The social media payoff for small and medium businesses

The ability of larger organizations to spend more on technology is a threat to small business. However, social media can be a mitigating force to help counter the resource advantage that larger enterprises have for marketing, sales, and informational purposes.

An advantage for pizza and restaurant chains

The Wall Street Journal recently profiled how the online ordering capabilities of large pizza chains have taken a bite out of mom and pop pizzerias. Domino’s, Papa John’s, and Pizza Hut each book at least 40% of their business online. As Domino’s CEO Patrick Doyle told investors, “Most of the small and regional chains who still continue to sell the majority of the pizza in the U.S. simply aren’t able to play on these technology platforms with the level of sophistication that we have”. Other large restaurant chains experimenting with online ordering, and Starbucks CEO Howard Shultz has described the trend as a “seismic shift”.

The restaurant sector of course is not alone, and we have also covered the similar dynamic in grocery sales, with implications through the supply chain.

Mobile is another area where larger companies lead

Smaller companies lag in other transformative technologies as well. While 65% of large banks provide mobile-based banking services, only 30% of banks with less than $10 billion in assets and 20% of credit unions offer mobile banking.

A business in helping small business

Still, there are ready examples of enterprising companies helping small businesses to market their offerings online. Amazon and eBay have helped many smaller companies to find not just regionally broader, but even global markets for their products. OpenTable helps restaurants with online reservations, and restaurants in larger metropolitan areas likely to have multiple options to facilitate online ordering.

Small businesses fight back with social media

A majority of small businesses are also fighting back with the use of social media. LinkedIn has come out with a study based on a survey of small and medium businesses. One would expect LinkedIn to look for heavy social media use and benefits. But it is not surprising that that is what they found, particularly for faster-growing companies.

For the 16% of SMBs reporting ‘significant growth in revenue year-over-year’, over 80% find social media to be very effective for reaching each of several marketing goals: branding, word-of-mouth, content market, and lead generation. Still, the LinkedIn study had its limitations. The survey was conducted online—which presumably would somewhat skew results toward regular online users—and was split nearly 50/50 (52% to 48%) between $1-10M ‘small’ and $10M to $50M ‘medium’ businesses, although the former actually outnumber the latter by nearly 10-to-1.

LinkedIn’s focus on financial services purchases
LinkedIn was also clearly looking for receptivity among SMBs to purchasing financial services through social media influences. Only those who influence or are involved in the purchase of financial services for their SMB were interviewed, and several questions were asked about financial services. Although more survey participants were open to receiving information about financial services products from LinkedIn (57%) than from other social media sites, such as Google+ (49%), Facebook or Twitter (47% each), Pinterest (45%) or Yelp (38%)–it appears as if only half of all participants are open to receiving information about commercial financial products online. So this trend does have some clear limits presently.

SMBs using social media for informational purposes

So what did LinkedIn’s SMB survey participants find to be the most valuable social media content? I can’t help but notice that, in combination, Gigaom and Gigaom Research provide information pretty much along the lines by which SMBs also find the most social media value:

1) industry specific news/article (79%),
2) testimonials/reviews from customers or clients (74%),
3) testimonials/reviews/opinions from industry experts (70%),
4) best practice guides from other companies (67%), and
5) news articles about other companies (66%).

Relevant Analyst
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Laura Stuart

Analyst Independent Industry Research

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