Marketing, The Internet & Regional Small Business

Transcription

1 Marketing, The Internet & Regional Small Business Dr Jacqueline A Flint School of Business Faculty of the Central Coast The University of Newcastle Dr Ric D Herbert School of Business Faculty of the Central Coast The University of Newcastle Abstract Commercialisation of the Internet makes available communication and information technologies to micro, small and large businesses alike, together with associated marketing opportunities and challenges for the ways in which customers, supply and distribution are managed. This study uses survey data to profile use and perception of the Internet among micro and small businesses in the Wyong Shire region of NSW. It finds that size of a business is associated with a difference between businesses in their capability to use the Internet but not in their perception of its importance. Reasons that may underlie this difference are discussed, and suggestions are offered for using differentiated messages and forms of assistance to small business according to size. Directions for future research are also suggested. Introduction Information technology (IT) is changing national economic profiles, patterns of industry and the way in which business is conducted (Dutta, Kwan & Segev 18; Frank 17; Ghosh 18). Telephony and call centres, the Internet and the World Wide Web in particular are often seen as important considerations of businesses in rapidly changing internal and external environments. Commercialisation of the Internet has helped remove communication barriers with customers and employees by decreasing the importance of obstacles that are created by geography, time zones and location (Quelch & Klein 16). It has helped to create new, more efficient ways in which to conduct marketing operations, communications, sales and customer service (Burgess & Cooper 18; Hoffman, Novak & Chatterjee 17; Zampetakis 2000). As well, where micro and small businesses were previously unlikely to have resources sufficient to provide a viable IT facility, Internet service providers (ISPs) offer them a tool to help compete with larger businesses. Micro (less than 5 employees) and small (between 5 and employees) businesses may now be able to extend their geographic markets to the point of having a global presence (Hamill & Gregory 17; Poon 1). A two-person tourism business, for example, can now develop a global catchment area using a Web presence rather than relying only on a smaller catchment area generated by local traffic, agency networks and limited advertising. The new kinds of marketing opportunities provided to micro and small businesses (MSBs) from commercialisation of the Internet prompt interest in whether and how these businesses take advantage of the opportunities. This interest is reinforced by government concern that major segments of the small enterprise community could disappear if they do not embrace electronic commerce (Gottliebsen 18:5), a risk that seems greater in regional areas (Steinfield & Whitten 1). A first step in understanding how MSBs in regional areas regard the Internet and its associated opportunities is to overcome the current lack of data. This paper reports results of a survey of MSBs in the Wyong Shire region of NSW in terms of their use of the Internet. Capability of Small Business to Use Internet Marketing Opportunties There are many ways in which a business can make use of the Internet. These can be understood readily via different models which present Internet adoption as a staged process from, say, brochure-ware through intermediate value-add activity, to interactive processing through a site and/or a virtual enterprise (Burgess & Cooper 18, Fox 2000, Hamill & Gregory 17). However, the details of these models also suggest that the later stages of Internet adoption are likely to be beyond the resources of many micro or small businesses. Similarly, research on perceived barriers to Internet adoption on the part of MSBs suggests a range of factors from security, limited knowledge and experience through to need for additional skills and resources as inhibitors to a small business establishing an Internet presence (Auger & Gallaugher 17; Dowler & Lawrence-Slater 18; Hamill & Gregory 17; Poon 1). As yet, however, there is little empirical evidence on whether MSBs have a basic capability to establish an Internet presence. Auger and Gallaugher (17) identify motivating factors and perceived barriers to the Internet for small business but their data are from businesses that already The financial support of the NSW Department of Urban Affairs and Planning is gratefully acknowledged. 34

