Small Businesses Are Slow to the Digital Party

BCG survey: only 3 percent of their ad dollars flow online

Digital marketing is all the rage among major corporations these days but not so much among small businesses, according to new research from The Boston Consulting Group. 

The consultancy surveyed 550 businesses with less than 100 employees in the U.S. and found that only 3 percent of their total advertising dollars flowed online, compared to as much as 16 percent for big companies. In short, in the heart of the digital age, these small businesses—including restaurants, hair salons and furniture stores—still rely mainly on newspaper circulars and direct mail to drive customers into their stores.

So why are mom-and-pops passing up online tactics to market their businesses? Well, they or one of their peers may have been burned in the past, according to John Rose, a senior partner at BCG. When it comes to making ad decisions, small business owners lean heavily on their peers for advice, explained Rose.

More fundamentally, entrepreneurs such as these are focused on getting goods and services out the door and aren’t necessarily thinking long-term about their advertising, even if online ad sales guys contact them regularly.

“The small- to medium-enterprise community faces a myriad of digital marketing, digital advertising choices and … most of these business do not have a professional marketing person whose job is to drive marketing,” Rose said. “It’s pretty hard for them to winnow their way through the 20 to 40 unsolicited requests they get a month to use digital marketing product A versus digital marketing product B.”

Generally, these businesses have Web sites, but for this survey, BCG didn’t count that as online marketing. Having a Web site is too basic and ubiquitous—like an old White Pages listing—to be characterized as active marketing, Rose explained.

The gap between what smaller businesses spend online and what online platforms sell is a significant opportunity both for the businesses and platforms. The key, according to Rose, is for salespeople to clearly and simply explain how the ad platforms work, with examples of how they have performed for similar businesses.

In short, these businesses are slow to adopt new practices, and they need assurances before they shift their ad dollars. And in that sense, they’re similar to big companies.

“Advertisers in general, including the most sophisticated of them, tend to move slowly and appropriately cautiously into new vehicles,” Rose said. “So, these guys are not moving in an inappropriately slow way. [Rather], there’s a market problem in getting the right offers to them in a way that allows them to figure out what’s right for them.”