New report confirms exactly what you'd expect: Digital technology is good for small/medium business

A new report by Salesforce and Deloitte, finds that small businesses that embrace digital technology benefit by increasing both customers and revenue.

The report, SMBs in the digital race for the customer,1 commissioned by US cloud computing company Salesforce and undertaken by Deloitte, is based on a survey of over 500 New Zealand and Australian businesses and found that small-to-medium-sized businesses that embrace digital technologies such as mobile platforms, social media and cloud computing (no surprise there).

If you want to read the 30-odd page report, you can find it here.

Otherwise, here are some of the key findings:

How investment in digital services helps SMBs win customers and generate revenue

  • Each 1% increase in spending on online services leads to a 2.9% increase in annual revenue growth (an average AU$100,000 a year among businesses surveyed)
  • Adding two extra communications channels provides a 4.8% boost to annual revenue growth (average of almost $160,000 a year)
  • Every 10% increase in customer relationship management software usage leads to a 1% increase in annual revenue growth (average of $30,000 a year)
  • SMBs which use social media in a wider variety of ways – for advertising, for customer service, for targeted offers – generate increased revenue of more than $30,000 a year

Trends in investment

  • SMBs are responding to an increasingly digital marketplace by investing in IT. In the last year, the average SMB in Australia and New Zealand spent 6% of their average total revenue – $144,000 of $2.5 million – on IT
  • SMBs plan on increasing spending across all three categories of IT – hardware, software and online services – but their spending is growing at very different rates. SMBs’ hardware spend is set to rise by 30%, software by 34%, and online services by only 14%
  • Australian and New Zealand SMBs are embracing hardware spending over online services to a much greater extent than larger players in international markets - for example, planned growth in online services spending falls well below global business projections of a 19% annual increase
  • This could be a missed opportunity for SMBs. This report finds that, after controlling for business size and industry, each additional 1% increase in online services spending leads to a 2.6% increase in the proportion of sales conducted via digital channels, and a 2.2% increase in digital lead generation. SMBs with higher spending on online services also report a lower cost of obtaining new customers

Why digital is key to customer loyalty and retention

  • The Salesforce and Deloitte report found half of respondents rated retaining existing customers as the number one factor for business success, yet only 15% of small businesses have the ability to personalise the online experiences of customers
  • Small businesses are facing a more discerning and critical customer than ever. 89% of consumers have stopped doing business with a company after experiencing poor customer service. Given it takes 12 positive experiences to make up for a negative one, small businesses have a challenge on their hands
  • Almost half (48%) of SMBs with no digital tools or transactions do not know what proportion of their sales are to new or existing customers. Not surprisingly, the lack of even the most basic data about their business and customers are associated with a longer than average response time to customer enquiries and complaints
1 Australians use the term SMB (‘small and medium-sized business’), while we usually use the term SME (‘small and medium-sized enterprise’). We’ll use their terminology here to be to be consistent with the report’s title. Okay? Okay.