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Why Aren’t Small Business Owners Taking Advantage of Online Marketing?



469994_antique_storeAs I travel around the web each day, I see a variety of ads. Many of them are banner ads reminding me of the effectiveness of cookie based technology. (Hey, look at that ad for Old Navy, I was just on their site this morning. What a coincidence.) Then there are the Facebook ads which I hardly notice and when I do, I find them irrelevant. Also the search results I see in Google (now that’s effective advertising) and the emails and social media updates I get from companies I follow.

That’s a lot of advertising and some of it is working because I’ve been known to click and buy things. But when I think about it, I realize that almost all of the ads I see in a day are for big companies and brand names. The last time I saw an ad for a local store it came out of a Val-Pak envelope.

Small businesses generate half of all sales in the United States but they’re barely a blip on the Internet radar. Why is that?

The Boston Consulting Group surveyed 550 small business owners and found that only 3% of their ad budget is spent online. The overwhelming majority of their money is going to coupon mailers like Val-Pak, the Sunday paper and other types of traditional marketing.

Here’s how that looks in comparison to big business:

Unlocking-Digital-Potential-ex1_large_tcm80-130063

I’m not sure that 550 small businesses is a large enough sampling but I don’t doubt the general result. You simply don’t see a lot of small business ads online. Why is that?

Partly, it has to be about habit. So many small businesses are family run, generation after generation, so they follow the same path year after year. The problem is, what worked in 1980 won’t necessarily work in 2013. In 1980, a small hair salon could reel them in with a bold listing in the Yellow Pages. To get that same amount of traffic today, that salon owner is going to have to be a little more creative.

I also think that online advertising is too confusing, leading many people to give up before they start. I’m not saying small business owners can’t handle it, but think about what’s involved in running a proper Adwords campaign or setting up Facebook advertising. The Yellow Pages had a salesman who would come  over and walk you through your options (maybe they still do?). Who does that online?

For the small business owner, it’s all about ROE – Return on Effort. They already have their hands full with the day to day running of their business, so there’s little time left over for anything else. If all a person has to do is say “run it again” when the newspaper calls about their ad, that beats the hours it will take to learn about Promoted Tweets on Twitter.

Which brings me to the biggest problem of all – a lot of online options are simply too expensive for a small business. You could argue that they’ll make it back in trade, just don’t say that to the people who ended up losing money on Groupon coupons.

There are affordable, suitable online options for all kinds of small businesses but until they become as common as direct mail and newspaper advertising, small businesses are going to keep paying for physical rather than digital.

Photo Source: G-MO

  • http://www.grahamjones.co.uk/ grahamjones

    You make an excellent point about Return on Effort. It is just easy for hard-pressed small business owners to sign up for traditional media advertising. It is what they know, it doesn’t mean they have to learn anything new and it isn’t “technical”. Online advertising, however, means they have to learn technical language in many instances because advertising firms assume too much knowledge. They also have to consider things, such as pathways and landing pages, none of which they have to do very much with their traditional media work. So, online advertising takes effort. For big firms they can train and employ specialist staff to do this – plus they can afford to set up online campaigns with dedicated landing pages and so on. For many small businesses its as much as they can do to set up and afford a brochure-style website.

    But there is a flaw in the study itself. It is looking at advertising. Advertising is a significant tool for big businesses who by their very nature are more distant from their customers and therefore need to reach them in this way. In addition, many big firms only advertise because their competitors do it. It’s about branding, image and so on, much more than direct sales. But small businesses tend to sell most through relationships with customers. They know them, they speak with them regularly and therefore don’t really need to advertise that much in many instances. As a result, the research itself is not comparing like with like. It raises issues for the advertising industry more than it does for small businesses – the industry is clearly failing to provide something which small businesses feel is worthwhile.

    • http://www.facebook.com/cynthia.boris Cynthia Boris

      Good point about landing pages. If you run a small cafe you might not even have a web page – you should, but statistically we know there are a lot of SMBs who don’t. As for the flaw in the data – I think the data makes your point in its own way. I imagine McDonalds buys promoted tweets to keep up brand awareness, not to drive traffic to a location on Tuesday. But that’s the magic of mobile advertising – a small business can use an ad to do just that.

      Thanks for the insightful comment.

    • http://www.swiss-putzfrauen.ch/ putzi

      Thanks for the insightful comment.
      ___________________________
      putzfrau zürich

  • casing leak

    Indeed SME’s do not make a lot of ads,I won’t repeat what grahamjones said in his comment but there is another fact. Currently I am enrolled in Mater 2 International Affairs and SME’s and I can say that SME’s doesn’t always have enough ressources ( humain or financial ) also the technologie is runing so fast that an SME can not afford paying a training for her employee unlike the big companies.

  • http://www.facebook.com/profile.php?id=100004604856503 Facebook User

    Excellent point. It really does come down to lack of education and resources. I couldn’t agree more.

    I believe it’s going to take an extremely simple and FREE service to get small businesses marketing online. We held our own survey. In the end, it was apparent, there is no innovation for small businesses. This is a huge problem. More than 36 million businesses in the US and only a small percent actively advertising online. Something is wrong, we believe we have the answer.

