72% small, medium businesses are investing in advertising: Study

Seven in every 10 small and medium businesses (SMBs) in India are now investing in advertising to fuel growth in domestic and global markets, according to a new study.  

As many as 72% of Indian SMBs are investing in advertising, with 85% reporting success in acquiring new customers, showed the study conducted by market-research agency Opinium for Amazon Ads, advertising arm of the e-commerce giant Amazon.com Inc.  

The study, which surveyed 300 Indian SMBs, along with businesses across several countries, also found that 28% of them decided against advertising because of prohibitive costs and unsatisfactory returns.

Also Read: Advertising brings a new revenue stream to quick commerce companies

"As a digital-first and consumer-first brand, effectively communicating our message is critical. Despite our limited budgets, which make Above The Line (ATL) advertising out of reach, we focus on performance-oriented online efforts. Our primary platforms include Amazon, Google and Meta," said Tushar Khurana, co-founder of Perfora, a dental-care company.

The challenges 

The path to advertising isn't without challenges. About 30% struggle with budget allocation and 36% find crafting compelling content to be their biggest hurdle.

"Typically, spending around 20% of our revenues on advertising is optimal; most new-age brands allocate between 20 and 40%. While there's a clear correlation between advertising and sales, the proportion isn't always consistent. We experience cycles. Generally, increasing our advertising spend tends to boost revenue, although the return on investment might take a hit,” said Khurana.

Also Read: SRK and Hrithik promote local businesses as AI moves deep into advertising

The study also highlighted the role of advanced technologies in enhancing advertising efficacy, with over two-thirds of SMBs being optimistic about the improvements artificial intelligence (AI) can bring to their campaigns. Around 30% are already equipping their teams with AI capabilities.

The findings suggest a consistent need among SMBs across the world for effective advertising solutions that can accommodate various operational scales and objectives.

“Our research indicates that SMBs across different countries share similar needs and constraints. This uniformity allows us to develop and apply solutions globally without major adjustments. However, specific market characteristics are considered to ensure relevancy and effectiveness,” said Kapil Sharma, director of growth customer sales at Amazon Ads India.

Also Read: Cracking the code: India's OTT advertising maze, trials and trends

Amazon plans to digitise 10 million SMBs and enable $20 billion in e-commerce exports from India by 2025. 

"We're excited about the potential of advertising to significantly impact SMB growth and are dedicated to supporting their success on both a local and global scale,” he said.