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Small Fry Go Online


Special Report -- Small Business Technology

SMALL FRY GO ONLINE

Bill Tuszynski doesn't fancy himself a techie. But as manager of new-business development at privately held Inolex Chemical Co., he is spending a lot of time in front of his personal computer, prowling the Internet to monitor the cybermarketing tactics of rivals, scanning chemical-industry bulletin boards for product ideas, and checking out the "home pages" of startups that might have materials or new technology that jibe with the $40 million Philadelphia company's business.

Little by little, he is becoming a regular on the Internet and other online services. "I can't say I'm browsing every day; maybe once a week," says Tuszynski. "It's a heck of a lot easier than going to conferences." Tuszynski's electronic sojourns have already paid off in prospective customers. Next, he hopes to expand the marketing of Inolex' foams, adhesives, and lubricants to a World Wide Web site.

Another champion of marketing technology is Richard A. Penn, vice-president for finance and operations at $20 million Puritan Clothing Co. of Cape Cod. A grandson of the store's founder, he set up a database to track store sales and coordinate customer mailings. Now, he's learning to identify big spenders and regularly engage them via personal mailings and special events such as private showings. Surrounded by department-store chains and discounters, Puritan regards the new technology as a key defense. "You have to have this information to be in the ball game today," says Penn.

All over America, small businesses are using information technology once only available to big companies to become Davids of marketing. The savviest are setting up databases to remember customers' favorite foods or clothing designers and sharing tips online in an electronic version of the Rotary Club. Making it all possible: the sweep of cheap digital electronics and networks into the core of everyday business activities. This may mean a cash register that does double duty by collecting customer names and buying preferences, or software that cranks out thousands of personalized letters overnight, or online networks that act as electronic conduits for selling merchandise, exchanging knowhow, and spreading marketing tips.

ONE ON ONE. It's trickle-down technology. Long after major corporations mastered marketing techniques that mom-and-pop companies couldn't match--let alone afford--technology is now letting small-business owners personalize their products and services. Marketing databases that once required million-dollar mainframes now run on personal computers. That's how Puritan practices "relationship" marketing with mailings to 2,000 customers. Where rivals may blanket customers with cookie-cutter mailings, Puritan's come with a personal note signed by the sales associate. "It's one-on-one vs. the mass market," says Penn.

All told, these technologies and services are letting small fry research new markets, test their ideas, and build close ties to customers. Underpinning it all is "a convergence of communications and database technologies," says marketing consultant Richard Cross of Cross Rap Associates, co-author of Customer Bonding: Pathway to Customer Loyalty. "The integration of database, Internet, and CD-ROM is where the real breakthrough thinking is going on. The beautiful thing is it's equally available to small and large companies." Adds Daniel H. Schulman, AT&T's marketing vice-president for small business: "Technology is going to become a tremendous equalizer. Size will no longer be as important in determining market strength. Creativity and innovation are the main factors."

In fact, with technology at their fingertips, entrepreneurs may have an edge over corporate giants. Why? Entrepreneurs can target smaller--and sometimes more profitable--niches, swiftly change plans, and enter new markets. "Entrepreneurs now can see what's happening immediately," says Cross. "They don't wait for reports."

Of course, using technology to set and achieve marketing goals can also be a bit intimidating at the outset. But here's the good news: New software makes gathering and manipulating marketing information with an ordinary PC far simpler, "reducing the level of difficulty to something the principals in small business can do in an evening or on a weekend," says professor Stuart L. Meyer of Northwestern University's J.L. Kellogg Graduate School of Management.

Just check out the huge variety of PC software available to build custom mailing lists. MarketForce, from Software of the Future Inc. in Arlington, Tex., lets companies manage their own direct-mail and telemarketing campaigns. And a growing library of market and customer data can be bought on CD-ROM. Pro CD Inc., Database America, Cole Publications (a unit of MetroMail), and Dun & Bradstreet all sell nationwide telephone listings on compact disks, including names and addresses, for as little as $175. The CDs let you search by name, zip code, and, in some, by income or business type. If your records are incomplete, list-matching software can plug the holes in partial records for about $300. A little work is required, such as adding details included on the CDs.

PRICE BREAK. For small businesses that don't have the time or inclination to cook up their own marketing setups, there are dozens of computer and software dealers to help. They will rig up a computer with retail-sales-and-accounting packages and preinstall the appropriate lists to get you started. Kevin Eldredge, president of retailing-systems supplier Rapidfire Software Inc. in Beaverton, Ore., says so many list services have sprung up in recent years that the lists now cost as little as 2 cents a name, down from 14 cents a name a few years ago. "We tell our customers to buy whatever they like, and we'll convert the data and put it on their system," he says. That lets stores such as Mi Amore Pizza & Pasta (see box) immediately begin tracking customers and their purchases just by asking for a phone number when customers call in an order.

