Entrepreneurial application of marketing communication in small business: survey results of small business owners.

Bell, Joseph R. ; Parker, Richard D. ; Hendon, John R. 等

ABSTRACT

The role of advertising in the course of entrepreneurial ventures is largely misunderstood by many academicians, practitioners and small business planners. Yet without a proper understanding of how entrepreneurs and small business owners view and use advertising, those who seek to study this area as well as those whose role in society is to advise and guide those working to develop their own enterprises are navigating without a compass.

This study seeks to address how small business owners in a mid-sized metropolitan area in a largely rural state view and use advertising in their ventures. By utilizing Internet-based surveys the researchers in this project seek to develop a greater understanding of how entrepreneurs and small business owners develop messages, understand target audiences and whether or not advertising is seen as a successful part of their businesses.

INTRODUCTION

Entrepreneurship and Advertising are fields rich in theoretical research, case studies and other forms of scholarship, yet surprisingly little work exists in how these two areas are combined. In order to understand how advertising and entrepreneurship work together one must review literature in separate areas and consider the inclusion of research in retailing, marketing and other related disciplines.

In a 2003 study about advertising and marketing behaviors in small business firms, Harris and Reece found that much literature exists regarding competitive advantage. Yet, despite the wealth of knowledge on this topic, it was "not clear whether small businesses are engaging in marketing and advertising planning" (Harris and Reece, 2003). A study in the Journal of Small Business Management found that in fact very little planning of any kind goes into small business activities, yet those who do some amount of planning are less likely to fail (Perry, 2001).

For small businesses to succeed some marketing activities must take place. Small firms can gain advantage over the obstacles to success through the use of appropriate planning activities (Harris and Reece, 2003). One potential reason for the reluctance of some small business owners to engage in any type of advertising may be the perception that advertising clutter could negatively impact their businesses. Ha and Litman found that while there was in fact a negative correlation with advertising clutter the effects were limited to certain vehicles within distinctive advertising media (Ha and Litman, 1997). Other studies (e.g. Lohse, 1997) suggest that the way ads are designed will impact how consumers pay attention to them. Yet one thing is abundantly clear: businesses that fail to engage in some form of marketing to promote their businesses will eventually fail.

While some entrepreneurs may feel that money spent on advertising is wasted, evidence shows that consumers often value advertising that is believable, credible and ethical (Ducoffe, 1995). Given that many entrepreneurs are ethical individuals who wish only to succeed in their business ventures, advertising that is seen as good (believable, credible and ethical) would seem to be an important element in small business strategy. One growing enterprise among entrepreneurs is in the area of service retailing. Given the number of individuals starting businesses that offer services over goods, advertising will be an essential key to the success of those types of businesses. In their 1995 study Stafford and Day found that advertising which is both informative and rational works best for service retail firms; but how many business owners specializing in this area are aware of this?

Many experts acknowledge the fact that the greatest marketing challenge facing small business owners is limited resources for effective advertising (Lipput, 1995; Harris and Reece, 2003). Other experts (e.g. McCarthy, 1999) suggest that effectively written and placed advertisements will have a positive effect on business growth. A 1984 paper by Dart & Pendleton even suggests that advertising agencies have a means to act as both educator and facilitator to small business owners, yet given the high fees often charged by these agencies many entrepreneurs may feel as if they are at a disadvantage for using the services of an ad agency (Dart & Pendleton, 1984).

The issues we seek to address in this study relate to how, why and by what means small businesses owners are using advertising in their businesses. We also seek to address attitudes relating to whether or not small business owners feel that advertising is a successful component of their businesses.

RESEARCH DESIGN

An Internet survey instrument was developed by the researchers and placed on-line with assistance from the Arkansas Small Business Development Center (ASBDC). Prior to the on-line placement of this survey three email messages were written and sent to clients, small business owners and entrepreneurs, who had registered with ASBDC. The researchers provided ASBDC with text of the email messages and the ASBDC contacted persons via email regarding this study. The first email was sent a week before the survey was available to potential respondents. The second email was sent when the survey was available and requested that potential respondents complete the survey. The third email was sent the following week as a reminder that the survey was on-line and available for responses.

Potential survey respondents were assured of confidentiality and anonymity in accordance with Institutional Review Board guidelines. Participation was strictly voluntary among those contacted by the researchers. No incentives for participation were offered by the researchers or ASBDC. The researchers are wholly unaware of the identities of the respondents nor are the researchers personally involved with any respondents of this study.

