How Much Should Businesses Spend On Social Media?
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How Much Should Businesses Spend On Social Media?

Depending who you ask there are conflicting points of view regarding the utilization of online marketing and social media by small and medium sized businesses (SMB = Less than 50 employees). The social media networks would have you believe that SMB’s are ripe with opportunity and the perfect market for online marketing while many local marketing agencies say that online tactics are a tough sell to SMB’s. Thankfully, some new research by Borell Associates sheds light on this matter and proves there is validity to both camps statements about the usage of social media and online marketing by small business but the main difference is what is actually being *spent* and *how*.

For small businesses, most the budget dedicated to online marketing is directed to their website and even that is generally small. The recent study by Borell Associates uncovered that while businesses on average lay out $17,000 annually for online marketing services, those with less than 50 employees will spend less than $500 a year — just enough for web hosting and email list management. For a mid-sized company with more than 50 employees, that budget shoots up to $63,000 a year, covering other areas like SEO, video production, public relations and social media. The media research firm estimates businesses are spending two and a half times more on website services than on online banners, pay-per-click keywords and video ads (the very tools social media networks are promoting to small business).

Having a decent website is a must before embarking on an online marketing strategy to drive people to a destination. Therefore, many small businesses dabble in social media by doing what they can for free since most their budget is spent on the website and related website maintenance costs. Unfortunately, very few small businesses know how to effectively utilize the free aspects of social media and end up doing a poor job or simply giving up. Regardless if the tools are free it takes time and effort which are also costly.

Besides the lack of budget, I think many small businesses have a lack of education and misunderstanding regarding what social media is most applicable for. In my experience, most expect it to drive immediate leads for new business, but the reality is quite the contrary. If small businesses want to drive immediate leads then pulse advertising campaigns with a compelling offer are their best bet. The role and application of social media is more so for creating awareness, providing customer service, and increasing engagement amongst existing customers. Make sure you read that last sentence twice because it’s important.

Social media is a slow drip approach so that you can eventually decrease the amount of advertising you have to do if you’ve effectively built up a large community through social media. The biggest downside of utilizing social media by small business is the time and effort it takes to do well, however. A company has to dedicate themselves to it and instead of trying to have a presence across every main platform it is better advised that they choose one or two where they can excel. Of course, a company also needs to take their audience into consideration when choosing a social platform – If you’re a retail business to consumers then it might be most appropriate to have a Facebook or Pinterest page, but if you’re a software developer for the business market then it’s better to be using Blogs and LinkedIn.

In summary, small businesses are utilizing social media but most their money is spent on website maintenance leaving little budget and time to properly devote to social media. Allocating $500 per year is not going to have much impact, so it’s recommended SMB’s shift some budget from traditional advertising (radio, print, sponsorship) towards measurable online initiatives and also add social media marketing duties to a staff members job description (It shouldn’t require more than an hour a day). Small businesses must also be aware of the social media hype and educate themselves that social media is most applicable for awareness and customer service as opposed to lead generation. Finally, the social media marketing strategy utilized by small companies can be effective in the long run if they devote time to it and choose the proper platforms most appropriate for their audience.

Don’t have time to develop an online marketing strategy and execute it? Take a break from the kitchen and let Deep Dish Digital whip up some tasty marketing recipes for you. Please leave a comment or drop us a line through our contact page. Thanks for reading. 



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