  • CiteAds

    Excellent point. It really does come down to lack of education and resources. I couldn’t agree more.

    I believe it’s going to take an extremely simple and FREE service to get small businesses marketing online. We held our own survey. In the end, it was apparent, there is no innovation for small businesses. This is a huge problem. More than 36 million businesses in the US and only a small percent actively advertising online. Something is wrong, we believe we have the answer.

  • Guest

    Why be so quick to take the BCG study at face value? BCG
    itself says: “The findings also stand in contrast to numerous surveys
    showing that a sizable percentage of small businesses promote themselves widely
    online…” So BCG is the only research company that got it right, with
    dramatically different results? If we’re talking anecdotal evidence, I’ve been
    helping small businesses with online advertising/marketing for more than a
    decade. For most clients, online is the largest chunk of their ad spend. Now
    there is a difference between location-based service businesses and
    non-location based small “retail” businesses. Concerning the latter,
    is it any different than in the non-virtual world? The local service businesses
    are a different matter; “local” is huge online. Run a Google search
    on just about any type of local business with a location and you usually find
    Google’s AdWords inventory used up. And they’ve got websites and social media
    pages. Small businesses love online precisely because they’ve got to be careful
    with their marketing budget. Local businesses love online because it’s so
    measurable and accountable.

  • http://twitter.com/ReviewPROXY Review PROXY

    Why be so quick to take the BCG study at face value? BCG itself says: “The findings also stand in contrast to numerous surveys showing that a sizable percentage of small businesses promote themselves widely online…” So BCG is the only research company that got it right, with dramatically different results? If we’re talking anecdotal evidence, I’ve been helping small businesses with online advertising/marketing for more than a decade. For most clients, online is the largest chunk of their ad spend. Now there is a difference between location-based service businesses and non-location based small “retail” businesses. Concerning the latter, is it any different than in the non-virtual world? The local service businesses are a different matter; “local” is huge online. Run a Google search on just about any type of local business with a location and you usually find Google’s AdWords inventory used up. And they’ve got websites and social media pages. Small businesses love online precisely because they’ve got to be careful with their marketing budget. Local business love online because its so measurable and accountable.

  • http://twitter.com/Finder411 Finder411

    Great article and while I can’t speak to the study as much as I can my own experience in calling on small businesses to introduce our new startup Finder411, I can say that consumers are tired of online advertising and are paying less and less attention to what they consider to be spam. Facebook is a GREAT example. People are more apt to find out and use a small business, regardless of type, when they know a friend or part of their online social circle has used and endorsed it. This is why you see sites like Airbnb.com popping up, because that social integration makes the path to entry so much easier when you have folks you know online using something that your considering. The trust factor is implicit. Users want an engaging and entertaining online experience, not a bunch of directory listings and staple info web pages. Once more small businesses consider what their consumers want and where they are – those who are and do – with survive & thrive.

  • https://www.youtube.com/user/Gcoolgroup Extreme Sports Videos

    Real good info

  • http://www.shellyannroper.com/ Shelly-Ann Roper

    Interesting post. Just yesterday I read a post saying that small businesses were really tired of online marketing due to its ineffectiveness. They created their social media accounts; wrote their blogs; tweeted, posted and plussed them with no engagement from readers. The post stated that content quality was the major problem. Many of the content just failed to connect and that’s the discrepancies that small businesses face. They are taking their offline approach to marketing and applying it to the internet, which is an entirely different realm. From my marketing perspective, I am saddened how challenging small businesses find this process. And it is really challenging: To constantly find content to keep readers interested is tough, esp against all the competition that floats around on here. But with careful planning and perseverance, small businesses should be OK. Quitting is just not a solution but simply to find a creative way to give value (not just their product or service) to reader in connecting way.

  • http://www.webmarketingquote.com/ Jamila Blue

    I think one of the main reason why small businesses are afraid to thread the internet marketing world is that they know less about the terms and processes. Just like a job you keep on doing all the time and you feel like you’re so productive in there that it becomes your comfort zone. Internet marketer should have an aggressive campaign in explaining SEO and social media in simple terms that they can easily understand. Hope my post could help – http://bit.ly/11f6M23

  • Terra Hoskins

    I know. I can’t tell you how many people ask, “what’s that?” when I say I’m an Internet marketer. I’ll blow their minds if I tell them I really do inbound marketing. To Shelly-Ann’s point, it’s saddening. (sad and maddening). This industry has been changing at light speed…it takes more than just social media to make a measurable difference, and we’ve all struggled to figure out what works and why. I think inbound is the right idea, because it plays into the customer’s buying cycle in a holistic way. But it is difficult to explain and get buy in.

    It feels like I’m witnessing the circle of life or something. Five years ago, communications departments were just gutted. As a writer, I couldn’t find work to save my life. Now everyone’s struggling with writing, but many devalue the skill and don’t want to pay for it. I use this example a lot: I know a small business owner who can trace $1 million in sales back to one blog post. It’s worth the effort, but yes: it is effort.

  • http://www.elitestrategicbusinesssolutions.com/ Reputation Management

    I would like to ask the opinion of everyone in the community if online services is preferable for small business owners.