How marketers helped Ugandan entrepreneurs grow 51.7%
Marketers help startups and small businesses grow mostly by establishing a premium product offering that differentiates them from competitors.
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Ok, let’s dive into today’s tip. It’s a good one.
First off, some background about today’s study, because it’s pretty awesome.
Previous research has shown that entrepreneurship is one of the most effective means of alleviating poverty in emerging markets.
530 professionals from all over the world volunteered to (remotely) pair up with a Ugandan entrepreneur each to help them grow their businesses.
There were 3 main groups of professionals:
Other professionals (e.g. finance, strategy, general managers, operations, HR)
All groups drastically increased growth (see image below - click to zoom in).
But marketers were the most successful, generating 51.7% higher monthly revenue compared to firms without support.
What did marketers do differently to spur such growth, and what can we learn? Let’s take a look in today’s tip.
P.S.: The volunteering scheme was arranged by Grow Movement. I found out about them thanks to this study.
It seems like we can do a lot of good as marketers. I’m considering volunteering in the future and I’d encourage you (and your teams) to do so too.
Marketers help small business entrepreneurs by differentiating with premium products
Impacted metrics: Customer acquisition | Customer spending
Channels: Business strategy | Brand strategy | Product
For: Both B2C and B2B
To help startups and small businesses succeed, focus on finding and developing a premium product offering that differentiates them for a large enough group of target customers.
For example, an entrepreneur opening a cafe in Milan, Italy may tend towards a standard product offering (espressos, croissants, maybe tobacco and a few sandwiches). Due to many similar competitors, they may struggle to succeed.
A marketer could help them identify an underserved premium niche in the area (e.g. Sicilian pastries, Calabrian sandwiches, Balinese coffee) which will differentiate them and lead to higher revenue and profits.
The positive impact marketers can have is particularly strong in emerging markets, where entrepreneurs tend to have less access to knowledge and resources to differentiate their offering without help.
One of the main reasons why entrepreneurs building small businesses struggle is because they don’t differentiate their offering to attract customer interest (e.g. a shop that offers largely the same as another one down the road). This is especially common in emerging markets.
In a field experiment with 930 Ugandan entrepreneurs, marketers were the most successful professionals at helping them grow their business. Compared to those without professional support, the 136 firms assigned to marketers generated:
51.7% more monthly sales
35.8% more monthly profits
A 31.0% increase in total assets
23.8% growth of paid employees
This increase was larger (double or more) than the positive effect from other professionals because marketers spent more time on product-related topics, mainly how to create a differentiated premium offering.
The positive effect was strongest on those entrepreneurs with the most previous knowledge of the local market and access to resources.
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🧠 Why it works
Small business entrepreneurs, especially in emerging markets, often lack the knowledge and resources to differentiate their product offering. Marketers fix that.
The research focused on entrepreneurs in Uganda. The results are likely to generalize to other emerging markets but it’s unclear how strong the impact of marketers would be on small businesses in developed markets.
Highly technical businesses might benefit more from support from other experts (e.g. engineers) to succeed.
🏢 Companies using this
It’s common for entrepreneurs to understand marketing as something tactical (e.g. running ads, social media presence) rather than the strategic core of business. This leads them to neglect some of the basic principles of marketing.
In emerging markets, development agencies (e.g. World Bank, International Monetary Fund) tend to focus business support in areas such as funding, regulation, and supply chains. Thanks to this study (which is quite high profile), marketing could soon become another lever to fight poverty through entrepreneurship.
Several business schools have programs to liaison students with entrepreneurs in emerging markets. Some large companies may follow soon as part of their CSR and employee satisfaction programs.
⚡ Steps to implement
Start with asking “Why should the customer buy from you and not elsewhere?”.
From there, research potential differentiating products the business could offer that fit the entrepreneur’s skills, desires, and resources.
Estimate the market size (e.g. how many people would regularly order Biangbiang noodles in Barcelona?) and competition for these options.
Choose the product offering that has a large enough target market (i.e. is there a big enough market to be profitable?) and isn’t saturated by competitors.
🔍 Study type
Field experiment (analysis of 930 Ugandan small businesses over 2 years, 136 of which were virtually advised by volunteer marketers for 2 to 6 months). Uganda
Anderson, S. J., Chintagunta, P., Germann, F., & Vilcassim, N. (March 2021). Do marketers matter for entrepreneurs? Evidence from a field experiment in Uganda. Journal of Marketing.
McCombs School of Business (University of Texas at Austin); Booth School of Business (University of Chicago); Mendoza College of Business (University of Notre Dame); and London School of Economics. United States and United Kingdom
Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may 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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