Report: Most Local Merchants Will Increase Marketing and Shift Budgets to Digital this Year

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The majority of local businesses are increasing their spending on advertising and marketing this year, and they’re shifting their dollars towards a broad variety of digital tactics. Those are two of the key findings from Street Fight’s just-released study, The Local Merchant Report 2017. Our analysis also revealed a pattern of momentum spending that makes a good case that suppliers of local marketing technologies and services should create modular offerings to jump-start even relatively light spenders. 

To help suppliers better understand and meet the needs of these local merchants, Street Fight in February conducted an online survey of owners and decision-makers at over 25o small and medium-sized businesses (fewer than 50 employees but with at least one physical location). Since the last time Street Fight surveyed this type of company in 2014-15, we’ve observed a continued shift to digital marketing tactics and a growing sophistication in their usage. Social media marketing is currently their preferred channel: they’re spending more on it, and, as they adjust marketing objectives, they’re using more tools to manage their efforts. 

A little over a third of the survey respondents said they would spend less than $1,000 this year across all their marketing efforts, including traditional media. But nearly 30% said they would spend $25,000 or more. These relatively heavy spenders are the best prospects, but not just because of their spending volume. They also use more types of marketing or advertising, and more measurement and management tools. But, as shown below, 57% of local merchants regardless of budget size said they were increasing their spending, a third significantly.

Those with larger budgets were almost twice as likely to say they were increasing their spending significantly. But when we dug into the numbers, we saw an interesting pattern of spending momentum. Checking against a variety of budget sizes, we saw a strong correlation between size and the intent to increase. We looked to see if there were a classic tipping point or critical mass – i.e. a certain budget size that really got the ball rolling. Instead, we saw a steady progression: the bigger the budget, the more likely to increase. That’s a pretty strong case for a supplier to get in the door early, and grow its business as the local merchant gets more comfortable with a marketing tactic and spends more and more on it and others.

At the same time, across budget sizes, about a third of the respondents said they spend at least half their marketing and ad dollars on digital tactics and media. Well over half (57%) said that digital mix was increasing. And we saw the same momentum pattern here as well. Bigger budgets are shifting to digital faster.

We asked about their planned spending on six types of digital advertising and marketing. On average, across all categories, three-quarters of respondents said they would maintain or increase their spending, while fewer than 10% said they’d cut back. The remainder said they weren’t using the given tactic. 

The figure above shows which tactics were most likely to receive an increase in spending from the local merchants. Social media and email marketing, which they deemed their most effective media, will likely get the biggest benefits. But even paid search – an area where survey respondents said they needed a lot of help, and that they didn’t rate as particularly effective – should see bigger budgets from nearly a third of local merchants.

Overall, that’s a very positive picture for local digital marketing. Budgets are growing and relying more on digital tactics. Local merchants are maintaining or increasing spending on a variety of digital categories. And there’s evidence to suggest that once they see a positive return on marketing, no matter how small they start, they’re likely to increase spending and that momentum fuels further increases.

David Card is Street Fight’s director of research.

Click here for more on the Street Fight Insights report, The Local Merchant Report 2017.