Franchises use more targeted marketing and advertising, are more engaged with their customers, and are also more disciplined across the full range of activities required in reaching and serving customers. They use more marketing tools and platforms, loyalty programs, mobile marketing, social media, cloud platforms, etc.

In particular, franchises are well ahead of other SMBs in their use of personalized, targeted digital media and platforms including Pinterest, mobile coupons and deals, text messages, Twitter ads, etc. Looking at the media usage findings from LCM is like looking into a new media laboratory (look out, MIT!).

Franchises estimate that about one-half of all their sales in the next 12 months will be through discount programs. This arrestingly-high reading is actually consistent with other behaviors of franchises — such as their near-saturation use of loyalty programs (and the personalized, targeted media mentioned above). Franchises are building close and deep relationships with their customers, and they’re accomplishing this by using a host of digital media and platforms.

The bottom line: Franchises might be viewed as a vanguard — showing us where the rest of the SMB world is heading.

Clients of the BIA/Kelsey Advisory Services can find the full report here.

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To be certain, the 2-9 employee bracket is quite interesting because it often represents a stage of development in which the SMB is deciding what it wants to be when it grows up, so to speak. This is a point at which some SMBs decide they’ll style themselves as a “lifestyle” business, and won’t focus on growth as much as on providing a high-quality lifestyle for the owner. On the other hand, other SMBs will decide to adopt a growth trajectory to become a significant player in their niche.

This “pre-teen” period for many of the SMBs in the 2-9 employee bracket poses unique challenges — and rewards — for service providers. For example:

– These SMBs use a fairly broad mix of media, and are applying increasingly-sophisticated analytics to assess media performance and make budget allocation decisions. Accordingly, they’re probably receptive to tools and platforms to grow their analytic capabilities.

– Over the next 12 months, 43.6 percent rate SEM/SEO as a “very high” or “extremely high” priority, suggesting they may be open to various tools (and learning) to master these activities.

– Email marketing also ranks fairly high both as a medium currently being used, and as a priority, again suggesting this may be a product area with a lot of interest for SMBs in this size bracket.

In sum, for many SMBs in the 2-9 employee bracket, this is the stage at which long-term relationships are formed — with media, products, platforms, channels and vendors. An important segment to pay attention to!

Clients of the BIA/Kelsey Advisory Services can find the full 2-9 employee spotlight report 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 of small-and-medium businesses. In the coming weeks we will be looking at even larger SMBs with between 10-99 employees, new SMBs, established and growing SMBs, and more. To learn more about our LCM survey, click here.

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According to the survey, more than half of these VSBs chose to “do it myself” when purchasing online advertising, while only 24 percent chose any kind of paid assistance with “do it with me” or “do it for me” options. Still VSBs do remain open to managed services. LCM Wave 18 reveals that VSBs who use a third party (12.5 percent) pay an average $661 a year on maintaining and operating their online properties.

Economic necessity is one key reason behind the do-it-yourself nature of VSBs. More than 68 percent of the VSB respondents in our survey reported annual revenue of less than $100,000. While their average annual advertising budget is $4,252, four out of the five most popular channels used for advertising (Facebook pages, LinkedIn, websites and email marketing) are offered free or have low cost options.

Other business services that VSBs report they “DIY” include tracking sources of leads and monitoring customer comments. Opportunities exist with this group for low cost solutions (DIY or managed) for communicating with their customers and managing their leads/customer lists. Email marketing and online satisfaction surveys ranked high among advertising services they were considering using in 2015.

The VSB report released today is just the first peek into our LCM data by number of employees at SMBs. In the coming weeks we will be looking at mid-sized SMBs with under 10 employees, and even larger SMBs with between 10-99 employees.

Clients of the BIA/Kelsey Advisory Services can find the full Very Small Businesses spotlight report here. To learn more about our LCM survey, click here.

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Home and Trade Services SMBs report their most popular channels to use are from traditional media: newspapers, print yellow pages and direct mail. Digital is also part of the Top 5 most used with Facebook pages and a website rounding it out. Given the vertical’s heavy reliance on traditional media, there’s an opportunity for traditional media players to bundle digital media to their offerings.

