Against a backdrop of post-election optimism, small business owners are planning to increase their marketing and advertising budgets in 2017. With budgets expanding, the age-old question of how to ensure the highest possible return on investment becomes even more critical.
When it comes to determining where to invest, small businesses face decisions at every turn. Should you hire a new teammate who can be devoted to your brand or go with a tried-and-true agency promising targeted results? Is organic reach on social media enough? How important is SEO, anyway? And finally, how much attention should you pay to the year’s hottest trends--augmented reality, virtual reality, and video?
Clutch interviewed 350 small- and medium-sized business owners and managers at companies with fewer than 500 employees to understand how they currently think about their marketing and advertising dollars--and how to make the most of every cent.
Whether your marketing budget is $10,000 or $1,000,000, Clutch found that best practices come at a wide range of price points and creative solutions that can boost any small business’s competitive edge.
- Overall, 59% of small businesses anticipate revenue growth, and 49% plan to invest more in marketing and advertising, two factors that convey a sense of optimism.
- When it comes to setting a marketing budget, it’s important to factor in additional time and funds for experimentation.
- When it comes to expanding investment in digital marketing, 29% plan to ramp up social media. Its low cost and ability to granularly track ROI make it an ideal area for additional spending.
- Of small businesses seeking to improve their search ranking, 52% focus on local searches to ensure that local customers come straight to them.
- With most small businesses having fewer than 10 employees total, it’s rare to have more than one person responsible for marketing.
- The majority of small businesses (80%) hire at least one agency, and lower cost consulting options exist for small businesses that are still ramping up.
- Augmented reality, virtual reality, and video are among the next big marketing trends to watch.
Most Small Businesses Are Truly Small
Small business owners are the heart of our economy, but they face a huge challenge: building a company on their own with a limited budget.
By the time she left Pepsi to start her own ecommerce business, Marisa Meddin had experience marketing iconic products such as Diet Pepsi, plus experience with corporate global strategy. As she made the transition from working in a global corporate setting to running her own small business, Meddin has embraced the learning curve. Now, she runs The Dessert Place, shipping gourmet cheesecake brownies across the United States with a staff of two bakers.
“In the Pepsi world, I could go to an accountant, a finance person or a PR specialist,” said Meddin. “As a small-business owner, it's all on me now.”
Meddin’s small team isn’t unusual among small businesses. According to census data, we know that of the seven million businesses currently driving the American economy, 73% have fewer than 10 employees. Clutch’s survey captured companies at a range of development points, from steadily growing teams to freshly launched startups that may only be a founder and one other employee. Clutch defined small businesses as those with 500 or fewer employees, with 40% of respondents reporting that they also had 10 or fewer employees. 27% of small businesses had 11 to 50 employees; 25% of small businesses had 51 to 250 employees, and 8% of small businesses had 251 to 500 employees.
When it comes to revenue, most small businesses’ small staffs also correlate with smaller earnings. Nearly half (46%) of the small businesses surveyed reported total revenue equaling less than $1 million in 2016, compared to only a quarter (24%) of small businesses that reported over $5 million in revenue. Of the small businesses that reported less than $1 million in revenue, 84% had 10 or fewer employees.
Small Businesses Reported Modest 2016 Marketing Budgets
Compared to pressing expenses like payroll or inventory, marketing and advertising can feel like creative luxuries. But experts caution against under-investment of time and other resources.
Debbie Williams is the co-founder and chief content officer of SPROUT Content, a content marketing agency that specializes in performance content for B2B companies in "unglamorous" industries.
“It's an old adage, but it's true: it takes money to make money,” said Williams. “If someone spends zero dollars on marketing, they will probably get the same back.”
Ideally, a marketing strategy should accommodate some experimentation.
“It boils down to committing the resources necessary for figuring it out,” said Ryan Buckley, CEO of Scripted, a content marketing agency that matches companies with freelancers and ghostwriters. In figuring out marketing for his own business, Buckley spent six months experimenting before finding one paid ad channel that would work for Scripted.
“To a small-business owner who goes through two weeks of trial-and-error, and throws their hands up, I would say that they need to invest more time than that into figuring things out,” said Buckley. A slightly bigger budget longer term strategy takes into account the fact that not everything will go according to plan.
