Small and midsize businesses will continue the recent trend of shifting their marketing budgets to digital advertising, performance-based platforms and customer-retention business solutions over the next five years, according to a U.S. SMB Spending Forecast by media and marketing consulting firm BIA/Kelsey. The report said this trend creates an increasingly large market opportunity for businesses serving SMBs and developing SMB tools.
By 2015, SMBs will allocate 30 percent of their marketing budgets to traditional advertising (down from 52 percent in 2010), with the remaining 70 percent going to digital/online media (mobile, social, online directories, online display and digital outdoor), performance-based commerce (pay-per-click, deals and couponing) and customer-retention business solutions (email, reputation and presence management, Websites, social marketing and calendaring/appointment-setting), the report predicted.
"With the advent of daily deals to drive customer acquisition, SMBs are now increasingly focused on leveraging technological solutions to engage, grow and retain a higher percentage of their customers," said Neal Polachek, president of BIA/Kelsey. "As this trend accelerates, these SMBs will turn to outside providers-media companies as well as pure-play technology providers-to harness simple tools, which will enable them to maximize the long-term value of each new customer they acquire."
Overall, U.S. SMB spending on media, marketing and business solutions will grow from $22.4 billion in 2010 to $40.2 billion in 2015, representing a compound annual growth rate (CAGR) of 12 percent, while SMB spending on traditional advertising will be essentially flat during the forecast period, experiencing a 0.6 percent CAGR, from $11.8 billion in 2010 to $12.1 billion in 2015, according to the report.
SMB spending on digital/online media will grow from $5.4 billion in 2010 to $16.6 billion in 2015 (at a 24.9 percent CAGR), and the report said SMBs would also increase spending on performance-based commerce and transaction platforms, from $1.7 billion in 2010 to $4.6 billion in 2015 (a 21.5 percent CAGR). Spending by SMBs on customer-retention business solutions will grow from $3.5 billion in 2010 to $6.9 billion in 2015 (14.6 percent CAGR).
"Our forecast clearly indicates that the allocation of SMB advertising and marketing dollars for acquiring and retaining customers will both shift and grow over the next five years," said Mark Fratrik, vice president of BIA/Kelsey. "Traditional media companies and new upstarts that are actively building products and solutions in the areas of digital display, SEM/SEO [search-engine marketing/search-engine optimization], email marketing, calendaring, and other acquisition and retention tools will be in a good position to take full advantage of this substantive change in the overall SMB landscape."
BIA/Kelsey's U.S. SMB Spending Forecast is derived from the firm's U.S. Local Media Annual Forecast and its proprietary Local Commerce Monitor study, which tracks the advertising and marketing spending habits of SMBs.