8/6/2019 SE Market Analysis 1.1

1/7

iSE | Vsn 1.1 | June 2010 1

Market-making,Market-shaping:Trends in Social Enterprise Markets in Birmingham

1.0 INTRODUCTION

DuringtheperiodJanuary-April2010iSEconductedanextensivesurveyingexercise

inwhichsocialenterprisesandtradingthirdsectororganisationswereaskedtocompleteadetailedmarketsandtradingdiagnostic.Thisisthefirsttimein

Birminghamthattherehasbeenanattempttoexamineinsuchdetailhowsocial

enterprisesbehaveinthemarketplace.

Thisanalysisisbasedonasampleof60outofmorethan100diagnosticscompleted.

Thesamplecapturedarepresentativecross-sectionofBirminghamssocial

enterprisesandreflectedthediversityofitsserviceandtradesectors.1

2.0 SOCIALENTERPRISEMARKETSWHOSOCIALENTERPRISESDOBUSINESSWITH

Publicsector

Thepublicsectorstillremainsthedominantcustomerforsocialenterprisesservices.

83%ofthesample(50organisations)derives20%-100%oftheirincomefrompublic

sectorcustomers,with67%dependentonthepublicsectorfor50%-100%oftheir

income.

58%(35organisations)alsowanttoincreasetheirtradewiththepublicsector,typicallybyatleast20%,butinsomecasesbyasmuchas60%-100%.

Socialenterpriseremainsoverwhelminglydependentonthepublicsector

marketplaceandmanyarelookingtoincreasethisasaproportionoftheir

business.Thisraisesseriousquestionsregardingsustainabilityandgrowth

1Thesampleincluded:largecommunity-basedsocialenterprisesprovidingmultipleservicesandproducts;

childrenandyoungpeoplesservices;recruitment,employmentsupportandtrainingproviders;specialist

disabilityorganisations;creative,educationalandartsorganisations;eventsmanagementandconferencing;

health,socialcareandwelfareservices;childcare;HRservices;personaldevelopment,guidance,advocacyandinformation;community-basedcounselling;communitytransport;textiles/softfurnishings;

construction,groundsmaintenance,landscaping;andcyclerepair.

8/6/2019 SE Market Analysis 1.1

2/7

iSE | Vsn 1.1 | June 2010 2

inaperiodwhenthedeepestpublicspendingcutsinagenerationare

anticipated.

Privatesector

However,socialenterprisesdoalreadyhavemoreprivatesectorcustomersthan

mighthavebeenimaginedtobethecase.50%(31organisations)derivesome

incomefromprivatesectorcustomers,butasaproportionofbusinessthisremains

relativelylowtypically5%-20%,withapeakatabout40%ofoverallbusiness.There

aresomeexceptions,however.Forexample,oneenterprise(probablytheonlyone

inthesamplewhosebusinesscouldbesaidtoconsistentirelyofconsumerproducts)

reportedthattheprivatesectormarketplaceaccountedfor100%ofitsbusiness.

Overhalfthesample(51%)alsowanttoincreasetheirprivatesectortradetypically

by10%-30%butinsomecasesby40%+andinonecasebyasmuchas200%.

Theprivatesectorisnotquitetheentirelyneglectedmarketforsocial

enterprisesthatmighthavebeenanticipated.Clearlysomehavebeen

innovativeinmarketingthemselvestotheprivatesector,andseveral

reportbeingabletocapitaliseonmajorcorporatesCSRobligations.

Thirdsector

Thebigsurpriseisthatmoresocialenterprisesdomoretradewiththeprivatesector

thantheydowiththethirdsector.Only42%ofthesample(25organisations)reporttradingwiththethirdsector,typicallyatlevelsbetween5%-70%,butgenerallyless

than50%.Thosedoingmostbusinesswiththethirdsectorarearts,culturaland

educationalproviders,conferenceprovidersandroomhirevenues,specialist

HR/personnelservices(perhapsunsurprisingly,asthereisonlyonemainprovider),

andvariouskindsoftrainers,includingequality/diversitytrainers.

