Looking to the Future of Ad Spending: 3 Top Trends Among Small and Mid-Sized Businesses

After a 2020 calendar year that brought unprecedented challenges for businesses both large and small, business leaders have approached 2021 with a more flexible, wait-and-see approach to advertising. Although the pandemic’s restrictions on regular business activities have eased in many parts of the country, concerns remain about the risk of further business disruptions or challenges that could complicate the recovery many businesses have targeted for the year ahead.

In response to those concerns, many businesses have executed 2021 advertising strategies with caution. According to a recent SMB survey from Borrell, 40 percent of businesses reduced their ad spending in the first quarter of 2021, preferring to preserve their cash flow and/or save ad budgets for future opportunities that may offer greater advertising impact.

But this early trepidation isn’t setting a pace to be maintained throughout the calendar year. While businesses have started their ad campaigns carefully, their long-term ad plans feature more aggressive spending, an embrace of new media formats, and a willingness to adapt to new ad opportunities that may arise.

Here’s a look at three of the top trends shaping the near future of SMB ad spending.

1. Many Businesses are Worried About Local Competition

As businesses plan out their ad strategies for the rest of the calendar year, most are concerned about the competition they anticipate in their local market. According to the Borrell survey, 56 percent of respondents expressed some level of concern about losing local market share in the wake of the pandemic’s disruption to their business operations.

While some businesses are worried about competition coming from regional or national brands attempting to build their presence in a local market, 60 percent of respondents say their biggest concern is local competitors. In response, those businesses are developing ad strategies that account for this local competition, prioritizing campaigns and channels that will offer the greatest value in winning this turf battle.

Despite the earlier cutback on social media advertising during Q1, 60 percent of respondents said they plan to address this local competition by increasing their spending on social media campaigns. Forty percent of respondents cite an overall increase of marketing and advertising spending to strengthen their local presence, while 36 percent of businesses are planning to expand the types of media used in their advertising strategy.

In other words, the current reservations that may have limited ad spending over the past few months are likely to make way for increased advertising through the rest of the calendar year, as local businesses make a strong push to win customers in their local market.

2. Increased Ad Spending Will Drive Revenue and Growth

For businesses suffering financial losses during the pandemic, reduced advertising and marketing spending was targeted as an easy short-term solution to preserving cash flow. But SMBs also recognize that this spending slash wasn’t a long-term fix, since the halt or restriction of revenue-generating ad campaigns would put businesses at risk of entering a “death spiral.”

In planning their future ad spending, it’s helpful to compare projected spending in 2021 to spending levels in 2019, before the pandemic disrupted these ad campaigns. Through this lens, 33 percent of businesses expect their ad spending to return to roughly the same levels as in 2019. Another 33 percent project an overall increase in ad spending—and the average amount of that expected increase is 31 percent.

The motivation for this spending is simple: As businesses look for ways to generate revenue in 2021, advertising and marketing are the clear paths to build back their business. SMBs that invested in advertising at the end of 2020 are reporting returns from those efforts in early 2021, with leads converting into paying customers that offer a much-needed influx of revenue.

Those forward-thinking businesses recognize that advertising isn’t a sunk cost—it’s an investment in the future.

3. Ad Budgets are Adaptable to New Opportunities

Setting an ad budget gives your business leaders and advertising partners a clear guideline when planning out campaigns and spending. But SMBs understand the value of a good deal, and in 2021 they’re more likely to stretch that ad budget to accommodate opportunities that offer great value.

While 43 percent of survey respondents said they have “An overall dollar amount we plan for” with their ad campaigns, 53 percent noted that “When we see a good opportunity/deal, we seize it.”

This trend aligns with SMBs’ stated goals of expanding their media mix in their overall ad strategy. Local businesses aren’t just planning to return to ad channels they’ve used in the past, such as social media local TV commercials. They’re also eager to explore new opportunities and experiment with new, better ways to connect with their local audience.

Among the 33 percent of businesses expecting to increase their ad spending, expansion into new advertising channels is projected to be a big driver of that growth: 70 percent of businesses planning to increase their ad spending report that this spending increase will be driven by the addition of new advertising methods. In other words, the future of local ad spending is filled with audience-centric innovation and experimentation.

If you want to rebuild and expand your advertising strategy, it helps to team up with an advertising partner that can help you develop campaigns, identify value, and deliver results that grow your customer base and revenue. Fill out the form on this page to contact us today and see how we can help.