• by Jack Loechner , Staff Writer @mp_research, March 9, 2011

MerchantCircle, the largest online network of local business owners in the nation, today shared results of its quarterly Merchant Confidence Index survey of over 8,500 small and local business owners across the U.S. The data reveals that local merchants, who have very limited time and money for marketing, are gravitating towards simple, low-cost online marketing methods such as Facebook and other social media, as well as towards tried-and-true methods such as search and email marketing. The research also demonstrates that while new marketing services such as mobile marketing and group buying are generating significant buzz in the media, local merchants have yet to tap these unproven marketing methods.

Darren Waddell, Vice President of marketing at MerchantCircle, says "Online marketing continues to be a challenge for most local businesses... merchants are working with very small budgets and almost no marketing resources...the marketing methods... gaining the most traction are... ones that offer merchants simplicity, low costs and immediate results."

More than half of local merchants are spending less than $2,500 a year on marketing, and 60% have no plans to raise their budgets this year. As many merchants struggle to manage their existing programs, 37% say lack of time and resources is the top online marketing challenge to take advantage of new, unproven services.

With huge consumer adoption, ease-of-use and low barrier to entry, Facebook continues to be a popular way for merchants to market their business, with 70% using the social network for marketing, up from 50% one year ago. 37% rate Facebook as one of their most effective tools, almost tied with Google search (40%) as one of their top three most effective marketing methods. 40% of local merchants say they use the twitter the microblogging platform to build awareness and community around their products and services.

Tried-and-true online methods trump new, unproven approaches. Three of the top marketing methods for local businesses, social, search and email, are cited as being the most effective, with 36% putting social networking in the top three, 40% citing search and 36% choosing email marketing.

Less than 15% of merchants report doing any sort of mobile marketing or advertising, and more than half have no plans to do so in the coming months. Lack of understanding remains a huge barrier to adoption, with 74% of merchants state that they don't have a good idea of how to reach consumers via mobile marketing.

Only 11% of local merchants have offered a "daily deal" using a service like Groupon or LivingSocial, with an additional 20% planning to do so in the coming months. Results of group buying have also been mixed and may be hindering growth, with  55% of people who have run a daily deal campaign said they would not do so again.

Over the course of 2010, use of print advertising dropped by 33% (from 40%), use of print Yellow Pages declined 18% (from 45%), and use of direct mail decreased 26% (from 39%).

Many of these methods, though, continue to deliver results for local merchants. 24% say that coupons or direct mail are still one of their top three most effective marketing tactics, 23% say print Yellow Pages are a top three tactic, and 20% put print newspaper ads in the top three as well.

Concluding that there is no letup in effort to increase new tactics within small businesses, the report says that 51% of local merchants get at least one online marketing sales call a week, with 10% getting called almost on a daily basis, often with a direct sales force making cold calls.

Almost concurrent to this report, BIA/Kelsey launched Social Local Media (SLM), an advisory service dedicated to cover the growing and dynamic social media ecosystem. SLM was created to address the rapidly developing social segment of what the firm estimates will be a $23 billion digital advertising market in 2011

Confirmation of the significance of social platforms for local media and advertising comes from the latest wave of BIA/Kelsey's Local Commerce Monitor. LCM reveals intense use of social media by SMBs, as 48% of respondents said they are using Facebook for advertising or promoting their business. Among those surveyed, 40% said they have a Facebook page specifically for their business. Additional findings indicate that among respondents, 25% use other social networks, 22% use a blog and 19% use Twitter to promote their business.

Neal Polachek, president, BIA/Kelsey, observes that "... social local media, as a marketing, customer-care and content agent, has crossed the mainstream threshold... "

For more about the MerchantCircle study, please visit here, and to view charts and graphs from the BIA/Kelsey study, go here.