Small Businesses Put Marketing to Work

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1 A Hurwitz White Paper Small Businesses Put Marketing to Work Sanjeev Aggarwal, Partner Laurie McCabe, Partner

2 A Hurwitz A White White Paper Paper Small Businesses Put Marketing to Work Contents Page Highlights and Key Findings... 1 Section 1: Marketing Adoption and Characteristics... 2 Figure 1: Small Business Adoption of Marketing... 2 Figure 2: Adoption of Marketing by Years in Business... 3 Section 2: Marketing Benefits and Challenges... 4 Figure 3: Small Business Top 3 Perceived Benefits from Marketing... 4 Figure 4: Percentage of Marketing in Overall Marketing Budget... 5 Figure 5: Top Metrics for Measuring the Success of Marketing Campaigns... 6 Section 3: Marketing Challenges... 7 Figure 6: Top Challenges Designing and Executing Marketing Campaigns... 7 Figure 7: Top 3 Reasons Small Businesses Do Not Invest in Marketing... 8 Figure 8: Level of Satisfaction with Current Marketing Solution... 9 Section 4: Marketing Trends Figure 9: Selection Criteria for an Marketing Vendor Figure 10: How Small Businesses Use Marketing Section 5: Conclusions... 13

3 Small Businesses Put Marketing to Work A Hurwitz White Paper Highlights and Key Findings marketing is now a mainstream small business tool, with 46% of small businesses using it, and 36% planning to start in the next 12 months. Adoption of marketing correlates with both the size of business and the number of years a company has been in business. Larger companies that have been in business longer are more likely to have deployed marketing than smaller, newer firms. Small businesses view cost, fast response and measurability as the top benefits that marketing provides to them. Investing in marketing also correlates strongly with small businesses expectation of revenue growth. On average, marketing accounts for about 15-22% of the total marketing budget for companies that use it. The spam fear factor is the most significant challenge that small businesses face in their endeavors to design and execute effective campaigns. This points to the need for more vendor education, and tools to mitigate this issue more effectively. About 52% of current users are satisfied or very satisfied with their marketing solution. Customers that are less than satisfied are likely to shop around for a replacement solution. Respondents rate ease of use, quality of customer support, and price as top priorities for selecting an marketing solution. Given the relatively low cost of this solution, small businesses should look for one that fits their budget not merely the lowest priced offering. The focus should be on solutions that are easy to use and provide strong support capabilities. Most businesses use marketing for newsletters, promotional offers and announcements. With adoption of both marketing and social networking on the rise, small businesses should think about how they can integrate the more ad hoc nature of social media with more structured marketing campaigns to boost the value of both. This report, the second of two, highlights key findings from a survey conducted in July 2009 by Hurwitz & Associates, and is sponsored by Campaigner. The survey investigates how North American small businesses with 1-20 employees are succeeding today, and how they are adapting their marketing plans and budgets to compete more effectively. This second report focuses on small business adoption, plans, use and requirements for marketing solutions. Page 1

4 A Hurwitz White Paper Small Businesses Put Marketing to Work Section 1: Marketing Adoption and Characteristics marketing has become a mainstream marketing staple for small businesses (Figure 1). 46% of small businesses currently use marketing 36% plan to begin in the next 12 months 18% do not use marketing and have no plans to begin!i#ure (: S+a--.usi0ess A2o45o0 o6 7+ai- 8ar9e50# Figure 1: Small Business Adoption of Marketing Company Size (# of employees) As companies grow, they are more likely to adopt marketing. Companies with 2-4 and 5-10 employees are the most likely to have plans to deploy marketing in the next 12 months. Having outgrown the sole-proprietor stage, these companies are looking to increase sales and revenues to support existing headcount and expand business. As companies get larger, they most likely have already deployed marketing. Now, they may be looking to deploy a broader marketing automation solution that incorporates marketing. Use of marketing also correlates with the length of time a company has been in business (Figure 2). marketing is one component of a broader portfolio of marketing and lead nurturing services. As companies mature in age, marketing drops off. More established companies begin using additional comprehensive marketing automation tools. Page 2

5 Small Businesses Put Marketing to Work A Hurwitz White Paper Figure 2: Adoption of Marketing by Years in Business FiAure 2: oj <mail Ky Lears in Musiness 9urrently use <mail Plan to use in the next 12 months Do not plan to use 30 years or more 4% 1% 0% years 2% 1% 1% years 4% 3% 1% 6-10 years 8% 4% 2% 3-5 years 17% 8% 6% 1-2 years 7% 8% 5% Less than 1 year 4% 10% 2% 0% 5% 10% 15% 20% 25% 30% 35% % of Small Businesses Small businesses enthusiastic adoption of marketing isn t surprising. marketing offers a quick, affordable way to reach their customers and prospects. As discussed in the first report in this series, investing in marketing also correlates strongly with small businesses expected revenue growth: 46% of those that currently use marketing anticipate revenue growth 36% of those that plan to use marketing forecast revenue growth 18% of businesses with no plans to use marketing foresee revenue growth Page 3

