New Or Me Too?

American Demographics, Sept 1, 2002

Byline: SANDRA YIN

It started in the fall of 2000, in a conference room on Microsoft's sprawling 265-acre campus in Redmond, Wash. Michael Knight, managing director of Third Wave Research Group, an eight-person market research firm based in Madison, Wis., pitched Microsoft execs on the idea of placing Third Wave demographic applications on bCentral.com, the Web site that the computer giant had developed to target entrepreneurs. The idea: Microsoft would have another service to entice Web-wandering small business owners to its Web site, and Third Wave would get both the prestige of working with a corporate giant and an additional revenue stream.

Sixteen months later, the deal was sealed, putting the company best known for bringing Windows to the desktops of millions into direct competition with some of the most venerable names in private market research that peddle data to entrepreneurs online - Claritas, SRC and MapInfo among them. With its March 2002 launch of this tool, Microsoft joined the fray in trying to serve the demographic data needs of the nation's 5 million businesses with fewer than 50 employees - a group that generated some $4.2 trillion in receipts, according to the 1997 Economic Census, the most recent data available. "A lot of entrepreneurs are stuck with too much data coming across their desks," says Knight. "We've collapsed the amount of time it takes to make a decision. Users don't have to go one place for a map and another for data. It's all here."

But what exactly is Microsoft offering to small business owners at the site? Is bCentral.com's content any different from what's already on the market? And do entrepreneurs care about any of it?

Visit the site's demographics section, bcentral.thirdwaveresearch.com, and you'll find a product that looks like it could help entrepreneurs with a burning question about their market. Who's buying beer and ale at full-service restaurants in the 10010 ZIP code, and how much are they spending? Which demographic spends the most on transportation in San Diego? For a fee, a household-spending tool generates tables that show estimates of the market potential of specific consumer products and services, segmented by demographic variables and geographic regions. The tables display frequency of purchase, average expenditure and market potential in dollars.

Armed with that knowledge, an entrepreneur could click on the site's "Demographic Trends" tool to learn the projected rate of household growth from 2002 to 2007. "You get in-depth analysis from the get-go," says small business owner Nadine Cino, CEO of Tyga-Box Systems, a New York City-based company, that makes equipment to help commercial movers haul boxes. When Cino wanted to determine whether a market was worth pursuing, she used bCentral's site to gauge potential demand for commercial movers.

The market information is useful to some entrepreneurs like Cino, but what's on bCentral's site is available elsewhere online. Much of the data the site presents is available free at the Census Bureau's factfinder.census.gov Web site. And more comprehensive tools have been available from research companies, such as San Diego-based Claritas and Orange, Calif.-based SRC.

For the past two years Claritas' sitereports.com has offered reports and maps that provide information to help analyze markets, select site locations and better target consumers. It includes data on demographics, business services and retail trade potential. The company's claritasexpress.com site presents census figures, marketing tips, detailed site and market analysis and mailing lists useful to small businesses. Meanwhile, SRC's demographicsnow.com offers a subscription service that provides reports and interactive mapping for all levels of U.S. geographies.

What's more, entrepreneurs are a tough sell, and capturing a portion of this market may prove difficult. According to a survey from the National Federation of Independent Business Owners, only 11 percent of small business owners pay a company to provide them with information for creating a customer list. Instead, when compiling a mailing list, entrepreneurs rely on their own records, recommendations from their customers and even on the Yellow Pages. Market research is something a lot of entrepreneurs skip, preferring to operate on gut instinct.

"They tend to follow their hearts and not their data," says Becky Naugle, state director of the Kentucky Small Business Development Center. Lacking large research departments or often, even an employee dedicated to conducting market research, small companies aren't eager to delve into a pile of numbers, says Jean Pierre Dube, professor of marketing at the University of Chicago's business school.

This means that sites like bCentral must walk a fine line: They must craft their offerings so that they appeal to entrepreneurs who are skeptical about the value of demographic data while also serving the needs of those small businesses that are sophisticated users of statistics. "The challenges in serving small business owners is to give them data that is complex enough to be useful yet is still easy to access," says Olivia Duane, executive vice president of SRC.