Small Business Blunders – How Does Social Really Stack Up?
Once upon a time, marketing a small business fit into one of two different categories; inbound or outbound. Inbound leads consisted of those clients or customers that initiated contact with the company via phone or physical presence while outbound marketing was initiated by the company or small business owner. There were several “staple” tools of the trade including the mandatory “Yellow Page” advertisement in the phone book directory (remember those?), newspaper and magazine advertisements (a rapidly shrinking market), telemarketing, direct mail, radio and television. That just about covered the majority of options for both inbound and outbound marketing. Then came the Internet. At first, it was a no-man’s land of porn, gaming, medical related information and bulletin boards with little opportunity for real tracking of customers much less actual selling. Of course, all that changed as bandwidth opened up and sites like eBay and Amazon started to outsell traditional brick and mortar stores. With increased sales came the ability to track user statistics, demographic trends, desires, conversion rates and other important measures of marketing success.
Despite all these advances, many small business owners are still “marketing” in much the same way they did 20 years ago; direct mail, telemarketing and print advertisements…but does it still work? Even more importantly, how does social media stack up against these tried and tested methods? Today we are going to delve into this somewhat complex topic to find out the facts.
Big Fish – Small Pond Approach. One commonly cited strategy used by small business owners is the “big fish in a small pond” approach. This rationale typically goes something like this; in the past, competition was tough for advertisements in traditional media but today, less competition means my advertisements will stand out even more. Or – closely related – traditional advertising is more cost effective than ever due to less competition. Well, that’s one way to think about it but does the premise really hold true in the real world? According to research…no. Not only does social media dramatically increase response rates, conversions, overall communications and long term “goodwill” but the overall cost of inbound marketing is nearly 1/3 that of outbound methods. In short, it’s much more cost effective and yields greater long term results.
Word-of-Mouth Marketing. Once considered the gold-standard of marketing, traditional word of mouth marketing was notoriously difficult to measure much less determine an actual ROI. In fact, advertisers used this to their advantage for decades in order to sell print advertisements; by routinely citing publication circulation or subscription data, advertisers often erroneously over-estimated the total reach and impact of a given advertising campaign. Thankfully those days are long gone. Thanks to social media, small business owners are able to quickly ascertain how many followers they have, estimate total reach by extrapolating visibility of current users, track each time a customer or partner mentions their brand and obtain fairly robust ROI data. In fact, social media IS the ultimate word-of-mouth marketing tool with the promise of allowing even the smallest business owner an opportunity to “go viral”.
Stand-By Versus Social. It’s no surprise that big business has adopted social media marketing so why are small business owners reluctant to join the trend? In part, it is due to the (mis) perception that social media marketing requires deep pockets and a lot of time to become effective. While social media marketing isn’t a one-size fits all solution, small business owners that give it a try report stellar results…and the intent to dedicate even more of their budget toward social media marketing in the coming year. For instance, when asked about their social media budget for 2012, small business owners reported they will spend dramatically more on social media and blogs. It’s not surprising given the impact:
- Nearly 60% of business blogs report a direct conversion and new customers exclusively from the blog and of those business owners that blog daily, over 90% report new clients solely from the blog. In fact, business blogs are listed as a critical area of importance by over 80% of business owners!
- Over 60% of business owners have acquired a new customer from the use of B2B site LinkedIn and well over 70% (approaching 80%) have acquired new customers via Facebook.
- Over 60% report social media is now a major source of new business and/or client leads while over 50 percent report direct mail has decreased in both value and leads.
- Despite being the “new kid on the block”, over 40% of marketing pro’s list Google+ as “critical” to their business!
Small Biz versus Big Biz
Small business owners often feel like “David” approaching Goliath and in fact, the metaphor might actually be a good one when it comes to social media marketing; it’s a great equalizer that allow small business owners to retain contact, convert new clients and maximize their exposure for a fraction of the cost required to reach consumers in the past. There was no doubt the old traditional forms of newspaper, journal or magazine articles, radio or television commercials etc were heavily slanted in favor of big business. Not so with social media! Unfortunately, time and time again mom and pop business owners fail to act upon these advantages. For instance, nearly 90% of big business is actively increasing their social media presence…small business owners are too but not nearly at the same pace.
The Bottom Line
Today, the average cost per lead (for all types of business and industry) associated with outbound marketing is just under $350. Remember, outbound marketing consists of telemarketing, direct mail and trade shows. Not only is each notoriously difficult to track in terms of conversion rates, but strong evidence supports the notion that certain forms such as telemarketing may actually decrease overall reputation over the long run.
Compare this to the average cost of inbound marketing at only $135 per lead. Again, this is across all industry types including notoriously expensive forms such as big pharma; inbound marketing consists of SEO, blogging and social media. At less than half the cost, inbound marketing makes sense for small business owners.