2 have an Internet capability. Similarly, Poon and Swatman (17) provide helpful identification of some preconditions and outcomes of Internet use by MSBs, but the study does not address the capability of these businesses to establish an Internet presence. Hamill and Gregory (17) investigate the propensity of small businesses to use the Internet, but as an internationalisation tool. From this they identify categories of Internet awareness and a key barrier to making greater use of the Internet, ie. lack of knowledge about the Web, its capabilities and how to use it effectively. One aspect of understanding the capability of MSBs to use the Internet beneficially is to acknowledge likely differences in needs and perceptions of urban and regional businesses. Bandwidth and ease of finding an ISP are recognised as inhibitors to use of the Internet (Hoffman et al 17; Larsson & Lundberg 18). These are arguably more of a problem for regional than urban businesses where slow infrastructure roll-out causes some regions to install their own local carrier network (Lynch 2000), and where there is less choice of ISP together with fewer points of presence for ISPs to provide local call access. Variance in sophistication of business practices also seems likely between urban and regional businesses even if only because knowledge acquisition in regional areas is more difficult due to relatively lower supply. Consistent with these kinds of factors, regional MSBs may also be less likely actually to use a computer and/or appreciate the potential of the Internet and, at this basic level, have little capability to take advantage of the marketing opportunities it can provide. Thus, the research question addressed by this paper is To what extent do regional MSBs use a computer and the Internet, and perceive the Internet to be important for the future of their business?. This question is important not only from a marketing perspective, but also because many governments (including the NSW and Federal Governments) are pursuing policies for regional development based on MSBs and these tools. Method A mail-ready population of 1508 enterprises was purchased from a call centre bureau which processed the 1 Yellow Pages Wyong Shire listing to confirm all organisations in terms of names, addresses, telephone numbers, contact personnel, but to exclude organisations identified by mobile telephone numbers. The mailready population was culled further to retain 107 businesses after excluding non-profit organisations and government agencies. A mail survey was sent to 107 businesses and the 317 responses received make up the final sample. This is a 2 per cent response rate, recognised as acceptable for mail (Emory & Cooper 11). Reported data are part of a wider survey of small business in the Wyong Shire of NSW (Smith & Cunneen 2000). A questionnaire was developed and piloted with small businesses. The final version comprises 32 questions predominantly requiring Yes/No answers or identification of a relevant category, and one question which is based on a five-point rating scale. (A copy of the questionnaire is available from the authors on request.) Data for this paper are drawn from demographic items in the questionnaire, together with four items relating to computer and Internet usage in the business. Occasional non-response on individual items means some variation in reported sample sizes. Results and Discussion Of the 317 businesses in the final sample, 58 are micro businesses and 42 are small businesses. As indicated in Table 1, 80 of all businesses in the sample use a computer, leaving 20 that do not. Micro businesses are less likely to use a computer (71) than small businesses (3), a significant difference in a contingency test [χ2(1,316) = 25.33, p < 0.00]. This suggests that, the fewer the number of employees in a business, the less likely it is to use a computer. It also suggests that, the smaller the business, the less likely it is to have the basic computing capability to allow it to take up marketing opportunities available via the Internet. Of the businesses that use a computer, 85 do so daily (see Table 1). Micro businesses, however, are less likely to use a computer daily (76) than are small businesses (6). This is a significant difference between the two groups in a contingency test [χ2(1,253) =20.673, p < 0.00], suggesting that the smaller the business, the less likely is a computer to be used frequently. Of the businesses using a computer, 66 are connected to the Internet (see Table 1). Again there is a contrast between micro and small businesses with 57 of the former being connected to the Internet and of the latter. This is also a significant difference in a contingency test [χ2(1,254) =.106, p < 0.00], suggesting that the smaller the business, the less likely it is to be connected to the Internet. Of the businesses that use a computer daily, 73 are connected to the Internet but, where businesses use a computer less frequently, only 24 are connected to the Internet. This is a significant different in a contingency test [χ2(1,253) = 32., p < 0.00] and suggests that, as frequency of computer use reduces in a business, so does incidence of Internet connection. Table 1. Computer Use & Internet Connection by Size of Business 350

