FEATURE
PAPER
Small
Business Advertising: Uses, Motivations and Missteps
The
following paper was presented at the 2006 SBI Mid-Year Conference.
It was written by Joseph R. Bell,
Richard D. Parker,
John R. Hendon,
and Kelli D. Marks (graduate student) of the University of
Arkansas at Little Rock.
Abstract
The
use of advertising by small businesses is largely misunderstood
by many people involved
with small business activities. A proper understanding of how entrepreneurs
and small business owners
view and use advertising will help those who study this area and
those who advise and guide small
business owners working to develop their own enterprises.
This study addresses how small business owners in a mid-sized metropolitan
area in a largely
rural state use advertising in their ventures. Using Internet-based
surveys the researchers in this
project sought to develop a better understanding of how small business
owners develop messages,
understand target audiences and regard advertising 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. For small
businesses to be successful some amount of promotion work must
be done by those engaged in the
business. 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 (1997) found that while there was
in fact a negative correlation with
advertising clutter the effects were limited to certain vehicles
within distinctive advertising media. 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 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.
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.
Read the Entire Paper...
TIP
OF THE WEEK
The
Marketing Plan
The marketing plan describes how the sales projections will be
attained. The marketing plan needs to detail the overall marketing
strategy that will exploit the opportunity and your competitive
advantages. Include a discussion of sales and service policies;
pricing, distribution, promotion, and advertising strategies; and
sales projections. The marketing plan needs to describe what is
to be done, how it will be done, when it will be done, and who
will do it.
A. Overall marketing strategy.
• Describe the
specific marketing philosophy and strategy of the company, given
the value chain and channels of distribution
in the market niche(s) you are pursuing. Include, for example,
a discussion of the kinds of customer groups that you already have
orders from or that will be targeted for initial intensive selling
effort and those targeted for later selling efforts; how specific
potential customers in these groups will be identified and how
they will be contacted; what features of the product or service,
quality, price, delivery, warranty, or training, will be emphasized
to generate scales, if any innovative or unusual marketing concepts
will enhance customer acceptance, such as leasing where only sales
were previously attempted; and so forth.
• Indicate whether
the product(s) or service(s) will initially be introduced internationally,
or regionally; explain why; and
if appropriate, indicate any plans for extending sales at a later
date.
• Discuss any
seasonal trends that underline the cash conversion cycle in the
industry and what can be done to promote sales out
of season.
• Describe any
plans to obtain government contracts as a means of supporting
product development costs and overhead.
• Describe any
sustainability advantages you have or can develop, and how these
aspects relate to building customer loyalty
and community support for your product(s) or service(s).
B. Pricing.
• Discuss pricing
strategy, including the prices to be charged for your product
and service, and compare your pricing policy with
those of your major competitors, including a brief discussion of
payback (in months) to the customer.
• Discuss the
gross profit margin between manufacturing and ultimate sales
costs and indicate whether this margin is large
enough to allow for distribution and sales, warranty, training,
service, amortization of development and equipment costs, price
competition, and so forth, and still allow a profit.
• Explain how
the price you set will enable you (1) to get the product or service
accepted, (2) to maintain and increase your
market share in the face of competition, and (3) to produce profits.
• Justify your
pricing strategy and differences between your prices and those
for competitive or substitute products or
services in terms of economic newness, quality, warranty, timing,
performance, service, cost savings, efficiency, and the like.
• If your product
is to be priced lower than those of the competition, explain
how you will do this and maintain profitability
(e.g., through greater value added via effectiveness in manufacturing
and distribution, lower labor costs, lower material costs, lower
overhead, or other cost component).
• Discuss your
pricing policy, including a discussion of the relationship of
price, market share, and profits.
C. Sales tactics.
• Describe the
methods (e.g., own sales force, sales representative, ready-made
manufactures' sales organizations, direct mail, or distributions)
that will be used to make sales and distribute the product or service
and both the initial plans and longer-range plans for sales force.
Include a discussion of any special requirements (e.g., refrigeration)
• Discuss the
value chain and the resulting margins to be given to retailers,
distributors, wholesalers, and salespeople
and any special policies regarding discounts, exclusive distribution
rights, and so on, given to distributors or sales representatives
and compare these to those given by your competition. (See the
Venture Opportunity Guide Exercises.)
• Describe how
distributors or sales representatives, if they are used, will
be selected, when they will start to represent
you, the areas they will cover and the head count of dealers and
representatives by month, and the expected sales to be made by
each.
• If a direct
sales force is to be used, indicate how it will be structured
and at what rate ( a head count) it will be
built up; indicate if it is to replace a dealer or representative
organization and, if so, when and how.
• If direct mail,
magazine, newspaper, or other media, telemarketing, or catalog
sales are to be used, indicate the specific channels
or vehicles, costs (per 1,000), expected response rates, and so
on. Discuss how these will be built up.
