Also in this story
More than 4.9 million small companies existed in the UK in 2013, and SMEs accounted for 99.9 per cent of all private sector businesses, according to the Federation of Small Businesses, so it is hardly surprising that they have been identified as critical to UK growth targets.
And while they make up 40 per cent of UK turnover, only one in five export abroad, compared with one in four of their European counterparts – making a potential shortfall of £42bn, according to a report out today (30 January) by the Advertising Association (AA) and seen by Marketing Week .
The study also claims that for every £1 a small or medium-sized company spends on advertising, the growth in turnover is approximately eight times as great as it is for larger firms and finds that the return on spending £1 on advertising is £2 in sales.
A good example is Devon-based Riverford, which delivers organic meat and vegetable boxes from four regional farms dotted around England. The business has been around for 25 years, in which time its customer base has grown from 30 a week to 40,000.
There’s no excuse for thinking a small company’s ideas aren’t as good as a billion-dollar corporation’s
Last year the business began to market itself on Facebook and ran competitions in the weeks leading up to Christmas. This drew 2,000 new visitors to its website, which quickly sold out of the product being advertised. Sales of promoted products increased by 7 per cent in one day, and half of all competition entrants opted to hear more about the company.
Riverford content marketing manager Katie O’Neill says: “[Social media] is easy to set up yourself and you can see how different campaigns work with different creative. We had varied results – some worked and some didn’t – but we are using that to feed into our next campaign.”
Meanwhile in London, mobile-focused music app Bloom.fm, which launched a year ago, wanted to stand out from other streaming services and decided to advertise. Working with creative agency Antidote, it ran a TV ad on Christmas Eve and Christmas Day on ITV and Channel 4 and used poster ads at transport hubs, including bus sides and London Underground cards.
Its marketing director, Jonathan Clark, says: “There are a lot of brands fighting it out in the music market. We had to punch above our weight through strong creative. The app has a personality unlike any other music service, and we wanted our advertising to be different too.” Last August, the app had 250,000 registered users. After the campaign, that figure had trebled.
Minicab app Kabbee also works with Antidote and plans to ramp up marketing, including advertising and PR, across the board.
“Increasing ad spend is certainly a priority for us this year – but it’s only one aspect of our strategy for building the Kabbee brand in 2014,” says marketing director Cristina Astorri.
“We’ve also massively increased our in-house marketing resource. I’ve just come on board as marketing director and I’ll be working alongside our head of marketing, who joined in Q4 last year.
“In addition, we’re ramping up PR activities, with new social and traditional media campaigns in the works.”
Astorri also highlights the government’s new Growth Vouchers scheme , which launched on Monday (27 January). “The Government’s attempts to fund SMEs or get them access to funding are relatively well known,” she says.
“Less well known is the Growth Vouchers scheme, which is designed to help small and early-stage businesses pay for professional advice. If this scheme takes off in 2014, it’s conceivable that these small and early-stage businesses will use it to kick-start their marketing campaigns.”
The government estimates that there are more than 700 support and funding schemes, services and initiatives for SMEs, but the AA’s study suggests that only one business out of every 10 intends to access them.
So, instead of adding to the numerous schemes already available, the Growth Vouchers project includes an element of research to gain an insight into how start-ups and SMEs benefit from professional advice.
Enterprise Nation is the small business network behind the Growth Voucher marketplace, where voucher-winners go to locate advisers.
Its founder, Emma Jones, believes that the vouchers will open up the market for small businesses to take advantage of advertising.
“If you look at why small businesses don’t spend on advertising at the moment, it [comes down to] two critical points,” she says.
“One is that they think it’s expensive, and two is a case of ‘Where do I start?’ The growth vouchers will hopefully address that.”
For the AA’s chief executive, Tim Lefroy, getting smaller businesses to advertise their services is critical. “It’s a question of whether we want to continue to grow our economy,” he says.
“Our report has flushed out an opportunity and sets down a challenge – to policymakers, whose great support schemes need to be promoted more effectively, and to our industries. Are we doing enough to make our media available to smaller advertisers? Are agencies willing to incubate smaller advertisers and turn them into major forces?”
According to the study, SMEs need help to manage short-term costs. They also want practical advice and support on advertising and marketing, and clearer signposting of the support that already exists.
That said, some small businesses don’t want to advertise in the first place.