Need to reach hundreds of fax machines overnight? PCs now come standard with fax modems to zip off brochures or product pitches. Until recently, if a small business wanted to send thousands of faxes overnight, it had to turn to fax-broadcasting services that cost 17 cents to 25 cents per fax. Now, they can do their own. QuadraFax, from Brooktrout Technology Inc., which starts at about $3,000, allows customers to request fax-back information on specific products--and can be designed to blanket thousands of customers with a single pitch. What's more, it can be programmed from a PC.

The key payoff for any of these tactics is to create a list of the best customers and then figure out how to keep them happy. That's the idea behind so-called affinity campaigns, such as frequent-flier programs that cultivate repeat business by rewarding customers for purchases. Now, small businesses in Omaha, Denver, and Phoenix can buy this kind of data-gathering and analysis as a service from U S West, the regional phone company. U S West Marketing Resources Group has 2,000 Denver businesses paying as little as $3,000 a year for installation of equipment to track customers and provide direct-mail services.

Here's how it works: U S West handles the customer tracking and target mailings to build sales by issuing 800,000 ATM-like cards that provide a discount when used with purchases at restaurants and retailers. Every month, subscribers receive a report on card users' zip codes, spending habits, and sales histories. It helps the companies fine-tune marketing by identifying the best customers and key groups to target with direct-marketing programs. Wild Oats Community Market, a natural-foods chain with stores in Denver and Boulder, says the program helped it tailor store events to higher- spending customers. "We get great feedback on who shops with us," says Regional Manager Jim Ware. One result: Cardholders' spending averages $41 a trip, vs. $15 for non-cardholders, he says.

BUDDY SYSTEM. Potentially, this could give mom-and-pop stores the chance to pinpoint new customers and create joint promotions--the way Burger King and Walt Disney Co. teamed up to promote Pocahontas, for example. Now, cross-promotions linking local restaurants and movie houses for dinner-and-theater deals are easily stitched together, says U S West Marketing Manager Joy Barber: "These are cross-promotional opportunities that all the big guys have been doing for a long time."

Denver's Wishbone Family Restaurants Inc. is a convert to the U S West system. For 32 years, it relied on local ads and word of mouth to build its $2 million business. Then, this spring, owner Joseph Lochi shelled out $6,500 to equip his two restaurants with U S West's electronic card readers and purchase its direct-mail services. The result: He has seen $75,000 in new business this year from mailings to people who live in the area but had never dined at the restaurant until lured by the promotion. "We've got tremendous play from it," says Lochi.

U S West isn't the only giant corporation that's seizing the opportunity to generate business by selling big-league marketing technology to small business. IBM estimates that the 52 million small and midsize businesses around the world will spend $230 billion on information technology this year. In addition to buying thousands of PCs and scores of other products, IBM Chairman Louis V. Gerstner Jr. is convinced that in the future, small organizations will reap big rewards from tapping into Big Blue's online networks. "They can now go out and in effect rent an IT [information technology] infrastructure. They don't have to buy it," he says. "There will be network-based applications that they will be able to participate in that are the equivalent of large competitors' without making the investment up front."

Telecommunications giant AT&T has refined its approach toward small business, focusing on putting together packages of solutions--including an online network and Internet services. "We've seen a sea change in our customers over the past year," says AT&T's Schulman. He says more customers are asking for integrated services, more sophisticated products, and help in using technology to do things such as electronic commerce. "When we put on seminars, there is a tidal wave of requests on how they plan for the upcoming electronic-commerce era," says Schulman.

On Oct. 18, AT&T launched a new program called Resources for Growth that helps businesses analyze and improve their return on sales and marketing and provides tips on expanding internationally. It includes reports on government regulations, shipping, and foreign distributors. Businesses can also purchase services such as language translation and travel services at a discount.

AT&T also has a service aimed specifically at startups. It includes things such as touch-tone access to a library of business-management and marketing information, discounts on office equipment, software, and payroll services, and savings of up to 80% on business publications. The entire service for startups costs an annual membership fee of only $99.

IN THE DOOR. Helping small businesses get hep to new marketing technology isn't just an opportunity for the giants. Nieto Computer Services, a Houston custom-software and computer-services company, developed an easy-to-use Internet package that links lawyers to key legal databases on the Internet. Rather than thumb through legal texts or pay paralegals to scour court decisions, customers can have Nieto's Lawyer's Link provide electronic access to federal and state tax-law databases, Supreme Court decisions, and commercial-law databases.

Nieto developed the product to showcase its software and network skills. "This package gets us in the customer's door," says co-founder Scott Mt. Joy. Once there, the company can pitch its Internet "home page" development services, technical consulting, and programming skills. It works so well with law firms that the two-man company is at work on another industry-specific service--this one to collate Internet information sources for the oil industry.

