Is The Yellow Pages A Money Machine Or Fools Gold?

By Hugh Geiger from DoBiz.com.au

This article is a brief discussion about usage patterns and investing in the Yellow Pages (print) directory. It’s something of an institution for many small business owners, and I know that many owners out there are terrified at the idea of not running the biggest possible ad they can afford. So far though, I’ve never spoken to a business owner who could substantiate their belief in the power of the Yellow Pages to generate business. The normal answer I’ve been given is ‘yes it works, no I don’t know how well’. Considering the pricing, I would hope it works damn well! It’s easy to drop $20K+ on a few inches of paper.

This got me pretty curious. So just over a year ago, I ran a small consumer survey for friends, family, and an online community I was involved with. I wanted to learn about where people were looking to find services (not products). I got about 60 responses, so not exactly a huge survey, but good enough for my purposes. It attempted to collect the following data from survey participants:

• Where people look when they need a service
• After listing a number of different services, it asked them to prioritise the information sources they used when deciding who to use (i.e. Where’s the first place you would look, second place etc).
• Asked them to record when was the last time they had used a given information source.
• It counted consumer transactions only – not B2B

It was presumed that each point of reference would only be used if the preceding reference did not provide a satisfactory answer. This means that if you’d had a past experience you were happy with, you were unlikely to ask a friend. I realise that it’s possible for a prospect to ‘skip’ a point of reference or be swayed by a particularly appealing advertisement, but this behaviour is way outside the scope of what I was doing.

In terms of where people reported looking, the average order was:

1. ‘Past experience’ (unsurprisingly) was by far the most common first point of reference.
2. Word of mouth referrals from friends
3. Word of mouth referrals from colleagues
4. Word of mouth referrals from family
5. Businesses that they had noticed in their local area but never been to
6. Current media advertising such as television / radio
7. Yellow Pages
8. The Internet
9. Local newspapers / magazines

In my opinion, these results reflect the relative value and trust that people place on information sources when looking to purchase a service. ‘Good Service’ is a very subjective thing, and personal opinions are far more important then advertising messages when we’re deciding where to buy.

These results (for me) put a new perspective on the value of the Yellow Pages directory. It strongly suggests that your $5-$10K+ investment only has a chance of being looked at if the prospect exhausts other more reliable sources of information. Then, they have to notice you from amongst a crowd of similar providers in a directory that is not even strictly alphabetical. That’s a lot of cash just to be in one of the last places a prospect will look.

I tested this across a range of different services, and found this to be true for most industries. However, there were a few exceptions. Businesses that provide emergency services and other situations that don’t lend themselves well to word of mouth or are too localised for the Internet, may benefit significantly from a strong presence in the directory. These are discussed in detail at the end of this article.

I see you, but I don’t trust you…

Your ad, no matter how big, doesn’t buy you a lot of trust. A side effect of being discovered via a less reliable information source, is that the prospects generated are going to be far more weary then those that have been referred to you by word of mouth. You’re going to get more tyre kickers and comparison shoppers and there will be more price sensitivity. Remember, anyone who finds you in the directory immediately gets a very good grasp of just how many competitors you have. They’ll make you work for their business. Which brings me to my next point…

Do you actually measure your response rates from the Yellow Pages?

…Or even better, have you kept a record of the number and value of sales it generates?

I have yet to come across a small business that effectively measures this. Many people take it for granted that it ‘just works’. Ad pricing is different depending on category, and I don’t have the exact figures handy, but to get a quarter page sized advertisement with a bit of colour, you’re probably looking at around $7500 – $10 000(AU).

If we assume a 35% gross profit margin in your business, your advertisement is going to need to bring in $21,428 – $28,571 in annual sales just to pay for itself.

If your ad in the Yellow Pages is a major part of your annual marketing budget, spend 3-4 weeks to test its effectiveness. Find out how they discovered you, and write down how much they spend. You might be surprised.

But they have HUGE distribution right?

Just looking at the website, aside from being in every Australian home and business, it quotes some extremely impressive figures:

8 million unique users of its print directory each month
2 million unique users per month on its website

Whilst it’s hard to dispute independent web stats, I still have some significant doubts about the accuracy of the print usage figures. Combined, these figures equate to 1 in 2 people in Australia using their service every single month! This very strongly contradicts my own research, and isn’t supported anecdotally from the people I’ve spoken to… but I’ve been wrong before. When was the last time you used the Yellow Pages (print) directory?

http://www.yellowpages.com.au/ (aff)

It may work really well for some…

The Yellow Pages seems to be primarily used by people trying to find a new service provider. Your existing customers are not likely to use it. If your business relies on a steady stream of clients new to your area, and does not build good relationships with existing customers easily, then the Yellow Pages may be a good option for you. Here’s a broad (not exhaustive) list of characteristics of businesses that will likely benefit most from a large presence in the directory:

• You provide emergency / rare use / niche services
• You are in a regional area, or your customer base is highly diffuse
• The types of service you provide are not conducive to word of mouth referrals
• You are unable to establish a strong relationship with your customer
• You sell a commoditised / impersonal product or service
• You are primarily a business to business (B2B) provider*
• Your product / service is not easily promoted via the web
• You primarily service people who are new to your area

*while this was not the subject of the survey, anecdotally it seems B2B prospects are more likely to use the Yellow Pages then average consumers.

What should you do?

With rapidly increasing Internet usage, I think that businesses that rely heavily on the print directory for new prospects are going to struggle in coming years, if not already. It’s a given that newspaper classifieds are dead or dying- superseded by the Internet. It’s not a huge stretch of the imagination to see that the heavy, disorderly, 2000 page golden brick is going the same way…

On that note, when was the last time you heard about a small business’s growth ‘exploding’ after an advertisement was placed in the Yellow Pages? It doesn’t happen, because it doesn’t work like that. It’s a highly competitive environment, the playing field is uneven, and the consumers its attracts are either looking for a deal, or don’t care who you are ‘cause they want it fixed yesterday’.

I don’t doubt that it generates traffic, but I question the quality of the referrals Vs word of mouth referrals, and also the risk presented by the size of the investment you are required to make. If Google said to you, “Give me $10K, I promise to put you in front of customers, but I can’t tell you who or how many, or even if they like your ad, AND you can only change it once a year” would they be a billion dollar company today?

In my opinion, the value presented by the Yellow Pages (print directory) is very questionable for a small business. I’m not saying that you should blindly go and dump your ad… but if you invest a large amount of money in the print edition every year just because that’s what you’ve always done; take a moment to re-evaluate your investment. Do some research, and determine if it *really* works for you.

Most businesses will be better off if they invest in ‘word of mouth generation’ by improving your service quality, building a stronger customer relationships, increased branding, and implementation of referral incentives. Look after the customers you have and give them a reason to talk about you. You’ll be rewarded with far more growth then a phone book can deliver.

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Hugh Geiger
www.dobiz.com.au/blog

I’m a Canberra based entrepreneur with a passion for effective management systems and customer service delivery. I’ve started doing some small business coaching, and my blog is dedicated to discussing the issues, tools, and trends that are relevant to me and hopefully other small business owners.