Show off that you’re a small company
Show off that you’re a small company
People believe products from small companies are higher quality. The exception is high-tech products, people prefer those from large companies.
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📝 Intro
81% of people say they are (at least sometimes) aware of a company’s size when they buy from it.
What impact does that have on which products they decide to buy?
In a survey of marketing managers run by the researchers, 77% got the answer wrong.
So here’s what you should do, according to the latest scientific research. You’re welcome 😉
P.S.: Ariyh is a very small business. It’s mostly me, but I’m blessed to also have:
Andreas - a process, website, and data whizz who helps me while he finishes his studies - and
Noor - my wife and Ariyh’s editor-in-chief (who also freelances, in case you ever need some top-notch content help)
Previous insight: Take advantage of rude complaints (150+ more insights here)
People believe small companies make better low-tech products, and big companies make better high-tech products
Channels: Messaging | Brand positioning | Marketing communications
For: Both B2C and B2B
Research date: August 2022
📈 Recommendation
If your product is perceived as high-tech (e.g. smartphone, complex IT systems, healthtech, AI content generator), emphasize and tell people that your company is big.
If your product is perceived as low-tech (most other products; e.g. furniture, real estate agency, homemade herb remedies, copywriter services), show off that your company is small (or even that it’s just you alone).
People will judge your products to be higher quality, and will be more likely to buy them.
🎓 Findings
People judge products as higher quality, like them more, and are more likely to choose them when:
A product is low-tech (does not require heavy R&D technological investment) and the company is small
A product is high-tech (requires heavy technological investment) and the company is big
For example, as part of a series of 10 studies:
People were asked to choose between a product made by either a small company (25 employees, $8M revenue) or a big one (9,000 employees, $3.5B revenue):
67.4% chose the small company when the product was a drip coffee maker (low-tech)
34.3% chose the small company when the product was a smart coffee maker (high-tech)
An analysis of the Net Promoter Scores (NPS) of 480 companies on the Fortune 500 list found that:
Smaller companies have higher NPS scores when their products are low-tech
Big companies have higher NPS scores when their products are high-tech
The effect weakens or disappears if people discover (e.g. through a review) that employees of the small company are unmotivated, or that the big company underinvests in R&D.
🧠 Why it works
We believe that employees at small companies are more motivated:
Stereotypes such as “the starving artist” or “I left my corporate job to pursue my passion”, make us think that people passionate about what they do would rather work in small businesses than large ones
If workers are passionate about their work, it must mean that the products they make are higher quality (e.g. a nicer handmade flower vase, more attention to the client)
This belief influences our choices, but it's not necessarily true. For example, the researchers did an analysis of 40 Fortune 500 companies and found no relationship between company size and employee sense of purpose
We also believe that larger companies have more financial resources to invest in research & development (R&D):
We often read about the billions that large companies like Apple or Google spend developing new products. At the same time, we see small businesses having to resort to crowdfunding cash on Kickstarter
We know that the quality of many products depends on how much R&D investment is made in designing them
Of course, quality innovations are not all about the cash spent on R&D, but we use that as a proxy
For most products, we consider employee motivation to be more important when judging their quality.
For high-tech products - which depend on advanced features - we consider financial investment in R&D to be more important in judging their quality.
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✋ Limitations
This research focused on mid-priced, for-profit companies. It’s unclear if this effect still holds for non-profits or for extremely cheap or expensive brands.
🏢 Companies using this
95% of Fortune 500 companies mention their size somewhere on their website (e.g. revenue, number of employees).
Small companies that produce artisanal products often (correctly) highlight their small size.
Most commonly, many large companies communicate their size when they shouldn’t, and many small companies don’t communicate their size when they should.
⚡ Steps to implement
If your company size matches the types of products you make, emphasize your size in your communications, for example:
Mention on your homepage, about page, and even product packaging how big or small you are
Use employee testimonials that emphasize either how small and passionate your team is (for low-tech), or how many resources you put into R&D (for high-tech)
Compare yourself to the size of your competitors (e.g. we don’t mass produce, our small team handmakes each and every product)
If your company size is not a match, try to deemphasize your size, or shine light on other aspects, for example:
If you are large but low-tech, talk about technological aspects that go into making your products (e.g. precision production technology) or describe how passionate your employees are
If you are small but high-tech, you can describe the budget you invest in R&D as large in comparison to other metrics (e.g. % of your total revenue) or just as “big”
🔍 Study type
Lab and online experiments and market observation (analysis of the NPS score of 480 companies, their size, and the level of tech of the products they sell).
📖 Research
Does Company Size Shape Product Quality Inferences? Larger Companies Make Better High-Tech Products, but Smaller Companies Make Better Low-Tech Products. Journal of Marketing Research (August 2022).
🏫 Researchers
Kaitlin Woolley. SC Johnson College of Business, Cornell University
Daniella Kupor. Questrom School of Business, Boston University
Peggy J. Liu. Katz Graduate School of Business, University of Pittsburgh
Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.
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