Survey: SMB Spend Data Shows Market Split

BIA/Kelsey has put out some interesting survey findings that confirm the most practical and useful way to segment the SMB market may be by ad spend. Those who spend less than $X per month or year are candidates for one set of services and products. Those that spend $Y for another. This is something that is generally understood but the data empirically help document it.

The “cut off” amount used in the BIA survey is $25K. Above that annual threshold advertisers do different things and have different attitudes vs. those below that threshold, according to the survey of 152 small business advertisers (compared to historical data).

BIA’s data show that average annual SMB spending is $2,092. Directionally that’s consistent with survey data we’ve captured, though the precise amounts can vary by survey.  Here are the findings and “takeaways” from the data released:

• Small-spending SMBs use an average of 3.1 media types vs. 6.5 for “plus spenders” (those spending more than $25K per year)
• 90% of plus spenders have a website vs. 62% of the small spender SMBs (the latter number is high for the overall market)
• Interestingly there isn’t as much of a gap in the data between the small spenders and the large spenders in terms of % of budget online: 21.8% for the smalls and 26% for the plus spenders

The big spenders spend a great deal more on TV/broadcast media than the smalls, understandably; the media cost more.

Plus spenders were also much more involved in tracking, measuring and monitoring ROI than the smalls — lots of cases and anecdotal information bear this out. Small SMBs consistently don’t look at their analytics and dashboards when they’re available.

This is not in the BIA data, but you’ll find considerable ambivalence about SEM among the smallest SMB ad spenders. There’s even some distrust about the efficacy of paid search. That’s partly because this group isn’t sophisticated about tracking results and they may not be spending enough to get value — hence their proclivity to churn.

In terms of SEM churn, I would guess we could chart the churn numbers according to ad spend;  the greater the budget, the smaller the chances of churn.

I think that in the near future the product suite being sold to SMBs will be tailored to small spending SMBs and those that are more “serious” about online marketing. The latter group will have video and display and meaningful search campaigns. The smalls will need to leverage (or have leveraged for them) lots of the free tools and products, mostly around “presence.”

This is a quick and crude formulation. But these data point to potentially important product segmentation approaches, already going on to varying degrees. For example:

Larger spenders:

• $1K+ monthly SEM
• Enhanced websites
• Hands-on SEO
• Coupons/CRM/email
• Video
• Display
• Mobile
• Print

Smaller spenders:

• Basic presence and very light SEO
• Landing page
• Light or no SEM
• Facebook + Google Places
• Light CRM (& couponing)
• Maybe print

Agree or disagree?