If you run a small business and aren’t an expert in online technologies, you will end up in one of three situations:

• you will quickly learn how to do some of the more important aspects of online marketing yourself,
• you will pay a lot of money to people who are experts in taking your money and little else, or
• you will ignore the online world and continue to wallow in your Luddite-ness while others are building their businesses.

Here is my guide on how to avoid the latter two end states and get smarter about online marketing.

I have been spending time with a friend of mine who owns her own retail interior design business. Earlier this year, she decided to grow her business using online marketing. Over the past several months, she has acquired new customers and found her niche. But it hasn’t been easy. She has had to attack the online world on several fronts, and develop an expertise in Google AdWords, Houzz.com, HomeAdvisor.com, and Angie’s List. She needed to beef up a simple WordPress-based website, and learn how to screen consultants offering her a variety of deals, some pricey, some ineffective, and some that were just plain scams.

Let’s start with the website. Any retail business today needs a solid website that shows their product, contains recommendations from satisfied customers, and makes it easy for a potential customer to research the firm and understand what products and services are offered and at what price points. I told my friend to look around the Web and find a couple of local sites that she liked and then call the business owners and find out who developed the sites. With one restaurant, the site was beautiful but it was $40,000. Another consultant wanted $4,000. Nice but still a bit pricey, and this consultant wanted to build a site from the ground up in Drupal, which I had my doubts that my friend could maintain over time. She ended up with a third consultant who used a nice WordPress template. That was attractive because she already had some familiarity with WordPress and could make the changes herself. Total spend so far: $1,000.

To populate the website, she needed photos of her work. She found a budding photographer who could do appropriately lit interior shots at low cost, and would send her digital images along with watermarks to distribute online. Another $1000.

Then she heard about Houzz.com, a wonderful social media site. Designers post their pictures of their rooms and objects in them; the public indicates their preferences. Clients post their reviews of both. In the past, my friend has had to carry around a looseleaf notebook filled with clips from shelter magazines for her clients to indicate a preference. Now she can do it digitally.

But Houzz, and other specialty communities like it have another function. By writing comments on these discussion forums, she is sharing her knowledge with the people most likely to hire her. It doesn’t cost her anything to participate in these forums, other than her time, and she is reaching a ready-made audience of thousands of customers. As a result, she has gotten new clients and her work has been featured in regional design magazines.

The next step was expanding her reach to other places that people would look at when hiring a designer. Here sites such as HomeAdvisor and Angie’s List come into play. There are a variety of rules and regulations for each site, and how you get recommendations posted on each. Part of the trick here is again finding the right specialty sites that have the best fit in your particular market segment.

The next step was understanding and using Google AdWords to create a series of paid search ads that would direct visitors to her website. This is an entire world unto itself, and required spending some money and experimenting with various ad campaigns, keyword selection, and geo-targeting her ads. A good place to read about this world is in a series of posts by small business owner Paul Downs about his furniture making business on the NY Times Boss blog.

Downs writes, “Basic ad group maintenance requires checking how many e-mail inquiries we get, whether the click-through rates are comparable to the overall campaign, which keywords generate the most traffic, and whether the ads are being triggered by searches that are relevant.” He adjusts his keywords constantly to tune his AdWords spending, even creating negative keywords to prevent wasting money. Part of the challenge here is in understanding what you are paying for, too. Google “tells you what level of spending — the maximum recommended amount — it would take to buy the rest of the clicks. What it leaves out is that the additional clicks you buy may not be of sufficient quality to result in additional sales.”

Part of Downs’ marketing pipeline is taking the inquiries from his paid search campaigns and qualifying them. He has two salesmen that use a ten-question survey to ask what kind of furniture they want to purchase. He then produces a classy proposal that is easy to understand and can be passed up the decision food chain to the ultimate decision-maker, without tying up a lot of his time in the process.

The challenge of AdWords is in the amount of data you have to look at to understand what you are doing, where you are spending your money, and how to improve your campaigns. “Beyond the most important number (monthly sales), I look at Web site traffic; the number of inquiries coming in each day, week, and month; the number of proposals written; and how much each salesman contributes to these totals.”

Downs’ business was humming along until earlier this year, when he introduced a new and lower-cost product. After months of seeing his total sales volume drop, he realized that he was wasting his Google AdWords spending on clicks from non-profits and schools, foregoing clicks on bosses and less-price sensitive potential buyers. “By all of its own metrics, the AdWords campaign was a home run. I had received lots of impressions and bought lots of clicks. The only problem was that these apparently were the wrong clicks…. My AdWords spending was going to the wrong people.”

Downs spends several hundred dollars a month on his campaigns, my designer friend has a similar budget but varies it based on her availability and how many new clients she is taking on: she doesn’t want to grow too fast. She also runs short-lived campaigns because she has found that her clients are only shopping online at certain times. This way improves her ad placement (the more you spend, the higher your ad ranks on the results).

As you can see, setting all this up is time consuming, and does involve some cash outlay. You can certainly spend more and get an “SEO expert” and you can certainly spend almost no money and get something that doesn’t really deliver. The trick is finding that middle ground where you are comfortable and yet can continue to sustain or grow your business at the rate that you want.

Still to come: writing a regular blog that will feature her clients and some of her thoughts on design, and spending more time developing a following on Houzz et al. And probably an email newsletter too. It is an on-going process. None of these things cost a lot of dough, though: just time.

Part of what is going on here is balancing each of the different online tools to create what Downs calls your own business narrative: “Every day I tell myself a story about what is going on with my business, and I draft future chapters that help me decide what to do next.” The trick is making sure you don’t go too far afield and you can explain the results that you see from the various reports.