Noraresocialenterprisescurrentlylookingtochangethisparticularly.Only31%of

thesample(19organisations)saidthattheyplantoincreasetradewiththethird

sector,andthisatpredominantlyquitelowlevelstypically10%-30%andinjusta

fewcasesby40%+.

Thereissignificantscopeforsocialenterprisestoexpandtheirbusinessin

thethirdsectormarketplace,butthisremainsarelativelylowpriorityfor

manyenterprises.

Governmentdepartments

Only18%ofthesample(11organisations)dobusinessdirectlywithgovernment

departments,andthisatlevelsrangingfromaround5%-50%ofturnover.Thiscanprobablybeassumedtobeadecreaseonpreviousyears,asotherresearchhasfairly

8/6/2019 SE Market Analysis 1.1

3/7

iSE | Vsn 1.1 | June 2010 3

categoricallydemonstratedaconsistentdeclineinboththevalueandnumberof

contracts/commissionsdirectlyfromgovernmentdepartments.Thisisprobably

attributableasmuchtochangesinbuying/commissioningpracticesasitisto

decliningbudgets,however.

Only10%ofthesample(6organisations)isseekingtoincreasebusinesswith

governmentdepartments,typicallyby10%-25%.

Directbusinesswithgovernmentdepartmentsisadecliningmarketand

evenputtingasidethecurrentprojectedcutsinpublicspendingofc.30%is

unlikelytoofferaroutetogrowthforthesector.

Individuals/consumers

33%ofthesample(20organisations)regardindividualsandconsumersasanimportantpartoftheirmarketplace,typicallyatlevelsbelow50%ofoverallbusiness.

GiventhepredominanceofPersonalisationandindividualbudgetsonemighthave

expectedthistobehigher.

Norarethatmanyinoursamplelookingtochangethis.Only25%(15organisations)

saidthattheyplannedtoincreasetheirbusinesswithindividuals/consumers.

Marketingdirectlytoindividualsandconsumersremainsunder-explored,

althoughmoreenterprisesdonowseemtobefacinguptothischallenge.

Forsome,thereisclearlyanissueabouthowtheyrepackageservicessothattheyareclear,coherentproductsappealingtotheindividual

consumerasopposedtothepublicsectorpurchaser.

3.0 SOCIALENTERPRISESSUPPLIERS

Whatkindsofsuppliersdosocialenterprisesuse?Doesthesectoractivelychooseto

buyfromwithinthesectorwheneveritcan?Weweresurprisedbywhatoursurvey

revealed.Currently:

35%ofbusinessesinoursampledontbuyanyproducts/servicesatallfromothersocialenterprisesorthirdsectororganisations.

45%buylessthan10%ofwhattheyneedfromothersocialenterprisesorthirdsectororganisations.

13%buy10%-30%ofwhattheyneedfromothersocialenterprisesorthirdsectororganisations.

Andonly1.6%buyupto,ormorethan,50%ofwhattheyneedfromothersocialenterprisesorthirdsectororganisations.

8/6/2019 SE Market Analysis 1.1

4/7

iSE | Vsn 1.1 | June 2010 4

Thekeyreasonsforthisareasfollows:

Firstandforemost,becausemanyhavefoundthatthirdsectorprovidersofthespecificgoodsandservicestheyrequiredonotexist:therearesignificant

gapsinthesuppliermarketplace.

Butpriceisalsoafactor10%saidthatwhereappropriatethirdsectorprovidersdoexist,theycansourcethegoods/servicesinquestionmore

cheaplyelsewhere.

Andqualityandconveniencearealsoissues13%saidthatwhereappropriatesocialenterpriseprovidersdoexist,theirgoods/servicesarenot

ofhighenoughquality,and13%saiditismoreconvenienttouse

mainstream,commercialproviders.