The brainchild of former Lehman Brothers banker Jenni Duthie, Skribbies – which designs and sells customisable hi-top trainers – keeps its advertising spend low by relying on social networking sites such as Pinterest, Facebook, Twitter, Google+ and Instagram.
The company tried out print advertising and “got burned”, as the product was not a recognised brand. The move was premature as the company is just six months old, says Duthie.
Her reluctance to spend large amounts on advertising is not down to the recession, she maintains, but to competition from established brands and the fear of being “drowned out”. As a consequence, the company has turned down a profit-share deal approach from the Nickelodeon network to run TV ads.
One source of investment is the oil giant Shell. Since 1982, and the launch of its LiveWIRE programme to address youth unemployment in Scotland, the multinational has helped thousands of young people in the UK to start their own businesses and exported the initiative to more than a dozen countries.
“You think, on the face of it, they are doing it to get the brand out there, but they are genuinely trying to improve the entrepreneurial ecosystem,” says Duthie.
As Shell UK’s social investment manager Christelle Langenhoven explains: “We believe that small businesses can play a big role in addressing some of the UK’s greatest challenges. They are key to the success of the UK economy. If we unlock the ambitions of entrepreneurs, they create growth and the ability for the UK to compete internationally.”
Other well-known brands run similar schemes. In December last year, for instance, the consumer goods company Unilever launched a digital incubator programme that will pair its brands with seven digital marketing start-ups in exchange for financial and mentoring support.
Other schemes come across less well, however. “My impression is that they tend to be bureaucratic, long-winded and takes ages to get involved with anything,” says Marisa Leaf at Hubbub, a London company that delivers food, drink and other goods from local shops to 200 postcodes across the capital.
“I haven’t got time. I’m running a small business,” adds the former human rights lawyer, who runs the business from Highbury. “If it’s not quick and easy for me to understand, execute and demonstrate the value, I’m not going to do it.”
Joe Middleton – former Levi’s president and now chairman of sports performance clothing line PlayerLayer and an online personal styling service for men, called The Chapar – believes that social media has levelled the playing field for SMEs and start-ups to compete with the big brands.
Last November, Twitter announced it would be opening up its advertising to UK small businesses for the first time.
“It’s an inbuilt presumption in SMEs that we can’t compete with big companies, but we can,” says Middleton. ”It doesn’t cost anything now with social media, digital advertising and marketing. I don’t think most SMEs fully appreciate the opportunity that is in front of them and the accessibility of that opportunity.
“You are only as good as your creativity, imagination and ideas. There is no excuse for a small company to believe its ideas can’t be as good as the ideas of a billion-dollar corporation.”
According to the AA, 67 per cent of the SMEs that don’t advertise think it is too expensive and 66 per cent consider it financially risky. But a positive side to being small is the potential they have to try out campaigns. Ahead of a round of funding, Hubbub experimented with outdoor advertising to gauge the impact of operating London-wide.
The campaign not only generated additional sales, but gained the attention of the press, leading to more than 6,000 website hits in 12 hours. Measuring the impact of advertising is crucial, says Leaf. “If you can’t measure it, don’t do it. You have limited resources, and there are enough campaigns to try that you can measure, so why would you do anything that you can’t?”
In some cases it isn’t necessary to experiment, as marketing plans can be steered by the product or service. QApp, which enables smartphone users to make bar orders, is promoted to customers in venues through point-of-sale marketing on tables. Bar staff also offer those still queuing at the bar a QApp card to tell them about the service.
Serge Taborin, chief executive of QApp, says: “For any start-up, cash is at a premium and the challenge is getting a lot of users with as little spend as possible. This is why it’s so important for us to have venues acting as our promoters, as it massively helps our cashflow.”
One universal challenge is that unique ideas, products and services require consumers to change their behaviour.
“With any piece of technology, however great it happens to be, it still takes time for people genuinely accept it as something that will improve their lives,” says Taborin.
In the past, the emphasis has been on encouraging entrepreneurs to start their own small businesses. This year, though, it is more about how they can grow. Vodafone’s recent report, entitled Fluid Thinking – Working Without Boundaries, looks at how technology has opened up new markets for UK products and services abroad. In a survey of 300 senior managers, 68 per cent agreed that it is easier to trade internationally, and two-thirds saw international markets as important for growth.
Competition between start-ups and SMEs themselves, let alone from bigger, more established brands, is another challenge. Kabbee and Bloom both have competitors in the start-up arena and both are using advertising campaigns to stand out.
