Yet there have been many notable branding successes for SMEs in the past few years. From Gu to Dorset Cereals, REN Skincare to Innocent Drinks, start-ups have not only managed to build credible brands from scratch, often without the use of big-budget marketing and advertising, but in some cases have transformed entire categories.
Some have made their size work to their advantage, using the personality and ethos of their founder to create a dialogue with consumers. 'When you are a small business, you enjoy greater control if you do it well,' points out Rita Clifton, chairman of Interbrand. 'You can share the support and vision of your founder, and control the experience you offer the customer. [Clothing brand] Howies started out with nothing but a strong point of view, and made customers feel special by sending personal emails and rewarding loyalty.'
Many of these brands have thrived, but the question has now arisen as to whether the economic slowdown means a more challenging environment for smaller companies looking to establish a presence. Simon Briault, a spokesman for the Federation of Small Businesses (FSB), says the rest of the year could be tough for SMEs, not only due to a lack of available credit, but to changes in legislation.
At the start of 2006, there were an estimated 4.5m SMEs in the UK, an increase of 125,000 (nearly 3%) on the year before. Almost all of these - 99% - were small, with fewer than 50 employees. However, they packed a powerful punch; SMEs together accounted for more than half of the employment (59%) and turnover (52%) in the UK in 2006.
For SMEs looking to build their brands, Briault believes the main growth area will be online. 'If you have a website that is smart, professional and up to speed, it will allow you to compete with bigger firms on a more level playing field,' he says. 'The danger is spending money on a great site that no one is going to look at. SMEs need to invest in building links across their business that will drive people to their website.'
Former Ben & Jerry's marketing director Ian Hills, who now runs Purple Pilchard, a consultancy specialising in small entrepreneurial brands, agrees. 'The website is a classic medium where small brands can completely outmanoeuvre their much larger and painfully predictable competitors,' he says. Hills advises small brands to avoid 'nerdy Flash art' and concentrate on providing an intelligently written, easy-to-navigate site that will be appreciated by genuine brand loyalists.
SMEs are also looking to online marketing to boost their brands, reports Suki Thompson, founding partner of search consultancy Oystercatchers. 'Many start-ups and medium-sized businesses, which in the past might have sought an integrated agency, are now looking to go mainly digital,' she says. 'One reason is that it's a lot more measurable for them.'
On the other hand, most small businesses are located within 50 miles of their customer base, according to the FSB, so engaging with the local community remains important. 'Getting involved with local press and networking organisations should be a priority,' says Briault. Indeed, SMEs have an opportunity to 'own' local marketing, argues John Hall, director at comms agency Curious. 'Bigger companies such as super-markets are putting a lot of resources into local marketing, but it isn't all that believable. In contrast, being part of the local community is something that SMEs do instinctively,' he says.
One medium-sized brand tapping into local communities is Little Dish, which sells freshly prepared chilled meals for toddlers, through supermarkets. 'Part of our marketing plan for 2008 is to recruit a panel of mothers across the country who will act as brand ambassadors, enabling others to sample the recipes,' says managing director and co-founder Hillary Graves. Little Dish is also working with parenting charity NCT, and introducing the brand to toddler groups by providing organisers with nutritional information.
For many small FMCG brands, packaging is a crucial communication channel, as shown by the successful start-ups of the past decade. 'Because they are not part of large corporations, SMEs are not shackled to the traditional design rules - they can be more flexible and adopt a more creative approach,' says Martin Grimer, executive creative director of Blue Marlin Brand Design. 'Brands such as Dorset Cereals have shaken up categories, and I've been in many a meeting where the brand manager has requested a "Dorset" on their brand.'
Many small brands also rely on PR. It can be used provocatively - as with Tyrrells Potato Chips in its battle against Tesco (see case study) - or simply to build awareness. REN Skincare, founded by former admen Anthony Buck and Rob Calcraft in 2001, has used PR as its main form of communication. 'We appointed a PR firm before our product existed,' says Buck. 'Editorial is more trusted in the beauty market, plus journalists want to write about you if you are small, new and different.'
