An Empirical Analysis of Small Business Advertising

By Van Auken, Howard E.; Doran, B. Michael et al. | Journal of Small Business Management, April 1992 | Go to article overview

An Empirical Analysis of Small Business Advertising


Van Auken, Howard E., Doran, B. Michael, Rittenburg, Terri L., Journal of Small Business Management


Selecting the most appropriate advertising media is usually difficult for small businesses. The normal objective is to reach potential customers using the most cost-effective methods available. Jackson and Parasuraman (1988) note that small firms confronted with competition and cost pressures generally have limited financial and professional resources. Therefore, promotional decisions are commonly influenced by the firm's target audience, available advertising media, and financial resources (Vaccaro and Kassaye 1988).

Typically, small retail firms place their advertising emphasis on newspaper and yellow page ads, with occasional use of radio and television advertising. The high costs of production and air time tend to make electronic media ads prohibitive for many small businesses. Trade shows have also been shown to allow small firms to effectively compete with large firms and have personal contact with their customers at a relatively low cost per contact (Brunning and Adams 1988).

The general purpose of this article is to extend prior research regarding advertising media utilization. Little is known about the effectiveness of various advertising media (Vaccaro and Kassaye 1988), partly because it is generally difficult to measure (Belch and Belch 1990). Therefore, this article focuses on perceptions of effectiveness of various advertising media and uses multiple regression techniques to identify possible salient determinants of that perceived effectiveness.

SAMPLE AND METHODOLOGY

The initial sample of 375 firms was drawn from businesses listed in the 1987 Iowa Business Directory. Half of the sample was drawn from small towns (with populations of less than 10,000), and half was drawn from larger towns (with populations of more than 10,000). To ensure geographic diversity, the sample was further portioned by dividing Iowa into four quadrants and selecting one-fourth of the sample from each quadrant. A proportionate random sample from representative small and large towns also was drawn from each quadrant. The sample provided a representative cross-section of small Iowa businesses.

A questionnaire was developed and pretested in June 1987. The first mailing was sent in early July, 1987; and a follow-up mailing was distributed in late July, 1987. A total of 132 usable questionnaires were returned, providing a response rate of 35.2 percent. The survey collected information on firm demographics, such as years in operation, size of market served (local, regional, national, international), type of ownership structure (sole proprietor, partnership, corporation), total capitalization, type of business (retail, service, and other), and size of local community.

Respondents also were asked to rank, in terms of severity, problems they experienced during their first and most recent years of operation. These problems included establishing market identity, advertising, cash flow, personnel, bookkeeping, inventory, short-term debt, long-term debt, and supplier relationships. Finally, each respondent was asked to indicate and rank, in terms of effectiveness, the advertising media used during their firm's first and most recent year of operation (television, radio, newspaper, participation in community events, word-of-mouth/referrals, flyers, telephone directory).

Given that most small businesses serve diverse markets and are confronted with a variety of problems, similar firms were expected to have some common problems, one of which was effective use of available advertising media. It was further expected that the types of advertising media used would change over time, in response to changing markets, resource availability, relationships with media salespeople, etc.

The sample was initially subdivided into three groups (retail, service, and other). The percentage of firms using each type of advertising media was tabulated for each group. These percentages were calculated for each firm's first and most recent years of operation. …

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