Multiple Discriminant Analysis: Tool for Effective Marketing of Computer Information Systems to Small Business Clients

Abstract

ABSTRACT Accounting firms have seen their margins shrink as competition increases simultaneously with decline in demand for traditional accounting services. The smaller accounting firms must find new niche markets to aid in their survival. They must develop a strategic marketing plan to identify these niche markets, understand their needs and obtain their business. One potential niche market for small CPA and accounting firms is to provide computerized information system consulting services to small business. Small accounting firms that have expertise in computer information systems are in a position to take advantage of this opportunity. A cost effective strategy utilizing inexpensive telephone survey information of local small businesses and Multiple Discriminant Analysis (MDA) is presented to find potential client leads that have a high success rate. A recent study of small businesses found systematic differences between small businesses that use personal computers (PC-Users) and those that do not (PC-Nonusers). MDA may be used to identify PC-Nonuser businesses that have a profile similar to the PC-Users and are misclassified as PC-Users by the statistical model. This subset of PC-Nonusers is more likely to benefit from computerization and thus very willing to computerize. Similarly, the subset of PC-Users that are classified as PC-Nonusers by the statistical model have some characteristics similar to PC-Nonusers. This subset of PC-Users is, very likely, not realizing the full potential of their computer systems and therefore be very amenable to establishing a mutually beneficial client-consultant relationship. Analysis of the responses of the misclassified PC-Users and PC-Nonusers provides insight that may be used to develop effective communications. Targeted marketing communications developed using the model variables as attributes or copy points should motivate these small businesses to seek computerization information and to upgrade their information system. Professionally approached, managers or owners of these small business may be easily convinced of the advantages of working with the accounting firm.