A surprising bounty of marketing information can be culled from commercial online services. Prodigy Services Co. provides access to a Dun & Bradstreet Corp. business database of private companies and professional offices. In-depth reports are about $2.50 each. Want up-to-date, financial details on public companies? America Online provides company histories and financial data via Hoover's Handbook On-Line Service. And complete Securities & Exchange Commission filings are available free over the Internet.

Online searches are changing the way $1.5 million Pacifitek Inc. finds new customers. The San Diego electronics company now taps into an electronic version of the bible of government procurements, Commerce Business Daily. The printed version is unorganized and may take days to reach the desks of executives. But the online version is there in a snap and lets contractors find leads using keywords, says Pacifitek Vice-President Jeff Stratton.

Online services, including CompuServe and the Microsoft Network, are rapidly building small-business resource areas to disseminate information once available only to big companies. Market researcher Interco Corp. in Norwalk, Conn., estimates that 22% of online users now tap such extra-cost services, up from 16% a year ago. "If you're a little bit savvy and familiar with online-research techniques, you can go a long way," says Interco research analyst Mark Snowden.

The Internet and online services are more than electronic libraries and a place to hang your home page. Want to test a new product idea without committing to a big purchase? Put it in an electronic catalog and test the response. TSI Soccer Corp., a $20 million Durham (N.C.) sporting-goods catalog company, uses an electronic version of its catalog to test-market ideas and trends before a slice of its customers. "We can do things with a Web catalog that we couldn't do with paper," says Robert Brown, TSI's director of international sales. What things? Experimenting with gear from untested suppliers, say, or posting updates to the printed catalog. If the inventory of a certain brand of jersey arrives after the catalog ships and TSI discovers the shirts run large, it can post a notice online, thus reducing costly returns.

Want to run a focus group in a new market but don't have the money to hire consultants? Find a bulletin board serving your target geographic market or post requests to a newsgroup where you think you're likely to find the right kind of prospects. The Internet is currently awash in contests designed to collect E-mail addresses and profiles of network denizens--but you have to cast your net carefully (page 161).

AGILE. The bottom line is that online services are leveling the barriers to reaching mass markets for small companies, says David L. Birch, president of small-business researcher Cognetics Inc. With millions now connected to online services such as AOL, Prodigy, CompuServe, and the Microsoft Network, company size becomes irrelevant to delivering a new product or service, he says. "From a marketing point of view, I'm just as good as the giants--or better, because I don't have to go through 38 committees to move quickly and reach a large group of people," says Birch.

On the Net, tiny TSI looks like one of the big boys. The company uses its electronic catalog to foster an image as a savvy soccer insider by donating space on its World Wide Web site to a fan club of the U.S. National Soccer Team and listing scores of Japanese soccer games. Both moves encourage regular visits to its electronic catalog and burnish the company's reputation, says Brown.

Never done market research before? Hundreds of companies conduct electronic information searches, market studies, and analyses using online networks. Houston's Research On-Line International Inc. uses the Internet to gather data for custom market studies and competitive analyses costing as little as $500. "The Internet is bringing the price of information down," says Research On-Line President Jonathan Lack, whose company has helped small businesses launch marketing campaigns on the Internet.

Whether hunting for new business, checking out the competition, or launching a customer promotion, small-business owners are no longer technologically challenged. Now, with technology available equally to small and big companies, the race can go to the fleetest of foot--and not always to the fattest of wallet.

HOW TO LAND CUSTOMERS WITH HIGH-TECH MARKETING

BUY MAILING LISTS ON CD-ROM

-- Pro CD, Danvers, Mass., $175. The list provides basic info on 95

million homes and businesses: Name, address, phone number, and SIC code.

-- Marketplace, Dun & Bradstreet, Westport, Conn., $599 for the first

3000 names. An in-depth list with thousands of businesses.

NETWORK ON THE NET

-- Use the Small Business Administration's online bulletin board:

800 697-4636, or Internet site: http://www.sbaonline.sba.gov.

-- Check out local or industry bulletin boards.

-- Look for small-business interest groups on America Online,

CompuServe, Prodigy, and the Microsoft Network.

SEND CUSTOMERS THE FAX

-- PCs with a fax card can be programmed to handle short lists.

Use products such as QuadraFax for larger lists.

-- AT&T, MCI, and Sprint offer volume faxing at a cost of

approximately $175 to $250 per 1,000 pages.

GET THEE TO A HOME PAGE

-- Create your own home page on the World Wide Web using such products as

Quarterdeck's $130 Web-server software.

-- Internet services from AT&T, MCI, and scores of small businesses

provide a home page for $200 to $5,000, plus monthly service fees. By Gary McWilliams in Houston


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