Every day, business owners across the nation are presented with a new service guaranteed to make it easier to run their businesses. They’re constantly bombarded with buzzwords like “seamless integration”, “smart marketing” and “insightful insights for data innovation” to keep up with the ever-evolving state of local business marketing. Being major players in this game ourselves, we wanted to take a step back and ask business owners how they really feel about the marketing and customer retention tools they're using.

The 429 small business owners we surveyed represent a range of business verticals from 41 states. Some have only been in business for less than a year and others are going on 20+. They all use or have used tools to grow and support their marketing and customer retention objectives and 49% have a loyalty program in place. Among their similarities and distinctions, there is one thing that unites them all: In March 2016, they were compelled to click a link to provide their opinions about the current state of marketing for small businesses.

Hot Takes On Marketing and Customer Retention From Those Surveyed:

• Local businesses plan to spend more on their marketing in 2016 than they did in 2015 with 42% of small business owners estimating they’ll spend between $1k and $5k on their marketing initiatives this year.
• 72% of small businesses plan to allocate the majority of their marketing budget to customer acquisition. 28% plan to allocate the majority to customer retention.
• Small businesses rated "customer loyalty programs", "social media advertising" and "email marketing" as the most effective marketing channels.
• Business owners with loyalty programs are willing to spend more on their marketing initiatives.
• Local merchants believe that in 2015, over 70% of their revenue came from loyal customers.
• Almost 30% of SMBs estimated that 71-90% of their customers visited more than once last year.
• Local merchants struggle to measure the effectiveness of their marketing campaigns.
• A large majority of local merchants are not segmenting their customers to send them personalized marketing offers.
• 30% of SMBs feel that they don't have enough budget to hire someone to run their marketing.
• Higher revenue merchants are more worried about the time and knowledge required to effectively run their marketing initiatives.

Show Me The Money

Local businesses plan to spend more on marketing in 2016 than they did in 2015.

Marketers and companies developing tools to assist small businesses can all breathe a sigh of relief: local businesses still want us! In fact, 42% of small business owners estimate they’ll spend between $1k and $5k on their marketing initiatives this year.

Even though it’s much more expensive to acquire a new customer than to retain an existing one, SMBs report putting more emphasis on customer acquisition than retention. According to Street Fight’s Local Merchant Report from 2015, 80% of SMBs in their first year of business said customer acquisition was their main priority. Of the merchants we surveyed, 72% plan to allocate the majority of their marketing budget to customer acquisition while only 28% plan to allocate the majority to customer retention. Tamara McCleary, an internationally recognized expert on business relationships, explains the detriment of putting acquisition over retention.

“It's potentially lethal to put acquisition before retention strategies. Look at the data: It costs five times as much to acquire a new customer as it does to keep an existing one.”

Given that business owners rank revenue growth and repeat customers as the top 2 indicators for measuring success, they still think they need to put the majority of their marketing dollars into acquisition. McCleary also adds that existing customers are 50% more likely to try a new product or service and spend 31% more than a new client. Which means that increasing customer retention by just 5% can yield up to 95% in increased profits. If merchants shift their thinking and put more importance on retention, then they will see the success metrics they’re after.

Do It To It

Merchants understand that marketing today means more than making a Facebook page. We polled our survey respondents to find out which marketing channels and media they expect to use in 2016 to promote their businesses.

As you can see, social media advertising, loyalty programs and email are the most popular marketing tools for SMBs. They also rank those tools as being the most effective for marketing their businesses. Why? Because these channels are so easy to track. Merchants utilizing them can easily measure how many customers are joining their loyalty program, which emails are driving customers in-store and how their Facebook ads are performing. SMBs should invest in marketing channels that can be measured and tied to in-store customer activity.

Greg Sterling, VP of Strategy and Insights at Local Search Association, stresses the importance of exploring additional platforms for increased exposure.

“SEO/presence management is critical. SMBs also need to think mobile first, which cuts across channels but is not being adequately prioritized by local businesses. Paid search remains effective and should be considered, especially in a mobile context. Organic video (YouTube) should also be explored.”

