Soft sell

Entrepreneur, Sept, 1998 by Mark Henricks

In the 1992 movie "The Player," cynical movie executive Griffin Mill dismisses a script with the comment, "It lacked certain elements that we need to market a film successfully."

Marketing experts might say the same about the marketing approach taken by most entrepreneurs. According to a recent study by international business information provider Dun & Bradstreet (D&B), the typical entrepreneur is little more than primitive when it comes to marketing. (For details about how the survey was conducted, see "By The Numbers" on page 143.)

The survey found few small businesses use formal marketing tools to identify new opportunities. Only about half prequalify customers and prospects. Word-of-month marketing and referrals remain their primary marketing means, while, for the most part, they spurn the use of unsolicited e-mail and marketing through Web sites. Generally, their sales approach is to react to customer inquiries rather than to proactively reach out to prospects. And only about one in five small businesses strategically plans how to market its products and services.

And entrepreneurs aren't arguing with the survey. "I'm still one of the yahoos," says Robert Stephens, founder of The Geek Squad, an 18-employee computer repair firm in Minneapolis. Stephens, 29, rarely purchases market research, qualifies customers as "anyone who has a computer problem" and relies on word-of-mouth marketing for more than half his sales.

SURVEY SAYS . . .

The survey findings dismay but do not surprise marketing professionals who work with small businesses. "I definitely think it's on the money," says Joyce Gioia, president of Greensboro, North Carolina, management and marketing consulting firm The Herman Group.

On the other hand, one of the problems the survey highlighted is that small businesses pursue too many opportunities. "When your resources are limited, you need to develop a more targeted approach," advises David Urban, associate professor of marketing at Virginia Commonwealth University in Richmond.

The survey also turned up the fact that few small businesses systematically recruit effective salespeople, and many fail to provide more than in-house training to those they hire. That's even more serious, says R. Keith Tudor, associate professor of marketing at Kennesaw State University in Georgia. "Sales is the most important part of a business," says Tudor. "Without sales, there is no business. So you've got to hire good salespeople, take care of them and train them properly."

So why aren't small-business owners better marketers? Entrepreneurs know the answer. "It's too expensive," says Stephens, who describes his marketing resources as "almost 100 percent inspiration."

Experts agree that small firms lack not only the dollars but also the hours and know-how to improve their marketing efforts. "It's time and money that prevent them," says William F. Doescher, senior vice president of D&B. "Plus, they don't know how to do it and they don't know where to go to find out how to do it."

Survey results indicate that sophisticated marketing efforts correlate with company size. The survey showed a particularly big change at 25 employees, with larger firms using advanced techniques and smaller companies relying on relatively rudimentary tools.

These facts don't excuse entrepreneurs' marketing weaknesses, argues Urban. "A lot of marketing ideas are fairly simple," he says. "In many cases, small-business owners just need [a few classes] to bring them up to speed."

CUSTOMER FOCUS

If you use formal techniques such as market research and market-share analysis to identify new markets, you' re in the minority among small-business owners. That's because the most common techniques are the relatively basic ones: defining a market (49 percent) and identifying prospects by assessing products (42 percent).

Is that a problem? Perhaps not. "[Small-business owners'] markets are usually well-defined," says Gioia. "The question is, How do you communicate with that market so they'll want to buy from you?"

According to Gioia, small businesses that want to identify their target markets should focus on the attitudes of existing customers. "Talk to them and ask them what's most important to them," she says. "Make sure you have your finger on the pulse of what your customers value."

Many small businesses, such as Washington, DC-based Temps & Co., are already one step ahead of the game. The employment services firm founded by CEO Steve Ettridge in 1981 routinely polls existing customers, as well as past prospects who chose competitors, to identify new needs and see how well Temps is serving them. "We're customer-driven," explains Ettridge. "We find out what people want, and we deliver it."

Overall, small businesses do a poor job prequalifying clients, according to the survey. Only about half make sure they market only to people who are willing and able to buy. Of the entrepreneurs that do, 16 percent rely on credit reports, 12 percent use estimates of a prospect's sales potential, 8 percent consider demographic variables and 7 percent use other prequalification methods.