Clutch asked small businesses to report their total spending on marketing and advertising in 2016, including both traditional marketing such as broadcast, direct mail, and telemarketing, as well as digital marketing such as a website, SEO, social media, and online advertising.
Over half of respondents (68%) reported spending less than $100,000 on marketing in 2016, with 41% spending less than $10,000. Depending on how much revenue your business earns, that number may sound surprisingly low—or impossibly high. When setting a marketing budget, the U.S. Small Business Administration recommends thinking in terms of a percentage of your revenue rather than a fixed amount of money:
As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This budget should be split between 1) brand development costs (which includes all the channels you use to promote your brand such as your website, blogs, sales collateral, etc.), and 2) the costs of promoting your business (campaigns, advertising, events, etc.).
This percentage also assumes you have margins in the range of 10-12 percent (after you’ve covered your other expenses, including marketing). – U.S. Small Business Administration
Meddin said that the low figure didn’t surprise her. She pointed out that digital marketing has cut costs and given small businesses the opportunity to simply spend smarter.
“We don't need $5,000 just for a print mail campaign anymore. I will try to play it smart and be as lean as I can with my marketing money,” said Meddin, adding, “If I do spend more, the first place to play around in is paid search.”
No matter what marketing strategy is on your wish list for future investment, it’s important to be flexible when budgeting time and funds in order to build in room for experimentation and shift gears as your company’s revenue grows.
Small Businesses Expect Increase Marketing Spend in 2017
In 2017, approximately half (49%) of small business owners plan to spend more on marketing and advertising in 2017. Of the small businesses that plan to boost their marketing budgets, roughly a third (36%) plan an increase of 11-30%.
Matt Ham is the founder and CEO of Computer Repair Doctor, an electronics repair company with six locations across the southern United States. He believes a positive outlook is an essential component of any small business’s success.
“I think that most people, especially small business owners, will be optimistic, since their business reflects them and the work they're putting in,” said Ham.
Optimism primes small businesses to be more willing to take risks and bet on their own success. Of the small businesses surveyed, over half (59%) expect to see revenue growth in 2017. A quarter (25%) of small businesses expected their growth to remain approximately flat, while relatively few reported uncertainty or anticipated a decrease in revenue.
“If the question is answered with ‘I think we will shrink,’ then they are already thinking negatively, and accepting failure,” Ham pointed out. “That's going to be a self-fulfilling prophecy.”
As you prepare to allocate a larger budget, thorough knowledge of best practices will also boost confidence and optimism.
Using Digital Marketing to Make the Most of Your Budget
With digital marketing strategies emerging as increasingly essential components of the marketing mix, where are small businesses planning to invest their expanded marketing budgets?
Among digital marketing options, small businesses are most eager to increase investment in social media (58%), a website (56%), email marketing (39%), and SEO (35%) in 2017.
Regardless of whether a small business has found success through traditional marketing, having a strong digital presence should be an essential element of every business’s marketing plan. Below, Clutch investigated two key digital marketing trends you can expect to see in 2017.
1. It Pays to Invest in Social Media
In 2010, Jason Parks founded The Media Captain, a full-service digital marketing agency in Columbus, Ohio. Parks tells his clients that prioritizing social media is a “no brainer.”
Recently, a client called to ask Parks for advice about advertising on local TV. “I asked him if he ever watched TV commercials himself, and he said no,” said Parks. “Most people know that digital is the place to be, over traditional advertising.”
The ubiquity of social media make it a key starting point for small businesses. “At the end of the day, it's much cheaper than any other form of advertising, and it gets very good results,” said Parks.
Nevertheless, Parks cautions that the days of organic reach on social media are over. Small businesses preparing to invest more in their marketing and advertising need to dedicate a portion of their marketing budgets to promoting posts on various social platforms, even if it means producing more focused posts less frequently.
“Many don't realize that every social media post, especially on Facebook, should have money behind it,” said Parks.
Luckily for small businesses, putting money behind a social media advertising campaign doesn’t have to break your budget. In an explanation of how a Facebook campaign functions, Facebook suggested $15 as a reasonable budget for a single ad.
2. Optimize SEO by Focusing on Local Searches
Beyond social media, SEO remains a powerful component of a robust marketing strategy.
Among SEO strategies, Clutch found that 52% of small business owners surveyed prioritize investing in improving their ranking in local searches.
