that you can embed in your business to establish a solid strategic marketing foundation (see more on that here). For that reason, I won’t be giving you tactical tips such as “set up a good looking website” or “use PPC campaigns” but rather knowledge that you can hopefully use in your long-term marketing direction.
Now moving on to the first consumer insight.
Personify the producer
Revealing the person behind the brand can have a strong beneficial impact on product or service demand. This is a key finding of a recent research paper1Fuchs, C., Kaiser, U., Schreier, M., & van Osselaer, S. (2022). The value of making producers personal. Journal Of Retailing, 98(3), 486-495. doi: 10.1016/j.jretai.2021.10.004 that spanned 4 studies of over 1,504 consumers of brands that sold cookies and knitted hats.
It states that giving consumers simple and non-product related information about the producer behind the brand can increase sales. Doing so makes the transaction more symbolic and emotion-laden and gives people a chance to form somewhat social connections. But, in order for that to happen, the whole thing has to be genuine and authentic.
Doing this is much easier for a startup or small to medium business than it is for a big corporation. To start with, for the latter, there probably is no “person behind the brand” whereas that’s much more likely to be the case for SMEs. For example it could be the founder of an up and coming startup or the sole proprietor of a local business. Should a large company try to pull this off the odds are it would come off as disingenuous while it comes much more naturally to an SME.
Position your brand as an underdog
Another potential source of competitive edge for small business, startups and other SMEs is underdog positioning. Underdog positioning is all about tapping into people’s tendency to side with the little guy. It’s therefore a requirement that you can position your brand against a dominant powerhouse in your region or industry.
We often see this tendency in sports. For example, Iceland going unbeaten in their group in EURO 2016 and then going on to eliminate England, a powerhouse in world football. Movies also frequently capitalize on the underdog effect. Just think of Rocky Balboa’s path to the world heavyweight championship, or Forrest Gump.
Not only is the underdog a powerful psychological mechanism in leisure activities but it’s also highly relevant in the marketplace. In a series of mixed method studies covering 878 consumers and 147 Yelp reviews, researchers at University of Maryland and Georgetown University found that people feel empathetic towards brands that are positioned as underdogs and this empathy can create a bias that makes up for lower perceived competence2Kirmani, A., Hamilton, R., Thompson, D., & Lantzy, S. (2017). Doing Well versus Doing Good: The Differential Effect of Underdog Positioning on Moral and Competent Service Providers. Journal Of Marketing, 81(1), 103-117. doi: 10.1509/jm.15.0369. In other words, people may pick underdog brands even though they think that their products or services are lower quality than the powerhouse’s offerings.
The study focused on service providers and covered personal trainers, career coaches and trivia games, but similar results have also been found in a product context focusing on chocolate. However, to take advantage of this effect, people must perceive you as moral. If they don’t, all possible benefits will be nullified. I will also advise you to not make this your whole brand foundation. It can be a powerful supporting brand element but overdoing it might make you come across as insincere and untrustworthy.
Use attractive packaging design
If you market a product, you can use your packaging design to your advantage. Of course large brands may do this also, but not nearly all do because it’s usually more expensive and therefore decreases their economies of scale. Attractive packaging design can be extremely important, especially for smaller brands.
In a series of four neurological neurological experiments3Reimann, M., Zaichkowsky, J., Neuhaus, C., Bender, T., & Weber, B. (2010). Aesthetic package design: A behavioral, neural, and psychological investigation. Journal Of Consumer Psychology, 20(4), 431-441. doi: 10.1016/j.jcps.2010.06.009, researchers found that people have a stronger preference for attractive packaging and this effect is stronger than the effect of a well-known brand. These findings suggest that you may make up for your relative low familiarity with beautiful and eye-catching packaging.
Build brand value with crowdfunding
Crowdfunding has an interesting psychological effect on people that you can use to your advantage, especially if you are selling a physical product. Crowdfunding is a way of democratizing business funding and product development. People are invited to pledge money to a brand in return for an incentive, usually in the form of a pre-order at a discounted retail price. Through doing so, people might experience psychological brand ownership and gain status and various other early-adopter benefits.
This is much more attainable for small brands than it is for large corporations.
A 2021 paper4Acar, O., Dahl, D., Fuchs, C., & Schreier, M. (2021). The Signal Value of Crowdfunded Products. Journal Of Marketing Research, 58(4), 644-661. doi: 10.1177/00222437211012451 in the Journal of Marketing Research found that crowdfunded products have positive behavioral benefits on consumers. Through 7 experimental studies covering more than 4,000 consumers of cameras, backpacks, digital notebooks and climbing ropes; the research inferred that not only are purchase intentions higher but people are also willing to pay a higher price for crowdfunded products.
Side note
I’m often skeptical when the outcomes of research papers are about intentions and hypothetical scenarios such as asking “how much would you be willing to pay for X”, even in the case of experiments. I’d advise you to be too. However, the authors took measures to maximize the actionable findings of the study. They used a real shopping site that sold both crowdfunded and ordinary products to make it as close to a real shopping experience as possible, making this a very solid piece.
The interesting aspect here is that this applies to the whole market, not only the people actually participating in the crowdfunding initiative. The rationale cited is twofold: people perceive crowdfunded to be of higher quality, and to reduce inequality in the marketplace. Moreover, market inequality perceptions are particularly impactful for people who are fundamentally against social inequality, or have been primed to be so. If you use crowdfunding, you may well be able to increase your marketing effectiveness and brand value significantly by catering to this group.
But, there is an important caveat in that products that are considered high-risk are not seen as higher quality when crowdfunded meaning you should position your own brand as the knowledgeable and trusted expert if you operate in that category.
Conclusion
In this article I have presented you with four interesting findings from marketing theory that can help you put together strategic marketing initiatives that give you an edge over your bigger competitors. Perhaps you may even relate strongly enough to a given consumer insight that you can use it as a building block for your brand.
For example, if you are building an egalitarian brand you may want to look closer into crowdfunding. Alongside that, you may want to consider attractive packaging once you take your crowdfunded goods to the general market. You may even be able to tie in underdog positioning and personifying the producers behind the brand and take advantage of all consumer insights simultaneously. In any case, I hope this article was useful to you.
References
- 1Fuchs, C., Kaiser, U., Schreier, M., & van Osselaer, S. (2022). The value of making producers personal. Journal Of Retailing, 98(3), 486-495. doi: 10.1016/j.jretai.2021.10.004
- 2Kirmani, A., Hamilton, R., Thompson, D., & Lantzy, S. (2017). Doing Well versus Doing Good: The Differential Effect of Underdog Positioning on Moral and Competent Service Providers. Journal Of Marketing, 81(1), 103-117. doi: 10.1509/jm.15.0369
- 3Reimann, M., Zaichkowsky, J., Neuhaus, C., Bender, T., & Weber, B. (2010). Aesthetic package design: A behavioral, neural, and psychological investigation. Journal Of Consumer Psychology, 20(4), 431-441. doi: 10.1016/j.jcps.2010.06.009
- 4Acar, O., Dahl, D., Fuchs, C., & Schreier, M. (2021). The Signal Value of Crowdfunded Products. Journal Of Marketing Research, 58(4), 644-661. doi: 10.1177/00222437211012451
