My Internet2Go program and Merchant Circle collaborated again on a SMB survey with over 8,000 respondents. MerchantCircle released a little of this data as part of their recent “merchant confidence index.” Much of the coverage you may have seen on blogs or tech publications have drawn incorrect or superficial conclusions from what was made public.
The survey we did in Q3 2009 predicted the rise of social media among SMBs. I said at the time:
We believe the behavior exhibited by these small business owners is a precursor of things to come – that small business owners will increasingly forgo expensive advertising options and embrace publishing their unique content across various social media outlets
Now it has come to pass.
We found in the current survey that Facebook was being used by SMBs more than any other site or service to promote themselves. This is not buying “Facebook Ads” however. And it also doesn’t mean they’re using Facebook effectively. What it means is that they say they have some sort of “presence.” Presence and “effective presence” are two very different things.
The data are interesting across the board. But there were some particularly interesting findings around group buying and daily deals (n=6,207):
- Just over 8% of respondents said they had used a group buying site to market themselves in the past three months
- 16% said they were intending to do so in the next three months
- 59% said they “had not and will not” use group buying sites
- 16% said they had not heard of group buying sites like Groupon
A related question asked whether those SMBs that had used group buying sites would do so again. The “would you do it again” response breakdown was as follows:
- Yes: 45.5%
- No: 54.5%
I’m going to be cautious in drawing too many conclusions here. One survey does not a definitive trend make.
The earlier and more specific Rice study found that 42% of SMBs who had used group buying (Groupon in particular there) would not repeat. While there were in-depth interviews, the SMB sample size was only 150. In our survey there were 10X the number of respondents who said they had used group buying (1,581). However one needs to be cautious because we didn’t verify that these SMBs had in fact done so; it’s all self-reported data. Nonetheless it indicates a potential problem. These datapoints (wouldn’t do so again and those saying they “had not and will not”) represent the most negative assessment group buying I’ve seen to date.
Despite this, the Groupon model (“customers not clicks“) remained highly popular in the abstract.
Another interesting finding came from a question asking these respondents to rate themselves in terms of “marketing savvy”:
Thirty-five percent rated themselves “reasonably savvy” or “very savvy.” Again this is self reported and subjective but it reflects that the majority of these respondents don’t consider themselves very savvy. Thirty-one percent said that they were “not very savvy” or “not savvy at all.”
We also asked about mobile marketing and LBS, among many other questions. Finally, 87% of respondents reported they spend less than $10K per year on all forms of marketing and advertising — most less than $5K.
In response to a question asking about the relative effectiveness of advertising media, print yellow pages were in the top 5 and rated as more effective than “online yellow pages,” interestingly.
February 21st, 2011 at 3:25 pm
[...] This post was mentioned on Twitter by Greg Sterling, Sebastien Provencher, Martin Aubut, Francois Bourdeau, Tom Sauer and others. Tom Sauer said: RT @gsterling: 54% of Small Business Survey Respondents Wouldn’t Use Group Buying Again http://tinyurl.com/47lv9n5 [...]
February 21st, 2011 at 3:27 pm
Local businesses are use to the print yp world, and they feel they are still gaining value because CMRs and local reps are negotiating massively discounted value packages these days in print (+some interactive thrown in). Online/interactive/social media advertising is still very new to many local businesses (many of which feel they are marketing savvy yet do not even know how to use a computer). So when something like Groupon ends up not working out for them on their first try (after a salesman pressured them into it in the first place), they get scared and go back to the traditional way of doing things in print.
If something like Groupon is one of their first forays into interactive advertising, they are turned off even worse because Groupon is not for creating direct ROI. (even though they try to sell it that way). It is essentially branding. Something many SMBs just can’t afford to do.
Another problem is that even agencies these days are pushing their own proprietary/partner offerings that give them higher commissions rather than recommending what is best for the client.
All of these reasons are causing local businesses to shy away from the new stuff, and if anything just try to learn the free new stuff.
February 21st, 2011 at 3:34 pm
The conclusion that SMBs that have had a poor experience with Groupon are “going back” to traditional media isn’t necessarily valid. However many of the complicated dynamics that you cite above are muddying the waters for SMBs in terms of some of the newer products.
One thing is very clear: they like free and they like Facebook; they just don’t really know how to use it.
February 21st, 2011 at 4:33 pm
Greg,
I think that one-third of businesses that consider themselves strong online marketers surprised me. While I think many of them may know about online marketing (from reading blogs like yourself and newspaper articles), I think they don’t know how to execute an online marketing campaign or know the key metrics and ROI. They might have heard a sales pitch about online marketing from their local print YP rep (or Groupon or Yodle, or ReachLocal), but they don’t understand the potential that online marketing can grow their business. While most of them may have a Web site, in many cases, it’s not optimized and they rarely go back and make adjustments or changes.
