Small Office/Home Office
By Paul Barbagallo
Currently, 15 million small businesses are active in America, if you define a small business as an enterprise with one to 500 employees. By the fourth quarter of 2002, more than half of these small businesses saw improvement in sales from the three previous quarters, according to a survey conducted by Business Know-How, a small business online service for home office professionals and small businesses.
A recent study by financial experts Cattles Invoice Finance reveals that, compared to 2001, almost 80 percent of small companies and self-run businesses enjoyed the same or higher profits in 2002, even though just under half noticed a slowdown in their business sector.
"Downsizing of big business, the inconsistent state of the economy and the tremendous gains in communication and computing have all contributed to the entrepreneurial movement of the past 10 years," says Steve Ruffler, sales manager, business division, List Services Corporation.
Of course, he asserts, the Internet and the ability to buy and sell almost anything from anywhere enables the small business to act and present itself like a big business.
Pete Candito, president of CC3 List Group, concurs: "The cost of technology has come down, so that's allowed this market to grow. In terms of high-speed communication, bandwidth has increased tremendously, making it easier for SOHO [small office/home office] people to participate in online activity."
Large or small, no business is expecting a pain-free 2003, but these numbers clearly show how SOHOs have bucked the downward trend.
A Captive Audience
Whether or not a small business is based out of one's home, a direct mail offer sent to this market will most likely be seen by the decision maker, says Lori Collins, director of business development, FocusUSA, a list company that manages several SOHO files.
"The owners of those small businesses and home office businesses are also the people who open the mail, answer the phones, run the errands. They do it all," Collins says. "So, why not send them an offer? At the very least it's a great way to get them to see your product."
Collins runs the FocusUSA Business Development Group from her New Hampshire residence, representing the growing number of telecommuters that also make up the SOHO marketplace.
"Telecommuting is going to happen more and more," she says. "The proof that it works is ostensibly productivity. It's more cost-effective for companies to have people work out of their homes. It's cheaper than paying for the body and real estate."
Collins shares that she regularly receives offers from office supply catalogers, publications, business-related software companies and printers. And she admits that they have her attention.
"With the SOHO market, you can get to the owner or head of the business easily," Collins says. "Just having that information allows you to get the offer into the right hands."
In Collins' situation, even though she is not the owner or head of her company, she is the sole decision maker when it comes to purchasing products and services for her home office.
Business vs. Consumer
The SOHO market is ripe for a variety of offers such as insurance, postal services, printers, publications, business credit cards and lines of credit, merchant account services, high speed Internet services, computers, telecommunications, security, accounting services, and office supply catalogs.
"New small businesses are opening every day, and just like homeowners moving into a new area, these businesses are prime for services," says Ruffler. "However, time sensitivity is important for mailers who want to ensure their mail piece is first to arrive in the new business owner's mailbox or e-mail box."
This market is perfect for offers of business supplies and services, but at the end of the day, they are consumers, too. Candito advises mailers to analyze the offer and market before venturing into the consumer realm.
"Theoretically, SOHO can work for both," says Candito, "but that's not always the case. This market lends itself more to a B-to-B offer than a consumer offer, because when the person is in their small office or home office, they're thinking business, not home."
However, Michael Elbrecht, list manager at Kroll Direct Marketing/Compiled Solutions, reports frequent consumer mailer usage of Kroll's EMSI Small Business file of 1,605,535 business executives at their postal addresses.
"I have recently seen increased usage from mailers who are looking for an additional segment that they feel might be previously untapped as far as consumer offers go," says Elbrecht. "We [Kroll] always tout any SOHO file as a great option for consumer mailers."
Candito says there are demographics in the SOHO market that lend themselves to consumer offers that are also used for business: e.g., cell phones, credit cards and PDAs.
The majority of what Collins observes at FocusUSA is business mailers renting SOHO files. But, she says, there has been a shift to consumer catalogers looking to get more exposure for their catalogs by sending them to small business addresses.
"The consumer offer may not have anything to do with the business at hand, but just being able to reach these people and not have your effort get lost in the home mailbox clutter is worth it," she says.
For marketers targeting the SOHO market, direct mail is the preferred medium.
According to Elbrecht, Kroll has rented its small business files on more occasions to postal mailers than to e-mailers.
"E-mail is probably not the best medium to use to go after these people if you are sending consumer offers," says Collins, "because you don't know if they are in a small business environment or are working with other people intimately. Companies often frown upon personal e-mail for various reasons."
But, says Collins, e-mail is a great medium for businesses to send business information and marketing appeals.
"If you have the availability in both mediums, [direct mail and e-mail], you should look into testing both," says Candito. "There's certainly more availability of direct mail names for this market, but there are e-mail lists out there, too, that allow you to reach these people effectively."
Regardless of the specific target, Candito advises to test both. "It's a market just like any other," he says. "I don't think there's one trick medium that works. The rules don't change for this market."
While each day seems to bring a new piece of research on the dismal prospects for big business, their entrepreneurial little brothers have been riding high in terms of proactivity and drive for new business.
According to Dun & Bradstreet's 2002 Small Business Survey, 87 percent of small businesses were optimistic about their companies' prospects at the close of 2002. When asked the same question in 2001, 81 percent were optimistic, a sign of continued positivity among SOHOs.
"You have to really think about the individuals in this market: They want to get things done quickly and efficiently," says Candito. "It's a small office/home office, they don't have droves of assistants running around doing things for them. They are a captive audience, but you have to be pretty straight forward and make it easy for them."