The way customers find and choose where they spend money in local markets has totally changed. This guide has everything you need to know to get more customers and keep them loyal in the internet age.
In this guide:
- Why do local businesses need marketing?
- 3 critical points in the modern customer journey
- 3 steps to get the biggest bang for your marketing buck
- How much should small businesses spend on marketing?
- What return should you expect on your marketing investment?
- Get better results with marketing software
Why do local businesses need marketing?
If you run a small, local business, you can always use more of these three things: customers, time, and money.
If you’re nodding your head, you’re not alone. We surveyed thousands of small business owners across dozens of industries (restaurants, retail, health and beauty, auto services, and more) in all 50 states. Nationwide, the top concerns for owners and operators of local businesses are:
- Attracting customers
- Having enough time for everything
- Making more money
The challenge, of course, is that these issues are interrelated. More customers means more money for you and your business, but it takes time and money to attract more customers. So, what’s a small business owner to do?
It’s tempting to think that just running your business and providing good customer service is enough. Marketing is just for big corporations with big budgets, right?
The truth is that every small business needs a marketing plan and a basic budget for acquiring, retaining, and engaging customers. Done right, marketing can help your business check all three boxes above.
This marketing success guide covers how to get in front of customers at the right time, how much your business should spend on marketing, and most importantly, how you should spend those dollars to maximize their impact.
Marketing doesn’t have to be hard or time-consuming. Take it step by step and get better business results with less time and effort.
3 critical points in the modern customer journey
Think about the motions you go through whenever you decide to spend money. What prompts your desire to make a purchase? How do you evaluate options of what to buy and where to buy it? And how do you decide whether or not you’re satisfied with your purchase?
Now, ask yourself how your customers answer those same questions.
Every day, millions of people decide they need products or services from local businesses and go through a series of steps to decide who will get their money. Increasingly, these decisions are made online long before the consumer sets foot in a business.
In fact, Google research suggests that foot traffic to local retailers is down by 57%, but every customer is worth 3 times more. Window shopping is dead. People who enter your place of business have already decided to buy.
This means that every business—even brick-and-mortar shops—must think about the customer journey through a digital lens. Take a look at this chart showing just a few ways that journey has evolved as smartphones have changed consumer behavior.
You get the idea. As you think about how to attract and retain more customers in the digital age, consider these 3 critical points in the modern customer journey:
Critical point #1: The “near me” search
Every day, Google serves billions of online search queries, and a growing number are for something “near me.” Local search is becoming a dominant form of online search as consumers try to find restaurants, plumbers, flower shops, hairdressers, auto mechanics, and more nearby.
What’s more, buying intent is very high with these kinds of searches. Google reports that 3 in 4 mobile searches for something nearby result in a same-day store visit, and 1 in 4 of those visits ends with a purchase.
Let that sink in. Local business listing sites like Google, Yelp, and TripAdvisor are sending people to businesses like yours exactly when they’re looking to spend money.
So, if you run a local business, it’s critical that you show up when those “near me” searches occur. If you don’t—or you do but your online reputation is poor—you’re missing out on a ton of potential customers and revenue.
Learn more: How the explosion in “near me” searches can drive more customers to your business.
Critical point #2: The place of business
We’ve established that once a customer enters your place of business, their buying decision is largely made. So, your next concern is how to keep that customer happy and loyal. You can’t do that if you don’t know who that customer is or have a way to stay in touch.
For most local businesses, it’s hard to keep track of customers and collect contact information. Most customers enter your business, make a purchase, and leave without much fanfare. And after all, who wants to give their name and email address while they’re enjoying a coffee, getting a haircut, or rotating their tires?
It’s challenging but critical to have a method for creating a list of your customers and collecting their contact information. If you don’t, your ability to build loyalty walks out the door the minute your customer does.
In fact, research shows that up to 80% of satisfied customers never return. If you don’t know your customers and can’t contact them after they leave, it’s going to be very hard to stay top of mind and encourage repeat visits.
Learn more: Avoid these 5 customer service pet peeves.
Critical point #3: The inbox
The #1 rule of human behavior is this: people respond to incentives. What incentives are you giving your customers to come back?