Judging from the range of marketing channels still being utilized (almost 12% of merchants plan to run radio ads in 2016), there isn’t one marketing strategy that can be applied across every business; therefore, it’s crucial that business owners customize a plan to fit their business’s unique needs.

Does Customer Retention Matter?

According to Peter Krasilovsky, chief analyst at Local Onliner, SMBs are more aware of ways to spend on customer acquisition than retention. This explains why they’re willing to dedicate more of their marketing resources to these strategies even if they aren’t always in their best interest for long-term success. Therefore, there’s a huge opportunity for marketing solutions to demonstrate their value simply by educating merchants. Per our findings, local merchants estimate that 70% of their revenue came from loyal customers in 2015, so it shouldn’t be a surprise that merchants with loyalty programs are willing to spend more on their marketing initiatives.

The findings below demonstrate the impact customer loyalty has on a business:

• Almost 30% of SMBs estimated that 71-90% of their customers visited more than once last year.
• How important is your loyalty program to retaining customers? 61% very important, 30% important

“A customer who buys today is only a customer as of today. If we don't know for sure that she has come back, then it's a useless estimate that's costing those businesses handsomely in lost profits.”

Noah Fleming, President of Fleming Consulting & Co.

With a digital loyalty solution, businesses can access how often customers are visiting, which rewards they’re redeeming and their engagement with other forms of marketing.

“Loyal customers love to be rewarded and what better way than to give them the food that they love? In my restaurant, I have actually phased out all traditional marketing, like menu mailing, and have moved 100% to loyalty programs and social media marketing.”

Keep It Real

One of the biggest marketing trends predicted for 2016 is the concept of personalization.

“Personalization demonstrates to a customer that they are important. Offer substance, create email marketing campaigns that make your customers feel seen, heard, and valued.”

Tamara McCleary

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Consumers today are smart. They understand targeted digital marketing and how Facebook ads work, and they’re used to doing minimal work when it comes to making buying decisions. They can see through generic, mass offers and instead want the offers that are most relevant to them. Email marketing is an easy way for businesses to keep customers engaged and influence buying decisions, but like everything there’s a right and wrong way to do it.

“If you send the same email to everyone, then you’re doing it wrong and likely getting a return on investment commensurate with that effort.”

Noah Fleming

And while it’s great that 54% of local merchants are sending emails to their customers, their efforts can cause a negative impact if they aren’t personalized. According to Aimia Institute, millennials are 44% more likely to disengage with brands if they receive high volumes of mass generic email communications (unsubscribe, anyone?). Of the 54% of local merchants that send email campaigns to their customers, only 32% ensure that those offers are personalized. In fact, 75% either haven’t made a decision yet or don’t plan to send targeted offers in 2016 at all.

More Money, More Problems

Even with the data supporting how SMBs should approach marketing and all the resources at the ready to help them, merchants will always have objections to even the best strategies. Of the merchants we surveyed, 30% feel that they don't have enough budget to hire someone to run their marketing; therefore, marketing in general is deprioritized. For merchants who do try marketing initiatives, most agree that it’s difficult to measure the effectiveness of their marketing campaigns. Fifty-five percent rely on anecdotal customer feedback to determine the success of a marketing initiative. Customer feedback is great, but it doesn’t carry the same weight as a hard data point. We observed that revenue volume dictates marketing challenges.

Higher revenue merchants are more worried about having the time and knowledge to effectively run their marketing. This could stem from the perception that even though higher revenue merchants can afford the tools to run their marketing, they feel that they don’t have the time or knowledge to fully run it properly. A word of advice?

“SMBs should find a good growth partner or agency; someone that knows the steps, tools and strategy needed to get from point A to point B.”

William Harris, Growth Marketer at Elumynt.com

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Find a loyalty program that offers a marketing solution. Merchants can then activate automatic features and tools to keep their customers engaged and coming back, without sacrificing time or resources.

These findings are worth sharing. Feel free to download this page here.