Thegoodnews

Thegoodnews,however,isthatthirdsectorprovidersarealreadybeingwidelyused

toprovidegoodsandserviceswhichinclude:

PATtesting Stationery(tosomedegree) Printing Roomhire/conferencing/events Consultancy/training Businesssupport Catering HRservices Accountancy Cleaning

Itmustalsobeacknowledgedthatsomeinoursampleclearlyregardothersocial

enterprisesandthirdsectororganisationsassub-contractordeliverypartnersrather

thanjustsuppliers,andthismaymaskthetrueextentofinter-tradingthatdoes

takeplace.Certainly,withinoursampleahealthylevelofpartnershipworkingandsub-contractingforservicedeliverypurposeswasevident.

Butitisalsosignificantthatinoursampleonlytwoenterprisesreporteddeveloping

goods/serviceswhoseprimarytargetmarketisthethirdsector.

Gapsinthesuppliermarketplace

Buttherearemajormarketgaps,andenterprisesinoursurveysaidtheywouldlike

tobeabletobuymorefromthirdsectorsuppliers,especially:

8/6/2019 SE Market Analysis 1.1

5/7

iSE | Vsn 1.1 | June 2010 5

ITsupport Ethical/environmentalstationeryandofficesupplies Cleaningandcleaningsupplies Buildingandconstructionservices Landscapingandmaintenance Utilities Rentalofficeandstudiospace,and Windowcleaning,tonamejustsomeareas.

Interestingly,inutilities,suchastelecoms,evenwhereamajormutual/social

enterpriseproviderdoesexistsuchasThePhoneCo-oponerespondentsaidthey

hadtriedthisserviceandweredissatisfied,whichsuggeststhattheservice

standardsofsocialenterprisesascustomersarealsoveryhigh.

Approachinghalfthesectorbuyslessthan10%ofthegoodsandservicesitneedsfromwithinthesector.Thereisenormouspotentialformutually

beneficialinter-tradingamongstsocialenterprisesandthewiderthird

sector,buttherearealsomajorgapsinthemarketinsomecasessocial

enterpriseprovidersoftherequiredgoods/servicessimplydontexist.

Therearealsosignificantbarrierstomarketentryfornewprovidersin

someareassuchastheprice,discount,qualityandconvenience

thresholdssetbymajorcorporatesuppliers.

Wesocialenterpriseandthirdsectorprovidersmayalsoneedtolookhonestlyattheprice,qualityandconvenienceofthegoodsandservices

theyoffer:

Arewereallybusiness-like?Isiteasytobuyfromus? Isourofferclearandcoherent? Isourmarketinguptoscratcharewereallygettingourmessagein

frontofthecustomersthatwantwhatwevegot?

4.0 MARKETRESEARCH&MARKETING

Thereseemstohavebeenasignificantshiftintermsofsocialenterprisesutilising

marketresearchandwidermarketingtechniques.Fourorfiveyearsagoitwas

evidentthatthesectorsadoptionofmarketinginitswidestsensewasdramatically

laggingbehindthatofitsprivatesectorcompetitors.Thisseemstobechanging.

Amajorityofenterprisesinthissamplearenowsuccessfullyusingallkindsofmarket

research,marketfeedbackandbroadermarketingandpromotiontechniquesto

promotetheirbusinesses,makecontactwithnewcustomersandidentifyorcreate

marketopportunities.Thesetechniquesinclude:

8/6/2019 SE Market Analysis 1.1

6/7

iSE | Vsn 1.1 | June 2010 6

Formalandinformalnetworking. Consultation. User,customerandcommunityfeedback. Opportunitiescreatedbylegislativechange. Socialmedia,newmediaandsocialnetworkingsites. Onlinepresence. Tele-marketing. Localmediaadvertising. Promotionaleventsandtradefairs. Tastersessions. Communityoutreachandinfewerinstancesdedicatedbusinessdevelopment

posts.

