Marketers More Aggressively Target Small Business Owners
"It's a huge opportunity [for financial services companies]," says Te Revesz, principal of Revesz International and author of the study. "Working with small businesses can include the business's financial needs, the owner's financial needs and some employee financial needs."
According to a 2006 National Federation of Independent Business poll (cited in the report), 43% of small business owners cited an increase in financial services companies seeking their business. Of that segment, 74% said there was an increase in direct mail and other advertising; 65% said they had seen an increase in phone solicitations, and 57% said they had experienced more in-person solicitations from the financial services companies.
While credit card spending only accounts for about 6% of all small business spending, credit card companies are becoming more aggressive when it comes to targeting small businesses. According to Revesz, who scoured TNS Media Intelligence data for the study, spending on small business-specific products increased from $91 million in 2004 to nearly $232 million in 2007.
"It's a growing and dynamic sector," Revesz tells Marketing Daily. "They see the consumer credit card market is saturated, and there's growth in the small business area."
And every major company is now participating in the segment. Discover, for instance, had no money earmarked for small businesses in 2004, but spent more than $60 million on small business products in 2006, according to the report. MasterCard increased its spend from just under $20 million in 2004 to $32 million in 2006, while Visa International went from $35 million to $53 million over the same time period. American Express more than doubled its outlay, from $40 million in 2004 to $86 million in 2006, according to the report.
While these companies used magazine, radio and television as vehicles for their advertising, direct mail is still a major component of credit card solicitations to small businesses. Because many small businesses are run out of people's homes, an estimated 12% of credit card solicitations sent to consumer households are actually small business offers, Revesz says. Citing Synovate's Mail Monitor October forecast, Revesz says an estimated 636 million direct mail small business credit card solicitations were sent to U.S. households last year.
But financial services companies are looking at different approaches for reaching small businesses, Revesz says. "There's still a lot of direct mail, but there is a major thrust to get to small businesses through the Internet," she says. One example, she says, is ads for Bank of America's Business Advantage Checking program that appear on The New York Times' Web site, as do ads for American Express. Capital One has also been running ads on Business Week's small business-dedicated Web site, Revesz says.
Financial services companies are also sponsoring more events, both in person and online, Revesz says. "If you look around, there are a lot of events going on, "she says. "Small business owners do like to network. These events offer potential for leads and information, and it's a way to meet people." The financial services companies are betting the goodwill of sponsoring these programs will offer the same opportunities for them with small business owners, Revesz says.
Moving forward, Revesz says she expects more targeted marketing programs from financial companies to small business owners, particularly women and minority-owned small businesses. "They're going to try to do more differentiation," she says. "They'll look at immigrant and women's groups, and they'll do more specific pitching to the vertical [i.e., specific industries] with text that's actually targeted at them."