Advertising is often seen as the next step to growth for many businesses and UK SMEs are taking greater care not only in what they spend, but how and where they spend it. For them to grow, it has to provide a return. That’s why they are so keen to scrutinise it, not as an industry but in terms of what it can do for them alone.
Regional publisher Archant launched a weekly start-up review column in its London local papers this week. The idea is to build awareness of new products and services aimed specifically at Londoners. Such businesses do not necessarily have a high street presence, but need PR to gain traction.
“It’s a natural step for us,” says Paul Hood, digital director at Archant London. “Our traditional advertisers are diminishing because there are less local businesses that have a traditional high street presence. More and more of the emerging local economies are microbusinesses, and their challenge is getting coverage.
“It’s doing what we have always done, but exposing a new set of local businesses and bringing them to the attention of relevant local audiences.”
Hood believes that many of the products and services of the future will be digital-only.
This week’s column focuses on QApp, an iPhone and Android app designed to end queuing in busy venues. QApp users can browse a menu, order and pay from their phone and then collect from a QApp fast lane, bypassing long queues at the counter.
QApp CEO Serge Taborin says: “The single biggest issue for start-ups is how you tell people that you exist. The nature of QApp is such that it has a broad appeal, so we think Archant’s London24 is the publication to do that.”
Archant is rolling the column out in its London portfolio, but will be extending it to other titles with the aim of connecting local businesses with consumers.
Jonathan Clark, marketing director of music app Bloom.fm
Marketing Week (MW): The report from the Advertising Association finds that £1 spent on advertising would benefit an SME nearly eight times as much an equivalent £1 spent by a larger firm. What are your thoughts on this?
Jonathan Clark (JC): When you’re a young company, it’s much easier to see and evaluate the benefit of your advertising. We were able to increase our brand awareness by over 600 per cent with our first brand campaign. If you’ve been around for a while, you’re less likely to see shifts of this magnitude.
MW: Do you see advertising spend as a priority for your business?
JC: Advertising helps us accelerate awareness, differentiate ourselves and communicate unexpected differences. Bloom.fm is only a year old. Our priority is to continue to spread the word about our great product and we’re lucky that the great user reviews and word-of-mouth recommendations get a lot of people seeking us out.
MW: What are your biggest challenges in brand-building?
JC: We have a small but experienced team, so the main challenge is focus and timing. Bloom.fm is a constantly evolving product and there’s always something new we’re about to add – we plan activity around the important stuff. Doing fewer things, properly, makes a bigger difference to the business.
MW: What do you think helps the growth and survival of SMEs in the current climate?
JC: If you have a great product and you’re doing something different, telling more people about it can only be a good thing. However, there is normally a smart time to invest in growth – for example, we didn’t properly launch the brand until we were on both iOS and Android.
Karen Fraser, research director at The Advertising Association
We commissioned a report to look at the contribution that advertising makes to the UK economy last year and saw that it was £100bn overall. This year we have been looking at the untapped potential of SMEs in the UK.
SMEs account for 40 per cent of turnover, but only 18 per cent of advertising expenditure. It’s a huge discrepancy. We are seeing economic growth back in the UK, but the important question is to find out how we can sustain growth.
Advertising helps growing businesses test the demand for products and services, particularly overseas. We find that those businesses that have been able to confirm the market for its products do better than those that don’t.
You wouldn’t expect small businesses to be advertising at the level of larger businesses, but we believe there must be ways that we can encourage them to have more considered and planned, structured campaigns.
There are 700 schemes that exist to support SMEs’ growth, but nobody knows about them. Only one in 10 businesses that we talked to intended to access them, so rather than say: ‘SMEs, this is what you need to do,’ it’s a question of how advertising and government can work together to better promote the schemes that already exist.
It’s something for the industry to consider – how do we adapt in order to meet the needs of growing SME’s, because this is where the government says our growth is likely to come from.
Monday saw prime minister David Cameron launch a £30m research programme to test the value of professional advice to small businesses.
Business support will be delivered randomly through Growth Vouchers, enabling businesses that apply and win them to receive a 50 per cent subsidy towards obtaining advice on five key topics.
These are: improving leadership and management; making the most of digital technology; managing cash flow, late payments and negotiating finance; marketing, attracting and keeping customers; and developing skills and taking on staff.
Businesses are then directed to a marketplace, built by Enterprise Nation, where they can pick an adviser from a list of more than 1,000. Enterprise Nation worked with the Chartered Institute of Marketing to promote the benefits of its members becoming advisers.