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Both Can-Do and Can’t-Do 2How Many They Are, and Who They Are 2The Rudiments of Small Companies’ Marketing 3The Technology They Bring to Bear 7Not Moving Fast to Mobile 8Trying to Take Advantage of Social Media 9And Elsewhere in the Digital Mix … 11Small Businesses as Customers 12

Conclusions 15

eMarketer Interviews 15

Related Links 16

February 2013

Executive Summary: Small-business owners (SBOs) are a diverse bunch that includes more women, immigrants and young people than one finds atop big corporations. But what many have in common are modest levels of marketing expertise and technological know-how. 150776 A large minority of small businesses don’t have their own

website. Rather than pursuing a systematic plan for usage of digital devices, many rely on employees to “BYOD,” or “bring your own device.” Money is an obvious constraint on SBOs’ marketing and technology adoption, but time is also a factor for owners who toil long hours and juggle several roles. They’re often too busy with their core business activities to have much time for mastering new technologies. Many have never used forms of digital marketing (e.g., social and mobile) that are routine among bigger companies. And their views on how effective various digital channels are suggest a low comfort level with them—something companies should consider when choosing the means by which they market to small businesses.

As it is, small-business owners are unimpressed with the sales pitches aimed at them, with more than half feeling companies don’t market to them effectively. But they appreciate it when potential suppliers provide information that can help them run their business better.

Key Questions

■ What is the demographic mix among SBOs?

■ How skilled are SBOs at marketing their businesses?

■ What sorts of technology do SBOs use, and how digitally adept are they?

■ How do SBOs feel about the ways big companies try to sell them goods and services?

% of respondents

Tactics that Are Effective for Marketing According toUS Small-Business Owners, April & Oct 2012

Word-of-mouth and customer referrals84%

87%

Networking with other small-business owners55%

49%

Advertising—print, broadcast, radio, etc.43%

41%

Direct mail or email46%

37%

Social media42%

32%

April 2012 Oct 2012

Source: Bank of America, "Small Business Owner Report," Nov 15, 2012150776 www.eMarketer.com

Mark Dolliver [email protected]

Contributors Christine Bittar, Jennifer Pearson, Tracy Tang

Small Businesses as Tough B2B Customers: Shaky in Their Own Marketing, Critical of Marketing Aimed at Them

Small Businesses as Tough B2B Customers Copyright ©2013 eMarketer, Inc. All rights reserved. 2

Both Can-Do and Can’t-Do

Small-business owners are famous for exuding a can-do spirit. But there are a lot of things they can’t do. They know their own line of business inside out, but many are lost when it comes to marketing and digital usage. Companies that want to sell to small businesses should not assume they’re dealing with an audience that is sophisticated in those areas. After all, those likely aren’t the disciplines that inspired owners to set up shop in the first place.

“At the end of the day, most of these people are passionate about their craft,” said Doug Llewellyn, vice president of business and corporate development at Manta, an online membership community of small companies. “They’re not going to spend six hours a day tweaking their website and making sure it’s SEO-optimized.”

Indeed, small businesses might not have a website at all, even if they realize that they ought to make more use of new technology.

Small businesses do try—within the constraints that budgets and time impose. When asked to rate the digital savvy of SBOs, Llewellyn replied, “I give them an A for effort, and I would probably give them a B-minus for follow-through.”

Many SBOs realize their shortcomings. In the April 2012 edition of a semiannual survey by Bank of America, 64% of SBOs said they “wish they took better advantage of technology innovations to help manage their business.”

However, it’s difficult for SBOs to better exploit digital when more pressing tasks demand attention. “They’re the CFO, the CIO and everything themselves,” said Nauman Haque, research director for the Enterprise Council on Small Business (ECSB) at The Corporate Executive Board Co. (CEB), a member-based advisory firm. “Most small-business owners are not professional marketers. It’s just one other hat they wear.”

Then again, SBOs might say big companies, with their numerous MBAs using the latest digital devices, aren’t so hot at marketing to small businesses. Owners often feel big companies talk down to them and don’t bother to learn what they actually need. And, despite the deep personal stake owners feel in their companies, they don’t feel these marketers make a personal connection with them. If nothing else, this ought to be a warning to big companies that the term business-to-business is a dangerous misnomer. It’s really “business-to-a-person-at-a-business,” especially if that person is the owner.

How Many They Are, and Who They Are

Using a capacious definition that includes companies with as many as 500 employees, the Small Business Administration pegs the number of US small businesses at 23 million. Most are far smaller, judging by the US Census Bureau’s latest tabulation, which found some 21 million “nonemployer firms”—firms with no payroll—as of 2008. There were 3.6 million businesses with one to four employees and slightly more than 1 million with five to nine. Another 1.2 million had at least 10 but fewer than 100 employees.

Despite their diminutive size, small companies have a large cumulative economic impact. According to the US Census Bureau’s 2007 figures, the most recent available, nonemployer firms had sales/receipts of $991.8 billion. Businesses with one to nine employees rang up sales of $2.6 trillion, and those with 10 to 99 employees took in $5.2 trillion.

Not Your Father’s Small-Business Owner

In the corporate world, “diversity” in the upper ranks remains a largely unrealized goal. In the SBO population, it’s a well-established reality—one that people who market to small businesses must take into account. More varied in gender, ethnicity, age and professional experience, SBOs do not match the archetypal business-to-business (B2B) audience of old.

