Although it may be tempting to believe that it’s only the behemoths of the business world that dominate our economy, with Britain’s rich history of spawning innovative, entrepreneurial companies, it should not be a surprise to find that it’s the small and medium sized enterprises (SMEs) which account for the vast majority of British businesses.

Ranging in size from 1 to 250 employees, SMEs provide 40 per cent of UK revenues, and half of our jobs. As Business Secretary Vince Cable has noted, “if we’re to get our economy going again, we must do all we can to support them."

But a recent report by the Advertising Association and Deloitte highlighted a barrier to the future success of our SMEs which has previously been ignored. UK SMEs are responsible for only 18 per cent of UK advertising expenditure. And less than one in three advertise at all.

To those of us operating in and around marketing, we inherently understand the value of advertising. It’s economic oxygen – stimulating competition, innovation and investment. But crucially for businesses, it creates demand, matching customers with the product and service they’re looking for.

And the report found this is no different for even the smallest firms. In fact, an additional £1 spent on advertising would benefit an SME nearly eight times as much relative to its size as an equivalent £1 spent by a larger firm.

An increase in advertising investment wouldn’t just grow revenues. SMEs already account for the majority of new jobs, and more employment would naturally follow. And by creating demand for new products, advertising optimises returns and promotes further investment in innovation.

And then there’s exports. While 25 per cent of the EU’s SMEs sell to foreign markets, only 19 per cent of ours do. If we matched our European competition, the UK could be £40bn better off.

So what’s holding them back? A survey of 1000 small businesses found that, broadly speaking, the challenges are two-fold: two-thirds believe advertising is ‘too expensive’, and SMEs feel less able to make the most of their advertising. By nature, they are less likely to develop consistent, integrated campaigns, and they’re less likely to measure the results of their work – making it harder to improve.

Lucky for them, the UK is an advertising services world-beater. We have the most-awarded creative agencies in the world, and now we’re digital trailblazers. A quarter of the money spent on European internet advertising is spent right here – and we have the most developed digital economy in the world.

As a consequence, smaller businesses in the UK have a global advantage. Digital has democratised advertising, allowing even the smallest companies a chance to talk to brand new audiences. Traditional platforms – like poster sites and television – are more accessible and more flexible than ever before, and the internet has opened up entirely new channels for companies looking to drive demand.

Take Riverford, an award-winning company with an innovative scheme to deliver organic produce. A low-cost social media advertising campaign in the run up to Christmas increased their festive sales by 7 per cent - adding 2000 visitors to their website, and crucially expanded their prospective customer base.

Riverford’s success with digital advertising underlines the Advertising Association’s findings that amongst even the smallest businesses, 59 per cent of those that advertise report a direct increase in sales.

Digital progress addresses the two biggest challenges SMEs face when it comes to their marketing – affordability, and efficiency, with ever-improving metrics to measure impact and return on any size of investment.

Which lays the gauntlet down to everyone working in our marketing, media and advertising sectors. Are we doing enough to help SMEs advertise? What can your organisation offer a smaller company with concerns about cost and effectiveness?

Addressing this challenge could open a world of opportunity for your company, and could dramatically improve the fortunes of any small business. Our work has shown that every pound spent on advertising returning six pounds to the UK economy – so we all have a critical part to play in realising Vince Cable’s vision for a return to British prosperity.


By Karen Fraser, Director of Advertising Association.

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