SMEsDid you know that the return on advertising investment made by small and medium sized businesses (SMEs) is eight times that of large companies – that is according to a report by the Advertising Association? 

The Business Secretary Vince Cable, who seems to know a lot about everything and is one of the respected members of the Coalition has something to say about this. He says: “Advertising gives all sectors of our economy the opportunity to grow by allowing firms to promote their goods or services and is now one of the biggest sectors within the UK’s booming creative industries.”

Of the one in three SMEs that have advertised, over 60 per cent say it has been a success for their business as value for money. But only 30 per cent of small and medium sized enterprises (SMEs) advertise their services, despite every £1 spent on advertising being estimated to have eight times the impact on growth as £1 spent by larger firms.

SMEs represent just 18 per cent of total advertising spending in the UK but account for 40 per cent of UK revenues and 50 per cent of jobs, according to a report by The Advertising Association is using the report to encourage SMEs to advertise after finding that small and medium sized companies are under spending relative to their turnover:

  • Despite the fact that SMEs account for 50 per cent of jobs and 40 per cent of revenue generated, they only make up 18 per cent of the total spent on advertising by UK companies.
  • Only 30 per cent of all SMEs advertise, the report adds. For medium-sized businesses with a turnover of more than £10m, the figure climbs but to less than half of those companies (46 per cent).
  • Legacy perceptions that advertising is expensive and wasteful were offered as a reason for the under investment. This despite 64 per cent of those polled stating ‘advertising has been a success’ and the same number reporting it provided value for money.

The AA argues that an increase in advertising by SMEs would boost jobs and growth as well creating demand for products. Its CEO says:  “Advertising pays, no matter the size of the business. There are sharp lessons here for entrepreneurs, policymakers and crucially for advertising itself.”

This is the third stage in AA’s long-term objective to demonstrate the value of advertising. In January 2013, it published ‘Advertising Pays’, an attempt to quantify the effects of advertising on the economy and claimed for every £1 spent on advertising £6 is returned to GDP. It followed this with a November campaign making the case for advertising’s cultural and economic impact. Advertising Pays 2 is the latest chapter in the economic case for advertising – exploring how SMEs can use it to create jobs, revenues and exports. You can download it from here.

Martin Pollins
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