February 2000


By George O. Gamble, Gwendolyn Highsmith-Quick, Eli Jones, and Priscilla D. Slade

CPAs have been free to advertise their services to the public for over 20 years, but local firms have been slow in using advertising to promote and increase the demand for services. The authors surveyed 2,000 small and medium-size firms to learn about their perceptions of the benefits to be derived from advertising. The results of the study are shown in Table 1 and Table 2.

Implications of Survey Results

The survey has produced some interesting results. Overall, larger firms are more positive about the benefits of advertising. More specifically, they recognize that advertising increases consumer awareness, if nothing else. The survey question concerning whether advertising increases consumer awareness of the company name received the highest positive response of any question. This is revealing when compared to the responses to other questions, which focused on firm benefits such as increasing the number of clients, services offered, and market segments serviced. Questions relating advertising to profit and increased annual billings received a neutral response. Therefore, do accountants perceive the value of name recognition to be worth the cost of advertising? Furthermore, does advertising ultimately translate into increased financial performance?

The study suggests that at this point in the advertising experience of public accountants, name recognition is perceived as important. Advertising apparently serves this purpose. The larger firms recognize that increasing name recognition is necessary before the number of clients, services offered, and market segments covered can be increased. Borrowing a marketing term, this is referred to as branding. According to this strategy, brand building leads to a considerable increase in financial performance.

Interestingly, disposition toward advertising to increase name recognition is related to the average age of the partners in a firm. We correlated the average age of partners with advertising favorability (the composite of all perceived advertising benefits) and found a significant inverse relationship. Younger partners feel that if their firms are to grow, they must advertise and follow a brand-building strategy. It can also be inferred that younger partners do not harbor ill feelings toward advertising as do older partners--who remember when advertising accounting services was banned.

The perceptions of the effects of advertising on the accounting profession are also noteworthy. Given the competitive nature of the accounting and accounting-related services industry, we expected CPAs to say that advertising increases their overall quality of services offered, because clients coming to a firm via its advertising will tell others if they are satisfied (word-of-mouth advertising), which leads to increased customer traffic.

The response difference between small and medium-size firms regarding whether advertising has a favorable influence on the public's perception of the moral and ethical character of public accountants is probably due to the type of advertising done by small versus medium-size firms. Small firms probably restrict their advertising to less expensive, traditional forms of advertising such as the Yellow Pages, company brochures, local newspapers, and radio. On the other hand, medium-size firms may use more sophisticated, nontraditional advertising media such as sponsorships, charitable programs, and other events that create a positive impression on the public. These events associate a firm, in the public's mind, with moral and ethical character. Thus, medium-size firms have a more positive experience with advertising's favorable influence on the public's perception of public accountants. In summary, the response differences suggest a chasm between small and medium-size public accounting firms regarding the benefits of advertising. Given the competitive intensity of the public accounting industry, we expected smaller firms to view advertising as an important growth tool. However, the survey results suggest that the smaller firms are indifferent, or even negative, about the benefits of advertising, whereas the larger firms have a more favorable impression.


Given the survey's results, we suggest the following tips for smaller accounting firms trying to maximize their advertising strategy:

* Let go of the past. Rule of Conduct 502 has changed dramatically in 20 plus years. The days of advertising being banned are gone. Remember, the number of new nontraditional competitors not bound by the CPA Code of Ethics is expected to increase.
* Keep an open mind. Invest in advertising as a tool for brand building: Increase consumer awareness of your firm's name.
* Be innovative in your advertising. Advertising can be used to extend services offered and improve your competitive position in market niches. For small firms seeking growth, perhaps promoting nonauditing services is an opportunity.
* Create a comprehensive marketing plan. The objective of a comprehensive marketing plan is to focus your efforts and resources on areas of strength and limit exposure to weaknesses. Small firms should capitalize on the benefits associated with their size. Ingredients of a comprehensive marketing plan are

a) long- and short-term goals and objectives,
b) current and projected services and market segments along with actual and projected billings from each,
c) current and projected ad media matched with services and market segments benefiting from their use, and
d) a realistic advertising budget.

* Involve your staff in the planning. Your staff is a good resource for ideas and suggestions. Include them in developing a comprehensive marketing program. This is important because it gives the staff an opportunity to become stakeholders, which translates into firm pride, commitment, and dedication. *

George O. Gamble, PhD, is the Robert Grinaker Professor of Accountancy and Taxation at the University of Houston;
Gwendolyn Highsmith-Quick, PhD, CPA, is an assistant professor of accounting at North Carolina A&T State University;
Eli Jones, PhD, is an assistant professor of marketing at the University of Houston; and
Priscilla D. Slade, PhD, is acting president at Texas Southern University.

James L. Craig, Jr., CPA
The CPA Journal

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