Retail SMBs are more poised than their counterparts in other verticals to adopt sophisticated digital advertising and marketing. This is clearly shown by BIA/Kelsey’s Local Commerce Monitor ™ (Wave 18) survey of small businesses.

Retail SMBs are already highly oriented to digital media, with plans to spend 43 percent of their total ad budget on digital media in the next 12 months*. They rank social media marketing, SEM/SEO and email marketing as their top priorities for advertising and promotion in the next 12 months*.

There are multiple signals in the LCM data that we think point to big expansion into digital by Retail SMBs:

— They’re experienced in maintaining customer lists, with 71 percent having maintained a customer list for over a year. With 61 percent of their customer lists  in digital form, they’re well positioned to move into marketing automation services like CRM (where they’re still at a low utilization level of 21 percent).

— They’re big users of ecommerce, with 90 percent reporting ecommerce sales.

— They’re highly satisfied with the mobile advertising they’ve done so far, reporting high ROIs — although usage of mobile advertising and marketing is still modest.

— They’re big on customer loyalty programs, which are used by 43 percent of SMB retailers. Since only 30 percent of these programs have been digitized, we believe this too represents another growth opportunity.

— They’ve registered an interest in many advertising and marketing services, particularly ecommerce services, online satisfaction surveys, email marketing, and online leads management.

In sum, we believe local retailers will be upping their digital game on multiple fronts in the near term. Since they’re such a staple of their communities, this shift will reinforce the broad and rapid digitization of daily life.

*The 12 month period following the Local Commerce Monitor Wave 18 survey, conduced in Q3, 2014.

These were a few of the top-level findings of the latest cut of LCM 18, focusing on SMBs in the Retail vertical. Clients of BIA/Kelsey can access this report through our client portal. The report is also available for purchase, and more information on the LCM survey is here.

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Not only are SMBs in the Professional Services vertical heavy users of Social Media for advertising and promotion, they are highly engaged on social media, according to LCM. 3/4 reported that they track “likes” in social media, while 57.4% monitor customer comments online.

There is a big opportunity with this group to offer CRM solutions because Professional Services SMBs stay connected with their customers but only 20% say they use a CRM system. 88.0% have maintained a customer list for a year or more, while an additional 6.4% have maintained a customer list for less than a year.

The full report can be viewed and downloaded by clients of BIA/Kelsey here. This report is one of a series of drill-down reports on the findings from Wave 18 of BIA/Kelsey’s Local Commerce Monitor? survey. In the coming weeks we will be looking at SMBs by additional vertical categories. Our Home and Trade Services SMB report is already available. To learn more about our LCM survey of small and medium-sized businesses, click here.

Click here to purchase the Professional Services SMBs — LCM Wave 18. To purchase any of our other Local Commerce Monitor drill-down reports, check out our new BIA/Kelsey Shop.

*Professional Services vertical includes consulting, legal, architecture, and computer software. Financial Services SMBs are not included, but will be profiled in their own vertical report.

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The current round has been led by led by Georgian Partners along with Spark Capital, OpenView Venture Partners, Scout Ventures and Jason Calacanis’ Launch Fund. The company has raised $36.5 Million since its founding in mid-2010. Earlier funders included Google Ventures.

Signpost’s evolution has been a dramatic one, fully reflecting the changes in local online marketing. The company launched as a provider of sales agents for local SMB deals, then evolved into an SMB-oriented SAAS company with offices in New York, Austin and Denver. In its case, deals gave way to a broad range of marketing services, including analytics, marketing automation, loyalty marketing, referrals and review acquistion.

The company now serves over 10,000 customers, and says it is eyeing a large customer set of six million very small businesses with 2-10 employees. Most of these have not previously had access to CRM and are unlikely to subscribe to pricey CRM tools such as Salesforce. Monthly fees are around $189.

The inclusion of financial transaction information provided by a third party is something that is increasingly being added to marketing services. Google, ForwardLine and others similarly incorporate financial transaction information.

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As GoDaddy reportedly prepares for a $4.5 Billion IPO, the company has increasingly focused on leveraging and upselling its 12 million worldwide members with a set of comprehensive solutions. At BIA/Kelsey’s Leading in Local: Interactive Local Media event at San Francisco Airport, SVP Raj Mukherjee noted that the company is delivering on a new vision statement: “Empowering people to easily start, confidently grow and successfully run their own ventures.”