Home and Trade Services is the only vertical industry in our study with print yellow pages among the Top 5 media used for advertising and promotion, and was only in the Top 10 of one other vertical — Professional Services. Print yellow pages also had the highest return on investment (ROI) of the top three traditional media — with nearly 28% saying that their ROI on print yellow pages was either excellent (10-19x) or extraordinary (over 20x) spend.

SMBs in the Home and Trade Vertical had an average annual advertising spend of $12,573 in Wave 18 (Q3/2014), down from $19,238 in the previous wave (Q3/2013). Home and Trade Service SMBs overall will not increase their ad budget in 2015. Nearly 61% of the SMBs in the Home and Trade Services vertical reported that they would maintain their ad spend over the next 12 months and 20.8% say they will increase. While SMBs in the Home and Trade Services utilize traditional media, their budget allocation for digital is increasing. On average, SMBs in the Home and Trade Services vertical allocated 24.7% of their advertising budget to digital in the last 12 months. Over the next 12 months, they report plans to increase it to 27.7%.

Local media players, especially in the traditional channels, have an opportunity to continue to serve their Home and Trade Services SMBs through traditional channels as well as grabbing more of their ad dollars by offering digital products.

Clients of the BIA/Kelsey Advisory Services can find the full Home and Trade Services vertical report here. Interested in finding out more about our LCM survey? Click here.

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One big trend we are seeing in our Local Commerce Monitor (LCM) findings is that low-spending SMBs are taking advantage of the lower price levels of digital and social media and reducing their overall ad spend. This has big implications for traditional media sellers as well as pure plays trying to find the right go to market strategy to reach smaller spenders at scale.

LCM tracks low-spending and high-spending SMBs separately. We call the low-spending SMBs “Core SMBs”, and define them as those spending less than $25,000 annually on advertising and promotion. In Wave 18, we saw a continuation of the downward pull on ad spending by Core SMBs due to the lower price points of digital media in general and social media in particular. We detail these findings in a new report, “LCM 18: Advertising Trends of Core SMBs,” available to BIA/Kelsey clients.

At around $2,500, average media spend by Core SMBs is down around 17 percent from the $3,000 average spend in 2011. We’re clearly seeing a de-emphasis on paid media, in favor of social media and other ways to engage customers, a trend that became apparent a year ago, in the LCM Wave 17 findings.

With Core SMBs, digital media, particularly social media, showed strength across the board. Core SMBs indicated bold intentions to increase spending on digital media. Social media achieved new heights in reach (69 percent) and spend (25 percent of total spend).

When asked about service models, 48.3 percent of Core SMBs said they preferred the “Do-it-myself” model, as opposed to the “Do-it-with-me” or “Do-it-for-me” models. This strong reading is a key message for companies serving the lower range of the SMB market.

In the section of the LCM survey about channels, we explored several behaviors and attitudes. For instance, we saw a big increase in Core SMBs concentrating their online ad purchases through a single channel. A record 82 percent of Core SMBs report using only one channel for purchasing online ad products. (Note: This metric considers “Do-it-myself” a channel).

At the same time, we also saw numerous differences between Core SMBs and high-spending SMBs. For example, there’s a huge gap in the usage level of online services. Only 12 percent of Core SMBs use some type of CRM system, compared to a full 50 percent of high-spending SMBs. Evaluated along with other data from the LCM survey, findings like this are crucial for companies serving the lower range of the SMB market.

Clients of the BIA/Kelsey Advisory Services can find the full report here. Interested in an excerpt? Download one here.

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BIA/Kelsey continues to engage market leaders in its coverage areas in order to collaborate on research reports. There’s one currently in the works, about optimizing SMB Marketing Efficacy, sponsored by Vendasta and written by our new associate Mitch Ratcliffe.

To preview the paper’s subject matter, we’ve included a teaser below. Stay tuned for the full release sometime next month. Meanwhile, an extended version of the below summary is available in physical form, if you’re at our Leading in Local conference. Stop by the Vendasta booth for a copy.

