MARKETING SUPPORT ACTIVITIES IN VERY SMALL BUSINESSES

http://sbaer.uca.edu/research/asbe/2003/pdfs/hub/27Withey&.pdf


MARKETING SUPPORT ACTIVITIES IN VERY SMALL BUSINESSES
John J. Withey, Indiana University South Bend
Eric Panitz, Ferris State University
ABSTRACT
The authors seek to identify which marketing support activities make a difference to company
performance among very small professional services businesses. Forty-seven marketing support
variables are regressed on three alternative measures of company performance.   Eighteen of the
forty-seven are found to be relevant to company performance. But only a very few activities turn
out to be significant across all measures of company performance.  Improvements in staff
expertise, employing the services of public relations specialists, advertising in appropriate
professional journals, and emphasizing price/value in the service were the only activities
identified as universally effective regardless of how company performance is measured.
Managerial implications are discussed and suggestions for additional research are presented.
INTRODUCTION
Many very small businesses do not commit significant resources to marketing and sales support
activities (Carson, 1990).   The usual reasons for the absence of marketing support activities
include budget constraints and general business orientation.
Budget limitations in small and very small organizations often relegate marketing activities to a
non-existent or very low priority.   Resources for promotion, public relations, sales training, sales
assistance, and general marketing support  are often not available.  Personal selling may be the
only commitment to anything related to marketing activities.  And, in the smallest organizations,
even personal selling is frequently sub-contracted to commission based, part-time sales agents or
representatives.  In the extreme, many very small organizations rely solely on word-of-month
and, perhaps, the sales effort so the company’s chief executive or president.
More subtle than resource budgets, but an equal contributor to low marketing support, may be
the general business orientation of the owner/manager of very small businesses.  The process,
product, or service offered by the company becomes the owner/manager’s central focus.  Small
organizations are normally shaped around a skill area, an experience base, or an interest of the
founder.  Initial and sometimes continuing emphasis is on the product or service being offered.
Considerations of marketing support are a distant priority.
The twin inhibitors of small budget and business orientation are especially strong in very small
professiona l service organizations.  These businesses are often sole proprietorships or family
operations which are devoted to and concentrate intensely on the narrow nature of the service
RETURN TO Table of Contents
RETURN TO CONFERENCE PAPERSbeing offered. Customer solicitation and general marketing are rarely viewed as significant
activities in professional service companies, and financial support for such activities would be
severely limited regardless of level of significance.  Consequently, marketing activities in
professional service organization are minimal.
At issue is whether sales support activities and general orientation toward marketing would make
a difference to the success of very small organizations.  This paper examines the possible
connection between the performance of very small businesses and their orientation toward
marketing activities.  More specifically, the paper provides an empirical example of how
marketing support activities of very small professional service businesses are associated with
company performance levels, and how these same activities may explain some of the variation in
performance. In addition to identifying the general link between marketing support activities and
company performance in very small professional service firms, the study attempts to delineate
specific types of support activities and their connection to performance.
BACKGROUND
Previous research points to a positive connection between performance and marketing in smaller
service organizations.  One of the most thorough and contemporary investigations attempting to
describe the link between business performance and marketing activities in smaller organizations
was completed by Brooksbank, Kirby, and Wright (1992).  Their study confirmed that the most
successful of the 231 manufacturing firms who participated in the research were those which
were marketing oriented.
More specifically, the Brooksbank study found a statistically significant link between high
performance and an emphasis on product quality, distribution channels, and brand recognition.
Perhaps more revealing, Brooksbank and colleagues discovered the higher performing
companies in their study were more concerned than their lower performing counterparts about
their market share, and very committed to using formal marketing research.  The more successful
organizations in the group conducted formal studies on market share and systematically used
customer satisfaction surveys. Overall, the high performing small businesses in Brooksbank’s
study emphasized sales growth over improvements in internal productivity.   Further,
Brooksbank’s follow-up study (1999) with many of the same participants, confirmed Carson’s
earlier conclusion (1990) that only a small percentage of the group actually deployed many of
the marketing support activities that they had espoused as beneficial.
Hunt and Adams (1997) reported on selected success factors in sixty- four very small, start-up
service and retailing businesses.  One key variable in the study was the use of marketing
research.  Labeled ‘external monitoring behavior,’ it was defined as the tendency to seek out
information in one’s relevant market environment (p.11).  The researchers found that business
owners scoring high on external monitoring were more likely to make adjustments in their
product/service mix, seek marketing assistance during their first year of operation, and develop
formal business plans.  These marketing oriented organizations were found, more so then those
low on external monitoring, to achieve their initial projected sales targets and exceed their
expectations for first year profits.  There is also evidence (most of it from large organizations) that business strategies containing
significant amounts of marketing activities are associated with high organizational performance.