Women are conspicuous in the ranks of today’s SBOs. A report last March by American Express OPEN—the American Express unit that caters to small businesses—estimated the number of female-owned US businesses at 8.3 million. Likewise, in Bank of America’s April 2012 survey of small-business owners, women made up 42% of its nationally representative sample. In addition, the female proportion was 60% in the 18-to-34 age group.

% of respondents

Demographic Profile of a US Small-Business Owner,April 2012

Female 42%

24-54 74%

Employ 2-10 people 64%

Consumer products retail or wholesale, and professional practices 60%

Have owned the business 1-10 years 59%

Source: Bank of America, "Small Business Owner Report," May 17, 2012140747 www.eMarketer.com

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Immigrants also account for an outsized share of small-business ownership. According to a June 2012 report from the Fiscal Policy Institute that analyzed American Community Survey data, 18% of US SBOs in 2010 were immigrants. Mexico, India


and South Korea were the leading countries of origin. Likewise, immigrants launched 30% of small businesses started between 1990 and 2010. Whether foreign- or US-born, Hispanics are a big part of the business owner population. The US Hispanic Chamber of Commerce puts the number of Hispanic-owned companies at nearly 3 million.

The poor economy of recent years has added its own wrinkles to the age composition of SBOs. In a May 2012 post on the CEB ECSB Marketing to Small Business Blog, the group noted a rise in “necessity-driven entrepreneurship.” Millennials, also known as Generation Y, have become a “source of significant entrepreneurial activity,” said a November posting, thanks in part to a dearth of available conventional jobs as this generation has entered the labor market. “In fact, today’s Gen Y business owners already comprise one-third of new entrepreneurial activity in the US,” the post added. They’re not just more digitally savvy than older owners, said CEB, they’re also “not hampered by legacy technology. As such, [millennial business owners] are leveraging new technologies in their businesses from the very beginning” and seeking suppliers to help them do so.

There’s also much entrepreneurial activity at the other end of the age spectrum. When an Ad-ology Research survey in October and November 2012 asked SBOs (in companies with fewer than 100 employees) to identify organizations they belonged to, 31.9% cited AARP (formerly the American Association of Retired Persons). Older SBOs include baby boomers who have left regular jobs—voluntarily or otherwise. Realizing their comparative lack of technological acumen, these older SBOs “prefer to outsource IT functions rather than making a do-it-yourself attempt, as many other owners would,” said a September 2012 entry on CEB’s blog.

When SBOs have a corporate background, it affects their approach to entrepreneurship. “I think the sophistication level that comes from the corporate side is a little stronger,” said Dan Gliatta, a partner at Cargo, an ad agency that helps big companies sell to small ones. “They take the same kind of discipline and philosophy from the big-business side and apply it to the small-business side of things.”

Terming these corporate veterans “encore career owners,” Haque said they have a distinctive approach to purchasing for their businesses. “They tend to invest in the best thing they can afford, and the reason is that they understand the long-term cost of ownership a lot better than other owners,” he said.

The Rudiments of Small Companies’ Marketing

It’s evident that marketing is important to small-business owners when they’re asked to say what keeps them awake at night. A May 2012 survey conducted by Constant Contact, which helps small businesses with email marketing and social media, posed that question. The top response—from 76% of respondents—was “how to attract new customers.”

Those late-night anxieties are understandable when one notes the often-limited scope and sophistication of SBOs’ marketing efforts, especially on the digital side. In the Ad-ology survey referenced earlier, a slim majority (53.5%) of SBOs said they spent more than $1,000 on advertising and marketing in the prior 12 months. That dovetails with an analysis that CEB published last July on its blog, which found that the average small company had an annual marketing budget of $1,000.

Though traditional media such as direct mail still claim a majority of small companies’ marketing dollars, digital spending is substantial. A Q3 2012 survey of small and medium-sized businesses (SMBs) by BIA/Kelsey found that they devoted an average of 29% of their marketing budgets to digital media.

Percent of Marketing Budget that Will Be Spent onDigital Media According to US SMBs, Q4 2010-Q3 2012

Q4 2010

29.0%

Q4 2011

26.0%

Q3 2012

29.0%

Note: n=187; in the next 12 monthsSource: BIA/Kelsey, "Local Commerce Monitor Survey: Wave 16" as cited bySearch Engine Land, Oct 1, 2012146571 www.eMarketer.com

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In December 2012 and January 2013, a Borrell Associates survey took a detailed look at the online advertising SMBs planned to invest in during 2013. Ads on Facebook and run-of-site banner ads were the leading categories.

How Many They Are, and Who They Are


% of respondents

Types of Online Advertising on Which US SMBs Planto Spend Money in 2013

Place ads directly with Facebook28%

Run-of-site banner advertising25%

Sponsorships16%

Geo-, behavioral or other targeted display13%

Streaming video ads10%

Display ads with audio9%

Video in online ads8%

Other online advertising and marketing5%

No plans to spend on online advertising42%

Note: n=1,028Source: Borrell Associates, "2013 Local Advertising Outlook: Get Ready forthe Rebound," Jan 8, 2013150258 www.eMarketer.com

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Since SBOs are often anything but digital experts, their choice of channels may reflect personal comfort levels rather than a systematic calculation of return on investment. As a February 2012 report by Street Fight remarked, “Small-business owners tend to favor the platforms they know how to use as consumers.” It’s not surprising, then, that many rely on email as a marketing tool. In the October and November 2012 Ad-ology survey, 26.9% of respondents said email was the medium on which they spend the largest share of their ad budget, putting it just behind direct mail (30.5%) and far ahead of other digital media.