Measuring SMB Marketing Efficacy: Logistics and Storytelling Will Reshape Local Business Metrics

SMBs are the new frontier for digital services. They will require a new reseller/marketing services layer in local media to spread digital marketing practices to millions of individual stores and business people. For many digital marketers, small business is suspended in time between the Main Street barbershop familiar from The Andy Griffith Show, where folks stopped in and talked even if they didn’t get a haircut, and the high-speed increasingly personalized digital services based on advanced logistics that characterize major global brands. If he were on TV today, Floyd the barber would be studying his web engagement metrics in addition to providing a friendly haircut.

Digital services for local business are about to catch up with global brand marketing and, as with every business that has crossed the digital divide before, measurement of tool performance and tactics will be critical to success. Measuring web promotions; Providing transactional and support services for complex products and services; Facilitating loyalty and customer engagement programs, all these daily digital chores are poised to become business as usual. The losers in the local goods and services race will wander off-course without solid metrics, spending too much to get poor results as others focus their limited marketing budgets with greater precision. The big story in the enterprise over the past decade, the rise of metrics-driven experimentation and marketing, is about to repeat itself at the grassroots on Main Street.

Technical and economic drivers are already reshaping the local media economy. BIA/Kelsey Local Commerce Monitor reports that SMB plus spenders, business that spends at least $25,000 annually on advertising and promotion, 35.2 percent of ad spending will be allocated to digital in 2015, up from 24.5 percent in 2011. 57.7% of these plus spenders pay an average of $7,238 a year to maintain an online presence. More SMBs are also paying for marketing help to tie together their online messaging across Twitter, Facebook, mobile sites, Google and their own websites, as 40.9% of surveyed small businesses reported hiring agencies and staffing to manage their presence, the “Do It With Me” approach.

Our analysis suggests the “Do It With Me” (DIWM) model, collaboration between an SMB and one or more vendors to build complementary messages, which benefit the individual client business and create network effects, such as qualified participants in shared loyalty programs, cross-promotional campaigns and integrated transactional systems that flag cross-selling opportunities for SMBs, is the most viable approach. This phenomenon is visible in the specialization of digital sales teams in iYP markets, the agreement by YP.com to represent Yelp promotions to its customers, and the emergence of vendors that “sell digital arms,” marketing tools and services, in a consultative relationship with the customer, among others. We expect to see Google and Facebook partnering more extensively in this area in coming months.

“A lot of channel partners sell digital only five percent to 10 percent of the time, which is a sin” said Jeff Tomlin, Senior Vice President of Vendasta, a Saskatoon, Saskatchewan-based marketing tools vendor that has adopted the DIWM model. Instead of investing in direct sales, Vendasta seeks value-added resellers who can provide on-site services to complement its own reputation monitoring, presence management, social and mobile marketing optimization services, which are presented in a dashboard for the SMB customer. Agencies that bundle Vendasta services share access to their customers’ dashboards and can take on creative and production tasks on behalf of the SMB.

Recall Floyd’s barbershop. There was no “marketing strategy.” There were two chairs, a phone (where an operator waited to connect the call), some magazines and, perhaps, a television for the customers to watch the World Series in some later years of its fictional life. Floyd did not have to compete with other barbers through media. Compared with the communications wave rolling through the economy today, Floyd’s approach to customer engagement grows more fictional and quaint every passing year.

 

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Not only do consumers use these devices for shopping locally, but they do so frequently. Thirty-three percent of tablet users and 40.3 percent of smartphone users use them once a day or more for shopping locally.

There is an apparent disconnect between consumer’s heavy use of smartphones and tablets to shop and SMBs adoption of advertising with these devices. SMBs are devoting just 5 percent of their total ad spend to mobile advertising, according to BIA/Kelsey‘s Local Commerce Monitor™. That 5 percent is spread among SMS, search, display, and other forms of advertising on smartphones and tablets.

Looking just at apps we see that 17.1 percent of consumer use apps regularly for local shopping and 3 percent make purchases based on apps. Only 9 percent of SMBs are tapping into this market and use apps for advertising.

While only a small portion of SMB budgets are going towards advertising through smartphones and tablets, its is providing big returns. Four of the top 10 media, based on ROI, are related to advertising through these devices. Mobile deals, mobile apps, mobile banners and location aware mobile ads all were felt to have provided SMBs with between 10 and over 20 times the return on spending by at least 40 percent of SMBs who utilize them.

