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

AdWords Express- Did Google Get it Right?

Google is continually launching changes to its AdWords online advertising service, and it recently rolled out AdWords Express in an aim to help smaller businesses more easily create and run keyword-targeted ads on Google and Google Maps.



Many small business owners have dabbled in AdWords, only to find it costly and complex. So any move by Google to make it easier for merchants to master the complex art and science of keyword advertising is a step in the right direction. But the new AdWords Express service does not solve all of the challenges that small businesses have experienced with AdWords, including a financially-impactful lack of control and the ability to reach intentional, targeted customers.



AdWords Express does include a number of helpful features for small business users, such as a simple campaign setup and no ongoing campaign management. The promise is that business owners will not have to bid on keywords, but will instead simply provide a bit of information about their business, set a monthly budget, and let Google do the rest– setting up, running, and managing ads for the user.



The result, according to the Google AdWords Express site is the following: “When people search your area for the products or services you provide (”flowers in Dallas”, or if they’re already in Dallas, just “flowers”) an ad for your business will appear above or beside their search results. Your business will also be marked with a distinctive blue pin on Google Maps, helping it stand out to potential customers.”



But while the nuts-and-bolts of Google AdWords Express may be simple, even for non-savvy advertisers, there are disadvantages to the program. For one, targeting is based on a searcher’s IP address – which is, at best, 20 miles around a zip code and in the worst case, hundreds of miles away. Someone searching for flowers 100 miles from Dallas may get ads for florists in Dallas – not very helpful to that searcher and not very useful to the florist in Dallas, either. IP-based geo targeting is often wrong or inaccurate, and even when it is accurate, it may only reflect the location of the consumer and not where she would like to have the service rendered.



Additionally there are issues with intent and return on investment. Without a method for vetting who will see a given add, business owners could lose hundreds of marketing dollars in wasted paid traffic at the hands of casual, click-happy Internet surfers who may not represent the intended target audience or aren’t interested in the offerings presented. If Express isn’t producing the right return on investment, what does an advertiser do? They don’t know their bid and can’t optimize geography, making cancellation the only option left.



Advertisers still need to develop and optimize ad copy to maximize click rates. Remember, just because Google makes this process simple, doesn’t mean they are giving up on maximizing yield (revenue) per search.



The bottom line is that Google AdWords Express is a step in the right direction to serve the needs of the small business community, but it doesn’t go far enough to meet the needs of local merchants. The service is almost too simplistic; local businesses need robust, targeted location-based marketing, not just a one-size-fits-all approach. What Google has launched will make it easier to advertise on the site. But they’ve also just made it easier for local business owners to spend a significant amount of hard-earned money resulting in discouragement coupled with little to no ROI .

We're really proud of our CEO!

In Silicon Valley, meeting brilliant, innovative, business-minded people is as common as traffic on 101 or overhearing happy hour hot-dogging about upcoming IPO's...



But. Meeting brilliant, innovative, business-minded people who are as focused on the world around them, as they are on their portfolios is, well, not so common.



The MerchantCircle team is honored to have one of these unique individuals at our helm. Payam Zamani, CEO of Reply! Inc, is one of those charismatic Valley personalities with an incredible story of perseverance and a contagious passion for helping others. And because we know that Payam himself wouldn't self-promote, we're proud to share the news that he's a GQ Gentleman's Fund nomine for the Better Man Better World Search.



We'd love to see Payam as one of the finalists and welcome your support! Head on over to the nomination page and cast your vote. Then check out the great company he's keeping in this group of world-changers and get inspired.





Cheers!

Can Group Deals Work for Sole Proprietor Businesses?

Small businesses such as restaurants, salons, auto repair shops, and fitness centers are becoming adept at using daily deals from services such as Groupon, LivingSocial, and Facebook Deals to attract new customers, but what about sole proprietors?



According to our most recent quarterly Merchant Confidence Index survey of nearly 5,000 local business owners across the U.S., only 8% of companies with less than five employees had tried offering a daily deal.



While group deals can work for sole proprietors, it just takes a bit of legwork and a clear understanding of the risks involved. Though the costs of doing a daily can be high – with small business owners turning over up to half of all revenues on already steeply-discounted deals to Groupon or another provider – the results can be worth it, if you manage the deal correctly. Some 77% of small business owners who’ve done daily deals said they’d be likely to do another – citing things like effective customer acquisition and profitability as benefits.



One MerchantCircle sole proprietor who successfully used Groupon to build his business is SchaOn Blodgett of Psinergy, a self-proclaimed “Tech Warrior” who offers computer diagnostics, repair, and upkeep in the St. Paul, Minnesota area. He offered a $99 system optimization and cleaning for $49 on Groupon and sold 50 of them in one day. But the best news was, of those 50 buyers, 37 redeemed the coupon and 12 became repeat customers. So many of the customers were happy with the service that Psingergy believes 95% of the Groupon buyers will eventually return for more services.



Why did Psingergy’s offer work so well? The bottom line is that he used Groupon to get them in the door, but then wowed them with customer service once they redeemed.



“I wasn’t that surprised that the Groupon customers came back, because I pride myself on fantastic customer service, guaranteed work, and reasonable pricing,” said Blodgett. “I treat all of my customers like human beings and answer any questions - even ones like ‘how do I turn on my computer’ – without making the person feel stupid or that it is beneath me.”



