SMB Surveys Show Digital Marketing Satisfaction Yet High Churn Persists

The “small business market” is a vast and diverse place, though I and others often speak about it as if it were a monolith. Variations by industry, headcount, revenues, marketing budgets, years in business and desire for growth (or not) create nuances and differences that are often lost in the many discussions we have about “SMBs” generically.

Because of such differences, it’s important to take any single survey about SMB attitudes and behaviors with some caution. We have to look at directional trends over time and the totality of evidence to get a better sense of how SMBs are thinking and acting.

It’s also the case that survey respondents can misrepresent their level of sophistication or activities. Many SMBs say they are adopting or actively implementing some digital strategy or tactic (e.g., mobile) than actually are. These kinds of responses are often statements of intent or on the to-do list.

One generalization about the SMB market in the US that can be made with some confidence is that digital “churn” is still rampant. Privately many vendors of digital marketing services to the SMB market report stubbornly high non-renewal rates.

In many cases and for many companies these rates are north of 50% or 75% annually — meaning 75% of their advertiser base turns over on an annual basis. The LSA is preparing to do some benchmarking and industry wide analysis of churn to determine what might or might not qualify as “acceptable churn.” But for most service providers churn remains unacceptably high.

BrightLocal SMB survey

Despite this, one often sees SMB marketing surveys that reflect high satisfaction levels when it comes to digital media and marketing. The most recent example comes from SEO firm BrightLocal, which not long ago released SMB survey data showing high “internet marketing effectiveness” ratings.

In this survey most of the SMBs respondents “had just 0-3 employees (58%) [and] were spending less than $500 on marketing per month” (70%). While some respondents were spending much more money on digital marketing, the respondents generally, across vertical categories, rated internet marketing “effective” or “very effective.”

A broader survey that I wrote in 2013 (n=1,255 US SMBs) found similarly strong satisfaction with digital channels. Company websites, social media, even online display advertising saw satisfaction levels of 60% or more among SMB respondents.

SMB survey 2013

The question arises: given these high digital satisfaction levels, why does churn remain such a persistent and widespread problem? One would expect satisfied SMBs to stay with vendors that are presumably delivering the results they’re seeing.

It’s tough to reconcile these high satisfaction numbers with the churn figures in the market. The 2013 survey I conducted revealed that low pricing was the single most important variable to SMBs when it comes to selecting a marketing services vendor. This finding might hold some insight into churn: price sensitivity and aggressive competition among vendors in some cases might in part be luring SMBs to switch providers.

But that’s not a sufficient or satisfying explanation. I know from all the empirical and anecdotal evidence that high expectations are a churn factor and ROI uncertainty is a factor, as well as cost. The dissatisfactions and demands of SMBs in the market that one hears about with regularity seem to directly fly in the face of these survey data arguing SMBs are fairly satisfied with their digital marketing programs.

It’s curious and I have no good explanation of the seeming paradox. What are your theories and thoughts?

At LSA 15 we’ll be devoting a good deal of time to discussing sales issues and SMB retention. On Monday April 20 in the afternoon we’ll be presenting a sales transformation workshop that will dive deeply into many of these issues and offer best practices recommendations and pragmatic advice regarding churn and SMB retention.

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8 Responses

  1. Marketing businesses answered “not effective” and “don’t do any”. To me that speaks volumes. They don’t know how to properly leverage internet marketing for their own marketing business, so how are they supposed to do internet marketing for customers?

    The other item I would consider in this survey, if you look at the question on in-house/outsourcing – majority of businesses answered they primarily do it in-house. It’s a lot harder to be truthful and admit your in-house efforts suck or deliver mediocre results, and they might be satisfied with it.

  2. I would like to see a survey breaking the churn down by type of service provider and product. I suspect that the vertically-focused vendors and infrastructure providers (much harder/scarier to swap your website out) see lower churn. Ironically, some vendors that provide transparency to attribution/ROI may actually suffer as compared to more opaque solutions.

    IMO, the paradox may be driven by a combination of factors which include how the SMBs think they should respond, how they want to be perceived, how well they understand the products and marketing tactics they employ, and an less-than-objective view of their marketing results. I suspect the survey responses from the small law firm my wife works for would not match reality – the owner spends ~ $1200/mo on marketing, a little over half of which is web hosting from an industry vertical-focused company and $400/mo on a display ad in the neighborhood newspaper. They track all of their sources of leads and find the vast majority come from SE traffic to long-form SEO content. The business hasn’t recorded a single instance of obtaining a client from the newspaper ad but the owner says she’s very happy with her print ad and refuses to reallocate the spend to another tactic because “she has had the ad in the paper for 14 years”. The business is down but the owner does not think directional advertising, paid search or management of ratings and reviews are good marketing investments.

  3. Part of the issue may be that SMBs tend to focus on just 1 or 2 items in their digital marketing strategy. So, they either stubbornly hold on to these strategies regardless of what the actual data is telling them, or they switch from one tactic to another, so in their minds the things that they are working with *right now* is a good one.

    It would be helpful to also ask during your surveys how MANY of the different types of marketing efforts do each of these SMBs use? And perhaps which ones have been used over the past 3, 6, 12, 18 months?

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