Almost half of SMEs with no digital tools or transactions do not know what proportion of their sales are to new or existing customers
Salesforce and Deloitte have released a report on how SMEs in Australia and New Zealand are using digital tools to engage with customers and grow their business.
The report is based on a survey of more than 500 SMEs across Australia and NZ.
Within the next five years, half of SME sales are predicted to involve digital channels. This would make the 25% of SMEs with no digital and no plans for digital severely disadvantaged and largely invisible to the market.
How investment in digital services helps SMEs win customers and generate more revenue:
- Each 1% increase in spending on online services leads to a 2.9 percentage point increase in annual revenue growth – an average $100,000 a year among businesses surveyed.
- Adding two extra communications channels provides a 4.8 percentage point boost to annual revenue growth – average of almost $160,000 a year.
- Every 10% increase in customer relationship management software (CRM) usage leads to a 1 percentage point increase in annual revenue growth – average of $30,000 a year.
- SMEs 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:
- SMEs are responding to an increasingly digital marketplace by investing in IT. In the last year, the average SME in Australia and New Zealand spent 6% of their average total revenue – $144,000 out of $2.5 million – on IT
- SMEs plan on increasing spending across all three categories of IT – hardware, software and online services – but their spending is growing at very different rates. SMEs’ hardware spend is set to rise by 30%, software by 34%, and online services by only 14%.
- Australian and New Zealand SMEs 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 SMEs. 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. SMEs 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 SMEs 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.
