What Are Small Businesses Doing Wrong During the Holidays?

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As more holiday shopping shifts to the e-commerce space, online businesses have an opportunity boost their bottom line and make this year a big success. However, online small businesses face a unique set of challenges that introduce potentially big barriers for them to have their fruitcake and eat it, too.

In a recent holiday readiness report from Volusion, online small businesses indicated that their top challenges this holiday season include determining the right marketing mix and competing with big-box retailers, such as Amazon.

With tighter budgets and limited staff, how small business owners invest their marketing dollars is paramount to achieving a profitable holiday season.

Small online retailers focus on acquisition yet opt for retention-based marketing channels. When asked their primary marketing objectives for the holiday season, 52% of respondents state they’re equally focused between customer retention and acquisition, and 40% indicate their main goal is customer acquisition. That means that 92% of smaller retailers will be working to acquire new customers as part of their holiday strategy.

Though the push for customer acquisition is an understandable one (it costs 6-7 times more to acquire a customer than to retain one), the viability of this goal in light of tight budgets comes into question.

The Wrong Marketing Mix

To complicate matters even more, many small businesses have selected a marketing mix that doesn’t align with their goal of attracting new customers. Small businesses instead opt to invest time and dollars into channels better served for customer retention.

When respondents were asked which marketing channel they plan to place the most emphasis for the holidays, they replied…

  • Social media marketing (35%)
  • Search engine optimization (24%)
  • Email marketing (24%)
  • Paid search/pay-per-click advertising (10%)
  • Shopping feeds/comparison shopping engines (4%)

Although SEO is considered an acquisition channel, small businesses’ first and third choices of SEO and email marketing are tactics most effective in achieving customer retention.

Even more telling are the bottom choices of marketing investments, paid search, and shopping feeds, which are far more powerful in attracting new customers from competitors both big and small.

Of respondents who indicated their primary marketing focus is customer acquisition, just 45% are placing heightened focus on acquisition channels like SEO, paid search, and shopping feeds, with 52% primarily placing their efforts in retention-based outlets like social media and email.

After looking at those statistics, you can tell that the marketing mix for many smaller online retailers isn’t the right recipe for driving new business.

Time and Resources

With such a strong desire to attract new customers this holiday season, why are small-business owners opting for a retention-based marketing mix?

Simply put, it’s not because they’re not savvy marketers—instead, it boils down to time and resources.

Consider the following:

  • Smaller businesses have smaller budgets. Channels that drive new customers, such as PPC and shopping feeds, present a barrier to entry for online merchants with fewer marketing dollars. Without these funds, advertising investments becomes difficult, if not impossible.
  • Small businesses have restricted resources. Beyond their limited marketing budgets, smaller retailers have fewer human resources than their larger counterparts. That means they typically don’t have the time to learn or deploy more complex, acquisition-based campaigns without the help or expertise of a third-party firm or vendor.

Tips to Fix the Marketing Mix

Now that we’ve detailed these barriers, how can small shops work to better align their marketing mix with their goal of obtaining new customers this holiday season?

Here are two high-level approaches:

  • Shuffle marketing dollars. Small-business owners should find means to adjust budgets to provide more spend into outsourcing channels like paid search and shopping feeds to a marketing firm or service provider. Doing so will free up much-needed energy for these merchants to focus on other high-priority holiday tasks.
  • Take a DIY approach. If reallocating marketing budget isn’t an option, smaller shops can take a do-it-yourself approach by learning the basics of acquisition channels and deploying campaigns independently.

To compete with mega-retailers this holiday season, many smaller online retailers will need to step back and reconsider their marketing mix.

Although time and budgets present obstacles to building a mass of new customers in the coming months, striking a balance between acquisition and retention is a safe bet for those looking to make this holiday selling season the most wonderful one yet.

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