6 A Hurwitz A White Paper Paper Small Businesses Put Marketing to Work Section 2: Marketing Benefits and Challenges Small companies see marketing helping them in a few key ways. 28% of current users and 44% of those that plan to use marketing cite an inexpensive, effective way to reach prospects/customers as the top perceived benefit from the solution (Figure 3). This is followed by generates a fast response so I can tell if my campaign is working, and an effective way to build customer loyalty. Figure 3: Small Business Top 3 Perceived Benefits from Figure 3: Small Business Top 3 Perceived Benefits from Marketing!"#$"%&'((")*+,-.++.+"/*00.-1(2"3+,-4"#0"5('--,-4"1#"3+."6&',("7'08.9-4" The cost advantages of marketing are underscored by the fact that, on average, marketing accounts for roughly 15-22% of the total marketing budget for companies that use it. (Figure 4). Page 4

7 Small Businesses Put Marketing to Work A Hurwitz White Paper Figure 4: Percentage of Marketing in Overall Marketing Budget Company Size (# of employees) Marketing Spend as % of overall Marketing Spend 1 20% % % % As indicated in Figure 3, both groups also rate generates a fast response so I can tell if the campaign is working as a top benefit. marketing solutions give businesses immediate metrics to gauge the success of their campaigns, enabling them to focus on what works. Both current users and those that plan to use marketing cite click-thru rates, response rates, and lead results as key metrics to determine if their campaigns are working or not (Figure 5). This strong parallel in responses indicates that most prospective customers have realistic expectations of what the solution will provide. They want to determine if a campaign is working or not both with new prospects and with existing customers. Page 5

8 A Hurwitz A White White Paper Paper Small Businesses Put Marketing to Work Figure 5: Top Metrics for Measuring the Success of Marketing Campaigns!"#$"%&'((")*+,-.++.+"/*00.-1(2"3+,-4"#0"5('--,-4"1#"3+."6&',("7'08.9-4" But, there is a potential disconnect between user expectations and actual experience in one important area. 67% of those planning to use marketing anticipate that sales results from the campaign will be the top metric that they will use to measure marketing effectiveness. However, current users do not rate this metric as highly. This indicates that prospective users may expect marketing to provide a more direct way to gauge sales effectiveness than marketing solutions currently provide. As users gain experience, they realize that they need to look at a number of variables in addition to marketing such as the effectiveness of landing pages or telesales follow up to gauge the effectiveness of their campaigns. Page 6

9 Small Businesses Put Marketing to Work A Hurwitz White Paper Section 3: Marketing Challenges Even as adoption of marketing rises, both current users and those that plan to use marketing have concerns about their marketing messages. Issues include: clogging up in-boxes, getting trapped in spam filters, and having messages deleted before recipients read them. They view spam and anything related to spam as the biggest barrier or potential barrier to successful marketing (Figure 6). Figure 6: Top Challenges Designing and Executing Marketing Campaigns Companies that are not planning to deploy an marketing solution also cite concerns about spamming as their top reason for not using this marketing tool (Figure 7). Many are also struggling with some uncertainty about marketing, as evidenced by the other reasons they give for not using it. These include: unsure of whether marketing will help my business, don t know how to measure the effectiveness of campaigns, and not sure how to get started. Such issues inhibit adoption. Page 7

10 A Hurwitz White Paper Small Businesses Put Marketing to Work Figure 7: Top 3 Reasons Small Businesses Do Not Invest in that my customers were viewing my markedng as spam 29% Onsure of whether markedng will help my business 20% Other Specify: 14% IonJt know how to a measure ekecdveness of campaigns 11% Not sure how to get started 9% Too expensive to implement Lack of Dme to evaluate soludons 6% as to which soludon will work And a product with funcdonality to suite my needs 3% 3% Lack of budget Too difficult to implement Lack of resources to implement and track campaigns 0% 0% 0% 0% 5% 10% 15% 20% 25% 30% % of Small Pusinesses Not Qlanning to Ose Rmail SarkeDng Small businesses are concerned about spamming. This may contribute to the fact that among existing users, 48% are somewhat satisfied or neutral about the marketing solution that they currently use (Figure 8). Page 8

11 Small Businesses Put Marketing to Work A Hurwitz White Paper Figure 8: Level of Satisfaction with Current Marketing Solution Page 9

