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SMB Franchises Rapidly Shift Media Dollars To Digital

Small biz outlets represent the “interactive marketing vanguard” in comparison to more general SMBs, says BIA/Kelsey.

BIA/Kelsey's Steve Marshall
BIA/Kelsey’s Steve Marshall

Small-to-medium sized franchise businesses plan to assign nearly 43 percent of their total ad budgets to digital media over the next year, according to local market researcher BIA/Kelsey.

As the researcher’s report,Franchise SMBs — Advertising & Marketing Trends, which is part of BIA/Kelsey’s ongoing Local Commerce Monitor survey, indicates, if there was a difficult period of acclimating to digital, franchise SMBs are well past it.

The average franchise SMB spent $87,165 on advertising and promotion, up from $57,072 the previous year — that’s a 52 percent increase. On average, about 39.1 percent of those dollars went toward digital media between July 2013 and the same month the following year. That in itself is a huge leap forward, says Steve Marshall, director of research at BIA/Kelsey.

“This is our third year looking at franchises as a separate group within our SMB survey and they’re really notable and distinctive,” says Marshall. “They’re almost on the cutting edge in the new wave of highly targeted digital media and heads and shoulders above non-franchise SMBs in use of these mediums.”

The SMB Fab 5

The BIA/Kelsey survey was taken in Q3 2014 with 76 respondents, or 13.9 percent of the full LCM sample of 546 individuals who identified themselves as “franchise SMBs.”

The survey participants fielded 65 questions in total (including questions on survey qualification, content and firmographics). The survey takes respondents about 20 minutes to complete. Questions are mixture of multiple choice, scaled, and other questions with quantitative responses.

The franchise respondents came mostly from five distinct business types:

1. Accounting or bookkeeping

2. Retail shop or store

3. “Other”

4. Auto sales/repair

5. Art, writing or photography

The “restaurant or bar” vertical was tied with “fitness,” and “consulting” at number six on that list.

As is the case with national advertisers, the digital mediums attracting more spending by franchise SMBs are social, mobile, and online/video. Each division contains a variety of choices — some more popular than others.

Where The Spending Goes

Overall, the social media category shows increasing willingness to explore ways of reaching customers through Twitter and Pinterest.

About 26.4 percent of franchise SMBs use Twitter and a very close amount — 24.6 percent — say they’ve started to use Twitter ads. About 15.7 percent use Facebook’s Instagram, while 11.5 percent have employed Pinterest as part of their marketing.

Facebook itself drew some interesting usage numbers in the BIA/Kelsey survey. The figures appear to reflect the social network’s efforts to place more emphasis on marketing services to SMBs in the past year:

  • 56.5% of franchise respondents reported having a Facebook page (free).
  • 33.9% of franchise respondents reported using a Facebook ad (which makes FB ads the 4th most-frequently used medium/platform by franchise SMBs).

Digital Deals Rise

In sign of how digital coupons and offers have evolved in terms of reaching consumers on the go, 22.6 percent of franchise SMBs use mobile banner or display ads, while 21.6 percent use mobile deals. Lastly, 19.3 percent rely on text messaging to connect with their customers.

Online video has attracted 23.6 percent of franchise SMB spending as well for conveying deals. In general, 22.6 percent of these marketers work with browser-based video, and 16.3 percent have run video banner or display ad campaigns.

Agency Influencers

The influence of ad agencies is part of the reason franchise SMBs are intent on boosting their digital spend. And in an age of high demands for accountability and ROI, franchise SMBs have proclaimed overwhelming approval of the service they’ve gotten from their agencies. Marshall cites 88 percent of the franchise SMBs surveyed as saying that they were “very or extremely satisfied” with their respective agencies.

“Agencies have come to grips with this new set of personalized media,” says Marshall. “That’s a major accomplishment and I think the agency industry gets a lot of credit for that.”

Marshall expresses some surprise at learning that many of these franchise SMBs have “deep and relatively long-standing relationships with [their] digital agencies.” About 49 percent have been partnered with digital or ad agency for two years or more, which he adds, is “way above other SMBs.”

General SMBs should look to their franchisee peers and embrace of digital media, Marshall says, noting that there are plenty of interactive mediums, like social for instance, that have relatively low price points.

“My best advice to SMBs is to study the franchises,” Marshall says. “They are the vanguard of the SMB space. They’re several step ahead in mastering digital personalized media.”

Local TV Sales Paradox

In large part, the story of all digital spending reflects the diminution of traditional media in consumers’ and advertisers’ mix.

“Broadly speaking, yes, budgets are being shifted mainly from print — newspapers and directories in particular,” Marshall says, though he notes that “direct mail isn’t being impacted as much” as other channels. “It does appear that local TV has lost ground with franchises — it is used less often by franchises than it was in [the 2013 survey results].”

However, BIA/Kelsey also found that TV stations, as a local sales channel, are still heavily used by franchises. In fact, TV stations’ websites were the second most-used channel for the purchase of digital ads — of any type — and were used by 29 percent of franchises for this purpose, Marshall says.

“The most-used channel were advertising/digital agencies, used by 37% of franchises,” he says. “So, there may be a bit of a paradox here: The local TV sales forces appear to be having more success selling online ads than their own TV ads!”

Aside from local broadcast sales, traditional out-of-home also experienced some erosion in the shift to digital. BIA/Kelsey looks at two categories of OOH in the LCM survey out of the 50 different local media in total.

Ads that can be considered “door hangers, flyers or brochures that are delivered to homes but are not sent through the mail” experienced the biggest declines, Marshall says by SMBs overall.

But the OOH categories that appear on “billboards, benches, buses, elevators, in coffee shops, movie theaters or in-store video,” have weathered less steep decreases in general and franchise-based SMB spending.