“Social media gets a lot of hype, but, for someone looking for a local dentist, a chiropractor or a taxi company, they'll still use Google,” said Parks. “It needs to remain a focus for businesses.”
“It's the equivalent of coming across a brick-and-mortar store,” said Meddin, whose ecommerce business was rebooted from an Atlanta-based restaurant franchise.
Meddin also pointed out that mastering SEO is affordable to businesses that are just starting out: “We don't need a ton of money in order to play in this marketing space--we just have to work smarter.”
Overall, the shift toward digital over traditional marketing strategies means that small businesses can now spend less while getting traction that they can track granularly.
Most Small Businesses Rely on In-House Marketing Staff
In the process of expanding his marketing operations, Ham, of Computer Repair Doctor, recently decided to bring in a marketing manager for the first time to help him manage the marketing projects he has always executed himself.
“My goal is to have nothing left to do myself, so that I can work on growth projects and other tasks,” said Ham. “This is my baby, but it won’t grow unless I’m delegating as much as possible.”
Although Ham has worked with agencies in the past, he admits that he’s a demanding client with strong opinions and high expectations. He hopes that bringing a marketing manager onto his team will allow him to train a collaborator in the ins-and-outs of Computer Repair Doctor’s business to a degree that a short-term commitment with an agency can’t provide.
“If we can get someone to do something 80-90 percent as well as us, and we can afford them, then we should hire out and focus on something else,” said Ham.
Ham isn’t alone. Of the 350 small businesses surveyed, 335 employ in-house digital marketing staff. Many small businesses (49%) rely on 1-2 employees to produce digital marketing campaigns ranging from social media marketing, SEO, content marketing, email marketing, a website, or a mobile app. Roughly a quarter (28%) of small businesses employ 3-4 digital marketing employees, while only 14% of small businesses reported that they employed 5 or more digital marketing employees.
Consider Ways to Work With an Agency
Despite widespread interest in hiring in-house marketing staff, 80% of small businesses surveyed do work with one or more digital marketing agencies, with the bulk (43%) working with one or two agencies.
In some situations, hiring a full service agency may be the equivalent of a full time marketing employee’s salary. This route may prove to be worthwhile if you are seeking the most cutting-edge strategies or need help with a thorough overhaul of your brand’s story.
“While the client isn't getting full time attention, they're getting smarter, more strategic attention, which delivers better results,” said Williams, of Sprout Marketing. “An internal person would have to be adept at strategy, SEO, writing content, design, website development, optimization, project management, and the list goes on. The likelihood that one person would have all of them and still be affordable, would be highly unusual.”
In other cases, your in-house marketing team may be so successful that they need help keeping up with the demands of a labor-intensive content marketing strategy. Scripted CEO Buckley has built his agency to provide the consistency that is the key to any successful content marketing strategy.
“For most businesses and small-business owners, it's simply too much for them to take the consistent-marketing pledge, so to speak, but that's where the ROI is,” Buckley said. “This is not a flash-in-the-pan, occasionally-dive-in-and-forget-about-it type of activity. It won't see payback unless it's done regularly.”
Rather than providing a full-service marketing consultancy, Scripted is designed to plug into an existing in-house staff. Scripted aims to elevate an in-house marketer to an editor-in-chief role, or to boost the productivity of in-house content marketers by replicating their successes on a bigger scale.
For small business owners who are curious about working with an agency but may be strapped for cash, The Media Captain’s Parks suggests that they consider hiring an agency for an hour or two of consulting.
“I am approached by many small businesses, but our agency fee may not be worth it for them,” said Parks, whose own experience running a small business helps him empathize with the limited resources many small businesses face. “Many people think that they need to spend a lot of money or come up with an elaborate strategy, but it's really about connecting with the average consumer.”
The Next Frontier: AR, VR, and Video
You may have already encountered virtual reality (VR) or augmented reality (AR) through Google Cardboard or Pokémon Go. But even if you have some familiarity with these new technologies, you may not have realized that they may become increasingly common components of your marketing strategy in the future.
Although AR and VR seem to evoke science fiction, small businesses are already finding creative ways to include them in the marketing mix. Surprisingly, Clutch found that 17% of small businesses are interested in investing AR and VR in 2017.