Not only are SMBs who participate in advertising with smartphones and tablets seeing big results, the consumer base for use of these devices when shopping locally is expected to grow. Fourteen percent of those who do not currently use a tablet or smartphone for shopping locally say they plan to do so in the next six months. So for all of the SMBs out there who are not capitalizing on the mobile advertising opportunity, it is definitely a move that would be wise to make.

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For the last few months, you may have noticed an increase in the conversation on this blog and elsewhere about call monetizaton. Sometimes referred to as Pay-per-call (a branch of call monetization), this includes charging businesses for inbound phone leads. It’s the topic of our latest report.

Like search marketing in its early days, call monetization is picking up fast. And in a lots of ways, it’s branching out from search. In fact, Google’s efforts with call monetization are characterizing and validating the opportunity to the broader market.

The reason this is culminating now is the growth in smartphone and resulting growth in mobile search. As we keep saying, mobile search carries a great deal of commercial intent from users. And don’t forget the mobile device is also a phone.

So the result is a flood of calls being driven to small businesses, and a greater appreciation for the value of these calls. Our SMB survey data shows that businesses very much want the phone to ring. So roll it all together and this is a huge opportunity.

We’ve tackled it with lots of webinars, analyst roundtables and blog posts. This comes together in a big white paper I’ve been working on for the last couple months. There’s lots of research, data, case studies and insights from the top players in the space.

Aside from “Pay-per-call” — the aspect that most people know call monetization for — there is are growing sub sectors supporting the field. This includes all kinds of things like call tracking, analytics, routing and even fighting nefarious areas like “call fraud.”

The exec summary for the report is below along with an analyst roundtable we did around the topic. The report is available to BIA/Kelsey clients or individual purchase. Email me (mbolandATbiakelsey.com) if you’d like to know more or talk about other ways to be involved.

Executive Summary

We’re seeing a shift underway in tech and media worlds: the tighter embrace of phone calls as a lead form for paying advertisers. Clicks and impressions, despite a sexier image and a decade of media adoration, aren’t as highly valued by many businesses as a ringing phone.

These are key reasons behind BIA/Kelsey’s estimate that $64.6 billion is spent annually across media on localized ads to generate calls to businesses. BIA/Kelsey data also indicate that 66 percent of small businesses consider phone calls the most valuable form of incoming leads.

As a result, we’ve seen a movement towards more tangible lead forms such as foot traffic and phone calls. BIA/Kelsey data indicate this is especially true in high-value verticals such as professional services, home services, and any business that typically closes sales over the phone.

This notion of calls as currency has also accelerated in the smartphone era, which has fused search with a phone. Calling a business post-engagement is intuitive for mobile users, who possess greater levels of immediacy and commercial intent than desktop counterparts.

For these reasons and more, BIA/Kelsey predicts an explosion in commercially-oriented call volume to businesses. Mobile search alone will drive 73 billion calls per year by 2018. This blessing and curse means a flood of inbound leads, but also dire need to manage them.

Therefore, businesses that get in front of consumers with the right messaging and calls to action (e.g., mobile click-to-call) can drive high quality leads and achieve high return on ad spend. Tech and media companies that can help them get there are likewise well positioned.

That translates to an opportunity for any ad tech or local media companies that already sell marketing services. Positioning advertisers to more effectively capture high value phone leads, and see clear ROI from them, will be a hugely opportune area in the coming years.

Beyond marketing, managing exploding call volumes will be vital for operational efficiencies. Given that 19 percent of inbound calls are quality leads according to BIA/Kelsey, optimizing those calls (e.g., sending to the best reps) and re-routing the rest will be critical.

This all relates to a renaissance in mobile advertising underway: The art of attribution[1]. Calls will be a vital part of all of this; to measure ad effectiveness and optimize campaigns accordingly. The suite will include call tracking and analytics to granularly determine ROI.

These call monetization components continue to develop in many ways, including location targeted ad placements, call recording, keyword tracking, sentiment analysis and identifying “call fraud.” These will be ripe areas for development in the near term.

This report examines the gravity of the call monetization opportunity, and what is being done today to capture it. What are best practices? What’s still missing? And where will value be unlocked in the coming months? The phone call is the new click.

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