One group of investigators examined the connection between  strategic choice, company growth
and degree of profitability in the computer software industry (Parnell, Carraher, and Odom,
2000).  Their strategy descriptor labeled ‘prospector,’ taken from the Miles and Snow strategic
typology (1978), was found to characterize the higher performing organizations.  Organizations
deploying a prospecting strategy have been shown to exhibit a strong orientation to marketing
and sales (Withey & Panitz, 2001; Panitz, 1995; McDaniel & Kolari, 1987).
The general hypothesis of the present study is consistent with the outcomes of most past
investigations. That is, in very small professional service organizations there is a positive
association between  marketing support activities and organizational performance.
METHODOLOGY
The professional accounting industry served as the sampling frame and data source in this study.
Not only are there many very small, independent CPA and general accounting offices, there is
also recent evidence that public accounting organizations are increasing their emphasis on
marketing (Traynor, et. al., 1995, and Diamantopoulos, et. al., 1993).  Competition,
concentration of market power among larger customers, and client demand for quicker
information have been cited as reasons for a growing interest in marketing among accounting
organizations.(Albrecht & Sack, 2000).
Company performance served as the dependent variable in the present study. The study utilized
three measures of performance.  Recent year gross sales, number of clients, and number of
employees were reported in ascending interval categories, and each served as a separate indicator
of success.  Statistically significant (p<.05) correlation coefficients revealed very little
association (.1543) between employee leve ls and either gross sales or numbers of clients.  The
connection between gross sales and numbers of clients was somewhat higher (.6212), but still
considered weak enough to justify using all three measures independently.
Levels of gross sales and/or the growth rate of gross sales have been used as indicators of
performance when attempting to link marketing activities with company performance (Hunt &
Adams, 1997).  Parnell, Carraher, and Odom (2000) combined sales growth rate with profit when
seeking to connect strategic choice with performance.  Begley and Boyd (1986) combined
volume of sales with number of employees to measure performance among smaller businesses.
Brooksbank, Kirby, and Wright (1992) included both profit and return-on-investment with sales
volume as they tried to link company performance to the importance of marketing.  Earlier
studies, even when focusing on marketing activities, tended to limit performance indicators to
strictly financial variables, and did not include sales level, market share, or sales growth in their
investigations (Judd & Vaught, 1988).
One of the contributions of the research reported here is its use of a unique combination of three
dependent variables. Borrowing most closely from Begley and Boyd (1986), the study replicates
the common use of gross sales as an indicator of company performance and then combines this variable with numbers of employees.  But unlike previous studies, the current investigation adds
numbers of clients as its third and most unique variable.  It should be noted that none of the
research cited above concentrates solely on small or very small organizations or on professional
service companies.  And many of the previously completed studies searched for connections
between marketing activities and/or marketing orientation and company strategy, not
marketing’s connection with company performance.  The current investigation may be the first to
try to identify correlates between a unique set of three measures of company performance and
marketing activities.  It also may be the first to search for these correlates in a group of very
small professional service organizations.
Independent variables used in this study parallel those used by McDaniel and Kolari (1987).  The
McDaniel/Kolari study included forty-seven ‘marketing elements’ thought to impact business
strategy.  These elements revolve around the traditional marketing mix topics of pricing,
promotion distribution, and product (McCarthy & Perreault, 1987).   The forty-seven elements
were presented to respondents on 7-point scales asking for degree of agreement/disagreement.
A commercially available mailing list containing a randomly selected group of 500 nationally
distributed independent, single office, public accounting firms provided the sampling frame.  A
single mailing to company presidents/CEO’s produced 164 completed survey instruments, a
response rate of thirty-two percent.  Response rate was considered very adequate given historical
rates accruing in business-to-business mail surveys conducted with small companies
(Brooksbank, Kirby, & Wright, 1992 & Hunt & Adams, 1997).