Looking beyond money, overworked SBOs have little choice but to scrimp on time spent on marketing. In a September 2012 survey that MerchantCircle, a division of Reply.com Inc., distributed to its member base of local merchants, fewer than half the respondents (45.1%) reported spending at least five hours per week on marketing. “Time is what they lack the most—more than dollars,” said Mark Schmulen, general manager of social media at Constant Contact.

Oh, Right, a Website!

These days, one would assume even the smallest company would have a website. But this is not the case. Ad-ology found that 68.7% of small businesses had a website—which, of course, means about three in 10 did not. Some abstainers achieve an online presence by having a Facebook page, but it is striking that so many small businesses forgo a website of their own. And even when they do have a site, many small businesses neglect to furnish it with fresh content.

% of respondents

Last Time Their Website Was Updated According to USSmall Businesses, Nov 2012

Within thepast 24 hours11.5%

In the past week20.9%

In the past month23.1%

2-5 months ago17.2%

6-12months ago14.5%

More thana year ago

12.9%

Note: numbers may not add up to 100% due to roundingSource: Ad-ology Research, "Small Business Marketing Forecast 2013,"Jan 15, 2013150496 www.eMarketer.com

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Infrequency of updates is consistent with the limited uses to which many SBOs put their website. Ad-ology found fewer than half of those surveyed (47.8%) used their site to “inform customers of new products, special events or promotions,” and only 28.9% used it to “provide customer support.”

Many small-business websites lack basic information, such as an address or a phone number. In a February 2013 study by vSplash, more than six in 10 did not provide a business address on the homepage.

% of websites studied

Website Homepage Information US Small BusinessWebsites Are Lacking, June 2012 & Feb 2013

No address on homepage56.11%

62.22%

No Google Places presence46.08%

47.46%

No local contact number43.74%

49.35%

No Bing Local presence32.64%

35.40%

June 2012 Feb 2013

Note: businesses with under 5 locationsSource: vSplash, "SMB DigitalScape 2013 US Audit Report," Feb 1, 2013151076 www.eMarketer.com

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Under the circumstances, it’s a good thing many SBOs realize they need help with digital marketing. When Constant Contact asked small-business owners to identify areas where they needed assistance, three in 10 cited their website. Even more mentioned social media and email marketing.



% of respondents

Marketing Activities with Which US Small BusinessesNeed Help, B2C vs. B2B, May 2012

B2C B2B Total

Social media marketing 66% 47% 59%

Email marketing 38% 42% 40%

Website 33% 25% 30%

Online advertising (paid search, etc.) 29% 19% 25%

Online surveys and polls 19% 19% 19%

Public relations 19% 17% 18%

Phone calls (for lead generation, etc.) 12% 23% 16%

Events 16% 9% 13%

Direct mail 11% 12% 11%

In-person interactions 8% 11% 9%

Traditional advertising (print, radio, TV) 9% 9% 9%

Other 4% 8% 5%

Note: n=448 (B2C) and 280 (B2B)Source: Constant Contact, "Constant Contact Small Business Pulse," Aug 3,2012144264 www.eMarketer.com

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Ready to Spend More?

Eager to win new customers, SBOs would likely prefer to boost their marketing budgets, but it’s a wish that will go unfulfilled for many this year. Borrell Associates found just 20% of respondents planned to spend more on marketing this year, slightly exceeding the 16% who planned to spend less.

The proportion of owners who planned to spend more on digital marketing was much higher, though, according to BIA/Kelsey’s polling. Four in 10 respondents intended to boost such spending; fewer than one in 20 expected to reduce it.

% of respondents

Change in Digital Marketing Spending According toUS SMBs, Q3 2012

Increase40.0%

Maintain48.0%

Decrease3.7% Not sure

8.3%

Note: n=300; in the next 12 monthsSource: BIA/Kelsey, "Local Commerce Monitor Survey: Wave 16" as cited bySearch Engine Land, Oct 1, 2012146569 www.eMarketer.com

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Ad-ology’s survey gives one a sense of where owners will increase their digital marketing outlays. As the next chart indicates, websites were the leading target for budget increases.

% of respondents

Change in Online and Mobile Marketing Spending in2013 Among US Small Businesses

Developing/designing company website23.4% 44.7% 8.4% 23.6%

Optimizing website for search engines (SEO)20.5% 42.1% 6.8% 30.5%

Online display/banner advertising6.8% 24.8% 7.6% 60.8%

More About the same Less Don't use

Note: vs. 2012; numbers may not add up to 100% due to roundingSource: Ad-ology Research, "Small Business Marketing Forecast 2013," Jan 15, 2013150497 www.eMarketer.com

Encouraging customers to post comments/reviews19.9% 32.4% 5.2% 42.5%

Email marketing blasts to current clients18.1% 34.6% 5.5% 41.8%

Email marketing blasts to potential clients16.5% 32.2% 5.7% 45.6%

Online video (including advertising and/or production)12.2% 22.7% 6.5% 58.6%

Search engine advertising (like Google AdWords)12.0% 32.5% 6.6% 48.9%

Ecommerce (online store)10.3% 21.5% 5.0% 63.2%

Developing a free mobile/smartphone app7.8% 18.9% 6.0% 67.2%

Mobile advertising or texting5.5% 18.2% 6.8% 69.6%

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What Works for Them

Even as spending rises for digital marketing, many owners of SMBs are skeptical about digital marketing’s worth. In a July 2012 study conducted by Hiscox, the percentage of SMBs who cited word-of-mouth as effective was more than double the number who said the same about social media—79% and 35%, respectively. Bank of America’s October 2012 survey confirmed this outlook: “Small-business owners find that traditional marketing vehicles are more effective than digital marketing,” with word-of-mouth having the biggest constituency.



