Merchants love selling but how do they buy?

March 8, 2020

We’ve been working on a handful of projects with fintechs and banks across the merchant landscape. Covering card payments, recurring payments, lending and business services - we have conducted qualitative research with more than 500 merchants over the last year, across the UK. 

From sole-trading side-hustlers, to Heads of Payments at global megacorps, we’ve chatted to them all. In this article, we’re talking about the lower end of this continuum - SMEs, the 99% of the UK businesses that keep the economy moving. With the industry hell-bent on engaging them with new services, and regulators doing all they can to promote competition, we’ve been interested to know more about how they view the world. 

What have we learned? 

  1. “SME” is not a segment

From brewers in the midlands, to toy manufacturers up north, or hotels on the south coast, we have met a lot of admirable businesses. They have unique needs, views and businesses. A look at their financial statements may tell one story, but a lengthy conversation will tell you something else. 

Too many service providers use measures like turnover, business model or number of employees to segment merchants. In reality a broader set of characteristics, like attitudes towards mainstream banks, planning cycles, level of advisory support, cash flow patterns and many other factors shape the attitudes of small businesses. 

So what? When we think about designing services for SMEs, we use “Business Personas” that blend a range of factors to create empathy for their time of day. 

  1. Buy like businesses, use like consumers

A common thread in all of our research has been that buyer and usage behaviour may vary significantly, for the same merchant. 

When testing messages and propositions, overly ‘consumer-like’ framing can be seen as patronising and casual. More often than not, entrepreneurial buyers view a choice of provider as a partnership - not a buyer / seller relationship - so care more about values, benefits and tone than style, or even introductory offers. 

Conversely, consumer habits die hard when it comes to using financial products. If, as consumers, business owners don’t use online banking, or open their statements, the chances are they won’t as businesses. 

So what? Testing propositions or buyer journeys requires a different methodology from testing product and service usage. Choose methods wisely. 

  1. Love what they do, hate admin

It has become a cliche of SME proposition design that a proposition exists to “make <insert merchant function here> easier, so merchants can focus on what they do best.” But it’s true. 

Whether a side-hustle, a career change, an entrepreneurial move or a career,  a lot of SMEs have a genuine passion for what they do. 

They also have a common hatred for pointless tasks. Every hour spent in an interface, running payroll, managing finances, updating inventory is an hour spent not serving customers or growing their business. A lot of the businesses that we’ve met have created their own patchwork of tools with which they manage their business. In one memorable session shodowing a week-end process for a restaurant owner, we witnessed 8 tabs open in a browser and a lot of manual reconciliation. 

So what? Time-based arguments rarely fail when it comes to SME propositions. 

  1. Emotional and Subjective, not Rational and Objective

As financially literate people, in the services industry, in London, it is very easy for us and our clients to base our understanding of the SME universe on our own experiences. The role of research is to broaden those horizons. 

Beyond the easy step of researching outside of London, overcoming intellectual bias is harder. When viewing businesses as ‘subjects’ it is too easy for service providers to assume that business owners view the world objectively and rationally. They often don’t. “Cash is expensive” doesn’t make sense to them, nor do some phrases that we rely on as fintech people - “working capital”, “bad debt”, “rolling reserves” all need explanation. 

So what? There is a difference between financial literacy (running a business) and financial language literacy (understanding accounting definitions). We think about ‘jobs’ holistically - balancing the emotional and functional with the financial. 

  1. Don’t feel hard done by 

Contrary to the trope of bank-battered SMEs, the majority of the merchants that we’ve spoken to don’t feel ‘overlooked’ or ‘mistreated’. Yes, they have some cynicism - for the integrity of big banks, or the credibility of new fintech brands - but they more often than not, they don’t give financial institutions (of any size) the credit of being able to materially change their fortunes. 

There is a sweet-spot when it comes to successful messages for SMEs in our experience. Too ‘techy’ doesn’t work - business owners don’t care if you built your proposition on microservices architecture. Industry-bashing doesn’t work either - business owners don’t care if the big banks are evil and you’re not. Emotive messages without clear functional benefits don’t wash either - your mission may be noble, but your product has to be good too. 

So what? Propositions that spend more time describing what they are, than what they’re not are the most successful in our experience.