The hypothesized association between company performance and marketing support activity was
measured with standard regression analysis (Hair, et. al., 1998) applied to each of the three
performance equations. The three equations were as follows:
1.  Sales volume (X1) = f(47 marketing variables)
2.  Numbers of employees (X2) = f(47 marketing variables)
3.  Numbers of clients (X3) = f(47 marketing variables)
Regression analysis has been used previously in studies seeking a connection between marketing
activities and company performance (Judd & Vaught, 1988).  The technique seems appropriate,
given the study’s general goal of uncovering explanatory relationships between the performance
variables (X1, X2, and X3) and the forty-seven marketing variables.
OUTCOMES
Adjusted R
2
's across all three regression equations suggest an impressive connection between
marketing support activities and company performance in this sample of small professional
service organizations.  Fifty-four percent of the variation in company sales volume was
explained by changes in the use of selected marketing support activities.  Sixty-seven percent of
the variation in number of employees was explained by changes in selected marketing support
variables.  And, 44.5 percent of the variance in numbers of clients is attributable to changes in a
third group of marketing support activities.Four marketing support variables appear in all three equations: (1) Emphasizing the technical
expertise of staff members, (2) using the services of external marketing and public relations
companies, (3) advertising in professional journals, and (4) focusing on pricing as a marketing
tool played significant roles in explaining changes in the three company performance measures.
Using mergers and acquisitions to reach new service areas was a support tactic that explained
change in sales volume and numbers of clients, but did not have a significant impact on numbers
of employees.  Using market research to identify potential clients was linked to numbers of
employees and clients, but had no statistically significant connection to changes in volume of
dollar sales.
In all, eighteen of the forty-seven marketing support variables appeared in at least one of the
three equations.  When numbers of employees served as dependent variable, ten marketing
support activities were found to be significant.  When numbers of clients was the performance
variable, seven marketing support activities were relevant.  And, when volume of dollar sales
acted as the measure of company performance, five marketing support variables were of primary
importance.
 
DISCUSSION
Results appear to support the study’s general hypothesis.  This is a significant connection
between marketing support activities and company performance.  Over one-third of the
marketing support activities described on the research instrument (18 of 47) were identified by
respondents as having a significant influence on changes in company performance.
A unique and useful dimension of the study was the use of three independent measures of
company performance.  Perhaps surprisingly, there was very little correlation between dollar
sales volume, numbers of clients, and numbers of employees.  Overall the study revealed
eighteen different marketing support activities as relevant to company performance. But only a
very few activities were found significant across all measures of company performance.  There
was very little overlap among equations.  This outcome may suggest that it is a few things that
make a big difference, and the best choice of marketing support activity is a function of what
measure of performance is viewed as most important.  Improvements in staff expertise,
employing the services of public relations specialists, advertising in appropriate professional
journals, and emphasizing price/value in the service are the only activities that seem be
universally effective regardless of how company performance is measured.  None of the
remaining 47 activities were found to be effective in all three scenarios.
It’s plausible that dollar sales volume might be the most popular indicator of performance.
(There may be circumstances in the life of a small, independent public accounting business
where numbers of clients and/or numbers of employees could hold a primary attractiveness.)
Perhaps unfortunately, the regression equation using dollar sales volume as its dependent
variable produced the fewest marketing support variables as significant contributors to level of
sales.  Only five of the entire set of forty-seven had any explanatory power at all.It should be recalled that mean scores on usage rates of marketing support variables continue to
remain low (Brooksbank, Kirby, & Wright, 1992).  In the current study most means on the 7-
point scales were below 2.00.  This indicates that for this sample of small professional service
firms the incidence of marketing support activities was low, despite their impressive connection
to company performance levels.
The clear prescription suggested by the outcomes of this investigation is that owner/mangers of
small professional service firms should increase their use of marketing support activities.  And,
more significantly, that attention should be on a small group of activities.  The narrow focus on a
select group of activities called for by the results of this study should be especially appealing to
small firms operating with modest budgets.  Recommending an emphasis on price appeals,
upgrades in staff expertise, the use of print relevant print media for promotion, and assistance
from public relations firms are valuable guidelines for management actions.
Hopefully, the current investigation will stimulate future studies with larger samples across
different industry groups.  In addition, a methodological weakest exists in the research reported
here that needs to be addressed in future investigations.  With self-reported responses collected
on mailed survey instruments, it is difficult to separate respondent attitude from action.  That is,
have we recorded the incidence of actual use of marketing support activity or have we captured
an opinion about such use.
The entire topic of marketing support activities and their contribution to company performance
has not been researched thoroughly.  This is especially true for smaller organizations.  And for
small service companies, where marketing has traditionally played little or no role, the topic is
uniquely important.
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