Respondents had the opportunity to review and complete a 31-item survey instrument. Items one through four requested that respondents provide financial information (within predetermined ranges) regarding approximate advertising expenditures for years 2004, 2005 and estimated expenditures for 2006 and 2007. Items five through nine dealt with efforts involved with advertising and media planning. Items 10 and 11 addressed why and how small businesses advertise. Items 12 through 20 sought demographic and psychographic information about the respondents' customers. Items 21 and 22 asked if and how respondents evaluated the success of their advertising efforts. Item 23 employed a 5-point Likert scale designed to measure small business owners' attitudes regarding their perceptions of advertising successfulness. Items 24 through 26 sought to identify in broad terms the types of business respondents were engaged in. Item 27 requested geographic locations of respondents within the state. Items 28, 29 and 30 sought information regarding length of time in business, number of employees and number of male and female business owners. Item 31 requested information within numerical ranges regarding approximate annual revenues.

The ASBDC has a state office located in Little Rock and six satellite offices dispersed throughout the state. The target list of emails was collected from the client base of all seven offices. The survey was emailed to 400 ASBDC clients that met the criteria of currently being in business and having been a client at some point during the year 2005. Of the 400 emails, 387 were deemed to be valid. A total of 87 survey responses were collected for an outstanding response rate of 22.5%.

RESULTS

The survey began by assessing advertising expenditures in 2004 and 2005 and anticipated expenditures for 2006 and 2007. In 2004, 58% of respondents spent $1,000.00 or less in advertising with 30% indicating they spent zero on advertising. Interestingly, in 2005 39% of that same group indicated that they spent $1,000.00 or less in advertising with 9% indicating they spent zero. In 2006, 32% of respondents indicated that they anticipated spending $1,000.00 or less and 7% indicated they would spend zero. Again, for 2007 those expecting to spend $1,000.00 or less dropped to 28% and 8% indicated that they would spend zero. It is noteworthy to mention that those who indicated they would spend $10,000.00 or more on advertising grew from 14% in 2004 to 17%, 25%, and finally 26% for the year 2007.

In determining advertising expenditures, 44% indicated that they plan and budget each year for their advertising. Of the survey respondents 22% indicated that they use the same advertising in each year. Only 16% said that someone would contact the business and offer them an advertising deal or opportunity.

Of the 87 total respondents only four (5%) indicated that they use an advertising agency to plan their advertising campaign. Of the remaining 95%, 44% selected "price or expense" and 37% selected "we know our needs best" as the primary reasons for not utilizing the services of an advertising agency.

The survey provided ten different categories from which to select the type of advertising media they employ. Respondents were allowed to select multiple categories and 81 of the 87 respondents completed this question on the survey. The responses to this question are listed in the table below. It should be noted that 51.3% selected "Other" but the survey neglected to allow for write-in responses under this category. It should also be noted that the survey neglected to include radio as one of the responses. When asked what types of advertising media they employ, 35.2% of the respondents indicated they use direct mail, representing the number two response after the "Other" category.

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In response to the question, "Do you use press releases to inform the media of changes to your business?", 32% said "Yes" while 68% responded "No".

Seventy-two percent of respondents indicated they use advertising to increase sales while 52% of the group said they use it to educate their customers. It was interesting to observe in the "Other" category that two respondents specifically discussed creating brand recognition.

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The next phase of the survey begins to look at the advertising relationship between the respondent and their customers. The follow-on analysis to this paper will attempt to define the level of understanding the respondents have of their target customer and the advertising they employee to reach that customer.

The next question examined the motivation of the particular type of advertising employed by the respondents. Only 17% of the respondents indicated that they use a "comprehensive advertising strategy", with "lowest cost alternative" (32%) and "broadest number of people see what we use" (39%) nearly doubling the 17% response.

The next series of questions (12 through 20) saw a drop off in response rates to a low of a single question response of 37 out of 87 potential respondents. Of 46 respondents, 37% indicated that their typical customer was male, 39% female and 24% were families. Surprisingly, of 43 respondents, 72% indicated that their typical purchaser was between the ages of 31 and 50. Only 12% responded that their customer was 50 years or older even though that portion of the population represents nearly 30% of the total. Respondents indicated that 59% (23--raw number) of the time females make the buying decision for their product while 41% (16--raw number) of the time the decision is made by a male (39 responses) And in raw numbers, 21 said that a female ultimately uses their product while 16 said a male would ultimately use the product (37 responses) and 86% of the time and the product is used by an adult (44 responses).