Increasingly, the war over your customer’s wallet is waged in the email inbox. How many promotional emails do you get every day? It’s probably a lot, because marketers understand this key stat: 91% of consumers actually want promotional emails from businesses they patronize, according to MarketingSherpa.
The trick is to place relevant promotional emails that drive action into your customer’s inbox at the right time. If you don’t, you’ll never be top of mind again. If you do, you drastically increase the odds of a return visit (or more). That’s good because repeat visitors spend 67% more than new customers!
Learn more: Who needs marketing automation? You do!
3 steps to get the biggest bang for your marketing buck
When you think of “marketing,” what comes to mind? For most, it’s synonymous with advertising.
Advertising is a $558 billion (with a “b!”) market globally. We’re all inundated with advertising every day, and even big companies like Amazon, Walmart, McDonald’s, and Jiffy Lube are pouring billions of dollars into advertising in local markets.
In other words, big national and multinational companies are invading your neighborhood, and they’re doing it with advertising.
The natural response would be to protect your turf by spending money on advertising, as well. However, for a small, local business, that’s the wrong order of operations. And the order matters.
To maximize the effectiveness of your marketing budget, we recommend following these steps:
- Take control of your “online presence”
- Find a way to engage your existing customers
- Layer on targeted advertising and loyalty programs
If you want to maximize your marketing results, don’t skip steps.
Step 1: Take control of your “online presence”
As we noted earlier, the way people find local businesses has totally changed. It doesn’t matter if you run a restaurant, boutique retail store, tire shop, salon, or dental office, people use the internet to find local businesses. Consider these facts:
- 84% of consumers search for local businesses online (Google)
- 97% read online reviews for local businesses (BrightLocal)
- 88% trust online reviews as much as recommendations from friends or family (BrightLocal)
The message is clear: even brick-and-mortar businesses need to take control of their “online presence.” Right now, people are searching online for businesses like yours, and what they find (or not) determines if they’ll spend money with you.
As a first step in your marketing plan, you should make sure you’re nailing this point because (a) it’s the way most customers find your business, and (b) it makes all your other marketing efforts more effective.
Here’s a quick checklist of items for optimizing your online presence:
- Do you have a company website with basic information about your business and how to contact you?
- Have you claimed all your business pages on Google My Business, Yelp, Facebook, etc?
- Is your business information, including hours of operation and contact info, accurate on those sites?
- Do you read and respond to customer reviews on those sites?
- Do you have a plan for getting feedback from your happiest customers and encouraging them to share it online?
- Here’s how customers use online reviews to make buying decisions
- Start here to claim your free business listings on sites like Google and Yelp
- 25 free listing websites every small business should be on
- 4 simple steps to take control of your online business reputation
Step 2: Engage your existing customers for repeat business
If you take control of your online presence, you’ll start attracting more new customers. The next step is to keep those customers engaged so they spend more money with you and promote your business to others.
Repeat visits are critical for small businesses. Once again, we’ve got some cold, hard facts for you:
- A 5% increase in customer retention increases profits by up to 95% (Bain)
- But up to 80% of satisfied customers never come back (Bain)
- 91% of customers actually want promotional emails from businesses they patronize (MarketingSherpa)
In short, repeat customers are insanely valuable and they want to engage with you, but they probably won’t come back without a little nudge.
A central part of your marketing plan should be building a customer engagement strategy. You need two things to do this:
- A way to contact customers after they leave the business
- A plan for when and how to reach out to them
As we noted earlier, the most frictionless way to engage customers is through simple email marketing. Most customers look forward to an email receipt, happy birthday wishes, or promotional offers delivered to their inbox. Email marketing can also help you collect invaluable customer feedback and request online reviews from your best customers.
Learn more: What’s the best CRM for small business in 2019?
Step 3: Advertising & loyalty programs
Finally, we’ve arrived where most small business marketing efforts begin.
Advertising amplifies customer acquisition. Loyalty programs amplify customer engagement. When you build these programs on top of the basics in steps 1 and 2, your dollars make a magnified impact on revenue and profits.
Imagine you spend $1,000 per month on advertising but you haven’t taken control of your online presence. You’re promoting a business that either (a) people can’t research online because you don’t have a footprint, or (b) has a poor review rating or inaccurate information on critical sites. In either case, you’re wasting money because customers will look you up no matter what.