% of respondents

Tactics that Are Effective for Marketing According toUS Small-Business Owners, April & Oct 2012

Word-of-mouth and customer referrals84%

87%

Networking with other small-business owners55%

49%

Advertising—print, broadcast, radio, etc.43%

41%

Direct mail or email46%

37%

Social media42%

32%

April 2012 Oct 2012


150776

In Constant Contact’s survey, email marketing received the most mentions (83%) when respondents pointed to marketing tactics they found effective. The website was runner-up (71%). Significantly fewer mentioned social media marketing (49%), and only 17% picked online advertising.

Presenting a different mix of choices, Ad-ology found direct mail got the highest effectiveness score; among digital channels, online display/banner ads scored best. Most conspicuous, though, are the large percentages of respondents who said they had never used many of the ad media that they were asked about.

% of respondents

Level of Effectiveness of Select Ad Types in Deliveringthe Message* According to US Small Businesses, Nov 2012

Direct mail13.8% 35.5% 10.6% 40.0%

Very effectiveSomewhat effective

Not effectiveHave never used

Note: numbers may not add up to 100% due to rounding; *to existing and potential clientsSource: Ad-ology Research, "Small Business Marketing Forecast 2013," Jan 15, 2013150500 www.eMarketer.com

Mobile advertising/apps/texting

3.2%

11.5% 7.9% 77.4%

Online/mobile video

4.2%

13.5% 7.9% 74.4%

Daily deals (Groupon, LivingSocial, etc.)

2.4%

8.6% 7.6% 81.3%

Online display/banner ads5.2% 21.0% 11.5% 62.3%

Yellow pages3.9% 24.3% 19.6% 52.2%

150500



The Technology They Bring to Bear

Small-business owners’ modest-at-best digital marketing efforts often reflect a general lack of technological expertise and infrastructure. In a November 2012 poll conducted for office products company Staples, 66% of respondents conceded it was “challenging to keep up with the constant technology changes.”

SBOs are often patching together available technology rather than pursuing a coherent strategy. One manifestation of this is a tendency for companies to rely on employees to use their own laptops, smartphones and other devices—a phenomenon sufficiently widespread to have acquired the acronym BYOD for “bring your own device.”

In January 2013, an article on Intuit Inc.’s small-business blog said BYOD was “poised to become standard practice in the near future.” A survey by CDW in Q3 2012 indicated BYOD had already done so in construction, food services, manufacturing, professional services and retail. Respondents said 89% of employees at their companies “use personally owned mobile devices for work.”

For SBOs, some technologies are must-haves, while others are more optional. A March 2012 survey by Cargo and Inc. Magazine identified a hierarchy of tech importance, with laptop/desktop computers and high-speed internet atop it. Though 64% of respondents said tablets were “important,” just 27% identified them as “very important.”

% of respondents

Technology that Is Important to Their BusinessAccording to US Small-Business Owners, March 2012

Laptop/desktop 98%

High-speed internet 97%

Wireless/mobile communications/smartphones 91%

Office networks 76%

Videoconference/online meetings 72%

Cloud computing 67%

Tablet devices 64%

Centralized sales platform 53%

Source: Inc. Magazine and Cargo, "B-Side Marketing Project," April 17, 2012139435 www.eMarketer.com

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Tight budgets limit the ability of small companies to technologically gear up, but many do intend to upgrade where they can. In a Cbeyond survey among SMBs, 64% intended to increase their technology outlays this year.

“There’s been a fair amount of limping along with technology,” said Alice Bredin, founder and president of B2B agency Bredin

and a small-business advisor to American Express OPEN. But SBOs realize getting technology that makes them more efficient “is a really great expenditure,” she added.

SBOs take pride in the technological steps they do take—a point CEB’s blog emphasized in a June 2012 post. “For example, when asked in interviews about what they view as significant milestones in their business, owners often mention accomplishments such as ‘when we moved to all digital files,’ ‘when we relaunched our website,’ ‘when we made all our systems mobile’ or ‘when we got VoIP.’” Quite apart from the practical benefits SBOs derive from those efforts, “they actually use such investments as markers of success in their business.”


Not Moving Fast to Mobile

Small-business owners see the importance of mobile marketing as more and more consumers acquire mobile devices. But that doesn’t mean SBOs have been quick to make mobile part of their marketing mix.

Owners may have other priorities that take precedence; a survey of SBOs in April 2012 by j2 Global indicated as much. When respondents were asked to rank half a dozen online and offline channels in order of importance to their marketing strategy, mobile had a lackluster showing.

