Study- Online Marketing & the Death of Small Business

In 2014, Google found that 50% of local smartphone searches led to a US customer visiting a brick and mortar store to make a purchase.  Tech researcher comScore found an even bigger correlation between online searches and local business traffic by stating that almost 80% of all local mobile searches led to a purchase in-store, over the phone or online.

Since 76% of those purchases took place on the same-day as the search was conducted, the benefits of having a strong online presence are virtually undeniable.  But do our small businesses across the United States realize that fact?

The Objective

In March of 2015, Upstate Synergy sent out over 800 survey invitations via email to small businesses throughout the Western Carolinas.  The goal was to see how local area businesses were capitalizing on local searches and more importantly, how businesses that do not have an online presence are doing in terms of gross sales.  We attempted to reach a wide variety of business sectors ranging from retail stores (gas stations, clothing stores, etc.) to professional services (law offices, auto repair, etc.) to hospitality (restaurants, hotels, etc.) and B2B providers.

Each business was asked to answer four brief questions about their sales totals in the first quarters of 2014 and 2015, plus any types of marketing that has been implemented to cause an increase/decrease in sales.

Those questions and the findings from the 241 respondents are listed below.

The Study

Question #1- Compared to the first quarter in 2014, has your annual gross sales increased, remained the same or declined for the first three months of 2015?

Of the 241 business owners/managers that responded, 28% claimed to see an increase in sales, 37% remained the same and the remaining 34% saw a decrease in sales during the first quarter of 2015.  There figures are within the national averages reported in 2015 so we believe that they are accurate, although it is worth noting that the totals reported by small business owners in this survey were not independently verified.

Question #2a- If your sales have increased, what do you believe was the main factor behind that growth?

The top three answers provided were website/social media traffic (41% combined), word of mouth (32%) and in-store promotions (12%).

Question #2b- If your sales have remained the same or decreased, what do you believe was the main factor in preventing growth?

The top three answers provided were a bad economy (63%), weather/a harsh winter (20%), and staffing issues (8%). Only sixteen people total from this segment (businesses without positive growth) mentioned the lack of an internet presence, which means that only around 10% saw it as a critical issue stunting their growth.

Question #3- How much money do you dedicate towards increasing your online presence every month?  Include website optimization, pay per click ads, social media marketing, etc. paid to your staff of an outside agency.

Here’s where the study gets interesting.  The small businesses that answered with spending a total of $800 or more per month (9%) almost unanimously saw an increase in sales (86%).  Of those who said they spend $300-799 each month (21%), over half of them fell into the increased profit category as well (60%).  The businesses that did not spend any money on online advertising or optimization (70%) came out the worst by far, with only twelve total participants reporting positive growth.

This statistic clearly shows that growth is almost impossible for small businesses without at least a basic online presence.  It is important to remember that this study was conducted in the Western Carolinas where that are a lot of small communities that do not have national retailers present, which would seemingly make success without an online presence much easier to accomplish.  The results do not support that conclusion at all though.

Question #4- What will be your primary marketing focus for the remainder of 2015?

This question was the most surprising part of the survey since the top answers from businesses with positive growth in 2015 almost unanimously revolved around the internet- search/website optimization (35%), social media (21%), email marketing (14%) and pay per click campaigns (14%).  Direct mail (8%) was the most common offline answer provided.

Almost 97% of the businesses surveyed with flat or negative growth are planning to continue traditional forms of marketing- direct mail (31%), television ads (16%), networking (9%), billboards (5%), and radio ads (3%).  Only 3% of the small businesses in this category mentioned any form of online advertising or website optimization at all, which starkly contrasts the strategies of the small businesses represented that claimed to have had positive growth.

Conclusion

The most telling statistic from this entire study is that the small businesses that optimize their online exposure are still alive and well in 2015; with many of them thriving.  Unfortunately, they are also in the vast minority with less than 1/3^rd of all small businesses seeing local optimization as a viable strategy.  In total, 156 of the 241 small businesses surveyed have no virtually online presence at all, which ultimately gives their customers opportunities to discover new alternatives online every time they shop.

Why the huge gap in marketing mentalities between those with increasing profits and those breaking even (or worse)?  We actually expected a fair portion of business owners to mention not having a website or not properly optimizing it, but only 12 of the 156 (7.6%) provided that as an answer…despite the world around us proving that search and local optimization is a really, really big deal these days.  When people type in a product name (aka- toothpaste) with a location (Dallas) into the search engines (buy toothpaste in Dallas), then the chances are extremely high that they are looking to make an immediate purchase.

Yet somehow that common knowledge is not represented within this study at all.

As consumers increasingly rely on their smartphones to find local businesses to suit their needs, it could very well mean the death of all of those great mom and pop businesses that so many of us have frequented over the past 30+ years.  Because while the study sample in this instance was relatively small, the trends of downward spiraling are far too large to ignore.  Unless small businesses adapt to marketing in the modern world the way that consumers overwhelmingly prefer it, they will have very little chance of survival.