3 Number of Employees Use a Computer Frequency of Computer Use Connected to the Internet Daily < Daily Yes No (a) Do Not Use a Computer (b) (a)+(b) < 5 of column of column of column Thus, it seems that small size of business and low frequency of computer use may both be associated with lower incidence of Internet connection and, as noted above, the smaller the business, the less frequently a computer is likely to be used. At the same time, of the businesses that are connected to the Internet, 45 are micro businesses and 55 are small businesses (see Table 1 bold figures). If size of business is a key factor in incidence of Internet connection, one might expect a much smaller proportion of micro businesses in the group of businesses connected to the Internet and a much higher proportion of small businesses. Because these proportions are relatively similar, it suggests that frequency of computer use might be a more useful indicator of Internet connection than the number of employees in a business. As well, however, where businesses are connected to the Internet, there is a very high percentage of daily computer use notwithstanding employee numbers. For micro businesses, 1 of businesses that are connected to the Internet use a computer daily while, for small businesses, the figure is 8 (see Table 1 bold figures). This contrasts with the significant difference of 76 of overall micro businesses using a computer daily and 6 of small businesses. Thus, while frequency of computer use may be a general indicator of Internet connection in a business, for micro businesses it appears that an Internet connection also prompts higher frequency of computer use. One implication is that micro businesses which have overcome the Internet barrier take advantage of the marketing and business opportunities provided by that resource. Alternatively, as in Poon and Swatman s (17) study, the businesses may use the Internet resource primarily as a communication and/or information tool. Additional research is needed to address these propositions. It may seem obvious that an Internet connection would prompt higher frequency of computer use in a business but it might just as readily be argued that presence of a computer would prompt frequent use. As an example, for small businesses in the sample, 6 use a computer daily if they have one. With an Internet connection, this increases by only 2, ie. it appears that presence of a computer prompts frequent use more than an Internet connection. This contrasts with the micro businesses where, overall, about 25 do not make daily use of a computer. However, where micro businesses have an Internet connection, it is only that do not make daily use of a computer. This suggests that, for small businesses, availability of a computer has more impact on frequency of use than an Internet connection but, for micro businesses, it is the Internet connection that has more impact. Given the significant differences identified between MSBs with regard to use of a computer, frequency of use and connection to the Internet, it might be expected that similar differences would be evident with regard to perceived importance of the Internet for future of the business. Table 2 indicates differences based on size of the business, but these are not strong (none of the differences was significant in contingency tests). Whether it is all businesses or the sub-sample of businesses that use a computer, or the sub-sample connected to the Internet, 351

4 there is no significant difference in the percentage of MSBs that perceive the Internet to be important. This means that micro businesses are as likely as small businesses to perceive the Internet to be important for the future of the business even though they might not use a computer or be connected to the Internet. It could be that micro businesses recognise the marketing and business opportunities presented by the Internet, but many have yet to establish the capability to take up those opportunities. It is also interesting to note from Table 2 that, across all sample groups, there is a relatively high proportion of businesses that do not perceive business importance of the Internet. At the same time, businesses connected to the Internet are more likely to perceive it to be important for the future of the business (70) than is the total sample (56). This is perhaps not surprising if the theory of cognitive dissonance is taken into account. Assuming respondents to the survey were also likely to be involved in the decision to purchase an Internet connection because of the small number of employees in the businesses, any post-purchase dissonance with regard to the Internet connection is likely to be reduced by selective perception (Craig-Lees, Joy & Browne 15). In other words, they might be expected to perceive the Internet to be important if they have participated in the decision to purchase an Internet connection. To the extent this is so, what does seem surprising is that 30 of the businesses connected to the Internet do not perceive it to be important for the future of the business. This may result from disenchantment with the benefits of the Internet (information, not knowledge; opportunity costs of staff time wasted ; investment of time, money and expertise needed before it becomes an effective and efficient marketing tool), or because it is used primarily for communication purposes. Table 2. Perceived Importance of the Internet for Future of the Business by Size of Business All Businesses Businesses that Use a Computer Businesses Connected to the Number of Internet Employees I* NI* I NI I NI < * I = Of Highest Importance, Very Important & Important NI = Not Very Important & Not at all Important Conclusions and Future Research The above discussion highlights that, the smaller the number of employees in a business, the less likely it seems it will use a computer and, if it does, the less frequent will be its use and the less likely it is to be connected to the Internet. This is so despite both micro and small businesses perceiving the Internet to be important for the future of the business. While this has been demonstrated here for a sample of small businesses in the Wyong Shire region of NSW, the results have broader implications. For organisations planning on implementing business-to-business electronic commerce with regional MSBs, there may be unanticipated impediments to doing so. Equally important, policy makers who consider that blending IT with micro and small businesses is crucial for regional development may find it necessary to target these regional businesses with differentiated messages, communications and forms of assistance in general, but also may find it necessary to address micro businesses in particular in terms of an even more limited IT capability. It is also the case, however, that substantially more research needs to be undertaken on regional small businesses and IT. In particular, it would be valuable to identify the purpose for which MSBs use computers and whether there are industry differences with regard to this purpose. It would also be helpful to investigate why MSBs establish an Internet connection and the primary purposes for which they use this capability. Similarly, it would be of interest to identify perceived barriers to use of the Internet among MSBs, and reasons which underlie perceptions that the Internet is not of importance to future of the business. With greater understanding of these kinds of areas, regional MSBs might be better able to take advantage of the marketing and business-to-business electronic commerce opportunities available to them via the Internet. 352

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