% of respondents

Most Important Marketing Tactics in 2012 Accordingto Small Businesses Worldwide

SEO31% 23% 20% 13% 8% 5%

Social media (e.g., Twitter, Facebook, LinkedIn, etc.)12% 20% 20% 18% 16% 14%

Mobile12% 10% 15% 22% 20% 20%

Direct mail11% 14% 15% 19% 27% 13%

1 (most important) 2 3 4 5 6 (least important)

Note: ranking based on a 6-point scale where 1=most important and6=least important; numbers may not add up to 100% due to roundingSource: j2 Global, "Small Business Opinion Survey," June 26, 2012150743 www.eMarketer.com

Catalog

2%

4% 10% 15% 25% 44%

Email marketing31% 29% 20% 12% 4%

3%

150743

So far, mobile marketing is more the exception than the rule among small businesses. In Ad-ology’s survey, seven in 10 SBOs said they did not use mobile advertising or texting. More vividly, BIA/Kelsey’s Q3 2012 polling found that owners who hadn’t heard of mobile marketing outnumbered those who were using it.

% of respondents

Experience with Mobile Marketing According to USSMBs, Q3 2012

Currently using20.0%

Learned about it;don't use19.3%Heard of it;

don't know much31.0%

Haven't heard of it29.3%

Tried & stopped0.3%

Note: n=300; numbers do not add up to 100% due to roundingSource: BIA/Kelsey, "Local Commerce Monitor Survey: Wave 16" as cited bySearch Engine Land, Oct 1, 2012146573 www.eMarketer.com

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Once having tried mobile marketing, do small businesses stick with it? Not necessarily, according to Borrell Associates’ January 2013 polling. Among owners who had already used mobile in their advertising and marketing efforts, fewer than half (45%) said they were “very likely” to do so in 2013; another 38% were “somewhat likely.”

% of respondents

Likelihood of US SMBs to Incorporate Mobile in TheirAd and Marketing Efforts in 2013

Very likely45%

9%

Somewhat likely38%

28%

Not very likely7%

30%

Not at all likely6%

23%

Don't know/not sure6%

12%

Already used (n=245) Not used (n=757)

Note: numbers may not add up to 100% due to roundingSource: Borrell Associates, "2013 Local Advertising Outlook: Get Ready forthe Rebound," Jan 8, 2013150260 www.eMarketer.com

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Money isn’t always the chief impediment to adoption of mobile marketing. An April 2012 survey conducted by Web.com Group asked SBOs to identify their “biggest hurdle in leveraging mobile marketing.” While 31.4% pointed to “budget,” 35.7% picked “time and resources.”


One way a small company might productively spend some money is on making its website fully functional via mobile; however, that has been something of a rarity so far. In CDW’s Q3 2012 study, 28% of small businesses had a website optimized for mobile. In August 2012, vSplash estimated that just 10% of local businesses with a website “have a fully functioning mobile web presence.”

Trying to Take Advantage of Social Media

Small companies realize consumers are avid users of social media and would like to use it to interact with them. However, many owners have yet to figure out how to make that environment work for their business.

A majority of small companies use social media to some degree. According to the Ad-ology report, more than two-thirds of small businesses used social media as a marketing tool. In Borrell Associates’ polling of SMBs, 79% reported a social presence in Q4 2012, after a steady rise in penetration in recent years.

% of respondents

US SMBs with a Social Network Site or Page, Summer 2010-Q4 2012

Summer2010

45%

Holidays2010

58%

Q12011

64%

Q22011

67%

Q42012

79%

Source: Borrell Associates, "2013 Local Advertising Outlook: Get Ready forthe Rebound," Jan 8, 2013150259 www.eMarketer.com

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Constant Contact’s Schmulen said the tough economy has boosted SBOs’ adoption of social media, “but probably for the wrong reasons. The perception is that social media marketing is free because sites like Facebook, Twitter and LinkedIn enable you to create a page for free, but nothing is really free in this world.” Success on social platforms requires “time and energy—and often money,” he said. Sustained attention would also help, but a January 2013 survey conducted by The Wall Street Journal and Vistage International found just four in 10 SBOs had an employee who was “dedicated to social media campaigns.”

A July 2012 report by SMB Group distinguished between SMBs using social “in an informal, ad hoc manner and those taking a more planned, strategic approach.” It found scant evidence of a trend toward the latter. “More SMBs are using social media, but they lack the solutions, expertise and guidance to integrate them with other business processes and use them more effectively in their businesses,” said Sanjeev Aggarwal, SMB Group’s founder and partner.

Not Moving Fast to Mobile


That helps explain why many are dubious about the effectiveness of social marketing. In Hiscox’s July 2012 polling among SMBs, nearly one in five agreed they “don’t believe social media is useful for promoting their business.” Another quarter either didn’t know if social media was useful or didn’t understand it enough to voice an opinion.

% of respondents

Attitude of US SMBs Toward Using Social Media forTheir Business, July 2012

Actively use social media35%

Don't believe social media is useful for promoting their business19%

Would like to learn how to use social media16%

Don't know if social media is useful for promoting their business14%

Don't understand social media enough to have an opinion10%

Would like to use it but don't have the time7%

Note: numbers may not add up to 100% due to roundingSource: Hiscox, Dec 4, 2012149057 www.eMarketer.com

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Asked to pass judgment on small companies’ performance in social media marketing, Schmulen replied, “The short answer is, most small businesses aren’t doing a great job.” He added, though, that “they’re getting better.”

