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Small businesses have been hit hard by the Covid-19 pandemic. In the first three quarters of 2020, the 50 largest companies in the U.S. saw their revenues grow by an average of 2 percent. Meanwhile, small businesses lost 12 percent of their revenues and more than 100,000 permanently closed. The Paycheck Protection Program hardly stanched the bleeding and was criticized for benefitting larger companies more than the small businesses it was intended for.
One reason smaller firms are disproportionately suffering is that they have struggled to reach their customers during the pandemic. Small businesses generally sell to small markets, whether that’s residents of a specific town or neighborhood or customers with niche interests. They often rely on community-based sales channels like neighborhood foot traffic, farmers markets, trade shows, local events and in-store promotions — all of which were greatly limited by the pandemic. Large corporations, meanwhile, have the resources to smoothly adapt their operations and reach customers through mass-advertising and premium-marketing campaigns.
While widespread vaccination and economic recovery are on the horizon, small businesses looking to rebuild their customer base must do more than simply return to their pre-pandemic sales channels. Social distancing will not go away overnight, and the new shopping habits people acquired may linger past the pandemic. For businesses to successfully rebuild, they need to leverage digital technology and find innovative ways to re-engage with customers.
As a professor at the USC Marshall School of Business who studies how businesses use technology platforms, I have watched small firms leap online in droves over the past year, launching and managing Amazon storefronts, Etsy shops, Instagram pages and Yelp profiles. However, as they go digital, small businesses shouldn’t simply mimic what works for large companies (something few can afford anyway).
Instead, they should focus on the big advantage they have over large corporations: They are part of the community. Here are four research-based strategies for how small businesses can marry digital tools with their unique ability to foster community and social connection in a time of crisis and renewal.
1. Don’t underestimate altruistic impulses
First, don’t underestimate people’s desire to help — even within the context of commerce. My research shows that in some cases, customers respond better to marketing messages focused on altruism and prosocial behavior than those focused on their own self-interest. These altruistic impulses are much more likely to be directed at someone’s favorite neighborhood restaurant or beloved bookstore than the local McDonalds or Target. Surveys show that large shares of consumers are trying to prioritize small businesses during the pandemic, even when they shop online, and over 80 percent are willing to pay more to buy small and local.
So, let the big box stores compete on price and product. For small businesses, messages around supporting the community or sharing with friends can be more effective, especially as we band together to recover and rebuild. Combine this with a sense of urgency about the challenges the business and the community are facing, as my research shows that highlighting the urgency of a need can motivate people to contribute to the public good.
Related: Giving Is Transformational
2. Support the desire for connection
Second, serve people’s desire to connect — even if it’s from a distance. Many small businesses have found creative ways to help people stay connected during the pandemic. Comedians, local cinemas and small theaters host livestream performances and movie screenings featuring opportunities for people to engage with friends and fellow audience members. Restaurants offer group ordering, where patrons place an order together, then eat at their own homes while they videochat. My research shows that group rewards can be more effective at driving engagement than individual incentives, and they can also help draw in new customers.
As social distancing loosens, people are hungry to reconnect with their community and friends, and small local businesses are uniquely positioned to meet this need. Consider ways to safely offer in-person social engagements, but don’t give up on the creative options for digital connection for those who want it. Some people have become accustomed to the convenience of fitting virtual happy hours and online yoga classes into busy schedules, and their interest in these offerings may continue even after social distancing ends.
3. Tap into the word-of-mouth approach, with a digital twist
Third, draw on the power of old-school word-of-mouth — but digitally. Customers are still the best source for finding other people who might be interested in a product or service. They have information about the people in their social circles and what will appeal to them that is much richer than any digital dataset. My research shows that online word-of-mouth is still tightly linked to people’s offline social networks and location.
By targeting promotions to groups, building social engagement into their digital offerings and product features, and experimenting with hyper-targeted social-media campaigns, small businesses can encourage existing customers to draw in new ones from their networks, connecting with niche markets that are hard to reach right now. My research also shows that careful design of promotions and messaging — such as how referral rewards and sharing messages are framed — can help shape the “social contagion” of marketing messages.
4. Use digital tools to supercharge marketing efforts
Finally, use digital tools to supercharge marketing efforts. There’s nothing new about the most powerful arrows in a small business’s quiver: word-of-mouth, social connection and community good. But to work in an age of social distancing, they must be married with digital technology, whether that’s a virtual tip jar, a group discount site or a delivery app that brings the product to customers. In fact, my research shows that digital technologies like targeted advertising can be even more important for small businesses that need to reach niche markets than for larger firms.
Large companies have been steadily building their online presences for years, but many small businesses were thrust into the digital world overnight when the pandemic hit. To build back from this crisis, they must not only learn to use digital tools, but also to use them in a way that draws on their unique strengths: community and social connection. These assets are more powerful than ever as people emerge from a time of isolation and uncertainty with a desire to reconnect and rebuild their communities. Small businesses have less room to fail than large corporations, but more community connections and support to draw on. Those that can adapt and survive may come out on the other side better prepared for our digital future.