Vlad Korobov is co-founder and COO of Live Typing, a web and mobile app development company. In his experience, companies use AR and VR to enhancing their reputation for being modern early adopters--not for a specific marketing function. Most requests he’s gotten have come from the gaming and entertainment industries, along with the scientific community.
“For a small business selling organic food on the local market, the prospect of AR or VR may seem mind-blowing,” said Korobov. “As a first step, I would recommend developing a project for local consumers; perhaps setting up a stand with high-quality headsets, where everything is already set up. They can simply put the headset on, have a ten minute experience, and leave with the impression that the business is offering them something unique.”
For example, a fruit producer could take customers on a virtual trip to the farm where the produce was grown and harvested, or on its journey to the store.
“The tools around VR are very expensive at the moment, and not really usable in a broad way,” said Korobov. “A more interactive experience will be more difficult, and require education for the users.”
For companies not positioned to invest in an AR or VR experience, there are other ways to achieve the highly visual and interactive qualities that make AR and VR so attractive. Korobov pointed out that for most companies, video with some augmented features could accomplish a similar goal. “The cheapest solution for giving people a VR experience would be to take a camera, record a video and upload it to YouTube,” Korobov said. “It's the simplest thing that a business can do.”
Hubspot has predicted that 2017 will mark a milestone for video, which is expected to account for 74% of all Internet traffic. Among the small businesses surveyed by Clutch, 29% plan to increase investment in video.
“I find video to be an instant differentiator at the moment,” said Parks, who pointed out that video posts achieve greater organic reach on Facebook. Parks believes that video published directly to social media platforms will eclipse traditional networks such as CBS or NBC within the next decade. “If a person puts out a solid video, even if it's simply done using an iPhone and a tripod, it can have a lot of potential.”
At The Dessert Place, Meddin has recently been exploring Instagram stories, a Snapchat-like feature that allows Instagram users to share short, ephemeral videos with their followers. In January, TechCrunch reported that Instagram stories were rapidly eclipsing Snapchat’s influence.
Meddin enjoys how unpolished video reads as authentic on the platform. “[Instagram stories] present an opportunity to relate something in a more playful and engaging way, letting people see us in a brand,” said Meddin. “The more vulnerable I can be, letting people in and telling my story, the better. Consumers love to feel in-the-know.”
At Sprout Marketing, an article about machine learning and artificial intelligence (AI) has been making the rounds among Williams and her team. Machine learning is a type of programming that allows computers to adapt when exposed to new data and is enabled by AI, which allows computers to develop without human interference. In early 2015, Google introduced RankBrain, a tool that aids online queries with machine learning and AI.
“I think that machine learning and automation are huge, and we have seen things we'd never heard of before being brought into the mix,” said Williams. “They present a huge opportunity for people not only to market themselves, but to change how marketing is done.”
Finding Marketing Solutions at Every Price Point
If you’re planning to expand your marketing and advertising budget this year, it’s as important as ever to make every dollar count.
Every small business owner would probably like to hire an agency to develop high quality social media and blog content, have a team of brilliant marketers on staff, and wow customers with a custom virtual reality experience. Even without a bottomless budget, there are a range of creative ways to learn from and apply top-shelf strategies.
When it comes to social media, the days of being able to rely on purely organic reach are over. Luckily, costs associated with paid social media marketing are still unbeatably low—as little as $15—so even a small investment will punch above its weight. Rather than spreading your budget across a never-ending array of social media platforms, focus on the one or two platforms that best serve your brand.
Although it’s not the buzziest topic on the list, investing in your small business’s SEO remains essential to success–and with no additional spend except staff time, remains one of the most accessible. SEO can help ensure that when consumers are looking for a product or solution, your small businesses appears at the top of the results.
Despite the fact that newly-formed or bootstrapped small businesses likely won’t be able to invest in a full partnership with an agency, it doesn’t mean that agencies’ insights are completely out of reach. Even a few hours or sessions of consulting with an established agency can help ensure an small business’s marketing and advertising plan doesn’t go off the rails. Doing so can support and extend the work of in-house marketing staff, at a fraction of the cost.
Augmented reality and virtual reality will undoubtedly continue to captivate the public imagination, but you don’t actually need costly equipment and a team of developers to add an interactive element to your marketing mix. A low-cost solution such as an Instagram story shot on an iPhone or a Facebook Live chat with your small business’s founder can provide a similar yet low cost opportunity give customers an opportunity for authentic interaction.