Mixed Feelings About Facebook

Along with the rest of the world, small businesses are more likely to use Facebook than other social networks. But to use Facebook isn’t necessarily to love it. In an August 2012 poll that Manta distributed to its online community of small businesses, more than four in 10 said they had a Facebook presence and found it “valuable.” But about one-third had such a presence and didn’t find it valuable or had abandoned it for that reason.

% of respondents

US Small Businesses Who Have a Facebook Presence,Aug 2012

Have a Facebook presence and find it valuable42%

Have a presencebut don't find it valuable30%

Don't have a presence23%

No longer do because they saw no value5%

Note: n=623Source: Manta as cited in press release, Sep 12, 2012145415 www.eMarketer.com

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Ad-ology’s study found a somewhat more positive outlook when it asked SBOs whether various social sites helped their business. Facebook scored best: 62.4% of respondents said they found it at least somewhat beneficial. Still, just 24.3% termed it “very beneficial.”

When Facebook introduced Promoted Posts last year, many owners were distressed as they realized that every update they put up on Facebook wasn’t reaching everyone who’d ever “liked” them. The notion of having to pay for wider distribution has been appalling to some, who had come to view free dissemination of their posts as something they could rely on forever.

Spending Some Money, and Some Time

Indeed, one measure of SBOs’ seriousness about social marketing is their willingness to pay for it. It’s telling that while many of MerchantCircle’s respondents were using free social media for their businesses, 74.3% weren’t using any paid social media. And many had little intention of doing so in the near future. Querying those who didn’t already use paid social media, the survey found just one in five “very likely” to do so in the following three to six months.

% of respondents

Likelihood of US SMBs Using Paid Social MediaProducts and Services, Sep 2012

Very likely20.2%

Indifferent37.2%

Very unlikely42.6%

Note: n=2,990 respondents who are not currently using paid social mediaproducts; within the next 3-6 monthsSource: MerchantCircle, "Fall 2012 Merchant Survey," Oct 17, 2012147161 www.eMarketer.com

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Still, there’s enough interest on the part of SBOs to put the sector’s social media spending on a modestly upward trajectory. In an October 2012 survey conducted by VerticalResponse, 22% of respondents said they were increasing their social media marketing budget, compared with 6% who planned to spend less. Ad-ology got similar results on the basic question of spending increases or decreases for social media advertising while gathering more detail on the kinds of social spending that will rise this year.

% of respondents

Change in Social Media Marketing Spending in 2013Among US Small Businesses

Promoted postings or sponsored tweets8.7% 27.5% 7.3% 56.5%

More About the same Less Don't use

Note: vs. 2012; numbers may not add up to 100% due to roundingSource: Ad-ology Research, "Small Business Marketing Forecast 2013," Jan 15, 2013150499 www.eMarketer.com

Social media advertising (Facebook, LinkedIn, etc.)20.5% 47.2% 6.4% 25.9%

Facebook widget/app development7.3% 23.2% 5.4% 64.1%

Reputation management services6.2% 26.9% 5.6% 61.3%

Social media games/contests5.7% 22.1% 6.9% 65.4%

150499

Money aside, effective usage of social media tends to be labor-intensive. Toiling full time on the core activities of their business, small companies often lack the time and energy this entails. That was evident in VerticalResponse’s study. Though spending more time on social media, “many are struggling with the added workload.” About one-third of those surveyed said “they’d rather spend less time on social media.” The majority (57%) spent five hours or less per week on social media.

% of respondents

Weekly Time Spent on Social Media by US SmallBusinesses, Oct 2012

1-5 hours57%

6-10 hours25%

11-20 hours11%

21+hours

7%

Source: VerticalResponse; eMarketer calculations, Nov 1, 2012147649 www.eMarketer.com

147649

And Elsewhere in the Digital Mix …

Beyond basic elements like a website, mobile and social, some small-business owners are including other elements in their digital efforts—with mixed results.

Doubts About Daily Deals

When Groupon propelled “daily deals” into the public consciousness, the phenomenon drew much attention from SBOs. However, many small companies had second thoughts about this by the end of 2012. One gets a sense of the trajectory of sentiment from the headline of a November article in Bloomberg Businessweek: “Small Business and Daily Deals: The Affair is Over.”

When Manta polled SBOs in October 2012, just 3% said daily deal sites had “brought them repeat business.” In addition, an end-of-year roundup by the website Small Business Trends noted a perception by some owners that “most Groupon users are simply bargain hunters who are only there for the deals and won’t come back at regular price.”

Even amid such misgivings, owners have not entirely given up on daily deals. In BIA/Kelsey’s Q3 2012 polling among SMBs, half the respondents were at least somewhat likely to consider participating in such deals in the following six months.

% of total

Likelihood of Participation in a Daily Deal Accordingto US SMBs, Q3 2012

Extremelylikely11.0%

Very likely15.0%

Somewhat likely24.3%

Not very likely23.7%

Not at all likely26.0%

Note: n=300; in the next 6 monthsSource: BIA/Kelsey, "The Outlook for Online Deals," Sep 17, 2012145751 www.eMarketer.com

145751

Seeking an Advantage in Search

Search ought to be a boon for small businesses—giving them widespread visibility while making them conspicuous to consumers who seek goods in a particular location. But they’re having a hard time exploiting search’s potential.

As pay-per-click search has become popular with big companies, small businesses have found themselves struggling to afford the prime keywords. An October 2012 post on Ad-ology’s blog said the rising cost of paid search was even driving some SBOs to redirect marketing money back to old media.



