Are Small Businesses Focusing Too Hard on Social Media Efforts?

These days, millions of small business owners may be trying to figure out exactly how they can crack the code on unlocking their social media potential, but new data suggests that all the effort they're pouring into doing so may not actually be as worth it as they think.

The number of customers that seem willing to make purchases with small businesses online as a result of links they discover on social media platforms like Facebook and Twitter remains relatively low, especially compared with the steps forward taken in other areas, according to a new study by the marketing company Custora. In the last four years, the amount of customer acquisition gained through email advertising alone has quadrupled, and now stands as the third-most effective acquisition channel behind only CPC and organic searches. Meanwhile, social media channels lag significantly behind.

In all, 15.8 percent of customers come from organic searches – that is, their typing something into a search engine and finding products that fit that description – which makes it the largest such acquisition channel today, the report said. At the same time, about 10 percent of customers connect with e-commerce sites as a result of cost-per-click (CPC) advertising, and that number has increased from less than 5 percent in 2009.

But email has made the largest strides, with the percentage of customers generated from this type of marketing growing by about 400 percent in the last four years, to roughly 7 percent of all business acquisition, the report said. It is for this reason that many owners may want to do more to increase email marketing efforts as a means of reaching more consumers.

Options that appear less effective
At the same time as these other types of channels are taking off, still more seem to be increasing at a far slower rate, the report said. For instance, affiliate advertising efforts have led to the next-most successful form of acquisition channel growth since 2009, but now attract only about 1 percent of all customers, the report said. This is obviously considerably less than those drawn in by email, but still well ahead of banner ads and social media.

The latter types of channels all stand at less than 1 percent of all attracted customers, the report said. Twitter and Facebook may seem like popular options, but they're more or less as effective at drawing in buyers as banner ads, which shows just how important it may be for small business owners to keep their focus on these channels in perspective. Further, it should be noted that the lifetime value of customers drawn in through Twitter is well below the levels for all channels, at 23 percent lower than the average. Organic search, meanwhile, draws in consumers with lifetime values of 54 percent more than the average, with CPC and email coming in at 37 and 12 percent more, respectively.

"The last few years have spawned massive changes in the world of online marketing. With U.S. e-commerce sales now topping $200 billion annually, digital marketers are getting savvier than ever," the company said in announcing these statistics. "The sharpest marketers in the new era of e-commerce will be looking beyond just where customers are coming from. They'll be looking at the value of new customers acquired across channels, platforms , and geographies. And it turns out – not all customers are created equal."

Finding the customers through the most effective channels may help to streamline spending and increase business, which in turn could lead to a company's growth. However, at these times it may be important to look into more affordable small business insurance options, including those for general liability insurance.