Wednesday, November 30, 2011

Technology vs. personal relationships: strategy for small businesses?

In the past five years, the holiday season has seen many trends around marketing sales particularly immediately after Thanksgiving. First there was black Friday with door-buster sales and lines of customers waiting to get deals at major retailers. This year Cyber Monday was the “biggest online shopping day in history” according to an article to news articles nationwide. For the first time this year I heard about a new sale day—Small Business Saturday. According to the official website this is the 2nd year of the annual Small Business Saturday sale. The goal of this new day is to let small businesses get in on the shopping madness of the weekend. The website has a link to a Facebook page with over 2 million “likes.” The site also provides store signage for small businesses and e-marketing strategies. What I found interesting was the push to use technology on the site which is something many small businesses do not have the capabilities to do or leverage. This made me think about the importance of adapting to changes in technology ever for smaller companies in an economy where consumers are relying more and more on the internet, mobile devices, and Web 2.0 for information.

One of the articles covered in this week’s materials talked discussed four popular types of strategies: low-cost, differentiating a product or service, customer relationship, and the network effect. Each strategy can be have variations but is probably based on one of these types. The article argues that small business can use a strategy of customer relationship because many consumers value the personalized relationship that small business can provide. The value added to the customer can be through providing convenience, ongoing benefits, personalized services, or customized products or solutions. I grew up in a small town and from my own personal experience I think this is why many small businesses thrive. I know I can go to a small boutique to find shoes similar to the ones I bought last month or that if I go to the PersonallyYours gift shop up the street they will know what my mom came in and looked at as a potential Christmas gift. This is why I am willing to pay more to shop at these places.

However, with technology many large organizations are beginning to try to mimic this “personalized” experience. Amazon is a great example. One of the reasons so many people shop on Amazon is because the experience is customizable. The site uses logarithms to determine similar products a customer may want or suggest products other consumers bought who purchased items you are looking at. Although many online shopping sites do this—Amazon really has makes the experience easy and somewhat personal compared to other online shopping services. Other online retailers offer “personalized shoppers” via the web that will look at your orders and find things that fit your taste. Many of these sites fail at successfully providing what is comparable to a personal relationship. Yet one thing that I find in some of these sites is the network effects being leveraged. I know if I go to Amazon I will get reviews of products and personally I find this more reliable than just buying from a local shop I’ve never been to before. Social media is also being leveraged as part of this strategy; I can look on a community blog, Facebook, or Twitter and see what my friends are buying.

As technology continues to advance will large companies that are already excelling in the operational efficiency and low-cost strategy also be able to provide a more personal service through video technology, mobile phone technology, and network-generated sites? If I can go a website, connect and see what people in my personal network or buying, rely on the community feedback, and buy items cheaper then I probably wouldn’t take the effort to shop at a local small business. Of course, the personal touch isn’t there but in the end some of the value-added described in the Types of Strategy article is no longer solely provided by small business.
This is why I found it interesting that the Small Business Saturday site is trying to get business to leverage technology. With so many Fortune 500s trying to mimic the personal touch through complicated data calculations and IT innovations, small business must also keep up with the trends in technology to stay relevant. This doesn’t mean small businesses have to lose their personal touch or focus less on relationships--- but small businesses should be afraid to leverage technology, network effects, and the online information sharing abilities as part of their strategy.

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