In theory, search engine optimization (SEO) should help small companies get better mileage from the time and money they allot to search, but many small companies lack the expertise this entails. An early 2012 report from World Synergy and Online Marketing Coach certainly gave that impression with its title: “Small Businesses Just Don’t Get SEO.”

The February 2013 vSplash study of SMBs lends statistical support to that view. It found large numbers of these companies’ websites lacked “even basic elements that are commonly employed to add robustness to a website for both the users and search engines.” In some respects, it noted a worsening of the situation since its June 2012 study of the matter. For example, “an alarming 15% more websites are not displaying contact email.”

Small Businesses as Customers

Small businesses are buyers as well as sellers—purchasing everything from trash bags to computers. But they’re tough customers, not least because budgets are tight. And given their travails with leveraging digital media to promote their own businesses, there’s reason to suspect they are picky about receiving marketing messages via digital channels.

Companies hoping to sell to small companies must be aware of the latter’s financial constraints. In Capital One’s “Small Business Barometer” survey in September and October 2012, just 14% of SBOs expected to increase their “business development and investment spending” in the following six months. Meanwhile, a November 2012 polling for the Wells Fargo/Gallup Small Business Index found 34% of SBOs expected to reduce capital spending in the next 12 months.

Much of SBOs’ spending stems from urgent need. “We call it a fix/break mentality,” said CEB’s Haque. “If something breaks, I make a purchase to fix it. … Otherwise, it’s just sort of good enough and I keep using the same,” he added.

Much the same mentality seems to guide SBOs’ relations with suppliers. Partly because they have little spare time for shopping around, SBOs tend to stick with suppliers they already have. “In a given year, only about 7% of small-business owners are going to be switching suppliers,” said Haque, citing CEB research. Asked if this reflects strong loyalties by SBOs, Haque replied, “I don’t know how much of it is loyalty and how much of it is inertia.”

When SBOs do switch vendors, customer service is the chief reason, according to Cargo and Inc. Magazine’s March 2012 survey. Obviously, nobody likes bad service, but it’s an especially sore point for SBOs. As the report explained, “SBOs pride themselves on how they treat customers, so poor customer service from brands/companies is at odds with their own business values.”

Off-Target Marketing

Tight budgets notwithstanding, SBOs would likely be more inclined to open their wallets if the marketing aimed at them struck a responsive chord—but it often does not. In Cargo and Inc. Magazine’s polling, about half of the respondents said companies didn’t market to them effectively. Many had more specific critiques, including a charge that companies “do not make the effort to understand their business.”

And Elsewhere in the Digital Mix …


% of respondents

Attitudes of US Small-Business Owners TowardCompanies/Brands Trying to Market to Them, March 2012

Companies do not market to them effectively52%

Companies are trying to sell to me vs. talk to me46%

Companies do not make the effort to understand their business45%

Companies do not understand their needs43%

Source: Inc. Magazine and Cargo, "B-Side Marketing Project," April 17, 2012139433 www.eMarketer.com

139433

The report of these findings emphasizes “the degree to which companies fail to reach small-business owners on a personal level”—a severe lapse when one considers how personally SBOs take their business.

In buying things, owners aren’t tapping a line in an institutional budget. “When they spend money for their business, it’s like pulling money right out of their own pocketbook,” said Schmulen. Thus, it’s crucial for marketers to convince a small-business owner that a product or service isn’t merely good in the abstract but is good for that person’s specific business. As Gliatta said of SBOs, “They’re constantly asking the question, ‘What’s in it for me?’” Moreover, a big company can’t take what’s essentially a consumer-oriented sales pitch and merely plop the phrase “small business” into it, said Bredin. “That’s probably the biggest mistake we see.”

A November post on CEB’s blog stressed that marketers of services must persuade owners they need outside help. “The problem is, business owners are do-it-yourselfers at heart,” it said. Outside vendors must point out the shortcomings of the DIY approach—whether in terms of subpar results or simply the distraction such efforts create from an owner’s core activities.

But, while big companies may assume they’re indispensable to the small fry, the latter don’t see it that way. In Bank of America’s October polling, just 17% of SBOs agreed that large companies “provide services that are critical to my business operations.”

% of respondents

Attitude of US Small-Business Owners Toward LargeBusinesses, Oct 2012

Motivate me to be a better small-business owner31%

Can be good customers for my business27%

Provide services that are critical to my business operations17%

Are my biggest competitor17%


150745

Manta’s Llewellyn suggested using a case-study approach to convince SBOs a purchase will pay off for them. “If a vendor can say, ‘This new piece of XYZ technology helps this person sell three times the amount of widgets in half the time, and it only took them a week to get it up and running,’ that’s incredibly valuable.”

Whatever the content of their message, marketers shouldn’t over-rely on digital channels to deliver it to an SBO audience. “It’s tempting to just do digital marketing,” said Bredin, “but we still find you can have great success with direct mail and other means.”

Their Digital Preferences as Shoppers

Like every other kind of marketing, business-to-small-business marketing is increasingly digital. But SBOs are apt to be more receptive to some forms of this than to others. In the Bredin study, product descriptions on a vendor’s website scored best among SBOs seeking information on new products and services (68%). SBOs’ own digital searches for information were a close runner-up (67.1%), and email newsletters also had a high favorable score (62.7%).



