A new study from Experian showcases the crucial differences between owners of incorporated and unincorporated small businesses that marketers need to know.
Posted Aug 21, 2006
Don't forget about the little guys, warns a new report from Experian. According to the Small Business Administration, 99.7 percent of all businesses in the United States are classified as small, meaning that they have 500 or fewer employees. With approximately 23 million small businesses operating in the U.S. alone, B2B marketers know the importance of selling to this segment. However, it is equally crucial not to treat all small businesses identically. Experian's study, "The Face of Today's Small-Business Owner," focuses on the importance of separating tactics when dealing with incorporated (INC) and unincorporated (UNINC) small businesses.
According to the study, owners of incorporated businesses comprise a significantly different demographic than unincorporated business owners. While small business owners as a whole are wealthier than the general population, the mean annual income for an INC owner is $78,500, while unincorporated owners make $72,000 on average. Correspondingly, UNINC business owners are 48 percent more likely to live in the top 10 percent of geographical areas for wealth as compared to 105 percent for INC owners.
The two groups differ slightly in age as well. The average INC owner is 48.6 years old, approximately a year younger than the average head of household age, while the typical UNINC owner is 51.0 years old. Education also comes into play: INC owners are 56 percent more likely than the average population to have graduated college, compared to only 29 percent of UNINC owners.
This demographical data is important for marketers to know and leverage, says Denise Hopkins, senior director of Experian's Business Marketing Solutions and author of the report. "INC business owners offer a lucrative and undermarketed segment. For example, incorporated businesses are often excluded from marketing campaigns, but when combined with the business owners' demographic information it makes them a more appealing segment." The report indicates that INC owners "show a higher affinity for travel, gadgets, and high end foreign cars" as well.
Demographical separations in wealth, age, and education lead to differentiating consumer behaviors as well, according to the study. For example, INC owners are more likely to live in areas with higher credit quality than owners of UNINCs. The report indicates that the two groups are more likely than not to display different general attitudes. While mottos such as "no time like the present" and "work hard, play hard" represent what more INC owners live by, attitudes such as "buy American" or "a penny saved, a penny earned" better describe the notions of UNINC owners.
The differences between unincorporated business owners and incorporated business owners are crucial for marketers to understand and to leverage when running B2B campaigns. Separate attitudes and demographics represent separate buying methodologies. As the report stresses, when looking at small business, "this is not a monolithic group." If this data is used properly, asserts the report, it "represent[s] a significant opportunity for marketers to target pitches to the right audience."
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