And when asked how often your customer buys from you the responses varied widely. This particular question had a total of 51 respondents.

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Again, attempting to get an idea of the respondents understanding of their typical customer or target market, respondents were asked about their customers' income profile. Once again, this question had a total of 50 respondents. Of the 50, eleven indicated that they had no idea as to what their customers' income level might look like. Therefore, of the 87 total potential respondents to the overall survey, less than half (44.8%) indicated and that they have a general income profile of their customer.

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When looking at the typical customers' occupation level it broke down nearly evenly between White-collar (56%) and Blue-collar (48%) workers (respondents were allowed to select multiple answer choices). Interestingly, 6% of the total 50 respondents indicated that their typical customer was "non-working". Though much of Arkansas is rural there is a significant representative portion that is rather affluent, to the point where respondents were able to single out this particular category of target customer.

The final question in this group attempted to identify the typical customers' profile. There were again 50 total respondents to this question. This section was particularly interesting in that 24 of the 50 respondents selected "Other", and 23 of those respondents more specifically described their customer. Entries included "children", "needle workers", "wheelchair patients", "Hispanics", "working mothers", "Razorback fans", and the list continued.

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The next three questions dealt again specifically with advertising. We first asked if they evaluate each method of advertising they use. A remarkable 55% said they did not. The remaining 45% said that their method of tracking varied widely from the merely asking customers how they found out about the business or products to using spreadsheets and on-line monitoring. The vast majority indicated it was generally through conversation with customers or just looking at how sales may have moved, though no specifics in regard to timeframe or methodology was indicated.

Respondents were also asked about their perceived success regarding the advertising they employ. Sixty-eight percent indicated the advertising they employ was either "Useful" or "Very Useful". The remaining 32% indicated the advertising success was either "Neutral" (26%-23 raw number) or "Useless" (6%-5 raw number) while no one selected "Very Useless". This question will obviously play a key role in the follow-on assessment addressing the connection between the advertising employed and the target customer.

The last series of questions (24 through 31) attempted to establish a demographic profile of the respondent businesses. All 87 respondents were comfortable with placing themselves in one of four categories in regard to business type which included Manufacturing (10%), Service (49%), Wholesale (3%), and Retail (37%). The next question dealt with business sector, with responses spread across 13 potential categories and only one receiving no responses (Infrastructure). Once again, "Other" was the most popular category, receiving 41% of the responses. Respondents in this particular area indicated specifically in what industry their business participated. The second most common response was Retailers/ Consumer Products at 25%, and tied for third, were Technology and Construction at 7%. A number of responses in the "Other" category at some points could be well allocated into the list of the twelve other options. This could affect the percentages as they are currently listed.

Question 26 asked the 87 respondents to specifically list in what type business they participated. All 87 respondents completed this question. The responses are expectedly varied as in any marketplace. This is somewhat indicative of the prior question and response dispersion regarding "Type of Business". When responding to the question of where the business was located, the highest frequency response was the Greater Little Rock area, but equally impressive was the survey's representation of both rural and urban areas of the state.

When asked how long the respondent had been in business, the average among the 87 respondents was 7.7 years. Four of the respondents had been in business less than one year while one of the respondents had been in business for 55 years. The average number of employees was 9.2 ranging from zero to 75. Interestingly, 57 of the 87 respondents indicated that they had a female as a principal owner or co-owner in the business. This represents over 65% of the respondents.

The final question in the survey dealt with annual revenue. A bit of a bell-shaped curve slightly weighted on the $50,000.00 or less side was noted when the results to this question were plotted. It will be of interest to note what type correlation might be indicated between advertising expenditure and annual revenue.

DISCUSSION

The design of the questions, and the data collected as a part of this survey, was an attempt to identify how well-versed business owners are in regard to allocating finite advertisement dollars, and specifically targeting those dollars in the most cost effective and audience specific manner.

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Though on the surface it does not appear that any of the responses are totally surprising there are a number of issues that need to be further examined. One of those issues is that 28% of the respondents were planning to spend $1,000.00 or less on advertising for the year 2007. Though over the years surveyed, the percentage of those businesses allocating $1,000.00 or less has steadily declined, the number appears to be surprisingly high. There also appears to be a disconnect between the businesses' perceived level of advertising planning and their depth of knowledge in regard to their target customers.