% of respondents in each group

Favorable Online Tactics for Learning About NewProducts/Services According to US Small-BusinessPrincipals, 2011 & 2012

Vendor's website: product descriptions

Search (e.g., Bing, Google, Yahoo!)

Email newsletters

Vendor's website: resource center

Emails with offers (excluding newsletters)

Facebook

Videos

Google+

Webinars/webcasts

Blogs

Banner ads/ads on sites

LinkedIn

White papers

YouTube

Twitter

Ebooks

Forum or chat room

Audio podcasts

2011

-

68.6%

45.4%

52.6%

31.2%

35.7%

37.1%

-

43.7%

33.1%

27.4%

36.7%

34.8%

-

24.9%

-

24.1%

19.5%

2012

68.0%

67.1%

62.7%

59.9%

58.3%

55.6%

54.6%

50.5%

49.3%

49.0%

47.9%

47.8%

47.1%

47.0%

46.7%

44.2%

41.6%

40.7%

Note: 2011 n=309; 2012 n=308; top-2 box responsesSource: Bredin, "Marketing to SMBs in 2013," Jan 22, 2013151085 www.eMarketer.com

151085

SBOs will look more kindly on companies that provide them with useful information than companies that plainly just want to sell them things. As Llewellyn put it, “That big marketer can’t be in sell mode all the time. They [sometimes] need to be in trusted-advisor mode.” The Bredin polling found many SBOs were receptive to online content that helps them figure out how to operate their business.

% of respondents in each group

US Small-Business Principals' Opinions AboutBusiness Management Tips on Vendor Sites, 2011 & 2012

More likely to explore a vendor's site if it has businessmanagement tips and advice

41.1%

58.5%

More likely to think favorably of a vendor site if it has businessmanagement tips and advice

41.0%

58.1%

More likely to visit a vendor's site if it has business managementtips and advice

38.9%

58.6%

More likely to buy from a vendor site that has businessmanagement tips and advice

32.2%

54.5%

2011 2012

Note: 2011 n=309; 2012 n=302; top-2 box responsesSource: Bredin, "Marketing to SMBs in 2013," Jan 22, 2013151090 www.eMarketer.com

151090

Of course, SBOs turn to outside sources of information as well—partly by digital means. “I think small-business owners are becoming much more discerning,” said Schmulen. “They’re asking other people what they think, they’re going to ratings and reviews and social media sites to find out what people think about it.”



Conclusions

SBOs are more diverse than the traditional B2B audience at big corporations. Recent years have seen an influx of women, immigrants and millennials, as well as refugees from the corporate world.

SBOs bring limited resources and expertise to their marketing efforts. Budgets are low, and SBOs are often their own chief marketing officer. Busy with the core activities of their business, they can’t devote a lot of time to marketing.

Nor do many SBOs have the time or money to master the latest technologies—or even some of the not-so-latest. Many small companies don’t have a website. When they do have one, it may be updated infrequently or lack basic information. While SBOs know their customers are attached to social media and mobile devices, they often struggle to use those channels effectively.

SBOs take a dim view of the marketing aimed at them. They feel the companies trying to sell them things make little effort to understand their needs. But they do appreciate it when a potential supplier uses its digital resources to provide small companies with helpful information.

eMarketer Interviews

B2B Perspective: How Should Vendors Approach Small Businesses?

Alice Bredin Founder and President

Bredin Interview conducted on January 24, 2013

B2B Perspective: No One-Size-Fits-All Social Solution for Small Businesses

Dan Gliatta Partner

Cargo Interview conducted on January 9, 2013

B2B Perspective: A Social Network Geared to Small Business

Doug Llewellyn Vice President, Business and Corporate Development

Manta Interview conducted on January 29, 2013

B2B Perspective: On Social Networks, Do a Soft Sell

Mark Schmulen General Manager of Social Media

Constant Contact Interview conducted on January 14, 2013

Nauman Haque Research Director

Enterprise Council on Small Business at The Corporate Executive Board Co.

Interview conducted on January 10, 2013

http://totalaccess.emarketer.com/Interview.aspx?R=6000973





Related Links

Ad-ology Research American Express OPEN Forum BIA/Kelsey Borrell Associates Bredin Cargo CDW CEB Enterprise Council on Small Business Constant Contact j2 Global Manta MerchantCircle Small Business Trends SMB Group SMB DigitalScape VerticalResponse vSplashWeb.com Group

Editorial and Production Contributors

Nicole Perrin Associate Editorial DirectorCliff Annicelli Senior Copy EditorEmily Adler Copy EditorDana Hill Director of ProductionJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistAllie Smith Director of Charts

http://www.ad-ology.com/

http://www.openforum.com/

http://www.biakelsey.com/

http://www.borrellassociates.com/

http://www.bredin.com/

http://thinkcargo.com/

http://www.cdw.com/small-business.aspx

http://www.executiveboard.com/exbd/marketing-communications/marketing-to-small-medium-businesses/index.page

http://search.constantcontact.com/index.jsp

http://www.web.com/landing/websitebuilder.aspx?trkid=semrznr3zw&promo=bsl1m495

http://www.j2global.com/

http://www.manta.com/

http://www.merchantcircle.com/

http://smallbiztrends.com/

http://www.smb-gr.com/

http://www.smbdigitalscape.com/

http://www.verticalresponse.com/

http://www.vsplash.com/

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