According to a study by Visa USA, non-payroll spending by U.S. small businesses will increase an estimated 5.4% this year over last year, to $4.7 trillion, and will reach $5.3 trillion in 2008.
"Small business is becoming more and more important, with probably one of the fastest growth rates [in spending]," said Susanne Lyons, exec VP-chief marketing officer at Visa USA.
The Visa study found that the largest category of small-business expenditures is core business services, including legal, accounting, insurance, shipping and mailing. Small businesses will spend $1.6 trillion on these services this year, up 5.7% from last year, according to the study.
Other strong areas of small-business spending include maintenance and operating supplies, raw materials and manufactured goods, and advertising and marketing.
According to a Jupiter Research report released in April, technology spending by small businesses is expected to remain flat this year, although there are some subsegments of the market that will boost their spending.
"Small business is a highly fragmented market," said Joe Wilcox, senior analyst at Jupiter Research and lead analyst on the small-business report.
"How you sell to them is very different from how you sell to large enterprises."
Wilcox said the strategies for marketing to small businesses vary based on the industry, size of the company and profile of the decision-maker.
Companies that market to small businesses say the highly fragmented nature of the market makes psychographic research into the segment extremely important.
"You really have to tap into their personal passions," said Visa USA's Lyons.
"In small business, more so than in large businesses, [owners'] lives and businesses merge more, even how they manage finances."
Lyons said that when targeting small-business owners, Visa promotes products and services that will save owners time and money, such as organizing and managing their finances, so they can focus on running their businesses.
Visa uses TV, print and online advertising to reach small-business owners. It also uses custom events, such as its Small Business Economic Insight series of conferences that bring together small-business leaders and advocates to discuss economic issues.
Another effective strategy for targeting small-business owners, marketers say, is the use of customer testimonials.
"You can really build credibility by enlisting your own customers to tell stories about their experience with your company," said Jay Fiore, senior manager of eBay Business marketing.
EBay Business has used this customer testimonial approach in ad campaigns, direct mail and other marketing communications with buyers and sellers on the online auction service. "A small-businessperson will listen to another small-businessperson before anyone else," Fiore said.
Since it began in 2003, business buying on eBay Business has grown to $3.3 billion a year, with 73% of revenue coming from businesses with fewer than 26 employees, Fiore said.
Donna Barrett, a spokeswoman for United Parcel Service of America, also said the use of customer testimonials is a good approach with small businesses.
UPS, recognizing the importance of the small-business sector, will reorganize its sales force beginning in January to focus on gaining more small-business accounts.
"The restructuring will enable our salespeople to have more face-to-face time with smaller accounts," Barrett said.
With the reorganization, UPS will assign more account executives to serve the small-business market and make small business a bigger part of reps' sales portfolio, she said.
"It is a recognition that this segment needs to be more personalized, with more of a one-to-one relationship approach than we have done previously," Barrett said.
Within the small-business market is another important sector-small office/home office (SOHO). Many marketers are targeting the SOHO market with special promotions, offers and campaigns to drive business.
"The needs of the SOHO market are very similar to those of the small-business market when it comes to marketing," said Janet Holian, exec VP-chief marketing officer at VistaPrint, an online provider of graphic design and custom printing services. "Much like small busi- nesses, the SOHO market is time- and budget-constrained, and is struggling to juggle all aspects of their businesses."
With these needs in mind, VistaPrint offers SOHO businesses special offers, such as free design services and small print runs.