SMB Churn and the Potential Return of ‘Guaranteed Clicks’
December 18, 2014 | Contributed by: Greg Sterling
In roughly 2004 the way that paid-search marketing was introduced to many small business advertisers was in the form of a “bucket of clicks” sold by yellow pages publishers and independent sales channels like the now defunct WebVisible. Paid clicks on Google and elsewhere were sold in bundles for a fixed price. That product was easy to sell and buy but publishers and SMB sales channels had a tough time with managing fulfillment.
Over time that product evolved into a budget and category based offering. Since that time numerous other products have been added to the sales mix, resulting in a complicated product list that is difficult to explain and sell: websites, SEO, SEM, social, mobile, reputation management, video, etc.
Now a version of the old guaranteed clicks product may be making a return. For the past two years Dex has been selling a product called “Dex Guaranteed Action” with mixed results. This is essentially a “bucket of leads/contacts” product that is calibrated to advertiser budgets.
In addition, a couple of years ago Yodle introduced radical simplification into its sales pitch. (Caveat: I don’t know if it’s still doing this.) Back in 2012 Yodle CEO Court Cunningham told me that Yodle was moving from a “product centric” approach to selling traffic/leads/calls/contacts/whatever from a network of channels. The company bundled channels and products “as a feature” of an overall SMB advertiser spending program.
Cunningham explained to me at the time, “What you’re buying is the state of the art in online customer acquisition.” As the market evolves Yodle will be adding services “for free.” The company is sourcing calls and emails from each of these channels: SEM, SEO, display, mobile, IYP and so on.
Since the early, heady days of guaranteed clicks SMB churn rates have been very high. In the case of WebVisible, toward the end, the company saw in excess of 100% churn on an annualized basis. On average churn rates remain above 50% today.
A 2013 study by Thrive Analytics found that SMB webhosts and SEM providers had low net promoter scores and comparably high churn.
In the decade since guaranteed clicks and SEM was introduced to the SMB market at scale, the churn problem has not been solved. In the Thrive Analytics survey some of the factors contributing to churn were the following:
- Limited contacts with service provider
- Poor performance of the product(s)
- Lack of trust in provider
- Lack of customization (in case of websites)
There are many other reasons for high SMB churn. Some of those include:
- Insufficient education of SMB buyer
- Inflated performance claims by sales rep
- Product confusion and clutter in the market
- Competitor claims, some of which may be unethical or inaccurate and contribute to false expectations
- Lack of consistent customer service
- Internal, structural issues regarding sales rep incentives tied to acquisition but not retention
These are not exhaustive lists. Perhaps the chief factor behind churn is poor onboarding and limited ongoing customer service. In addition reps may be confused themselves, not sufficiently educated or trained and trying to sell too many “products.”
Given all this there is now some evidence that more companies are thinking about moving to a bundled or even “black box” approach where they deliver a certain number of calls or leads or contacts (whatever the “currency”) to SMBs and source them in a variety of places from a network or multiple channels. This approach is something of a return to the “guaranteed clicks” model but with much greater sophistication on the back end, in terms of fulfillment.
Source: Thrive Analytics 2013 SMB survey
It’s becoming more and more unwieldy to ask premise or telephone reps to explain and sell multiple products, though some things will still need to be explained. The challenge is for vendors/sales channels to keep pace with the rapidly changing market and to simplify the pitch for both the reps and the business owner, while providing enough transparency to generate trust. It may well be that a high level budget-based bundle that includes presence, acquisition and retention products is the future of SMB digital marketing.
As I’ve been arguing for the better part of the past decade, the investment advisor/portfolio analogy is the model. Business owners want to hand over their marketing budgets to one provider and trust that they’re being properly allocated and that they’re getting value.
However that’s much easier said than done — or scaled.
Give us your thoughts about these ideas. Do you think “the industry” will move from a product centric sales approach to a bundle/network or black box approach? Why or why not?