Mukherjee said GoDaddy is servicing its customers in three core ties: “basic identity,” “advantage identity,” and “marketing and back office.”

“Advantage identity” includes hosting and security, do it yourself websites, online stores and listings. “Marketing and back office” includes Domain specific email; Office 365; email marketing; invoicing and bookkeeping.

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As GoDaddy reportedly prepares for a $4.5 Billion IPO, the company has increasingly focused on leveraging and upselling its 12 million worldwide members with a set of comprehensive solutions. At BIA/Kelsey’s Leading in Local: Interactive Local Media event at San Francisco Airport, SVP Raj Mukherjee noted that the company is delivering on a new vision statement: “Empowering people to easily start, confidently grow and successfully run their own ventures.”

Mukherjee said GoDaddy is servicing its customers in three core ties: “basic identity,” “advantage identity,” and “marketing and back office.”

“Advantage identity” includes hosting and security, do it yourself websites, online stores and listings. “Marketing and back office” includes Domain specific email; Office 365; email marketing; invoicing and bookkeeping.

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Marketers have lots of disparate information about the consumers they are targeting, but if they don’t put it together in a consumer friendly way, it quickly becomes an off-putting “Creepy Valley of Local Marketing” that is counter productive, said Salesforce VP Randy Wootton in a keynote address at BIA/Kelsey’s Interactive Local Media event at San Francisco Airport.

Citing GoDaddy’s Blake Irving for inventing the “Creepy Valley” moniker, Wootton noted that “where it gets weird is when there are things that target you” and are really not consistent with good Customer Relationship management principles. It becomes especially worrisome in a mobile environment where there are no barriers.

The solution? Provide all services in the cloud, where several layers of services can be easily mediated. “The cloud is the democratization of the marketing world — although local marketers aren’t taking advantage of it yet. When you cross the creepy valley, you have a different relationship with your customers,” says Wootton.

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Marketers have lots of disparate information about the consumers they are targeting, but if they don’t put it together in a consumer friendly way, it quickly becomes an off-putting “Creepy Valley of Local Marketing” that is counter productive, said Salesforce VP Randy Wootton in a keynote address at BIA/Kelsey’s Interactive Local Media event at San Francisco Airport.

Citing GoDaddy’s Blake Irving for inventing the “Creepy Valley” moniker, Wootton noted that “where it gets weird is when there are things that target you” and are really not consistent with good Customer Relationship management principles. It becomes especially worrisome in a mobile environment where there are no barriers.

The solution? Provide all services in the cloud, where several layers of services can be easily mediated. “The cloud is the democratization of the marketing world — although local marketers aren’t taking advantage of it yet. When you cross the creepy valley, you have a different relationship with your customers,” says Wootton.

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The company may break $100 million in annual revenues this year, and is not yet profitable (which may — or may not — matter to tech investors).

Zendesk has a CRM product suite that is particularly appropriate to SMBs. Their suite is a cloud-based CRM platform that runs off extensive inputs from social media. Their suite is action-oriented, designed to help SMBs dialog and engage with their customers. So, here we have the new model for CRM for SMBs: Cloud-based, fueled by social media, bi-directional communications (consumer, SMB).

They’re also using a new approach to pricing plans. Their starter plan is $1 per seat/month.  Although this is close to a true “freemium” model, it is NOT freemium — there’s an actual cost incurred, even if it’s only nominal (at first).

Zendesk is betting this pricing model will produce superior results, net, than a “free” or “fremium” model.

— Scenario A: A customer starts with a free version of a product. Soon enough, the vendor tries to upsell that customer into a paying product. But the customer sees the product as inherently “free,” and is resistant to moving to a paying model. (We saw a lot of this in the early days of Internet Yellow Pages).

— Scenario B: A customer starts with a product version that has a nominal cost — $1 per seat/month. Although there isn’t much difference between $0 and $1 in economic terms, PYSCHOLOGICALLY there’s a big difference. Putting a price on the starter package, even a nominal one, establishes the concept in the SMB’s head that this is not a free service — there’s tangible economic value to it.

Their bet with this pricing model is that it’s easier to move a customer from $1 per seat/month to a meaningful price than it is to move a customer from free to a meaningful price.

In any case, Zendesk has put several business model elements together in a creative way with their CRM offering for SMBs. The ways of Zendesk bear watching. Mindfully, of course.