It was also somewhat surprising to have 37% of the respondents indicate that they knew best what type of advertising could benefit their business. This is further complicated by 32% indicating that they selected their advertising based on the "lowest cost alternative" while 39% said that they used advertising that reached the "broadest number of people".

It was very surprising to see the significant drop in response rate when the respondents were asked to describe the typical customer. Questions 11 through 20 specifically dealt with the respondents' understanding and knowledge of their customer base. Interestingly, the response rate to the first ten questions was 100%, and again beginning with question 21 through the final question, the response rate was 100%. It would appear that a significant portion of the respondents were either unaware or uncomfortable with describing their customer. If the response rate had dropped-off insignificantly, this may not be a major observation. But because of the significant drop-off rate for only these select questions, it can be assumed that many of the respondents do not understand their target customer. And this may also be reflected in the fact that 32% of the respondents indicated that their impression of the success of their advertising campaign was either "neutral" or "useless".

The survey was very encouraging in regard to the overall response rates and the broad dispersion of respondents across businesses and industries. And though it was interesting to observe that an average of time in business was 7.7 years, a rather successful group of respondents, some additional time and analysis needs to be allocated, as a few long lived businesses could well have skewed the results. And again, the 65% female participation in the business as a principle seems to be a little high in regard to what the national numbers may actually look like.

IMPLICATIONS FOR FUTURE RESEARCH

The future research implications will involve an assessment and analysis of the survey data to attempt to gain a better understanding of the current advertising practices of the 87 respondents in regard to their knowledge and understanding of their target market. The intent will be to assess the respondents' ability to identify and target their advertising and public relations allocation.

Additional opportunities are being explored with Canadian researchers who could possibly administer the survey in a similar fashion to Canadian businesses. Upon the conclusion of their survey the researchers would hope to perform a comparison of the US and Canadian data to be published in a joint paper.

SUMMARY AND CONCLUSION

The purpose of this study was to gain a better understanding of the knowledge and practice small business owners and entrepreneurs exercise over their marketing and advertising choices. While it appears that the survey respondents are willing to in fact spend money on advertising, it is not clear that they are wholly aware of the best use for their advertising expenditures. Also given the number of responses regarding target audience profiles, it is clear that a number of survey respondents are unable or unwilling to describe their customers. If the former is the case, then entrepreneurs and small business owners are gambling with the future success of their endeavors. Without knowing who to target messages to, they will not be able to use advertising effectively in the future.

Our study has sought to better understand the advertising practices of small business ventures. With the knowledge gained here, it is our hope that academics, practitioners and consultants may use this information in providing superior guidance and expanding knowledge in the interactive area of entrepreneurship and advertising. The potential for future and duplicate comparative studies in other geographic or demographic regions is strong and it is our hope that this research will serve as a catalyst for greater awareness in this area.

ACKNOWLEDGMENT

The authors would like to express their appreciation to State Director Janet Roderick and the staff of the Arkansas Small Business Development Center for their significant assistance in administering the survey instrument that was a large part of this research project.

REFERENCES

Dart, J. & Pendleton, L.L. (1984). The Role of Advertising Agencies in Entrepreneurial Education. Journal of Small Business Management. 22(4), 38-44.

Ducoffe, R.H. (1995). How Consumers Assess the Value of Advertising. Journal of Current Issues and Research in Advertising. 17(1), 1-18.

Ha, L. & Litman, B.R. (1997). Does Advertising Clutter Have Diminishing and Negative Returns? Journal of Advertising. 26(1), 31-42.

Harris, S.A. & Reece, B.B. (2003). Advertising and Marketing Planning Behaviors in the Small Firm. Proceedings of the 2003 Conference of the American Academy of Advertising, 148-155.

Lipput, H. (1995). A Shoestring Budget. Executive Report. 14(3), 42.

Lohse, G.L. (1997). Consumer Eye Movement Patterns on Yellow Pages Advertising. Journal of Advertising. 26(1), 61-73.

McCarthy, B. (1999). Guerrilla Targeters Win with Marketing Basics. Marketing News, 33(14), 13.

Perry, S.C. (2001). The Relationship between Written Business Plans and the Failure of Small Businesses in the U.S. Journal of Small Business Management. 39(3), 201-8

Stafford, M.R. & Day, E. (1995). Retail Services Advertising: The Effects of Appeal, Medium, and Service. Journal of Advertising. 24(1), 57-72.

Joseph R. Bell, University of Arkansas Little Rock

Richard D. Parker, University of Arkansas, Little Rock

John R. Hendon, University of Arkansas, Little Rock