REN also invested in distinctive packaging and market research, although the latter wasn't always taken into account. 'We tended to do the opposite of what any research said. You're not going to stand out if you do what everyone already knows and likes,' says Buck. The firm now has a turnover of more than £7m, and is focusing on growth via international expansion. It is also thinking about advertising for the first time. 'It will probably be restricted to London, but we are looking at it from a brand positioning and awareness point of view,' he adds.
Another gourmet crisp brand, Darling Spuds, has targeted foodies by using tasting panels in upmarket food magazines, such as Observer Food Monthly, to establish its high-end credentials. For the second half of this year, it is looking to build its brand via sponsorship and the export market, says marketing chief Ian Hills. Choosing the right media is only half the story, though; creating a strong message and appropriate tone of voice is fundamental to making an impact as a smaller brand.
Ben Bilboul, managing partner at Karmarama, says start-ups need to have a 'burning sense of mission' to get their message across. 'If you look at IKEA in its early days, it wasn't just saying, "we sell cheap furniture"; it was about bringing democratic design to the masses.'
The past few years have produced a flurry of smaller FMCG brands targeting the premium end of the market. Bilboul puts this down to the 'Innocent effect'. He explains: 'Many entrepreneurs have seen small groups of people do very well out of selling a premium, high-margin product.'
Magnus Willis, founding partner at brand consultancy Sparkler, agrees. 'Big brands trying to behave like small ones will look like a granddad in a racy T-shirt,' he says. 'The reason it works for people like Innocent is that those values come from the heart of the brand.' While bigger rivals muscling in on creative strategies is a perennial problem for small brands, it shouldn't keep them awake at night, according to Will Chase, founder of Tyrrells. 'Even Walkers started running ads set in a potato field,' he says. 'But I've learned not to be jealous of the competition - the real challenge is in thinking up new ideas.'
Even in times of economic slowdown, there are advantages to being small. One is in meeting customers' needs in a more personal way than can be achieved by a big, faceless corporation. 'At times when clients have less money to spend, small businesses can really concentrate on getting the basics right and ensuring they deliver on their promises,' says Julian Thomas, client services director at brand consultancy The Liquid Way.
Others make the point that because SMEs are more flexible and fleet of foot, they can ride out an economic storm more easily. 'It's the bigger businesses with huge overheads that will run into trouble,' says Chase. 'Small businesses are like speedboats - they can turn around very quickly, and can afford to tighten their belts when things get tough.'
Case studay Tyrrells Potato Chips
When flooding struck the West of England in the summer of 2007, Tyrrells Potato Chips founder Will Chase made BBC headlines by highlighting the plight of potato farmers. The next day there was a flurry of hits on the brand's website.
It's a typical example of the provocative, PR-led strategy that has propelled the gourmet crisp-maker to an estimated brand value of £20m, exporting to 34 countries worldwide, in just six years. Chase, a Herefordshire potato farmer who decided to start making crisps when a big manufacturer rejected a batch of his produce, also made headlines last year by standing up to Tesco, which was stocking his crisps against his will and selling them at a discount in some stores. Tesco eventually backed down.
As well as innovation in flavours and ingredients, such as vegetable and apple chips, Chase puts the brand's success down to word of mouth. The majority of its marketing spend has been on PR, with advertising limited to the upmarket foodie magazines. 'It's important for a brand to have a real story behind it - to stand out, you need to make it interesting for the media,' says Chase.
For 2008, the focus will be on another product innovation. Amid rumours of outside investors taking a stake in the business, the next project will be the launch of a potato-based vodka. Again, PR will be the main thrust of its marketing campaign, says Chase. 'We want to do for the spirits market what Tyrrells has done for the snacks market,' he explains.
Once a brand reaches a certain size, it has a decision to make. 'Do you stay small and exclusive or do you go out to the mass market?' asks Chase. 'If you are too slow, you lose the opportunity, but if you go too mainstream, you lose your original customers and get battered by the bigger companies at the same time. The challenge is to keep your brand clean and make it grow.'