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Citibank Survey: Small Businesses Not Leveraging Online Tools

Survey also uncovered a disconnect regarding the importance placed on word-of-mouth marketing by small businesses
New York, N.Y. – April 21, 2010 – Despite the ubiquitous and relentless buzz around social media, most small businesses today aren't leveraging the basic online tools readily available to them to help grow their businesses, according to the latest small business survey by Citibank.

According to the survey of 552 small business executives across the United States, in the last year 37 percent of small businesses have not used a Web site for marketing or expanding their business and 84 percent have not used ecommerce to sell their products or services. Additionally, 62 percent aren’t using basic email for marketing their business. Yet among those businesses that do have a Web site, 74 percent say their site has been effective at generating more business.

“Many small businesses today have yet to really harness the marketing and communication power that online tools can provide them,” said Raj Seshadri, the head of Small Business Banking at Citibank. “Our survey reveals a huge opportunity for many businesses to begin using some of the basic online tools, such as email marketing, to drive their sales.”

When it comes to more advanced methods of online marketing, and increasing reach and influence, the survey’s findings were similar: Sixty-five percent of small businesses are not placing online ads to expand their business and 67 percent have not used search engine optimization.

The survey also uncovered a disconnect regarding the importance placed on word-of-mouth marketing by small businesses. Sixty-three percent of respondents say word-of-mouth marketing is the most effectiveway to market their business and find new customers. Yet this doesn’t translate into online behavior, showing that many do not view social media as a word-of-mouth channel; 81 percent say they have not used social media sites such as Facebook, LinkedInor Twitter. Among those not using social media sites, 47 percent don’t believe these sites are of value to their business while another 21 percent believe these sites are more for personal than business use; 18 percent say they don’t know enough about how to use the sites.

At the same time, many small businesses say they plan more online activity in the next 12 months. Among the findings: 72 percent say they are likely to use a Web site for marketing or expanding their business in the next 12 months - up 14% from those who do today. 24 percent will likely use ecommerce to sell their products or services online over the next 12 months – up 50% from those who do today. 30 percent say they intend to use social networking sites such as Facebook, LinkedInor Twitterfor marketing or expanding their business – up 58% from those who do today.

“This survey shows that many small businesses have yet to add new tools to traditional marketing methods that they have found effective in the past,” said Seshadri. “This may be because the online world does not fit their business model or other factors such as inexperience with technology or lack of time to effectively enter these marketing channels. It’s encouraging, however, to see that many intend to utilize more of these tools in the next 12 months.”

Age Makes a Difference

When it comes to leveraging online tools for business growth, small business executives 45-years-old and older are less likely to use online tools than younger small business executives. Twenty-seven percent of small business executives under the age of 45 used social networking sites such as Facebook, Twitterand LinkedInas marketing tools in the last 12 months, while only 16 percent of their peers aged 45 and over used them. In addition, more younger survey respondents say they are likely to use a company Web site for marketing purposes (81 percent versus 69 percent of older respondents) and search engine optimization (52 percent versus 35 percent of older respondents) to market their business in the next year.

This Citibankpoll was conducted via telephone by Abt SRBI during the period March 10 - March 31, 2010 among a national random sample of 552 small businesses, with revenue over $100,000 and no more than 100 employees. The margin of error is approximately +/- 5 percentage points at the 95% confidence interval. Surveys are subject to other error sources as well, including sampling coverage error, recording error, and respondent error.

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About Citibank Citibank is a member of Citi, the leading global financial services company, which has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.comor www.citi.com.

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