Statistics indicate that somewhere between 20 and 39 million Americans are currently engaged in home-based business ventures. Such wildly disparate figures illustrate the elusive nature of this rapidly growing segment. Perhaps the biggest challenge in marketing to these businesses is finding them in the first place, since individually they are often so small they don't register on the standard commercial radar screen.

Head for the Grassroots

One highly effective way to ferret them out is to reach directly into the grassroots. Bank of America's marketing director for small business, Bob Visini, reports, "You may already be doing business with this segment and not realize it; if you identify these people as purely consumers. Poll your clientele, find out what their needs are, and ask for their business card. You'll gain valuable marketing information, and your customers will feel valued."

Pacific Bell Directory also relies heavily on grassroots intelligence to pinpoint potential home-based business customers. Small Office Home Office Manager Alison Stice generates most leads at the community level. New business licenses, Chambers of Commerce membership lists, and local business expositions or trade shows are all excellent sources.

Home-based business people don't fit neatly into any mold; in fact, their diversity is perhaps their most common characteristic. Most don't read standard business publications or belong to professional associations. Many hold other jobs and work at their endeavors on a part-time basis. Ventures run the gamut from selling gift baskets in the local marketplace to providing high-level business consulting on a global scale.

Experts describe the segment as a business/consumer hybrid. Many of their needs are similar to other businesses, although the scale is usually smaller. However, overall objectives and the decision-making process often resemble the consumer market segment. While the general goal of business is to build equity, the prime objective for most home-based enterprises is to generate an income stream for the family. Because business and family are so closely intertwined, the purchase trade-off is just as likely to be between a family vacation and new computer as it is between a fax machine and copier.

Other Attributes Beat Out Price

Because many are fledgling ventures with severe capital constraints, some experts would contend that marketing to this group is all about price. Paul Edwards, renowned home-based business authority and co-author of Getting Business to Come to You, agrees that price is an important factor, but believes the need for reliability is paramount. "Home-based operations usually consist of one or two people, so when a crucial piece of equipment breaks down, business grinds to a halt." he says. "Good customer service can be a company's best marketing tool in addressing these sorts of urgent needs. The optimal bottom line is that little time or effort is required on the part of the customer." In essence, since revenues depend wholly on the efforts of its proprietors, time spent in non-revenue-generating activities directly- and adversely-affects income.

Conversely, any service or product that saves time and increases efficiency frees the owner up to generate more revenue. This demand for convenience is one reason the segment is so amenable to online banking, according to Bank of America's Bob Visini. "Almost 100 percent of these people have personal computers and close to 90 percent are tied into the Internet," he says. "Online banking gives them immediate access to their accounts to check balances, transfer funds and manage their finances without ever leaving the comfort of their home office."

Each of these attributes-reliability, customer service, convenience and efficiency-ultimately feed into price, or more accurately, total cost of ownership. Astute home-based business owners rapidly learn that a low purchase price doesn't necessarily translate to best value. Pacific Bell Directory's Alison Stice refers to the "Titanic effect" in which the purchase price represents only a small percentage of the cost. An inexpensive printer that breaks down frequently and goes through ink like running water rapidly turns into a money pit. On the other hand, a more expensive printer that is a workhorse and uses less supplies provides long-term economy.

Marketing to this Market

Once the market and its needs are fully understood, effectively reaching it remains a challenge. As Paul Edwards claims, "There are lots of brains and eyeballs to reach and they're quite a diverse bunch." While mass media is superb at reaching huge numbers of consumers, and business trade media is an efficient channel for connecting with traditional companies, neither works perfectly for this hybrid segment. While a percentage of the market can be reached vertically through specialized industry and small business media channels, this audience represents only thousands within a group of millions. For this reason, it may be a portion of the marketing mix, but should not constitute the primary focus.

As with all marketing efforts, success depends on reach and frequency; utilizing multiple channels multiplies both factors. According to Paul Edwards, the best way to determine the most effective marketing mix is to decide who your customers are and what would motivate them to purchase your product. For example, a home-based entrepreneur may not recognize the need for a formal business plan until he applies for a loan. Therefore, for a company that sells business planning software, developing a cooperative marketing program with banks that specialize in small business loans would be a highly focused way to reach the target audience.

Experts unanimously agree that the single most important marketing channel for reaching home-based businesses is old-fashioned word of mouth. To paraphrase Scott Cook, co-founder of Intuit, "Please your customers and they will become your best salespeople." The shoestring nature of many of these enterprises makes each purchase crucial and mistakes can spell financial disaster. Thus, home-based entrepreneurs often look to trusted associates like fellow business owners, accountants, friends and family for advice and reassurance. The resulting word of mouth can either be a company's most effective marketing tool or its death knell.

Don't Forget the Internet

No discussion of marketing in the '90s would be complete without the Internet. Incredible reach, wildfire growth, and intense media attention have all contributed to a perception that it is a marketing panacea-it is not. It can be an important part of the marketing mix if properly executed and appropriate to the product or service. However, mind-boggling clutter, lack of strong linking strategies, and poor focus can render it utterly ineffective.

There are ways to overcome the challenges. One avenue is to hitch your wagon to a star. For every subject area, a number of gateway sites provide in-depth information, access to specialized resources, and links to any number of other related sites. Industry associations, professional groups and business segment leaders are commonly developers of such sites. Because the traffic to these sites is tremendous, developing a co-marketing strategy that may include banner advertising, linking or both can dramatically increase awareness of your product and draw people to your Web site.

Taking this strategy one step further, many organizations are developing e-commerce sites that function as online malls, offering a wide array of related products from many different sources. These sites provide transaction security and a way to market your product without the expense of establishing a separate Web site.

Consider Associations and Direct Marketing

According to Terri Lonier, author of Working Solo, industry and professional associations can also be important vehicles if vertical marketing is appropriate for a product or service. Opportunities include advertising in niche publications, direct marketing, exhibiting at trade shows, giving seminars and, of course, Web site linking.

These associations may also offer potential for co-marketing and bundling. A traditional strategy that is just now making its way into the home-based business marketing arena, it allows companies and organizations to promote their products and services on a joint basis. The synergy between organizations, their products and target markets will strongly impact such a campaign's effectiveness. At its best, co-marketing and bundling strategies expand reach, save money, and leverage the credibility and reputation of the partners.

If the market has been well defined, direct marketing can be highly effective. The scale of such efforts can range from participation in cooperative efforts such as postcard packs to campaigns that exclusively promote one company's products or services. As with any direct marketing effort, the mailing list is key to success. Businesses can build their own or purchase them from professional associations or list houses.

Home-based business authorities, Paul and Sarah Edwards, distill the marketing challenge into four simple principles that are universally relevant:

1. Walk. Walk around the neighborhood, introduce yourself, let people know what you do and ask them to call on you. This applies whether your neighborhood is the four-block area around your residence or the entire world.

2. Talk. Network with potential customers, give speeches, share your knowledge through seminars and over the Internet.

3. Show. Visually showcase your product in any way that is appropriate from television and tradeshows to posters and T-shirts.

4. Tell. Tell your product story through newsletters, Web sites, promotional literature and publicity.

These principles constitute a simple, yet highly effective, strategy for tapping the rapidly expanding and highly lucrative home-based business market.

Excerpted with permission from Small Business Success, Volume XII, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.