• Show the sales
expected per salesperson per year and what commission, incentive,
and/or salary they are slated to receive,
and compare these figures to the average for your industry.
• Present a selling
schedule and as sales budget that includes all marketing promotion
and service costs.
D. Service and warranty policies.
• If your company
will offer a product that will require service, warranties, or
training, indicate the importance of these
to the customers' purchasing decisions and discuss your method
of handling service problems.
• Describe the
kind of term of any warranties to be offered, whether service
will be handled by company service people, agencies,
dealers, and distributors, or returns to the factory.
• Indicate the
proposed charge for service calls and whether service will be
a profitable or break-even operation.
• Compare your
service, warranty, and customer training policies and practices
to those of your principal competitors.
E. Advertising and promotion.
• Describe the
approaches the company will use to bring it product or service
to the attention of prospective purchasers.
• For original
equipment manufacturers and for manufacturers of industrial products,
indicate the plans for trade show participation,
trade magazine advertisements, direct mailings, the preparation
of product sheets and promotional literature, and use of advertising
agencies.
• For consumer
products, indicate what kind of advertising and promotional campaign
will introduce the product, including
sales aids to dealers, trade shows, and so forth.
• Present a schedule
and approximate costs of promotion and advertising (direct mail,
telemarketing, catalogs, etc.), and
discuss how these costs will be incurred.
F. Distribution.
• Describe the
methods and channels of distribution you will employ. Discuss
the availability and capacity of these channels.
• Indicate the
sensitivity of shipping cost as a percent of the selling price.
• Not any special
issues or problems that need to be resolved or present potential
vulnerabilities.
• If international
sales are involved, now how these sales will be handled, including
distribution, shipping, insurance, credit,
and collections.
| Jeffry
A. Timmons and Stephen Spinelli. New Venture Creation
- Entrepreneurship for the 21st Century - 7th Edition. McGraw-Hill/Irwin.
New York. 2007. p240 & 241. |
|
CONFERENCES
AACSB
|
| Who: |
AACSB
Communications
|
| What: |
Business
Accreditation
|
| Where: |
Tampa,
Florida, USA |
| When: |
November
13-14, 2006 |
|
|
|
ABEAI
|
| Who: |
Applied
Business and Entrepreneurship Association International
|
| What: |
Annual Conference
|
| Where: |
Marriott Waikoloa Beach Resort, Kona,
Hawaii, USA |
| When: |
November 16-20, 2006 |
|
|
|
CHAOS
|
| Who: |
CHAOS
|
| What: |
The 2006 Chaos Conference
|
| Where: |
Austin, Texas |
| When: |
November 17, 2006 |
|
|
|
DSI
|
| Who: |
Decision
Sciences Institute
|
| What: |
37th Annual Meeting
|
| Where: |
San Antonia, TX, USA |
| When: |
November 18-21, 2006 |
|
|
|
Unite
for Sight
|
| Who: |
Unite for
Sight
|
| What: |
Fourth
Annual International Health Conference
|
| Where: |
Stanford University School of Medicine,
Palo Alto, California, USA |
| When: |
April 14-15, 2007 |
|
|
|
CALLS FOR PAPERS
IAEB
|
| Who: |
International Academy
of E-Business
|
| What: |
7th Annual Conference
|
| Where: |
Pacific Palisades Hotel - Vancouver,
BC, Canada |
| When: |
April
5-8, 2007 |
Submission
Deadline:
November 1, 2006
|
|
|
|
AIMS
|
| Who: |
AIMS4
|
| What: |
Fourth
AIMS International Conference on Management
|
| Where: |
Indian
Institute of Management (IIM) Indore, India |
| When: |
December
28-31, 2006 |
Submission
Deadline:
October 27, 2006
|
|
|
|
ICSM
|
| Who: |
ICSM
|
| What: |
2007
International Conference on Strategic Managementt
|
| Where: |
Sichuan University, Chengdu, P.R. China |
| When: |
April 19-20, 2007 |
Submission
Deadline:
October 31, 2006
|
|
|
|
ASBBS
|
| Who: |
American
Society of Business and Behavioral Sciences |
| What: |
14h
Annual Meeting of the American Society of Business
and
Behavioral Sciences
|
| Where: |
Imperial
Palace Hotel and Casino, Las Vegas, Nevada |
| When: |
February
22-25, 2007 |
Submission
Deadline:
November 1, 2006
|
|
|
|
CIJM
|
| Who: |
Cyprus International Journal
of Management |
| What: |
11th
volume, No.1, Autumn 2006 of the Cyprus International
Journal of Management
|
| Where: |
N/A |
| When: |
May
24-27, 2007 |
Submission
Deadline:
November 30, 2006
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