12 A Hurwitz White Paper Small Businesses Put Marketing to Work Section 4: Marketing Trends With so many vendors to choose from and free 30-day trials and monthly subscriptions the norm customers that are less than satisfied are likely to shop around for a replacement solution. When they do, ease of use, quality of customer support, and price are at the top of the list when they evaluate marketing solutions (Figure 9). Given the relatively low cost of these solutions, small businesses should look for one that fits their budget not only the lowest priced offering. The focus is on ease of use, strong support, and tools to help mitigate spamming concerns. Some of the specifics that customers should consider include: What does the vendor provide to help me get productive, quickly? Vendors may or may not provide things such as phone support, online tutorials and webcasts to help customers launch their first campaign. How fast can I set up my first campaign? Things to consider here are how easy it is to tailor the template for your business, and how to import and manage lists. What type of ongoing support does the vendor provide? Is there 24/7 support? Do they provide support by phone, and/or online chat? How much depth and breadth is provided in terms of online FAQs, best practices, tips and other resources? Sometimes other small businesses are the best source of advice. Does the vendor have an active, engaged online-user community to share tips, questions and successes? Is there an automated unsubscribe process to help me comply with CAN- SPAM regulations? How does the vendor monitor and manage spam complaints? Does the vendor provide tips and tools to help me understand how to target s to different types of customers, so I can make campaigns more relevant? Different customers want to be treated differently. If it s easy to assemble and adjust lists to customer preferences, campaigns will be more effective. Page 10

13 Small Businesses Put Marketing to Work A Hurwitz White Paper Figure 9: Selection Criteria for an Marketing Vendor Currently Use Marketing Plan to Use Marketing As discussed in the first report in this series, Small Business Marketing Health Check, small businesses are shifting more of their marketing initiatives to digital marketing tools, including marketing, social media and networking solutions. Use of social media is increasing. Community sites (such as Facebook), blogs and micro blogs (such as Twitter), webcasts and podcasts are becoming more influential. Most businesses, however, rely on marketing for newsletters, promotional offers and announcements (Figure 10). With adoption of both marketing and social networking on the rise, small businesses should think about how they can integrate the more ad hoc nature of social media with more structured marketing campaigns to boost the value of both. Page 11

14 A Hurwitz White Paper Small Businesses Put Marketing to Work Figure 10: Top 3 Ways SBs Use Marketing Figure 10: How Small Businesses Use Marketing Page 12

15 Small Businesses Put Marketing to Work A Hurwitz White Paper Section 5: Conclusions marketing is now an established marketing vehicle for small businesses, providing them with a fast, relatively easy and inexpensive way to reach customers and prospects. With a strong correlation between adoption of marketing and revenue growth, marketing is becoming a preferred marketing method over more traditional media. However, many current marketing users are at best lukewarm in their satisfaction with their current solution. These customers are likely to shop around for a replacement. Given the relatively low cost of these solutions, small businesses should look for one that fits their budget not merely the lowest priced offering and focus on solutions that are easy to use and provide strong support capabilities. In addition, many small businesses are concerned about clogging up recipients in-boxes with spam and clutter, pointing to the importance of selecting a solution with strong anti-spam monitoring capabilities and features. With adoption of both marketing and social networking on the rise, small businesses need to integrate the more ad hoc nature of social media with more structured marketing campaigns to boost the value of both. marketing will prove to be most effective in combination with other tactics, both online and offline, not just as a solo tool. This report, the second of two, highlights key findings from a July 2009 survey conducted by Hurwitz & Associates, and is sponsored by Campaigner. Read the first report, Small Business Marketing Health Check, at hurwitz.aspx. Page 13

16 About Hurwitz & Associates Hurwitz & Associates is a consulting, market research and analyst firm that focuses on how technology solutions solve real world business problems. The firm s research concentrates on disruptive technologies, such as Service Oriented Architecture and Web 2.0, Cloud Computing, Service Management, Information Management, and Social and Collaborative Computing. We help our customers understand how these technologies are reshaping the market and how they can apply them to meet business objectives. The team provides direct customer research, competitive analysis, actionable strategic advice, and thought leadership. Additional information on Hurwitz & Associates can be found at www. hurwitz.com. About Campaigner Campaigner s software-as-a-service marketing solutions enable organizations to have highly personalized one-to-one dialogues with their customers, measure how they respond, and analyze those responses to interact in a more intelligent, automated way - resulting in more profitable relationships. It is part of a total Software as a Service (SaaS) business communications offered by Protus that also includes MyFax, the fastestgrowing Internet fax service used by individuals, small, medium and large business, and the my1voice featurerich virtual phone service. Additional information is available at Copyright 2009, Hurwitz & Associates All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means, without the prior written permission of the copyright holder. Hurwitz & Associates is the sole copyright owner of this publication. All trademarks herein are the property of their respective owners. 233 Needham Street Newton, MA Tel: w w w. h u r w i t z. c o m

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