Sole proprietors that want to offer a group deal should think before they leap – because a deal done badly can cost owners a fortune without bringing in high-quality customers. Here are some tips from Mashable to get sole proprietors started with daily deals.



1. Shop around.



Groupon and LivingSocial may be the most well-known daily deal sites, but there are now a wide range to choose from. Yelp, Facebook, and Google have all tossed their hat in the ring, as most daily newspapers. Now there are also many vertical and niche deals sites focused on certain sectors, such as Daily Gourmet for foodies, Yuupon and TripAlertz for travel, and even a deal site for dog owners: Doggyloot. There are also business-to-business deal sites like RapidBuyr. These niche daily deal sites are often the right choice for sole proprietors because they reach a targeted audience interested in particular products or services instead of just “everyone in the local area.”



2. Set time parameters.



With most group deal services, you won't have much control over when your deal hits, and this can make it tough for sole proprietors to manage a sudden surge in demand. This is a big problem for “one-person shops” as your time is your most precious resource. Taking on too many new customers or clients all at once could leave you overwhelmed and lead to unhappy customers and bad reviews. The way to solve this problem is to put time constraints on your deal when possible – spelling out a fairly short time period during which the deal can be redeemed. You can also set up your deal so the value of the discount is greater on your slowest days or during off-peak times. If your business has significant seasonality, try running deals during your slowest months.



3. Understand the costs.



Group deals don't always result in an immediate profit – and may even result in a net loss to the business.



To do the math on what a Group deal will cost you, here’s the basic formula. People only buy group deals offered at a steep discount to the regular price – let's say somewhere around 50 percent off. You then need to share revenue from the deal with your service provider, at rates as high as 50 percent or more. So if you’re offering a $200 interior design consultation for $100, and you have to pay $50 of that to your service provider, you'll end up with $50 for your $200 service. If it costs you more than $50 to provide the service, you'll lose money on the deal. In fact, the better the deal does, the more it will cost you.



Still, since your company's name gets in front of thousands of local consumers and you hopefully acquire many new repeat customers, a daily deal can be well worth the immediate “loss”.



4. Make the most of each customer visit.



According to recent Rice University study, less than 20 percent of group buyers return again to make a full-price purchase. To improve these odds, most of each new customer visit by turning on the customer service charm, offering add-ons, and giving them a reason to come back. Think about potential up-sells for people who redeem your coupon. A party planner could offer customers a $10 giftcard to an online party supply store, or a personal fitness coach could offer a discount for new patrons who book a series of sessions.



And don’t forget to stay in touch with your new customers. Ask for their email address and/or encourage people to leave reviews of your service on Yelp, MerchantCircle, and other local sites. You could also remind people to follow you on Facebook or Twitter.



As a sole proprietor, you are a one-person band. But that doesn’t mean you can’t benefit from the same group deal services that larger businesses – and even national brands – use regularly to acquire new customers. Just play it safe and set up guidelines ahead of your offer, and this could be your chance to build your customer base.

Facebook Ads: Small Businesses are Fans

Local businesses early on recognized the potential to market their products and services on Facebook. With a free Facebook page, businesses could offer special deals to customers, build an online fan base, and publish information and promotions – all for free. But local merchants are increasingly also early adopters of paid Facebook Ads.



According to our newest MerchantCircle survey of nearly 5,000 small businesses, some 94% of small business owners are aware of Facebooks Ads. Some 22% of small businesses are already using Facebook Ads, and nearly two-thirds of those who have used them would do so again. And while Facebook Ads have been lambasted for “abysmal” clickthrough rates, small businesses are finding value in the paid placements.



Why are small businesses satisfied adopters of Facebook Ads?



First, Facebook Ads are affordable – something very important to small business owners. While brands can afford to spend millions buying keywords on Google, cash-strapped small businesses must make every marketing dollar count. In a recent Inc. Magazine article, a New York-based small business owner said she gets great results buying Facebook Ads – at a cost a fraction of what it would cost to buy the same keywords on Google.



The below chart illustrates that cost-per-click of $0.67 for Facebook Ads in the “local services” category, and $0.53 in “restaurants” category. While that’s not cheap, it’s better than the $1-$2 per click small businesses can pay for competitive keywords on Google.

Secondly, small businesses are highly adept users of Facebook. They were avid early adopters of Facebook, with about 70% of local merchants using the platform to market their businesses, and may feel more comfortable taking the plunge to buy “experimental" ads than their larger business counterparts, whose marketing departments must justify every ad buy as part of a larger pre-defined budget.



Lastly, Facebook Ad are easy to use. Small business owners don’t have VPs to run their marketing programs for them. Most merchants run marketing as just one of the many hats they wear every day, and they don’t have weeks or months to master complicated advertising platforms. In the MerchantCircle survey, 67% of small business owners said that “ease of use” was the number one reason they’d use Facebook Ads again, with 65% saying they appreciated the ability to easily start and stop campaigns.



Of course, not every small business has seen successful with Facebook Ads. Of the 35% of merchants who said they would not advertise with Facebook again, nearly 70% said that the ads did not help them acquire new customers. While Facebook Ads may be easy to use and fairly affordable, if Facebook doesn’t introduce improved local targeting and other value-ads for small business advertisers that result in higher customer acquisition over the longer term, they will undoubtedly lose their luster with local merchants. After all, local business owners may be willing to experiment with different types of advertising, but, at the end of the day, they’ll only reinvest in methods that bring customers through the door.