Customer Acquisition is (Still) King for Local Merchants

For many small businesses, the biggest challenge is acquiring new customers at an acceptable cost. And in 2011, we saw several new approaches to customer acquisition gain momentum: Facebook Ads and group deals.





According to our most recent Merchant Confidence Index survey of 2,500 local business owners across the U.S., while newspaper ads and direct mail – tried-and-true offline customer acquisition techniques – are still popular, with 25% and 24% of merchants using them, some 12% of merchants have offered a daily deal – up 33% compared to three months ago – and 24% bought targeted Facebook Ads.

Daily deals appear to be effective in driving customer acquisition tool for some small businesses.  According to the Merchant Confidence Index, 75% of merchants who have used daily deals in the past would do so again.  Of those who would use daily deals again, 61% of said they’d use them again because daily deals are “effective for customer acquisition.” While only 37% of merchants said the deals were “profitable”, it seems getting a new customer through the door makes daily deals worth trying again.

Local merchants are also acquiring new customers via Facebook Ads, the targeted paid ads offered by the world’s largest social network.  Some 38% of merchants said they’d use Facebook Ads again due to their effectiveness as a customer acquisition tool.  But for those who wouldn’t use Facebook Ads again, 66% said it’s because the ads did not work to acquire new customers – showing that customer acquisition is a top priority for small businesses.

Customer acquisition is so important to local merchants, the majority of respondents said they’d be willing to purchase qualified prospect information on a pay-per-lead basis. Over 60% of merchants in the financial services industry would pay for leads, while one-third of merchants in the automotive, construction, and home improvement industries would.  Look for this strategy to gain steam in 2012.

Marketing strategies that aren’t proven to bring in new customers are, unsurprisingly, not very popular with local merchants looking to grow their businesses. Mobile marketing, for example, has been slow to catch on with local merchants. Only 22% of merchants have tried mobile marketing, with 72% saying they’ve hesitated because they don’t have a good understanding of how to use it to reach potential customers.

With nearly a third of local merchants concerned about the high cost of marketing in the next year, it’s no wonder they prefer to use channels that deliver what they most need: new customers.

Sincerely,

The MerchantCircle Team

New Data on Small Business Adoption of Facebook Ads and Group Deals (Google Offers, Groupon and LivingSocial)

New marketing trends data from MerchantCircle's 7th survey of small business owners across the U.S. reveals that group deals are gaining popularity among small businesses and shows Google Offers and other niche deal providers are putting increased pressure on Groupon and LivingSocial. There’s also evidence of slowing adoption for Facebook Ads, although favorability for this new advertising medium remains strong among those who are using it.

Key insights from MerchantCircle's research include:

1. Group deals are experiencing steady growth among local merchants

• Nearly 12 percent of local merchants now report having offered a daily deal, up 33 percent since the last MerchantCircle survey in June 2011.

• About 75 percent of respondents say they would offer another deal in the future, citing its effectiveness for customer acquisition as their top reason (61 percent).  Deal profitability also appears to be on the rise: 37 percent now say solid profitability will lead them to offer another deal, up from just 24 percent in June.

• Among the 25 percent who said they wouldn’t offer another daily deal, 42 percent said it was not effective for customer acquisition, 36 percent said it was too costly and 34 percent said they lost money on the deal.

2. Cost is the most important criteria for selecting a deals provider.

• 64 percent citing cost as their top consideration when selecting a deals provider.  Local targeting (57 percent) and the ability to reach a large audience (52 percent) were the second and third-most important selection criteria.

• Businesses that plan to use Groupon in the future report that the ability to reach a large audience is equally as important to them as cost, with 62 percent citing reach and cost as key selection criteria.

3. Groupon and LivingSocial may face increased pressure from Google Offers in 2012.

• About 19 percent of local merchants who have offered a group deal have tried using Google Offers since its launch this summer, as compared to Groupon (26 percent) and LivingSocial (21 percent).  A large number of specialized deals providers have also entered the market; these services have been used by about 43 percent of local merchants who have offered a group deal.

