Mountain View, California (PRESS RELEASE – February 16, 2011) – MerchantCircle, the largest online network of local business owners in the nation, shared results of its quarterly Merchant Confidence Index survey of over 8,500 small and local business owners across the U.S. The data reveals that local merchants, who have very limited time and money for marketing, are gravitating towards simple, low-cost online marketing methods such as Facebook and other social media, as well as towards tried-and-true methods such as search and email marketing. The research also demonstrates that while new marketing services such as mobile marketing and group buying are generating significant buzz in the media, local merchants have yet to tap these unproven marketing methods.
“Online marketing continues to be a challenge for most local businesses, and many merchants are working with very small budgets and almost no marketing resources,” said Darren Waddell, vice president of marketing at MerchantCircle. “The marketing methods we see gaining the most traction are therefore the ones that offer merchants simplicity, low costs and immediate results.”
Key conclusions from the survey include:
1. Local businesses have little time or budget to devote to marketing.
According to the MerchantCircle survey data, more than half of local merchants are spending less than $2,500 a year on marketing, and 60 percent have no plans to raise their budgets this year. These merchants are also price-sensitive: one quarter of merchants cite high costs as their chief complaint about online marketing (26 percent).
Many merchants are also struggling to manage their existing programs and don’t have time to take advantage of new, unproven services, with lack of time and resources the top online marketing challenge for more than one third of merchants (37 percent).
2. Social media are now the top marketing strategy for local businesses.
With its huge consumer adoption, ease-of-use and low barrier to entry, Facebook continues to be a popular way for merchants to market their business, with 70 percent using the social network for marketing, up from 50 percent one year ago. Facebook has now surpassed Google (66 percent) as the most widely used marketing method amongst local merchants, and is almost tied with Google search (40 percent) as one of their top three most effective marketing methods, with 37 percent rating Facebook as one of their most effective tools.
Facebook Places has benefited from this high level of adoption, soaring past Foursquare to reach a 32 percent current usage rate, with an additional 12 percent citing plans to use Facebook Places in the coming months. While Foursquare’s usage is up from just 2 percent one year ago, use of the location-based service has remained steady at about 9 percent over the past two quarters.
Twitter has also grown in popularity over the past year, with nearly 40 percent of local merchants using the microblogging platform to build awareness and community around their products and services, up from 32 percent in Q4 2009.
3. Tried-and-true online methods trump new, unproven approaches.
With little time and budget to devote to marketing, local merchants are slow to adopt unproven technologies such as mobile marketing and group buying and are relying on more familiar methods that have delivered results. Three of the top marketing methods for local businesses — social, search and email — are also cited as being the most effective, with 36 percent putting social networking in the top three, 40 percent citing search and 36 percent choosing email marketing.
In spite of the hype around mobile marketing, less than 15 percent of merchants report doing any sort of mobile marketing or advertising, and more than half have no plans to do so in the coming months. Lack of understanding remains a huge barrier to adoption: 74 percent of merchants state that they don’t have a good idea of how to reach consumers via mobile marketing.
Group buying will also take time to penetrate the local market. Only 11 percent of local merchants have offered a “daily deal” using a service like Groupon or LivingSocial, with an additional 20 percent planning to do so in the coming months. Results of group buying have also been mixed and may be hindering growth: 50 percent of people who have run a daily deal campaign said they would not do so again.
4. Use of traditional offline marketing methods continues to decline.
Traditional offline marketing methods continue to decline across the board. Over the course of 2010, use of print advertising dropped by 33 percent (from 40 percent usage to 27 percent); use of print Yellow Pages declined 18 percent (from 45 percent to 37 percent); and use of direct mail decreased 26 percent (from 39 percent to 28 percent).
Don’t expect these methods to disappear anytime soon, however, as many continue to deliver results for local merchants. 24 percent say that coupons or direct mail are still one of their top three most effective marketing tactics, 23 percent say print Yellow Pages are a top three tactic, and 20 percent put print newspaper ads in the top three as well.
5. Online marketing services companies are aggressively targeting local businesses.
Despite the fact that local merchants have very little budget for marketing, online marketing services companies are working hard to reach and serve this market, often with a direct sales force making cold calls. MerchantCircle’s research reveals that 51 percent of local merchants get at least one online marketing sales call a week, with 10 percent getting called almost on a daily basis.
About the Merchant Confidence Index
The Merchant Confidence Index is a quarterly survey conducted by MerchantCircle, the largest social network of local business owners in the U.S. with over 1.6 million members. The Index is designed to track trends in small business sentiment over time and is derived from four key questions designed to synopsize the prevailing trends among local business owners. The overall index score is based upon a standardized five-level Likert scale.
This fifth Merchant Confidence Index survey was fielded online, between January 22nd and February 3rd, 2011, and sent to a random sample of MerchantCircle’s member base of over 1.6 million local business owners. There were 8,456 total responses from local business owners across the United States. Responding businesses classified themselves as legal and financial services, automotive, health and beauty, entertainment, travel and more, with 75 percent of respondents having less than 5 employees. The survey data can be broken out by state, business type or business size (by headcount) upon request. No incentive was offered to complete the survey.
Founded in 2005, MerchantCircle is the largest online network of local business owners in the nation, combining social networking features with a variety of free marketing tools that enable merchants to maximize their online visibility. Over 1.6 million merchants use the tools offered on MerchantCircle to create conversations with customers and connect with fellow local merchants. Local consumers can find more than 20 million business listings through http://www.merchantcircle.com or major search engines in the U.S., Canada, United Kingdom and Australia. In addition to its free services, MerchantCircle offers a portfolio of premium online advertising solutions including search engine marketing and instant website development.
In 2010, MerchantCircle acquired TimeBridge and the popular Bloglines service to futher extend its network offerings. MerchantCircle is based in Mountain View, Calif., and funded by Rustic Canyon Partners, Scale Venture Partners, Steamboat Ventures and IAC.