February 21st, 2011 at 4:46 pm
With surveys there’s always danger of over-generalizing. I don’t think 1/3 of SMBs out in the world would consider themselves “savvy.” Yes, as a broad matter, most SMBs are in the bottom groups.
February 21st, 2011 at 7:23 pm
At least 50% of the 54% don’t know how to use group buying and the rest simply don’t have a competitive business model. This applies to every marketing channel. Search Marketing does not work for every Business and the two key factors are competitiveness and quality of campaign just like any marketing channel.
The data in these surveys are way to broad and lack qualitative variables.
I’m in no way arguing that these surveys are useless nor am I saying that Daily Deal sites run an absolutely sustainable business model into perpetuity.
February 21st, 2011 at 7:28 pm
Edward:
I’m the first to qualify the findings. However, they’re noteworthy in that the numbers that have been in the market show 90%+ satisfaction levels.
Yes, many of these businesses have no idea how to run these deals and make them work. That’s part of the point.
Groupon and others (see Groupgro: http://www.groupgro.com/) need to educate SMBs.
February 21st, 2011 at 8:16 pm
Greg:
I totally follow you, 90% satisfaction level for any business other than maybe Zamboni should be questioned.
February 22nd, 2011 at 3:56 am
As someone who has been selling to SMBs (primarily local merchants in the service categories) for years I can tell you that they not only like free, they love it! Anything that can help them drive business that doesn’t cost them anything out of pocket is, in most cases, attractive to them.
Online advertising (even Google Pay Per Click at minimum spends) is a tough sell these days for local merchants, hence their attraction to the Groupon model and the rise of so many Groupon clones.
To your point Greg, I believe the reason they like Facebook so much is because it is consistent with their criteria — FREE! Of course setting up a page doesn’t cost anything to start, but growing a marketing list through Facebook doesn’t just happen. Savvy merchants (of which there are few, they are just too busy running their businesses to stay up with the latest and greatest!) can tap into any number of free resources like, http://www.sparqcode.com, Foursquare, twitter, etc, but again, managing these tools takes time that they just don’t have.
It all comes back to the simplicity of the Groupon pitch – “we do everything, you get customers, and you don’t pay us anything out of pocket.” The sound of that is sweet to any local merchant. But as more and more merchants educate themselves on the pitfalls of the Groupon trap, they’ll seek out ways to take advantage of the social media/deal marketing concept, hence innovations like Closely and our solution, http://www.publicdeals.org. Self service deal marketing with a helping hand!
February 22nd, 2011 at 3:20 pm
Could it be that once an SMB has already used Groupon to get 1000+ new customers and a truckload of awareness, there is no actual need to do it again?
February 22nd, 2011 at 3:23 pm
Dan:
I think that theory is interesting but people are probably expressing some dissatisfaction. In a way a more interesting number is the “haven’t and won’t try it.” That number was 59% of respondents.
This is just one survey and shouldn’t be seen as “gospel.”
February 22nd, 2011 at 8:56 pm
The “haven’t and won’t try it” number is probably more an indication of the newness of the idea and the technology. The longer such strategies and technologies exist, the more likely that number is to go down.
February 22nd, 2011 at 9:18 pm
Ryan:
You may be correct about resistance coming down.
February 23rd, 2011 at 2:52 pm
[...] restaurants are small businesses and according to our recent survey more than 80% of SMBs aren’t doing anything in [...]
March 17th, 2011 at 2:41 pm
I just don’t see how Groupon is beneficial for the majority of SMB’s out there. The marketing plan for a Groupon user is much more expensive than a typical marketing strategy. An SMB owner (not all but most) can’t sustain the type of loss they do with Groupon. If a business owner only recoups $4500 from a service that normally costs 20k, thats quite an expensive marketing effort. On top of the fact that they will prob be overwhelmed by the influx of business, pissing off consumers who are price shoppers anyway. These consumers that are using Groupon are not the “ideal” consumer anyways, as they are usually price shoppers. I would love to know how many consumers that use a Groupon go back to the business at full price….I’d be willing to bet no more than 5-10%.
March 17th, 2011 at 5:20 pm
The Fact is that every market and SMB is very different and due to the dynamic landscape of the online arena what may generate a huge ROI for one company may bankrupt another. The problem lies in the hands of the sometimes aggressive sales reps of these online marketing companies who make the assertion that their respective company is the best way to market online. When in actuality the only true way to effectively market online line is through incorporating a broad portfolio of outlets i.e. PPC, SEO, SMM, and group buying, but not relying on the person who makes the commission to determine which works best for their business. That is why these percentages don’t surprise me at all and I’m sure once the group buying craze settles down a bit you’ll have 2 possibly 3 (Facebook) major players out there that cater primarily to the industries that can realize significant and immediate gains from running a coupon.
June 9th, 2011 at 3:29 pm
[...] results above stand in contrast to a survey I did with MerchantCircle in February (n=8,514), where we saw 54% of those who had done a deal say “no,” they would not [...]