• About 32 percent of merchants planning to use Google Offers for their next deals, as opposed to 26 percent who plan to use Groupon and 16 percent who plan to use LivingSocial.

• Google Offers enjoys the highest retention rate of all the large deals providers: 66 percent of its customers plan to use Google Offers again.  Just 41 percent of Groupon and LivingSocial customers report that they plan to use these services again.

• Before ceasing operations, Facebook Deals had been used by 22 percent of the respondents who’d offered a daily deal in the past.  More than half of these customers say they plan to use Google Offers for their next deal (53 percent).

4. Facebook Ads growth slows among local merchants.

• About 23 percent of local merchants report having tried Facebook Ads to date, which is only five percent more than six months ago.

• That being said, favorability for Facebook Ads remains strong among those who have tried them, with 62 percent saying they would use Facebook Ads again, citing ease of use (62 percent) and the ability to start and stop campaigns (55 percent) as the top reasons for continuing.

• Of the 28 percent who say they wouldn’t use Facebook Ads again, nearly two-thirds report that they didn’t acquire new customers (66 percent).  But more merchants now also cite high costs and low click-through rates as reasons not to advertise with Facebook again: 41 percent of merchants said the ads were too expensive (up from 35 percent in June) and 37 percent reported low click-through rates (up from 29 percent in June).

• While Facebook Ads growth may have slowed, general Facebook marketing continues to be extremely popular among local merchants, with 70 percent of people using the social network for marketing, up from 66 percent in June. 

A big THANK YOU to all our merchant members who participated in the survey.  Stay tuned for more insights into small business marketing in the coming days!

Sincerely,

The MerchantCircle Team

Small Business Survey: Group deals and "Pay-per-lead" poised for growth

The results from our latest installment of the Merchant Confidence Index survey are just in.  We received over 2,500 responses from our small business members and we'll be "crunching the numbers" over the next few days to share insights into: 1) small business owners' opinions of the current economy, and 2) the adoption of new marketing channels by these business owners.



As illustrated by the super-cool infographic below, newer paid marketing channels like Facebook Ads and group deals are now part of the small business marketing mix, with local pay-per-lead poised for some serious growth in the near future.



Also surprising is the quick adoption of Google Offers relative to the "big boys" in the group deal space like Groupon, Facebook Deals (no longer around) and Living Social.  Local business owners tell us that they plan to try Google Offers more than any other group buying service in the future.



Enjoy the infographic!



Sincerely,

The MerchantCircle Team

Big changes are coming (and we think you're going to like them)!

Our goal has always been to help busy people solve everyday problems.  Whether it’s helping local merchants promote their business online, or helping busy consumers get things done – we focus on connecting people with a vibrant network of local business owners who are eager to help. Our goal hasn’t changed, but the way we approach it certainly will.  In the coming weeks, we will be introducing a "beta" version of the new and improved MerchantCircle.



Most of the time, people need more than just online reviews to solve a problem.  Our network of 1.6 million local merchants makes MerchantCircle the one place to go to find trusted merchants, get great deals, find expert advice and get competitive quotes for real-life projects.  No more surfing the web for hours trying to find what you need – we have it all right here.



Here are some exciting new features being added to help both MerchantCircle Neighbors and our member merchants:



For MerchantCircle Neighbors:

• Deals - with enhanced search capabilities, promotions, coupons and offers will be easier to find


• Reviews - we're making changes to ensure that you get real reviews from people in your community


• Better search – find more relevant businesses and local advice

For our merchant members:

• Free member support - just call our US-based call center (more to come soon!) 


• New forums - same great discussions, but way faster and easier to use 


• Updated listing templates - we’ve freshened up and reorganized the look and feel of listing pages so people learn more about your business

So stay tuned – we’re excited about the new direction and we hope you like what you see.

Sincerely,

The MerchantCircle Team