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Why Social Media is Perfect for Small Businesses

TMCnews Featured Article

March 23, 2011

Why Social Media is Perfect for Small Businesses

By Gary Kim, Contributing Editor

Small businesses are rarely early adopters of new technology, and so far, it appears smaller businesses have quickly figured out that social media and social networking, in fact, social software in general, is valuable because it matches the way most small and local businesses already get most of their new customer leads. That is to say "word of mouth" is what really works for small local retailers. 

In fact, a recent American Express (News - Alert) survey of small business executives found that 82 percent get new customers through word of mouth. In other words, people tell other people about a place. That is precisely how social media and social software works: people tell other people about interesting and useful things, and share useful and interesting places. 

That isn't to say small businesses do not use other marketing channels. Among small businesses who conduct some form of online marketing, 66 percent say that new customers find them through search engines, compared to 82 percent who say word of mouth is still the main source where new customers find them. 

The most common online marketing techniques currently being used by small businesses are a company website (86 percent) followed by social media (44 percent). About 21 percent of small businesses report that they are using search advertising as well.

The nexus here is the synergy between offline "word of mouth" and online or mobile "word of mouth." Combine mobile devices, knowledge of location, user opt-in and the ability to deliver incentives, coupons or other messages to people "where they are," and often when they might be receptive to buying something. If that sounds an awful lot like advertising, it is. That's why there now is so much attention being paid to social applications such as Groupon or Living Social,  local mobile advertising, direct marketing and local promotion. 

About 37 percent of 400 small business executives interviewed reported that "advertising" is how they currently get new customers. About 23 percent use the "Yellow Pages." A similar percentage use newspapers or magazine advertising or earned media. What that pattern of behavior suggests is that lots of current spending on local ad media is subject to a shift to contextual promotion using social software. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Tammy Wolf

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