More Ads Target Small Firms, But How Good Is Their Aim? By JEFF BAILEY…

More Ads Target Small Firms,
But How Good Is Their Aim?
By JEFF BAILEY
Staff Reporter of THE WALL STREET JOURNAL

January 15, 2002
Everybody knows small businesses ar e a great potential market. Actually selling to them is another
matter.

It isn't for lack of trying. Advertising and marketing efforts aimed at smaller companies have boomed in
recent years.

Financial advertising targeting small and medium-size companies more than tripled from 1996 to 2000,
according to Competitrack Inc., a New York ad-monitoring concern. And ads for computers and
telecommunications services also boomed. In the first nine months of 2001, however, print and television
financial ads aimed at small business declined about 14% to $80 million from a peak of $93 million a year
earlier, reflecting the soft economy, Competitrack says.

But is all that ad money well spent?


No Couch Potatoes Here

Though smaller than print advertising, TV ad spending aimed at smaller companies grew more swiftly in
recent years. But some marketers question whether that makes much sense. Entrepreneurs don't spend
much time in front of the TV, according to Warrillow & Co., a Toronto marketing-research firm. Warrillow
estimates that the average U.S. entrepreneur watches 11.5 hours of TV a week, compared with 28 hours
for the average consumer. Thus, TV ads, says John Warrillow, the firm's chief executive, are
"questionable in small business." The growth in TV ads aimed at smaller companies, he says, represents
"a lot of money in a consumer medium that is not well spent."

If that's true, how can companies effectively spread the word to the millions of entrepreneurs they want to
sell to? Mr. Warrillow and others believe selling directly to smaller companies is often a waste of time. For
one thing, they're hard to find. What's more, each is so small that even if they buy something, sales efforts
can be highly inefficient.


Effective Selling

Instead, some of the most successful sales efforts aimed at smaller companies have targeted so-called
aggregators -- professionals such as accountants who have many small-business clients, and industry
associations that count thousands of entrepreneurs as members.

Intuit Inc.'s QuickBooks accounting software for small business controls roughly 80% of that market and
owes much of its success to accountants. Intuit tried selling to small businesses, figuring accountants
would be threatened by software that did their work. Instead, many accountants embraced the software
themselves, offloading the drudgery of small-business bookkeeping to their clients, in essence, and
allowing themselves to focus on more sophisticated services.
Today somewhere between 25% and 50% of QuickBooks sales are either directly or otherwise influenced
by an accountant, according to Intuit. And the company in many cases pays the accountant a commission
or some other enticement.

"We kind of stumbled onto it," says Steve Cook, group channel manager at Intuit, based in Mountain
View, Calif. Now, QuickBook ads are in accounting trade magazines, and much of the company's direct
mail and telemarketing efforts are aimed at accountants. The software has about 2.5 million current
users. It sells for $180 to $500.

Another company that caught onto the indirect-sales approach is MBNA Corp. The Wilmington, Del.,
banking concern sells its credit cards through industry and professional associations rather than directly
to small businesses or consumers in many cases. MBNA estimates that 67% of U.S. physicians and
dentists and 47% of U.S. lawyers carry an MBNA credit card that they signed up for in response to mail
solicitations.

Using logos or insignias with the permission of the associations, the mailing "has the appearance that it's
from the Association of Trial Lawyers of America or the American College of Surgeons," says John
Cochran, executive vice chairman of MBNA. That means MBNA isn't fighting the mailbox full of other
credit-card pitches to get its envelope opened.

The MBNA approach has another entrepreneur-friendly aspect: It doesn't look at the potential customer's
size, but rather at the kind of business it's in. Mr. Warrillow, the market researcher, counsels his big-
business clients to "forget about the small-business market," and instead to identify industries or
professions that include many entrepreneurs and then market to that group.


Using Television

Of course, some big companies insist that TV advertising is essential to building brand awareness. Sprint
Corp. late last year began running a 60-second TV ad featuring actress and Sprint pitchwoman Sela
Ward touting data services for small businesses. The ad is simple, as opposed to a 30-second spot three
years ago full of details on discount pricing for small-business phone services. "It wasn't long enough to
get the message across," a spokeswoman says.

The company also uses direct mail and telemarketing, hoping that entrepreneurs are softened up by Ms.
Ward.

Gateway Inc. is taking to heart the advice to forget about small business and think industries and
professions. The computer maker tried adapting its consumer and big-company ads to small business,
says Karen Davis, director of business-segment marketing. "Consumer programs aimed at small
business don't work," she says. "Neither do corporate programs scaled down."

More recently, Gateway has run TV ads featuring a lawyer and a real-estate agent -- focusing on those
professions instead of all small businesses. "The targeted programs are the most effective," Ms. Davis
says.

E-mail questions or comments about small business to Jeff.Bailey@wsj.com