On the other hand, putting advertising against a strong online presence drastically increases the likelihood that people will find your business and like what they see precisely when they’re looking to buy what you offer.
Similarly, loyalty programs are great as long as you build a relationship first. According to Accenture, the average U.S. household is enrolled in 29 loyalty programs but only uses 12. Build the relationship first if you don’t want to be white noise.
Learn more: the 6 elements of an effective loyalty program
Now that we’ve covered how to spend your marketing dollars, let’s focus on how much to spend.
How much should small businesses spend on marketing?
First off, small businesses don’t need to outspend larger competitors or internet businesses to get great results. In fact, the things small businesses should spend their marketing dollars on are fundamentally different compared to bigger companies or e-commerce retailers, as described in the previous section.
At Womply, we advise hundreds of thousands of small businesses in all 50 states across every consumer-facing industry. We typically recommend that a small business should spend 7-8% of gross revenue on marketing, which corresponds to guidance from the U.S. Small Business Administration.
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Of course, it’s a little more nuanced than that. In the early stages of a business, for example, you might need to spend more to get traction. The same is true if you’re facing stiff competition in your local market, or you’re in an industry (like retail or restaurants) that gets more leverage from marketing.
Here’s a simple model you can follow:
Percent of gross revenue to budget for marketing
Sound like a lot? A study by Gartner found that the average large company spends 13% of sales on marketing, and the average small business spends 10%. Furthermore, a study by Duke University and Deloitte found that many businesses spend up to 50%!
If that sounds overwhelming, take heart. Small businesses don’t need to spend nearly as much as big ones, and spending more doesn’t necessarily mean better results, especially if your spend matches the priorities outlined in the previous section.
What return should you expect on your marketing investment?
If you spend $1 on marketing, what return should you expect on that investment?
There are lots of theories out there, but the consensus is a good return on investment (ROI) is 5:1. You may not get that in all cases, and you may do much better sometimes, but you should aim for making $5 for every $1 you invest.
How can you get there? Let’s look at an example.
Imagine your business grosses $50,000 per month in sales, and you invest 8% of sales and get a 5% return. Here’s what that looks like:
- Monthly investment (8%): $4,000
- Monthly ROI (5:1): $20,000
- Month net revenue increase: $16,000
- Annual net revenue increase: $192,000
That’s almost an extra four months of revenue for the business generated by marketing! A more modest return (2:1) would still fetch an extra month of revenue, and an aggressive return (10:1) would result in nearly $400,000 in additional revenue.
Get better results with marketing software
In the past, marketing software was built exclusively for big businesses with massive budgets and armies of specialized employees to geek out on every feature. That gave yet another advantage to the Goliaths out there.
Recently, some software providers have turned their attention to underserved small businesses and the response has been remarkable. The chart below shows software adoption by small businesses since 2011. Take a look:
Software adoption by U.S. small businesses
That’s a major uptick in a few short years! The growth in software adoption by small businesses is happening because time is money, and software can do jobs that take time.
What kinds of software systems should you use? We recommend using marketing software that makes it easier to manage or accomplish the priorities we’ve outlined in this guide:
- Step 1: Take control of your online presence
- Tracking and replying to your reviews can be time consuming, especially considering you have to jump from one review site to the next. Look for reputation management software that will help you manage, track, and respond to reviews in one place.
- Step 2: Engage your existing customers for repeat business
- For this step, you’ll need CRM or email marketing software to help you track your customer interactions and engage with them when they aren’t spending money with you. It’s also important to be sure you look for CRM or email marketing software built specifically for small and local businesses like yours and not an expensive or hard-to-use enterprise solution.
- Step 3: Advertising & loyalty programs
- You can use ad management or loyalty program software. Ad management systems can automate pay-per-click (PPC) and cost per thousand (CPM) ad campaigns on sites like Google and Facebook. Loyalty program software can help you create and deliver programs with minimal effort.
Like any business software, the right solution should accomplish most or all of these steps while being simple to use. Avoid overly-complex solutions or software built primarily for big business. The right software should be built from the ground up with you in mind.
And Just like any other marketing-related expense, marketing software should be seen as an investment for your small business. Every dollar you spend should save you hours of time worked while bringing more business in your door than if you tried to manage these steps on your own.
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