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A central theme emerged this morning at SMB Digital Marketing. It began in the Focus on Profits session, where former BIA/Kelsey analyst and current Yellowbot CEO Matt Booth declared, “In ten years, this conference will be all about software and services.”

Matt’s point was simple. Selling advertising to local SMBs is a tough business. Renewals are getting harder and competition is fierce. Selling cloud based services (presence management, CRM, reputation management) offers the opportunity for that coveted “lock in” that ensures a long-term high-value customer relationship because the SMB depends on your service to manage its business. Think Demand Force or Open Table.

“I couldn’t agree more with Matt that it will all be in SaaS in the future,” said ReachLocal President Nathan Hanks during his keynote presentation following the Focus on Profits panel.

Hanks took Booth’s prediction a step further by predicting the move to a SMB marketplace built around SaaS is closer to five years away. The big opportunity is in marketing automation, and ReachLocal is moving aggressively in this direction.

Part of Hanks’ thesis is that the purchasing process for local merchants is broken.

“It is not fun to do all you have to do to get and keep customers today,” he said. Sifting through the entire basket of point solutions and providers, getting leads, following up, and fulfilling orders adds up to a draining process.

Software is going to dominate local because it makes life better for the merchant. “Software is the answer for what ails us in local, and for what takes us to the next level.”

No doubt a large sales force is an asset. However, it is not a requirement for success in local, particularly as the local space moves toward more of a data- and software-driven paradigm. Hubspot, Hanks points out, uses technology to bring in leads, and sales to close the leads. “You don’t to have to have a big sales force to win in where local is going,” Hanks said.

Hanks leads a company that will drive about $500 million in revenue this year, with 2,000 employees and 23,700 active advertisers. Hanks replaced Reach’s CEO and co-founder, Zorik Gordon as keynoter. Gordon resigned last week, for reasons that were not immediately disclosed. The company did reaffirm guidance for the year, in an effort to reassure investors that Gordon’s departure wasn’t tied to the company’s performance.

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Maybe it’s not my glasses. In fact, all those straight lines with hard edges are quickly disappearing. Technology is making everything that was simple much more confusing. Luckily, for all the analysts at BIA/Kelsey, we have the privilege of spending our entire work days bringing sense and clarity to this rapidly changing local commerce space.

For instance, a couple of years ago I went out and suggested the notion of the three Ps — “Presence,” “Performance” and “Permanence.” I spoke of these three buckets at the YPA (now LSA) annual convention in San Diego in 2009.

We’ve now evolved this construct to “Media,” “Commerce” and “Engagement” — the three pillars of local commerce. Media is what you’d expect — advertising and promotional messages necessary to drive both awareness and action. Commerce is the conversion of those messages into customers, clients and patients (if you are a medically oriented SMB). And Engagement is the process of retaining and engaging those customers as they move from one-time customers to long-time fans.

These buckets of activity are becoming more and more solved by cloud-based solutions — nearly anyone and everyone figures he or she can get a piece of the action. Consequently, it is not surprising to watch transactional companies such as American Express nibble around the edges of advertising and marketing solutions. Nor will we be surprised when companies such as AT&T Interactive begin to solve the riddle of social media, marketing and engagement by offering easy-to-use solutions for the millions of U.S. merchants struggling to make sense of — and money in — the new marketplace.

Which brings me to the “rimshot” of the day. BlackBerry maker Research in Motion, the longtime mobile business phone leader, suffered a 20 percent decline in its market valuation Friday. In just three years, the company has plummeted from a lofty $150 a share and a $90B market valuation to a skimpy $30 a share and a $18B market valuation. It makes one think — as one of RIM’s largest investors has suggested — that RIM cannot adopt and adapt fast enough to keep pace with the relentlessly aggressive product initiatives driving consumers to the iPhone and to Android devices. At this point, it appears that RIM missed the boat, like Palm did, when it tried to milk its way to success while Apple and Google chose to break the existing model.

As companies in the local commerce space ponder their strategic direction in the coming months and years, the fate of their company and their competitors will ride heavily on the ability to transform — not just evolve and nibble on the edges. It likely won’t be enough to dabble in adjacent markets or products or service. It won’t be enough to tinker with the business model. It won’t be enough to hope that the marketplace stands still just long enough to get out and with a hefty retirement in place. Indeed, technology is altering the competitive landscape and the dimensions of the marketplace like never before.

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