Socialenterprisemessages&values

Whileasignificantproportiondoincludesocialenterprisemessagesandvaluesintheirmarketing,manycurrentlydonot.Thereasonsforthisvary.Insomecases,

organisationsconsiderthemselvesnewtosocialenterpriseinterestingly,not

becausetheyarenecessarilynew-startbutbecausetheyhaveonlyrelatively

recentlyadoptedasocialenterprisestructure(convertingtoaCIC,forinstance,or

settingupasocialenterprisetradingarm)andareasyetunsurehowbestto

incorporatesocialenterprisemessagesintheirmarketingandpromotion.

Othersareservingcustomergroupsforwhomsocialenterpriseperseisnota

primaryconsideration,andtypicallythesebusinessesfocusinsteadonpriceand

qualityaskeydifferentiators.Buttherearemanywhodoseesocialenterprisevaluesandmessagesaskeytotheirmarketingforexample,severalstatethattheyhave

successfullybrokenintoprivatesectormarketsbypromotingtheirsocialenterprise

missiontomajorcorporatesseekingtodeliveronCorporateSocialResponsibility

goals.

TheSocialEnterpriseMark

WhiletherearestillrelativelyfewholdersoftheSocialEnterpriseMarkin

Birmingham,theseenterprisesareusingtheMarkvigorouslyintheirmarketingand

promotion.ThereiswidespreadinterestinthesectorinachievingtheMark,andsignificantnumbersofsocialenterprisesnowrecognisethatitcanhelpthemachieve

widercredibilityandcompetitiveadvantage.Thisisveryencouraging.

Thereseemstobeanewrecognitioninthesectoroftheimportanceof

marketing.Evenallowingforlimitedresources,moresocialenterprisesnow

seemtobeutilisingmoreandmorevariedmarketingtechniquesto

raiseawarenessoftheirbusinesses,reachnewcustomers,andidentifyand

createnewmarketopportunities.

8/6/2019 SE Market Analysis 1.1

7/7

iSE | Vsn 1.1 | June 2010 7

Aresocialenterprisessuccessfullydevelopingnewproducts/servicesasa

consequence?

Thetrackrecordhereismoremixedbutstillappearstobegood.Themajorityofthis

samplereportedthatnewserviceshavesuccessfullybeendeveloped,usuallyin

responsetoemergingneed,legislativeopportunities,orgapsinprovisionleftbythe

closureorcontractionofotherproviders.

Whatislessclearisthedegreetowhichthisconstitutesgenuinediversificationand

theservingofentirelynewcustomers,marketsorsectors.

Historically,thesocialenterprisesectorhasalwaysbeenoverwhelminglyservice-

based,dominatedbyserviceindustriesratherthanmanufacturingandforthisthe

developmentofnewproductsgoodswithmaximumtransferabilityandthe

potentialtoappealacrossentirelydifferentcustomergroupsandmarketsremainsproblematical.

Obstaclestoservicedevelopment

Anumberofenterprisesinthesamplereportthatlackoftime,capacity,or

resourceshavepreventedthemtakingforwardnewservicedevelopmentsdespitea

clearmarketopportunityhavingbeenidentified.Severalciteadverseeconomic

conditionsasthekeyreasonfornotpursuingnewservicedevelopments.

Arelatedissueemergesinregardtopublicsectorpurchasing.Severalinthesamplereportthatevenwhentheyhavebeenabletodevelopservicesofa

commissionablestandard,ithasprovenimpossibletoidentifythekey

commissioningofficers(orevenorganisations)theyneedtoapproachinorderto

makeasale.Identifyingandgettingthemessageacrosstotherightcommissioners

remainsaproblem.

Despiteadverseeconomicconditions,andlimitationsintime,capacityand

resources,newservicesarebeingsuccessfullydevelopedandbroughtto

market.Significantnumbersofsocialenterprisesareidentifyingand

respondingtonewmarketopportunities,emergingneed,andlegislativeopportunities.Towhatextentthisconstitutesgenuinediversificationisless

clear,however.Nonetheless,theseareallencouragingsignsforasector

thatwithsomeurgencyneedstodiversifybeyonditscorepublicsector

marketplaceifitistorideoutthestormofpublicspendingcuts.

iSE

June2010

Vsn1.1